The massive tobacco company Altria Group (MO.N.) reduced its projected yearly earnings on Thursday due to smokers gradually switching from its priciest brands of cigarettes to less costly ones or smokeless alternatives.
The manufacturer of Marlboro has been raising the costs of its classic goods to counteract volume drops as more customers choose other products like vapes or oral nicotine because they are concerned about the health hazards.
Price hikes, however, have made Altria lose ground to less expensive cigarettes like USA Gold as consumers who are sick of inflation attempt to save money.
According to the business, Marlboro’s retail share of the entire cigarette category fell by 0.3 percentage points from the previous year.
Better pricing in the third quarter was only partially able to offset lower shipping numbers and increased promotional efforts, which led to a 5.3% decline in Altria’s net sales from smokeable products.
However, Altria’s attempts to enter the e-cigarette market have not turned out well. It suffered billion-dollar losses on its 2018 investment in Juul Labs due to the vape company’s involvement in an increase in teen vaping and the subsequent regulatory scrutiny.
It took a fresh risk in June when it acquired the pod-based vaporizer NJOY ACE, although when it comes to market share, NJOY is well behind Juul. Altria said over 7.5 million pods were sent to NJOY ACE during the third quarter.
Oral tobacco use, particularly spitless nicotine pouches, is another smoking substitute that is gaining popularity in the United States.
Shipment volumes of Altria’s product, nicknamed On!, increased by 36.7% during the quarter. However, its oral portfolio is still heavily weighted toward conventional moist-cut tobacco, like its Copenhagen brand, which is facing increasing pressure due to the rising popularity of nicotine pouches.
Against a prior estimate of $4.89 to $5.03 per share, the business anticipates adjusted earnings of $4.91 to $4.98 per share this year. Excise tax receipts were $5.28 billion, a 2.5% decrease from the previous quarter. LSEG data shows that analysts had projected sales of $5.43 billion.
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