On the threshold of the annual financial report, presented by Altria Group, owner of Philip Morris USA, leading industry analysts forecast its performance during the fourth quarter of the year, basing on its Q3 results.
Since adult Americans reduce their expenses on tobacco products, due to growing taxes, and increasing social stigma on smoking, the largest cigarette maker in the United States reported drop in shipping volumes, but confirmed it still managed to obtain revenue growth through increase of organic cigarette prices during its earning conference pre-call.
Industry experts predicted that the company’s leading brand, Marlboro could retain its market share, thanks to the recently introduced Marlboro Leadership Price, though the brand has lost 1% of market share in the previous quarter, totaling 41.7% of the US cigarette market. In addition, the market share of its other key brands, including Parliament and Virginia Slims, went down as well.
The drops in Marlboro market share affected the overall number of cigarettes sold by the company during the quarter, which dropped by 9% to equal 33.3 billion cigarettes versus the same period a year before. Yet, Philip Morris USA’s discount cigarette brands, including L&M were up by 9.5%.
In addition, the cigarette maker has also introduced several new products, under Marlboro trademark, including an extension to Marlboro menthol family. Nevertheless, the company is still under market share pressure from ever-growing mid-value cigarettes, led by the remarkably popular Pall Mall brand, manufactured by RJ Reynolds.
The latest price increases also didn’t contribute to better sales, as the average price of a pack of Marlboro Red is currently $5.74 versus $4.22 charged on the average for a pack of a mid-value brand, so it’s not surprising that smokers switch to less expensive brands.
Altria Group, as well as its main rivals is considerably looking at the smokeless tobacco market category, in an attempt to find alternatives to its decreasing cigarette sales. Thus, experts are interested in the performance of other tobacco products, such as John Middleton cigars, Marlboro Snus, and some other brands manufactured by Altria.
At the same time, Altria continues its efforts in cutting manufacturing costs and expenses on promotional campaigns, in order to achieve better financial results in the long-term perspective. During the third quarter, the company declared its intentions to save $400 million by the end of 2013, in order to compensate for the falling cigarette volumes.
Altria Group is one of the nation’s largest corporations, occupying leading positions in tobacco market, beer market, as well as other markets.