Altria, the largest U.S. Tobacco Company and maker of cigarettes Marlboro, says that customers are increasingly their discount brands and smokeless tobacco products in the face of rising prices and smoking bans.
On Friday, Altria has made two announcements that may mean a shift in long-term strategy. Michael Szymanczyk, 63-year-old chief executive of the company, said that he resign and be replaced by Martin Barrington, group vice-chairman.
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Separately, Altria said it has entered into an agreement with the Okono, branch Fertin Pharma, a Danish manufacturer of nicotine chewing gum, to develop a "noncombustible" tobacco products.
“Altria continues to focus on developing reduced-risk products that appeal to adult tobacco users," Mr. Szymanczyk said.
The moves came as Altria announced a 9 per cent year-on-year decline in its fourth quarter net earnings to $837m, or 41 cents a share, as restructuring charges weighed on the results. Last October, the company announced a cost reduction programme intended to save $400m a year to help cope with declining cigarette sales volumes.
With sales of Marlboro cigarettes fell by 0.6 percent on an annualized basis in the fourth quarter, while Altria in other premium brands declined 7.2 percent. Meanwhile, the volume discount for their brands has jumped nearly 20 percent and smokeless products were up 9.7 percent.
Overall, revenues grew by 3.4 percent from a year ago to $ 6.1 billion in the fourth quarter.
"Despite the increased shares, the share of retail sales of Marlboro continues to decline," said Bonnie Herzog, an analyst at Wells Fargo.
Ms. Herzog said that the second-level tobacco brands fighting for supremacy, and taking market share from more expensive cigarettes premium. Shift, she says, is "fueled in part by a consumer dispute, which tends to decrease”.
Altria’s results come as the tobacco industry continues to face pressure from prohibitions of taxation and the threat of greater regulation on packaging and menthol products.
Although Mr. Szymanczyk recognized changes in the cigarette market, he said it was important to maintain Marlboro "modest momentum", so that the company supports the growth of profits. Altria, which recently made a package of amendments to some of its brands Marlboro, said that to announce brand-building plans in the next month.
Altria shares fell 1.57 per cent to $28.21 in midday trading on Friday.
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