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Shares of Altria Group Inc. The stock has gained 7% over the past three months. The difficult macroeconomic environment that has impacted consumer discretionary income has also weighed on Altria, causing volume and profit to decline during the most recent quarter. As headwinds are rising in the tobacco space, the company is working hard to move toward a smoke-free future.
Heated tobacco
Altria sees significant opportunity in the heated tobacco category in the US. As part of efforts to expand this space, the company has joined forces with international tobacco company JT Group for the global development and commercialization of tobacco-free products.
In this partnership, the companies created Horizon Innovations, a joint venture between Altria and JT to commercialize hot tobacco products (HTS) in the US. JT subsidiary Japan Tobacco International (JTI) will supply the Ploom heated tobacco device and PM USA will manufacture the mobile HTS fuel for US commercialization.
JT currently sells Ploom HTS products in four countries. Last year, the company launched its latest HTS device Ploom X in Japan and since then, it has managed to double its share of the Japanese HTS segment. There are estimated to be over 1 million Ploom X consumers and Altria is working to bring this product to the US.
Altria’s hot cigarette portfolio also includes tobacco capsule (HTC) products. The company believes the product can appeal to smokers who have not found a satisfactory alternative to cigarettes and includes smokers who have tried and rejected e-vapor products. Altria expects to complete the first capsule product design later this year.
E-vapor
In its quarterly conference call, Altria stated that its total estimated e-vapor volume was down 4% in the third quarter compared to a year ago. The company also noted a reduction in JUUL purchases throughout the supply chain. A few months ago, Altria exercised its option to be released from non-compete obligations related to its JUUL investment. Although the company still holds a 35% economic stake in JUUL, the company is working to build a portfolio of e-vapor products that will help smokers switch from cigarettes.
Oral tobacco
Altria remains buoyed by growth in its oral tobacco products. During the third quarter, revenues from oral tobacco products increased by 7% year-on-year, while domestic shipment volumes increased by 1.3%. The company’s oral tobacco category grew by 6.5 share points year over year and now represents about 23% of the overall oral tobacco category. The volume of submissions for the ing! nicotine pouches increased by almost 70% to 21 million cans. Total US oral tobacco category shows for in! increased to 5.2% in Q3. The company seeks to strengthen its position! in the oral tobacco category.
Click here to read the full transcript of Altria’s Q3 2022 earnings conference call
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