New snuff boosts profits for Altria
A new flavor kicked up sales sharply for a Marlboro brand of snuff and helped to boost profits at Altria Group Inc.
And as the tobacco giant’s aggressive push into noncigarette businesses starts paying off on the bottom line, directors yesterday voted to share more of future profits with stockholders.
Other Richmond corporate giants also reported profit gains yesterday for the end of one of the toughest years ever for American business.
At Henrico County-based Altria, parent company of Philip Morris USA, strong earnings led directors to decide they’ll pay about 80 percent of future profits as dividends, up from 75 percent now.
Altria’s profits rose despite a more than doubling in cigarette taxes that led some smokers to quit and others to switch to discount brands.
Though U.S. sales of all makers’ cigarettes fell about 8 percent, smokeless tobacco rose – a trend that many health advocates fear will keep Americans hooked on a deadly product.
For Altria, smokeless tobacco is starting to play an ever-moreimportant role in its business.
One big signal: a 15 percent jump in sales of Copenhagen snuff in the fourth quarter, to 77.9 million cans, mainly because of a new wintergreen-flavored variety launched toward the end of the quarter.
“When you look at the growth in Copenhagen it’s really strongly being driven now by Copenhagen long-cut wintergreen,” Altria Chairman and CEO Michael E. Szymanczyk said yesterday.
The wintergreen-flavored snuff was only the fifth product in Copenhagen’s 187-year history, but Altria Executive Vice President David R. Beran said yesterday that the company is introducing two more varieties early this year.
“Clearly, Cope’ wintergreen is off to a pretty good start,” Goldman Sachs analyst Judy Hong said.
Szymanczyk said Altria’s top brand, Marlboro, hung in strongly in a year that saw a 62-cents-a-pack federal tax increase as well as a 9-cent-a-pack price increase in the spring and a 6-cent-a-pack price increase in the fall.
“The loyalty factor remains high. It ended the year in pretty good shape,” Szymanczyk said. Marlboro’s market share slipped just 0.1 percentage point last year.
Beran said Marlboro’s menthol varieties were among the fastest-growing brands last year, largely because of the new Blend 54 version.
He said Marlboro will introduce two new nonmenthol varieties this year, both to be called “Special Blend” and both based on the Marlboro “Red” blend.
Cigarette price increases and what Szymanczyk called a “disciplined” approach to promotions – that is, not doing them as aggressively as some tobacco firms – meant the company’s net revenue per pack rose to $1.27 from $1.15 the previous year. The figure excludes federal taxes and various fees.
Altria’s earnings from continuing operations last year rose 4 percent to $3.2 billion, as revenue increased 21.7 percent to $23.6 billion.
Its shares rose 4 cents to close at $20.03.
