Altria Pushes Forward With Marketing of New Noncombustible Products

RICHMOND, Va. — Altria Group Inc. is moving along on its 10-year journey to a noncombustible future, partly by building excitement and momentum around its oral nicotine and heat-not-burn tobacco products. 

At the end of the first quarter of 2020, Altria's on! brand of nicotine pouches was sold in more than 28,000 stores, including the top five convenience store chains by volume, according to Altria CEO Billy Gifford. In addition, newly redesigned on! cans are now available, with retail visibility being boosted through premium fixture space in most stores.

"We believe on! is a compelling proposition for both adult dippers and smokers. Although it's early days, we're encouraged by the momentum that on! is building at retail, and we're continuing to test several go-to-market approaches," Gifford said during Altria's first-quarter 2020 earnings call, held April 30.

He pointed to recent promotional programs in two large c-store chains in different states that drove accelerated sales volume for on!. That sales volume largely maintained momentum throughout the quarter, Gifford added.

"To date, we believe the pace at which adult tobacco consumers are adopting on! is related to the duration of Zyn's time in market. For example in Colorado, we expected a competitive environment as Zyn has been available since 2016," the CEO said. "But we're quite pleased that on! has doubled its velocity within the chain in just a few short months. In North Carolina, where Zyn has only been sold for 12 months, we observed faster adoption of on! and continued momentum after the promotional period."

Altria expects to submit a premarket tobacco application (PMTA) to the Food and Drug Administration (FDA) for on! this month. After finalizing the PMTA submission, its regulatory and science teams will pursue plans for a modified risk application for on!.

Altria entered the oral nicotine category in 2019 when it acquired 80 percent of certain companies of Burger Söhne Holding AG to commercialize on! products worldwide. On! is an oral tobacco-derived nicotine (TDN) pouch product.

IQOS Update

In the heat-not-burn tobacco segment, Altria's Philip Morris USA (PM USA) has shifted its marketing of IQOS in light of the COVID-19 pandemic. As Gifford explained during the Q1 earnings call, the company had to temporarily close its IQOS stores in Atlanta and Richmond, pausing its interactive marketing efforts, to limit person-to-person contact. The IQOS HeatSticks, though, remain available for sale in more than 500 retail stores across Atlanta and Richmond.

PM USA also pushed back the launch of IQOS into a third market — Charlotte, N.C. — which was slated to take place in April.

"Our Charlotte expansion will include several enhancements from earlier launches, including a more disruptive retail look and a greater emphasis on flexible marketing units such as pop-ups and pods," Gifford said. "We believe our enhanced retail fixtures will aid awareness as both the IQOS brand and its proposition of real tobacco no ash and less odor will be prominently displayed at the point of purchase."

While the company awaits guidance from public health authorities as to when its IQOS stores can reopen and resume the interactive marketing approach, Altria is keeping up digital marketing efforts to generate awareness and drive product education.

Altria, through its PM USA subsidiary, is commercializing IQOS in the United States through a pact with Philip Morris International (PMI). According to Gifford, PMI recently submitted a supplemental PMTA to the FDA for IQOS 3.

In addition to PM USA, Richmond-based Altria's wholly owned subsidiaries include 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-percent interest in Helix Innovations LLC, and holds equity investments in Anheuser-Busch InBev SA/NV, Juul Labs Inc. and Cronos Group Inc.