SIC 3482
SMALL ARMS AMMUNITION



This industry includes establishments primarily engaged in manufacturing ammunition for small arms having a bore of 30 millimeters (1.18 inches) or less. Establishments primarily engaged in manufacturing ammunition, except for small arms, are classified in SIC 3483: Ammunition, Except for Small Arms; those manufacturing blasting and detonating caps and safety fuses are classified in SIC 2892: Explosives; and those manufacturing fireworks are classified in SIC 2899: Chemicals and Chemical Preparations, Not Elsewhere Classified.

NAICS Code(s)

332992 (Small Arms Ammunition Manufacturing)

Industry Snapshot

The early 2000s were marked by increased sales for small arms and small arms ammunition manufacturers. Ongoing controversy over gun laws helped boost sales and interest in shooting sports, as did concerns about selfdefense, especially in the aftermath of the terrorist attacks on September 11, 2001. On the heels of the Y2K bug, which roused fears of possible of power outages, food shortages, and communication failures as a result of computers turning over to the millennium, the industry has seen large numbers of first-time gun buyers in the past few years.

Specialized, niche products helped lead the industry out of its short-term slump, including top-end high-performance ammunition, "cowboy-action" loads, and light recoiling ammunition targeted for the growing market segment of women gun consumers.

Organization and Structure

Ammunition producers manufacture both cartridges and shells. The two types of cartridges used in rifles and pistols are rimfire and centerfire. Rimfire cartridges are comprised of a soft lead bullet, a case most often made of brass, and the smokeless propellant (powder). The priming compound is spun into the rim of the case, and, when the firearm's firing pin strikes and indents the rim of the cartridge, the priming mixture ignites and in turn ignites the propellant—hence the name "rimfire." Centerfire cartridges differ from rimfire cartridges in that a separate primer is seated in the base or head of the cartridge. When struck by the firing pin, the primer ignites the propellant via the flash hole in the base of the cartridge—hence the name "centerfire."

Prior to the Civil War, both large- and small-bore rifle and pistol cartridges were rimfire. In the post-Civil War period, however, more powerful cartridges began to be developed. These cartridges reached subsequently higher pressures and thus required case heads too thick to be indented by a firing pin. The centerfire ignition system solved this problem, and was still being used in the same configuration in the 1990s for high-pressure cartridges. Shotgun shells are also centerfire but are made up of a paper or plastic cylinder with a brass base or head. The shell is filled with powder followed by a cupped plastic wad filled with birdshot or much larger buckshot. While birdshot may be made of either lead or steel, buckshot is always made of lead. Federal law mandates that all duck and goose hunting be done with steel shot. It has been found that wildfowl accidentally ingesting spent lead shot while feeding are subject to lead poisoning. Shotgun shells may also be loaded with a single heavy slug, which in various configurations is made of lead or a lead alloy. Slugs are used both in law enforcement and for hunting big game such as deer. In addition to cartridges and shells, the small arms ammunition industry also includes the manufacture of BBs and pellets, which are most commonly fired from spring- or pneumatic-powered pistols and rifles.

Rimfire cartridges were typically .22 caliber and used in rifles and pistols designated "small-bore". Their share of small arms ammunition shipments increased by just over 85 percent from 1992 to 1997, accounting for 13 percent of total shipments. In 1997, centerfire rifle cartridges showed the largest decline in that period, falling from the top to the fifth position among the seven categories of ammunition; after accounting for 21 percent of market share in 1992, these cartridges garnered only 12 percent just five years later. Centerfire pistol cartridges, including those cartridges such as the .44 Magnum that could be interchanged between pistols and rifles, increased market share by 26 percent by 1997, second in sales only to shotgun shells, which accounted for about 22 percent of total industry shipments. Shipments of industrial shells and cartridges, airgun ammunition, and percussion caps, as a group, fell markedly—from 18 percent of the total in 1992 to just over 10 percent in 1997. Other major sectors of the industry in 1997 included components (wads, shot cases, bullets, and bullet jackets), with 19 percent of shipments, and primers, with 3 percent of shipments.

Consumers and Trade Representatives. Most of the ammunition made by manufacturers in this industry is sold to private consumers: 44 percent in 1992, up from 40 percent of industry sales in the 1980s. Sales to the federal government for military and other uses accounted for about 19 percent of sales in 1992, a slight decline from 20 percent in the 1980s. Exports, the third largest category for sales in the 1980s, jumped to second place in the early 1990s, increasing from 10 percent of sales to 28 percent. State and local government, including police and corrections officers, accounted for nearly 9 percent of sales in 1992, a slight increase from the previous decade.

There are three industry and consumer groups that represent ammunition interests in the United States. Most ammunition industry executives are affiliated with the National Shooting Sports Federation (NSSF), which promotes hunting and target shooting. The NSSF's sister organization, the Sporting Arms and Ammunition Manufacturers Institute (SAAMI), sets voluntary national standards for ammunition and firearm design. These groups rarely participate in political lobbying efforts, although ammo producers have traditionally donated money to support game populations and preserve hunting areas. The third and best-known organization, the National Rifle Association (NRA), is heavily involved in lobbying efforts, most of which are of interest to ammo manufacturers and users. As of 1996, only 12 percent of all hunters, however, belonged to this organization.

An Obscure Industry. In 1996, the ammunition industry was about 70 percent as large as the entire firearms industry that it complements. The comparably high-profile firearm industry receives large amounts of press and is often the target of state and federal regulatory initiatives. Ammunition makers, however, operate in relative obscurity, with little publicity, regulation, or outside analysis of the industry.

One reason that the industry has such a low profile is that most of its products are homogenous, resulting in a commodity-like business environment that is not dynamic. In addition, the largest producers in the industry are owned by massive conglomerates that view ammo operations as relatively small sideline businesses.

Background and Development

The use of gunpowder to propel projectiles dates back to fourteenth century Europe. Iron darts with brass fittings were mounted on shafts, much like crossbow arrows of the time. The shaft held the gunpowder and was wrapped with leather to keep gases from the burning powder from leaking out of the sides of the shaft. During the fourteenth, fifteenth, and sixteenth centuries, armies experimented with a variety of projectiles. Gunpowder was used to fire rocks in the 1300s, though metal balls became the ammunition of choice by the 1400s. Hot shot, or heated metal balls, added a deadly twist to this technique.

The advent of rifled barrels following the American Revolution created a demand for new types of bullets. Although barrels were being rifled as early as the 1500s in Germany, it was not until the late 1700s that this manufacturing technique became popular. Long spiral grooves or rifling cut into a barrel's inner surface causes a fired projectile to spin on its axis, imparting ballistic stability and greatly increasing the firearm's accuracy and range. Because elongated projectiles benefited most from the rifling technique, elongated bullets grew in popularity throughout the nineteenth century, gradually replacing the solid lead ball. All pistols and rifles manufactured in the 1990s have rifled barrels; shotgun barrels, however, are not rifled.

Muskets, which fire rounded lead balls and similar projectiles, were dominant in North American until the end of the Civil War. Westward expansion following the Civil War, however, created a market for heavier and more powerful firearms. Buffalo hunters needed long range rifles, and settlers on lonely farms needed repeating firearms such as the Winchester lever action rifles. The cartridge technology used in the 1990s originated in this era and consisted of an elongated bullet enclosing powder and primer in a brass cartridge. The cartridge was powerful, virtually oblivious to weather, and could be used in repeating firearms. This technological breakthrough quickly spelled the end of the muzzle-loading Kentucky rifle of Daniel Boone fame.

Winchester rifles, Colt revolvers, and other famous weaponry created markets for a variety of new ammunition during the westward U.S. expansion. Widespread use of smokeless gunpowder, which was perfected in the late 1880s, hastened ammunition industry growth. Most importantly, advances in ammunition and firearms during both World Wars broadened the scope of the industry to include specialized ammunition for automatic weapons and other new firearms.

In addition to a huge demand for ammunition by the military, ammunition producers in the United States enjoyed a large market for hunting products throughout the twentieth century. Not counting times of war, hunters remained the largest consumers of all types of small arms ammunition throughout the nineteenth and twentieth centuries.

Industry Conditions from 1970 to 1996. Following steady growth in commercial sales during the first half of the twentieth century and throughout the 1960s, the general public's demand for ammo began to slip in the 1970s. Although military consumption provided sporadic boosts in sales, the industry's core market, hunters, stagnated.

Stalled growth in hunting impeded the expansion of profits for some manufacturers throughout the 1970s and early 1980s. After Ronald Reagan was elected to office in 1980, however, an increase in ammo sales to the military boosted revenues. Profits were further buoyed by an increase in target shooting. By the mid-1980s, the military consumed nearly 30 percent of industry production, and handgun and target shooters had become the primary growth market for manufacturers.

To boost profits, small ammo producers began raising productivity, selling through new marketing channels, and offering new niche products. In the 1980s, manufacturers invested an average of $25 million per year in production facilities, a very low investment compared to most other industries. Despite that low figure, industry employment fell from about 7.4 million to 6.3 million workers during the decade, even though overall production increased.

Winchester, for instance, installed computer-controlled cartridge loading machines that allowed the company to produce 9 mm cartridges and other popular ammo at a rate of up to 450 units per minute. Despite industry efforts at low-cost, high-volume production in some areas, most manufacturers still used some very old production techniques. Even at Winchester factories, many low-volume products in 1993 were still loaded at rates of 40 to 60 per minute using machines the company acquired in 1931.

Along with moderate productivity gains, producers were benefited from new marketing channels in the early 1990s. Discount stores, such as Wal-Mart and Kmart, accounted for 30 to 50 percent of commercial sales by 1992. In addition, mail order catalog sales were becoming an increasingly important channel of distribution. One of the largest ammunition catalogers, Acu Sport Corp. of Ohio, increased mail order sales from $30 million in 1988 to over $75 million by 1992.

As the mid-1990s approached, an area of potential growth for industry competitors was the export market. Productivity gains realized in the 1980s allowed U.S. producers to stem an influx of cheap import ammunition from Brazil and the Far East during that decade. Exports already accounted for more than 10 percent of total U.S. production in the early 1990s. Foreign producers had captured less than 20 percent of the U.S. ammo market by 1992, and import growth seemed to have stabilized.

Increasing Regulation. Despite measures aimed at controlling the manufacture and sales of guns during the 1990s, the small arms ammunition industry remained loosely regulated. Congress, with the support of the NRA, had succeeded in banning certain types of "cop-killer" bullets, designed to penetrate bulletproof vests. That ban represented the only piece of legislation ever passed to directly limit the sale of small arms ammunition.

Senator Daniel Patrick Moynihan (New York) proposed legislation in the early 1990s to ban the sale of 9 mm, .25 caliber, and .32 caliber ammunition, which together accounted for 50 percent of the bullets fired at police officers. He also tried to pass legislation making many pistol cartridges prohibitively expensive. Moynihan was unsuccessful in both attempts. Critics argued that such laws could not be enforced and would have a negligible effect on crime. Nevertheless, the Clinton administration had indicated support for similar types of legislation.

In 1994, President Clinton signed the Brady Bill, which called for a waiting period for handgun purchases and required local police authorities to conduct an investigation before issuing a permit to purchase a handgun. Because of a general fear of crime and social and civil unrest, however, the sale of handguns and those military style assault rifles that were still legal skyrocketed along with ammunition for these arms. Many such firearms and ammunition were in short supply, causing a booming business among gun stores, distributors, importers, and manufacturers.

Spurred by 1994 Republican majorities in the U.S. House and Senate, pro-gun grass roots organizations began active campaigns to promote gun safety and shooting activities. In an attempt to increase its membership of young males, the 4-H Clubs of America formed a Shooting Sport Committee, which developed a shooting sports program in cooperation with various manufacturing interests. By mid-1996, the program had spread to chapters in 38 states. The Boy Scouts of America revived many of their shooting sports programs and began laying the groundwork for a nationwide Young Hunter Education Challenge. The National Rifle Association continued its "Eddie Eagle" firearms safety program and played a major role in "right to carry" legislation at the state and local level. In 1996, South Carolina became the 31st state to pass such legislation.

Driven by fears of the Y2K bug and the threat of increased regulation by the federal government, sales of small arms and small arms ammunition boomed in the late 1990s, after a mid-decade slump following a sales boom in 1994. The Wall Street Journal offered anecdotal evidence of huge sales increases in 1999: The small Los Angeles manufacturer U.S.A. Magazine—widely known to gun control proponents for its controversial products and marketing tactics—predicted a 50 percent increase in sales over its $10 million in 1998. Retailers reported increases in 1999 sales of up to 112 percent, reflecting a "stampede" of first-time gun buyers.

Moderate growth began in 1997, as wholesalers, retailers, and buyers began to deplete excess inventory following the 1994 boom. In 1998 sellers and consumers finally needed new supplies, continuing the upswing. Targeted marketing and consumer demand for more and more specialized and technologically advanced products also enhanced sales.

Despite slow growth in the area of hunting, the strong economy of the 1990s, changing demographics, and increased leisure time all combined to spur sales of top-end hunting ammunition. Richard Carreon, vice president of sales for Federal Cartridge Corp., was quoted in Shooting Industry : "About 46 percent of the hunters today are 35 to 54 years old and have relatively high disposable incomes coupled with a high degree of free time …. They don't necessarily want the best deal on .30-'06 hunting ammunition, for instance. They are often technology-oriented and are looking for anything that will give them an edge in the field. Hence the very strong sales of virtually every company's high-end, or premium hunting ammo lines."

So-called "cowboy-action" ammo also contributed to sales, marking one success in the gun industry's effort to project a more family friendly image. Cowboy-shooting competitions took place at Wild West festivals and often involved elaborate costumes; the sport appealed especially to women. Black Hills, Winchester, and Hornady were among leading manufacturers of dedicated cowboy-action ammunition.

Despite a ban on the controversial Black Talon expanding bullet made by Winchester, production of high-performance specialty ammo continued to be strong even during the sluggish mid-1990s, supported by a solid market in personal protection. Winchester replaced the Black Talon with another expanding bullet, the less controversial SXT; bullets popular with law enforcement, such as Federal's Hydra-Shok, were also popular with consumers. Personal protection also drove the market for gender-specific products. In 1998, Federal and Winchester were among small ammo producers who developed light recoiling ammunition, designed for women concerned with losing control of their handguns due to heavy recoil.

Throughout the 1990s, the industry continued to battle increased government restrictions, the threat of which contributed to the increase in sales for the industry. The Clinton Administration continued the work begun with the Brady Bill and the Assault Weapons Ban by pressing for further regulations and increased enforcement for current laws. On Nov. 30, 1998, the federal government approved the National Instant Criminal Background Check System, a national database containing names of individuals banned from buying weapons, a system required by the Brady Bill. Although frustrated retailers complained about delays and downed computer systems, the effect on sales was minimal.

An even more serious threat to the industry than legislative regulation was from judicial decisions. In early 1999, a federal jury in Brooklyn, New York, found that 15 of the nation's largest gun manufactures were engaged in negligent distribution and marketing of guns. "In the past, gun companies have defeated lawsuits charging that they made defective guns or objects that were inherently dangerous, but the Brooklyn suit was the first to take a broader perspective and charge them with negligent marketing," said a CNN report.

According to CNN, gun industry attorney James Dorr said that it was unfair to "hold the manufacturers of a lawful, legitimately sold product responsible for acts of outlaws who are totally outside their control …. The caseis simply wrong." According to Adam Cohen, writing for Time , the Brooklyn case won because it was built on an innovative theory: "It argued that gun makers should pay for injuries from illegally obtained guns because their distribution practices let guns fall into the hands of criminals. The suit exposed a netherworld of gun trafficking, including the 'straw buyers,' who resell guns to minors and convicted felons, and the 'iron pipeline' of illegal guns that flows from states with lax gun laws, like Georgia, to states with tough ones, like New York." Following the success of the Brooklyn suit, and a wave of large settlements in the big tobacco lawsuits of the late 1990s, several other cites initiated their own lawsuits or expressed the intent to consider doing so.

The gun industry also went to the courthouse to combat regulations proposed by Massachusetts Attorney General Scott Harshbarger. In early 1998, the American Shooting Sports Council filed suit in Boston to protest restrictions that it claimed were a "back-door approach to gun prohibition," according to Richard Feldman, ASSC's executive director.

The industry also found support from a Republican Congress generally hostile to further gun control. In 1999, the Senate ignored a request from the Clinton White House to close a gun show "loophole" allowing certain sales of guns without background checks, instead expanding the loophole to include pawnshops. Pro-gun activists also declared victory when, in early 2000, President Clinton announced a national gun enforcement initiative, seeking a record $280 million to step up enforcement of current gun laws. According to the NRA, this approach to crime prevention follows the path pro-gun activists have recommended all along.

Industry watchers have long noted that gun control debates have generally had a positive impact on sales. The Wall Street Journal reported in 1999 that "the gun market historically booms whenever consumers perceive a threat that regulations will make it harder to obtain firearms or their accoutrements." Moreover, most attempts at regulating firearms leave ammunition untouched, while most attempts to regulate ammunition have failed. Ironically, the 1994 Assault Weapons Ban was a boon to makers of clips. According to the The Wall Street Journal , "A customer who in years past might have bought an extra 18-round clip with his Glock, for a total of 36 rounds, today has to buy three extra clips to match that firepower."

The Internet proved to be a new and controversial venue for guns and ammunition sales. Online sales in general went through the roof in the late 1990s, but concerns about controlling sales caused some sellers to change course. eBay, the Internet's leading auction site, reversed its policy in 1999 and halted the sale of weapons and ammunition after sharp criticism. Because each state had its own laws regulating the sale of firearms, online sellers found it difficult to comply with regulations. Others have found the Internet to be a way to flout gun laws: U.S.A. Magazine used its Web site to advertise high-capacity clips that were illegal to manufacture, but not illegal to sell. Mass market retailers like Kmart and Wal-Mart, which accounted for up to half of sales in 1992, began to decrease their stock in guns and ammunition. In 1998, Shooting Industry pronounced, "The industry must find an outlet to replace sales lost in the mass market."

Current Conditions

Gun and ammunition sales soared in the days following the terrorist attacks of September 11, 2001, as people were once again preparing for the unexpected and looking for a sense of control and security. The Federal Bureau of Investigation reported a 21 percent increase in background checks, required for gun purchases, in the months following the attacks. In Maryland, where gun ownership had been curtailed by strict gun laws, gun sales were up 50 to 75 percent in early October 2001. Although sales have since leveled off, gun sales have remained steady. Ammunition companies responded to the events of September 11 by working on the development of a bullet that can be safely used on a airplane. The object is to make a bullet that will disintegrate on contact with a hard surface to eliminate ricochet, thus allowing pilots and security personnel to be armed in flight.

The development of lighter, faster, and more accurate premium bullets is proving to ignite the interest of gun and ammunition enthusiasts. According to Terry Wieland of Sports Afield , "The new bullets hold together beautifully, retaining a high percentage of their original weight for maximum penetration. There is no need to go to the heaviest and longest bullets to achieve such performance. The virtues of the new premium bullets complement the capabilities of the new short magnum cartridges to create a combination that renders just about every conventional magnum cartridge obsolete."

Industry Leaders

In November 1997, Blount International Inc. acquired Federal Cartridge Company, the industry leader in sales, from Pentair Inc. According to a Blount press release, "The transaction was structured as an all-cash acquisition for approximately $112 million." In 1998, Federal's estimated sales were $90 million, double that of its nearest competitor, and the company employed nearly 1,000 workers. Blount reported 2002 revenues of $479.5 million.

Remington Arms Company, Inc. is the only maker of both fire arms and ammunition, and the leading small arms and ammunition dealer in the nation. The company posted revenues of $383.1 million in 2002. Other industry leaders included Crosman Corp., Day and Zimmerman, and Hornady.

The other approximately 100 companies that made up the industry were comparatively small. Most of them employed fewer than 100 workers and had sales of less than $1 million per year. Several companies focused on producing specialty cartridges, construction industry products, and reused rounds.

Workforce

Employment in the small arms ammunition industry dropped steadily throughout the 1990s, according to the U.S. Bureau of Labor Statistics. In 1997 there were 6,863 workers employed in the small arms ammunition industry, down from just over 10,000 some 15 years earlier. In 2001 the number of workers remained relatively steady at 6,947. Average pay per hour for a production worker in 2001 was $16.52.

Productivity gains, movement of production facilities to countries with cheaper labor, and stagnant domestic market growth were expected to contribute to the downward employment trend within the industry. Jobs for assemblers and fabricators, which represented 12 percent of industry positions, were forecast to fall by more than 10 percent. Other manufacturing positions, which accounted for the bulk of industry employment, were also expected to decline by 10 percent. General management and executive positions were likewise expected to drop by more than 10 percent.

Further Reading

Buel, Stephen. "eBay Will End Online Auctions of Guns, Ammunition." Knight-Ridder/Tribune Business News , 22 February 1999.

Cohen, Adam. "Where There's Smoke … The Siege of Big Tobacco and a Brooklyn Verdict Provide a Strategy to Take Aim at Gun Manufacturers." Time , 22 February 1999.

Dailey, John. "House Passes Bill Limiting Gunmakers' Liability." Nation's Cities Weekly , 14 April 2003, 2.

"Female Purchases of Guns on the Rise." Marketing to Women: Addressing Women and Women's Sensibilities , November 2001, 8.

"Gun Sales Soar." The New American , 19 November 2001, 5.

McLeod, Douglas. "Gunmakers See More Equal Status." Business Insurance , 21 April 2003, 28.

Mraz, Stephen J. "Targeting the Perfect Bullet: Is Small and Fast Better than Large and Slow?" Machine Design , 24 October 2002, 48-49.

Prada, Paulo. "Making Bullets Airplane-Friendly is Tricky Job." The Wall Street Journal , 27 December 2001, B4.

Quindlen, Anna. "Tort Reform at Gunpoint." Newsweek , 5 May 2003, 72.

Rennen, Carol. "Radio, Guns, Ammo Hot Sellers in Wake of Terrorist Attacks." The Business Journal (Phoenix) , 14 September 2001, 46.

Van Zwoll, Wayne. "Lock and Load." Outdoor Life , June-July 2002, 97-100.

Wieland, Terry. "The Real Deal: Hot New Magnums and Premium Bullets that Really Deliver." Sports Afield , May 2002, 72-75.



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