Billy Gifford: Yes. They’re great questions, Chris. I think when you think about the resilience here at Marlboro, we’re very pleased with it. We’re pleased with how it’s positioned with the consumer. We are pleased with that. It’s still the aspirational brand within the cigarette space. I think when you think about your question on promotions, I would point to you that the high price realization actually shows that we’re able to be more effective and efficient on our Marlboro price promotion. I think it may be useful that — I talked about Marlboro Red and Gold versus some of the price sensitive, but some of the tools that we have in place actually allow the precision. So, I’ll just walk through a quick example with three consumers.
You have one consumer that’s purchasing premium brands and occasionally pops up and buys a discount brand. The other consumer is continuing to flip flopping between premium and discount. And the third consumer is a discount consumer that occasionally pops up and smokes a premium cigarette. When you think about those consumers, you’re going to treat those differently to make them more of a continuous premium brand smoker. That discount smoker, you may never be able to get them to convert to a premium because of the condition — the economic condition that they’re in. So, as we move to personal value delivery as close as we can get to the consumer, we can tailor that across those three. And so that’s where I refer to the price that being at the national level.
We’re doing this down at the local level and on our journey to move as close as we can get to the consumer. And so, that allows us to have Marlboro be resilient, address the consumers’ needs on a case-by-case basis, if we can get really close to the consumer and spend those resources accordingly to have a more consistent premium consumer through time.
Chris Growe: Thanks for that and the color there. I appreciate that. I had one other follow-up, which would be, you do have two relatively unique kind of profit drags this year, with PMCC winding down, obviously, pensions moving around. Could you give some more color around — or context around the run, how much that’s weighing on profitability this year?
Sal Mancuso: Yes, Chris, I’ll be — so let’s talk about pensions for a moment. If you think about pensions, obviously, there’s a P&L impact related to return on assets, changes in discount rate, but I would say the pension is really well funded. We have strong funding in that pension plan. It’s actually fully funded. So, we feel really good about that. And I would say the changes in pension expense I’ll remind you a noncash. We have successfully completed the wind-down of PMCC. So, you are correct in that we had earnings and cash flow last year, and this year we will not. And it is a year — on a year-over-year basis is a slight lag. But remember, PMCC was part of our all other category. It was — so we consider it fairly immaterial to the total earnings of Altria.
Operator: Our next question comes from Andrei Condrea with UBS.
Andrei Condrea: One for me, please, if you don’t mind. On your smokeless business, especially on what we’ve seen, the brand has been driven by strong discounting versus the main peer. Now, do you expect that to continue going forward or rather just closing the price gap between you and your main peer, even if you put your product — promo spend per can is decreasing? Thank you.
Billy Gifford: Sure. Thank you. I think when you think about it — and this is not an excuse, it’s just facts. They had a first mover advantage. And when consumers — to get consumers to have new brands in their consideration set, you have to induce trial. And that’s what we feel like we’re doing. I would say, from a consumer standpoint, it’s still very small compared to the total nicotine space. So, we’re going to spend while — and invest while the overall category is growing, so we can participate in that growth. We mentioned previously, it was intuitive that the adult dipper would move to the product pretty quickly and that the adult cigarette consumer, you’re going to have to induce trial and that’s what we’re in the process of doing and are excited about the results thus far.
I think through time, we did reduce the promotional spend per can. So, when you think about the price gap, if you will, the way you referred to it, to a competitive product in the marketplace, you’re going to invest while the category is growing, so you get these products in the consideration set. I talked about bringing some of the data analytics. I think you saw the benefit of that in this past year, but we have more to do there. And I think as we continue to progress and move forward, we feel good about it. I don’t want you to think, though, it’s all discount. It’s all priced off. That’s to induce trial. We really see it as a complete marketing ecosystem, if you will. And I hate to use the business term, but it’s surrounding the consumer and really meeting them where they’re at in their journey and then supporting in that journey to fully transition over, if you will, from cigarettes to this novel oral pouch.
And so, that’s where we’re at. We feel good about the progress we’ve made thus far, but we certainly have to continue to drive awareness of the induce trial.
Andrei Condrea: That’s very clear. Thank you. And yes, you are completely right. It has been fantastic progress for one. And if I could squeeze in just one more if you don’t mind, is that Marlboro has indeed done very well, and congratulations for that. But for the rest of your portfolio, as small as it is versus Marlboro, what steps are you taking to defend your market share versus pressure, both from peers on the very top end of the price and the bottom end? Thank you.
Billy Gifford: Yes. I would say if you look at growth, I would say the growth, if you look at competitors has really been at the very, very bottom end. Sal highlighted in his comments, there are a number of major manufacturers that have what we would consider branded discount priced in deep discount space. And so, when we look at total portfolios for some of those, we don’t see the benefit of having gone down to that low price tier. They may grow one brand to the detriment of another brand within the discount space. So, we want to participate in the discount category. We think it’s important, but we certainly don’t want to grow the discount category. And I think being premium focused where we feel the profitability and the high loyalty is in the cigarette space is an important place to play, and that’s where we’re focused.
And Sal highlighted for you, our premium brands are growing. Total premium share of the premium space is growing through time on the backs of Marlboro. So, we’re pleased with that. We talk about the RGM tools, so I won’t repeat that. But being able to continue to get closer to a consumer-by-consumer basis and meet them where they’re at when they have needs is where we’re headed. And we’re excited about that progress.
Operator: Our next question comes from Priya Ohri-Gupta with Barclays.
