Altria Group (MO)

History and Background

Altria Group, formerly Philip Morris Companies Inc., was founded in 1919. It has evolved from a tobacco company to a consumer packaged goods holding company. A significant milestone was the spin-off of Kraft Foods in 2007 and Philip Morris International in 2008, allowing Altria to focus on the U.S. market.

Core Business Areas

• Smokeable Products: Manufactures and sells cigarettes in the U.S., primarily through Philip Morris USA. Brands include Marlboro, Virginia Slims, and Parliament.
• Smokeless Products: Manufactures and sells moist smokeless tobacco and snus through U.S. Smokeless Tobacco Company. Brands include Copenhagen and Skoal. Also has on! nicotine pouches.
• Oral Tobacco: Manufacture and sale of oral tobacco products such as nicotine pouches.
• Wine: Produces and markets wine through Ste. Michelle Wine Estates. This segment has been sold off in 2021.
• Equity Investments: Holds an investment in Anheuser-Busch InBev (ABI).

Leadership and Structure

Billy Gifford is the CEO. The company is structured with various business units under the Altria Group umbrella, each with its own leadership and management team. The Board of Directors provides oversight.

Key Offerings

• Marlboro: Marlboro is the leading cigarette brand in the U.S. with approximately 42% market share. Competitors include R.J. Reynolds (British American Tobacco) and ITG Brands.
• Copenhagen: Copenhagen is a leading moist smokeless tobacco brand in the U.S. Competitors include R.J. Reynolds (Grizzly, Kodiak) and Swedish Match (General Snus).
• on!: on! is a nicotine pouch product. Competitors include Swedish Match, British American Tobacco (Velo).
• Anheuser-Busch InBev (ABI) Investment: Equity stake in the world's largest brewer. Altria's investment is worth approximately $9 billion.

Industry Overview

The tobacco industry is facing declining cigarette consumption due to health concerns and increasing regulations. Growth is shifting towards alternative nicotine products like e-cigarettes, heated tobacco, and nicotine pouches. The wine industry is competitive, with a wide range of domestic and international players.

Positioning

Altria is the leading tobacco company in the U.S. with a strong brand portfolio and distribution network. Its competitive advantages include its established market presence, brand loyalty, and pricing power. It is trying to adapt towards a smoke-free future

Total Addressable Market (TAM)

The total addressable market for tobacco and nicotine products is estimated to be $800 billion globally. Altria is primarily positioned in the U.S. market, which represents a significant portion of this TAM. Altria is expanding into alternative nicotine products to capture a larger share of the TAM.

Key Competitors

• PM
• BTI
• IMBBY

Competitive Landscape

Altria has a strong position in the U.S. cigarette market, but faces increasing competition from other tobacco companies and alternative nicotine products. Altria's advantages include its brand portfolio and distribution network. Disadvantages include its dependence on the declining cigarette market.

NJOY Holdings, Inc.

• Year: 2023
• Acquisition Price (USD millions): 2750
• Strategic Rationale: To strengthen Altria's position in the e-vapor category and accelerate its transition to a smoke-free future.

Historical Growth: Historical growth has been primarily driven by price increases and cost reductions in the cigarette business. However, cigarette volume has been declining. Altria has invested in alternative nicotine products to drive future growth.

Future Projections: Analysts expect revenue to decline slightly in the coming years due to reduced cigarette consumption. Growth in alternative nicotine products is expected to offset some of the decline. Earnings growth is expected to be modest, driven by cost savings and share repurchases.

Recent Initiatives: Recent initiatives include investments in alternative nicotine products (on!, IQOS), cost reduction programs, and share repurchases.

Altria Group is a financially strong company with a dominant position in the U.S. tobacco market, but faces challenges due to declining cigarette consumption. Its high dividend yield makes it attractive to income investors, but its long-term growth prospects depend on its ability to successfully transition to alternative nicotine products. Regulatory risks and litigation exposure remain significant concerns. Its recent acquisition of NJOY could be a good move to diversify into the e-vapor industry.

Data Sources:

• Company Filings (10-K, 10-Q)
• Investor Presentations
• Earnings Call Transcripts
• Industry Reports
• Analyst Reports
• Market Research Reports

Disclaimers:

The information provided is for informational purposes only and should not be considered investment advice. Investing in the stock market involves risk, and past performance is not indicative of future results. Conduct your own research and consult with a financial advisor before making any investment decisions.