(Reuters) – Tobacco giant Altria Group cut its annual profit forecast on Thursday as smokers increasingly swapped out its more expensive cigarettes for cheaper brands or smoking alternatives.
The Marlboro maker has been hiking prices of its traditional products to offset volume declines as many consumers, wary of health risks, opt for new options like vapes or oral nicotine.
But price increases have caused Altria to lose further ground to cheaper cigarettes such as USA Gold, as inflation-weary consumers try to conserve cash.
Marlboro’s retail share of the total cigarette category decreased by 0.3 share points compared to a year ago, the company said.
Altria’s net revenues from smokeable products fell 5.3% in the third quarter, as higher pricing only partially offset lower shipment volumes and higher promotional investments.
Meanwhile, Altria’s forays into the e-cigarette realm have proven ill-fated. It lost billions on its 2018 investment in Juul Labs after the vape company was hit with a series of lawsuits and heightened regulatory scrutiny over its contribution to a surge in teen vaping.
It made a new bet via the acquisition of pod-based vape NJOY ACE in June, but NJOY lags far behind Juul in terms of market share. Altria said the reported shipment volume for NJOY ACE in the third quarter was about 7.5 million pods.
Another smoking alternative seeing rapid growth in the U.S. is oral tobacco, and spitless nicotine pouches in particular.
Altria’s product, dubbed on!, saw shipment volumes grow 36.7% in the quarter. However, its oral portfolio remains skewed towards traditional moist-cut tobacco such as its Copenhagen brand, which is coming under pressure as nicotine pouches grow in popularity.
The company expects adjusted profit of $4.91 to $4.98 per share this year, against earlier forecast of $4.89 to $5.03 per share.
Quarterly revenues net of excise taxes fell 2.5% to $5.28 billion. Analysts had expected revenue of $5.43 billion, according to LSEG data.
(Reporting by Juveria Tabassum; editing by Milla Nissi)
Jessica Roberts is a seasoned business writer who deciphers the intricacies of the corporate world. With a focus on finance and entrepreneurship, she provides readers with valuable insights into market trends, startup innovations, and economic developments.
