Between 1965 and 2015, the U.S. adult smoking rate 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. like Altria (NYSE:MO), Reynolds American (NYSE:RAI), and Vector Group (NYSE:VGR).

Graph showing U.S. market share of cigarette companies

Data source: Company earnings reports. Chart by author.

Altria's flagship Marlboro brand remains the top brand in America, with a whopping 44% of the market. 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 like e-cigarettes, and consolidating the market. That's why Reynolds bought former third-place player Lorillard, and why British American Tobacco will soon acquire Reynolds to become the second-largest U.S. tobacco company.

U.S. tobacco companies will likely keep growing, since the average price of a pack of cigarettes across the U.S. 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.

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