Altria's Future Growth: The Role of NJOY and Oral Tobacco

Current Performance of NJOY and Oral Tobacco

Altria's oral tobacco products have shown encouraging performance, with on! achieving significant share gains. Despite some share losses in traditional brands like Skoal and Copenhagen, on! has increased its market share to 8.1% by Q2 2024. NJOY, with FDA market authorization, strengthens Altria's smoke-free portfolio.

"We remain encouraged by the performance of our oral tobacco products as on!" --- (MO, earning call, 2024/Q1)

"Jennifer Maloney: Thanks. One more question on modern oral tobacco. So looking at the share losses in Skoal [ph] and Copenhagen, and also the share performance in on!, it seems like zin [ph] is taking significant share from traditional oral tobacco and on!" --- (MO, earning call, 2024/Q1)

"maintained year-over-year share momentum through the second quarter of 2024 to achieve 8.1% of the total oral tobacco category, an increase of 1.2 share points versus the second quarter of 2023 and an increase of 1.0 share point sequentially." --- (MO, sec filing, 2024/Q2)

"maintained year over year share momentum through the first quarter of 2024 to achieve 7.1% of the total oral tobacco category, an increase of 0.2 share points versus the fourth quarter of 2023 and an increase of 0.2 share points sequentially." --- (MO, sec filing, 2024/Q1)

"Our smoke-free portfolio includes ownership of U.S. Smokeless Tobacco Company LLC (USSTC), the leading global moist smokeless tobacco (MST) manufacturer, Helix Innovations LLC (Helix), a leading manufacturer of oral nicotine pouches, and NJOY, LLC (NJOY), currently the only e-vapor manufacturer to receive market authorizations from the U.S. Food and Drug Administration (FDA) for a pod-based e-vapor product." --- (MO, press release, 2024/06/21)

Market Trends and Consumer Preferences

Altria and its competitors are navigating shifting market trends and consumer preferences, with economic pressures influencing purchasing behaviors. The transition from combustible to non-combustible products, such as NJOY and oral tobacco, is critical. Strategies include leveraging data analytics, broadening consumer appeal through varied pricing, and addressing economic strains to maintain market share.

"Is there a growing risk that ON loses its leading market share position? And as related to the combustible segment, with consumers under increasing economic pressures, what are the opportunities to leverage data analytics to better target resources or promotions to address the widened domestic cigarette price gap and adjust to changing consumer purchase patterns?" --- (MO, event transcript, 2024/05/16)

"It's all more complicated than that, but that's the starting point. It frustrates me that the dominant conversation around your business is the transition from a combustible product to a non combustible product, all the benefits that entails, everything you guys are doing to educate the consumer, the market, etcetera, but it still feels like non consumer stakeholders led by investors aren't discounting the future of your business and where it should be, what value that attracts, what multiple it should be, etcetera, etcetera." --- (PM, conference, 2024/06/04)

"Well, we are seeing other parts of consumer weaken sequentially. So is it fair to say that you are maybe seeing some green shoots and your key competitor was highlighting that they are beginning to see industry volume trends improve." --- (MO, earning call, 2024/Q2)

"This successful strategy of broadening consumer appeal with different price tiers while reinforcing and growing the premium line-up is a good illustration of how our IQOS business is evolving across markets as the category continues to grow." --- (PM, earning call, 2024/Q1)

"So when you think about that, I think when you think about the pricing, and we've talked about the factors that go into pricing decisions, certainly we've highlighted for you that our consumer is under economic strain, both from the cumulative impact of inflation as well as debt loads and high interest rates." --- (MO, earning call, 2024/Q1)

Competitive Landscape and Market Positioning

Altria's competitive landscape in NJOY and oral tobacco is shaped by strategic pricing, regulatory challenges, and promotional efforts. Competitors like Philip Morris are not matching Altria's price increases, impacting market share. Regulatory control by the FDA is crucial, and promotional strategies aim to retain and attract consumers in a competitive market.

"We've been increasing price by $0.30 on our consumables. And that has not been followed only very marginally by the competition with some impact on our market share as it happens when we increase price in a meaningful manner, widening the gap with competition and the competition not following." --- (PM, earning call, 2024/Q2)

"We believe it is critical that the FDA acts decisively to regain control over the oral nicotine pouch category to prevent another widespread illicit market from taking hold." --- (MO, earning call, 2024/Q2)

"achieving a number one closed pod position in five markets within the first year of launch including Italy, the Czech Republic and Romania.We continue to observe good repeat purchase and conversion rate, which is often a challenge for this category." --- (PM, earning call, 2024/Q2)

"And so you're going to have pulse [ph] promotions through time. The real goal there is to keep the converted consumer engaged with the brand, but still induce trial both from competitive and those that are making different choices in the nicotine space." --- (MO, earning call, 2024/Q1)

"Viv1 enjoys premium positioning and it offers a better value for money compared to the disposable products, which make it a great destination for converted vapers who use several pods a week." --- (PM, conference, 2024/05/07)

Technological Innovations and Product Development

Altria's focus on technological innovations and product development is evident through increased R&D spending on innovative products, rapid advancements in product evolution, and ongoing efforts to enhance safety and harm reduction. Regulatory considerations, such as potential FDA standards for flavors, also play a crucial role in shaping the future of NJOY and oral tobacco products.

"Years of innovation and scientific research have led to the development of products that can provide an alternative to adult smokers who don't quit." --- (PM, Twitter post, 2024/05/20)

"Sal Mancuso: Matt, we don't, as you know, we don't guide at the segment level, but you are correct in that you are seeing a shift in R&D spending towards the innovative products." --- (MO, earning call, 2024/Q1)

"And I think when you look at what's happened in the last 5 years, the speed of innovation means the product we to study today may not be there in 10 years because we'll have evolved to much better products by then." --- (PM, conference, 2024/05/07)

"The FDA could propose an additional product standard for flavors in innovative tobacco products, including e-vapor products and oral nicotine products." --- (MO, sec filing, 2024/Q1)

"Great, Vansigitel. Next question, What more could be done in terms of innovation or product development that could make these products even safer and therefore make the argument for harm reduction even more compelling?" --- (PM, conference, 2024/05/07)