Altria Highlights Dynamic Year in Tobacco Category

CEO Billy Gifford notes changes in oral tobacco, e-cigarettes, more
Photograph: Shutterstock

RICHMOND, Va. — Altria CEO Billy Gifford said  2020 was a dynamic year in the tobacco industry, with notable changes in each category.

The oral tobacco category is growing rapidly, heated tobacco is showing encouraging signs of smoker interests, combustible cigarette volumes saw little change and the e-vapor category is struggling, according to the company’s Jan. 28 conference call on the fourth quarter of 2020 and year-end results.

“While 2020 represented a pause in some industry trends away from combustible products, our plans to achieve our 10-year vision remains centered around building a deep understanding of evolving tobacco consumer preferences, meeting these preferences by expanding the awareness and availability of our non-combustible product portfolio and, when authorized by the FDA, engaging with smokers to educate them on the benefits of switching to alternative products,” Gifford said on the call.

The Richmond, Va.-based company’s net sales grew 5.3% for fiscal year 2020 compared to 2019, it said.   

When it comes to e-cigarettes and vapor products, Gifford estimated that total category volumes decreased by 10% for the full year. The industry is undergoing a transition as the U.S. Food and Drug Administration (FDA) makes determinations on thousands of premarket tobacco product applications (PMTAs), which were required to be filed for deemed new tobacco products by Sept. 9, 2020.  

Altria said its value of its stake in e-cigarette maker Juul Labs Inc. fell $4.1 billion in the fourth quarter of 2020. It values Juul at about $12 billion now, compared to $38 billion when Altria invested in the company in December 2018, according to a report by the Wall Street Journal.

“We believe the categories long-term trajectory will be determined by regulatory decisions, legislative and tax policy and innovation that best addresses smoker and vapor preferences,” Gifford said.

The maker of Marlboro cigarettes saw cigarette shipment volume increase by 3.1% in fourth-quarter 2020 and decrease 0.4% in 2020, compared to 2019. Altria said it expects 2021 cigarette industry volume trends to be most influenced by stay-at-home practices, unemployment rates, fiscal stimulus, cross-category movement and the timing and breadth of the COVID-19 vaccine deployment.

Shipment volumes for oral tobacco products increased 0.5% for the fourth quarter and 1.2% for the year compared to the year prior, according to a news release on Altria’s fourth-quarter 2020 and full-year earnings guidance.

“Copenhagen remains the leading oral tobacco brand and delivered strong volume and profit performance for the year. We are also excited about the potential for on! and believe it's a satisfying product for both smokers and dippers,” Gifford said.

In heated tobacco, Philip Morris USA is expanding IQOS and Marlboro HeatSticks “responsibly and in a disciplined manner,” Gifford said. The product launched in Charlotte, N.C., expanding the retail distribution of HeatSticks to about 1,000 stores, he said, including convenience stores. The FDA also authorized the IQOS 3 devices for sale in the United States, which offers enhancements compared to the current version including a longer battery life and faster reaching time.

Gifford remained optimistic for the year ahead.

“Our plans for the year ahead include accelerating investments in support of our 10-year Vision, which we expect to fund through the continued financial strength of our tobacco businesses,” he said. “We expect to deliver 2021 full-year adjusted diluted EPS in a range of $4.49 to $4.62, representing a growth rate of 3% to 6% from an adjusted diluted EPS base of $4.36 in 2020.”

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