The Great American Ammunition Conspiracy
BY Herschel Smith
3 years, 2 months ago
At a glance, Americans appear to have a variety of ammunition companies to choose from: Remington, Winchester, Speer, CCI (Cascade Cartridge, Inc.), Federal Premium. Winchester bills itself as “The American Legend” and has been in business for over 150 years, while Remington has been making guns and ammo for over 200 years and states that their company is as “boundless as the American spirit.” These companies associate their brands with freedom, independence, and toughness. What most customers do not know, however, is that they are all owned by the same two entities: Olin Corporation and Vista Outdoor.
This consolidation in the small arms ammunition market by corporations and private equity firms is hurting businesses, consumers, and workers. And it’s producing a massive shortage, just as demand for ammunition picks up. It looks like the problem could get worse, not only in the commercial shooting market, but where it really matters: for our national security.
He goes on to talk about the ability of the FBI, DHS and others to get ammunition, something I don’t care one whit about. I’d prefer they have none.
But due to consolidation within the industry, only a couple of incumbent companies have that ability to make it through low-demand periods. When demand surges, they are no longer forced to produce, but can focus instead on “efficiencies.” They can raise prices and generate shortages, knowing that no one else exists to meet the demand that they cannot or will not fill.
Such refusals to invest in increased capacity can clearly be seen as Vista’s plan over the last few years. According to their annual reports, Vista is focused on “long-term shareholder value,” and when they have influxes of cash, they acquire more companies that “deliver top-line growth … within one year of purchase.” They do not build more plants, even though they project more long-term increased demand; building a plant to increase capacity is a long-term project, one that does not return a profit in a year, much less a quarter.
[ … ]
Remington’s story involves some twists and turns and financial engineering. In 2007, private equity firm Cerberus Capital Management bought the then-thriving Remington, using it as a piggy bank. To execute the buyout, Remington borrowed hundreds of millions of dollars it immediately handed over to Cerberus, which meant that Cerberus would make money on the deal no matter whether Remington succeeded.
Initially, Cerberus made “hundreds of millions of dollars” from Remington, due to high gun sales during the Obama years. But when demand decreased after Donald Trump’s election, Remington was forced to file for bankruptcy in 2018. The firm restructured its debt and continued operating under new creditors, but due to continued mismanagement and lawsuits, Remington filed for bankruptcy again in 2020. Vista Outdoors bought Remington’s ammunition brand later that year.
Winchester’s story is more straightforward. Chemical producer Olin Corporation bought Winchester in 1931 and is now “a leading U.S. manufacturer of ammunition.” Olin’s most recent annual report revealed that Winchester sales increased from $665.5 million in 2019 to $927.6 million in 2020. This increase is reportedly due to “higher commercial and military sales, which included ammunition produced at Lake City, and higher commercial ammunition pricing.” Olin won a $28.3 million, ten-year contract to operate the Department of Defense’s Lake City Army Ammunition Plant in September of 2019. It also won contracts with the Secret Service, Customs and Border Protection, and the FBI.
It’s certainly the case that the proliferation of law enforcement entities in America is one of the causes of ammunition prices.
On the whole, I think consolidation is a very bad thing. I did when Cerberus bought Remington (they set their sights on others as well), and I do now. I think it’s better to have many medium size and small companies.
This ensures competition and innovation, despite the fact that a large corporation can bring financial resources to bear on R&R. Corporations rarely focus on their employees, R&D or building. Rather, they focus on stock prices, dividends and returns.
On October 21, 2021 at 10:09 pm, Big Country Expat said:
Agree with you (if I followed your line of reasoning after 6 Vodka-and-Cokes) but yeah, selling to the ‘normal supply chain?’ Exactly THAT. IF they announced a MAJOR diversion of ammo for ‘fedreasons’ THEN you should make a stink.. currently under my diminished capacity should I be commenting but OMG rly? as my millennial step daughter would say?
On October 22, 2021 at 12:42 am, scott s. said:
Well, ya got your Wolf and Aquila, which brings up, what’s the supply of 7.62×39 like these days?
scott s.
.
On October 22, 2021 at 3:19 am, Georgiaboy61 said:
Re: “On the whole, I think consolidation is a very bad thing. I did when Cerberus bought Remington (they set their sights on others as well), and I do now. I think it’s better to have many medium size and small companies.”
Small is beautiful, right? Or it can be at any rate. One of the greatest scams sold to the American public over the last forty-to-fifty years or so is that “bigger is better” where corporations and other organizations are concerned. That’s when the first waves of corporate mergers and acquisitions started coming on pretty hard-and-fast.
“Better for whom?” we might ask. Certainly for the big-money men on Wall Street and the richest people in the country, but all of those much-touted “economies of scale” and whatnot – while true often enough to provide a fig-leaf for the whole enterprise – did not turn out to be true. At least not for the little guy on Main Street U.S.A.
There is a particular phenomenon which occurs as a business is created by its owner(s) and grows from being a small start-up to a going concern and eventually into a large corporation or even a multinational one: Small businesses and those that own/operate them tend to believe in free markets and may the best product/service win.
But as a firm gets larger, you tend to see their owners try and pull up the ladder of success behind them. They tend to gravitate towards socialism and big-government – primarily because they see that big government can restrict competition or even do away with it entirely.
The ammunition business is a case in point (no pun intended!): Since there is substantial government regulation of that business, larger firms tend to be able to afford the extensive staffs of regulatory specialists, accountants and lawyers needed to navigate the rocks-and-shoals of those regulations and red tape.
And once the market is down to only a few big players, then the owners of these businesses, especially if they are now judged “essential,” can really turn the screws on people. They now have a monopoly or near-monopoly on that product.
And vis-a-vis the right to keep/bear arms, it can’t be ruled out that clearing the decks of all but one or two very large ammunition-manufacturing firms is a backdoor form of gun control via eventual ammunition control, i.e., placing a stranglehold on access to it. The big money men are enjoying their huge profits too much for that now, but such a move shouldn’t be ruled out in the future. Brave New World and all of that.
On October 22, 2021 at 5:45 am, Slave Larry said:
Question: What do all big companies want to be when they grow up?
Answer: Government
On October 22, 2021 at 6:46 am, Furminator said:
Well, yeah, commodity ammo is pretty much locked up by the big manufacturers. But there are plenty of smaller operations such as DoubleTap, Buffalo Bore, and Grizzly just to name some in the Redoubt, that make better quality/niche loads like your fave 450 SMC, +P+ 44, 10 mm penetrator, etc. And let’s not forget Hornady.
On October 22, 2021 at 7:50 am, Fred said:
Every time the unelected government bureaucrats make a new rule a large company gets bigger and several small companies close their doors.
So the big corps catch on and start lobbying for rules only they are large enough to navigate. The politicians love the money (1 Timothy 6:10) from the lobbyists. Then it gets so bad that the pols end up just telling the corporate lawyers to write any law they want, for a price. It’s fascism and it’s working exactly as it always does.
On October 23, 2021 at 5:49 pm, Ned said:
Furminator: Hornady is drinking the statist Kool Aid… https://postimg.cc/gnHGXmn8