Business Plan Example Ammo Manufacturer
Business Plan Example Ammo Manufacturer
Business Plan Example Ammo Manufacturer
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Funding Business Plan
TABLE OF CONTENTS
1. Executive Summary 1
2. Company Values 4
3. Company Products 4
4. Keys To Success 5
5. Short Term Goals 6
6. Target Markets 7
7. Sales Strategy 7
8. Management Plan 9
9. Key Personnel 11
10. Competitors 28
11. SWOT Analysis 29
12. Business/Expansion Strategy 30
13. Inventory Management/Pricing 31
14. Start Up Expenses 32
15. Action Items 33
16. Financial Projections 34
17. Market Research 38
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Funding Business Plan
1. EXECUTIVE SUMMARY
Utilizing the unique experiences and skillsets of four owners with an extensive
amount of project and business management experience, Morgan Ammunition
LLC was founded in May of 2014 for the purpose of supplying ammunition to
private and public sector clients. Headquartered in Austin TX, we intend to reach
our target customers located in surrounding states by directly pursing contracting
opportunities as a direct supplier, along with establishing relationships with brick
and mortar gun stores to supply ammunition as a wholesale distributor.
In accordance with our stated company mission and company vision, we practice
attention to detail from start to finish in every aspect of our company whether it be on
the manufacturing floor, customer service, or business relations. Morgan Ammunition
seeks relationships with ammunition suppliers who mirror our vision and who are
known for upholding and perpetuating the quality of the industry.
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2. COMPANY VALUES
In order to successfully fulfill our mission and realize our vision, Morgan
Ammunition subscribes to the following values that govern how we do business,
and how we treat our employees:
Professionalism
Dependability
Integrity
Quality
3. COMPANY PRODUCTS
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In an effort to achieve the company’s vision as the company grows and expands,
Morgan Ammunition shall diversify its product offerings to include the
manufacture and supply of the following types of ammunition:
.45
.38
5.56
.223
.338
.308
Morgan Ammunition shall also produce brass casings for each caliber we produce
and we may also expand into producing Jacketed Hollow Point (JHP) for each
caliber.
4. KEYS TO SUCCESS
Morgan Ammunition has identified the following elements and important factors
contributing to the success of the company:
Good Reputation – Being known for providing quality and reliable products
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Financial Projections
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
1 2 3 4
Year 2014 2015 2016 2017
Gross Revenue 0 $175,000 $225,000 $300,000
Net Income 0 $26,250 $33,750 $45,000
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6. TARGET MARKETS
Morgan Ammunition has identified the following potential target market segments:
Distributing To Retailers:
o Gun Stores
o Hobby Shops
o General Retailers
Governmental Agencies:
o Department of Defense (Air Force, Army, Navy, etc.)
o Local Governments (Municipal Agencies, School Districts, etc.)
7. SALES STRATEGY
Morgan Ammunition shall implement the following sales strategy to market the
company to each of the identified target market segments:
Distributing To Retailers:
STEP #1: Morgan Ammunition will identify potential retailers within our
geographic sales area and prequalify/vet them as potential clients.
STEP #2: For those retailers who are vetted as potential clients, the company
representative responsible for business development shall market the company’s
product offerings to the retailer’s manager in an effort to secure a distribution
agreement to become a distributor to the retailer
Governmental Agencies:
Step #1: Morgan Ammunition shall obtain the applicable small business
certifications to enhance our ability to do to business with governmental agencies.
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Step #2: Morgan Ammunition shall register as a vendor with all target
governmental agencies.
Step #3: Utilizing our company’s marketing materials; Morgan Ammunition shall
send introductions to each agency’s small business specialist to request a meeting
in an effort to develop a relationship with our target customer.
Step #4: Morgan Ammunition shall search the applicable governmental agency
websites to receive notices of contracting opportunities that are consistent with the
company’s capabilities.
Step #2: Morgan Ammunition shall implement free social media platforms such as
facebook, twitter and LinkedIn to promote the company’s brand to target
customers, and to maintain a relationship with them via the internet spotlighting
any deals, upcoming events or new product offerings as they occur.
Step #3: Representatives from Morgan Ammunition shall join and participate in
events hosted by local Chambers of Commerce to promote the company’s brand
within the local business community.
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Governmental
Agencies, 15%
Individuals, 50%
Retailers, 35%
8. MANAGEMNET PLAN
President
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Duties President VP of VP of VP of SC
Ops Prod.
Business Development x
Production x
Logistics/Supply x
Chain/Inventory
HR: Hiring/Firing/Interviewing x x x x
Program/Project Management x
Budgeting/Purchasing x x
*Duties To Be Outsourced:
Payroll
Bookkeeping
Financial Reporting
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9. KEY PERSONNEL
INSERT NAME
Work Experience
Risk Agent
W Austin Hotel in Austin, Texas (April 2012-January 2014, October
2014-Current)
● Maintain safety and security of property, employees and guests
● Monitor all surveillance footage of property
● Operate all software and hardware of Security command office
● Maintain knowledge of all rules and regulations to provide proper
compliance and enforcement
● Assist in training of all new hires
● Provide excellent customer service in the W way
VIP Host/Security
Haven Nightclub in Austin, Texas (August 2011-April 2012)
● Recognize VIP guests and expedite entry into Venue
● Assist in selling tables for bottle service
● Assist in Day to Day Function of Venue
● Maintain Club Security
Director of Operations
Longhorn Moving & Storage Inc. in Austin, Texas (May 2011-August 2011)
● Manage 25+ employee's including Full-time and Part-time
● Delegating tasks to senior staff to ensure optimal productivity and customer
service
● Acquire and Maintain proper supplies, equipment and vehicles for daily
operations
● Set pricing for products and services
● Oversee and manage client bookings schedule
● Interview and hire new employees
● Employee scheduling
● Maintain compliance of all local and state rules & regulations
● Obtain & maintain business contacts to grow and sustain the company
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Sales Associate
The Mobile Solution in Austin, Texas (April 2009-May 2009)
● Provide Excellent Customer Service
● Knowledgeable in all T-Mobile products and services
● Draw customers into sales conversations
● Efficiently close sales
● Communicate clearly
Security
The Ranch in Austin, Texas (Oct. 2008-April 2009)
● Maintain Club Security
● TABC Certified
● Assist in Day to Day function of Venue
● Maintain Club cleanliness
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Education History
Northampton High School in Eastville, Virginia
(Sept. 1998-June 2002)
● Diploma Advanced Studies
● Certificate of Completion Business Administration
TABC Certification
Valid July 2013-July 2015
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INSERT NAME
SUMMARY:
• Device/Package Qualification
• Device Characterization
• Device/Program Verification
• Cost Reduction
• Prototype Deliveries
• Yield Enhancement
• DVT/DFT/Fault Grading
• Statistical Analysis
• UNIX
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PROFESSIONAL EXPERIENCE
NPI product engineer for 8-bit microcontrollers. In addition to the standard Product
Engineering duties performed, the main tasks performed were test program
enhancement through device characterization and test program optimization. Other
duties included product yield enhancement, cost reduction, lab and tester device
characterization, debugging test hardware, programs and silicon, liaison with
design, fab, assembly, failure analysis labs, factory manufacturing/test and
mentoring and training peers.
Key Results:
NPI lead product engineer for 16-bit microcontrollers. Duties included liaison for
design, device fabrication, assembly, factory manufacturing test, quality
assurance/control, and failure analysis. Tasks performed include test hardware
design and development, test program development and optimization, parametric
pattern coding and generation, functional pattern generation, silicon verification,
qualifications and product manufacturing release within a very aggressive product
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design to launch schedule. Other duties included product yield enhancement, cost
reduction, lab and tester device characterization, debugging test hardware,
programs and silicon, liaison with design, fab, assembly, failure analysis labs and
mentoring and training peers.
Key Results:
Key Results:
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Council) Specification requirements for all 16 bit microcontrollers. Wrote scripts
to automate the fault grading process. Initiated and documented fault grade
strategies. Automated the generation of fault grade reports. Mentored design and
verification engineers in the fault grading process. Supported Chip builds by being
a member of the design, verification and test teams. Leader in developing targeted
IDDQ diagnostics.
Key Results:
Product engineer for 8-bit microcontrollers responsible for device fabrication (fab),
test hardware and program development and optimization, parametric pattern
coding and generation, functional pattern generation, silicon verification,
assembly, qualification, product manufacturing release within a very aggressive
product design to launch schedule. Other duties included product yield
enhancement, cost reduction, scheduling, lab and tester device characterization,
debugging test hardware, programs and silicon, liaison with design, fab, assembly,
failure analysis labs, factory manufacturing/test and mentoring and training peers.
EDUCATION
Lubbock, Texas
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INSERT NAME
Manufacturing Engineer
Professional Strengths
High-Volume Production
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Program & Project Management
Vendor Management
Production Assembly
Optimization
Product Development
Lean Manufacturing
Six Sigma
JIT/WIP/MRP
OSHA/Safety
Kaizen
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Significant Accomplishments:
• Setup the new Apple Mac Pro services production line to service all
countries in the world that will have defective returns, contributing to Apple being
half of the sites annual income. Flextronics
• Saved $1M annually by creating a new process and training employee for a
maintenance program for injection molds. Lancer Corporation
Career Highlights
Product Engineer
The lead engineer of a successful launch of the new Apple Mac Pro services line.
Responsible for the ROI, acquiring, and installation of needed machines and
equipment. Responsible for setting up and maintaining product routings in the
FlexFlow(shop floor control) MES system on the Customer products, including the
process flow, layout and fit-up of multiple test, ECO and repair lines. Interacted
with the customer and various departments on product related issues – engineering
changes, new model development.
• Setup the new Apple Mac Pro services production line to service all
countries in the world that will have defective returns, contributing to having
Apple be half of the sites annual income.
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• Major equipment purchases were under budget by 10% to make any final
unforeseen purchase that might have occurred and on time.
• Setup and validated machines on the production line for essential repair of
components on pc boards.
• Assisted to create the shop floor control flow and processing of serialized
and Non serialized parts.
Manufacturing Engineer
Reviewed and inputted all drawings and manufacturability information for all NPI
coming into plant from the semiconductor, oil and natural gas fields. Assisted plant
production as liaison between manufacturer to customer needing parts in a timely
manner. Created new work instructions for new products introductions, coming
into the plant and revised old, out dated instructions on an as needed basis through
random inspection.
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Lancer Corporation, San Antonio, TX 2009-2010
Manufacturing Engineer
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INSERT NAME
QUALIFICATIONS PROFILE
CORE COMPETENCIES
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PROFESSIONAL EXPERIENCE
Paramedic
• Supply Officer: Tasked with ordering up to fifty medications for the regional
ambulance fleet. Assured medication distribution was compliant by documenting
and utilizing proper procedures through validation and completion of legal
paperwork on narcotic documentation and transfers.
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• Erect hospital medical environments from mobile trucks and shipped
supplies and equipment.
• Triage patients and disaster victims during disaster relief efforts. Assists
local medical and law enforcement personnel.
Medic
• Treated basic common injuries and illnesses and assisted with facility
management of medical lodge.
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• Interacted with current and potential client base through various social
media outlets.
• Providing emergency care for the students, staff, and visitors of the
University of Texas.
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10. COMPETITORS
I. http://www.ammunitiontogo.com/
II. https://alamoammo.com/
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Strengths Weaknesses
Opportunities Threats
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Phase I
Phase II
In phase 2 of our business strategy, Morgan Ammunition shall expand our caliber
offerings along with increasing our productivity abilities by way of purchasing
larger output machines. In this phase, Morgan Ammunition shall also begin
production of our own brass in order to lower production costs and increase profits.
We shall begin focusing on partnering with companies and other industry entities
to further expand our customer base.
Phase III
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Funding Business Plan
Dillon S 1050
This is a commercial grade machine, is capable of loading 1,000 to 1,200 rounds per hour and carries a one year warranty.
Pricing
9mm Luger 115gr & 40mm S&W Auto 15p5gr - Amount in parentheses
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Funding Business Plan
SUPPLY CHAIN MANAGEMENT
Initial Inventory
of 60,000 rounds
Inventory
Replenishment
at 10,000
rounds
Successful Inventory
Management
ITEM COST
LLC Formation $300
Manufacturing Equipment $2,000
Initial Ammunition/Supplies $21,000
Office Space - 6 months $9,000
Utilites - 6 months $1,600
Phone/Internet - 6 months $900
Website/Logo Development $6,500
Initial Advertising/Marketing $3,000
Initial Office Expenses $5,000
Professional Fees $4,000
Working Capital $20,000
Meals and Entertainment/Travel $10,000
Subtotal Initial Start Up Expenses $83,300
Contingency (20%) $16,660
Total Initial Start Up Expenses $99,960
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15. ACTION ITEMS
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Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Total
Cash on hand (beg. of month) $0 $300 $600 $900 $1,200 $1,500 $1,800 $3,150 $4,500 $5,850 $8,075 $10,300
CASH RECEIPTS
Cash sales $12,000 $12,000 $12,000 $12,000 $12,000 $12,000 $15,000 $15,000 $15,000 $17,500 $17,500 $17,500 $169,500
Total Gross Profit $4,200 $4,200 $4,200 $4,200 $4,200 $4,200 $5,250 $5,250 $5,250 $6,125 $6,125 $6,125
TOTAL CASH PAID OUT $3,900 $3,900 $3,900 $3,900 $3,900 $3,900 $3,900 $3,900 $3,900 $3,900 $3,900 $3,900 $46,800
Net Income/Loss $300 $300 $300 $300 $300 $300 $1,350 $1,350 $1,350 $2,225 $2,225 $2,225
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REVENUES EXPENSES
Total Revenues $169,500 Advertising/Marketing $2,400
Insurance $1,200
COST OF GOODS SOLD Meals and entertainment $1,800
Direct Labor (20% of Revenue) $33,900 Office expense $1,800
Materials/Supplies (45% of Revenue) $76,275 Rent/Lease $14,400
Utilities $3,600
Total Cost of Goods Sold $110,175 Professional Fees $3,000
Phone/Internet $1,800
GROSS PROFIT $59,325 Miscellaneous $1,200
Loan Repayment $15,600
Total Operating Expenses $46,800
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Funding Business Plan
REVENUES EXPENSES
Total Revenues $194,925 Advertising/Marketing $2,700
Insurance $1,300
COST OF GOODS SOLD Meals and entertainment $2,000
Direct Labor (20% of Revenue) $38,985 Office expense $2,000
Materials/Supplies (45% of Revenue) $87,716 Rent/Lease $14,400
Utilities $3,600
Total Cost of Goods Sold $126,701 Professional Fees $3,500
Phone/Internet $1,900
GROSS PROFIT $68,224 Miscellaneous $1,500
Loan Repayment $15,600
Total Operating Expenses $48,500
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rd
3 Year Annual Financial Projection
REVENUES EXPENSES
Total Revenues $224,165 Advertising/Marketing $3,000
Insurance $1,400
COST OF GOODS SOLD Meals and entertainment $2,200
Direct Labor (20% of Revenue) $44,833 Office expense $2,350
Materials/Supplies (45% of Revenue) $100,874 Rent/Lease $14,500
Utilities $3,700
Total Cost of Goods Sold $145,707 Professional Fees $4,000
Phone/Internet $2,000
GROSS PROFIT $78,458 Miscellaneous $1,750
Loan Repayment $15,600
Total Operating Expenses $50,500
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WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 1
Industry Definition This industry manufactures small grenade launchers), small arms
arms (including shotguns, rifles, and other ammunition, ordnance
revolvers, pistols, machine guns and and accessories.
Industry at a Glance
Guns & Ammunition Manufacturing in 2014
% change
5 0
Corporation 13.2%
0
BAE Systems PLC −6
−5
8.9%
−10 −12
Freedom Group Year 06 08 10 12 14 16 18 20 Year 08 10 12 14 16 18 20
Inc. 6
.8% Revenue Employment
SOURCE: WWW.IBISWORLD.COM
p. 28
Products and services segmentation (2014)
13.1%
Key External Drivers Other ordnance
and accessories
Federal funding
for defense
Trade-weighted index 31.7%
Small arms
Local and state
government investment
World price of steel
Crime rate
27.2%
Other ammunition
p. 5 28.0%
Small arms ammunition
SOURCE:
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 39
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 5
Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
Executive The Guns and Ammunition control legislation and fears over a
Summary Manufacturing industry was in decline possible increase in crime resulting from
until the start of the 2000s, when the the poor economy. However, many of
September 11 terrorist attacks renewed these trends are now coming to an end.
demand for industry products. Favorable Since 2011, troop withdrawals from the
conditions existed throughout the next Middle East and defense budget cuts
decade and possible tightening of gun have severely reduced military spending
laws and fear of a potential rise in crime on industry products. Moreover, with
have contributed to unprecedented fears over stricter gun regulation dying
industry growth in the five years to 2014. down, consumers have reduced gun
Revenue is estimated to grow at an purchases. As a result, industry revenue
annualized rate of 3.2% over the period. is expected to decline 3.7% to $13.0
During the past five years, the wars in billion in 2014.
With demand for industry products
surging in recent years, domestic
Growthwill let up slightly, as fears about rising manufacturers have been unable to
completely satisfy domestic demand;
crime and stricter laws subside consumers have therefore increasingly
relied on imports to fill that gap. Over the
Iraq and Afghanistan have ushered in a five years to 2014, imports are expected
substantial increase in the amount of to grow at an average annual rate of 3.8%
military spending by the government, to $3.7 billion. However, the industry is
resulting in an increase in purchases of still expected to be a net exporter over the
the industry’s military-related products. next five years, as emerging market
Enduring conflicts in these regions and growth and geopolitical tensions increase
US troop surges spurred industry industry exports. Nonetheless, industry
demand. The budgets of federal, state growth is forecast to temper over the next
and local law enforcement agencies also five years as defense spending continues
grew during the five years to 2014 due to to fall and fears of rising crime rates and
the sustained threat of terrorism. gun law changes subside. In the five years
Meanwhile, civilian gun sales spiked to 2019, revenue is projected to grow at
because of concerns about potential gun an annualized 2.0% to $14.3 billion.
Key External Drivers Federal funding for defense 2015, representing a potential threat to
The US government, especially the the industry.
Department of Defense, is a major
purchaser of industry products, Trade-weighted index
particularly those of a higher caliber The trade-weighted index (TWI)
and complexity. As the amount of measures the strength of the US dollar
expenditure allocated for these items relative to the currencies of countries
increases, sales and revenue typically with which it trades. Because exports
grow. Government funding for defense account for a moderate portion of
is influenced by fears over terrorism, industry revenue and imports account for
defense expenditures of rival nations, a growing portion of domestic demand,
outbreaks of conflict and other the TWI can significantly affect sales
geopolitical factors. Federal funding for volumes. The trade-weighted index is
defense is expected to decrease during expected to increase over 2015.
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 6
Industry Performance
Key External Drivers Local and state government investment price increases depends upon the
continued Growth in government spending on state specific product being manufactured.
and local agencies generally coincides For example, if demand is strong
with increased funding of law enough, lower steel prices can translate
enforcement. When law enforcement to higher profit margins. The world
funding increases, gun and ammunition price of steel is expected to increase
purchases also grow. Local and state over 2015.
government investment is expected to
increase in 2015, representing a potential Crime rate
opportunity for the industry. As the crime rate, or the fear of an
increase in the crime rate rises, people
World price of steel purchase more guns and ammunition
Purchases of raw materials, such as for self-protection. Therefore, a rising
steel, form a large component of the crime rate positively affects the industry.
average firm’s cost structure. The The crime rate is expected to decrease
ability of manufacturers to pass on slowly in 2015.
12 95
90
6
85
% change
Index
0
80
−6
75
−12 70
Year 08 10 12 14 16 18 20 Year 06 08 10 12 14 16 18 20
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 7
Industry Performance
% change
industry experienced aggressive revenue 10
growth during the recession, as
consumers’ recessionary fears about 0
rising crime and more restrictive gun
control laws overrode their financial −10
restrictions. Revenue growth was Year 06 08 10 12 14 16 18 20
bolstered over the five-year period by the Revenue Exports
United States’ involvement in military SOURCE: WWW.IBISWORLD.COM
War and government Prior to the September 11 terrorist attacks extensive resupply of ammunition and
expenditure and ensuing US military deployment, worn-out weapon systems. Additionally,
most manufacturers of warfare products the recession and budget sequestration
were in a state of decline. The wars in has cut military spending. IBISWorld
Iraq and Afghanistan ushered in expects that federal funding for defense
substantial increases in military spending will drop from $749.7 billion in 2010 to
by the government, resulting in $620.6 billion in 2014.
additional purchases of the industry’s Federal, government and local law
products. In particular, sales of the enforcement agencies’ budgets also grew
industry’s military-grade, larger caliber during the past five years. As a result of
weapons systems and munitions, such as the sustained risk of terrorism, the
tank ammo and howitzers, increased. responsibilities of federal, state and local
However, this initial boon to industry departments have expanded to include
growth has recently become a detriment. terrorist attack prevention, thereby
In 2011, the United States withdrew its increasing budgets for guns and
troops from Iraq and has more recently ammunition. Nevertheless, falling tax
begun ending combat operations in receipts caused by poor economic
Afghanistan. The withdrawal of US conditions have put pressure on law
troops in the Middle East has resulted in enforcement budgets, with local and state
a sharp decline in demand for industry- government investment declining at an
relevant products, as warfare requires annualized 3.8% in the five years to 2014.
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 8
Industry Performance
International trade Domestic consumers have increasingly rate of 3.8% to $3.7 billion over the five
turned to imports to satisfy their rapidly years to 2014.
growing demand for guns and Nevertheless, the United States is a net
ammunition. With demand for industry exporter, effectively maintaining a trade
products surging during the past five surplus. Canada, the United Kingdom
years, domestic manufacturers have and Australia purchase the majority of
struggled to keep up. The industry gets a the industry’s firearm exports, accounting
large portion of its firearm imports from for about 39.0% of total exports in 2014.
Austria and Italy thanks to the Furthermore, Canada is a large buyer of
popularity of the Glock and Beretta US exports in this industry because of its
brands, respectively. Additionally, proximity to the United States and the
Germany and the United Kingdom are North American Free Trade Agreement
the most popular sources of imports of (NAFTA). Israel, the United Kingdom
ammunition and ordnance products, and Japan are the United States’ largest
with the United Kingdom’s BAE Systems customers for ammunition and
being a major supplier to the US ordnance products. In addition, all of
military. Consequently, imports are these countries are major US allies, and
expected to grow at an average annual their armed forces extensively use
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 9
Industry Performance
International trade US-manufactured guns and presence of imports limits the extent to
continued ammunition. Therefore, industry which domestic producers can increase
exports are expected to grow at a rate of prices and profit margins. Additionally,
3.8% per year on average to $4.3 billion military spending cuts have squeezed
over the five years to 2014. profit for those companies that are
Overall, profitability has increased due heavily reliant on defense contracts, but
to rising demand for guns and have also encouraged them to export
ammunition; however, the increasing products to overseas markets. As a result,
level of import penetration into the US profit is only expected to increase from
market has tempered growth. The rising 10.6% in 2009 to 10.9% in 2014.
Industry Performance
International trade, The Guns and Ammunition exports are forecast to grow at an
establishments and Manufacturing industry faces challenges annualized rate of 3.1% to $5.0 billion
ahead, many of which are part of long- over the same period. Military suppliers,
employment
term trends within the industry. in particular, will try to offset declining
Domestic producers have dealt with defense spending in the United States
rising import competition for years. In with more exports to growing markets,
response, some domestic producers have such as Asia and the Middle East.
moved production to emerging Profitability is projected to decline
economies with lower-cost labor or slightly over the next five years as
acquired foreign weapons manufacturers. demand and revenue growth slows to a
Import competition will continue in the more moderate pace and the industry is
future, with imports growing at a faster forced to compete with foreign imports.
rate than exports during the next five In particular, defense contractors will
years. Imports are forecast to grow at an have a hard time increasing profit in
average annual rate of 3.5% to $4.4 amid a declining defense budget and
billion in the five years to 2019, while increased government emphasis on cost
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 11
Industry Performance
International trade, control. The world price of steel is also market at the expense of smaller players.
establishments and forecast to climb over the next five years, Over the next five years, the number of
putting pressure on input prices. establishments is projected to grow 1.0%
employment
IBISWorld projects the number of per year on average to 548. On the other
continued establishments will grow because of hand, employment is forecast to decline
sustained demand for guns and at an annualized 0.2% to 45,534 people,
ammunition. Market share is also as companies increase automation and
expected to shift in favor of the industry’s defense contractors cut payroll. As a
larger participants, though mostly result, the average number of employees
through acquisitions. These operators per establishment is forecast to decline
have sizable manufacturing facilities with from 88 in 2014 to 83 in 2019, while the
lower production costs, enabling them to average wage is expected to increase from
capture an increasing portion of the $63,068 in 2014 to $65,121 in 2019.
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 12
Industry Performance
Life Cycle Stage Industry firms are undergoing consolidation
The industry is slowing down from a growth phase
Innovation is improving existing products
rather than creating new markets
10
Quantity Growth
Many new companies;
minor growth in economic
importance; substantial
5 technology change
-5 Decline
Shrinking economic
importance
-10
-10 -5 0 5 10 15 20
% Growth in number of establishments
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 13
Industry Performance
Industry Life Cycle After years of a few years of growth, the demand and have been scrambling to
industry has entered a mature stage of its expand their product lines to
life cycle. Due to a number of factors, accommodate growing customer bases.
Thisindustry including a resurgence of demand from IBISWorld estimates the number of firms
is M
ature the civilian sector, industry revenue has will only grow at an average rate of 0.7%
surged over the past few years. However, per year over the five years to 2014,
as fears over gun regulation subside and despite strong revenue growth in 2012
the government continues to cut defense and 2013.
spending, the industry’s growth is While the industry is constantly
expected to significantly slow down, innovating existing products, its core
returning to historic levels. In the 10 products and major markets have
years to 2019, industry value added essentially been established and its
(IVA), which measures an industry’s participants are mostly focused on
contribution to GDP, is expected to grow winning market share from competing
at an annual rate of 1.6% per year, countries and companies. However, over
compared with GDP growth over the the next five years a number of
same period of 2.5%. technological advancements are expected
Over the past five years, significant to begin changing how the industry
players have engaged in a multitude of operates. Smart guns, which use
mergers and acquisitions, including fingerprint or RFID technology to
Freedom Group’s recent acquisition identify their owners, are anticipated to
spree and both Smith & Wesson’s and carve out market from more conventional
Sturm, Ruger & Company’s acquisitions firearms. Moreover, 3D-printing
of small companies to expand their technology also has the potential to
product lines. Large players within this increase the speed and efficiency at which
industry have observed the spike in industry products are made.
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 14
31.7%
Small arms
27.2%
Other ammunition
28.0%
Small arms ammunition
Total $13.0bn SOURCE: WWW.IBISWORLD.COM
Products & Services market due to anticipation of more ammunition account for an estimated
continued stringent gun control laws. However, 27.2% of industry revenue. The
falling orders from the military market military and law enforcement agencies
has tampered this growth. make up the vast majority of this
segment’s market and have recently
Ammunition cut down on spending.
The ammunition segment (including
small arms and other) includes Ordnance and accessories
ammunition, ammunition loading and Ordnance manufacturing involves more
assembly plants, arming and fusing explosive weaponry and includes aircraft
devices, bomb loading and assembly and antiaircraft artillery, antitank
plants, bomb cluster adaptors, bombs, rocket, cannons, field artillery, gun
canisters, bomb caps, depth charges, turrets, howitzers, mortars, naval
ammunition detonators, grenades, mines, artillery, rocket projectors, tampions,
missile warheads and mortar shells. line throwing guns, tank artillery,
Over the five years to 2014, revenue torpedo tubes, flamethrowers and gun
generated by small arms ammunition turrets. This segments products are
sales has increased. In 2009, this almost exclusively bought by the
segment made up 26.1% of industry military and has thus dropped in value
revenue, while in 2014 it will grow to as defense spending fell. In 2009, it
28.0% of industry revenue. Like with made up 22.4% of industry revenue,
small arms, this rise is dependent on though by 2014 it will fall to 13.1% of
rising civilian demand. Other industry revenue.
Demand ammunition and have therefore gone on a its wars in the Middle East and military
Determinants buying spree. The crime rate can also spending declining due to budgetary
impact demand. When people feel or see issues, industry sales of related products
continued
that crime has increased they may wish to has severely declined.
purchase guns for protection. Even
without an actual rise in crime rates, gun International trade
purchases can increase when people The level of industry imports also affects
anticipate an increase in crime. In times of demand for domestically produced
high unemployment, people expected industry products. Imports have been on
crime to increase (though there is no the rise for the past decade, with the
actual connection between the two), which United States importing $622.4 million
results in an increase in industry sales. more industry products in 2014 than it
did in 2009. Certain imported brands,
Defense funding like the Italian Beretta are popular in the
The military is a major purchaser of United States. Export markets are also a
industry goods and is almost the key source of industry demand. The
exclusive buyer of the industry’s more industry is a net exporter and American
sophisticated and heavier weapon gun and ammunition are popular in
systems and munitions. Examples of such many international markets. Export sales
weapons include naval artillery, are particularly important for military
howitzers, tank munitions and warheads. suppliers. Recent defense cuts in the
When defense spending and combat United States have encouraged
operations increase, industry sales rise. contractors to look for clients in overseas
However, with the United States ending markets like Asia and the Middle East.
Major Markets Civilian and law enforcement increasing crime and civil disorder due to
The three major domestic markets for the economic downturn. Although there
industry purchases are civilians, military is no evidence of any such link, guns still
and law enforcement. Civilians constitute provide people with a sense of security
the largest market for guns and during times of uncertainty.
ammunition purchases. Guns and Law enforcement agencies purchase
ammunition purchases by civilians are industry products directly from
made through gun stores, sporting goods manufacturers and wholesalers, in
stores and some large retail stores like addition to retail stores. Historically this
Walmart. This market segment has segment has had steady revenue growth,
experienced surprisingly strong growth though as of late law enforcement
over the past five years. Despite the fact agencies have received additional
that most Americans have cut back on funding in response to the increased
their purchases of luxury items, threat of terrorism and from the
purchases of firearms and ammunition stimulus package. The civilian and law
have surged. The spike in sales is enforcement market makes up an
attributable to fears surrounding the estimated 42.9% of industry revenue.
possibility of the Obama administration
enacting tougher gun control legislation. Military
Another factor influencing civilian gun The military and law enforcement makes
purchases has been fears about up the rest of the domestic market. There
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 17
42.9%
Civilians and law enforcement
33.3%
Exports
$ billion
demand. Many customers have turned to 0
Imports in the imports to satisfy their needs. The United
industry are States is a net exporter of industry −4
Mediumand products. In 2009, the industry exported
$660.8 million more than it imported,
Increasing −8
though that is expected to remain about Year 06 08 10 12 14 16 18 20
that same 2014. The industry gets a large Exports Imports Balance
portion of its firearm imports from SOURCE: WWW.IBISWORLD.COM
7%
10% 7% Brazil
Israel
Italy
10%
Germany
12%
Japan
57% 15%
Other United Kingdom
62% Other
12%
United Kingdom
International Trade industry’s firearm exports are purchased billion over the five years to 2014. The
continued by Canada, United Kingdom and top export destinations for the industry
Australia, who together will purchase as a whole include United Kingdom,
about 39.0% of total firearm exports in Japan, Israel and Australia. These
2013. Canada is a large purchaser of US countries also have close defense ties
exports in this industry due to its with the United States and their armed
geographic proximity to the United States forces are heavily dependent on US made
and NAFTA. Israel, United Kingdom and armaments and ammunition. For
Japan are the United States’ largest example, Israel, a very small country,
customers for ammunition and ordnance imports over 10.0% of US exports
products. Industry exports are expected primarily because its armed forces are big
to grow at a rate of 3.8% per year to $4.3 buyers of US weapon systems.
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 20
West
AK
0.0 New
England
ME
Great Mid- 0.8
Lakes Atlantic 1 2
NY 3
WA MT ND 3.0
5 4
2.0 0.0 MN
Rocky
4.7 2.0
WI
OR Mountains SD
1.8
Plains 4.3 MI
2.2
PA
4.7
6
7
2.5 ID IA OH 9 8
1.8 WY 3.9
1.0
NE
1.2
IL IN WV VA
3.7 0.6 1.2
West NV
0.8 0.8
KY
UT MO
1.8 NC
1.2
2.2 CO KS 3.2 2.2
2.4 1.2 TN
SC
Southeast
3.5
CA 0.6
5.5
OK AR GA
0.4 2.9 AL 2.4
AZ MS 1.8
4.9 NM
0.2 Southwest 1.0
TX LA
0.6 FL
7.3 3.3
West
HI
0.2 Additional States (as marked on map) Establishments (%)
1 VT 2 NH 3 MA 4 RI Less than 3%
0.4 1.0 1.4 0.0 3% to less than 10%
10% to less than 20%
5 CT 6 NJ 7 DE 8 MD 9 DC
3.5 0.6 0.2 0.6 0.0
20% or more
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 21
%
the Southeast, Great Lakes, Southwest 10
and West regions of the United States,
due to their proximity to major supply
industries as well as population centers. 0
These regions combined will account for
West
Great Lakes
Mid-Atlantic
New England
Plains
Rocky Mountains
Southeast
Southwest
51.0% of industry establishments.
IBISWorld forecasts that in 2013, the
Southeast region will account for an
estimated 22.2% of industry
establishments. This is the most Establishments
populous region in the United States. The Population
high percentage of establishments in this SOURCE: WWW.IBISWORLD.COM
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization
Market Share The Guns and Ammunition such a big buyer of guns and
Concentration Manufacturing industry consists of a ammunition and the increased prices of
large number of small to medium more complex weapon systems, this
operators. The wide variety of products segment also represents a large portion
Level
produced in this industry and the diverse of overall industry revenue. Thus,
Concentration in this buying markets make it difficult for overall industry concentration is
industry is M
edium individual companies to grab a large increased and hides trend in the civilian
portion of industry’s entire market share. market. Defense bias also explains why
Overall industry market concentration is concentration decreased when falling
medium and has declined over the five military spending caused defense
years to 2014, with the top four players contractors to lose money.
accounting for an estimated 56.0% of On the other hand concentration in the
industry revenue. However, this drop has civilian market has been increasing.
been led by the huge exposure the top Within the past five years, major players
players have to defense spending. such as the Freedom Group have
Due to the high barriers to entry and undergone acquisition sprees. Smith &
sophistication of the military market, Wesson and Sturm, Ruger & Company
concentration in the defense segment of have also acquired small gun
the industry is very high and is manufacturers to expand their product
dominated by General Dynamics, BAE lines. However, the recent drop in
Systems and Alliant Techsystems. commercial gun sale has caused reversals
Additionally, because the military is for many of these companies.
Key Success Factors Having a loyal customer base Having a good technical
There is a distinct competitive advantage knowledge of the product
in cultivating and maintaining strong Having a good technical knowledge of the
IBISWorld identifies long-term customer relationship. product is a key success factor within this
250 Key Success industry group because firms must
Factors for a Access to high quality inputs provide strong engineering, design and
business. The most Companies within this industry group technical support to clients.
must be able to source a variety of raw
important for this
materials, both from within the United Establishment of brand names
industry are: States and overseas. Strong brand recognition is considered to
be a major basis of competition.
Effective quality control
In providing high-quality products Control of distribution arrangements
and services, firms must maintain The cultivation, maintenance and control
detailed and extensive quality of downstream distribution channels are
assurance programs. a distinct advantage.
Competitive Landscape
Average Costs of
all Industries in Industry Costs
sector (2014) (2014)
100 ■ Profit
6.6 10.9 ■ Wages
10.5 ■ Purchases
80 ■ Depreciation
22.3 ■ Marketing
■ Rent & Utilities
■ Other
Percentage of revenue
60
58.5
40 52.0
2.5 1.3
20 2.9
3.9
17.7 1.5
6.5
0 2.9
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the US October 2014 24
Competitive Landscape
Cost Structure little impact on profitability. However, costs incurred by the industry will account
Benchmarks the persistent higher raw material for 22.3% of an average company’s
prices experienced during the past five revenue. However, this represents a slight
continued
years have placed increasing upward decline from 2009 levels as companies
pressure on the cost structure of have increased automation and in some
industry participants. instances cut labor expenses.
Across product segments,
manufacturing costs associated with raw Depreciation, rent and utilities
material expenditure fluctuate due to the The cost of depreciation will invariably
differences in the size and density of the fluctuate between operators depending
product being manufactured. The on their size and the amount of capital
complexity, quality and quantity of raw expenses involved. The cost of new plant
materials used are also factors and equipment used to manufacture
influencing cost. Shortages and changes industry products is significant and
in the price of raw materials are common periodic product innovation necessitates
(availability and cost are influenced by, regular investment in new capital. In
among other factors, political stability in 2014, depreciation is estimated to
exporting nations). In 2014, purchases account for 3.9% of an average firm’s
are estimated to account for 52.0% of an revenue. Companies may reduce facility
average firm’s revenue. depreciation by leasing or renting the
factories, with rent and utilities
Wages accounting for an estimated 6.5% of
The industry has a high level of capital industry revenue.
intensity compared to other industries.
Despite this, labor costs are high relative Other
to other manufacturing industries Other expenditure includes
because of the level of skill required to communications, legal, accounting; while
manufacture certain products, especially advertising and marketing expenses
military grade equipment. Over 2014, labor make up 1.5% of revenue. In 2013, other
costs are forecast to total about $2.9 billion. expenses are expected to equal about
IBISWorld estimates that in 2014, wage 2.9% of industry revenue.
Competitive Landscape
Basis of Competition product lines at different price points is a also produce a more secure revenue
continued key to maintaining and increasing source as regulations and requirements
product and market share. Products reduce competition in this segment.
manufactured and developed in the
industry also have a high research and External
development component. As a result, While the industry doesn’t really have a
technical excellence rather than price can lot of competition from other industries,
be more important to remaining it does have to deal with imports.
competitive within certain segments. In Consumers may find imported firearms
technologically advanced segments (i.e. and ammunition to be of higher quality
specialized military munitions), R&D is and better price. The Austrian Glock and
particularly important in developing new Italian Baretta brands are especially
products and ensuring products are popular in the United States in both the
up-to-date and evolving. civilian and law enforcement markets.
Companies that are able to diversify When it comes to suppliers or military
their customer base can also achieve a guns and ammunition, competition for
competitive advantage. Firms that can contract with foreign firms can be strong.
serve both military and civilian markets However, the nature of military
can mitigate their exposure to the equipment manufacturing and the
cyclicality of these markets. For example, strength of domestic firms, combined
Alliant Techsystems was able to offset with advantages associated with domestic
revenue declines from its military related manufacturing and regulations, means
business with strong growth from its that foreign produced products are not as
sporting firearms subsidiaries. On the big a threat in this segment. Yet,
other hand, companies like BAE Land competition for foreign contracts is much
and Armament, which sell almost tougher. Domestic manufacturers have to
exclusively to the military, have seen sometimes deal with foreign firms that
revenue significantly drop. At the same can offer cheaper equipment and/or have
time, being a supplier to the military can special connections to local governments.
Barriers to Entry While there are few explicit barriers to R&D. Additionally, many incumbent
entry, there are some factors that may firms in this industry have developed
deter entry. A significant financial strong relationships with upstream
Level & Trend
investment is required to acquire, suppliers and downstream markets,
arriers to Entry
B maintain and update plant and making it difficult for other firms to break
in this industry are equipment. This cost may deter some in. This may be a deterrent to some firms
Mediumand S teady firms from entering the industry. entering the industry.
Machinery operators also need to be For certain product segments,
trained, but these costs are relatively establishing a brand for their product
insignificant. The rising level of represents a barrier to entry. This may
unemployment in the United States has require funds to be spent on advertising in
lowered some of the difficulty in obtaining order to establish a market presence. Firms
a workforce with the required skills. are likely to experience difficulty entering
R&D is necessary for product the industry as a result of the customer
innovation. In order to effectively loyalty that the more prominent industry
compete, an entrant should be committed participants have, including Remington,
to spending a significant amount on Smith & Wesson and Ruger.
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the US October 2014 26
Competitive Landscape
Industry Globalization is on the rise within the due to the popularity of the Glock and
Globalization Guns and Ammunition Manufacturing Beretta brands. Germany and the United
industry. Although the level of foreign Kingdom are the most popular sources of
ownership in domestic firms is low, some imports of ammunition and ordnance
Level & Trend US-based firms have begun investing in products. Over the five years to 2014,
lobalization
G in and purchasing foreign weapons and imports are expected to grow at a rate of
this industry is ammunition manufacturers. Domestic 3.8% per year. The top import origins for
Highand the trend consumers have also increasingly turned the industry as a whole include United
to imports to satisfy their rapidly growing Kingdom, Germany, Italy and Brazil. In
is I ncreasing
demand for guns and ammunition. In the addition countries like the United
beginning of 2009, imports accounted for Kingdom are home to major defense
about 28.8% of domestic demand. By the contractors like BAE Systems, which is a
end of 2014, imports will account for major supplier of the United States
29.7% for domestic demand. With Department of Defense.
demand for industry products surging Over the five years to 2014 exports are
over the past five years, domestic also expected grow at annualized 3.8%
manufacturers have struggled to keep up due to rising international demand for
with growing demand. The United States domestically manufactured products. The
is a net exporter of industry products. In majority of the industry’s firearm exports
2009, the industry exported nearly are purchased by Canada, United
$660.0 million more than it imported, Kingdom and Australia, who together will
though that number is expected to purchase about 39.0% of total exports in
remain about the same in 2014. 2014. Canada is a large purchaser of US
The industry gets a large portion of its exports in this industry due to NAFTA
firearm imports from Austria and Italy, and its geographic proximity to the
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the US October 2014 27
Competitive Landscape
Industry United States. Israel, United Kingdom export markets are countries that have
Globalization and Japan are the United States’ largest extremely close military ties and their
customers for ammunition and ordnance armed forces extensively use US made
continued
products. Most of the major industry equipment and munitions.
Exports/Revenue
Exports/Revenue
Major Companies
Alliant Techsystems Inc. | General Dynamics Corporation
BAE Systems PLC | Freedom Group Inc. | Other Companies
43.9%
Other
Player Performance Alliant Techsystems Inc. (ATK) is an are not included in industry revenue,
Arlington, VA-based aerospace, defense through its armaments systems and
and commercial products company with small-caliber systems divisions. The
Alliant Techsystems about 16,000 employees and operations sporting group, which generated 39.0%
Inc. in 21 states and Puerto Rico. ATK has of ATK’s revenue in fiscal 2014, develops
Market share: 27.2% made a number of notable acquisitions in and produces commercial ammunition
recent years, including Eagle Industries and accessories and tactical systems. US
in March 2009, Blackhawk Industries customers are estimated to account for
Products Group in April 2010, Bushell 53.0% of ATK’s sales in 2014, with the
Group Holding in November 2013 and remaining coming from commercial and
Caliber Company in June 2013. ATK is a other foreign customers.
former subsidiary of Honeywell Inc. and In 2014, the ATK agreed to merge its
generated $4.8 billion in fiscal 2014. Aerospace and Defense divisions with
ATK conducts its business in three Orbital Sciences Corporation and spin off its
operating segments: the aerospace group, Sporting division as a separate company.
defense group and sporting group. The
business segments that pertain to the Financial performance
Guns and Ammunition Manufacturing Over the five years to fiscal 2015, ATK’s
industry are the defense group and industry-specific US sales are expected to
sporting group. The defense group, which grow at an average annual rate of 9.7%
generated 35.0% of ATK’s external sales per year to $3.5 billion, with revenue
in fiscal 2014, develops and produces estimated to have skyrocketed 33.0% in
military small, medium, and large caliber fiscal 2014 and forecast to climb by an
ammunition, among other products that additional 10.4% in fiscal 2015. The
Major Companies
Player Performance company’s recent growth has been almost sales at the company’s defense group
continued entirely driven by its sporting group segment, which is heavily reliant on US
division, for which revenue has more military funding, have been slowing
than tripled from $601.5 million in fiscal growth. As the federal government cut
2009 to $1.9 billion in fiscal 2014. The spending, demand for small to large
combination of booming civilian sales caliber ammunition and development
and acquisitions of consumer-oriented fell, thereby causing a drop in the defense
companies has been the primary driver of group’s industry-relevant revenue.
both the company’s revenue and profit Declining military sales were also
growth. On the other hand, declining responsible for revenue declining in 2011.
Player Performance General Dynamics Combat Systems systems division. This division produces
(GDCS) is a business group of Falls small, medium and large caliber
Church, VA-based General Dynamics, munitions (including tank
General Dynamics one of the world’s biggest aerospace and ammunition), machine guns, mortar
Corporation defense firms. GDSC produces a wide weapons, arterially projectiles,
Market share: 13.2% variety of land combat systems ranging propellants, rockets and gun systems.
from main battle tanks and wheeled In 2013, munitions, rockets, propellants
combat vehicles to rockets and and gun systems made up about 28.8%
munitions. The group’s sales are almost of GDCS’s revenue.
exclusively made to armed forces, with In recent years, General Dynamics as
the United States military being the a whole has been spending billions of
largest procurer. Other customers include dollars on acquisitions to enhance
US allies in Europe, Asia and the Middle capabilities, cut out middlemen and
East. In 2013, GDCS generated about diversify operations to mitigate lost
$6.1 billion, accounting for almost 20.0% revenue from defense-spending cuts. In
of General Dynamic’s total revenue. 2012, the company purchased the
GDCS competes in the Guns and defense operations of Gaystone Corp., a
Ammunition Manufacturing industry firm that produces metal components
through the ordnance and tactical for munitions.
**Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 30
Major Companies
Player Performance Arlington, VA-based BAE Systems Land systems, which manufactures and
and Armaments is a US subsidiary of BAE supports tracked and wheeled vehicles;
Systems PLC, one of the top aerospace and and weapons and support, which
BAE Systems PLC defense manufacturers in the world. The encompasses BAE’s munitions and
Market share: 8.9% subsidiary operates under BAE’s platform artillery activities. The weapons and
and services reporting segment, which support division manufactures naval
employs 19,200 workers and has guns, howitzers, missile launchers,
operations in the United States, the United related ammunition and other industry-
Kingdom, Sweden and South Africa. The specific products. According to latest
company’s platform and services segment financial information, artillery and
also includes BAE’s support solutions munitions accounted for 19.0% of
division, which provides ship munitions platform and services revenue in 2013.
facilities and rotary wing aircraft repair and Land and Armaments is the primary
support. In 2013, the company’s platform supplier of munitions to the UK and a
and services segment generated $6.6 major supplier to the United States and
billion in revenue. other allied countries.
OF BAE’s reporting segments, only
Land and Armaments manufactures Financial performance
industry-specific products. The Over the five years to 2014, BAE Systems
subsidiary has two subdivisions; vehicle Land and Armaments’ industry-specific
Major Companies
Player Performance revenue is expected to decline at an withdrawal of US-led forces from Iraq.
continued annualized rate of 13.7% to $1.2 billion, However, operating income remained
with a 7.4% drop in 2014. Since 2010, the positive as the company cut costs, such as
division experienced shrinking revenue labor. For example, Land and Armaments
and squeezed profit and 2011 was a cut its staff count from 21,300 workers in
particularly bad year because of reduced 2008 to 19,200 in 2013. The firm has also
product demand caused by defense begun to mitigate its exposure to western
spending cuts in the United States and military spending by seeking to export to
United Kingdom, along with the clients in Asia and the Middle East.
Player Performance Freedom Group (also known as the ammunition. It has 12 manufacturing
Remington Outdoor Company) is a facilities with about 4,200 employees and
Remington, NC-based manufacturer of delivers products throughout the United
Freedom Group Inc. guns, ammunition and other firearm- States and to more than 80 countries. The
Market share: 6.8% related accessories. It is one of the Freedom Group claims to be the largest
Industry Brand Names leading firearms, ammunition and related manufacturer of commercial firearms, with
Remington products companies in the world, with the number one market share in domestic
Bushmaster top commercial market positions across shotgun sales and commercial AR-style
Dakota Arms all of the major product categories in the rifle sales. It also boasts more caliber
Parker Gunmakers United States, the largest firearms and offerings than any other manufacturer, a
Marlin Firearms ammunition market globally. top market share in lever action sales,
Furthermore, it is the United States’ rimfire rifles and bolt-action rifles.
oldest and largest manufacturer of firearms Freedom Group sells more than 2.0 billion
and ammunition, with a history dating rounds of ammunition products annually.
back to 1816. It serves the hunting, In 2013, firearm products are estimated to
shooting sports, law enforcement and account for 58.3% of company revenue,
military markets under some of the most with ammunition at 34.4% of company
globally recognized brands, including revenue and other products making up
Remington, Marlin, Bushmaster and an additional 7.3% of company revenue.
DPMS. Freedom group is the only major Over the past five years, Freedom
US manufacturer of both firearms and Group has added a number of companies
*Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 32
Major Companies
Other Companies Sturm, Ruger & Company Inc. is one of the world’s leading
Estimated market share: 4.9% manufacturers of firearms. Horace Smith
Sturm, Ruger & Company Inc. is a and Daniel B. Wesson founded the
Southport, CT-based designer and company in 1852. The company
manufacturer of firearms. The company manufactures an array of pistols,
has been in the business since 1949 and revolvers, tactical rifles, hunting rifles,
offers products in four industry product black powder firearms, handcuffs and
categories: rifles, shotguns, pistols and firearm-related products and accessories
revolvers. Sturm, Ruger & Company’s for sale to a variety of customers,
firearms are sold through a select number including gun enthusiasts, collectors,
of independent wholesale distributors, hunters, sportsmen, competitive
principally to the commercial sporting shooters, protection-focused individuals,
market. About 99.0% of the company’s law enforcement and security agencies,
total sales were from the firearms officers and military agencies in the
segment and about 1.0% came from United States and throughout the world.
investment castings. Sturm, Ruger & It is the largest manufacturer of
Company’s design and manufacturing handguns and handcuffs in the United
operations are located in the United States and the largest US exporter of
States and most content is domestic. The handguns. It manufactures these
company has 1,880 employees. products at its Springfield headquarters
IBISWorld projects that the company will and at facilities in Houlton, ME. In 2007,
generate $639.0 million in revenue in it acquired the Thompson Center Arms
2014, representing a decline over 2013 Company. However, in 2012, it divested
due to falling civilian sales. SWSS LLC, a company it only acquired in
2009. In fiscal 2015, the company’s
Smith & Wesson revenue forecast to decline to $483.2
Estimated market share: 3.7% million as civilian sales drop after years
Springfield, MA-based Smith & Wesson of rapid growth.
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 33
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility
Regulation & Policy | Industry Assistance
Capital Intensive
Labor Intensive
Operating Conditions
Capital Intensity equipment. On the other hand, labor Manufacturers can lower production costs
continued expenses for these companies are also by making one-time or periodic (depending
higher because of the increased on the rate of technology change)
complexity and engineering of certain investments in equipment, though
military products. demand for a higher output has
The industry has trended toward increased employment and wages.
mechanization over the past five years, Defense contracts have also sought
although wages and employment have produce more with less labor as military
increased between 2009 and 2014. budgets around the world shrink.
Operating Conditions
Technology technology (including robotics) to public domain, but there are some
& Systems perform repetitive tasks, thus promoting proprietary processes used in the
manufacturing efficiencies. While being manufacturing of goods produced by
continued
relatively expensive to set up and install, this industry that are patented,
once the machinery is working, an particularly in the military sphere.
increase in the total output of parts Manufacturing more advanced systems
produced reduces the unit cost as fixed for the military, especially prototypes,
costs are spread across the company. may require companies to introduce new
Much of the technology in use is in the production methods.
Revenue Volatility This industry has a moderate level of with changes in the price of purchased
volatility as represented by the 6.5% inputs, such as zinc, steel and other input
average annual fluctuation in industry materials. These associated costs are
Level
revenue in the past five years. Volatility passed on to consumers. Defense
The level of has increased in response to surging contractors have seen a high amount of
Volatility is M
edium demand for the industry’s civilian volatility as military spending has been
products, though this industry has cut, thereby significantly reducing order
exhibited a moderate level of volatility in volumes and revenue. However, securing
most years since 2000. Companies are a long-term defense contract can smooth
also subject to the volatility associated out revenue swings.
Operating Conditions
Regulation & Policy Industry operators are subject to various which provides for economic and military
federal, state and local laws and assistance to foreign governments. Other
regulations relating to the protection of laws and regulations include the
Level & Trend the environment. These laws and Legislation of Foreign Relations Through
he level of
T regulations impose limitations on the 2005 (which includes Arms Export
Regulation is discharge of materials into the Control Act, Foreign Assistance Act, Gun
Heavyand the environment and require companies to Control Act, National Firearms Act and
obtain and operate in compliance with several other pieces of legislation); the
trend is S
teady
government regulations. As a result of International Traffic in Arms Regulations
government regulation in this industry, (ITAR), which establishes the rules of
most companies have developed operation used to control the import and
extensive environmental, health and export of defense articles and services;
safety policies and procedures that and the Export Administration
include the proper handling, storage Regulations, which are rules for the
and disposal of hazardous materials. export of dual use (both civil and
Although manufacturers design their military) goods and technology.
equipment and manufacturing process
to comply with these standards, the Specific regulations
regulations have nonetheless increased The manufacture, sale and purchase of
the price of the equipment as well as firearms are subject to extensive federal,
the cost of production. The higher state and local governmental regulation.
costs associated with these The basic federal laws are the National
environmental regulations are one of Firearms Act, the Federal Firearms Act,
the reasons that companies are now and the Gun Control Act of 1968.
looking to manufacture in countries These laws generally prohibit the
with looser laws. private ownership of fully automatic
The industry’s products have their own weapons and place certain restrictions
set of regulations. These are design on the interstate sale of firearms
standards, which specify dimensions, unless certain licenses are obtained.
tolerances or other physical From time to time, congressional
characteristics of products; and committees review proposed bills
performance standards, which provide a relating to the regulation of firearms.
voluntary method of rating products. These proposed bills generally seek
Government control and regulation either to restrict or ban the sale and, in
regarding the manufacture and trade of some cases, the ownership of various
firearms and ammunition is much more types of firearms. Several states
stringent. Manufacturers within this currently have laws in effect similar to
industry must complete numerous the aforementioned legislation.
reports, including the “Annual Firearms Until November 30, 1998, the Brady
Manufacturing and Exportation Report”. Law mandated a nationwide five-day
In addition, there are an assortment of waiting period and background check
laws and regulations governing arms prior to the purchase of a handgun. As of
exports that industry participants must November 30, 1998, the National
abide by. Such laws and regulations Instant Check System, which applies to
include the Arms Export Control Act of both handguns and long guns, replaced
1976 (as amended), which establishes the five-day waiting period. On
procedures for sales and transfers of September 13, 1994, the Crime Bill
military equipment and related services, banned so-called “assault weapons.”
and the Foreign Assistance Act of 1961, This ban expired by operation of law on
WWW.IBISWORLD.COM Guns & Ammunition Manufacturing in the USOctober 2014 37
Operating Conditions
Regulation & Policy September 13, 2004. Various states and have a shorter average range than rifles) to
continued cities have adopted or proposed their minimize the possibility of shooting
own version of the ban. accidents in more densely populated areas.
Bills have been introduced in Congress Bills have been introduced in Congress
to establish, and to consider the feasibility in the past several years that may
of establishing, a nationwide database potentially affect the manufacture and
recording so-called “ballistic images” of sale of handgun ammunition, including
ammunition fired from new guns. Should bills to regulate the manufacture, import
such a mandatory database be established, and sale of any projectile that is capable
the cost to operators in these industries of penetrating body armor, to impose a
and their customers could increase, tax and import controls on bullets
depending on the type of firearms and designed to penetrate bullet-proof vests.
ballistic information included in the There have also been bills introduced
database. To date, only two states have that seek to prohibit the manufacture,
established such registries. transfer or importation of .25-caliber,
Some states are considering mandating .32-caliber and 9-millimeter handgun
certain design features on safety grounds, ammunition, to increase the tax on
most of which would be applicable only to handgun ammunition, to impose a
handguns. IBISWorld expects that hunter special occupational tax and registration
safety issues may affect sales of firearms, requirements on manufacturers of
ammunition and other shooting-related handgun ammunition, and to drastically
products. In the northeastern United States, increase the tax on certain handgun
for example, some communities permit ammunition, such as 9-millimeter,
deer hunters to use only shotguns (which .25-caliber and .32-caliber bullets.
Operating Conditions
Key Statistics
Industry Data Industry Federal funding
Revenue Value Added Establish- Exports Imports Wages Domestic for defense
($m) ($m) ments Enterprises Employment ($m) ($m) ($m) Demand ($b)
2005 7,472.1 2,684.5 430 402 29,624 2,586.6 1,689.4 1,656.4 6,574.9 588.9
2006 8,696.5 3,004.6 451 422 31,092 3,288.5 2,081.3 1,775.1 7,489.3 602.2
2007 9,380.9 3,232.3 464 432 31,396 3,433.3 2,437.6 1,814.2 8,385.2 619.8
2008 10,057.0 3,583.6 482 451 36,172 3,322.8 2,556.8 2,127.1 9,291.0 679.4
2009 11,106.4 4,122.0 498 466 39,921 3,601.6 3,041.9 2,508.4 10,546.7 723.1
2010 11,124.5 3,978.7 491 462 37,087 4,132.1 2,904.5 2,330.2 9,896.9 749.7
2011 11,437.9 4,303.2 502 470 38,820 3,911.3 2,750.2 2,437.0 10,276.8 748.0
2012 12,503.2 4,221.6 511 477 40,339 4,130.2 3,247.4 2,581.5 11,620.4 706.2
2013 13,499.8 4,755.1 517 480 44,474 4,677.2 3,730.9 2,854.8 12,553.5 650.0
2014 12,996.6 4,819.4 521 482 46,012 4,329.6 3,664.2 2,901.9 12,331.2 620.6
2015 13,278.0 4,695.9 526 485 45,215 4,486.1 3,807.1 2,880.5 12,599.0 631.3
2016 13,393.1 4,605.9 531 487 43,088 4,672.8 3,967.0 2,779.6 12,687.3 592.4
2017 13,821.5 4,711.9 536 490 43,998 4,836.6 4,062.2 2,853.3 13,047.1 578.2
2018 14,189.0 4,807.2 543 494 44,959 4,979.9 4,216.5 2,925.9 13,425.6 578.7
2019 14,340.7 4,839.6 548 497 45,534 5,048.1 4,355.7 2,965.2 13,648.3 585.8
Sector Rank 113/373 81/373 137/373 125/373 85/373 64/341 95/341 73/373 128/341 N/A
Economy Rank 539/1309 478/1309 929/1308 878/1308 571/1309 80/397 105/398 470/1309 153/397 N/A
Industry Jargon AMMUNITIONPrimers that are fired from guns, TAMPIONWooden plug, or a metal, canvas, rubber or
explosive military items like grenades and bombs and plastic cover for the muzzle of a gun.
any materials that are thrown in fight.
ORDNANCEAmmunition, explosives and similar
warfare devices.
IBISWorld Glossary BARRIERS TO ENTRYHigh barriers to entry mean that INDUSTRY REVENUEThe total sales of industry goods
new companies struggle to enter an industry, while low and services (exclusive of excise and sales tax); subsidies
barriers mean it is easy for new companies to enter an on production; all other operating income from outside
industry. the firm (such as commission income, repair and service
CAPITAL INTENSITYCompares the amount of money income, and rent, leasing and hiring income); and
spent on capital (plant, machinery and equipment) with capital work done by rental or lease. Receipts from
that spent on labor. IBISWorld uses the ratio of interest royalties, dividends and the sale of fixed
depreciation to wages as a proxy for capital intensity. tangible assets are excluded.
High capital intensity is more than $0.333 of capital to INDUSTRY VALUE ADDED (IVA)The market value of
$1 of labor; medium is $0.125 to $0.333 of capital to $1 goods and services produced by the industry minus the
of labor; low is less than $0.125 of capital for every $1 of cost of goods and services used in production. IVA is
labor. also described as the industry’s contribution to GDP, or
CONSTANT PRICESThe dollar figures in the Key Statistics profit plus wages and depreciation.
table, including forecasts, are adjusted for inflation using INTERNATIONAL TRADEThe level of international
the current year (i.e. year published) as the base year. This trade is determined by ratios of exports to revenue and
removes the impact of changes in the purchasing power of imports to domestic demand. For exports/revenue: low is
the dollar, leaving only the “real” growth or decline in less than 5%, medium is 5% to 20%, and high is more
industry metrics. The inflation adjustments in IBISWorld’s than 20%. Imports/domestic demand: low is less than
reports are made using the US Bureau of Economic 5%, medium is 5% to 35%, and high is more than
Analysis’ implicit GDP price deflator. 35%.
DOMESTIC DEMANDSpending on industry goods and LIFE CYCLEAll industries go through periods of growth,
services within the United States, regardless of their maturity and decline. IBISWorld determines an
country of origin. It is derived by adding imports to industry industry’s life cycle by considering its growth rate
revenue, and then subtracting exports. (measured by IVA) compared with GDP; the growth rate
EMPLOYMENTThe number of permanent, part-time, of the number of establishments; the amount of change
temporary and seasonal employees, working proprietors, the industry’s products are undergoing; the rate of
partners, managers and executives within the industry. technological change; and the level of customer
acceptance of industry products and services.
ENTERPRISEA division that is separately managed and
keeps management accounts. Each enterprise consists of NONEMPLOYING ESTABLISHMENTBusinesses with
one or more establishments that are under common no paid employment or payroll, also known as
ownership or control. nonemployers. These are mostly set up by self-employed
individuals.
ESTABLISHMENTThe smallest type of accounting unit
within an enterprise, an establishment is a single physical PROFITIBISWorld uses earnings before interest and tax
location where business is conducted or where services or (EBIT) as an indicator of a company’s profitability. It is
industrial operations are performed. Multiple calculated as revenue minus expenses, excluding
establishments under common control make up an interest and tax.
enterprise. VOLATILITYThe level of volatility is determined by
EXPORTSTotal value of industry goods and services sold averaging the absolute change in revenue in each of the
by US companies to customers abroad. past five years. Volatility levels: very high is more than
±20%; high volatility is ±10% to ±20%; moderate
IMPORTSTotal value of industry goods and services
volatility is ±3% to ±10%; and low volatility is less than
brought in from foreign countries to be sold in the United
±3%.
States.
WAGESThe gross total wages and salaries of all
INDUSTRY CONCENTRATIONAn indicator of the
employees in the industry. The cost of benefits is also
dominance of the top four players in an industry.
included in this figure.
Concentration is considered high if the top players account
for more than 70% of industry revenue. Medium is 40% to
70% of industry revenue. Low is less than 40%.
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