The most successful tobacco company across the world

Published on July 27th, 2011 11:10

Correctly valued at $27

Altria Group

Altria Group, Inc., formerly known as Philip Morris Companies Inc., is one of the most successful tobacco corporations across the world possessing several best-selling tobacco brands, such was the world’s number one cigarette brand Marlboro, cigar brand Black and Mild and smokeless tobacco brands Copenhagen and Skoal. Altria owns several major companies, including Philip Morris USA, United States Smokeless Tobacco, Inc., John Middleton, Inc., John Middleton, Inc., and Philip Morris Capital Corporation

In 2008 the company decided to spin off its international tobacco business, naming the newly-created company Philip Morris International and distributing its shares between Altria shareholders. The company’s positive pricing power and wide product range are main sources of value origination. At the U.S. tobacco market, Altria’s major rivals are Reynolds American Inc. and Lorillard, however, Altria holds a more than 50% share of the retail tobacco market, which is more than Lorillard and Reynolds American combined share of retail market.

Company Overview

Altria is former owner of Kraft Foods and Philip Morris International that carried out its business on the international tobacco market. In 2009 the company finalized the purchase of United States Smokeless Tobacco, Inc, one of the leading companies in smokeless tobacco market, which also owns the Ste Michelle Wine Estates. Besides, Altria owns 27% share in London-based SABMiller, one of the leading brewing firms globally.

Overall, Altria’s business is segmented in the following way:

  • Cigarettes
  • Cigars
  • Smokeless tobacco
  • Wine
  • Financial sector

Product Portfolio Overview

In cigarette segment, Altria’s brand portfolio includes such iconic and world-recognized brands as Marlboro, Parliament and Virginia Slims, in smokeless tobacco the company owns Copenhagen and Skoal and in cigars it markets Black & Mild. It’s wine division, Ste. Michelle sells premium sorts of wine, such as Columbia Crest and Chateau Ste. Michelle. Philip Morris Capital Corporation, Altria’s financial sector division manages leased assets, including direct finance lease investments.

Cigarette business represents Altria’s most profitable division accounting for more than 75% to the company’s stock value. Philip Morris USA owns nearly 50% market share in the American cigarettes market whereas itc flagship brand, Marlboro holds unprecedented 42% share. In addition, Altria’s smokeless tobacco brands account for more than 40% market share and is likely to grow further as this is the most rapidly-developing segment of tobacco market, with 7% annual growth.

Tobacco Industry Prospects

The U.S. tobacco industry deals with continual volume decrease due to increasing health concerns about severe health consequences related to tobacco use and hefty taxes on tobacco products. In addition, stringent anti-tobacco laws, such as smoking bans and marketing restrictions also contribute to decline.

However, amid falling sale volumes, higher pricing help Altria keep the strong cash flows. The company is clearly focused on the profit maximization by means of setting higher prices on tobacco products to offset the decrease in sales.

By Kevin Lawson, Staff Writer. Copyright © 2011 All rights reserved.

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