Altria Group, Inc. (NYSE:MO) Q2 2023 Earnings Call Transcript

A – Sal Mancuso: Yes, I’m going to be careful not to talk about future quarters. I will agree with you, we’re really happy with the margin performance in the OTP segment. You know for year-to-date, OTP margins, as I said in my remarks were over 68%. What you’re seeing, I think is the success of on! where we’ve grown share each quarter. And as we talked about in our earlier remarks, you see increased pricing of 17% on a year-over-year basis. So I think that shows the strength of on! in the marketplace, but we’re really excited about the progress on! is making and the overall OTP performance.

Vivien Azer: Certainly. Thank you for that. And then for my follow-up question, Billy, nice to see the Marlboro market share advance sequentially, despite some of the heightened competitive activity that you called out from competitive premium menthol offerings. Do you – just given kind of the competitive backdrop, do you think that you need to have the Marlboro Black Gold in the marketplace longer than you had originally contemplated?

A – Billy Gifford: Look, we think that’s an addition to our portfolio. It certainly gives the Marlboro team – it rounds out the Black portfolio. The Marlboro Black, the family has been around a while. We saw this as a gap in that portfolio and we filled that. So from a standpoint of overall Marlboro Black, you can think about that as about 10% of Marlboro, and it certainly gives the consumer a safe place or a place to land if they are under economic pressure. And as you’ve seen previously, when we use tools like this, we’re able to shrink the gap to mainline through times. So it’s about keeping mainline very strong, which we’re very pleased that it is, and then having a place for the Marlboro consumer, because Marlboro is still the aspirational brand in the cigarette category. Having a place for them to land when they are under economic pressure, and as the situation changes, we can shrink that gap to mainline.

Vivien Azer: Certainly. Thank you so much for that.

Billy Gifford: Thank you.

Operator: And we’ll take our next question from Matt Smith with Stifel.

Matt Smith: Hey, good morning.

A – Billy Gifford: Good morning Matt.

Matt Smith: Billy, I just – I wanted to follow-up on your commentary about the level of investment in the cigarette business. And are we in an environment now with the enhanced digital tools in more efficient ways to engage with your consumers, that you expect more volume to be sold using promotional activity, even as economic conditions improve.

A – Billy Gifford: Yes, I wouldn’t think of it as more volume under promotional. I think it’s being more efficient and effective with that promotional spend. It’s trying to get it to the individual consumers as close as we can get to that, that needs it, while not subsidizing adult cigarette consumers that don’t need it. And I think you’ve seen that with both, the growth of Marlboro in the premium space, the investments we made first to second as Marlboro [ph] has the 10th sequentially bump and the price realization we’re experiencing in the cigarette space.

Matt Smith: Okay, thank you for that. And if I could ask another question on the growth on the on! oral brand. The growth there remains robust even as you’ve reduced promotional activity. Can you remind us where the brand stands today in terms of distribution and how we should think about the drivers of growth for on! in the second half of the year?