U.S. big tobacco still in control

Between 1965 and 2015, the adult smoking rate in the U.S. plunged from 42% to 15% due to tougher anti-smoking regulations and higher excise taxes.

Yet that decline didn’t deter top tobacco companies in the U.S., such as Altria, Reynolds American and Vector Group.

Altria’s flagship Marlboro remains the top brand in America with a whopping 44% of the market share. The rest of the market is dominated by Reynolds American’s Camel, Newport, Pall Mall and Natural American Spirit brands, as well as Vector Group’s Pyramid and Eve brands.

These companies grew their bottom lines by raising prices to offset declining shipments, cutting costs, expanding into adjacent markets such as e-cigarettes and consolidating the market. That’s why Reynolds bought former third-place player Lorillard and why British American Tobacco soon will acquire Reynolds to become the second-largest tobacco company in the U.S.

U.S. tobacco companies likely will keep growing since the average price of a pack of cigarettes across the country remains lower than other markets with comparable smoking rates. So despite their controversial reputations, tobacco stocks could remain core holdings of conservative investors for the foreseeable future.