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Altria’s Smokeless Tobacco Products 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 2Q 2020, 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 business segment?

To find out, in this article, we will dive into the sales and growth rates as well as the market share of Altria’s smokeless tobacco products segment over several quarters.

Let’s move on!

Alria’s Smokeless Tobacco Products Sales (Quarterly)

Altria smokeless tobacco products sales (quarterly)

Altria smokeless tobacco products sales (quarterly)

Let’s first look at Altria’s smokeless tobacco product quarterly sales results over the past 3 years.

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!.

As seen from the chart, the quarterly sales from the smokeless tobacco products segment have been steadily trending upward since 2017, reaching as much as $660 million and $626 million in 2Q 2020 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 smokeless tobacco segment have avoided the downfall and even thrived, driven largely by higher pricing and higher shipment volume.

In 2Q 2020, both net revenue and revenue net of excise taxes grew nearly 10% year over year.

Alria’s Smokeless Tobacco Products Sales (TTM)

Altria smokeless tobacco products sales (ttm)

Altria smokeless tobacco products sales (ttm)

On a trailing 12-months (TTM) basis, the uptrend for sales is clearly displayed, with net revenue and revenue net of excise taxes reaching all-time highs in multiples quarters in 2020.

Moreover, Altria managed to generate sales of $2.5 billion and $2.4 billion in 2020 Q2 for net revenue and revenue net of excise taxes, respectively.

Year over year, the 2Q 202 TTM result represents a growth rate of as much as 8%.

Alria’s Smokeless Tobacco Products Shipment Volume (Quarterly)

Altria smokeless tobacco products shipment volume (quarterly)

Altria smokeless tobacco products shipment volume (quarterly)

In terms of total shipment volume, Altria has done fairly poorly on a quarterly basis, with shipment volume staying flat between 2017 and 2020.

However, we can see that the 2020 2Q result significantly ticked higher and reached 213.8 million cans and packs, representing a growth rate of 3% year over year.

Alria’s Smokeless Tobacco Products Shipment Volume (TTM)

Altria smokeless tobacco products shipment volume (ttm)

Altria smokeless tobacco products shipment volume (ttm)

The TTM plot above clearly shows that Altria’s oral tobacco products shipment volume spiraled downward since 4Q17 and reached only 807 million cans and packs in 4Q19.

Starting in 2020, Altria reported a reverse in the downtrend, with shipment volume for the oral tobacco products improving consecutively in 2 quarters.

Alria’s Copenhagen and Skoal Shipment Volume (Quarterly)

Altria Copenhagen and Skoal shipment volume (quarterly)

Altria Copenhagen and Skoal shipment volume (quarterly)

In the smokeless tobacco product category, Altria’s Copenhagen and Skoal are the most prominent products, generating sales of well over 120 million and 50 million cans and packs, respectively, on a quarterly basis.

These 2 smokeless tobacco products alone contributed over 90% of Altria’s total smokeless tobacco products shipment volume.

Despite being the top contributors in sales in the smokeless product segment, these 2 non-combustible tobacco products have historically been declining in terms of shipment volume.

Over the past 3 years, neither the Copenhagen nor the 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.

Alria’s Copenhagen and Skoal Shipment Volume (TTM)

Altria Copenhagen and Skoal shipment volume (ttm)

Altria Copenhagen and Skoal shipment volume (ttm)

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 poor when the reported shipment volume was only 214.2 million cans and packs on a TTM basis in 2Q 2020, a new low for Altria.

Alria’s Other Smokeless Tobacco Products Shipment Volume (Quarterly)

Altria other oral tobacco products shipment volume (quarterly)

Altria other oral tobacco products shipment volume (quarterly)

Other than Copenhagen and Skoal, Altria also carries other oral tobacco products, including Red Seal, on! and IQOS.

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 when sales volumes for other smokeless products surged significantly higher, driven largely by the expansion of on!, an oral nicotine pouch product.

Prior to 2020, Altria’s other oral tobacco products have been relatively flat in terms of sales volume.

Alria’s Other Smokeless Tobacco Products Shipment Volume (TTM)

Altria other oral tobacco products shipment volume (ttm)

Altria other oral tobacco products shipment volume (ttm)

A similar trend is observed in the TTM plot above.

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

Based on the chart, we are seeing a sales volume of more than 75 million cans and packs on a TTM basis in 2Q 2020 for Altria’s other oral tobacco products.

This category of oral tobacco products may have grown significantly higher, but it represents only 9% of Altria’s total shipment volume.

Alria’s Smokeless Tobacco Product Market Share by Quarter

Altria smokeless tobacco products market share by quarter

Altria smokeless tobacco products market share by quarter

*The market share data in the chart above does not relate to the restated numbers. Therefore, the year over year comparison may not be meaningful.

From the above chart, Altria commands a combined market share of roughly 50% for all of its smokeless tobacco products.

Out of all the oral tobacco products, Copenhagen leads the pack, with a market share of more than 30%.

Skoal stands at the 2nd place with a market share of around 15%.

Other oral tobacco products such as Red Seal, on! and IQOS command only 3% of market share.

Overall, Altria’s market share for smokeless tobacco products went slightly lower throughout 2020, due mainly to the growth of oral nicotine pouches such as on!.

Alria’s Smokeless Tobacco Product Market Share by Year

Altria smokeless tobacco products market share by year

Altria smokeless tobacco products market share by year

*The market share data in the chart above does not relate to the restated numbers. Therefore, the year over year comparison may not be meaningful.

Altria’s market share for total smokeless tobacco products has slightly declined from 2016 to 2019, with 2019 being the worst performer at 53.9% market share.

A similar decline occurred for Skoal where its market share reached only 15.6% in 2019.

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.

Summary

Despite a shrinking shipment volume in the smokeless tobacco product segment, Altria’s sales in this 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 new tobacco product category represents only 9% of the company’s total sales in the smokeless business segment in 2020.

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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