MO - Earnings call transcript Q1 2021

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Operator

Good day and welcome to Altria Group 2021 First Quarter Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by Altria management and a question-and-answer session. [Operator Instructions] Representatives of the investment community and media on the call will be able to ask questions following the conclusion of the prepared remarks. I would now like to turn the call over to Mr. Mac Livingston, Vice President of Investor Relations for Altria Client Services. sir. ahead, go Please

Mac Livingston

today, morning metrics Gifford, you Mancuso, Altria's Altria's website release, results. will Good providing Altria.com. press This results. at all our our joining available morning, discuss The Earlier business quarter Billy CEO, and first issued and Stephanie. a for release quarterly thank presentation us. CFO, we are Thanks, and our Sal on

XXXX. comparing call results stated, to today, period same our During we're in unless the otherwise

accordance and projections at remarks future forward-looking adjusted Altria's today's of call Today's today's both its subject contain reported to cautionary statements financial and reconciliations these non-GAAP U.S. financial from Future in will and reports that a are Adjusted measures results section that Altria Our review Board. on and Descriptions differ release results Please of comparisons basis. Statements earnings reported items results factors projections. remain Forward-Looking to results operating at contain dividend in the Accounting of altria.com. Generally the special the cause various website affect on included and results. of actual payments Accepted Principles. discretion could our materially repurchases earnings and release and results. Cautionary for with various with end share exclude

of or references over older. Finally, or call category existing remarks refer segment consumers turn XX age tobacco to I'll in specific to years today's tobacco within Billy. all tobacco consumers With a or to the adult that, consumers

Billy Gifford

as make full deliver plans. businesses the advancing we we year comparison our the in remaining are our smokers, interest. now ownership acquire to off own well recently We on you Against pouches joining the important our to the have excited talented with portfolio. in Altria's and to move We're to closed progress to for XX% we a a have another opportunity global supporting morning plans year of the on about against to announced oral have challenging full strong businesses thank global Good continue teams convert start first milestone transactions believe the nicotine and the for product we Mac. brand. non-combustible morning, we journey track global to This performed tobacco beyond Thanks, smoking. quarter and and us. We're

Before discussing board, served his tenure, memory like a Tom true and to in of would Chairman detail, visionary. Farrell, late first our insights on years our quarter results offered honor was during distinguished guidance we the Tom of our the and valuable more Board. XX

and friendship. May. We our will in shareholders its his miss meeting following at new a leadership, appoint contributions annual The will meeting Board chair

quarter now Let's our turn results. to first

driven continue maximizing balancing funding of the profitability Segment non-combustible Marlboro and the continued and retail from investments in Marlboro first tax with we XXXX. adjusted the adjusted primarily adjusted In diluted unfavorable a timing Our our EPS of rate. quarter by back and income expense, OCI combustibles while expanded, execute to appropriately higher of X.X% interest momentum segment, half its margins product smokeable strategy of declined share products. growth

quarter a estimated reflecting For these for cigarette When inventory cigarette volumes first the domestic first one declined reported factors, movements, the declined smokeable volume shipping of factors. adjusted and quarter, that year-over-year segment by in other XX% quarter driven We day volume that fewer domestic an wholesalers believe XXXX. part in trade X.X%. level At first approximately in quarter compared XXXX, COVID-XX of the first approximately XXX estimate million inventories by units, the depletion we volume declined adjusted units with cigarette by built dynamics, X%. of industry in XXX million

became monitor were remain below Also trip to when from in continuing steady first estimated remain quarter external total government patterns that consumer levels the In increasing consumer consumer estimated on purchasing federal March stimulus passed keeping and provide expenditures package. to people trips insights of the continue number behavior. and An factors pre-pandemic tobacco the eye to our the elevated we Looking at year we mobility third and factors will underlying impacts smoker a retail as levels. improved the compared on tobacco close sequentially. vaccinated the per a pre-pandemic We're on and sharply. We're dynamics, cigarette progresses.

non-combustible to products. Moving our

small the pouch period. share original oral have our retail and for we pouches nicotine On! We nicotine transactions April U.S. initial was are remaining December to were its the XX% full year pouches Oral business pleased a the to approximately of acquire in off XX% category growing nicotine we made for on! $XXX pouch nicotine in in exceeded the first In total XXXX, tobacco XX% the quarter that We on! in estimate estimates. XXXX, approximately ago million. base. completed Subsequently, the oral of now the of double share of category, rapidly growth has Global of globally. on! the When ownership acquisition

from In And point X.X% data store from achieved enterprise increased increase retail of estimate XX on! selling manufacturing by growth PMTAs pouch full was on! of In products, category the continued the that grew cans providing quarter expect of share year an seven the annualized rate a the share. on! supported approximately market year XX on!'s the capacity, On followed significantly to of XXXX, significantly on! and distribution, in for the product was broadened compounded continued. basis first oral awareness at category the the stores. entire consumer XX,XXX of last portfolio. tenths over XXXX momentum X.X%. will million XX% manufacturing total the five sold sale on!'s end grew by retail of annual tobacco moving Helix tobacco the end next month Helix capacity and U.S. the share the in of Since as in the growth quarter approximately and We volume a U.S. of first nicotine grow years.

be XX% of tobacco share report total oral category Helix industry's on! to intend in we expects tobacco covering of oral volume by U.S. forward stores the the midyear. Going to as

Our on! market. on in strengthen the see in primary Swedish potential increasing be to to focus on!'s the US. continues we growth Internationally,

also We expand To on smokers, expanded Team. U.S. to prospects consumer their potential on! believe we supporting these and presents the we a and on! term the non-combustible see international feedback on! additional gain non-combustible have look for We in explore products opportunities to conversion journey. Europe forward for alternative compelling longer

total increased e-vapor. to We year versus estimate XX% volume Moving period. the ago the category

X% QX, in we FDA menthol. with estimate continued. XXXX. among competitive activity marketplace the sales Sequentially flavored of tobacco e-vapor increased As category the systems restricted a and reminder exception that of pod products all The the as volume

these share retail XX%. total the category of result dynamics JUUL's a e-vapor quarter first As of to decreased

can responsible We that play to of continue a harm an believe category important tobacco FDA in role authorized consisting products reduction. solely e-vapor

IQOS USA across are stores In As retail vigorously points by the rewards our IQOS share to the month increase was two remain is and offers IQOS now investment. defending system. increase Virginia, Smokers generating Last also all category content retail compared has retail retail Marlboro FTC awareness their center and of using month South our in device. sequentially stores program IQOS see Atlanta IQOS, in Carolina. HeatSticks HeatSticks. encouraged and tenths to selling consumers Washington to IQOS claim which is and earn D.C. Along available PM X.X% the which up their HeatSticks battery USA Carolina, year The about the on USA the IQOS grow X.X sign in quarter. be USA X distribution, can June we to longer JUUL tobacco its nationwide. representing points IQOS sequentially. trial platforms and for Marlboro PM drive Marlboro an the is dropping statewide can is available area trial is Corner of this for been this committed North on Beginning program life being quarter. In getiqcos.com for many Georgia, HeatSticks devices through began rewards highly of cigarette HeatStick first approximately and is in mobile X.X Mall is and benefits with smokers area. the In at Smokers upgrading and of X faster geographic learning continuing and X% available of three when point expand also tenths through to sales PM first device and and continue to USA share notified investment, receive use Marlboro device their and value PM the scheduled delivery. and outside with PM Charlotte now engage marvel.com are for discounts Virginia heated communicate populated offered the metro open an a IQOS a the in effective to like plans in the the is June Tyson's X.X Northern communications recharging of HeatSticks IQOS an model.com of bundles which share redeem with new to volume as and boutique to We're increasing its digital On version. IQOS including of can device lending that purchase. device was the expansion, XX% the MRTP

on! a and investing of to into of a our year the IQOS and non-combustible inform in end. we insights to U.S. making acquire to geographies PM Marlboro strategies metro to future non-combustible our availability while reminder, As volume year three transition expand HeatSticks and expand products to more additional awareness XX% progress and IQOS driving consumer tobacco the smokers continue to availability approximately USA We're plans throughout and innovative portfolio. markets cigarette to actively by covering

products in and can to that vision invested non-combustible generating our Our segment shareholders. cash returned smokeable products continues to significant support be

guidance outlook. from transition to adjusted $X.XX range represents XXXX. $X.XX our future. of adjusted We our X% investments the range to continued adult a of The to EPS reaffirm guidance to X% a diluted $X.XX. Turning to in of This EPS in growth XXXX to includes rate support an diluted base smokers non-combustible financial a deliver

that to continue various will factors our could guidance. impact We monitor

to communities. and deliver are the risen businesses. success and together our of supporting Our challenge drive employees the They've their continue other to each to results

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Sal Mancuso

do. sentiments you employees Thanks Billy. thank you to your all I for echo our and

our Moving results. to

perform Our XX.X%. tobacco OCI The $X.X supported net margins businesses framework the billion delivered of adjusted adjusted expanded continue segment growth segment's price the products points to smokeable quarter. revenue the realization and for by over strong X% to first well PM in USA's OCI management quarter. in percentage X.X

is where times, Marlboro's from pleased observed price first of four Marlboro to gap In was year. older prior cigarettes be and share familiar reported discount driven activity, competitive XX% as the increased tenths disruptive segment. and in products versus heavy in the was tenths Marlboro's to XX.X% comparison Middleton's cigarette increase consumers gain category & increase continue believe versus leadership increase benefit retail the e-vapor. The Black for back Mild share. with lapping XX.X% discount continuing to profitable first We its to total price shipment activity In cigar In quarter, the deep preferences this over the discount we the leadership. Marlboro's ago declined segment by the period. that smoker during one the year long Despite is cigars, We share to quarter. first an year performance ago retail coming tenth the and standing effective primarily cigar quarter, tip continued discount lowest branded the first four in from XX% in volume segment. quarter by promotional of branded share quarter

by and adjusted increased investments behind estimated reported X.X calendar Turning to OCI OCI on! higher product and other by higher driven to inventory an non-combustibles. X.X%. tobacco XX.X%. were products driven offset segment differences When adjusted grew adjusted movements, X.X% by pricing Total primarily declined segment points by by segment factors partially OCI results tobacco on! margins Oral for percentage increased oral volume trade by Adjusted X.X% volume

to API's pricing of tobacco And of approximately retail driven fourth pouches. beer, equity alcohol, MST product and First increased in the oral quarter percentage XX% and quarter was to pouches. XX.X%. traction unchanged adjusted first due share million primarily down in earnings for represents million higher results. $XX adjusted points oral $XXX and of XXXX fair In the growth the leading our quarter recorded costs. nicotine on! quarter continued St. gain segment lower be continued ago in nicotine first the from Michels brand the year by share of period OCI we which to X.X was oral Copenhagen the

Cronos's adjusted XXXX $XX of fourth loss Moving in representing to share our equity quarter and We recorded Altria's of results. million investment Cronos.

in We market. regulation. the $X.X for creates We who to And finally, age the our quarter. dividends for and continue investment in that approximately use, by members responsible education safety advances $XXX coalition science, legal a capital of allocation. U.S. addresses million support inform recently cannabis comprised in joined inequity. shares is prevents comprehensive repurchased cannabis federally and million policy plan of standards, across experts quality This advocating and coalition X.X on cannabis totaling and Cronos industries public to first diverse We development and social and policy policy, launched regulated approximately the under paid billion

program, buyback expect complete we to authorized We the XX, have currently share remaining under billion by June which approximately XXXX. $X $X.X billion

the series to of sheet $X.X balance ratio notes of our profile happy maturity of and questions. our as transactions to and up take billion take to due we remains debt. first with adjust a We In Our coming notes average maturity With of totaling $X over end In the long I retire the billion and notes. term that times. May, billion of EBITDA strong debt wrap the to first of extend X.X and we our be market outstanding expect Billy term issued in debt quarter, advantage new conditions was repurchased and will quarter, long cash. favorable to weighted your available $X.X we'll executed

our on quarterly While inventory release I'll calls and are remind you also We've the our that which items. being earnings metrics, reconciliations altria.com. are today's available pricing, in posted compiled. non-GAAP usual include other

open and questions? period. Let's do answer any Operator the we have question

Operator

you. Stanley. [Operator Instructions] Our comes Thank question from Kaufman Pamela first with Morgan

Pamela Kaufman

year? if with cigarettes to behavior Good the seeing morning. could Thanks per throughout for question. you're how I industry wanted throughout what to comment consumption this to smoker XXXX? the and you thinking about see performance as begin volume see you and Do expect day you're respect to things continue on reopen, elevated

Billy Gifford

question. Yes. good morning for Pamela. the Thanks

mentioned a market is remarks. asked one as in fluid You good because the we very our

stay somewhat nicotine we practices we quarter, first that we we then XX year at still increased can I at of the add occasions as home seeing you for their that you have see and day. we you the the mobility offsets. have end consumer believe look we highlighted think progress last as it for significantly. de-comp also Certainly that moving consumers a of believe they are the our month when as that to But and we provided tailwind the

the out came areas could stimulus and has they government the that what that and we'll the consumer that of just have mobility stimulus how thinks about discretionary You other towards. as use spend see increased

though saw So it last continuance end at we a what saw was but call of quarter continuance tough the we certainly through year. first a even to the

the phrase and up what prior question. back remain picked pre-pandemic had it remains to that for the they thanks and levels normal COVID trends revert But your I will what use pandemic. place during the seen be to will I'll pandemic that the to consumer think has or in to

Pamela Kaufman

FCT you in And And weeks. be recent mind you for FDA? week? backdrop also from the what your proposal headlines might discuss then the from investors, of separately is regulation and on view anticipating thoughts obviously, top the last your current of the Can given all regulatory of

Billy Gifford

Yes.

think the headlines to we been a you menthol tends when we have think common the Where is we I look have menthol. and those place. really in just doesn't consumer back headline think have that news you tobacco as take industry has goal, expect has an for cigarette disagree heard have is unintended which regulatory the that you about topics the administration it, in about think you take you The to from established future. turn FDA to the a in marketplace But new been is non-combustible framework, two products. and continued them heard. when to you've think considering transition this criminalizing just and if non-combustible a step adult has about authorized consequences. prohibition better a it only It consequences, have approach of significant FDA to and work. what We We've years

FDA and on what be evidence whatever in multiyear announces would will focus the science certainly FDA analysis continue review engage process. will to a the and of what So and the

you think been to and authorized It's this. years. to I they've many it works has think Again studies established so because know non-combustible portfolio have when approach similar. FDA is they're considering lowered we something it's about nicotine The related prohibition unintended believe very don't products. consequences. for We running cigarettes, that better of

significant science be what's that see the science I can the at hasn't it there hurdles have been evidence FCT. they practical and bit you look news From the before discussion, of from these been base an the suggested. get and of were introduced from as seen. to a as it a was don't to when the it's feasible you specifics that overall are suggested that's something or a comments standpoint, remains week. you has There it When to it's and addition, step lot FDA been far. think that In previously, standpoint think you of we submitted it didn't a we last so very back there headline that evidence, from and they considering impact and mentioned,

I than we has increase remind President raise topics the I not to well. you, some to these made our tax that. Team an excise all ready making you that affairs as affair. excellent about to of individuals about year is Biden less team on counter think think engage of taxes statements XXX,XXX and runs have a on wanting just regulatory when government

But ready. we I we're news. continued So that would believe will see, caution we headline

Pamela Kaufman

you. Thank

Billy Gifford

Thank you.

Operator

next question Your is Vivien with from Cowen. Azer

Vivien Azer

Hi, good morning.

Billy Gifford

Good morning, Vivien.

Vivien Azer

can much five Thank very growth detailed assumptions for just offer year about that the your of oral hoping expectations terms more competitive if on category expand your modern I'm and engagement of outlook detail for that in categories? the understand any what thinking how you're category. reduce are underlying outlook risk in you CAGR around to cross you Thanks. and terms

Billy Gifford

for Thanks the question. Sure. Vivien.

putting I the when mouth that adult is it's U.S. think used the exciting of adult a will On! interact that extremely consumer I has dipper the We're from think On! the about excited very I economics modern category. very with his on cigarette in with you it have consumer. think global to to the excited traditional the intuitive engagement MST level, so what things us and it's in is both of the about XXX% you basis. When now think oral think about a

do run we various as we so scenarios. always And

consumer can and engaging I adult we adult to the it on cigarette are depends through think dipper you big time. how the successful category certainly, of get that can with how converting see it

constraint to be excited which past manufacturing midyear. So we're expect we'll very to the extremely get by excited we it capacity and

are as brands. various consumers capture the through have profitability. new standpoint and can time, competitive you that in that for them the participating products trying are in a from think choose in are it category expect I think I manufacturers volume grows categories all to and companies their Certainly

play. competitive are profitability. be will at you return some and then And grows there a for expect as So activities volume would consumers towards

Vivien Azer

more the cigarette the nascent Thanks to smokers That's oral perhaps migration a relative into dip. movement index or oral well, the novel from category and is menthol helpful. to maybe smokers? cigarette little really category Does modern bit over cigarette

Billy Gifford

don't in I have factors me, of front Vivien. those Yes,

mouth. a have I presentations. tobacco think seen of from to some higher consumer the with about certainly don't when normal tried we've they you category the than previous this and we female to because appreciate it putting MST It think in available interaction their it, cigarette tends have just in

so to cigarette over it's think of compared diagnose that to from too a now MST. I to tell from category. And and to over when right But it's it's standpoint you've that small a coming indexes very the early interaction bit certainly who's tried

Vivien Azer

and through as cigarette? Understood. States. the just If HeatSticks not Can last can necessary be squeeze framing you the mechanisms be the one one, I the a like it's for United caps walk what HeatSticks taxed about to in for would us

Billy Gifford

definition that Yes, able the Virginia, seven the step Virginia. is that a affairs different states of have has and a in of has they designation coming now excise out been Vivien claim authorized I think definition eight has and the biggest the and one in would seven is team government of that product down I different our have FDA taxes of in again function total so of states that with HeatSticks that to and the that and state to activity of highlight state a MRTP the it a a secure

reduced to that the I risk any designation being best think of is the product be going So by the mechanism authorized of MRTP have FDA. that's those

Vivien Azer

very much. Thank you

Billy Gifford

you. Thank

Operator

Your Growe next Chris from with comes Stifel. question

Chris Growe

Hi, morning. good

Billy Gifford

Good morning, Chris.

Chris Growe

factors products has been consumers larger to like risk products products to they a underlying have regulation. before two So is the your curious the heard and by and so guess commentary and in in it of feels as the about transition reduced approved if you risk I'm consumer really does the creating before maybe just perhaps products has the the pursue move the reduced the consequences. unintended of significant about that I regulation. with aware backdrop they and opinion. work of that But I regulation like your think do, thoughts to products a for I need ever on on I has there's stable backdrop, implement before them my FDA it Billy, that timetable with That's new could thought the more products far, get and guess obviously this risk that influence a of got regulation? forward FDA seems They've at or to approving lot define they

Billy Gifford

would that's your we So looking And appropriate for that way to roughly the that with product through a it Chris, it reduce call satisfies certainly opinion, do that are half agree risks is cigarette you consumers time. I remember, conventional them. non-combustible of would something

prohibition. are move. a with that consumers certainly can certainly those robust that them meet place on will tends fraught take their They unintended focusing consequences non-combustible then receive an and and add authorized that satisfy by be point so And just needs your cigarette that products and eventually portfolio to of based to prohibition MRTP FDA on need the having products so

Chris Growe

real other the And other in deviation in then, of price market. gaps? the your price price of the gaps in months versus today, products the look look I'm at in meaningful been you're curious, I Marlboro especially just later And always even I know, one few products? kind amongst change know it just seen in some premium the product last from any the lowest But is it's little versus premium year, as the those talking brands. competitors Have we you last you question. at I'm there different retail a side. pricing any over

Billy Gifford

our pretty Yes the realization the nothing it first in Chris. results price Marlboro solid. that company, at think our We X%, shows of independent, pricing substantial. quarter in decisions the when of make highlight, you rock that's I look is And

to major the in being and a lot gain it branded gap mentioned discount driven manufacturer by didn't really You we very price lowest category that was to seem traction. competitive that highlighted and of the a

nothing So would you a that's substantial. but highlight various and little through that look movement you at, always in I periods time that have

Chris Growe

today. Thank you your for time

Billy Gifford

Thank you.

Operator

Your with Herzog next Sachs. question is Bonnie Goldman from

Bonnie Herzog

Thank morning, everyone. you. Good

Billy Gifford

Good morning, Bonnie.

Bonnie Herzog

volume on business quarters Good negative. just at year’s the morning. and tobacco remained to your back I wanted over actually performance circle the looking really has last several oral growth

or ultimately a trying why yet. I I'm seen capacity be you? of to guess I total wondering constraint this issue we understand I'm haven't you on! maybe guess been on volume anticipate in your So a for lift more incremental So how few last oral that quarters color be greater then on for anticipated? think helpful about been on maybe how we the business? if hear Has can just that potential you that. the cannibalization do of purchase more has the outright Thanks. And than tobacco opportunity global would should could some we because

Billy Gifford

Thanks for take to I'll them up. one miss the if try but Bonnie, back Yes. and I questions follow turn, in

the category. you a on about significant category in growth when think I think the us. We've the seen start in certainly head growth great we had competitor a had

have engaged consumer. and way in And to be like to we out with midyear. capacity and at manufacturing engage we in then stores can with passed be so from to the the we wanted the it a been constrained We the look consumer we would have

total a engaging growth of we're it with but is as the mentioned, think standpoint about I adult the on! because excited the from think only I not dipper adult also smoker. upside engaging I for with

So the to you the able more successful engage with that the with. consumer we base of can that size see you're are

related on! question international. to presence had internationally. your already a think important It's I to remember that

have right make So products to and we'll market, we products was Altria and sure market team, U.S. already insights, we in other what the in international future attention right consumer and in highlighted what that the it's the the time at to opportunities going as marketplace, we that through for supplementing for the employees introduced pay our where then pipeline look increased both the insights look at we're in certainly in remarks get consumer as but with to products well have the get we've to some existing international are

Bonnie Herzog

as That's MRT IQOS helpful. it relates if marketing also, could thinking to be I ask nice was plan, want that That's did a and in I I opportunity. that. on what to could the

think I on MRTP IQOS the there's on think could that bit, of this marketing this certain do really does the see anything with in touched or that to I you if you've have fact started share wanted more how markets. you consumers given mentioned to you're but some even quarter last I just a communicating you

to to have on be how consumers responded? those you. any helped or hear in love Has in some markets? that I trial So of terms think that Thank feedback would of helpful. conversion it drive

Billy Gifford

consumer really system store, still connect to what the about we're be with think it's with if investing that's Sure. Thanks as our at Bonnie. HeatSticks would and And industry the view we it, to from to really consider engaged can on the trials, But the the leading to when with. you engage consumer but path being we're not digitally able so the only the they're XXX want investments through they when what we the that highlighted engagement in part sea with do. consumer of a guided that beginning was engage consumer in for certainly, and a is early both at year through of looking Yes of question, stores. we just bit the retail importantly, at yet. But

well try that in consumer product research standpoint is the claim once both that product. does and more to it understood that with the as they the from what of think is were as there the understand the the it I claim was certainly showed highlighting they inclined engage

year. the as more move have through we'll share So we to

Bonnie Herzog

makes That you. sense it. and be Appreciate would definitely Thank great.

Billy Gifford

Thank you.

Operator

Priya Your Barclays. comes question Gupta Ohri with from next

Priya Ohri Gupta

balance coming the up. have little of just And hoping out? pieces how identified we cash takes about was balance trending you you an of But about elevated intent a cash be get as that repay various year land where we and to that could we through sorts that into are look understanding that mindful maturity given bit we that to we think you've the you. other talk that expect puts should and should I main Thank do already there as XXXX? that your

Sal Mancuso

At balance. end cash Sal and you This thank first an did you see Good of elevated is morning quarter, Priya. question. the for the the

with due plan have quarter cash in talked, As of include on payments opening available. our payment, and I'll I and we which agreement the large our debt our remind rather taxes, paying the also first my post settlement stated you some spoke coming we to remarks do master dividend. quarterly you you

of to share in place. begins make payments. that program those have cash And buyback course April still So our depleted in May we and get we as

Priya Ohri Gupta

Great, thank so much. you

Sal Mancuso

You're welcome.

Operator

Jefferies. Your comes from with Bennett question Owen next

Owen Bennett

Morning, hope you all are well.

Billy Gifford

Good morning Owen.

Owen Bennett

global So up environment mean, clear to a we follow in by forward. appear at to me, the And to a going wanted to some recent for e-vapor I plans a submit results U.S. that on PM be I it that USA comment competitive will point. does returning PMTA

the this need you're I wondering, about thinking to Thank did full make a globally, or you tobacco to are link just now U.S. on business And globally? about indeed the e-vapor So this was you. especially have think you elements products have need then of the to global how how control in expanding basis? into

Billy Gifford

thanks the in merger Yes, I'll Owen question future. anything be from talk anything the careful acquisition to or and for not about

U.S. think focus, we because sales primarily of primarily have way U.S. we wholesalers all infrastructure, it about our and the focus. with force, relationships is we all retailers, I are think are

the that our conversion very of is take that focus to oral journey will similar so from will be getting our consumers focus That the those consumers combustible have we you conversion learnings And in the and mentioned have, be world. in around consumers to primary that that but learnings we modern journey their non-combustible. the

and want it's And certainly so we pay attention that appropriate. participate to in that when that, to

probably PMI, made the by around is opportunities to I globe. when comments our we'll PMI. seize think on appropriate directed certainly from But focus the primary a certainly, standpoint better U.S. But of they're

Owen Bennett

you. Thank

Billy Gifford

you. Thank

Operator

Your with next Gaurav Barclays. Jain comes question from

Gaurav Jain

on morning. is question good JUUL. My you. Hi, Thank

about could and be that JUUL us remind million falls out at just of the valued value the you clause you if now your in investment be $X.X So billion which non-compete about is the XX%, will $X.X of is below will JUUL.

of now think valuation one should how the JUUL? you that to are So ascribing

Sal Mancuso

you Thank This the question. for is Sal.

of independent we JUUL's any do pertains a say have as valuation that agreement we ownership. let First me when just our the to is analysis

of some have. the investor You below comes non-compete. which relates to But other $X.X slightly were that rights that original we is drop option option are if with an we below our minority as correct the billion, to valuation would investment XX% it have

team a management is obviously would not automatic as something it So analyze to It trigger. we that an have is discuss. and

Gaurav Jain

you CAGR. business market and or it in is large so growth just market XX% on think share, five progressively tobacco Thank deceleration if are market should the where nine the months. the these oral My just will I oral of month law seems next that tobacco becoming any last the And bigger second in Sure. six decelerating the saying that you. is numbers for at how the we it years question or bigger Is is applying be grow look over to you at of growth? seasonality there data

Billy Gifford

Yes.

seeing reduces. look right I you total remind that when gets base when we at exactly you're certainly rate a the oral standpoint I that's mathematic what the from you show the larger you're category. tobacco, growth the is think would

MST and oral that's pouches. a So novel

that category months. And you've over the growth so a got at total six look of the last

cannibalization to So the oral you're some as the smokeless pouches gets on slows. as tobacco oral, grow. just novel you're larger, more I as growth correct rate base traditional, going novel mentioned have also of But

Gaurav Jain

these a Sure, now of smokers and one achieve lead year last is more right vision you the support in if which question. adult if would future, XX pathway planning a squeeze to of responsibly could of that regulators but non-combustible a menthol your transition just a to cigarette requires which of lot is would regulatory ban the regulatory vision? are some process initiators be that I Look created time be again opposing same supportive you at helps you

Billy Gifford

achieve helps a that looking regulatory vision. pathway Certainly we're us the for

great so with that right and menthol pathway the an inclination prohibition FDA regulatory order cigarettes happen get in a products can has You better there transition sense that's that the us. portfolio the earlier MRTP with on authorized having that believe allows consumer. heard an on believe or the is and my already we we the remarks they want to cigarettes. to Certainly it makes in reduction shown right the the of whether to pathway that We perfect much having because nicotine through insights eventually a have we by in be conventional uses consumer non-combustible that outright then process and

Gaurav Jain

Brilliant. Thank you.

Billy Gifford

Thank you.

Operator

from comes question with Sandler. next Your Michael Lavery Piper

Michael Lavery

you. Thank Good morning.

Billy Gifford

Michael. morning, Good

Michael Lavery

Just to get current how people their the notice launch when your IQOS available how digital who've website come of ability things receive comments We've and got lots mentioned you've IQOS markets now to online with in area. outside back for wanted seen chats you the them. asked capabilities to and adult to a is smokers

you So expand sense this Can response lot you a what what where of and kind and year in if of in makes far a sense. might how order? you've us next steer give of to choose that so had much

Billy Gifford

that then Certainly markets, we've states Yes, to are. what the it's metro the we're three areas we a certainly and four bit haven't Michael. Virginia then they which announced across additional early, discussed expanding Northern and

And so foot certainly to get the the be informed consumer traffic. it's and believe we where informed going can by by we heavy

grow from have foothold Just from you densely a to grow want then that populated a once watch we to you states. in and across that initially remind area

going and to the be the where we've existing the seen on them we're And insights next. consumers the by from we both what have we so to go certainly in markets inform and consumer influenced

Michael Lavery

as IQOS a that the momentum more a That's redeemed way But of bigger momentum little cannibalization. on of could Can a like for of markets you you little it the on this already think those mean and of mentioned be the helpful. given certainly just certainly might some push some or even getting you about You have simple How as if trial. some what's device cannibalization strategy? could to thinking incremental balance on you've it do some one seems rewards that. just discounts lot color certainly give And in two? risk IQOS Marlboro bit more build that right bit can us a help here the

Billy Gifford

our Certainly can we really But our to a know for move our consumers. We they don't and consumers in where we the stay you vision have but and we total profitability when consumers we to either. incrementality want Michael, and have look of see in reach incrementality them. market move to standpoint, ways to want now incrementality competitive to want ready reach when them know they're go always out portfolio move that I to the we so Certainly we want assess we proactively that look want and and ignore to mind at at products. to cigarette we moving from think various conventional

can way at the that's to get But certainly so extent. and retail out balance. the we And to we assess reach consumers we incrementality where the fine greatest

Michael Lavery

so much. Thanks great. That's

Billy Gifford

you. Thank

Operator

with next Your from Adam question Citibank. is Spielman

Adam Spielman

very you Thank much.

So two questions.

I'm said you. is in the if to First know X.X of it I remember I IQOS That's market think interested source you to Atlanta how it the that where all, question. on rightly, Thank you share in went distribute in many Atlanta. and stores first

Billy Gifford

that we engagement. that quality the what look, want when like great we make go to consumer execution, because to because Adam, retail we and learn Yes sure have right for we get high to want select chains does we it look

Atlanta to drive across to execution they each number consumer of and live we goal regardless specific have even great states of access habit product the interest. and mentioned when haven't expand the state the to the have but in stores We availability our and is where awareness where

And may to the store we want be certain a the so sure to consumer every any make in access locale that not locale product. in in but we has

Adam Spielman

around I Atlanta be And metro that XX around of included about estimated right? have if in share stores about would sorry, all bits has market IQOS that

Billy Gifford

that haven't we to through that. Adam Yes, done go

and based the on about to outtake estimate. guesstimate we the look by zip your say is to The or geography way we okay, say that's at try then what it. to way So are assurance code take on off I'm so exactly total what go hesitant that think and cigarette IQOS to you the, geography the about hesitant how the it take and is give for I'm

Operator

Robert comes next with Your from question UBS. Rampton

Robert Rampton

Good and question. my thank you morning, taking for

pricing. one is First on just

people the at running year. is also record by more argue and it's last robust So tax volumes towards that being I'd expected tail levels of end moderate than are increases maybe

That's more being on I that it versus between investing you about and question. the do efforts incremental how to to guess reduce the price you. competitive transition your taking Thank margin in tradeoff risk? think Now

Billy Gifford

category Robert. profitability Marlboro, the back time balancing into for strategy investments which you overall is question. we funding to initiatives the through to for back growth take appropriate of would mentioned. thanks the maximize and have I the as Yes, the you combustibles while

is first the it quarter. balance so quarter I you. a And with X% result agree that is but the for price would a at for realization say we in look great would was I something

Robert Rampton

a just understand the now your nicotine roughly category XQ, sorry, within then quick come. to doubled and share clarification and Are that Right versus is your a That's XX%? way great you that oral. the pouch category XX on modern saying

Billy Gifford

oral Yes, total so saying novel the category we were share. had a

novel of the oral tobacco XX%. So total old the space was

that So sense of -- the total the makes yes oral it oral total of space.

Robert Rampton

that the are on And in and you Perfect, very I Marlboro. a modern on of then follow oral comment not just much pack insert ins guess pack is example, question pack doing effectiveness then Can up a their every for Marlboro? clear. on of specifically put why how you on broader and

Billy Gifford

engagement, to way certainly at test understand with learn just one We're wanted something and that the with to that the engage ways to avenues efficient most to digital looking avenue. about we That's engage it's way. Yes, consumers. consumers understand

at looking and And consumer make journey for commence those meet support they then you're and that what ways their to the decisions they're it. we with we're them so is what that can engage as investments when the doing on our with trying conversion various them are conversion

the just avenue consumer and and getting so that's to test one what efficiency and the convert. And engagement there of certainly, successes that learn we'll but understand

Robert Rampton

if clear. And one I very That's sneak apologies. in may more Great.

IQOS of rollout. drives mind your pace Just in of the to curious the what as in terms

tax to it right those very So it's now tied looks breaks. like

process tax be So more is we breaks I expect would I slow guess incremental? terms national point or getting of a a launch in you. mean, bang Thank what given at big

Billy Gifford

about the They've Yes, been been a have important it long on pathway remind guys time. about just for is it. it. think and Certainly way we has been talking it's to you talking about this PMI look, everyone

We the have. U.S. It consumer. new is to brand

we're Once it put sure we feel make to to Certainly it a doing we want in we we're able our would being disciplined by foot in right, big bang. say like always we influenced continue plans expansion. place that have a I way. your the So best be to to have fashion versus terminology forward. the going right

that and having IQOS a the having and had X along Atlanta. say the I the Charlotte way. learnings learning better engagement in us claim launch the would indication but much plan device on on we approved based better much a Now X.X are MRTP was system consumer Richmond gives we the more with successful

we're how And the legislatures proceed an launch. so I don't to that will think to agreements and to you we're about think with we want trying going not That SET with launch. that get continue the the the influence disciplined state IQOS to approach. be how or that we But influence fast how

Robert Rampton

Thank clear. very that's for Thanks Right. question. taking you. my

Billy Gifford

Thank you.

Operator

Wall [Operator Instructions] is Maloney question Journal. Your from Street Jennifer with next

Jennifer Maloney

good Hi, morning.

move just reduce switch have press consumption. products? your like to many that I release they a pursue from would announcing to How people wonder risk say cigarette example? formally on FDA would to published quit just perspective, the what ban. nationwide for many How their How this many cigarettes? intend would from menthol would Marlboro, impact newports So

Billy Gifford

me and call. off caught Yes, because guard, been it's you phone a question the I've again, great having

it. haven't had to So read I a chance

each previously, how they I see, prohibition implementing the provided consumer if evidence any right what consequences. play, think that had there regulatory time on that. to think that and the on in unintended sure approach and the and categories We we wanted we the product, the the science in you depends brands portfolio are evidence make in the and why through are different we by to focus right we evidence. in they that But pursued specific brands to remind actions about the it a as think with set encourage how engaged category science of it. put don't on support think that and certainly products that will would them based reason consideration with exactly fraught that and and would be their science proposal I those about proposal the It's choices with have but and see faced is we continue works. comments have they any the don't the this FDA, is, we

Jennifer Maloney

that it know but and think cigarettes happen were that's volumes? in decline overnight, wouldn't I implemented, a it Do it would big if you U.S. accelerate the

Billy Gifford

they considers and If I that have products a of We'll how to gain consequences go are see answer. it's a are the it to satisfaction. from that's they it's access play think implemented. for how of about have the and standpoint menthol and how to consumer tough and cigarettes hypothetical they outside unintended their implemented system at the legal then other to what

Jennifer Maloney

presence in cigarettes, past the speak presentation category to has menthol kind importance the share of the in represents Over the you category to and been menthol few investor U.S. noting the a for of industry? cigarette of years company for its cigarette sales. expand U.S. menthol that growing trying Could the Altria

Billy Gifford

it remind think would to share that when think under in I you in Yes tend we're indexed non-menthol. category. in you menthol about Altria, I We indexed for over be the

they've air total category FDA of concerns of really working. the And provided of direct to that the been we we standpoint previously the on I you so when ban a to outright would menthol provided comments an from

Jennifer Maloney

very much. Alright. Thanks

Billy Gifford

you. Thank

Operator

is question RBC. with Modi Nik from next Your

Nik Modi

you. everyone. Thank Good morning,

you happen right Billy just we just make to we're steps from and just thinking could can wanted follow it the remind question. of process just the way? that about here square maybe need menthol in of it the to so So us sure kind terms the on up

Billy Gifford

multiyear about process have I think can't it. When Yes what we Nick. caught because administrative the they how read a and believe you it'd they me unawares be again, stated you've published a and process bit

a they be consider right and and to have place. have to But diagnosing certainly final they now to come comments, have that's that they we'll rulemaking. to it. at rulemaking those They they're where process If reading receive to out rule. go with takes have that there's proposed So all a comments, of then

FDA the of engaged process certainly a view. lengthy we And so that's to point be with will pretty share in a that

Nik Modi

we've of because is the several And everything obviously, guess, times in the through gone was last question that resets? years. my which Right, this I XX kind

that So they I way I'm to just the about again. whole sure right the that have want to through go process thinking make

Billy Gifford

what they know don't announced. I Yes,

the processes a through would final there normal can't There specifics that as go then speak So the I rule. to proposed they but be comments, rulemaking. a would would be

can't read speak specifics so, to based And again, not on announced. they having I what

Nik Modi

Right. Thanks, Billy.

Billy Gifford

you. Thank

Operator

would the At this turn call like to I Livingston back time for you. Thank comments. to Mac closing

Mac Livingston

us. everybody the questions. further Thanks for joining you Please contact Thanks. if relations have investor team

Operator

call. conference This you. Thank concludes today's

disconnect. now may You

Altria (MO) 29 Apr 212021 Q1 Earnings call transcript