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Altria’s Smokeless Tobacco Sales and Market Share

No vaping and no smoking sign. Source: Flickr

Altria (NYSE:MO), a Fortune 200 company, is on a mission to transition to a non-combustible future.

To do that, Altria has made several acquisitions and investments in recent years to expand its non-combustible or smokeless tobacco portfolio.

As of 3Q 2022, Altria, directly and indirectly, owns several businesses, including the following subsidiaries as well as agreements with others that Altria believes, will turn the company around from a stagnant to a growth-driven non-combustible focused conglomerate:

  • Helix Innovations LLC – maker of on! oral nicotine pouches,
  • 35% ownership interest in JUUL LABS – the nation-leading e-vapor company,
  • Exclusive U.S. license to commercialize Philips Morris International Inc’s IQOS products – the only heated tobacco product authorized by the U.S FDA.
  • A significant stake in Cronos – a leading Canadian cannabinoid company

But just how successful has the company been in its transition to a smokeless tobacco endeavor?

To find out, in this article, we will look at the sales and growth rates as well as the market share of Altria’s smokeless tobacco products segment.

Let’s take a look!

Altria’s Oral Tobacco Product Sales (Yearly)

Altria oral tobacco product sales by year

Altria oral tobacco product sales by year

* Oral tobacco product (used to be called smokeless tobacco product) revenue by year is a GAAP measure and is obtained from Altria’s earnings presentation.
* Revenue net of excise taxes is shown in the chart to rule out the effect of government taxes.
* Altria’s fiscal year begins on Jan 1 and ends on Dec 31.

Let’s first look at Altria’s oral tobacco product sales on an annual basis for the period from FY2014 to FY2021.

As shown in the chart above, Altria’s oral tobacco product sales have been on a steady rise over the last 8 years, with FY2021 having the highest figure at nearly $2.5 billion.

In FY2021, Altria’s oral tobacco product sales of $2.5 billion represent a year-over-year increase of roughly 3%.

Keep in mind that the sales figures are net of excise taxes to exclude the effect of the rise in government levies and duties imposed on tobacco products.

Year to date, Altria sold nearly $1.9 billion worth of oral tobacco products as of Q3 2022.

Of all prior records, Altria’s oral tobacco product sales increased the most in fiscal 2020.

Altria’s record revenue in fiscal 2020 was partly driven by the consolidation of on!, an oral nicotine pouch distributed by Helix, into its own result.

Altria fully owned Helix as of 3Q 2022.

Altria’s Oral Tobacco Product Shipment Volumes (Yearly)

Altria oral tobacco product shipment volumes by year

Altria oral tobacco product shipment volumes by year

* Oral tobacco product (used to be called smokeless tobacco product) shipment volumes by year data is obtained from Altria’s earnings presentation.
* Data does not come from restated results triggered by business combinations, changes in accounting standards, and sales/acquisition of subsidiaries.
* Altria’s fiscal year begins on Jan 1 and ends on Dec 31.

In terms of shipment volumes, Altria shipped slightly more oral tobacco products in FY2021 than in FY2020.

In this aspect, Altria’s total oral tobacco product shipment volumes totaled 820.3 million cans and packs in FY2021 compared to 819.6 million cans and packs in FY2020.

However, on a long-term basis, Altria’s oral tobacco product shipment volumes have been on a decline between FY2014 and FY2021.

Altria’s oral tobacco product shipment volumes topped out at 853.5 million cans and packs in FY2016.

Since then, Altria shipped considerably fewer smokeless tobacco products in subsequent years.

Year to date, Altria’s oral tobacco product shipment volumes reached 603.5 million cans and packs as of fiscal 2022 3Q.

Breakdown of Altria’s Oral Tobacco Product Shipment Volumes (Yearly)

Altria oral tobacco product breakdown

Altria oral tobacco product breakdown

* Oral tobacco product shipment volume breakdown data is obtained from Altria’s earnings presentation and does not come from restated results triggered by business combinations, changes in accounting standards,s and sales/acquisition of subsidiaries.
* Altria’s fiscal year begins on Jan 1 and ends on Dec 31.

According to the chart, Altria’s Copenhagen makes up most of the company’s oral tobacco product shipment volumes, at over 60% in FY2021.

In FY2021, Altria shipped 503.6 million cans and packs of Copenhagen, which was slightly lower compared to the number a year ago.

On a long-term basis, Altria’s Copenhagen shipment volumes have been on a decline in subsequent years after topping 531 million cans and packs in FY2018.

A similar downtrend is seen for Altria’s Skoal, another leading oral tobacco product for the company.

Altria shipped the lowest volume of Skoal in FY2021 at only 197.4 million cans and packs, down 5% compared to FY2020.

Between FY2014 and FY2021, Altria’s Skoal shipment volumes have been on a decline, with FY2021 reporting the lowest level.

On the contrary, Altria’s Red Seal and on! shipment volumes increased the most in FY2021 to 119.3 million cans and packs, up nearly 35% compared to FY2020.

Keep in mind that Altria consolidated the sales of on! product in fiscal 2020 and thus, the significant volume increment in this category of smokeless tobacco products.

Alria’s Oral Tobacco Product Market Share By Year

Altria oral tobacco product market share

Altria oral tobacco product market share

* Market share data is obtained from Altria’s earnings presentations and it excludes international volume.
* Market share data does not come from restated results triggered by business combinations, changes in accounting standard and sales/acquisition of subsidiaries.
* Altria’s fiscal year begins on Jan 1 and ends on Dec 31.

Altria’s total market share for oral tobacco products has slightly declined from FY2014 to FY2021, with FY2021 being the worst performer at 47.8% retail market share.

Altria’s Copenhagen, the largest product category, also saw a similar decline in retail market share over the years, with 2021 being the lowest at only 29.4%.

A similar decline occurred for Skoal where its market share reached only 12.6% in FY2021, the lowest figure ever reported.

However, other smokeless tobacco products’ market share has increased year over year and reached 5.8% in FY2021, primarily driven by on! expansion in the USA.

Alria’s Oral Tobacco Products Sales (Quarterly)

Altria oral tobacco product sales - quarterly

Altria oral tobacco product sales – quarterly

* Oral tobacco product sales data is a GAAP measure and is obtained from Altria’s earnings presentations.
* Net revenue and revenue net of excise taxes are shown in the chart to show readers the amount of taxes that have been paid.

Previously called the smokeless tobacco product, this business unit has now been renamed to oral tobacco products unit starting in FY2020 which now includes oral nicotine pouch products such as on!.

On a quarterly basis, Altria’s oral tobacco products sales have been steadily trending upward since FY2017, reaching as much as $670 million and $640 million in 3Q 2022 in terms of net revenue and revenue net of excise taxes, respectively.

Despite facing multiple challenges throughout FY2021, including the COVID-19 pandemic disruption and lower consumer sentiment as a result of the pandemic, Altria’s sales from the oral tobacco segment continued to thrive, driven largely by higher pricing and higher shipment volume.

In fiscal 3Q 2022, Altria’s oral tobacco product net revenue and revenue net of excise taxes surged as much as 8% year-over-year and had been up over the past 6 years.

Alria’s Oral Tobacco Products Sales (TTM)

Altria oral tobacco product sales - ttm

Altria oral tobacco product sales – ttm

* Oral tobacco product sales data shown in the chart above is presented on a TTM basis.
* TTM data consists of the sum of the quarterly data on a trailing 12-month or 4-quarter basis.

The quarterly plot may not clearly display the long-term trend of Altria’s oral tobacco product sales.

Therefore, the TTM or trailing 12-month plot above is created.

On a TTM basis, Altria’s oral tobacco product sales have been increasing, with net revenue and revenue net of excise taxes reaching $2.6 billion and $2.5 billion, respectively, as of 3Q 2022.

The 2022 Q3 result represents a year-over-year growth rate of 2% for both net revenue and revenue net of excise taxes.

Alria’s Oral Tobacco Products Shipment Volumes (Quarterly)

Altria oral tobacco product shipment volumes - quarterly

Altria oral tobacco product shipment volumes – quarterly

* Quarterly oral tobacco product shipment volumes data is obtained from Altria’s earnings presentations.
* Data does not come from restated results triggered by business combinations, changes in accounting standard and sales/acquisition of subsidiaries.

In terms of total shipment volume, Altria has done fairly poorly on a quarterly basis, with shipment volume staying flat between FY2017 and FY2022.

As of Q3 2022, Altria shipped only 201.4 million cans and packs of oral tobacco products, up slightly from a year ago.

Alria’s Oral Tobacco Products Shipment Volume (TTM)

Altria oral tobacco product shipment volumes - ttm

Altria oral tobacco product shipment volumes – ttm

* Oral tobacco shipment data shown in the chart above is presented on a TTM basis.
* TTM data consists of the sum of the quarterly data on a trailing 12-month or 4-quarter basis.

The TTM plot above clearly shows that Altria’s oral tobacco product shipment volumes have spiraled downward since 4Q17 and reached only 807 million cans and packs in 4Q19, a seemingly bottom since fiscal 2017.

Thereafter, Altria’s oral tobacco product shipment volumes rose in the following quarters and reached 809.5 million cans and packs as of 3Q 2022 on a TTM basis.

The 3Q 2022 TTM result was up slightly at 1% from the previous quarter but was down 1% compared to a year ago.

Alria’s Copenhagen And Skoal Shipment Volumes (Quarterly)

Altria Copenhagen and Skoal shipment volumes - quarterly

Altria Copenhagen and Skoal shipment volumes – quarterly

* Quarterly Copenhagen and Skoal shipment volumes data is obtained from Altria’s earnings presentations.
* Data does not come from restated results triggered by business combinations, changes in accounting standard and sales/acquisition of subsidiaries.

In the oral tobacco product category, Altria’s Copenhagen and Skoal are the most prominent products, contributing well over 120 million and 50 million cans and packs, respectively, on a quarterly basis to Altria’s total shipment volumes.

These 2 smokeless tobacco products alone make up more than 80% of Altria’s total oral tobacco product shipment volumes.

Despite being the top contributors in shipment volumes, the numbers have been declining.

Over the past 3 years, neither Copenhagen nor Skoal has managed to score a breakthrough, except in 2020 2Q when Copenhagen’s shipment volume ticked surprisingly higher, driven possibly by a sudden surge in demand.

In Q3 2022, Altria shipped 118.2 million and 45.3 million cans and packs of Copenhagen and Skoal, respectively, representing a year-over-year decline of about 3% and 5%, respectively.

Alria’s Copenhagen And Skoal Shipment Volumes (TTM)

Altria Copenhagen and Skoal shipment volumes - ttm

Altria Copenhagen and Skoal shipment volumes – ttm

* Copenhagen and Skoal shipment data shown in the chart above is presented on a TTM basis.
* TTM data consists of the sum of the quarterly data on a trailing 12-month or 4-quarter basis.

To clearly display the trend, the TTM plots above show it all.

Both Copenhagen and Skoal’s sales volume has been drifting lower over the last 3 years, with Skoal’s result performing particularly poorly when the reported shipment volume was only 185.3 million cans and packs on a TTM basis as of 3Q 2022, a new low for Altria.

Similarly, Altria’s Copenhagen shipment volumes reached 481.7 million cans and packs on a TTM basis as of 3Q 2022, also a new low for the company.

Both smokeless products declined 5% and 7% respectively in 3Q 2022 from a year ago.

Alria’s Other Oral Tobacco Products Shipment Volumes (Quarterly)

Altria other oral tobacco product shipment volumes - quarterly

Altria other oral tobacco product shipment volumes – quarterly

* Other oral tobacco products consist of Red seal, on!, etc., and the shipment volumes data is obtained from Altria’s earnings presentations.
* Data does not come from restated results triggered by business combinations, changes in accounting standards and sales/acquisition of subsidiaries.

Other than Copenhagen and Skoal, Altria also carries other oral tobacco products, including Red Seal, on! and certain USSTC as well as Philip Morris USA smokeless products.

This segment of smokeless tobacco products is referred to as “Others” in Altria’s annual and quarterly filings.

Accordingly, Altria has done particularly well in 2021 and 2022 when sales volumes for other smokeless products surged significantly higher, driven largely by the addition of on!, an oral nicotine pouch product, into its consolidated financial reports.

Prior to FY2020, Altria’s other oral tobacco products have been relatively flat in terms of sales volume.

For your information, Altria completed the acquisition of Helix at the end of 2019 and started consolidating the results from Helix in 2020.

Also, Helix produces and distributes on!.

As of 3Q 2022, Altria’s other oral tobacco products shipment volumes surged to 37.9 million cans and packs, a 28% growth from the same quarter a year ago.

Sequentially, the 3Q 2022 result was flat from the prior quarter.

Alria’s Other Oral Tobacco Products Shipment Volumes (TTM)

Altria other oral tobacco product shipment volumes - ttm

Altria other oral tobacco product shipment volumes – ttm

* Other oral tobacco product shipment data shown in the chart above are presented on a TTM basis.
* TTM data consists of the sum of the quarterly data on a trailing 12-month or 4-quarter basis.
* Others consists of Red seal, on!, and certain USSTC and PM USA smokeless products.

A similar trend is observed in the TTM plot above.

Altria’s other oral tobacco products shipment volume has gone significantly higher beginning in 2020, driven mainly by the addition of on! into its smokeless portfolios.

Based on the chart, we are seeing a sales volume of 142.5 million cans and packs on a TTM basis in 3Q 2022 for Altria’s other oral tobacco products.

This category of oral tobacco products has certainly grown significantly higher, particularly in FY2022, but it represents only about 18% of Altria’s total shipment volumes.

Summary

Despite a shrinking shipment volume in the oral tobacco product segment, Altria’s sales in this product category continued to climb relentlessly in the last 3 years, driven primarily by higher pricing.

Altria has probably been raising prices across all oral tobacco products all these years.

Also, Altria’s ambition to transition to a smokeless tobacco company may have a long way to go, considering that the size of the oral tobacco product segment represents only 12% of the company’s total sales in FY2021.

Moreover, shipment volume has been relatively flat in the last 3 years for 2 of its most prominent smokeless tobacco products, Copenhagen and Skoal.

In short, investors just have to be patient with Altria during this transition period when the company is working tirelessly to drive profitability while finding growth in the non-combustible business segment.

References and Credits

1. All financial and sales data in the charts in this article were referenced and obtained from Altria’s annual and quarterly filings available in Altria SEC Filings.

2. Featured images in this article are used under creative commons license and sourced from the following websites: Aaron Yoo and Mike Mozart.

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Disclosure

The content in this article is for informational purposes only and is neither a recommendation nor a piece of financial advice to purchase a stock.

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