Altria Restructures, Forms Two Separate Divisions to Focus on Core Tobacco & Innovative Tobacco Products
RICHMOND, Va. — In a move marrying its traditional business with the future of tobacco, Altria Group Inc. unveiled a new company structure.
According to the tobacco company, there are three key components to maximizing is core tobacco business while realizing its aspiration to the U.S. leader in authorized, non-combustible, reduced-risk products.
The three components are:
- Establishment of two divisions: core tobacco and innovative tobacco products;
- Creation of a chief growth officer function to accelerate speed to market for innovative products and technologies; and
- Aligning product development efforts more directly to the core and innovative tobacco product businesses.
"This is a dynamic time in the tobacco industry, and just as we lead in traditional tobacco products, we intend to lead in offering adult smokers more choices in innovative, non-combustible, reduced-risk products," said Howard Willard, Altria's chairman and CEO.
"We expect this new structure to accelerate our innovation pipeline, maximize our core tobacco businesses and allow us to continue to reward shareholders," he added.
Willard was named Altria's leader in January and took the position when Marty Barrington retired on May 17. The former chairman and CEO officially passed the baton at Altria's annual shareholders meeting.
Altria will adapt its structure from a chief operating officer who oversees all operating companies to a structure aligned with the company's dual strategies — maximizing income from core tobacco businesses and growing new income with innovative tobacco products.
Two Business Pillars
Making up Altria's core tobacco business are its wholly owned subsidiaries Philip Morris USA Inc. (PM USA), U.S. Smokeless Tobacco Co. LLC (USSTC), John Middleton Co., and Sherman Group Holdings LLC and its subsidiaries
Jody Begley, as senior vice president, tobacco products, Altria, will oversee the core tobacco businesses, as well as their product development and engineering support.
Begley has been president and general manager of Altria's wholly owned subsidiary Nu Mark LLC since 2015. He brings to his new role 23 years of experience in sales, marketing and strategy from PM USA, USSTC and Nu Mark, as well as leadership positions in Altria Group Distribution Co.
He will report to Billy Gifford, vice chairman and chief financial officer.
Leading those core businesses will be:
- Heather Newman, president and CEO, PM USA
- Shannon Leistra, president and CEO, USSTC
- Ryan Bauersachs, managing director and general manager, Middleton
- Dominik Meier, managing director and general manager, Nat Sherman
On the innovation front, Nu Mark "will focus on developing a compelling portfolio of non-combustible products that adult smokers enjoy and have the potential to drive adult smoker conversion," according to the company.
This portfolio includes oral nicotine-containing products, e-vapor and innovative inhalable products.
Brian Quigley will move to president and CEO, Nu Mark, reporting to Willard. He has been president and CEO, USSTC since 2012.
Quigley joined PM USA in 2003 and has served in brand management leadership roles in PM USA and USSTC.
New Leadership Position
With the restructuring, Altria established a chief growth officer function to identify and pursue the company's strategic and innovative growth priorities across the tobacco landscape.
This function will identify marketplace and adult tobacco consumer insights and translate them into strategies for product development, consumer engagement, future of commerce and business development, according to the company.
Chief among the responsibilities of the chief growth officer and its team will be innovative product development and enhancing the company's capabilities by building and acquiring the competencies, technologies and talent to achieve Altria's aspiration of being the U.S. leader in authorized, non-combustible, reduced-risk products.
To lead this new function, the company is appointing K.C. Crosthwaite to senior vice president and chief growth officer, Altria Client Services LLC (ALCS), reporting to Willard.
Crosthwaite has been president and CEO, PM USA for the past year. Before that, he was vice president, strategy and business development, ALCS, and vice president and general manager, Marlboro, PM USA.
He joined PM USA in 1997 and brings to his new role many years of experience leading and supporting major brands.
These changes will be effective June 1.
An Analyst's Take
According to Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC, Altria's new organization structure "makes a lot of sense."
"While the breadth of key management role changes rings a bit like 'musical chairs' to us, we note that Altria has a long history of promoting from within and rotating talent to deepen managerial/operational experiences," Herzog said, adding the changes also highlight loyalty with the new leadership averaging 20 years at Altria.
She noted that Wells Fargo Securities found it "surprising" the restructuring announcement did not mention heated tobacco or iQOS, a Philip Morris International heat-not-burn product Altria will market in the United States.
However, according to Herzog, she confirmed with the company that iQOS remains a key priority and focus for Altria and it will sit under the core tobacco division because of the Marlboro trademark associated with the product.
Based in Richmond, Altria's wholly owned subsidiaries also include Ste. Michelle Wine Estates Ltd., and Philip Morris Capital Corp.
The brand portfolios of Altria's tobacco operating companies include Marlboro, Black & Mild, Copenhagen, Skoal, MarkTen and Green Smoke.
