Product and Service
Companies included in leaf tobacco merchant sector in tobacco industry primarily purchase, process, pack, store and ship tobacco to manufacturers of cigarette.
Demand for Product and Service
As indicated by typical sales data, the demand for leaf tobacco supply seems to have been weak and have been declining in terms of value. Changes in preference of consumers to cigarette and supply of farmers may be able to explain this trend among companies in this sector.
The Sector
Sector’s Current, Trend, Causes behind trend, and Future
Current and Trend
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The demand for leaf tobacco has been weak as indicated by decreasing sale volumes of companies in this sector.
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There is an increasingly apparent trend in manufacturer demand’s shifting to lower priced products in the past several years.
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The average selling price of leaf tobacco decreased in the past several years.
Causes behind the trend
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Changes in preference of consumers to cigarette and increasing sensitivity to price can help explain manufacturer demand’s shifting to low priced leaf tobacco.
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Oversupply from farmers in the past several years caused reduction in supply costs, which has been transferred to price of leaf tobacco due to competition.
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Increasing competition from local leaf tobacco suppliers may be part of reasons for decline in revenue and price of US companies.
Industry Future
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Demand for leaf tobacco of companies in this sector may continue to shrink putting huge pressure on price of their products and their profitability.
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Emerging market, especially China’s market, may be the key to maintain their margins.