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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 econ

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?

skybrian 9y ago
A much larger market. Nobody buys crayons or even school supplies every day.
- bgia 9y ago
  Exactly. And nobody gets addicted to crayons.
  - jacoblambda 9y ago
    marines?
  - mikeash 9y ago
    I beg to differ. Still, feeding a crayon addiction is much cheaper, since they’re multi-use.
cjhveal 9y ago
I'd hazard that the difference is in the demand for the products. The total addressable market for crayons is likely much smaller, and would be more quickly saturated if you were to ramp up production. Cigarettes have killer recurring revenue and the demand for them is highly inelastic.
flogic 9y ago
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 9y ago
  That is true, but I feel obliged to point out that tobacco is an incredibly difficult and labor-intensive crop.
  - cglace 9y ago
    But they don't have to grow it.
    - TylerE 9y ago
      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 9y ago
        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.
- mikejharrison 9y ago
  They’ve also significantly reduced the materials consumed over the years. Cigarettes went from 8.6mm diameter to 8.5, 8.4, 7.9. Introduced slims 7.1, superslims 5.4. They started expanding the cellular structure of the tobacco with co2 to increase its ‘filling capability’. Longer filters, hollow filter tips. Thinner tipping paper. Thinner paperboard, thinner foil, less glue. The list goes on and on. Lots spent on R&D, but small material savings on billions of cigarettes soon adds up.
deleted 9y ago
[deleted]

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?

skybrian 9y ago

A much larger market. Nobody buys crayons or even school supplies every day.

bgia 9y ago
Exactly. And nobody gets addicted to crayons.
- jacoblambda 9y ago
  marines?
- mikeash 9y ago
  I beg to differ. Still, feeding a crayon addiction is much cheaper, since they’re multi-use.

cjhveal 9y ago

I'd hazard that the difference is in the demand for the products. The total addressable market for crayons is likely much smaller, and would be more quickly saturated if you were to ramp up production. Cigarettes have killer recurring revenue and the demand for them is highly inelastic.

flogic 9y ago

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 9y ago
That is true, but I feel obliged to point out that tobacco is an incredibly difficult and labor-intensive crop.
- cglace 9y ago
  But they don't have to grow it.
  - TylerE 9y ago
    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 9y ago
      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.
mikejharrison 9y ago
They’ve also significantly reduced the materials consumed over the years. Cigarettes went from 8.6mm diameter to 8.5, 8.4, 7.9. Introduced slims 7.1, superslims 5.4. They started expanding the cellular structure of the tobacco with co2 to increase its ‘filling capability’. Longer filters, hollow filter tips. Thinner tipping paper. Thinner paperboard, thinner foil, less glue. The list goes on and on. Lots spent on R&D, but small material savings on billions of cigarettes soon adds up.

deleted 9y ago

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