CCentral-Main-logo-EN-trans

Convenience Central
Join our community
extra content
Unknown

Altria CEO Willard steps aside after COVID-19 diagnosis

UnknownAltria Group Inc.’s chief executive is handing the reigns to the company’s chief operating officer (CFO) after contracting COVID-19.

According to a filing with the U.S. Securities & Exchange Commission, Altria chairman and CEO Howard Willard is taking a temporary leave of absence after receiving the confirmation. In connection with his leave of absence, the company’s board of directors tapped vice chairman and CFO Billy Gifford to take over Willard’s authority and responsibilities until the CEO returns.

Gifford has served in his roles since May 2018. He has been with Altria and its subsidiaries since 1994.

Altria is also temporarily hitting the pause button on operations at its Philip Morris USA’s (PM USA) Manufacturing Center in Richmond. The company made the move “out of an abundance of caution” after a second PM USA employee tested positive for COVID-19.

The company expects work at the manufacturing center to take a two-week break, although PM USA will continue to monitor the evolving situation.

According to Altria, PM USA has actively implemented business continuity plans and believes it has sufficient finished goods cigarette inventory for approximately two months based on current estimated shipping volume, in addition to current wholesale and retail inventories.

Separately, some John Middleton Co. domestic operations will also be suspended for two weeks due to COVID-19 related supply chain constraints. Middleton believes it has sufficient finished goods cigar inventory for approximately three months based on current estimated shipping volume, in addition to current wholesale and retail inventories.

PM USA and Middleton are wholly owned subsidiaries of Richmond-based Altria.

“We are committed to protecting the safety and well-being of our employees, contractors, their families and the communities where we operate,” Gifford said. “We take the threat of COVID-19 seriously and have been actively implementing plans to minimize business disruptions and their potential impact to our employees, consumers and customers.”

During this temporary two-week suspension of plant operations, PM USA and Middleton will pay employees their regular base wages. PM USA and Middleton will evaluate providing additional pay continuation beyond that timeframe as needed, Altria said.

Altria continues to follow updates from public health authorities and implementing CDC-recommended precautions including travel restrictions, remote working, and social distancing.

Originally published at Convenience Store News. 


Unknown

Altria charts path for non-combustible future

Unknown

Altria CEO Howard Willard

As cigarette volumes continue to decline, Altria Group Inc. continues its move toward a noncombustible future.

The Richmond, Va.-based tobacco leader’s path forward comes as the industry overall places a stronger focus on harm reduction, with other tobacco products like oral nicotine pouches, vapor products and heat-not-burn tobacco products in the spotlight.

“We believe the foundation for tobacco harm reduction in the U.S. is firmly set. Adult tobacco consumers are increasingly seeking alternatives to combustible products, and we have a federal regulatory framework that has established pathways to bring new tobacco products to market and communicate about their relative risks,” said Altria Group chairman and CEO Howard Willard.

“We recognize the importance of this opportunity and over the next 10 years, our vision is to responsibly lead the transition of adult smokers to a noncombustible future,” he added.

According to the chief executive, Altria will implement several strategies to make that vision a reality. This includes:

  • Leading the industry in operating responsibly and preventing underage use of adult products;
  • Developing and expanding its portfolio of noncombustible products authorized by the Food and Drug Administration (FDA) and actively converting adult smokers to them;
  • Maximizing the profitability of its combustible products, while appropriately balancing investments in its Marlboro brand and funding the growth of its noncombustible portfolio; and
  • Seizing leadership in the external environment through communications, engagement, science-based policy and regulatory solutions.

Willard’s comments came during Altria’s presentation at the Consumer Analyst Group of New York conference, held in Boca Raton on Feb. 19.

“We believe adult smokers are looking for alternatives to cigarettes beyond just the e-vapor category. While many adult smokers have used e-vapor products to transition away from cigarettes, third-party research indicates that approximately 40 percent of current U.S. adult smokers have tried, but ultimately rejected e-vapor products,” Willard noted.

“When you combine this data with the current challenges in the e-vapor market, we believe this is the opportune time to expand IQOS and on!,” he explained. “We believe that these products could be satisfying alternatives for adult smokers who have rejected e-vapor, and we’re excited about our commercialization plans for these brands.”

Altria’s wholly owned subsidiaries include Philip Morris USA Inc., U.S. Smokeless Tobacco Co. LLC, John Middleton Co., Sherman Group Holdings LLC and its subsidiaries, Ste. Michelle Wine Estates Ltd. and Philip Morris Capital Corp.

Altria also owns an 80% interest in Helix Innovations LLC, and holds equity investments in Anheuser-Busch InBev SA/NV, JUUL Labs Inc., and Cronos Group Inc.

Originally published by Convenience Store News.


Unknown

Marlboro maker slammed by Juul investment, takes $4B charge

Unknown-1The company that makes Marlboro cigarettes saw in late 2018 the opportunity to offset declining tobacco sales with a $13 billion investment in Juul, the e-cigarette maker.

That investment has come at a tremendous cost, the latest a $4.1 billion hit announced Thursday by Altria as legal cases against the company continue to mount. That follows a $4.5 billion writedown in October, when Altria slashed the value of its investment in Juul Labs by a third.

Since October, the company said the number of legal cases against Juul have spiked 80%. A wave of vaping illnesses and deaths have raised concerns about the products. The outbreak of vaping-related lung injuries continues, but new cases are on the decline.

More than 2,500 cases of vaping illness have been reported by all 50 states. There have been 54 deaths and more deaths are under investigation.

Tobacco companies like Philip Morris International are attempting to develop new technologies that could serve as an alternative to traditional tobacco use.

Smoking has been declining for more than five decades. Some 42% of U.S. adults smoked in the early 1960s. That was down to 14% in the latest report from the Centers for Disease Control and Prevention.

Efforts to capitalize on new technologies such as e-cigarettes is crucial for for companies like Altria, which took a 35% stake in Juul at the end of 2018. But few saw the risks involved.

The Richmond, Virginia, company on Thursday reported that it had swung to a loss in the fourth quarter from the associated costs, citing burgeoning legal cases that it expects to grow.

It also announced revised terms for its investment in Juul. Juul will restructure its board to include two directors designated by Altria, three independent directors, the Juul CEO and three directors designated by Juul stockholders other than Altria. The board restructuring will take place once Juul receives antitrust clearance from the Federal Trade Commission. Juul will add a nominating committee and a litigation oversight committee to its existing compensation and audit committees once it receives antitrust clearance.

Altria Group Inc. now expects no earnings contributions from Juul through 2022, and it’s lowering its adjusted earnings growth forecast for 2020 through 2022 to between 4% and 7%. It previously had forecast 5% to 8% growth.

For 2020, Altria anticipates adjusted earnings of $4.39 to $4.51 per share. Analysts polled by FactSet predict $4.45 per share.

Shares fell slightly before the market opened.

 


Unknown

Altria CEO says company committed to multiple tobacco platforms

Despite some challenges facing alternative tobacco products today, Altria Group Inc. remains committed to its harm reduction journey.

“We are in the midst of a remarkable transformation within the tobacco industry. Once predictable, the industry has become increasingly dynamic and complex and while this evolution may pose short-term challenges, we believe tobacco harm reduction is a significant opportunity for the industry and adult tobacco consumers,” Altria Chairman and CEO Howard Willard said during the company’s third-quarter earnings call on Oct. 31.

“We believe that in the next decade, non-combustible products can surpass combustibles as the preferred choice among adult tobacco consumers,” he continued. “We intend to lead this historic transformation with our unmatched portfolio of non-combustible products and investments.”

To that end, Altria made several investments in the alternative tobacco segment over the past year. It took a $12.8 billion stake in Juul Labs Inc., and entered the oral nicotine category with a definitive agreement to acquire 80% of certain companies of Burger Söhne Holding AG that will commercialize On! products worldwide. It also took a $1.8 billion minority stake in Canadian cannabis company Cronos Group Inc.

“We assessed our portfolio and believe that we have addressed gaps with investments in e-vapor and oral nicotine pouches, as well as an adjacent investment in cannabis,” Willard said. “Today, we believe we have the strongest portfolio across multiple tobacco platforms and are well positioned for future growth in a rapidly evolving U.S. tobacco industry.”

E-VAPOR SEGMENT

Altria’s stake in San Francisco-based Juul equals a 35% economic investment. As Willard explained, the tobacco company invested in Juul based on its belief that the vapor company’s product development strength, early signs of brand equity and potential to convert adult smokers set it apart from all other e-vapor products in the market.

However, “dramatic shifts in the current e-vapor regulatory and marketplace environments” has led Altria to revise its transaction assumptions, the CEO said.

In preparing its financials for the quarter, Altria performed a valuation analysis on its Juul investment, which considered multiple regulatory and marketplace scenarios.

“In aggregate, we’re now projecting lower e-vapor category volumes in the U.S. vs. our original estimates, which resulted in a third quarter non-cash impairment charge of $4.5 billion related to our Juul investment,” Willard explained. “Also factoring into this determination were other changes to our original assumptions. For example, we expect it may take longer for Juul to realize the strong margin performance that we previously communicated.”

Altria also revised its estimates of Juul’s international business as the result of recent market development, he added.

“Despite this impairment charge, we remain committed to Juul’s success. We are pleased with the recent decisions by Juul to change leadership, and we are optimistic about Juul’s focus and prioritization in key areas such as establishing industry-leading responsible practices and pursuing regulatory authorization of their products,” Willard said.

ORAL NICOTINE SEGMENT

Altria closed on its investment in On! products during the latest quarter. With the transaction completed, Altria is now focused on retail and digital engagement with the adult tobacco consumer.

For more, visit Convenience Store News. 


Unknown

Altria takes a $4.5 billion hit on Juul amid vaping backlash

UnknownMarlboro-maker Altria is taking a big financial hit from its multibillion-dollar bet on e-cigarettes.

The tobacco giant on Oct. 31st slashed the value of its investment in the beleaguered vaping company Juul Labs by a third, dragging down its results to a financial loss for the quarter.

Richmond, Virginia-based Altria bought roughly a third of Juul for $13 billion last December. But executives said they would take a $4.5 billion write-down on the investment amid a growing crackdown on Juul and the vaping industry at large.

Since last year, Juul has been hit by new federal and state investigations into its marketing amid an explosion of underage vaping among teenagers. Separately, an outbreak of lung injuries tied to vaping has led to new government warnings around e-cigarettes. No single product or ingredient has been identified as the root cause.

Altria executives said the cut to Juul’s value reflects recent vaping bans by state and local authorities and expected restrictions from the federal government. The U.S. Food and Drug Administration is expected to soon outline new restrictions on vaping flavours, a step intended to curb youth appeal.

Juul has made a number of voluntary concessions in an effort to weather the firestorm, including halting product advertising and pulling several of its flavoured products .

A lawsuit filed in California earlier this week by a former Juul executive levelled new allegations against the company, including that it disregarded quality procedures and knowingly shipped of tainted mint-flavoured pods to customers.

Juul called the lawsuit “baseless.” And the company’s former CEO, Kevin Burns, rejected the account.

“As CEO, I had the company make huge investments in product quality, and the facts will show this claim is absolutely false and pure fiction,” said Burns, through a spokesperson. Burns was replaced as CEO last month by K.C. Crosthwaite, an executive from Altria.

In a regulatory filing, Altria revealed that the Federal Trade Commission is investigating the company’s role in the resignation of Burns and “the hiring by Juul of any current or former Altria director, executive or employee.”

Under the management shake-up last month, Crosthwaite announced that another Altria executive, Joe Murillo, would become Juul’s chief regulatory officer. Murillo previously worked as Altria’s head of regulatory affairs.

Altria Group Inc. said it posted a quarterly loss of $2.6 billion, or $1.39 per share, for the period ended Sept. 30. Those results included the $4.5 billion pretax write-down of Juul. Adjusted earnings of $1.19 per share beat the average Street estimate of $1.14 per share, based on an analyst survey by Zacks.

Altria, the maker of Marlboro cigarettes and Copenhagen chew, has been working to shift its business away from traditional tobacco amid steady declines in smoking.

The company recently began selling a heat-not-burn cigarette alternative, iQOS , made by Philip Morris International. Altria is marketing the first-of-a-kind device in the U.S. under a licensing deal with the international tobacco maker. Both companies say the device could appeal to smokers who have been unwilling to switch to vaping products, which use a nicotine solution, not tobacco.

Altria, which owns Philip Morris USA, said total revenue was virtually flat at $6.86 billion. Its adjusted revenue, which excludes excise taxes, totalled $5.41 billion and beat estimates.

The company still expects to earn $4.19 to $4.27 per share for the full year, representing growth of 5% to 7% over last year. It lowered its long-term growth target of 7% to 9% to a new range of 5% to 8% growth for 2020 through 2022.


Altria PMI Logos_Sm_082719

Merger off between Altria and Philip Morris

Altria Group Inc. and Philip Morris International Inc. (PMI) have decided against joining forces as merger talks between the two tobacco leaders end.

“While we believed the creation of a new merged company had the potential to create incremental revenue and cost synergies, we could not reach agreement,” said Altria’s Chairman and CEO Howard Willard. “We look forward to continuing our commercialization of IQOS in the U.S. under our existing arrangement.”

In late 2013, Altria and PMI formed a strategic partnership to bring PMI’s heat-not-burn product IQOS to the United States.

This spring, the Food and Drug Administration approved a Pre Market Tobacco Application for IQOS, paving the way for the product to hit U.S. stores. In September, the first U.S. IQOS retail store at Lenox Square in Atlanta.

IQOS is an electronic device that heats tobacco-filled sticks wrapped in paper to generate a nicotine-containing aerosol. Under and exclusive licensing agreement with PMI, Philip Morris USA will commercialize IQOS in the U.S. with Marlboro Heatsticks.

“After much deliberation, the companies have agreed to focus on launching IQOS in the U.S. as part of their mutual interest to achieve a smoke-free future,” added PMI CEO André Calantzopoulos.

Rumors about a possible merger have been around for years, kicking up every few months— with the most recent coming at the end of the summer. On Aug. 27, Altria and PMI did confirm they were in discussions about merging the two companies. However, at the time, Altria said there can be no assurance that any agreement or transaction will result from these discussions.

“While we are dismayed by today’s announcement that PMI and Altria have ended merger talks, we aren’t all that surprised given the length of negotiations (nearly a month since talks were confirmed) and the litany of negative FDA [Food and Drug]/health headlines throughout,” said Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC,

Based in Richmond, Altria’s wholly owned subsidiaries include Philip Morris USA Inc. (PM USA), U.S. Smokeless Tobacco Co. LLC, John Middleton Co., Sherman Group Holdings LLC and its subsidiaries, Ste. Michelle Wine Estates Ltd., and Philip Morris Capital Corp.

The company holds equity investments in Anheuser-Busch InBev SA/NV, Juul Labs Inc. and Cronos Group Inc.

PMI is a leading international tobacco company engaged in the manufacture and sale of cigarettes, smoke-free products and associated electronic devices and accessories, and other nicotine-containing products in markets outside the United States.

PMI’s smoke-free IQOS product portfolio includes heat-not-burn and nicotine-containing vapor products. Its heat-not-burn product is available for sale in 48 markets in key cities or nationwide under the IQOS brand.

Originally published at Convenience Store News.


Altria in merger discussions with Philip Morris International

Screen Shot 2019-09-03 at 11.30.55 AMTwo major tobacco players are exploring the possibility of joining forces.

Altria Group Inc. confirmed it is in discussions with Philip Morris International Inc. (PMI) to merge the two companies. The talks centre around a potential all-stock, merger of equals.

According to Altria, there can be no assurance that any agreement or transaction will result from these discussions. In addition, if Altria and PMI reach an agreement, there can be no assurance that the two sides will complete the transaction.

Any transaction would be subject to the approval of the two companies’ boards and shareholders, and regulators, as well as other conditions.

Based in Richmond, Altria’s wholly owned subsidiaries include Philip Morris USA Inc. (PM USA), U.S. Smokeless Tobacco Co. LLC, John Middleton Co., Sherman Group Holdings LLC and its subsidiaries, Ste. Michelle Wine Estates Ltd., and Philip Morris Capital Corp.

The company holds equity investments in Anheuser-Busch InBev SA/NV, Juul Labs Inc. and Cronos Group Inc.

PMI is a leading international tobacco company engaged in the manufacture and sale of cigarettes, smoke-free products and associated electronic devices and accessories, and other nicotine-containing products in markets outside the United States.

PMI’s smoke-free IQOS product portfolio includes heat-not-burn and nicotine-containing vapor products. Its heat-not-burn product is available for sale in 48 markets in key cities or nationwide under the IQOS brand.

In December 2013, the two companies came together to form a strategic framework to commercialize reduced-risk products and electronic cigarettes. Two years later, Altria and PMI extended the pact to include a joint research, development and technology-sharing agreement, as Convenience Store News previously reported.

As part of the agreement, Altria’s PM USA commercializes IQOS in the United States with three HeatStick variants: Marlboro Heatsticks, Marlboro Smooth Menthol Heatsticks and Marlboro Fresh Menthol Heatsticks. The company brings the product to its first test market, Atlanta, in September.

Rumors about a possible merger have been swirling around for some time, with reports kicking up a notch on Aug. 26.

In response to the renewed speculation, Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC, noted the firm believes a merger will happen especially considering Altria’s stake in Juul and IQOS.

According to Herzog, key reasons the probability of a deal are now higher include:

  • Altria’s stake in Juul and the vapor company’s “clear dominance” of the U.S. e-cigarette/vapor market and international ambitions;
  • PMI will capture the full margin and accelerate the growth of IQOS in the U.S. given its full control over sales and distribution; and
  • PMI can invest Altria’s strong U.S. free cash flow to further catapult the growth of IQOS globally.

Herzog first raised the possibility of an Altria-PMI tie up in December 2016.

Originally published at Convenience Store News.


Altria shares fall on weaker outlook for cigarettes

Screen Shot 2019-07-31 at 5.48.30 PMShares of Altria Group fell last week, as the tobacco company predicted steeper declines for cigarettes in coming years.

The Richmond, Virginia-based company reported second-quarter earnings of roughly $2 billion, or $1.07 per share. Earnings, adjusted for asset impairment costs and non-recurring costs, were $1.10 per share.

The results matched Wall Street expectations, according to analysts surveyed by Zacks Investment Research.

But company executives forecast a bigger drop for cigarette demand in years ahead, with annual volume declines between 4% and 6% through 2023. That’s slightly greater than previous expectations of 4% to 5%.

Altria shares fell $1.81, or 3.6%, to $48.50 last Tuesday.

Altria, the maker of Marlboro cigarettes and Copenhagen chew, has been working to shift its business away from traditional tobacco products amid steady declines. The smoking rate has been falling for decades amid smoking bans, higher taxes and public health efforts urging smokers to quit and discouraging young people from ever starting.

In April the company won federal approval in the U.S. to sell its heat-not-burn cigarette alternative, IQOS, which will go on sale in September. The company has also bought a 35% stake in the vaping juggernaut Juul, which has come under scrutiny for its popularity with teenagers.

Altria CEO Howard Willard said some of the declines in cigarettes are due to more smokers switching to Juul and other electronic cigarettes, battery-powered devices that vaporize a flavoured nicotine solution.

“We believe this reflects both increased availability of satisfying e-vapour products that began mid-year 2018 and higher levels of exclusive e-vapour use,” Willard told analysts.

The owner of Philip Morris USA, the nation’s largest cigarette maker, said revenue increased 5% to $6.62 billion, mainly driven by higher prices. Its adjusted revenue was $5.19 billion, topping Street forecasts. Five analysts surveyed by Zacks expected $5.05 billion.

The company reaffirmed its full-year earnings in the range of $4.15 to $4.27 per share.