Altria Continues Innovation Journey

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Altria Continues Innovation Journey

By Melissa Kress, Convenience Store News - 10/29/2015

RICHMOND, Va. — Innovation is taking the lead in the tobacco space, and The Altria Group Inc. is embracing innovation in every area of its business, including cigarettes.

Two of the Richmond-based company's latest moves are Marlboro line extension Marlboro Midnight and the new Marlboro mobile app.

"They both represent how Marlboro is innovating at the core of our business," Altria CEO Marty Barrington said during the company's third-quarter earnings call Thursday morning. "We talk about innovation on the innovative products side, but it's important to remember that innovation is everywhere, and at Marlboro you see it all the time."

According to Barrington, Marlboro Midnight is the latest innovation under the brand's architecture. It will come out in the Marlboro Black family and should help Marlboro participate in the menthol category. Marlboro Midnight is anticipated to hit wholesale in mid-November and reach retail outlets a couple of weeks later.

Altria continues to see strong innovation on the digital side as well. The company now offers mobile couponing. "It's a tremendous step forward in terms of efficiency and meeting adult smokers where they are," Barrington said, noting that mobile couponing is now available nationally.

Discussing the recently launched Marlboro app, the chief executive said "it's responsibly done, aged verified and it will be a place for the brand to connect again with adult smokers in a very innovative way in the digital space. We are very excited about both of those innovations."

As for innovative products, Altria's Nu Mark division continues pursuing disciplined innovation in e-vapor. 

"We've seen encouraging trial on MarkTen XL, allowing us to expand our lead market presence. Nu Mark also continues its in-store evaluation of Green Smoke retail positioning," he explained. "We focus first on getting the product right and we are learning a great deal about the adult tobacco consumer response. We're optimistic about these brands as we move forward."

STRONG Q3 PERFORMANCE 

Overall, Altria reported another strong quarter and delivered "outstanding performance in the third quarter and for the first nine months of 2015," Barrington reported.

"Each of our reporting segments has contributed to our strong earnings performance, especially the smokable products segment led by the terrific Marlboro brand," he said.

Notably, Marlboro gained one-tenth of retail share in the third quarter and two-tenths for the year to date, the CEO cited.

"Our investments in the Marlboro architecture continue to pay off," Barrington added. "By all key measures — [other comprehensive income], margin, price realization, volume and share — our smokable segment is performing very well."

Meanwhile in the smokeless segment, Altria's U.S. Smokeless Tobacco Co. delivered income growth and combined retail share growth on Copenhagen and Skoal.

BREWING MERGER 

As for the Anheuser-Busch InBev and SABMiller potential merger, Barrington acknowledged there is a great deal of interest in the transaction and he said Altria looks forward to providing details at the appropriate time. "But as I hope you can appreciate, we have to wait until final terms are reached before doing so," he added. 

The U.K. Takeover Panel has extended the deadline to Nov. 4 for A-B InBev and SABMiller to have a firm offer on the table. Altria has been a shareholder of SABMiller since 2002 and is its largest shareholder.

"We are pleased to see this transaction moving forward and that the parties are reporting progress has been made," Barrington said. "We believe that combining the largely complimentary businesses of SABMiller and A-B InBev to create the world's largest brewer is a compelling opportunity."