Altria, the parent company of Phillip Morris, John Middleton, US Smokeless Tobacco, and an ever-increasing slate of alternative nicotine and cannabis products, has continued to diversify and expand its portfolio. In May 2021, CEO Billy Gifford announced that Altria had acquired the remaining 20 percent of the on! brand of oral nicotine pouches for an estimated $250 million.
“When we made the initial 80 percent acquisition in 2019, the oral nicotine pouch category in the US was rapidly growing off of a small base,” Gifford said during Altria’s first-quarter 2021 earnings call on April 29. “Subsequently, on! nicotine pouch growth has exceeded our original estimates.”
The CEO reported that in the first quarter of 2021, on! accounted for 13 percent of the total oral tobacco category, which was double its share of the market from only a year ago. Altria is betting on that continued growth, with on! expected to be in more stores and eclipsing the bulk of its competition by next year.
The acquisition continues to strengthen Altria’s market cap during a time that has proven challenging even for one of the world’s largest producers of tobacco products. The company has a 35 percent stake in electronic cigarette maker Juul and rights through its sister company, Philip Morris International, to distribute IQOS, a heated tobacco system. Outside its mainstay portfolio, Altria also owns wine company Chateau Ste. Michelle and holds a nearly 10 percent stake in Anheuser-Busch.
Altria has also remained on the front lines of the burgeoning cannabis market, with a hefty stake in global cannabinoid company Cronos.
The company’s noncombustible tobacco offerings through its IQOS system also continue to evolve. It plans to bring IQOS to three new markets in 2021 and expand availability of its Marlboro HeatSticks to nearly 25 percent of the US cigarette volume by the end of the year.
“We’re making progress and driving awareness and availability of on! and IQOS while investing in future innovative noncombustible products, and we continue to acquire more tobacco consumer insights to inform our strategies to actively transition smokers to our noncombustible portfolio,” Gifford said during the earnings call.
Altria is aided in evolving its portfolio by VP and Associate General Counsel Teresa Downs. The ten-year Altria veteran has significant experience in the sales, marketing, and M&A spheres of the highly regulated tobacco industry.
Downs assumed senior counsel duties in the spring of 2011 and has been promoted several times to her current position, all the while helping Altria navigate one of the market’s most challenging industries. She was named a 2017 fellow on the Leadership Council for Legal Diversity and is also on the board of directors for the educational nonprofit Richmond Forum.
The sales, marketing, and M&A experience of the associate general counsel has likely been integral to Altria’s continuously diversifying portfolio. Altria’s Ten-Year Vision is a reflection of evolving preferences of its customers as well as a significant focus on helping traditional smokers turn to less harmful alternatives.
“Today, over 20 million US adult smokers seek less harmful alternatives to cigarettes,” the company’s mission states. “This is a pivotal moment. With adult smoker demand for noncombustible alternatives, innovation, and an appropriate regulatory framework, we have the opportunity to make more progress on harm reduction in the next ten years than we have in the past fifty years. In fact, our future success depends on it. Over the next ten years, we will invest in our business and our people to transform Altria and our industry.”
With one of the most iconic names in tobacco publicly acknowledging a sea change, there is no doubt that the future of noncombustible tobacco and traditional cigarette alternatives is still being written. Altria is hoping that embracing the future makes more sense than fighting it—and that the wafting winds of change may still carry a faint scent of tobacco.
Arnold & Porter:
“Teresa is smart, creative and practical in her approach to solving complex problems. She works extremely hard and has high expectations for her outside counsel, but she is also warm, friendly and open-minded. The perfect mix!”
–Daphne O’Connor, Partner