Altria Group Inc. is the owner of the largest U.S. cigarette maker Philip Morris USA. Recently the tobacco company had to demonstrate in the second-quarter financial results that its popular Marlboro brand can save its domination on the market.
In order to save the position of Marlboro cigarettes, Altria has created few new products with the Marlboro brand. The cigarette maker often used lower promotional pricing to attract smokers from its rivals, who also have experienced cigarette sales declines. New offerings include “special blends” of both menthol and non-menthol cigarettes.
Among new products are Marlboro Eighty-Threes and Marlboro Black in menthol and non-menthol versions.
Altria is fighting for its market share as Americans buy fewer cigarettes. The company’s volumes have declined significantly, but it has supported income by increasing prices.
The cigarette maker experiences pressure from cigarette brands such as Pall Mall of Reynolds American Inc. and Maverick of Lorillard Inc.
Marlboro was sold for an average of $5.71 per pack during the first quarter in comparison with an average of $4.23 per pack for the low-priced brand.
The Marlboro cigarette brand got 0.1 point of market share in the first quarter to end with 42.3 % of the U.S. market in spite of a 3.4 % decrease in the number of Marlboro-branded cigarettes sold. Altria’s whole cigarette volumes decreased 2.6 % to 31.1 billion cigarettes, suffered by declines of premium cigarettes like Marlboro.
Altria and other cigarette makers as well intend to get growth from cigarette alternatives such as cigars, snuff and chewing tobacco. Analysts wait the results from Altria’s Black & Mild cigars and Copenhagen and Skoal smokeless tobacco products, as well as Marlboro Snus, perform.
Altria as well is the owner of a wine business and has a financial services division.
As the company suffers from volume declines in its major cigarette business, it’s cutting costs. After finishing a $1.5 billion multi-year cost savings program last year, the tobacco firm introduced a plan to cut $400 million in “cigarette-related infrastructure costs” by the end of 2013.
Increased expenditure on premium cigarette brands like Marlboro could mean that smokers have to pay more for cigarettes because of federal and state tax increases. Consumer spending makes up nearly 70 % of the U.S. economy and is vital to continuing the recovery from the worst economic decline since the Great Depression.
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