Altria Group, Inc. · NYSE:MO
Altria — 2017 CAGNY Conference
100 slides from Altria's conference presentation, Feb 22, 2017
Slide 1: 2017 CAGNY Investor Presentation
2017 CAGNY Investor Presentation February 22, 2017 Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 1
Slide 2: Management Team
Management Team Howard Willard Billy Gifford Chief Operating Officer Chief Financial Officer Jim Dillard Murray Garnick SVP, Research, Development, Deputy General Counsel and Regulatory Affairs Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 2
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
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This space is blank because brand images which appeared in the original presentation have been removed. For Investor Relations Purposes Only - CAGNY Conference, Feb. 17, 2016
Slide 5: 2016 Adjusted Diluted EPS Performance
2016 Adjusted Diluted EPS* Performance +8.2% $3.03 $2.80 2015 2016 *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: Altria company reports Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 5
Slide 6: Growing Our Dividend
Growing Our Dividend +8.0% $2.44 $2.26 50th increase in the last 47 years Aug-15 Aug-16 Note: Dividend is based on the current annualized dividend (Last increased August 2016). Dividends are subject to the discretion of the Board. Source: Altria company reports Altria Client Services l Investor Rela
Slide 7: 2016 Total Shareholder Return
2016 Total Shareholder Return 20.5% 12.0% 8.8% Altria S&P 500 S&P Food, Beverage & Tobacco Note: Total shareholder return is simple price appreciation plus the reinvestment of the dividend as of the ex-dividend date Source: Bloomberg, 12/31/2015 to 12/30/2016 Altria Client Services l Investor Relati
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Slide 9: Long-Term Financial Goals
Long-Term Financial Goals Grow adjusted diluted EPS at average annual rate of 7% to 9% Maintain a target dividend payout ratio of approximately 80% of adjusted diluted EPS Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 9
Slide 10: 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 Altria Client Services l Investor Relations l 2-22-17 l FINA
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Slide 12: 2016 U.S. Dollar Sales in Major Retail Channels
2016 U.S. Dollar Sales in Major Retail Channels $ in Billions $83 $71 $34 $28 $22 Tobacco Cigarettes Beer Carbonated Salty Beverages Snacks Note: Total US MOC is comprised of Food, Drug, Mass Merchandisers, Club, Dollar, DeCA, Convenience and Walmart classes of trade with ACV of $2MM+ excluding Phar
Slide 13: 2016 U.S. Dollar Sales in Major Retail Channels
2016 U.S. Dollar Sales in Major Retail Channels $ in Billions $83 $71 $34 $34 $28 $22 Tobacco Cigarettes Beer Marlboro Marlboro Carbonated Salty Beverages Snacks Note: Total US MOC is comprised of Food, Drug, Mass Merchandisers, Club, Dollar, DeCA, Convenience and Walmart classes of trade with ACV o
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Slide 15: Smokeable Products Segment Adjusted OCI
Smokeable Products Segment Adjusted OCI* $ in Billions +7.6% CAGR $8.0 $6.4 2013 2016 *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: Altria company reports Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 15
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Slide 17: Marlboro Brand Leadership Across the U.S.
Marlboro Brand Leadership Across the U.S. Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 17
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Slide 19: Smokeless Products Segment Adjusted OCI
Smokeless Products Segment Adjusted OCI* $ in Billions +6.3% CAGR $1.2 $1.0 2013 2016 *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: Altria company reports Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 19
Slide 20: Copenhagen and Skoal Combined Retail Share
Copenhagen and Skoal Combined Retail Share +1.5pp 52.2% 50.7% 2013 2016 Source: IRI InfoScan Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 20
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Slide 22: 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 Altria Client Services l Investor Relations l 2-22-17 l FINA
Slide 23: Innovative Products
Innovative Products This space is blank because brand images which appeared in the original presentation have been removed. Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 23
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Slide 25: Continuum of Risk
Continuum of Risk Conventional Cigarettes Smokeless Tobacco Products Medicinal Nicotine Smoking Cessation Most Harmful Least Harmful Risk continuum of tobacco products (directional only – not to scale; adapted from Hatsukami et al.) Source: D.K. Hatsukami et al., Developing the science base for redu
Slide 26: Altria's Role in Harm Reduction
Altria’s Role in Harm Reduction Understand adult tobacco consumer preferences Develop products that meet them Seek FDA authorization to market and communicate appropriately about them Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 26
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Slide 28: Heated Tobacco
Heated Tobacco Exclusive license to sell IQOS system in U.S. PM USA’s dedicated team is building its commercialization plan Note: Third party trademarks are the property of their respective owners and are included for informational purposes only. Altria Client Services l Investor Relations l 2-2
Slide 29: IQOS Retail Engagement – Japan (PMI)
IQOS Retail Engagement – Japan (PMI) This space is blank because brand images which appeared in the original presentation have been removed. Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 29
Slide 30: IQOS Retail Engagement – Italy (PMI)
IQOS Retail Engagement – Italy (PMI) This space is blank because brand images which appeared in the original presentation have been removed. Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 30
Slide 31: PM USA Commercialization of IQOS
PM USA Commercialization of IQOS Develop robust marketing plans for a U.S. lead market - Integrated engagement model to educate at retail and in digital Create opportunities for guided trial using flexible retail concepts Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Con
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Slide 33: Regulatory Timing
Regulatory Timing PMI submitted MRTP application in December 2016 Expects to submit PMTA this quarter Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only. Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly
Slide 34: Regulatory Landscape
Regulatory Landscape • Substantial equivalence • Applications for newly-deemed products • Fostering innovation Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 34
Slide 35: Substantial Equivalence
Substantial Equivalence Comprehensive submissions to FDA FDA’s review process requiring more resources Confident in data and information provided Note: Third party trademarks are the property of their respective owners and are included for informational purposes only. Altria Client Services l
Slide 36: PMTA Cost Estimates (per application)
PMTA Cost Estimates (per application) ~$2.5M to $5.0M ~ $117,000 to $466,000 Note: Third party trademarks are the property of their respective owners and are included for informational purposes only. Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 36
Slide 37: Fostering Innovation
Fostering Innovation Advocating to move the predicate date, which would: - Provide multiple product pathways - Significantly reduce regulatory burden and costs Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 37
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Slide 39: Smokeable Products Segment Strategy
Smokeable Products Segment Strategy Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 39
Slide 40: Competitive Landscape
Competitive Landscape Note: Third party trademarks are the property of their respective owners and are included for informational purposes only. Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 40
Slide 41: Smokeable Products Segment Performance
Smokeable Products Segment Performance Adjusted OCI* PM USA’s Retail Share in Billions +5.3% +0.1pp $10 65% $7.6 $8.0 51.3% 51.4% $0 0% 2015 2016 2015 2016 *For reconciliation of non-GAAP to GAAP measures visit altria.com; CAGR calculated on actual figures Source: Altria company reports Altria Clien
Slide 42: Marlboro Long-Term Retail Share Growth
Marlboro Long-Term Retail Share Growth 44.0% 1954 1962 1970 1978 1986 1994 2002 2010 2016 Source: Maxwell; MSAi Shipments; IRI/Capstone – Total Retail Panel; IRP IRI Group/Capstone Projected Retail Panel; IRI/MSAi Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l
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Slide 44: Unmatched Brand Equity
Unmatched Brand Equity Equity among Adult Smokers 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 Altria Client Services l Investor Relations l 2-22-17 l FINA
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Slide 46: Marlboro Adult Smoker 21 – 29 Share
Marlboro Adult Smoker 21 – 29 Share 50 0 Marlboro Newport Camel Source: ALCS CATTS – 6MM ending September 2016 Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 46
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Slide 48: Marlboro's Growing Menthol Retail Share
Marlboro’s Growing Menthol Retail Share +0.8pp 10% 7.6% 6.8% 0% 2013 2016 Source: IRI/MSAi Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 48
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Slide 50: Retail Coverage
Retail Coverage ~240k Retail Stores ~90% Volume Coverage Source: ALCS Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 50
Slide 51: Digital Engagement
Digital Engagement This space is blank because brand images which appeared in the original presentation have been removed. Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 51
Slide 52: Marlboro Digital Connections
Marlboro Digital Connections in Millions 120 +34% 0 2015 2016 Note: Connections defined as the sum of logins, email opens and SMS entries/opt-ins Source: ATCD and Web Trends as of 12/31/16. Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 52
Slide 53: Marlboro Mobile Engagement
Marlboro Mobile Engagement in Millions Mobile Connections Coupon Redemption +99% +620% 50 10 0 0 2015 2016 2015 2016 Source: ATCD and Web Trends as of 12/31/16.
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Slide 55: Nat Sherman
Nat Sherman Portfolio of super-premium cigarettes and premium cigars Will benefit from Altria’s companies’ retail distribution, brand management and adult tobacco consumer engagement capabilities Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 55
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Slide 57: Middleton's Performance
Middleton’s Performance Shipment Volume Share of Profit Pool (Sticks in Millions) +5.4% CAGR 38% 1,403 32% 1,198 2013 2016 2013 2016 Source: IRI InfoScan Source: ALCS estimates Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 57
Slide 58: Smokeless Segment Strategy
Smokeless Segment Strategy Increase income by growing volume at or ahead of the category growth rate, while maintaining momentum on Copenhagen and Skoal combined. Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 58
Slide 59: Smokeless Segment Performance
Smokeless Segment Performance Volume Growth Copenhagen & Skoal 2013-2016 (3-yr CAGR) Combined Retail Share +0.5pp Avg. Annual Growth ~3% ~2.5% 50.7% 52.2% USSTC Industry 2013 2016 Source: ALCS estimates Source: IRI InfoScan Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confi
Slide 60: Smokeless Segment Adjusted OCI
Smokeless Segment Adjusted OCI* $ in Billions +6.3% CAGR $1.2 $1.0 2013 2016 *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: Altria company reports Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 60
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Slide 62: Copenhagen Retail Share
Copenhagen Retail Share +2.2pp 33.8% 31.6% 2015 2016 Source: IRI InfoScan Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 62
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Slide 64: Skoal's Innovative Forms and Varieties
Skoal’s Innovative Forms and Varieties This space is blank because brand images which appeared in the original presentation have been removed. Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 64
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Slide 66: Smokeless Products Segment Results
Smokeless Products Segment Results Shipment Volume Adjusted OCI* Growth Copenhagen & Skoal Share (Cans in Millions) (in Billions) +4.9% +11.0% +0.9pp $1.2 52.2% $1.1 51.3% 814 854 2015 2016 2015 2016 2015 2016 *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: Altria company r
Slide 67: Smokeless Recall Update
Smokeless Recall Update USSTC voluntarily recalled products from its Franklin Park facility Majority of USSTC’s products unaffected Estimated OCI impact of ~$50 to $70 million Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 67
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Slide 69: E-Vapor Estimated U.S. Consumer Sales
E-Vapor Estimated U.S. Consumer Sales $ in Billions ~$2.5 ~$2.5 ~$2.0 ~$1.3 ~$0.5 2012 2013 2014 2015 2016 Source: ALCS estimates Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 69
Slide 70: Long Term E-Vapor Opportunity
Long Term E-Vapor Opportunity in Millions Past 30-Day Users 9.1 5.3 3.6 Adult Vapers Adult Dippers Adult Large Mass Cigar Smokers Source: ATCT 12MM ending Nov2016, LA+ Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 70
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Slide 72: MarkTen XL Expansion
MarkTen XL Expansion This space is blank because brand images which appeared in the original presentation have been removed. Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 72
Slide 73: MarkTen National Retail Share
MarkTen National Retail Share +6pp 11% 5% MarkTen XL Q4 2015 MarkTen XL Q4 2016 Source: IRI Projected Database – MOC as of 01/01/17 (Totals may not foot due to rounding) Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 73
Slide 74: MarkTen XL in #2 Position Where Sold
MarkTen XL in #2 Position Where Sold 50% 32% 21% 8% 0% Vuse MarkTen MarkTenXL blu *Volume Sales: 1 Disposable Unit = 1 Cartridge = 1 Kit w/ 1 Cartridge = 1mL E-Liquid Source: IRI Masked Store Level Database as of we 1-1-17 Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confid
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Slide 76: Improving Economic Conditions
Improving Economic Conditions US Consumer Confidence Unemployment Rate US Housing Starts (in Millions) 150 10% 1.4 1.2 1.1 7.4% 1.0 98 100 0.9 87 6.2% 5.3% 73 4.8% 0 0% 0.0 2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016 Sources: The Conference Board, full-year average Altria Client Serv
Slide 77: Cigarette Category Decline Rate Estimates
Cigarette Category Decline Rate Estimates (0.5)% (2.5)% (3.5)% (4.0)% 2013 2014 2015 2016 Source: ALCS estimates – rounded to nearest 0.5% Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 77
Slide 78: 2016 Category Volume Growth
2016 Category Volume Growth ~10% ~3% Smokeless Machine-made Large Cigars Source: ALCS estimates – rounded to nearest 0.5% Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 78
Slide 79: Cigarette SET Environment
Cigarette SET Environment Weighted average $ per pack $1.49 $1.51 $1.57 $1.44 2013 2014 2015 2016 California and Pennsylvania SET increases expected to have an approximate 1% impact on industry volume in 2017. Source: ALCS estimates Altria Client Services l Investor Relations l 2-22-17 l FINAL l Hig
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Slide 81: Smokeable Products Segment Performance
Smokeable Products Segment Performance Net Revenue per 1000* Adjusted OCI Margins* +4.6% +6.0pp CAGR $133.54 48.2% $116.60 42.2% 2013 2016 2013 2016 Note: Net of FET *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: ALCS Finance Altria Client Services l Investor Relations l 2
Slide 82: Smokeless Products Segment Adjusted OCI Margins
Smokeless Products Segment Adjusted OCI Margins* +2.1pp 62.3% 64.4% 2013 2016 *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: Altria company reports Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 82
Slide 83: Cost Discipline
Cost Discipline $300 million productivity initiative - SG&A Infrastructure - Leaner organization - Reinvesting some savings in brand building, harm reduction and regulatory capabilities $50 million manufacturing consolidation plan Source: Altria company reports Altria Client Services l Investor
Slide 84: Altria's Alcohol Assets
Altria’s Alcohol Assets Note: Third party trademarks are the property of their respective owners and are included for informational purposes only. Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 84
Slide 85: Consistent Financial Performance
Consistent Financial Performance Adjusted Diluted EPS* Dividend Per Share Growth +8.0% +8.6% CAGR CAGR $3.03 $2.44 $1.51 $1.16* 2007 2016 2007 2016 * For reconciliations of non-GAAP to GAAP measures visit altria.com. Note: Dividend is based on the current annualized dividend (Last increased August 2
Slide 86: Ste. Michelle Wine Estates Growth
Ste. Michelle Wine Estates Growth in Millions Adjusted OCI* Reported Shipment Volume +12.3% +5.4% CAGR Cases CAGR $200 10 9.3 $167 8.0 $118 $0 0 2013 2016 2013 2016 * For reconciliations of non-GAAP to GAAP measures visit www.altria.com Source: Altria company reports Altria Client Services l Investo
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Slide 88: Third party trademarks note
Note: Third party trademarks are the property of their respective owners and are included for informational purposes only. Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 88
Slide 89: Altria's Strong Balance Sheet
Altria’s Strong Balance Sheet A- A3 BBB+ Note: Third party trademarks are the property of their respective owners and are included for informational purposes only. Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 89
Slide 90: Dividend Growth
Dividend Growth +8.0% $2.44 $2.26 Aug-15 Aug-16 Note: Dividend is based on the current annualized dividend (Last increased August 2016). Dividends are subject to the discretion of the Board. Source: Altria company reports Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confide
Slide 91: Share Repurchase Program
Share Repurchase Program Repurchased over $1 billion in shares in 2016 Expanded and extended share repurchase program in October - $1.9 billion remaining in $3 billion program at the end of 2016 - Expect to complete program by the end of Q2 2018 Note: Share repurchases are subject to the discret
Slide 92: Returning Cash To Shareholders
Returning Cash To Shareholders $ in Billions $28.2 Share Repurchase Dividend 2011-2016 Source: Altria company reports Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 92
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Slide 94: 2017 Guidance
2017 Guidance Altria reaffirms our expectation 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. We also expect that our 2017 earnings growth will be higher in the second half of the
Slide 95: 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 Altria Client Services l Investor Relations l 2-22-17 l FINA
Slide 96: Five-Year Total Shareholder Return
Five-Year Total Shareholder Return 187% 98% 92% Altria Group S&P 500 S&P Food, Beverage and Tobacco Note: Total shareholder return is simple price appreciation plus the reinvestment of the dividend as of the ex-dividend date Source: Bloomberg, 12/31/2011-12/30/2016 Altria Client Services l Investor
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Slide 99: Regulation G Disclosure
Regulation G Disclosure For reconciliations and further explanations of non-GAAP financial measures, visit: altria.com Altria Client Services l Investor Relations l 2-22-17 l FINAL l Highly Confidential l 99
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