Altria (MO) Poised On Solid Pricing, Growth In Low Risk Products

Growing health concerns and regulatory barriers on cigarette consumption have led several tobacco companies to focus on expanding low-risk offerings. Altria Group, Inc. (MO Quick Quote MO - Free Report) has also been gaining from growth in its oral tobacco category and other reduced risk products (RRPs). Moreover, prudent pricing strategies are supporting the company’s top-line performance, as witnessed during fourth-quarter 2020. That said, let’s get a closer look at the factors supporting this well-known tobacco player.

Low Risk Products are Gaining Popularity

Altria is striving to boost its presence in the RRPs arena. These products are being widely accepted owing to their less detrimental impacts on health. Notably, the marketing and technology sharing agreement between Altria and Philip Morris International Inc. (PM Quick Quote PM - Free Report), pertaining to the sale of IQOS in the United States, is yielding.  IQOS is one of the leading RRPs in the industry. We note that the U.S. Food and Drug Administration (FDA) approved the marketing of IQOS and HeatSticks as Modified Risk Tobacco Products in July 2020. Also, the authorization from the FDA on sales of IQOS 3 is encouraging. Altria, through its subsidiary — Philip Morris USA, Inc. — is striving to make IQOS available across more stores in the United States.  We note that other tobacco companies such as Turning Point Brands, Inc. (TPB Quick Quote TPB - Free Report) and British American Tobacco p.l.c. (BTI Quick Quote BTI - Free Report) have been expanding their offerings in the low-risk tobacco space.

Apart from this, Altria has been undertaking efforts to expand oral tobacco offerings. The company through its subsidiary Helix Innovations, holds 80% stake in certain companies of Burger Group that is engaged in the commercialization of the oral tobacco-derived nicotine (TDN) pouch product — on! Notably, on! was sold in more than 78,000 stores by the end of the fourth quarter, up 40% from third-quarter levels. Management believes that on! is a worthwhile addition to Altria’s smokeless portfolio, as oral TDN products are gaining popularity in the United States owing to their low-risk claims. The company is also undertaking efforts to expand in the cannabis industry. Markedly, the company acquired stakes of the Canada-based cannabis company, Cronos Group.

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