Marlboro Maker’s Sales Fall as Smokers Switch to Cheaper Cigarettes
Altria Group said cigarette sales volume declined 12% and low-cost brands picked up market share on Marlboro
By Jennifer Maloney
Updated Feb. 1, 2023 11:02 am ET
Americans, pinched by inflation, are smoking less and switching to cheaper cigarettes.
Altria Group Inc., the largest U.S. cigarette maker, said its cigarette sales volume plummeted about 12% in the latest quarter. The company’s revenue fell 2.3%, as price increases on its tobacco products only partially offset the volume declines.
Altria, whose flagship Marlboro brand is in the premium price tier, had steeper sales declines in 2022 than the industry overall, the company said. A pack of Marlboro cost an average of $8.46, including taxes, in the most recent quarter, Altria said.
“The consumer remains under pressure,” Altria Chief Executive Billy Gifford said Wednesday on a call with analysts and reporters. People under economic pressure tend to smoke fewer cigarettes per day, and those under the most pressure switch to cheaper alternatives, he said.
Marlboro’s U.S. market share declined by 0.4 percentage point to 42.5% in the fourth quarter. Meanwhile, discount brands gained steam, increasing their market share by 1.7 percentage points to 27.8%, Altria said. Sales are climbing for cheap brands like Maverick, made by Imperial Tobacco Group PLC, and Montego, made by Liggett Vector Brands, according to an analysis of Nielsen data by Goldman Sachs analyst Bonnie Herzog.
Altria noted that Marlboro’s share of the premium cigarette segment has increased over the past three years.
“We are encouraged by Marlboro’s resilient performance,” Chief Financial Officer Sal Mancuso said.
Smokers began switching to cheaper cigarettes early last year, and that trend has accelerated as higher prices force difficult choices at the checkout.
Altria Wednesday again wrote down the value of its investment in e-cigarette maker Juul Labs Inc., citing macroeconomic conditions such as interest-rate increases. Altria now holds its stake at a price that valued Juul at $714 million—a 98% drop from the $38 billion valuation Altria gave Juul when it bought a 35% stake in 2018. Juul didn’t immediately comment Wednesday.
Juul, which represents 27% of e-cigarettes sold in U.S. stores tracked by Nielsen, reached the brink of bankruptcy last year amid a dispute with federal regulators over whether its products could remain on the U.S. market.
The Wall Street Journal last week reported that Juul was in early-stage talks with Altria and two other tobacco giants as the vaping maker seeks a potential sale, investment or partnership.
U.S. cigarette unit sales have fallen for decades as smokers died from smoking-related illnesses or other causes, quit or switched to alternatives such as e-cigarettes. That trend reversed temporarily in 2020: Americans smoked more while they were stuck at home in pandemic lockdowns and spent less on travel, entertainment and dining out.
In 2021, the decline in cigarette sales resumed. The number of cigarettes that the largest U.S. cigarette companies sold to wholesalers and retailers nationwide fell in 2021 to 190 billion—a drop of 70% from a high of 637 billion in 1981, according to data released this week by the Federal Trade Commission.
According to Altria, the decline in U.S. cigarette sales volumes accelerated in 2022, falling 8%.
