WASHINGTON (AP) — Shares of Altria dipped Thursday after the tobacco giant reported flat earnings due to declining cigarettes sales and challenging competition for newer products, including flavored nicotine pouches.
The Richmond, Virginia-based company said fourth-quarter revenue slid 2% to $5.8 billion, mainly driven by lower cigarette sales. Tobacco companies have long had to manage shrinking sales of their main product category, but Altria executives said cigarettes have been increasingly squeezed by the introduction of unauthorized disposable electronic cigarettes, which are often cheaper and come in fruit and candy flavors.
“We have long advocated for stronger enforcement against illicit products,” Altria CEO Billy Gifford said Thursday.
The company reported adjusted net income of $1.30 per share, falling short of Wall Street expectations for earnings per share of $1.32, according to analysts surveyed by Zachs Investments Research.
Company shares fell more than 2.4% in morning trading.
Altria executives updated investors on the company’s longstanding efforts to diversify its business into next-generation products, such as e-cigarettes and nicotine pouches, though the company is not a market leader in either space.
In December, the Food and Drug Administration officially authorized Altria’s pouches, on! Plus, in several flavors, including mint and wintergreen. The brand has been available for years, but FDA authorization means the products have the agency’s permission to remain on the market and expand nationally.
However, company results showed the company’s products losing ground in the latest quarter. Altria said on! pouches’ share of the market shrank to about 13%, down about 5 points from the prior year.
The U.S. market for pouches is dominated by Zyn, the flavored brand from Philip Morris International, which accounts for more than two-thirds of sales for the category, according to figures from Nielsen.
Altria executives said they faced pricing competition from Philip Morris in the latest quarter, including 2-for-1 sale promotions for Zyn.
Gifford said Altria plans its own pricing strategy as it expands its FDA-authorized nicotine pouches at the regional and then national level later this year.
“Certainly as we introduce at retail we’ll have various introductory price promotions,” he told investors and analysts Thursday. “We feel very excited about the differentiation we have and the consumer feedback.”
Gifford and other executives said the company remains interested in other alternative tobacco products, including e-cigarettes.
