
Tobacco industry generates highest net income per employee - qwerty2020
http://erikrood.com/Posts/NIPE.html
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jmarbach
One reason for this is because the Tobacco industry benefits enormously from
manufacturing economies of scale. Take for example Reynolds American's
(mentioned in the article) largest manufacturing facility in Tobaccoville,
near their HQ in Winston-Salem. The Tobaccoville plant is capable of producing
110 billion cigarettes a year¹, and employs just ~1,200 people².

Let's say the average revenue per cigarette pack is $5, and there are 20
cigarettes in a pack. That works out to $0.25 revenue per cigarette. The
Reynolds Tobaccoville plant is capable of producing $27.5 billion in revenue
alone ($0.25 x 110 billion), for a labor cost of roughly 90 million (1,200 x
$75,000).

1\. [http://www.nytimes.com/1987/08/23/business/what-s-new-in-
tob...](http://www.nytimes.com/1987/08/23/business/what-s-new-in-tobacco-in-
tiny-tobaccoville-a-giant-plant.html) 2\.
[http://www.journalnow.com/business/business_news/local/updat...](http://www.journalnow.com/business/business_news/local/update-
reynolds-to-create-jobs-in-tobaccoville-to-expand-
vuse/article_cc60b98c-e283-11e3-ac51-001a4bcf6878.html)

~~~
jldugger
Crayola also has like 1,200 employees manufacturing packs of paper wrapped
tubes of product for 5 bucks a pop. What about cigarettes is more beneficial
for economies of scale?

~~~
flogic
Cigarettes are literally dried up leaves. Their customers light the product on
fire and then buy more the next day. Given that as a viable business model,
how do you not make ridiculous quantities of money?

~~~
TylerE
That is true, but I feel obliged to point out that tobacco is an incredibly
difficult and labor-intensive crop.

~~~
cglace
But they don't have to grow it.

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TylerE
But they still have to buy it from people who do, and the difficulty is
reflected in raw material prices.

From
[http://www.nasda.org/File.aspx?id=48147](http://www.nasda.org/File.aspx?id=48147)

Types of Tobacco & December 2016 Avg. Price/lb. – Flue Cured $5.12 – Fire
Cured $7.25 – Burley $5.09 – Maryland $4.86 – Dark Air Cured $6.54 –
Pennsylvania Seedleaf $5.23

For comparison, wheat is around $6 per bushel. A bushel is 56 lbs.

~~~
cglace
You can get roughly 22 packs of cigarettes from a pound of tobacco. Lets say
RJ Reynolds sells those packs for 2.50 wholesale. 22 * 2.50 = 55. 10x the cost
of a lb of tobacco doesn't seem too bad.

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M4v3R
It's a shame and a terrible irony that one of the most successful industries
on our planet is also one of the leading causes of deaths on Earth.

~~~
Clubber
>is also one of the leading causes of deaths on Earth.

The methods of calculating that 400,000 number are highly suspect.

 _Nearly 60 percent of the deaths occur at age 70 or above; nearly 45 percent
at age 75 or above; and almost 17 percent at the grand old age of 85 or above!
Nevertheless, without the slightest embarrassment, the public health community
persists in characterizing those deaths as “premature.”_

 _tobacco-related deaths occur at an average age of roughly 72, an age at
which mortality is not unusual among smokers and non-smokers alike._

[https://www.cato.org/publications/commentary/blowing-
smoke-a...](https://www.cato.org/publications/commentary/blowing-smoke-about-
tobaccorelated-deaths)

I'm not disagreeing that they are harmful, but 400,000 deaths a year is
hyperbole. Governments make a lot of money on that hyperbole too.

 _In Fiscal Year 2010, the federal excise tax on cigarettes (currently $1.01
per pack) brought in $15.5 billion in revenue._

 _In 2009, states raked in more than $24 billion by taxing cigarettes and $8.8
billion in settlement payments from tobacco companies_

[http://dailycaller.com/2011/02/28/what-would-an-america-
with...](http://dailycaller.com/2011/02/28/what-would-an-america-without-
smokers-cost/)

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ianferrel
Sure. Imagine how much income the crack industry would produce if they didn't
have to waste so much labor avoiding law enforcement.

~~~
theparanoid
Just look at Miami in the 80s.

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setgree
I would be interested in more summary statistics rather than just mean (NIPE),
particularly median. What story is actually being told by this data, that
tobacco growth and sales are highly automated and they employ relatively few
people, or that execs are disproportionately compensated relative to other
industries, or what?

~~~
qwerty2020
Author here -- boxplot distribution is in the article.

Also, any story I could string together would definitely be speculative, so
just stuck to the few facts I know for purposes of article. Will speculate
here, however :) -- I'm going to guess primary driver is efficient
manufacturing coupled with simple product offering. (e.g. this isn't some Tech
company employing X% of it's workforce for R&D purposes)

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gmiller123456
I used to work for Brown & Williamson Tobacco (though I did not receive my
$608k per year), and I can absolutely attest that their profits are not as the
author suggests "return on talent". I worked at corporate HQ, which is
probably very different from the factories where the cigarettes were actually
made. The vast majority of people spent the vast majority of their time
looking for work to do, because we quite literally had nothing to do. We had
something like 20 corporate holidays, plus many other "bonus" holidays
announced a day or two ahead of time, and many half-days. One story goes that
the CEO was talking to someone about our building and someone on the street
asked her "How many people work in that building", and her response was "Oh,
about half".

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tryingagainbro
A pack of cigarettes is about 20 gram, or about 2/3 of an ounce. So tobacco
used to make a pack, is not free, but pretty close to it. Factories cost money
but after the initial investment, they mint cash...

I'm almost certain that Marlboro would sell you a gazillion packs for around
$1 each on the black market---complete with e Vegas trip and hookers--if they
could. Smuggling, to avoid taxes, was a huge business a while back when
getting away with it was much easier.

Taxes and advertising cost a lot.

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jakeogh
160kμSv? Why?
[https://www.youtube.com/watch?v=TRL7o2kPqw0](https://www.youtube.com/watch?v=TRL7o2kPqw0)

Without the combustion and rads is nicotine interesting on it's own?

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chinathrow
And highest externalities too?

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Iv
Who would have guessed that addiction sells.

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itomato
Excellent news for Legal Cannabis.

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sytelus
Tabacco - average of $609k per employee

Oil, Gas, & Consumable fuels - average of $421k per employee

I think top 5 public software companies (GOOG, MSFT, FB, AMZN, AAPL) averages
more than Tabacco.

~~~
pinot
[http://www.wolframalpha.com/input/?i=microsoft+net+income+%2...](http://www.wolframalpha.com/input/?i=microsoft+net+income+%2F+microsoft+employees&dataset=)

[http://www.wolframalpha.com/input/?dataset=&i=google+net+inc...](http://www.wolframalpha.com/input/?dataset=&i=google+net+income+%2F+google+employees)

Facebook, however:
[http://www.wolframalpha.com/input/?dataset=&i=facebook+net+i...](http://www.wolframalpha.com/input/?dataset=&i=facebook+net+income+%2F+facebook+employees)

