Commonwealth Brands has struck USA Gold. The discount cigarette maker's best-selling brand is USA Gold, but it also sells the premium Davidoff cigarette as well as Spanish favorite Fortuna, and discount labels Malibu, Montclair, Rave, and Sonoma. Moreover, it is the exclusive distributor of smoking tobaccos sold under the Bali Shag, McClintock, Premier, and Rave brands. Founded in 1991 with six brands purchased from Brown & Williamson (a Reynolds American company), Commonwealth Brands is the fourth largest cigarette producer in the US. The company has eschewed advertising, instead counting on discount pricing for success. Its growth is further supported by parent Imperial Tobacco, the UK's #1 cigarette maker.
As rising taxes, legal settlements, and new warning labels increase the cost of smoking, Commonwealth benefits from its market position as a value brand for cash-strapped consumers. It and other discount tobacco firms have gained a double-digit percentage of the cigarette market, counted as the second largest after China. Following declines in revenues and operating profits in 2010 (driven by a highly competitive landscape), the US business modestly regained its sales momentum and managed to maintain its market share in 2011. Operating profits, however, continued to slide, albeit ever so slightly.
Commonwealth's sales performance is buoyed by the parent company's investment in expanding its US sales force and distribution network, as well as rejuvenating its brands through increased promotional activities. Taking steps to improve its bottom line, Commonwealth in mid-2011 announced plans to combine its sales and marketing operations with sister company, Altadis USA, a maker of premium and mass-market cigars. The move cuts costs and broadens both sales coverage and offerings for customers, yet preserves the cigarette and cigar makers as separate entities.
No stranger to change, Commonwealth was acquired by Imperial Tobacco from Houchens Industries for $1.9 billion in 2007. Subsequently, the new parent company merged its US subsidiary Robert Burton Associates into Commonwealth Brands. The deal added the Premier Supermatic brand of products (rolling tobacco, rolling papers, cigarette tubes, and tube-filling machines) to Commonwealth's portfolio. Later that year, Commonwealth Brands bought the right to manufacture the Bali Shag and McClintock brands. The company acquired the Rave brand in 2008. – less