Edit
Tobacco

Altria’s Future Comes at a Cost

Job cuts at tobacco company follow promising forecasts for Juul, Cronos investments
Photograph: Shutterstock

RICHMOND, Va.--Despite a promising outlook for its recent multibillion-dollar investments in e-cigarette maker Juul Labs and cannabis supplier Cronos Group, one of the country’s largest tobacco companies, Altria Group Inc., said it will cut jobs within its own workforce as a way to help finance its recent moves, according to lead executives.

After describing Altria’s confidence in the growth potential of San Francisco-based Juul and Toronto-based Cronos, Howard Willard, CEO of Richmond, Va.-based Altria, said it was proceeding with a cost-reduction program that includes cutting about 900 jobs, mostly within its own support services.

The move would “offset most of the interest expense associated with the debt incurred to finance the Juul and Cronos investment,” Willard said during a Jan. 31 earnings call, leading to a $575 million savings by the end of the year. Segments affected would include third-party spending in areas such as professional and consulting services, information technology and product research, and regulatory investments.

Meanwhile, Willard said they expected Juul to grow at a 15%-20% compound annual rate over five years, with a near-term focus on expansion into new markets. He said their projections incorporated potential market shifts, such as future action from the U.S. Food and Drug Administration that may include new regulations and sales restrictions.

Describing their confidence in Juul, Willard said the industry has seen products, “particularly in the e-vapor category that have had some success, and then that success has fizzled … but I have to point out that Juul’s growth and success in the U.S. market last year was unique, and first of its kind compared to other tobacco-product successes both in the U.S. and overseas.”

Giving two examples of Juul’s promise in other countries, Willard pointed to Canada and the United Kingdom. In Canada, Juul reported on a retail promotion that led to more than 60% dollar share in stores selling their products after only three months at retail. Then with the Sainsbury retail chain in England, Juul said it recently became its No. 1 e-vapor brand, with a dollar share in excess of 23% in less than 12 weeks after launch.

“And just to remind you, the U.K. operates under the tobacco products directive adopted by many [European] countries, which limits the nicotine concentration level,” Willard said. “Ultimately, we expect the international revenue and income opportunity to end up being as large as or larger than the U.S. opportunity.”

With Cronos, Willard described growth opportunities as “significant” as more markets for cannabis open. He described the Cronos management team as “strong” and having “built unique capabilities to compete globally across the medicinal, recreational and nutraceutical categories.”

The goal with Cronos is to quickly expand its global footprint and production capacity, Willard said. “We also expect it to accelerate the execution of its strategic initiatives, including investments in cannabinoid innovation and developing differentiated products and brands across medicinal and recreational categories,” Willard said. “We look forward to helping Cronos realize its significant growth potential.”

Related Content

Trending

More from our partners