Guns & Ammunition Manufacturing in the US

35 Pages·2012·2.41 MB·English

WWW.IBISWORLD.COM Guns&AmmunitionManufacturingintheUS October 2012 1
Bite the bullet: Continued conflict will support
revenue, but subsiding fears will limit growth
IBISWorld Industry Report 33299a
Guns & Ammunition
Manufacturing in the US
October2012 NimaSamadi
2 AboutthisIndustry 14 International Trade 32 Industry Assistance
2 Industry Definition 16 Business Locations
2 Main Activities 33 KeyStatistics
2 Similar Industries 18 CompetitiveLandscape 33 Industry Data
2 Additional Resources 18 Market Share Concentration 33 Annual Change
18 Key Success Factors 33 Key Ratios
3 IndustryataGlance 18 Cost Structure Benchmarks
20 Basis of Competition 34 Jargon&Glossary
4 IndustryPerformance 21 Barriers to Entry
4 Executive Summary 22 Industry Globalization
4 Key External Drivers
5 Current Performance 23 MajorCompanies
8 Industry Outlook 23 Alliant Techsystems Inc.
9 Industry Life Cycle 25 Freedom Group Inc.
11 Products&Markets 28 OperatingConditions
11 Supply Chain 28 Capital Intensity
11 Products & Services 29 Technology & Systems
12 Demand Determinants 30 Revenue Volatility
13 Major Markets 30 Regulation & Policy
www.ibisworld.com|1-800-330-3772|[email protected]
WWW.IBISWORLD.COM Guns&AmmunitionManufacturingintheUS October 2012 2
AboutthisIndustry
IndustryDefinition This industry manufactures small grenade launchers), small arms
arms (including shotguns, rifles, ammunition, other ammunition and
revolvers, pistols, machine guns and ordnance and accessories.
MainActivities Theprimaryactivitiesofthisindustryare
Machine guns manufacturing
Shotguns manufacturing
Rifles manufacturing
Revolvers manufacturing
Pistols manufacturing
Gun magazines manufacturing
Small arms ammunition manufacturing
Ammunition (except small arms) manufacturing
Grenades manufacturing
Mines manufacturing
Themajorproductsandservicesinthisindustryare
Small arms
Small arms ammunition
Other ammunition
Other ordnance and accessories
SimilarIndustries 32592 ExplosivesManufacturingintheUS
Manufacturers of blasting caps, detonating caps and safety fuses.
33641b SpaceVehicle&MissileManufacturingintheUS
Guided missiles are similar to the industry’s ordnance products, such as mortars, rocket launchers and
howitzers.
AdditionalResources Foradditionalinformationonthisindustry
www.atf.gov
Bureau of Alcohol, Tobacco, Firearms and Explosives
www.nra.org
National Rifle Association
www.nssf.org
National Shooting Sports Foundation
WWW.IBISWORLD.COM Guns&AmmunitionManufacturingintheUS October 2012 3
IndustryataGlance
Guns&AmmunitionManufacturingin2012
KeyStatistics Revenue AnnualGrowth07-12 AnnualGrowth12-17
Snapshot $11.7bn 5.7% 3.5%
Profit Exports Businesses
$992.8m $4.4bn 465
Revenue vs. employment growth Federal funding for defense
MarketShare
Alliant 20 10
Techsystems Inc.
15
5
12.7%
10
Freedom Group ge ge 0
n n
a 5 a
Inc. 6.4% h h
c c −5
% 0 %
−10
−5
−10 −15
Year 04 06 08 10 12 14 16 18 Year 05 07 09 11 13 15 17
Revenue Employment
SOURCE: WWW.IBISWORLD.COM
p. 23
Products and services segmentation (2012)
KeyExternalDrivers
Federalfunding
22% 27%
fordefense
Other ordnance and accessories
Small arms
Trade-weightedindex
Localandstate
governmentinvestment
Worldpriceofsteel
Crimerate
25%
Other ammunition
26%
p. 4 Small arms ammunition
SOSUORUCREC: WE:W WWW.IWBI.ISBWISOWRLODR.CLDOM.COM
IndustryStructure Life Cycle Stage Growth Regulation Level Medium
Revenue Volatility Medium Technology Change Medium
Capital Intensity Medium Barriers to Entry Medium
Industry Assistance Medium Industry Globalization High
Concentration Level Low Competition Level High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 33
WWW.IBISWORLD.COM Guns&AmmunitionManufacturingintheUS October 2012 4
IndustryPerformance
ExecutiveSummary|KeyExternalDrivers|CurrentPerformance
IndustryOutlook|LifeCycleStage
Executive The Guns and Ammunition state and local law enforcement agencies
Summary Manufacturing industry has grown also grew during the five years to 2012,
strongly during the five years to 2012. due to the sustained threat of terrorism.
The industry was in decline until the start Meanwhile, civilian gun sales spiked due
of the decade, when the 9/11 terrorist to concerns about potential law changes
attacks renewed demand for industry by the Obama administration and fears
products. In addition, political over a possible increase in crime due to
uncertainties combined with a the poor economy.
foundering economy contributed to With demand for industry products
unprecedented industry growth during surging over the past five years, domestic
the five years to 2012. Over the period, manufacturers have been unable to
revenue is expected to grow at a rate of completely satisfy domestic demand, so
5.7% per year on average, with revenue consumers have increasingly relied on
increasing 8.2% in 2012 to $11.7 billion. imports to fill that gap. In fact, over the
five years to 2012, imports grew at an
average rate of 3.6% per year to $2.8
 Growth will let up slightly, as fears about billion. The United Kingdom and
rising crime and stricter laws subside Germany, in particular, have benefited
from the United States’ renewed love of
guns. This trend is expected to continue in
During the past five years, the wars in the future, with net exports declining from
Iraq and Afghanistan ushered in a about $1.6 billion in 2012 to $1.3 billion in
substantial increase in the amount of 2017. Despite the industry growth that
military spending by the government, occurred from 2007 to 2012, growth is
resulting in an increase in purchases of expected to moderate over the next five
the industry’s military-related products. years due to subsiding fears about
Enduring conflicts in these regions and potential rising crime rates and gun law
US troop surges caused the amount of changes. During the five years to 2017,
revenue earned from the sales of these revenue is projected to grow at a rate of
products to grow. The budgets of federal, 3.5% per year on average to $13.9 billion.
KeyExternalDrivers Federal funding for defense and ammunition due to fears about their
The US government and, specifically, its own safety. This driver is expected to
Department of Defense are major decrease during 2013.
purchasers of industry products. As the
amount of expenditure allocated for Trade-weighted index
these items increases, sales and revenue The trade-weighted index (TWI)
typically grow as well. Government measures the strength of the US dollar
funding for defense is influenced by relative to the currencies of countries
fears of terrorism. As the fear of with which it trades. Because exports
terrorism increases, the government account for a moderate portion of
increases funding of federal, state and industry revenue and imports account for
local law enforcement agencies to a growing portion of domestic demand,
protect against or respond to these the TWI can significantly affect sales
threats. This factor results in more gun volumes. This driver is expected to
and ammunition purchases. Consumers increase during 2013, indicating a
also increase their purchases of firearms potential threat to the industry.
WWW.IBISWORLD.COM Guns&AmmunitionManufacturingintheUS October 2012 5
IndustryPerformance
KeyExternalDrivers Local and state government investment manufactured. Demand is usually
continued Growth in government spending on state sufficient to overcome any price
and local agencies generally coincides increases imposed; therefore, revenue
with increased funding of law typically increases when steel prices rise.
enforcement. When law enforcement This driver is expected to increase during
funding increases, gun and ammunition 2013 and is a potential opportunity for
purchases grow as well. This driver is the industry.
expected to decrease slowly during 2013.
Crime rate
World price of steel As the crime rate or the fear of it
Purchases of raw materials, such as steel, increases, people purchase more guns
form a large component of the average and ammunition for self-protection.
firm’s cost structure. The ability for Therefore, a rising crime rate positively
manufacturers to pass on price increases affects the industry. This driver is
depends upon the specific product being expected to decrease slowly during 2013.
Federal funding for defense Trade-weighted index
10 90
5
85
ange 0 dex 80
h n
% c −5 I
75
−10
−15 70
Year 05 07 09 11 13 15 17 Year 04 06 08 10 12 14 16 18
SOURCE: WWW.IBISWORLD.COM
Current The Guns and Ammunition Manufacturing aggressive growth during the five years to
industry has experienced strong growth 2012, though, due to the United States’
Performance
over the past five years. Despite the involvement in sustained military
economic fallout generated by the global conflicts abroad. Other driving factors
financial crisis, guns and ammunition have include an increased need for local, state
proved to be items that many people and federal law enforcement because of
believe they cannot live without. the threat of terrorism and heightened
The industry experienced revenue consumer demand due to uncertainty
growth during the recession from 2007 regarding federal gun law changes. As a
through 2009, but revenue dipped 2.5% result of these factors, revenue is
in 2010 to $10.5 billion as consumers’ expected to grow at an average annual
recessionary fears about rising crime and rate of 5.7% to $11.7 billion in the five
more restrictive gun control laws years to 2012, with an increase of 8.2%
subsided. The industry experienced expected to occur from 2011 to 2012.
WWW.IBISWORLD.COM Guns&AmmunitionManufacturingintheUS October 2012 6
IndustryPerformance
Warandgovernment Prior to the 9/11 terrorist attacks and the
Revenue vs. exports
expenditure ensuing US military deployment, most
manufacturers of warfare products were in
30
a state of decline. The wars in Iraq and
Afghanistan ushered in a substantial
20
increases in military spending by the
government, resulting in additional e
g
n
purchases of the industry’s products. a 10
h
Enduring conflicts within these regions and % c
US troop surges have caused the amount of 0
industry revenue earned from the sale of
guns and ammunition to increase.
−10
Federal, government and local law Year 04 06 08 10 12 14 16 18
enforcement agencies’ budgets also Revenue Exports
grew during the past five years due to SOURCE: WWW.IBISWORLD.COM
the sustained risk of terrorism. The
responsibilities of federal, state and declining consumer and business
local departments have expanded to sentiment, though recessionary
include terrorist attack prevention and pressures indirectly influence the
response preparedness. Along with government’s capacity to spend. For
increased responsibilities, these instance, the recession caused
agencies also received greater funding, unemployment to rise substantially,
some of which was parlayed into gun decreasing government tax and income
and ammunition purchases. In 2009 tax revenue. This factor will eventually
and 2010, law enforcement agencies reduce military and law enforcement
also received additional funding from spending, though the government has
the stimulus package. maintained its elevated level of funding
Government spending habits are for these departments and services
relatively distanced from the effects of during the past five years.
Private-sector While most Americans have cut back on As a result, they are purchasing firearms
demand their purchases of cars, clothing and and ammunition at record rates. The
other luxuries, purchases of firearms number of FBI National Instant
and ammunition have managed to Criminal Background Checks (NICS)
remain stable or even grow during the have risen every year since 2002 and hit
past few years. an all-time high in 2011, indicating that
Although gun and ammunition sales consumer interest in gun ownership has
rates are driven by a number of factors, not begun to wane. From 2008 to 2011,
the recent spike is mainly attributable to the number of background checks has
fears about the possibility of tougher risen at an average annual rate of 9.0%
gun-control legislation from the Obama per year and over the first nine months
administration. With another of 2012, the number of background
presidential election looming in checks rose 12.5% compared to the same
November, gun enthusiasts are working period in 2011.
themselves into a frenzy over what Fears about increasing crime
another four years under the Obama and civil disorder due to the
administration may hold for gun laws. economic downturn have also
WWW.IBISWORLD.COM Guns&AmmunitionManufacturingintheUS October 2012 7
IndustryPerformance
Private-sector influenced civilian gun purchases. still grown, ostensibly providing
demand While crime has not risen during people with a sense of security
the past five years, guns sales have during uncertain times.
continued
Internationaltrade Domestic consumers have increasingly
turned to imports to satisfy their rapidly Consumers are increasingly

growing demand for guns and
looking to imports to
ammunition. With demand for industry
products surging during the past five satisfy demand for guns
years, domestic manufacturers have
struggled to keep up. The United States is
a net exporter of industry products, about 39.0% of total exports in 2012.
though the gap between industry imports Canada is a large buyer of US exports in
and exports has been closing. In 2012, the this industry due to the North American
industry will export about $1.6 billion Free Trade Agreement (NAFTA) and its
more than it imports. The industry gets a geographic proximity to the United States.
large portion of its firearm imports from Israel, the United Kingdom and Japan are
Austria and Italy, due to the popularity of the Unites States’ largest customers for
the Glock and Beretta brands, respectively. ammunition and ordnance products.
Germany and the United Kingdom are the Industry exports are expected to grow at a
most popular sources of imports of rate of 6.1% per year on average to $4.4
ammunition and ordnance products. Over billion over the five years to 2012.
the five years to 2012, imports are Overall, profitability has increased due
expected to grow at an average rate of to rising demand for guns and
3.6% per year to $2.8 billion. ammunition; however, the increasing
Over the period, exports are also level of import penetration into the US
expected to grow at a faster pace than market has tempered this growth. The
imports. Canada, the United Kingdom and rising presence of imports limits the
Australia purchase the majority of the extent that domestic producers can
industry’s firearm exports, accounting for increase prices and profit margins.
Consolidation Mergers and acquisitions are rampant economies of scale and are attempting to
within the industry. Within the five years gain a competitive advantage through
to 2012, private-equity firm Cerberus acquisition and growth.
went on an acquisition spree for weapons In 2012, IBISWorld estimates that 69
manufacturers prior to gun and people on average are employed per
ammunition conglomerate Freedom industry establishment, earning $61,379
Group’s initial public offering. Gun each. From 2007 to 2012, the number of
manufacturers Smith & Wesson, and establishments is expected to grow at an
Sturm, Ruger & Company Inc. have also average annual rate of 1.6% to 510, with
acquired a number of companies over the the number of employees increasing at an
past few years to expand the breadth of average annual rate of 1.8% to 35,165.
products they offer. The trend toward Over this period, wages are estimated to
consolidation indicates that major increase at an average annual rate of
players are realizing the benefits of 4.2% to $2.2 billion.
WWW.IBISWORLD.COM Guns&AmmunitionManufacturingintheUS October 2012 8
IndustryPerformance
Industry The Guns and Ammunition
As the US withdraws from
Manufacturing industry’s trajectory over 
Outlook
the next five years will largely depend on the Middle East, military
the United States’ continued involvement
spending will slow
in foreign conflicts and perceptions about
the future of firearms legislation. While
revenue surged during the five years to continues to wind down combat
2012, it is forecast to move more in line operations in Iraq and Afghanistan. On
with historical growth rates from 2012 to the other hand, the threat of terrorism will
2017. Revenue is expected to increase likely persist for years to come, resulting
4.3% increase in 2013 to $12.2 billion. in continued funding of federal, state and
From 2012 to 2017, IBISWorld forecasts local law enforcement to expand terrorism
that revenue will grow at an annualized prevention and response capabilities.
rate of 3.5% per year to $13.9 billion. After record growth in civilian small
Lower government spending arms and ammunition sales during the
domestically and abroad have, and will past few years, demand is expected to
continue to, dampen industry demand. moderate over the next five years. As the
Federal, state and local law enforcement economy continues to recover, fears
agencies are projected to cut back on about increased crime due to the
spending as stimulus funding dries up and recession and concerns about changes to
budgetary constraints return. Military gun laws will begin to subside, causing
spending abroad is also forecast to decline this segment’s uncharacteristically fast
over the next five years as the US growth rate to slow.
Internationaltrade, The Guns and Ammunition more moderate pace and the industry is
establishmentsand Manufacturing industry faces challenges forced to compete with foreign imports.
ahead, many of which are part of long- IBISWorld projects the number of
employment
term trends within the industry. establishments will grow, however,
Domestic producers have dealt with because of sustained demand for guns
rising import competition for years; some and ammunition. Market share is also
have moved production offshore to expected to shift in favor of the industry’s
emerging economies with cheaper labor larger participants, though mostly
or acquired foreign weapons through acquisitions. These operators
manufacturers. Import competition will have sizable manufacturing facilities with
continue in the future, with imports lower production costs, enabling them to
satisfying a growing portion of domestic capture an increasing portion of the
demand. Over the five years to 2017, market at the expense of smaller players.
imports are forecast to grow at a rate of Over the next five years, the number of
5.4% per year to $3.6 billion. Exports are establishments is projected to grow 1.0%
forecast to grow at an average annual rate per year on average to 535, while
of 2.3% in the same period to $5.0 employment is forecast to grow 0.1% per
billion. Despite import and export year on average to 35,426 people. As a
growth, imports are forecast to far result, the average number of employees
outpace exports in the future. per establishment is forecast to decline
Profitability is projected to decline from 69 in 2012 to 66 in 2017, while the
slightly over the next five years as average wage will increase from $61,379
demand and revenue growth slows to a in 2012 to $71,267 in 2017.
WWW.IBISWORLD.COM Guns&AmmunitionManufacturingintheUS October 2012 9
IndustryPerformance
LifeCycleStage Revenue is outpacing GDP growth
Industry firms are undergoing consolidation
Import growth is occurring
Innovation is improving existing products
rather than creating new markets
y Maturity QualityGrowth
m 20
no Company High growth in economic KeyFeaturesofaGrowthIndustry
o consolidation; importance; weaker companies
c
e level of economic close down; developed Revenue grows faster than the economy
of importance stable technology and markets
e Many new companies enter the market
ar Rapid technology & process change
h
s
n 15 Growing customer acceptance of product
thi Rapid introduction of products & brands
w
o
Gr
%
10
QuantityGrowth
Many new companies;
minor growth in economic
importance; substantial
5 technology change
Guns&AmmunitionManufacturing
ExplosivesManufacturing
0 SecurityServices MetalPipe&TubeManufacturing
SportingGoodsStores
SpaceVehicle&Missile
Manufacturing
–5 Decline
Shrinking economic
importance
–10
–10 –5 0 5 10 15 20
%Growthinnumberofestablishments
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Guns&AmmunitionManufacturingintheUS October 2012 10
IndustryPerformance
IndustryLifeCycle After years of maturity, the industry has of small companies to expand their
entered a new phase of growth. Due to a product lines. Large players within this
number of factors, including a industry have observed the spike in
This industry
resurgence of demand from the military demand and have been scrambling to
is Growing
and civilian sectors, industry revenue has expand their product lines to
surged over the last five years and it is accommodate growing customer bases.
expected to continue growing over the IBISWorld estimates the number of firms
next five years. From 2007 to 2017, will grow at an average rate of 1.3% per
industry value added (IVA), which year over the five years to 2012. With
measures an industry’s contribution to demand for industry products rising so
GDP, is expected to grow at an annual quickly, consumers have increasingly
rate of 4.6% per year, compared with been relying on imports to satisfy
GDP growth over the same period of domestic demand. Imports have grown
1.8%. Over the past five years and next from $2.3 billion in 2007 to $2.8 billion
five years, revenue growth is expected to in 2012.
far outpace GDP growth. While the industry is constantly
Over the past five years, significant innovating existing products, its core
players have engaged in a multitude of products and major markets have
mergers and acquisitions, including essentially been established and its
Freedom Group’s recent acquisition participants are mostly focused on
spree and both Smith & Wesson’s and winning market share from competing
Sturm, Ruger & Company’s acquisitions countries and companies.