33299A Guns & Ammunition Manufacturing

42 Pages·2017·3.35 MB·English

WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the US June 2017 1
Lock and load: After recent sales surge, demand
normalizes as fears of gun control subside
This report was provided to
University of Nevada, Reno (2126926196)
by IBISWorld on 01 September 2017 in accordance with their license agreement with IBISWorld
IBISWorld Industry Report 33299a
Guns & Ammunition
Manufacturing in the US
June 2017 Daniel Longo
2 About this Industry 17 International Trade 32 Operating Conditions
2 Industry Definition 19 Business Locations 32 Capital Intensity
2 Main Activities 33 Technology & Systems
2 Similar Industries 21 Competitive Landscape 34 Revenue Volatility
3 Additional Resources 21 Market Share Concentration 34 Regulation & Policy
21 Key Success Factors 36 Industry Assistance
4 Industry at a Glance 21 Cost Structure Benchmarks
23 Basis of Competition 38 Key Statistics
5 Industry Performance 24 Barriers to Entry 38 Industry Data
5 Executive Summary 25 Industry Globalization 38 Annual Change
5 Key External Drivers 38 Key Ratios
7 Current Performance 26 Major Companies 39 Industry Financial Ratios
10 Industry Outlook 26 General Dynamics Corp.
12 Industry Life Cycle 27 Vista Outdoor Operations LLC 40 Jargon & Glossary
28 Remington Outdoor Company
14 Products & Markets 28 American Outdoor Brands Corporation
14 Supply Chain 30 Olin Corp.
14 Products & Services 31 Orbital ATK Inc.
15 Demand Determinants
16 Major Markets
www.ibisworld.com | 1-800-330-3772 | [email protected]
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the US June 2017 2
About this Industry
Industry Definition This industry manufactures small arms
(including shotguns, rifles, revolvers, pistols,
machine guns and grenade launchers), and
ammunition, ordnance and accessories.
Main Activities The primary activities of this industry are
Machine guns manufacturing
Shotguns and rifles manufacturing
Handguns manufacturing
Gun magazines manufacturing
Small arms ammunition manufacturing
Ammunition (except small arms) manufacturing
Grenades manufacturing
Mines manufacturing
Artillery and tank ammunition manufacturing
Howitzers and man-portable and vehicle installed rockets and rocket launchers manufacturing
The major products and services in this industry are
Ordnance & accessories
Small arms & machine guns
Small arms ammunition
Other ammunition
Similar Industries 32592 Explosives Manufacturing in the US
This industry manufacturers blasting caps, detonating caps and safety fuses.
33641a Aircraft, Engine & Parts Manufacturing in the US
This industry manufactures military aircraft, including bombers, fighter jets and attack helicopters.
33641b Space Vehicle & Missile Manufacturing in the US
This industry manufactures guided missiles, which are like ordnance products, such as mortars, rocket
launchers and howitzers.
33699b Tank & Armored Vehicle Manufacturing in the US
This industry manufactures complete military armored vehicles, combat tanks and specialized components
for combat tanks, including self-propelled weapons.
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About this Industry
Additional Resources For additional information on this industry
www.atf.gov
Bureau of Alcohol, Tobacco, Firearms and Explosives
www.nra.org
National Rifle Association
www.nssf.org
National Shooting Sports Foundation
www.defense.gov
US Department of Defense
IBISWorld writes over 1000 US
industry reports, which are updated
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reports, go to www.ibisworld.com
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Industry at a Glance
Guns & Ammunition Manufacturing in 2017
Key Statistics Revenue Annual Growth 12-17 Annual Growth 17-22
Snapshot $13.3bn -1.0% 3.5%
Profit Exports Businesses
$1.0bn $8.4bn 659
Revenue vs. employment growth Federal funding for defense
Market Share
General Dynamics 15 10
Corp.
10
12.2% 5
5
e e
Vista Outdoor g g
n n
a 0 a 0
Operations LLC 1 1.7% h h
c c
% -5 %
American Outdoor -5
-10
Brands Corporation
6.6% -15 -10
Year 09 11 13 15 17 19 21 23 Year 10 12 14 16 18 20 22
Remington Outdoor Revenue Employment
Company SOURCE: WWW.IBISWORLD.COM
6.5% Products and services segmentation (2017)
Olin Corp.
9.5%
5.8% Ordnance & accessories
p. 26
12.9%
Other ammunition
Key External Drivers
47.6%
Federal funding for defense
Non-NATO defense Small arms & machine guns
spending
Local and state
government investment
Per capita disposable
30.0%
income
Small arms ammunition
Trade-weighted index
p. 5
SOURCE: WWW.IBISWORLD.COM
Industry Structure Life Cycle Stage Mature Regulation Level Heavy
Revenue Volatility Medium Technology Change Medium
Capital Intensity Medium Barriers to Entry Medium
Industry Assistance Medium Industry Globalization High
Concentration Level Low Competition Level Medium
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 38
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Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
Executive The Guns and Ammunition budget deficit, spending on industry-
Summary Manufacturing industry has experienced related products fell. While the defense
inconsistent growth over the past five market lost demand, the civilian small
years. Industry operators design and arms and ammunition segment performed
manufacture small arms, bombs, very well. Increasing consumer concerns
ordnances, ammunition, artillery and about stricter gun control laws led many
related parts. Companies in this industry to purchase industry products in
vary between small arms manufacturers anticipation of a ban. As a result, despite
to large multibillion-dollar defense defense cuts, industry revenue made
contractors, with many companies strong gains. However, as fears of gun
serving both the civilian and military regulation subsided following President
markets. During the period, often- Trump’s electoral victory in November
diverging trends in these two markets 2016, demand for industry products fell,
drove industry performance. As a result, negatively impacting industry revenue. In
response to a weakening domestic military
market, industry players have increasingly
Industry operators will increasingly
sought growth in exports, which have
turn to export markets to offset weaker been rising due to geopolitical tensions
and global instability.
domestic demand
Over the five years to 2022, industry
revenue is forecast to grow at an
over the five years to 2017, industry annualized rate of 3.5% to $15.8 billion.
revenue is expected to decrease at an The defense market is anticipated to
annualized rate of 1.0% to $13.3 billion, remain at historically low levels, and the
including a 6.8% decline in 2017. domestic side is also set to remain weaker
Prior to the five-year period, the than average due to allayed fears of
expanding US defense budget and combat national gun control legislation under the
operations in the Middle East greatly Trump administration. As a result,
increased demand for military-related industry operators will increasingly turn
small arms, ammunition, bombs, artillery to export markets to offset weaker
shells, ordnances and other munitions. domestic demand. Moreover, industry
However, as the United States began to profit is projected to slightly increase due
wind down combat operations and to increased consumer demand and
Congress attempted to reduce the federal defense contractor restructuring.
Key External Drivers Federal funding for defense funding for defense is expected to
The US government, especially the increase in 2017.
Department of Defense, is a major
purchaser of industry products, Non-NATO defense spending
particularly those of a higher caliber and Non-NATO defense spending is the sum
complexity. As the expenditure allocated of global military spending, excluding the
for these items increases, sales and 29 members of the North Atlantic Treaty
revenue typically grow. Government Organization. Therefore, this driver
funding for defense is influenced by fears excludes spending by most Western
of terrorism, defense expenditures of states, focusing more on non-Western
rival nations, outbreaks of conflict and nations. When non-NATO spending
other geopolitical factors. Federal increases, the market for industry exports
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Industry Performance
Key External Drivers climbs. Non-NATO defense spending is industry products. When incomes fall,
continued expected to increase in 2017. demand for industry products often
declines. Per capita disposable income is
Local and state government investment expected to increase in 2017.
Growth in spending by state and local
government agencies generally coincides Trade-weighted index
with increased funding of law The trade-weighted index (TWI)
enforcement. When law enforcement measures the strength of the US dollar
funding increases, gun and ammunition relative to the currencies of its largest
purchases also grow. Local and state trading partners. Since exports
government investment is expected to account for a moderate share of
increase in 2017, representing a potential industry revenue and imports account
opportunity for the industry. for a significant share of domestic
demand, the TWI can significantly
Per capita disposable income affect sales volumes. The trade-
Guns and ammunition are typically weighted index is expected to increase
discretionary purchases. When incomes over 2017, representing a potential
rise, individuals can better afford threat to the industry.
Federal funding for defense Local and state government investment
10 8
5 4
e e
g g
n n
a 0 a 0
h h
c c
% %
-5 -4
-10 -8
Year 10 12 14 16 18 20 22 Year 10 12 14 16 18 20 22
SOURCE: WWW.IBISWORLD.COM
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Industry Performance
Current The Guns and Ammunition
Industry revenue
Manufacturing industry has experienced
Performance
increased volatility over the past five
15
years. The industry experienced
aggressive revenue growth in the years 10
after the recession as fears of more
5
restrictive gun control laws overrode e
g
n
consumers’ financial constraints. a 0
h
However, as the US military began to % c -5
withdraw from the Middle East and
Congress sought to address deficit -10
spending, federal funding for defense
-15
dropped, greatly tempering overall Year 09 11 13 15 17 19 21 23
revenue growth. In addition, fears of
greater gun control subsided in 2014 SOURCE: WWW.IBISWORLD.COM
after a series of measures proposed by
the Obama administration failed in the ammunition to partially offset a
Senate, including a ban on assault weakening defense market at home. Even
weapons. The subsequent combination of domestic military demand recently
falling military and consumer spending picked up as US bombing operations
caused revenue to fall. against ISIS intensified.
Consumer demand was rekindled The 2016 US presidential election may
following renewed emphasis on gun have exerted the greatest impact on the
control in 2016, as well as security fears. industry. Donald J. Trump’s victory over
The June 2016 mass shooting at a Hillary Clinton eased concerns over
nightclub in Orlando, FL, combined with sweeping gun reform. Indeed, his win
pollsters’ favored odds of Hillary Clinton caused a 6.8% revenue decline in 2017
winning the November election, stoked alone. Therefore, industry revenue is
fears of impending legislation. On the expected to decline at an annualized rate
military side, many manufacturers used of 1.0% to $13.3 billion over the five years
growing foreign demand for US arms and to 2017.
War and government The wars in Iraq and Afghanistan ushered decline in demand for industry products,
expenditure in substantial increases in military as warfare requires extensive resupply of
spending by the government, resulting in ammunition. The United States stationed
additional purchases of the industry’s 90,000 troops in Afghanistan in 2012,
products. The industry especially increased compared with 10,000 at the beginning of
sales of its military-grade, high-caliber 2016. In addition, budget sequestration
weapons systems and munitions, such as has led to cuts in military spending.
tank ammo and howitzers. IBISWorld expects federal funding for
However, this initial boom has recently defense to fall from $644.3 billion in 2012
become a detriment. In 2011, the United to $540.9 billion in 2017. The military’s
States completed the withdrawal of its decline in gun and ammunition purchases
troops from Iraq and has more recently has played a significant role in slowing
begun curtailing combat operations in down industry revenue growth. However,
Afghanistan. The withdrawal of US troops most recently, US military spending on
from the Middle East resulted in a sharp industry products has climbed as bombing
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Industry Performance
War and government operations against ISIS has created terrorist attack prevention, thereby
expenditure demand for bombs and ammunition. increasing budgets for guns and
Federal government and local law ammunition. Nevertheless, falling tax
continued
enforcement agencies’ budgets also grew receipts caused by poor economic conditions
over the past five years. As a result of the have put pressure on law enforcement
sustained risk of terrorism, the budgets, with local and state government
responsibilities of federal, state and local investment growing at a tepid annualized
departments have expanded to include rate of 0.6% over the five years to 2017.
Commercial demand Overall, private-sector demand has been
Private-sector demand has
the biggest driver of industry revenue
growth, even picking up the slack caused been the biggest driver of
by declining military spending. The past
industry revenue growth
five years’ growth is mainly attributable
to fears of potentially tougher gun control
legislation. In 2012, with the presidential federal level. Therefore, industry revenue
election looming, many consumers fell 10.6% that year. However, this dip was
looking to purchase industry products only temporary, as attacks such as the
wondered what another four years of the Charleston, SC church shooting and the
Obama administration might hold for San Bernardino, CA, terrorist attacks
gun laws, and whether purchasing a stoked consumer fears of regulation and
firearm in the future would prove more the need for self-defense, all during a
difficult. The situation was exacerbated heated presidential campaign. Domestic
by high-profile mass shootings, such as in demand for guns and ammunition surged
Aurora, CO, and Sandy Hook Elementary in the second half of 2015, breaking
School in Newtown, CT, both of which previous records, with the FBI National
took place in 2012. In December 2012, Instant Criminal Background Check
the Obama administration announced its System (NICS) recording an all-time high
intention to reform gun laws to prevent for checks during the year. Moreover, in
similar tragedies from occurring. early 2016, President Barack Obama issued
As a result, consumers purchased an executive order that expanded gun sales
firearms and ammunition at record rates, licensing and background check coverage,
with industry revenue surging through likely further heightening consumer
2013. In 2014, demand began to normalize anxiety over regulations. The new
as it became clear that more stringent gun administration has rolled back Mr.
control laws would not be passed on a Obama’s efforts.
International trade Amid a weakening domestic military spending, which excludes most Western
market, the industry’s defense contractors military expenditure, is expected to climb
have increasingly sought growth in foreign an annualized 2.9% to $865.6 billion.
markets. Fortunately for operators, Demand for munitions from US allies in
growing geopolitical tensions and the Middle East has surged in recent years
instability around the world have boosted as tensions with Iran climbed and conflict
military spending in many regions. Over and instability proliferated. Tensions in
the five years to 2017, non-NATO defense Asia have also increased, creating further
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Industry Performance
International trade demand for US-made guns and market. Once consumer demand for
continued ammunition. As a result, industry exports industry products declined in 2014,
are expected to grow at an annualized rate imports plunged. However, the recent
of 5.9% to $8.4 billion over the five years pickup in demand has helped imports
to 2017. recover. Over the five years to 2017,
Unlike exports, industry imports are imports are expected to increase at an
much more focused on the consumer annualized rate of 4.9% to $6.9 billion.
Consolidation Declining demand from the military and
Declining demand from the
the 2014 contraction is expected to cause
industry profit to drop from 9.8% of military is expected to cause
revenue in 2012 to 7.8% in 2017. Overall
industry profit to drop
market share concentration, defined as
the top players’ share of industry
revenue, has declined over the five years prevalent. For example, private equity
to 2017 due to declining revenue for the firm Cerberus Capital went on an
industry’s biggest defense suppliers. The acquisition spree for weapons
military market has high barriers to manufacturers prior to gun and
entry, and its products tend to be more ammunition conglomerate Freedom
sophisticated and expensive. Therefore, Group’s attempted public offering. This
this segment accounts for a large portion trend toward consolidation indicates that
of industry revenue and is dominated by major players within this segment are
a few large companies, including General realizing the benefits of economies of
Dynamics Corporation and BAE Systems scale and are attempting to gain a
PLC. As a result, this segment skews competitive advantage through
overall industry concentration. When acquisition and growth.
defense spending declined, the resulting Over the five years to 2017, the number
loss in revenue among defense of industry establishments is expected to
contractors caused overall industry grow at an annualized rate of 6.0% to 690.
concentration to also decline. The However, as defense contractors and some
industry further fragmented when Alliant consumer manufacturers restructured, the
Techsystems spun off its commercial number of employees expanded at a
business, now called Vista Outdoor, and slower rate and even declined in recent
merged its defense business with Orbital years. Therefore, industry employment is
Sciences, creating Orbital ATK. expected to grow at an annualized rate of
However, in the consumer market, only 4.0% to 45,308 workers during the
mergers and acquisitions have been more five-year period.
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Industry Performance
Industry The Guns and Ammunition normalize. Increased military spending
Manufacturing industry’s trajectory on industry products will help bolster
Outlook
over the next five years will largely revenue growth, despite overall
depend on US defense spending and spending remaining below levels
perceptions about the future of experienced in 2012. Moreover,
firearms legislation. While revenue industry operators will increasingly
experienced some volatility over the depend on exports for expansion. Over
past five years, it is forecast to grow in the five years to 2022, industry revenue
a more tempered fashion as consumer is forecast to grow at an annualized
demand eventually begins to rate of 3.5% to $15.8 billion.
Demand normalizes After years of surging demand,
Geopolitical tensions will
consumers are expected to slow the pace
of their recent gun and ammunition continue to fuel foreign
spending. After previous failed attempts
demand for US munitions
to create more stringent gun regulations,
it has become clear that the chances of
such laws being passed on a federal level Nonetheless, spending will still be well
are increasingly dim. Consequently, below rates in previous years. In
consumers will be less worried about new addition, the overall defense budget is
regulations in the coming years and, after expected to grow over the next five
years of stockpiling, less likely to years, particularly in procurement,
purchase industry products at the same research and development.
rate as in the previous five years. This will Federal, state and local law
likely help to normalize demand in the enforcement agencies are projected to
near term, causing fewer sales. However, remain frugal on spending as budgetary
if prospects for federal regulation constraints persist. For instance, local
increase, higher demand may return. and state government investment is
Some state governments have already projected to grow at a mere annualized
implemented more stringent regulations, rate of 0.9% over the next five years.
potentially driving away demand from Nonetheless, fears of terrorism are
those regions. anticipated to lead to continued funding
While demand from consumers of federal, state and local law
moderates, the government segment is enforcement to expand terrorism
anticipated to slightly pick up. Based on prevention and response capabilities,
President Trump’s fiscal 2018 budget bolstering demand for industry products.
request, US Army, Air Force, Navy and As in the previous five years, industry
Marine outlays for ammunition, small operators will try to increase their
arms, ordnances and similar munitions exposure to the export market.
are anticipated to increase more than Geopolitical tensions and instability in
7.6% between 2018 and 2023. Drivers of the Middle East and Asia will continue to
this trend include increased combat fuel foreign demand for US munitions.
operations in Iraq and Syria and the However, exports are expected to level off
eventual implementation of the Modular in the near term after the recent surge.
Handgun Systems (MHS) contract. The Alongside demand normalizing, export
MHS is an Army and Air Force attempt growth is expected to slow, growing at an
to replace their Beretta M9 pistol. annualized rate of 3.6% to $10.1 billion
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