Thinking of Buying a Tobacconist Business in Australia? Here Are 3 Vital Questions to Ask

Australia’s tobacco wholesaling and retail sector, which supplies tobacconists and specialist stores, generated $1.46 billion in 2025 across 63 enterprises, employing around 1,800 people.

Despite a long-term decline in smoking rates, tobacconists remain an important part of the retail landscape. While cigarette sales have fallen, specialist stores offering cigars, accessories, and premium products continue to attract loyal customers seeking variety and exclusivity unavailable in supermarkets. However, tightening regulations, rising excise taxes, and the growing prevalence of illicit tobacco products continue to challenge profit margins and business sustainability.

1. Is the Business Financially Stable Amid Declining Tobacco Sales?

Why It Matters:

Profitability in the tobacconist sector depends on managing cost pressures from excise increases and competition from both supermarkets and illegal tobacco. Buyers should assess whether the business has strong supplier relationships and diversified revenue streams.

What to Check:

• Revenue trends – Industry revenue has fallen by 16.4% annually since 2020, with further declines forecast at 4% per year through 2030, totalling around $1.2 billion.

• Profit margins – Average margins remain high at 20.9%, but are expected to shrink as the market contracts and excise taxes rise.

• Product mix – Value cigarettes now account for 37.1% of sales, while roll-your-own tobacco (9.8%) and cigars (4%) have grown as price-sensitive customers shift from premium products.

• Illicit trade impact – As of 2023, 28.6% of tobacco consumed in Australia was illicit, up from 16.7% in 2020, significantly eroding legitimate retail profits.

• Supplier concentration – Major wholesalers like British American Tobacco (41.3%), Imperial Tobacco (25.4%), and Philip Morris (21.4%) dominate supply chains. Independent stores must maintain reliable distributor links to remain competitive.

2. Does the Business Have Competitive Positioning and Loyal Customer Base?

Why It Matters:

Tobacconists compete on service, variety, and brand recognition rather than price, since excise and plain packaging laws limit promotional opportunities. Stores with loyal local clientele and diversified offerings perform better in this highly regulated environment.

What to Check:

• Customer segmentation – Tobacconists account for 25% of all tobacco retail sales, with a notable share coming from premium cigars and pipe tobacco, categories less affected by price-sensitive consumers.

• Store variety – Successful operators offer accessories, vaping products (where legal), lighters, and gifts to supplement tobacco margins.

• Reputation and location – Stores near major shopping centres or transport hubs typically attract steady trade from regular customers.

• Regulatory compliance – Retailers must hold a tobacco retail licence and comply with the Tobacco Plain Packaging Act 2011 and display restrictions under state legislation.

• Community engagement – Niche branding and membership programs can help tobacconists retain repeat customers as mainstream advertising remains prohibited.

3. Is the Business Positioned to Adapt to Market and Regulatory Shifts?

Why It Matters:

With smoking rates projected to decline by 2.7% annually to 2032, tobacconists need to anticipate evolving regulations and consumer behaviour. Businesses that diversify or modernise their model will be more resilient to ongoing change.

What to Check:

• Regulatory outlook – Excise rates are set to rise by 5% per year through 2026, further tightening margins.

• Vaping legislation – Government reforms restrict nicotine vapes to pharmacies only, but ongoing regulation changes may open new legal retail opportunities.

• Sustainability focus – Anti-smoking campaigns and public health initiatives will continue to suppress consumption. Businesses can reposition towards premium, collectible, or lifestyle products.

• Technology use – POS systems with age verification, inventory tracking, and loyalty programs support compliance and efficiency.

• Diversification opportunities – Expanding into cigars, accessories, and legal alternatives can offset cigarette sales declines.

Ready to Invest in a Thriving Tobacconist Business?

While tobacco sales face long-term decline, tobacconists with loyal clientele, strong supplier relationships, and diversified product offerings continue to perform steadily.

Success depends on compliance, adaptability, and strategic positioning in a market where regulation, price pressure, and consumer preferences are evolving rapidly.

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