Tag: Altria Group

Altria Earns Double ‘A’ for Climate And Water

Photo: Altria Group
Altria Group has been awarded a double ‘A’ rating for tackling climate change and protecting water security by CDP, a nonprofit that runs a global disclosure system on managing environmental impact. Altria ranks among the 1 percent of companies that achieved a double ‘A’ out of 5,800-plus businesses scored by CDP in 2020.
“We recognize the critical importance of addressing environmental challenges and have set a high bar for ourselves,” said Jennifer Hunter, senior vice president of corporate citizenship, in a statement. “In pursuit of our 10-year vision, we established ambitious goals to address climate change and water security, like achieving 100 percent renewable electricity by 2030, 100 percent water neutrality annually and aligning our business with the most ambitious greenhouse gas emissions reduction targets.”
Earlier this year, Altria announced that its greenhouse gas emissions reduction targets were approved for the first time by the Science Based Targets initiative (SBTi). The Scope 1 and Scope 2 target covering greenhouse gas emissions from Altria’s operations is consistent with reductions required to keep warming to 1.5 degrees Celsius, a goal that the latest climate science says is needed to prevent the most damaging effects of climate change. The Scope 3 target meets the criteria for ambitious value chain goals and current best practice.
CDP’s annual environmental disclosure and scoring process is widely recognized as the gold standard of corporate environmental transparency. A detailed and independent methodology is used, allocating a score of A to D- based on the comprehensiveness of disclosure, awareness and management of environmental risks and demonstration of best practices associated with environmental leadership, such as setting ambitious and meaningful targets. Those that don’t disclose or provided insufficient information are marked with an F.
CDP also recognized Philip Morris International, Japan Tobacco and Imperial Brands for their environmental commitments.
December 9, 2020
Resilience in Adversity

Photo: PMI
The Altria Group continues to deliver a strong 2020 performance despite a challenging economy.
By Timothy S. Donahue
Despite a challenging economic environment, Altria Group’s net revenues rose by 3.9 percent to $7.12 billion in the third quarter of 2020. Through the first nine months of the year, the tobacco giant’s net revenues grew by 3.9 percent to $19.85 billion. During its third-quarter conference call with investors, Altria CEO Billy Gifford said that the company demonstrated its resilience during the third quarter while continuing to navigate the adversity produced by the Covid-19 pandemic.
Altria’s third-quarter adjusted diluted earnings per share (EPS) was unchanged at $1.19. Gifford explained that for the first nine months of the year, adjusted EPS grew 5.6 percent to $3.37, driven by the strong financial performance of Altria’s tobacco businesses. The smokable products segment delivered third-quarter adjusted other comprehensive income (OCI) of $2.8 billion, up nearly 10 percent from the same period last year. And for the first nine months, the smokable segment adjusted OCI increased 10.5 percent to $7.7 billion, according to Altria’s third-quarter report.
“In the third quarter, our tobacco businesses delivered strong financial performance once again, and we made steady progress against our 10-year vision,” said Gifford. “At the same time, we’re pursuing our vision to responsibly lead the transition of smokers to a noncombustible future.”
Smokeless and next-generation tobacco products continue grow in Altria’s portfolio. The company has made steady progress with expansion plans for its On! and IQOS brands. These products, alongside Altria’s moist smokeless business and its investment in Juul Labs, present significant opportunities for smoker conversion to noncombustible alternatives, according to Gifford. Altria subsidiary Helix Innovations is responsible for marketing, manufacturing and distribution of On! nicotine pouches globally.
“We believe On! is a strong proposition and has been successful with both smokers and dippers. On! was sold in 56,000 stores at the end of the third quarter, up 40 percent from the second quarter and more than tripled the store count from the end of last year,” said Gifford. “In stores with distribution, On! achieved a retail share of 2.1 percentage points of the oral tobacco category in the first nine months of 2020. Helix continues to test different trial-generating promotions and has benefited from strong trade partnerships.”
In the vapor category, Altria submitted its premarket tobacco product application (PMTA) to the U.S. Food and Drug Administration (FDA) for its Juul product and four flavors of pods. That application is currently under scientific review. Gifford believes that a sustainable vapor category is one that exists with solely FDA-authorized products.
“We encouraged FDA enforcement against noncompliant manufacturers, including those who continue to sell e-vapor products without a PMTA submission,” he said. “We estimate the total e-vapor volumes decreased by 13 percent for both the third quarter and the first nine months of 2020. We believe the e-vapor category will continue to undergo a transition period over the next few years as [the] FDA makes market determinations on the thousands of PMTAs before the September [2021] deadline.”
Altria’s valuation of Juul Labs dropped to less than $5 billion, down from $38 billion two years ago. In September, Juul Labs announced a strategic update, which included its plans for a significant global workforce reduction, evaluation of resource allocation and the possibility of exiting various international markets.
“I think while we’re disappointed in the investment, we do believe that e-vapor will play an important role as we progress harm reduction, especially in the U.S. but even worldwide,” Gifford told investors. “In preparing our third-quarter financial statements, we performed a valuation analysis of our investment in Juul, which considered both its international prospects and current U.S. e-vapor category dynamics. As a result of this analysis, we’ve recorded a $2.6 billion impairment to our Juul investment, bringing its carrying value to $1.6 billion as of Sept. 30.”
Pamela Kaufman, an analyst with Morgan Stanley, asked Gifford to explain the rationale behind the magnitude of the Juul Labs write-down, which implies a total value for the company of about $4.5 billion—well below Juul’s reported internal valuation of about $10 billion.
“When we put together a valuation for the company, we do our best to make the best assumptions we can based on the future cash flows, how large we would expect [the industry] to become both on the domestic side and the international side,” said Gifford. “We highlighted for you that we believe the category is going to go through a two-[year] to three-year transition as all manufacturers in the e-vapor category navigate this FDA regulatory process. Certainly, we’ve seen a number of manufacturers get fairly competitive and step up their competitive activities in the marketplace. And we believe as the FDA makes decisions and products can remain and some products leave the category that there will be consumers at play. And so, all of those factors went into the valuation that we have, and we came forward with our best estimate.”
Meanwhile, Altria subsidiary Philip Morris USA (PM USA) continues to expand the footprint of the IQOS heated-tobacco brand in the United States under an agreement with Philip Morris International. Gifford said that the FDA’s recent authorization of a reduced exposure claim for IQOS has allowed the tobacco company to use its “robust digital assets and tobacco consumer database” to communicate with smokers, including through websites, email and direct mail.
“We believe that the combination of these modified-risk communications and PM USA’s more disruptive retail fixture will significantly enhance the quality of IQOS awareness among smokers. As smokers move along the journey to engagement and trial, PM USA is providing flexible options to learn about IQOS and purchase devices,” explained Gifford. “PM USA now offers a video chat option for age-verified smokers to use their mobile phones and connect directly with IQOS experts for product education and support.”
PM USA is also expanding the availability of IQOS devices into the convenience store channel. Beginning next month, PM USA expects IQOS devices to be available in select convenience stores in Charlotte, North Carolina. Gifford said the company estimates the number of tobacco consumer trips to the store rebounded in the third quarter and that tobacco expenditures per trip remained elevated versus a year ago.
“The IQOS team is looking at how we meet the consumer where they’re at and putting it in select convenience stores; it really is meeting the consumer where they make their point of purchase,” said Gifford. “It’s really an education process. But our IQOS team has done some excellent work. We’re also testing at-home delivery; once the consumer has gone through the tutorial and has been age verified, we could actually have at-home delivery of devices.”
Altria’s fourth quarter is expected to follow the third-quarter’s and first nine month’s trends. Gifford says that Altria’s tobacco businesses have a track record of delivering strong and consistent financial performance in challenging environments. He said the company will continue to reward its shareholders by returning a significant amount of cash in the form of dividends. “We believe our tobacco business platform has the winning brands and is unmatched,” he said. “We’re excited to make further progress in achieving our vision of responsibly transitioning smokers to a noncombustible future.”
Timothy Donahue is the assistant editor of Tobacco Reporter. Since joining our team in January 2013, he has become not only an expert on the traditional tobacco business but also a well-respected voice in the rapidly developing vapor industry. Tim spends much of his time on the road, attending conferences and interviewing industry representatives. His networking skills, work ethic and quick mind are valuable assets to our diverse audience.

December 1, 2020
Altria Results Demonstrate Resilience

Photo: Altria Group
Altria Group’s net revenues rose by 3.9 percent to $7.12 billion and by 3.9 percent to $19.85 billion in the third quarter and the first nine months of 2020, respectively, when compared to the same periods in 2019.
“Altria continued to demonstrate its resilience during the third quarter while navigating the challenges presented by the Covid-19 pandemic,” said Altria CEO Billy Gifford in a statement. “In the third quarter, our tobacco businesses delivered strong financial performance once again and we continued to make progress against our 10-year Vision.”
Altria noted that Philip Morris USA expects its heat-not-burn IQOS devices to be available for sale in select Charlotte, North Carolina, convenience stores sometime in November while Helix expanded the distribution of On! by an additional 16,000 stores with its modern oral product now available in 56,000 stores as of the end of the third quarter.
While tobacco analysts from Morgan Stanley noted that Altria’s third-quarter results were ahead of expectations, Philip Morris’ recent write-down of Juul was larger than expected.
November 1, 2020
Ellen Strahlman Joins Altria Board

Photo: Jakub Jirsák | Dreamstime
Ellen R. Strahlman will join the Altria Group board of directors Nov. 2, 2020, the company announced in a press release.
Strahlman served as executive vice president, research & development and chief medical officer of Becton, Dickinson and Co., a leading global medical technology company, from April 2013 until her retirement in January 2018.
Before joining Becton Dickinson and Co., she served as a senior advisor to the CEO at GlaxoSmithKline from April 2012 through March 2013, after previously serving as the senior vice president and chief medical officer from April 2008 through March 2012.
Prior to 2008, Strahlman held senior executive leadership roles in global product development and commercialization, medical affairs and business development at leading pharmaceutical and medical technology companies including Pfizer, Novartis, Virogen, Bausch & Lomb and Merck & Co. She currently serves as a director of Syncona having previously served as a director of Syncona Partners.
At Altria Group, Strahlman will be a member of the finance and innovation committees.
November 1, 2020
John Casteen Retires from Altria Board

Photo: Altria Group
John T. Casteen III, a director of Altria Group since 2010, will retire from service on Altria’s board of directors following the completion of his current term.
Casteen will not stand for re-election to the board of directors at Altria’s 2021 annual meeting of shareholders, which is presently anticipated to be held on May 20, 2021.
“Altria has benefited from John’s significant contributions over the past ten years,” said Tom Farrell, Altria’s independent board chairman in a statement. “We thank him for his distinguished service and wish him the very best.”
Casteen is a member of the audit, compensation and talent development and innovation committees. He became president emeritus of the University of Virginia in August 2010 after having served as president of the university since 1990.
Previously, Casteen served as secretary of education for the Commonwealth of Virginia from 1982 to 1985 and president of the University of Connecticut from 1985 to 1990. He is a director of Strategic Education. He also serves as a director of the Leifur Eiriksson Foundation, the Institute for Shipboard Education (Semester at Sea) and Echo360.
October 14, 2020
Eyes on the Ball

Photo: PMI
Even as cigarette dollar sales increase during the Covid-19 pandemic, IQOS expansion remains Altria’s primary focus.
By Timothy S. Donahue
Covid-19 has slowed the traditional decline of U.S. cigarette sales. With less opportunity to spend on travel and entertainment, consumers have had more money to purchase tobacco products, according to Billy Gifford, CEO of Altria Group. Since the start of pandemic lockdowns in mid-March, traditional cigarette sales have increased over the same period last year, breaking a longstanding trend.
During Altria’s second-quarter earnings call, Gifford said that the cigarette category has proved resilient during the pandemic. Based on year-to-date industry volume performance, the largest U.S. cigarette manufacturer has adjusted its estimated 2020 volume decline rate to a range of 2 percent to 3.5 percent, down from its previous estimate of 4 percent to 6 percent. The company also increased its annual dividend by 2.4 percent, saying it had more clarity on the pandemic’s effects on consumer demand. It is the company’s 51st consecutive annual dividend increase.
“Remember, last year, the cigarette category peaked its decline at 6 percent, then it receded to 5.5 percent in the third, and then down to 4.5 percent in the fourth,” Gifford said. “So a little bit tougher comparisons were also included in that forecast. But it’s a fluid environment and it’s something that we’ll continue to monitor.” Altria’s forecast was lower than its prior outlook, which was withdrawn due to the uncertainties around the pandemic’s economic impact.

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Cigarette sales have seen a series of ebbs and flows through the first half of 2020. When some U.S. state governors began issuing stay-at-home orders in mid-March, combustible cigarette sales volume rose 1.1 percent for the week that ended March 22, according to Nielsen. Those sales were likely generated by consumer stockpiling, according to Gifford. For the four-week period that ended May 16, Nielsen reported only a 0.2 percent decline in sales volume for traditional cigarettes. Comparatively, sales volumes in 2019 fell 8.8 percent over the previous year (2018) in the four weeks to March 23, according to Nielsen data.
Bonnie Herzog
Bonnie Herzog, managing director at Goldman Sachs, stated in an email that the cigarette category is now holding steady. All channel cigarette dollar sales growth was up 3.1 percent for the two weeks ending on July 25. “Higher pricing more than offset a deceleration in cigarette volume, which was down 2 percent during the same time,” she said.
The pandemic is not the only factor driving increases in cigarette sales. Gifford says restrictions on e-cigarette flavors and the Sept. 9 deadline for premarket tobacco product applications (PMTA) to the U.S. Food and Drug Administration (FDA) have come together to create a perfect storm that is driving vapers back to combustible cigarettes.
Gifford told listeners that Marlboro’s second-quarter retail share for the overall cigarette category was 42.8 percent, down six-tenths versus the year-ago period. In April, Altria reported that older smokers who had switched to e-cigarettes were turning back to traditional cigarettes because of negative news coverage and regulatory crackdowns on vaping.
“As you’ll recall, earlier this year we noted an increase in the number of adult smokers aged 50-plus who moved from the e-vapor category back into cigarettes benefiting volumes from Marlboro and the cigarette category,” he said. “This demographic has a greater tendency to purchase discount brands than younger adult smokers, which increased the discount segment share at the start of the year. We believe the effect of this dynamic will have a lingering impact on Marlboro’s year-over-year retail share comparisons through 2020 … when you think about that, it’s a bit early on to tease out the exact impact from both of those, but that’s something that we’ll continue to monitor as we move forward.”

Altria’s headquarters in Richmond, Virginia, USA
Photo: Altria Group
Looking toward the second half of 2020, Altria has high hopes for its IQOS heat-not-burn device. On July 7, the FDA issued exposure modification orders to IQOS. Gifford said he was pleased with the FDA authorization to market IQOS as a modified-risk tobacco product (MRTP) with a reduced-exposure claim. The FDA’s decision includes the device’s holder and charger as well as Marlboro HeatSticks, Marlboro Smooth Menthol HeatSticks and Marlboro Fresh Menthol HeatSticks.
IQOS is the first next-generation product to receive an MRTP. In a statement, the agency concluded that the available scientific evidence demonstrates that IQOS is expected to benefit the health of the population as a whole, taking into account both users of tobacco products and persons who do not currently use tobacco products.
According to the FDA website, a reduced-risk claim authorization would generally allow a company to say a product is less harmful than combustible cigarettes. However, according to the FDA, the current reduced-exposure claim authorization allows the manufacturer to only state that IQOS heats rather than burns tobacco and significantly reduces the production of harmful and potentially harmful chemicals. The decision follows a review of the extensive scientific evidence package Philip Morris International (PMI) submitted to the FDA in December 2016 to support its MRTP applications.
IQOS is produced by PMI and marketed in the U.S. by Philip Morris USA (PM USA), a subsidiary of Altria Group. Gifford said PM USA is making the necessary preparations to communicate the reduced-exposure claim to adult smokers, which includes developing new marketing assets and submitting them to the FDA in advance of being used.
“We’re looking forward to communicating with adult smokers the additional benefits of switching to IQOS. We’re excited to get back on track with our IQOS rollout and our future expansion plans to accelerate adult smoker conversion,” he said. “As many parts of the country began lifting restrictions in June, PM USA reopened the Atlanta and Richmond IQOS boutiques and just last week launched IQOS in its third lead market by opening a boutique in the SouthPark mall in Charlotte.”

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Over the next 18 months, PM USA plans to launch IQOS in four new markets with large adult smoker populations and expand the availability of IQOS devices through retail partnerships, explained Gifford. PM USA also plans to expand its HeatStick distribution to the surrounding geographies in all seven IQOS markets. He said the commercialization approach for IQOS is designed to maximize the organic growth potential of the device by focusing first on the densely populated metro areas and then expanding outward as the user base grows.
“In Charlotte, PM USA launched a more disruptive retail fixture that communicates the benefits of real tobacco, no ash and less odor and expects to begin HeatStick distribution to retail stores in the next few weeks. By the end of August, we expect HeatSticks to be in a total of 700 retail stores across the three lead markets,” he said. “PM USA will continue to leverage its IQOS retail ecosystem, including IQOS mobile, pop-up and kiosk retail formats, which allows for more strategic and agile marketing plans. We’re making several digital enhancements to the IQOS website too.”
The IQOS website now includes virtual tutorials, and a new expert video chat functionality will be available this fall, according to Gifford. These digital enhancements and “the ability to have devices delivered to smokers in lead markets with the proper age verification” will provide smokers with a variety of options to “learn about and access IQOS,” said Gifford, adding that PM USA expects to use its “first-mover advantage” to expand IQOS responsibly.
“Our commercialization strategy is based on the learnings from our IQOS lead markets and PMI’s international results paired with our desire to continue avoiding use by unintended audiences. We believe that a sustained focus on the consumer journey from awareness to conversion is the key to achieving our vision,” Gifford said. “Word of mouth among IQOS users and their fellow adult smokers has been a critical factor to the global success of IQOS.”

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Timothy Donahue is the assistant editor of Tobacco Reporter. Since joining our team in January 2013, he has become not only an expert on the traditional tobacco business but also a well-respected voice in the rapidly developing vapor industry. Tim spends much of his time on the road, attending conferences and interviewing industry representatives. His networking skills, work ethic and quick mind are valuable assets to our diverse audience.

September 1, 2020
Nat Sherman to Close Premium Cigar Business

The Entrance to the historical Nat Sherman Townhouse in Manhattan (Photo: Askoldsb | Dreamstime)
Nat Sherman will shut down its premium cigar businesses by the end of September.
The 90-year-old company will close both its wholesale cigar business and the company’s iconic New York City retail location known as the Nat Sherman Townhouse.
Altria Group, which purchased Nat Sherman in 2017, had wanted to sell the premium cigar business but reached no deal despite initial interest from buyers.
“We worked hard to successfully transition Nat Sherman International to a new home,” said Jessica Pierucki, general manager and managing director for Nat Sherman. “The Covid-19 pandemic created new challenges that were unfortunately too big to overcome.”
“Leading what has become Nat Sherman International’s final chapter these last nine years has been the honor of a lifetime,” said Michael Herklots, vice president of Nat Sherman International. “Hopefully, our premium cigars will live on in the humidors of our greatest fans and be appreciated with fond memories for many years to come.”
Nat Sherman International includes the retail store as well as the wholesale premium cigar and pipe company. The cigarette portfolio is handled by a different Altria division and is not affected by the closure.
August 6, 2020
Altria Donates $5 Million to Fight Racial Inequality

Photo: Tumisu from Pixabay
Altria Group is donating $5 million dollars to address systemic racism faced by black Americans and advance social and economic equity. These funds will be used to support national and local organizations working across the United States and in Altria’s operating communities, as well as provide immediate support to small businesses in the company’s communities impacted by recent vandalism. This commitment is incremental to Altria’s planned 2020 corporate giving.
“These are difficult times, and we must find ways to embrace our differences, address underlying systemic issues and move forward as a country,” said Billy Gifford, Altria’s chief executive officer. “We know we don’t have all the answers, but we will learn by listening to our diverse colleagues, community members and others as we seek progress within our company and the places we call home.”
Altria will also launch a month-long employee giving campaign which will match on a two-for-one basis all employee donations. Recipient organizations will be selected by Unifi, Altria’s Black Employee Resource Group (ERG) and other ERGs. Altria also announced a company-wide paid “Day of Healing” on June 19 to allow employees time for personal reflection and healing. Altria is also voicing support for removing confederate monuments in its hometown of Richmond, Virginia, USA, once the capital of the Confederacy.
Matthew L. Myers, President, Campaign for Tobacco-Free Kids, dismissed Altria’s donation as “shameless hypocrisy.”
“With its announcement today of a $5 million donation to African-American organizations, Marlboro-maker Altria is once again trying to divert attention away from the enormous harm it has done and continues to do to the health of African Americans with the targeted, decades-long marketing of menthol cigarettes,” he stated.
June 6, 2020
Altria Group Declares $0.84 Dividend

Photo: Altria Group
Altria Group’s board of directors has declared a regular quarterly dividend of $0.84 per share, payable on July 10, 2020, to shareholders of record as of June 15, 2020. The ex-dividend date is June 12, 2020.
The announcement followed Altria’s 2020 annual meeting of shareholders on May 14. During the meeting, Altria CEO Billy Gifford summarized the company’s full-year 2019 and first-quarter 2020 financial results, discussed Altria’s 10-Year vision, corporate responsibility priorities and environmental, social and governance efforts and addressed shareholder questions.
Copies of Mr. Gifford’s prepared remarks and business presentation and a replay of the audio webcast of the Annual Meeting are available on altria.com and via the Altria Investor app.
Final voting results will be reported in a current report on Form 8-K filed with the U.S. Securities and Exchange Commission.
May 15, 2020
Philip Morris Challenges Health Warnings

Image by jessica45 from Pixabay
Philip Morris USA filed a lawsuit on May 6 in the U.S. District Court for the District of Columbia to block the graphic cigarette warnings that tobacco companies will be required to print on their products in the United States starting June 18, 2021.
It follows a similar lawsuit filed last month by other tobacco companies in the U.S. District Court for the Eastern District of Texas.
This is the Food and Drug Administration’s (FDA) second attempt to enact graphic health warnings under the 2009 Family Smoking Prevention and Tobacco Control Act. The first rule was struck down by the federal court in the District of Columbia as a violation of the First Amendment. The plaintiffs in Texas case state that this version of the FDA’s rule is no improvement and urge the court to strike down both the rule and the Tobacco Control Act’s graphic-warnings requirement as violations of the First Amendment.
The companies allege that FDA’s required warnings force plaintiffs to become a “mouthpiece for the government’s anti-smoking advocacy” and are “precisely the type of compelled speech that the First Amendment prohibits.”
The new rule includes 11 graphic images paired with textual warnings. Among other smoking-related afflictions, the images depict a person with neck cancer, ill children and bloody urine
Also on May 6, the plaintiffs and the government in the Texas case jointly proposed to delay the implementation date for the graphic warnings for four months, from June 18, 2021, to Oct. 16, 2021.
Public health advocates expressed outrage at the legal challenge. “It is truly shameless for tobacco companies to file these lawsuits at a time when there is clear evidence that smoking can increase risk of severe complications and even death from Covid-19,” said Matthew L. Myers, president of the Campaign for Tobacco-Free Kids.
“We urge the Administration to vigorously defend these warnings in court and urge the court to reject the proposed four-month delay.”
May 8, 2020