Sales of traditional cigarettes are falling even faster than expected. That trend is reassuring tobacco companies like Altria of the importance of their investments in e-cigarettes and other smokeless alternatives. Jennifer Maloney writes for The Wall Street Journal:
Altria CEO Howard Willard on Thursday offered new projections on U.S. cigarette industry volumes, saying cigarette sales would continue to decline at a faster clip than they have in the past as smokers switch to e-cigarettes. He also said his company’s recent $12.8 billion investment in vaping startup Juul Labs Inc. would allow the tobacco giant “to support and even accelerate transition to noncombustible alternative products.”
Altria said U.S. cigarette sales volumes declined 4.5% last year—more sharply than expected—as e-cigarette sales grew 35% and higher gas prices also damped cigarette sales. Over the same period, the company’s market-leading Marlboro brand declined 5.2% in volume. Altria now expects U.S. cigarette volumes to decline 3.5% to 5% this year and 4% to 5% a year through 2023, while e-cigarette volumes grow 15% to 20% a year, Mr. Willard said.
Altria’s share price is down more than 14% since The Wall Street Journal first reported in November that the tobacco giant was in talks with Juul, whose sales exploded last year to capture 75% of the retail e-cigarette market. Altria ultimately took a 35% stake, valuing the upstart at $38 billion. Mr. Willard, a company veteran who took over as Altria’s chairman and CEO in May, sought Thursday to allay investor concerns about the deal and a separate $1.8 billion investment in Canadian marijuana company Cronos Group . CRON 11.73%
Last year “was a transformative year for Altria,” Mr. Willard said on a call with analysts. He said the investments in Juul and Cronos would allow Altria to participate in categories poised for rapid growth overseas as U.S. cigarette sales fall.
Calling Juul’s growth “remarkable,” Mr. Willard said the e-cigarette company had more than $1 billion in revenue in 2018, up from $200 million in 2017. It sold more than 450 million refill pods last year, he said.
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