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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 responsibly lead the transition of adult smokers 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 1Q 2021, 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% economic 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.

But just how successful has the company been in its 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 move on!

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.

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 FY2020 having the highest figure at $2.4 billion.

In 2020, Altria’s oral tobacco product sales of $2.4 billion represent a year-over-year increase of 9%.

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 $600 million worth of oral tobacco products in Q1 2021.

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

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

Altria fully acquired Helix as of 1Q 2021.

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 standard and sales/acquisition of subsidiaries.

In terms of shipment volumes, Altria shipped more oral tobacco products in FY2020 than in FY2019.

In this aspect, Altria’s total oral tobacco product shipment volumes totaled 819.6 million cans and packs in FY2020 compared to 807 million cans and packs in FY2019.

However, on a long-term basis, Altria’s oral tobacco product shipment volumes have been on a decline between FY2014 and FY2020.

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

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

Year to date, Altria’s oral tobacco product shipment volumes reached 197.9 million cans and packs in 2021 1Q.

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 standard and sales/acquisition of subsidiaries.

According to the chart, Altria’s Copenhagen makes up most of the company’s oral tobacco product shipment volumes, at over 60% in FY2020.

In FY2020, Altria shipped 522 million cans and packs of Copenhagen, which was the same number that it shipped a year ago.

Altria’s Copenhagen shipment volumes have slightly declined 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 FY2020 at only 208.5 million cans and packs, down 4% compared to FY2019.

Between FY2014 and FY2020, Altria’s Skoal shipment volumes have been on a decline, with FY2020 reporting the lowest level.

On the contrary, Altria’s Red Seal and on! shipment volumes increased the most in FY2020 to 88.7 million cans and packs, up more than 30% compared to FY2019.

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

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 2020 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 2017, reaching as much as $626 million and $595 million in 1Q 2021 in terms of net revenue and revenue net of excise taxes, respectively.

Despite facing multiple challenges throughout 2020, including the COVID-19 pandemic disruption, Altria’s sales from the oral tobacco segment continued to thrive, driven largely by higher pricing and higher shipment volume.

In 1Q 2021, Altria’s oral tobacco product net revenue and revenue net of excise taxes grew 4% year over year.

Alria’s Oral Tobacco Products Sales (TTM)

Altria oral tobacco product sales - ttm

Altria oral tobacco product sales – ttm

* 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 clearly increasing, with net revenue and revenue net of excise taxes reaching all-time highs as of 1Q 2021.

As of 2021 Q1, Altria’s oral tobacco product segment generated TTM sales of $2.6 billion and $2.4 billion in net revenue and revenue net of excise taxes, respectively.

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 FY2021.

In FY2020 and FY2021, Altria’s quarterly shipment volumes for oral tobacco products have been on a decline.

As of Q1 2021, Altria shipped only 197.9 million cans and packs of oral tobacco products, which was the same level compared to the same quarter 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

* 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.

However, Altria’s oral tobacco product shipment volumes rose in subsequent quarters and reached 820.8 million cans and packs in 1Q 2021 on a TTM basis.

As mentioned, Altria’s rise in terms of oral tobacco product shipment volumes in FY2020 has been mainly driven by the addition of on!, an oral nicotine pouch product produced and shipped by Helix which Altria fully acquired in 1Q 2021.

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 90% 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 Q1 2021, Altria shipped 123 million and 48 million cans and packs of Copenhagen and Skoal, respectively, representing a year-over-year decline of about 5%.

Alria’s Copenhagen and Skoal Shipment Volumes (TTM)

Altria Copenhagen and Skoal shipment volumes - ttm

Altria Copenhagen and Skoal shipment volumes – ttm

* 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 205 million cans and packs on a TTM basis as of 1Q 2021, a new low for Altria.

Similarly, Altria’s Copenhagen shipment volumes reached 520 million cans and packs on a TTM basis as of 1Q 2021, a new low for the company.

Alria’s Others Shipment Volumes (Quarterly)

Altria other oral tobacco product shipment volumes - quarterly

Altria other oral tobacco product shipment volumes – quarterly

* Others consists 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 standard 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 PM USA smokeless products.

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

Accordingly, Altria has done particularly well in 2020 and 2021 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 2020, 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.

Helix produces and distributes on!.

As of 1Q 2021, Altria’s Others shipment volumes surged to an all-time high of 26.8 million cans and packs, a 35% growth from the same quarter a year ago.

Alria’s Others Shipment Volumes (TTM)

Altria other oral tobacco product shipment volumes - ttm

Altria other oral tobacco product shipment volumes – ttm

* 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 more than 95 million cans and packs on a TTM basis in 1Q 2021 for Altria’s other oral tobacco products.

This category of oral tobacco products has certainly grown significantly higher, particularly in 2020, but it represents only about 10% of Altria’s total shipment volumes.

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 market share for oral tobacco products has slightly declined from 2014 to 2020, with 2020 being the worst performer at 49.8% retail market share.

A similar decline occurred for Skoal where its market share reached only 13.8% in 2020.

However, Copenhagen and other smokeless tobacco product’s market share has increased year over year and reached 34.8% and 3.5%, respectively, in 2019.

Altria’s Copenhagen retail market share topped out at 34.8% in 2019 and declined to 31.9% in 2020.

Additionally, Altria’s Others oral tobacco product retail market share increased to 4.1% in 2020, primarily driven by on! product expansion in the USA.

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 less than 10% of the company’s total sales in FY2020.

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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