Altria Group, Inc. · NYSE:MO
Altria — Investor Day (November 2017)
186 slides from Altria's investor day presentation, Nov 2, 2017
Slide 1: Experience Altria Investor Day
Experience Altria November
Slide 2: For Investor Purposes Only
For Investor Purposes Only
Slide 3: Safe Harbor Statement
Safe Harbor Statement Statements, including earnings guidance, in this presentation that are not reported financial results or other historical information are “forward-looking statements” within the meaning of Private Securities Litigation Reform Act of 1995. Such forward-looking statements are bas
Slide 4: For Investor Purposes Only
For Investor Purposes Only
Slide 5: Combustibles Non-Combustibles
Combustibles Non-Combustibles For Investor Purposes Only
Slide 6: Tobacco product brands
Viddleton's Pire-ToBacco Cicars PON WARNING: This product is nota safe alternative For Investor Purposes Only
Slide 7: For Investor Purposes Only
For Investor Purposes Only
Slide 8: For Investor Purposes Only
SATISFACTION SINCE 1822 For,Investor PurposestOnly - iz —_ -
Slide 9: For Investor Purposes Only
For Investor Purposes Only
Slide 10: AGDC covers over 240,000 retail locations
AGDC covers over 240,000 retail locations For Investor Purposes Only
Slide 11: AGDC's Competitive Advantage
AGDC’s Competitive Advantage Broad distribution Speed to market Cost-effectiveness Quality of execution 90% distribution achieved by Week 3 For Investor Purposes Only
Slide 12: The Most Profitable U.S. Tobacco Business
The Most Profitable U.S. Tobacco Business OCI* Margins* $8.0 Billion 48% $1.2 Billion 64% * 2016 Adjusted Operating Companies Income (OCI) and Adjusted OCI Margins * For reconciliations of non-GAAP to GAAP measures visit altria.com. Source: Altria company reports For Investor Purposes Only
Slide 13: For Investor Purposes Only
Note: Third party trademarks are the property of their respective owners and are included for informational purposes only. For Investor Purposes Only
Slide 14: Consistent Financial Performance
Consistent Financial Performance Adjusted Diluted EPS* Dividend Per Share Growth +8.0% +8.6% CAGR CAGR $3.03 $2.64 +8.2% $1.51 $1.16* $2.44 2007 2016 2007 2017 * For reconciliations of non-GAAP to GAAP measures visit altria.com. Note: Dividend is based on the current annualized dividend (Last increa
Slide 15: Shareholder Returns
Shareholder Returns Cash Returns (in Billions) Total Shareholder Return $28.4 20.5% Share Repurchase 23.1% 34.5% Dividend 28.6% 11.8% 27.7% 2011-2016 2011 2012 2013 2014 2015 2016 Note: Total shareholder return is simple price appreciation plus the reinvestment of the dividend as of the ex-dividend
Slide 16: For Investor Purposes Only
For Investor Purposes Only
Slide 17: For Investor Purposes Only
For trivéstor Purposes Only
Slide 18: For Investor Purposes Only
For Investor Purposes Only
Slide 19: Tobacco Control Act
Tobacco Control Act For Investor Purposes Only
Slide 20: FDA
U.S. Department of Health and Human Services Food and Drug Administration
Slide 21: For Investor Purposes Only
For Investor Purposes Only
Slide 22: For Investor Purposes Only
For Investor Purposes Only
Slide 23: For Investor Purposes Only
For Investor Purposes Only
Slide 24: We aspire to be the U.S. leader in reduced-risk products
We aspire to be the U.S. leader in authorized, non-combustible, reduced-risk products. For Investor Purposes Only
Slide 25: Effective Advocacy
Effective Advocacy “…we must acknowledge that there’s a continuum of risk for nicotine delivery. That continuum ranges from combustible cigarettes at one end, to medicinal nicotine products at the other.” “…nicotine in cigarettes is not directly responsible for cancer, the lung disease, the heart di
Slide 26: Continuum of Risk
Continuum of Risk (submitted to FDA in 2009) Conventional Cigarettes Smokeless Tobacco Products Modified Risk Cigarettes Medicinal Nicotine Decreasing number of cigarettes/day Smoking Cessation Most Harmful Least Harmful Risk Continuum of Tobacco Products (Directional only – not to scale; adapted fr
Slide 27: Engagement
Engagement October 27, 2017 June 14, 2017 Where are the Large Science and evidence Domestic and to demonstrate International Tobacco potential harm Companies Headed? reduction: electronic cigarettes Joe Murillo Willie McKinney Note: Third party trademarks are the property of their respective owners
Slide 28: Highest Potential Product Platforms
Highest Potential Product Platforms Smokeless/Oral Tobacco E-Vapor Heated Tobacco Note: Third party trademarks are the property of their respective owners and are included for informational purposes only. For Investor Purposes Only
Slide 29: For Investor Purposes Only
For Investor Purposes Only
Slide 30: Plan to file MRTPA on Copenhagen Snuff in 1Q 2018
Plan to file MRTPA on Copenhagen Snuff in 1Q 2018 For Investor Purposes Only
Slide 31: Oral Tobacco & Nicotine Products
Oral Tobacco & Nicotine Products VERVE® VERVE® Discs Chews For Investor Purposes Only
Slide 32: Plan to file PMTA for Verve Discs and Chews in 2018
Plan to file PMTA for Verve Discs and Chews in 2018 For Investor Purposes Only
Slide 33: Smokeless Retail Share History
Smokeless Retail Share History Copenhagen and Skoal combined -13.1pp +4.9pp 59.5% 51.3% 46.4% 2004 2009 2016 Purchased January 2009 Source: CMI For Investor Purposes Only
Slide 34: For Investor Purposes Only
For Investor Purposes Only
Slide 35: E-vapor and Harm Reduction
E-vapor and Harm Reduction Royal College of Physicians: Encouraging UK smokers to migrate to e-vapor Estimates that e-vapor is ~95% less harmful Note: Third party trademarks are the property of their respective owners and are included for informational purposes only. Source: “Nicotine without
Slide 36: Plan to file PMTAs in 2018 with MRTPAs to follow
Plan to file PMTAs in 2018 with MRTPAs to follow For Investor Purposes Only
Slide 37: For Investor Purposes Only
For Investor Purposes Only Note: Third party trademarks are the property of their respective owners and are included for informational purposes only.
Slide 38: For Investor Purposes Only
For Investor Purposes Only
Slide 39: Unleash Our Potential
Unleash Our Potential Simplification Diversity Innovation & Inclusion Be clear Be curious Be open For Investor Purposes Only
Slide 40: Our Financial Engine
Our Financial Engine Average annual free cash flow of over $4.5 billion* Strong balance sheet * 3-year average (2014 through 2016). For reconciliations of non-GAAP to GAAP measures visit altria.com. Source: Altria company reports For Investor Purposes Only
Slide 41: For Investor Purposes Only
For Investor Purposes Only
Slide 42: FDA commissioner quote on innovation
“We must recognize the potential for innovation to lead to less harmful products, which, under FDA’s oversight, could be part of a solution.” — Scott Gottlieb, July 28, 2017 For Investor Purposes Only
Slide 43: Continued Leadership
Continued Leadership Building a portfolio of leading platforms of non-combustible, nicotine-containing products For Investor Purposes Only
Slide 44: Continued Leadership
Continued Leadership Building a portfolio of leading platforms of non-combustible, nicotine-containing products Highly capable organization For Investor Purposes Only
Slide 45: Continued Leadership
Continued Leadership Building a portfolio of leading platforms of non-combustible, nicotine-containing products Highly capable organization Extraordinary financial engine For Investor Purposes Only
Slide 46: We aspire to be the U.S. leader in reduced-risk products
We aspire to be the U.S. leader in authorized, non-combustible, reduced-risk products. For Investor Purposes Only
Slide 47: Leading in Harm Reduction
Leading in Harm Reduction
Slide 48: Interest in Reduced-Risk Tobacco Products
Interest in Reduced-Risk Tobacco Products (among established smokers) “If a tobacco product made a claim that it was less harmful to health than other tobacco products, how likely would you be to use that product?”1 very unlikely 27% somewhat unlikely 19% somewhat likely 37% ~55% (~22MM AS) very lik
Slide 49: Tobacco Product Usage by Category
Tobacco Product Usage by Category Exclusive Combustible Exclusive Non-combustible / Dual Usage Exclusive Non Combustible 83% Dual Usage 72% 14% 12% 14% 5% 2007 2017 2007 2017 Sources: 2007 & 2012 - NSDUH; 2017 - ATCT 12MM P30D September 2016 – August 2017 For Investor Purposes Only
Slide 50: Misperceptions of Risk
Misperceptions of Risk % of adult tobacco consumers* thinking each product is as harmful or more harmful than cigarettes 88% 45% Smokeless Tobacco E-Vapor * Every Day or Some Days Adult Tobacco Users Source: ALCS analysis of PATH Wave 1 (Sept ’13 – Dec ’14) Adult Public Use File. In PATH, “Don’t Kno
Slide 51: FDA commissioner quote on innovation
“We must recognize the potential for innovation to lead to less harmful products, which, under FDA’s oversight, could be part of a solution. While there’s still much research to be done on these products and the risks that they may pose, they may also present benefits that we must consider.” — Scott
Slide 52: We aspire to be the U.S. leader in reduced-risk products
We aspire to be the U.S. leader in authorized, non-combustible, reduced-risk products. For Investor Purposes Only
Slide 53: Adult Tobacco Consumer Expectations
Adult Tobacco Consumer Expectations Superior sensory experiences and nicotine satisfaction Reduced health risks and accurate risk information Ability to avoid social frictions For Investor Purposes Only
Slide 54: Planned PMTA/MRTPA Submissions
Planned PMTA/MRTPA Submissions 2017 2018 2019 2020 2021 2022 Cope Snuff MRTPA VERVE PMTA (4 ) Product A MRTPA Smokeless / Product B PMTA Oral Tobacco Product B MRTPA Product C PMTA Product C MRTPA MarkTen PMTA (14) MarkTen MRTPA (2) Product D PMTA E-Vapor Product E PMTA Product F PMTA Product G PMTA
Slide 55: Harm Reduction Framework
Harm Reduction Framework Constituent Reduction Risk Reduction Individual Harm Reduction Population Risks & Chemical & Toxicology Studies in Perception & Product Design Benefits to Physical & Risk Adult Human Behavior & Control Health of the Characterization Assessment Subjects Assessment Population
Slide 56: Research organization: employees and PhDs
400+ employees 195 PhDs and 75 engineers 16 countries, 32 languages For Investor Purposes Only
Slide 57: CRT Research
CRT Research 600+ Patents 200+ Publications 200+ Presentations For Investor Purposes Only
Slide 58: For Investor Purposes Only
For Investor Purposes Only
Slide 59: For Investor Purposes Only
For Investor Purposes Only
Slide 60: Center for Research and Technology
Center for Research and Technology
Slide 61: Smokeless Tobacco & Oral Nicotine-Containing Products
Smokeless Tobacco & Oral Nicotine-Containing Products
Slide 62: For Investor Purposes Only
For Investor Purposes Only
Slide 63: USSTC Acquisition Rationale
USSTC Acquisition Rationale Growing and highly profitable business Adult smokers migrating to smokeless tobacco Harm reduction opportunity For Investor Purposes Only
Slide 64: Pre-Acquisition Share Decline
Pre-Acquisition Share Decline Copenhagen and Skoal combined 59.5% -13.1pp 46.4% 2004 2009 For Investor Purposes Only
Slide 65: Copenhagen Growth
Copenhagen Growth Retail Share +11.9pp 33.9% 22.0% 2009 Q3 2017 Source: Altria company reports; IRI/MSAi For Investor Purposes Only
Slide 66: For Investor Purposes Only
/ of 161MM FINE COT WARMINGRTNs product
Slide 67: Growth Since USSTC Acquisition
Growth Since USSTC Acquisition Adjusted OCI* (in Billions) ~95% $1.2 $0.6 2009 2016 *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: Altria company reports For Investor Purposes Only
Slide 68: Smokeless Segment Margin Growth
Smokeless Segment Margin Growth Adjusted OCI Margins** 67.7% 64.4% 49.5% 2009 2016 YTD* 2017 * YTD through Q3 2017 ** For reconciliation of non-GAAP to GAAP measures visit altria.com Source: Altria company reports For Investor Purposes Only
Slide 69: For Investor Purposes Only
For Investor Purposes Only
Slide 70: For Investor Purposes Only
For Investor Purposes Only
Slide 71: USSTC's Goal
USSTC’s Goal Be the leading oral tobacco and oral nicotine products company with products that appeal to a diverse set of adult tobacco consumers and have the potential to reduce harm. For Investor Purposes Only
Slide 72: Plan to file MRTPA on Copenhagen Snuff in 1Q 2018
Plan to file MRTPA on Copenhagen Snuff in 1Q 2018 For Investor Purposes Only
Slide 73: MRTPA Data Sources
MRTPA Data Sources National Health Interview Survey National Longitudinal Mortality Study (NHIS) (NLMS) 1987 – 2005* 1993 – 2005* * Intermittent survey years Note: Third party trademarks are the property of their respective owners and are included for informational purposes only. For Investor Purpos
Slide 74: Smokeless Tobacco Harm Reduction Potential
Smokeless Tobacco Harm Reduction Potential Mortality Risk vs Cigarette Smoking* 100% 75% > 96% > 99% > 90% > 97% > 90% > 88% 50% reduction reduction reduction reduction reduction reduction 25% 0% All Causes Chronic Lower Heart Disease Lung Cancer All Digestive Oral Cancer** Respiratory Disease Cance
Slide 75: Copenhagen Snuff MRTPA Rationale
Copenhagen Snuff MRTPA Rationale Extensive epidemiological evidence Addresses current misperceptions of risk Claim supported by science and understood by adult tobacco consumers MRTPA will demonstrate net population benefit For Investor Purposes Only
Slide 76: For Investor Purposes Only
For Investor Purposes Only
Slide 77: For Investor Purposes Only
For Investor Purposes Only
Slide 78: Adult Tobacco Consumer Demographics
Adult Tobacco Consumer Demographics Cigarettes MST Snus 3.9% 6.8% 45.5% 96.1% 93.2% 54.5% Cigarettes MST Snus Male Female Source: ATCT 12MM as of 5/17 among ATCs21+ For Investor Purposes Only
Slide 79: For Investor Purposes Only
For Investor Purposes Only
Slide 80: VERVE Portfolio
VERVE Portfolio VERVE® VERVE® VERVE® VERVE® Discs Chews Chewable Melts Dissolvables * Not all products are currently sold. For Investor Purposes Only
Slide 81: 2018 VERVE Plans
2018 VERVE Plans Expand Distribution of VERVE Discs Retail e-commerce File PMTA Product Development: Oral Tobacco & Oral Nicotine Product Portfolio Note: Third party trademarks are the property of their respective owners and are included for informational purposes only. For Investor Purpos
Slide 82: For Investor Purposes Only
For Investor Purposes Only
Slide 83: E-Vapor
E-Vapor
Slide 84: For Investor Purposes Only
For Investor Purposes Only
Slide 85: E-Vapor Category Growth
E-Vapor Category Growth (Estimated U.S. Consumer Sales, $ in Billions) ~$2.5 ~$2.5 ~$2.0 ~$1.3 2013 2014 2015 2016 Source: ALCS estimates For Investor Purposes Only
Slide 86: Significant Long-Term Opportunity
Significant Long-Term Opportunity Adult Past 30-Day Users (in Millions) Large Mass Cigars ~4 E-vapor ~10 MST ~6 E-vapor Source: ALCS estimates For Investor Purposes Only
Slide 87: Nu Mark's Goal
Nu Mark’s Goal Lead the U.S. e-vapor category through a portfolio of superior reduced-risk products that adult smokers and vapers choose over cigarettes. For Investor Purposes Only
Slide 88: Range of Adult Smoker & Vaper Preferences
Range of Adult Smoker & Vaper Preferences More Like Less Like Form a Cigarette a Cigarette Traditional Flavor Flavor Tobacco Forward Low Nicotine Level High Less Vapor Volume More For Investor Purposes Only
Slide 89: Adult Cig-alike Consumer Expectations
Adult Cig-alike Consumer Expectations Experience resembles cigarette smoking Flavor and nicotine satisfaction No secondhand smoke, smoke odor or ash Flavor variety For Investor Purposes Only
Slide 90: For Investor Purposes Only
For Investor Purposes Only
Slide 91: MarkTen products
For Investor Purposes Only “MAR MARK > = M CLASSIC ) TE MARK? = CLASSIC Sore MARKIEN § MARKTEN™ : SMOOTH CLASSIC MARKT EN SMOOTH MENTHOL qe vapor pevice CHARGER — ~ VAPOR DEVICE USB CHARGER
Slide 92: MarkTen e-vapor
MARKTEN ; | = | il . - ; O rF ~ ’ 7 Be OM, e-vapor aa Mee NOV AVAILABLE
Slide 93: Nicotine Delivery PK Studies
Nicotine Delivery 14 PK Studies* Baseline-Adjusted Plasma Nicotine 12 10 Concentration(ng/mL) 8 6 Cigarettes 4 MarkTen Bold 2 0 0 20 40 60 80 100 120 140 160 180 TIME (minutes) * Ad libitum use Source: ALCS For Investor Purposes Only
Slide 94: MarkTen Retail Share
MarkTen Retail Share Q3 2017 ~27% ~13.5% National Major Chain Accounts Selling* * Readable chains selling MarkTen for the full third quarter of 2017 Source: Altria company reports; IRI/MSAi For Investor Purposes Only
Slide 95: Device and Cartridge Sales Q3 2017
Device and Cartridge Sales Q3 2017 Cartridge Device 11% 89% 1 Source: ALCS For Investor Purposes Only
Slide 96: E-Commerce
E-Commerce For Investor Purposes Only
Slide 97: MarkTen 2017 Campaign
MarkTen 2017 Campaign For Investor Purposes Only
Slide 98: Plan to file PMTAs in 2018 with MRTPAs to follow
Plan to file PMTAs in 2018 with MRTPAs to follow For Investor Purposes Only
Slide 99: MarkTen Harm Reduction Potential
MarkTen Harm Reduction Potential Exposure vs Reference Cigarette 100% 3R4F Reference cigarette 75% > 99% 50% reduction 25% 0% Carcinogens (13 chemicals)* *ALCS Internal Report LIQUID 16241 – MarkTen XL Classic 3.5% nicotine, Official Stability Study –PMT1,3,6 and 9 months. Average of 140 intense puf
Slide 100: MarkTen Smooth Classic
| MARKTEN’ SMOOTH CLASSIC For Investor Purposes Only
Slide 101: Adult Closed Tank Consumer Expectations
Adult Closed Tank Consumer Expectations Slightly different product experience Flavor and nicotine satisfaction No visual cues or social frictions of cigarettes Simplicity For Investor Purposes Only
Slide 102: APEX by MarkTen
APEX by MarkTen For Investor Purposes Only
Slide 103: VIM by MarkTen & MarkTen Elite
VIM by MarkTen & MarkTen Elite For Investor Purposes Only
Slide 104: CYNC Acquisition
CYNC Acquisition For Investor Purposes Only
Slide 105: Adult Open System Consumer Expectations
Adult Open System Consumer Expectations Flavor variety Vapor fullness Stylish and customizable products For Investor Purposes Only
Slide 106: Avail Vapor Investment
Avail Vapor Investment For Investor Purposes Only
Slide 107: Nu Mark, an Altria Innovation Company
Nul An Altria Innovation Company
Slide 108: Heated Tobacco Products
Heated Tobacco Products
Slide 109: IQOS
lQOS THIS CHANGES EVERYTHING
Slide 110: IQOS Proposition
IQOS Proposition Alternative to Conventional Cigarettes Great Sensory Reduced Harm Reduction Experience & Social Friction Potential Nicotine Satisfaction For Investor Purposes Only
Slide 111: IQOS Harm Reduction Potential
IQOS Harm Reduction Potential Reference cigarette Represents average yield reductions of an investigational variant of IQOS compared to the 3R4F reference cigarette, calculated as an average of the reductions of individual HPHCs, which could be reliably quantified in the study. Aerosol was collected
Slide 112: IQOS Goal
IQOS Goal Maximize the number of U.S. adult smokers who convert to IQOS. For Investor Purposes Only
Slide 113: For Investor Purposes Only
For Investor Purposes Only
Slide 114: IQOS U.S. Product Portfolio
IQOS U.S. Product Portfolio Original Smooth Menthol Fresh Menthol IQOS Tobacco Heating System Marlboro HeatSticks For Investor Purposes Only
Slide 115: IQOS Regulatory Review Timeline
IQOS Regulatory Review Timeline Filed: Begin 12 Months Submitted Scientific Review After Filing MRTPA DEC’16 MAY’17 Q4’16 Q1’17 Q2’17 Q3’17 Q4’17 Q1’18 Q2’18 Q3’18 PMTA MAR’17 AUG’17 FEB’18 Submitted Filed: Begin 180 Days Scientific After Review Filing For Investor Purposes Only
Slide 116: For Investor Purposes Only
For Investor Purposes Only
Slide 117: Lead Market Criteria
Lead Market Criteria Size of adult smoker population E-vapor rejecters and competitive adult smokers Constructive legislative and regulatory environment Strong retail partnerships For Investor Purposes Only
Slide 118: For Investor Purposes Only
For Investor Purposes Only Note: Third party trademarks are the property of their respective owners and are included for informational purposes only.
Slide 119: IQOS marketing
For Inve: EW Way TO ENJOY TOBACCO Y f aN s EVERYTHING® getlQOS.com | ses Only
Slide 120: For Investor Purposes Only
For Investor Purposes Only
Slide 121: IQOS Sales Teams
IQOS Sales Teams For Investor Purposes Only
Slide 122: Consumer Engagement & Customer Care
Consumer Engagement & Customer Care For Investor Purposes Only
Slide 123: Digital Engagement
Digital Engagement Consumer Engagement App IQOS Website For Investor Purposes Only
Slide 124: Lead Market Key Questions
Lead Market Key Questions How do U.S. adult smokers approach IQOS and switch to it? How does IQOS interact with the tobacco category? What is the impact of Marlboro branding? For Investor Purposes Only
Slide 125: IQOS Financial Drivers
IQOS Financial Drivers Pricing dynamics Volume Competitive sourcing For Investor Purposes Only
Slide 126: For Investor Purposes Only
For Investor Purposes Only
Slide 127: For Investor Purposes Only
For Investor Purposes Only
Slide 128: Smokeable Products Segment
Smokeable Products Segment
Slide 129: For Investor Purposes Only
For Investor Purposes Only
Slide 130: Nat Sherman and Middleton, Altria companies
NAT SHERMAN fo4in Widdlaton an Altria Company an Altria Company
Slide 131: Three-Year Smokeable Products Segment Performance
Three-Year Smokeable Products Segment Performance Adjusted OCI* (in Billions) CAGR +7.6% $8.0 $6.4 2013 2016 *For reconciliation of non-GAAP to GAAP measures visit altria.com; CAGR calculated on actual figures Source: Altria company reports For Investor Purposes Only
Slide 132: Maximize income while maintaining momentum on Marlboro and Black & Mild
Maximize income while maintaining momentum on Marlboro and Black & Mild over time For Investor Purposes Only
Slide 133: Marlboro's Brand Metrics
Marlboro’s Brand Metrics Brand equity Demographics Retail share Profitability For Investor Purposes Only
Slide 134: Consumer Preferences – Flavor
Consumer Preferences – Flavor Cigarettes – Menthol Segment +1.9pp 34.4% 32.5% 2013 YTD* 2017 * YTD though September 30 Source: IRI/MSAi Info Scan Cigarette 2015-Blended; IRI/MSAi Info Scan 2017 – Blended as of 6/11/17 For Investor Purposes Only
Slide 135: Nat Sherman tobacco and water
TOBACCO. WATER. SIMPLY NAT SHERMAN 7 VOBACCO INGREDIENTS; TOB, ACCO AND WATER For Mvastowburnosss Only.
Slide 136: For Investor Purposes Only
For Investor Purposes Only
Slide 137: For Investor Purposes Only
For Investor Purposes Only
Slide 138: Unmatched Brand Equity
Unmatched Brand Equity 70 Marlboro’s equity score is at least 14 points higher than the leading competitive brands. 30 Marlboro Camel Newport Source: 2016 TNS Brand Equity Study (Age Group: 21 – 54), January 2017 For Investor Purposes Only
Slide 139: Marlboro Adult Smoker 21–29 Share
Marlboro Adult Smoker 21 – 29 Share 50 0 Marlboro Newport Camel Source: ALCS CATTS – 6MM ending September 2017 For Investor Purposes Only
Slide 140: Smokeable Products Segment Performance
Smokeable Products Segment Performance Adjusted OCI** (in Billions) +7.4% $6.6 $6.1 YTD* 2016 YTD* 2017 * YTD through September 30. ** For reconciliations of non-GAAP to GAAP measures visit altria.com. Source: Altria company reports For Investor Purposes Only
Slide 141: Marlboro Retail Share Performance
Marlboro Retail Share Performance -0.3pp California SET increase 43.7% Elevated competitive activity 43.4% Promotional spend Product launches YTD* 2016 YTD* 2017 * YTD through September 30. Source: IRI/MSAi For Investor Purposes Only
Slide 142: Marlboro's Share Performance
Marlboro’s Share Performance +1.7pp -0.3pp 43.7% 43.4% 42.0% 2011 2016 YTD* 2017 * YTD through September 30. Source: Altria company reports For Investor Purposes Only
Slide 143: Reallocating Resources
Reallocating Resources Trade Programs Promotions For Investor Purposes Only
Slide 144: Marlboro Mobile Coupon Redemption
Marlboro Mobile Coupon Redemption (in Millions) 10 +40% 0 YTD 2016 YTD 2017 Note: YTD through 10/02/17; Connections defined as the same of logins, email opens and SMS entries/opt-ins. Source: ALCS For Investor Purposes Only
Slide 145: Marlboro.com Platform Enhancements
Marlboro.com Platform Enhancements Intuitive Design Personalization Value Relevant Content Efficient Value Ease of Navigation Display Delivery For Investor Purposes Only
Slide 146: For Investor Purposes Only
NE \ ; Cc (- ’ For Investor Purposes’
Slide 147: For Investor Purposes Only
For Investor Purposes Only
Slide 148: For Investor Purposes Only
For Investor Purposes Only
Slide 149: Refined. Smooth. Classic.
REFINED. SMOOTH. CLASSIC. tor Purposes Only
Slide 150: For Investor Purposes Only
For Investor Purposes Only
Slide 151: The Menthol with Taste
THE MENTHOL WITH TASTE REFINED. SMOOTH. CLASSIC.
Slide 152: For Investor Purposes Only
For Investor Purposes Only
Slide 153: Nat Sherman, an Altria Company
NAT SHERMAN an Altria Company
Slide 154: For Investor Purposes Only
For Investor Purposes Only
Slide 155: Super Premium Opportunity
Super Premium Opportunity For Investor Purposes Only
Slide 156: Nat's Lead Market - Colorado
Nat’s Lead Market - Colorado For Investor Purposes Only
Slide 157: For Investor Purposes Only
For Investor Purposes Only
Slide 158: Middleton, an Altria Company
Vddletin LG an Altria Company f For Investor Purposes Only \ i
Slide 159: For Investor Purposes Only
For Investor Purposes Only
Slide 160: John Middleton Return on Invested Capital
John Middleton Return on Invested Capital WACC 2014 2015 2016 Source: ALCS For Investor Purposes Only
Slide 161: FDA Announcement
FDA Announcement
Slide 162: FDA commissioner quote on innovation
“We must recognize the potential for innovation to lead to less harmful products, which, under FDA’s oversight, could be part of a solution. While there’s still much research to be done on these products and the risks that they may pose, they may also present benefits that we must consider.” — Scott
Slide 163: Substantial Equivalence Process
Substantial Equivalence Process Information in SE reports Reconsider current process Current process continues to be onerous and expensive Note: Third party trademarks are the property of their respective owners and are included for informational purposes only. For Investor Purposes Only
Slide 164: Potential Nicotine Standard
Potential Nicotine Standard Rulemaking process Requirements to satisfy Note: Third party trademarks are the property of their respective owners and are included for informational purposes only. For Investor Purposes Only
Slide 165: Rulemaking Process
Rulemaking Process Initiating events to consider Optional: Advance Notice of Determination whether a rule rulemaking Proposed Rulemaking is needed Office of Management & Preparation of proposed rule Optional: TPSAC Review Budget (OMB) Review (Timing undefined) Public comments on Publication of propo
Slide 166: Nicotine Standard Requirements
Nicotine Standard Requirements Perform as intended Technically achievable Cannot be reduced to zero Unintended consequences For Investor Purposes Only
Slide 167: Nicotine Standard Practical Considerations
Nicotine Standard Practical Considerations Measurement and implementation Compensation Phase-in period Existing marketplace of FDA-approved reduced risk products “Our approach to nicotine must be accompanied by a firm foundation of rules and standards for newly-regulated products. To be succ
Slide 168: For Investor Purposes Only
For Investor Purposes Only
Slide 169: For Investor Purposes Only
For Investor Purposes Only Note: Third party trademarks are the property of their respective owners and are included for informational purposes only.
Slide 170: For Investor Purposes Only
For Investor Purposes Only
Slide 171: Performance Track Record
Performance Track Record
Slide 172: For Investor Purposes Only
For Investor Purposes Only
Slide 173: Long-Term Financial Goals
Long-Term Financial Goals Grow adjusted diluted EPS at average annual rate of 7% to 9% Maintain a dividend payout ratio target of approximately 80% of adjusted diluted EPS For Investor Purposes Only
Slide 174: Altria's Strategies
Altria’s Strategies Maximize income from core tobacco businesses over the long term Grow new income streams with innovative tobacco products Manage diverse income streams and strong balance sheet to deliver consistent financial performance For Investor Purposes Only
Slide 175: Altria's Competitive Advantages
Altria’s Competitive Advantages For Investor Purposes Only
Slide 176: For Investor Purposes Only
For Investor Purposes Only
Slide 177: Smokeable Products Segment Performance
Smokeable Products Segment Performance Net Revenue per 1,000* Adjusted OCI Margins* +4.6% +6.0pp CAGR $133.54 $116.60 48.2% 42.2% 2013 2016 2013 2016 *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: ALCS Finance; Altria company reports For Investor Purposes Only
Slide 178: Smokeless Products Segment Performance
Smokeless Products Segment Performance Adjusted OCI* Margins Adjusted OCI* (in Billions) +6.3% +2.1pp CAGR $1.2 62.3% 64.4% $1.0 2013 2016 2013 2016 *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: ALCS Finance For Investor Purposes Only
Slide 179: Productivity and Reinvestment
Productivity and Reinvestment Reinvestments: Marlboro architecture ~$2.3 billion of cost savings Digital marketing platform (2007- Q3 2017) Harm reduction efforts Regulatory capabilities Source: ALCS Finance For Investor Purposes Only
Slide 180: Future Investments
Future Investments For Investor Purposes Only
Slide 181: Financial Firepower & Flexibility
Financial Firepower & Flexibility • Low leverage: Debt-to-EBITDA of 1.3 to 1 • Enhanced by ~$1 billion of annual excess cash from operations after dividends Note: Third party trademarks are the property of their respective owners and are included for informational purposes only. Source: Altria compa
Slide 182: For Investor Purposes Only
TA ogee | seen TH 4 i For Investor Purposes Only
Slide 183: 2017 Guidance
2017 Guidance We reaffirm our guidance to deliver 2017 adjusted diluted EPS in a range of $3.26 to $3.32, representing a growth rate of 7.5% to 9.5% from our adjusted diluted EPS base of $3.03* in 2016. * For reconciliation of non-GAAP to GAAP measures visit altria.com Source: Altria company repor
Slide 184: For Investor Purposes Only
For Investor Purposes Only
Slide 185: Slide 185
Slide 186: Regulation G Disclosure
Regulation G Disclosure For reconciliations and further explanations of non-GAAP financial measures, visit: altria.com