RICHMOND, Va. -- Despite declining demand for its core, smokeable tobacco products, major manufacturer Altria has outlined a four-point plan for maintaining profitability, according to investment-research resource Seeking Alpha.
Despite demonstrating returns three times higher than the broader market over the past seven years, Richmond, Va.-based Altria faces declining demand for tobacco products overall, and a significant drop in demand among young consumers, said the report from New York-based Seeking Alpha.
The firm reported that Altria’s Philip Morris USA business suffered a 5% drop in cigarette-shipment volumes during its second-quarter this past summer, which drove a 2.4% drop in revenue from smokeable products that quarter.
Despite the declines, Altria has outlined a four-point plan to grow profitability going forward. Here are those steps …
Raising prices helped Altria generate a 4.3% increase in operating income with its smokeable products in the first half of the year. Playing with price elasticity is a tool in its arsenal.
Relying on product innovation for continued growth, Seeking Alpha reported that Altria expanded its MarkTen XL e-vapor product to retail channels to where it represents “more than 50% of e-vapor category volume.”
With exclusive rights to the iQOS “heat not burn” product from New York-based Philip Morris International (which Altria split from in 2008), Altria has submitted an application to the U.S. Food and Drug Administration (FDA) to designate the product as “modified risk.” It will also apply for FDA approval of the product under the new “deeming” regulations.
The company intends to cut costs and, at the same time, buy back shares. Economies of scale and Altria’s solid distribution infrastructure have allowed the company to identify $300 million in annualized cost savings. It expects to realize these costs savings by the end of 2017.
Altria will also aggressively repurchase its own shares on an annual basis. It received a $5.3 billion windfall relating to the recent Leuven, Belgium-based AB InBev takeover of SABMiller. Altria holds a significant equity stake in London-based SABMiller.
Get today’s need-to-know convenience industry intelligence. Sign up to receive texts from CSP on news and insights that matter to your brand.
CSP’s Top 202 details the largest chains in the convenience-store industry and the biggest M&A stories of the past year. Welcome to a deep dive into the c-store landscape.
Category sales performance in Beverages, Candy, General Merchandise, Packaged Food/Foodservice and Snacks.
The industry’s largest distributors by sales volume
Corporate retail news affecting the convenience-store industry
The latest information on products and trends in the convenience-store and foodservice industries.
Peek inside new convenience stores to uncover the best in retail store design across North America.