Altria - 1st pass - business results 2010 q4 and full year..

January 28, 2011 - These figures were released yesterday as the Altria Group presented its full year and fourth quarter figures for last year.

For the full year of 2010, Altria's net revenues increased 3.4% to $24.4 billion, and revenues net of excise taxes increased 0.4% to $16.9 billion due primarily to higher net revenues from cigarettes, smokeless products and wine, partially offset by lower net revenues from financial services.

In the fourth quarter of 2010, Altria's net revenues decreased 1.4% to $5.9 billion due primarily to lower net revenues from cigarettes and cigars, partially offset by higher net revenues from smokeless products, financial services and wine.

Cigarettes, manufactured by PM USA

PM USA's reported domestic cigarette shipment volume last year, at 140.8 billion, was down by 5.3 per cent on that of 2009. Marlboro volumes were down by 3.7 per cent to 121.9 billion, while volumes of other premium cigarettes(such as Virginia Slims, Parliament and Benson & Hedges) were down by 12.6 per cent to 10.3 billion. Discount product (include Basic, L&M and other discount brands) volumes were down by 16.8 per cent to 8.6 billion.

Domestic cigarette shipment volume during the fourth quarter of last year, at 33.6 billion, was down by 7.0 per cent on that of the fourth quarter of 2009. Marlboro volumes were down by 5.7 per cent to 29.2 billion, while volumes of other premium cigarettes were down by 12.2 per cent to 2.4 billion. Discount product volumes were down by 18.2 per cent to 2.0 billion.

PM USA’s retail share of the US cigarette market during the full year 2010, at 49.8 per cent, was down by 0.1 of a percentage point on that of 2009. Marlboro’s share was up by 0.8 of a percentage point to 42.6 per cent, while the share of the company’s other premium brands fell by 0.5 of a percentage point to 3.9 per cent. The share of the company’s discount brands fell by 0.4 of a percentage point to 3.3 per cent.

Smokeless Products, manufactured by USSTC and PM USA

USSTC and PM USA's combined retail share of smokeless products for the three-month period declined 0.1 share point to 54.5%, and for the twelve-month period increased 0.7 share points to 55.3%. The retail share decline in the fourth quarter of 2010 was primarily driven by share losses on Skoal, partially offset by share gains on Copenhagen and Marlboro Snus. Full-year retail share gains were driven primarily by Copenhagen and the national introduction of Marlboro Snus, partially offset by share declines on Skoal. Copenhagen and Skoal's combined retail share for the three- month period declined 0.5 share points, and for the twelve-month period increased 0.8 share points.


USSTC and PM USA's combined reported domestic smokeless products shipment volume during 2010, at 724.4 million cans and packs, was up by 12.2 per cent on that of the previous year. Copenhagen volumes, at 327.5 million, were up by 16.7 per cent, while Skoal volumes were up by 3.4 per cent to 274.4 million. Red Seal and other brand volumes were up by 22.9 per cent to 122.5 million.

Total volumes during the fourth quarter of 2010, at 172.5 million, were 2.5 per cent up on those of the fourth quarter of 2009. Fourth quarter volumes of Copenhagen, at 82.6 million, were up by 6.1 per cent, while those of Skoal were down by 1.5 per cent to 65.7 million. Red Seal and other brand volumes during the fourth quarter were up by 1.5 per cent to 24.2 million cans.

USSTC and PM USA’s smokeless product retail share last year, at 55.3 per cent, was up by 0.7 of a percentage point on that of 2009. Copenhagen’s share rose by 2.0 percentage points to 25.6 per cent, while Skoal’s share fell by 1.2 percentage points to 22.4 per cent. The retail share of Red Seal and other smokeless brands fell by 0.1 of a percentage point to 7.3 per cent.

USSTC and PM USA's combined retail share of smokeless products for the three-month period declined 0.1 share point to 54.5%, and for the twelve-month period increased 0.7 share points to 55.3%. The retail share decline in the fourth quarter of 2010 was primarily driven by share losses on Skoal, partially offset by share gains on Copenhagen and Marlboro Snus. Full-year retail share gains were driven primarily by Copenhagen and the national introduction of Marlboro Snus, partially offset by share declines on Skoal. Copenhagen and Skoal's combined retail share for the three- month period declined 0.5 share points, and for the twelve-month period increased 0.8 share points.

Copenhagen's retail share for the three- and twelve-month periods increased 1.1 and 2.0 share points, respectively. The brand benefited from the introductions of Copenhagen Long Cut Wintergreen in the fourth quarter of 2009, Copenhagen Long Cut Straight and Extra Long Cut Natural at the end of the first quarter of 2010 and Copenhagen Black in the fourth quarter of 2010, as well as other brand-building programs. Copenhagen Black is offered for a limited time only.

Skoal's retail share for the three- and twelve-month periods declined 1.6 and 1.2 share points, respectively, as the brand's performance continued to be impacted by the Copenhagen and Marlboro Snus product introductions and competitive activity. USSTC is introducing ten new Skoal products nationally in the first quarter of 2011. These launches, along with other brand-building initiatives, are expected to improve Skoal's performance.

PM USA continues to build awareness and trial of Marlboro Snus among adult cigarette smokers, and introduced two new snus varieties in January 2011.

In the first quarter of last year (2009), PM U.S.A. expanded Marlboro's Snus nationally to build awareness and trial among adult cigarette smokers for these innovative smokeless tobacco products. This month, PM U.S.A. began shipping two new Marlboro Snus varieties and a bigger and bolder format for adult cigarette smokers looking for a more flavorful experience. Also this month, Skoal began shipping two new Snus varieties for adult smokers tobacco consumers seeking a spit-free smokers tobacco alternative.

Q-and-A: Marlboro SNUS (only question in Q/A):

Vivien Azer - Citigroup Inc

And my last question has to do with the new Marlboro Snus direction. Are those incremental, or are those replacing what's existing in the market today?

Michael Szymanczyk

No. Those are new products, incremental products. They are of a different format, so they offer as you study the consumer in this segment and the development of the segment. You see different people have different kind of preferences relative to these Snus products. So these products have different pouch size, for example, and there are different set of flavor profiles, and that's all based on continuing consumer research.

Cigars, manufactured by John Middleton Co.


The cigars segment's financial, shipment volume and retail share results for the fourth quarter and full year of 2010 were negatively impacted by events in the aftermath of the 2009 FET increase on tobacco products. Middleton observed increased competitive activity, including significantly higher levels of imported, low-priced machine-made large cigars. Middleton responded with promotional investments to defend its position in the marketplace.

Middleton's reported cigar shipment volume last year, at 1,246 million, was down by 1.0 per cent on that of 2009. Black & Mild volumes were down by 0.5 per cent to 1,222 million. Middleton’s share of the US cigar market in 2010, at 28.9 per cent, was down by 1.5 percentage points. Black & Mild’s share was down by 1.3 percentage points to 28.5 per cent.

WINE - The Wine segment (Ste. Michelle) reported strong operating companies income and volume results in 2010. The Wine segment's reported operating companies income increased by 41.9% to $61 million for the full year of 2010 and by 42.9% to $30 million for the fourth quarter.

FINANCIAL SERVICES - reported operating companies income for 2010 declined by $113 million to $157 million, due primarily to lower gains on asset sales. For the fourth quarter of 2010, the Financial Services segment's reported operating companies income increased by $60 million to $70 million, due primarily to higher gains on asset sales and asset impairment and exit costs in 2009.In the fourth quarter of 2010, reported OCI for the financial services segment was $70 million, an increase of $60 million, due primarily to higher gains on asset sales, and asset impairment and exit costs in 2009.

Reference: Altria Reports 2010 Fourth-Quarter and Full-Year Results, SOURCE: Altria Group, Inc., 1/27/2011. Cigarette volume and share falls at PM USA last year, Tobacco Reporter, 1/28/2011; Altria Group CEO Discusses Q4 2010 Earnings Call Transcript Courtesy of Seeking Alpha, Seeking Alpha, 1/27/2011; Altria Group CEO Discusses Q4 2010 Earnings Call Transcript Question-and-Answer Session, 1/27/2011.