Altria (MO -0.37%) is the undisputed leader in tobacco. The company sells the most popular cigarettes in the country (Marlboro). It also owns the second-bestselling large machine-made cigar brand (Black & Mild).
The company has been leveraging its leadership in combustible products to move beyond smoking in recent years. It has acquired the top brand in moist smokeless tobacco (Copenhagen) and several other innovative nicotine-based smokeless products. On top of that, Altria has investments outside the tobacco industry, including in a leading brewer and cannabis company.
Here's a look at how Altria built its brand empire and where the tobacco stock could expand as it seeks to grow beyond smoking.
The companies Altria owns
What companies does Altria own?
Altria owns a leading portfolio of tobacco products for the U.S. market. The company's portfolio includes smokeable products, oral tobacco products, and investments outside the tobacco industry. Here's a closer look at the companies Altria owns and its investments.
Phillip Morris USA
Phillip Morris USA is the largest tobacco company in the U.S., with a 46.9% market share in 2023. Marlboro is its leading brand, commanding a 42.1% share of the U.S. cigarette market and bigger than the next 11 brands combined. The company manufactures other premium and discount cigarette brands as well, including Parliament, Virginia Slims, and L&M.
Market Share
Phillip Morris USA only operates in the U.S. Phillip Morris International (PM -1.11%) owns the rights to market and sell Phillip Morris brands (including Marlboro) internationally. Altria spun off Phillip Morris International in 2008 to give that company more freedom to operate outside the U.S.
John Middleton
Altria acquired U.S. cigar maker John Middleton in 2007 for $2.9 billion from privately held Bradford Holdings. John Middleton makes Black & Mild cigars, the second-bestselling large machine-made cigar brand in the U.S. The company also manufactures pipe tobacco products.
U.S. Smokeless Tobacco Company
Altria bought UST for $10.4 billion in 2009. The entity, now called U.S. Smokeless Tobacco Company (USSTC), is the most profitable smoke-free company in the country. Copenhagen is its top brand in the moist smokeless tobacco product category and the country's leading premium moist smokeless tobacco brand. USSTC also owns the No. 2 premium brand, Skoal, and makes Red Seal and Husky.
Helix Innovations
Altria bought an 80% stake in certain companies of the Burger Group to commercialize the oral nicotine pouch brand on! in 2019. It paid $372 million for the initial investment and subsequently acquired the remaining 20% stake in on! for $250 million in 2020 and 2021.
NJOY
Altria bought NJOY Holdings for $2.75 billion in 2023. The company makes e-vapor products, including NJOY ACE, the only pod-based e-vapor product with marketing authorization from the U.S. Food and Drug Administration. That transaction enhanced the company's smoke-free product portfolio as it journeys toward a future beyond smoking.
Horizon Innovations
Altria formed a joint venture with J.T. Group in 2022 to expand its heated tobacco portfolio. The Horizon Innovations joint venture focuses on marketing and commercializing heated tobacco stick products in the U.S. The company's Phillip Morris USA unit owns a 75% economic interest in Horizon, with J.T. Group owning the other 25%.
Anheuser-Busch InBev
Altria owns an equity interest in the world's largest brewing company, Anheuser-Busch InBev (BUD 0.12%). The company increased its stake to more than 10% in 2016 following the closing of the beer maker's acquisition of SABMiller.
Cronos Group
Altria acquired a 45% stake in leading Canadian cannabinoid company Cronos Group (CRON 3.6%) for $1.8 billion in 2019. While the company had warrants to increase its stake to 55%, it let them expire because Cronos Group's stock price declined significantly after Altria's initial investment. Although Cronos Group explored a sale in 2023, it has yet to find a buyer as of early 2024.
Smokeable products (Phillip Morris USA and John Middleton) make up most of Altria's revenue. In 2023, the company reported $20.5 billion in revenues net of excise taxes. Smokeable products contributed 87% of the total ($17.9 billion, down 1.6% from 2022). Meanwhile, cigarettes comprise most of the volumes shipped from its smokeable products segment (98%).
The company's oral tobacco products segment contributed about $2.6 billion in revenue for Altria in 2023, up 3.8% from 2022. More than half the cans and packs sold were from its Copenhagen brand (56% of its volume in the oral tobacco products category).
However, that year's volumes for Copenhagen and Skoal were down (6.5% and 9.1%, respectively). Strong volume growth of its on! product (up 38.5%) helped drive revenue growth for the segment. While Phillip Morris USA is currently the company's main revenue source, Altria is working toward reducing its reliance on smoking.
The company wants to grow its U.S. smoke-free portfolio's volumes by at least 35% from its 2022 base of 800 million units. It also aims to roughly double its revenue from smoke-free products to $5 billion, with $2 billion coming from innovative smoke-free products (they contributed $165 million of its total in 2023).
This forecast suggests that USSTC, Helix Innovations, and NJOY will become increasingly important to Altria's financial results. Given the continued decline in the U.S. smoking sector, that should make a better stock to buy and hold.
What companies could Altria still buy?
What companies could Altria buy in the future?
Altria is evolving. The tobacco company is working toward "moving beyond smoking." Its vision is to "lead the transition of adult smokers to a smoke-free future" by helping them transition to less harmful options. That suggests the company will continue to seek out investments in smoke-free products, including those with tobacco and without.
In 2023, Altria introduced its 2028 enterprise goals, including one to compete beyond the U.S. nicotine space. The company believes international smoke-free and non-nicotine categories will represent multibillion-dollar business opportunities over the next few years.
While the company aims to organically grow the volumes of its current smoke-free products by marketing them internationally, it could also continue to make acquisitions to help accelerate its move beyond smoking. Among the opportunities the company is considering is expanding into new non-nicotine products like cannabis products or caffeine pouches.
Mergers and Acquisitions
Given that strategic direction, Altria could buy companies focused on those products. For example, it could acquire full control over Cronos or another cannabis company to expand into cannabis products. It could also look to buy a caffeine-pouch maker like Grinds Coffee Pouches. Altria's move beyond smoking could also see it move back into the food and beverage industry.
In 1998, its predecessor, Phillip Morris, acquired Kraft Foods and purchased General Foods the following year. While the renamed Altria spun off Kraft Foods -- now KraftHeinz (NYSE:KCR) -- to its shareholders in 2007, it could consider getting back into the food business by acquiring a snacking or confectionary company.
The company could also increase its investment in the beverage sector by raising its stake in Anheuser-Busch, buying another beer maker, or investing in another beverage category, like energy drinks or coffee. In the past, it has also invested in the wine sector (Altria sold its Ste. Michelle Wine Estates business for $1.2 billion in 2021) and could re-enter the sector if it finds a compelling opportunity.
The company will also likely continue to invest in smokeless products as opportunities arise. While its $12.8 billion investment for a minority stake in e-vapor products maker JUUL Labs was a big flop (Altria exchanged its entire stake in the company for heated tobacco intellectual property rights worth $250 million in 2022), smokeless products are a key part of its future.
However, as the JUUL investment showed, not all of Altria's investments have paid off in the past. It must ensure that future investments to expand its smokeless business will grow shareholder value instead of destroying it, as the JUUL investment did.
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The bottom line on companies Altria owns
Altria is a leader in selling tobacco products in the U.S. However, the company is working toward a smoke-free future by investing in and acquiring smokeless products.
The company will likely continue to buy companies that make less harmful products, including those without nicotine. Altria hopes that evolving into a smokeless company will enable it to continue growing shareholder value by increasing its sales and earnings so it can return more cash to shareholders through share repurchases and a steadily rising dividend.
FAQ
FAQ on companies Altria owns
Is Altria a stable company?
Altria is a very stable tobacco company. Its adjusted earnings rose by about 2.8% in 2023. It expects them to rise by another 1% to 4% in 2024. The company's overall stability enables it to generate lots of cash, the bulk of which it returns to investors via dividends and share repurchases. The company's stability drives its progressive dividend goal of increasing its payout at a mid-single-digit rate each year.
Who is the largest shareholder in Altria?
The Vanguard Group was the largest shareholder of Altria in early 2024 at about 9% of its outstanding shares, worth roughly $6.7 billion. However, The Vanguard Group doesn't own the shares directly. It's an asset management company that owns the shares on behalf of its mutual fund and exchange-traded fund (ETF) clients, making it a passive investor in Altria stock.
Is Altria in debt?
Altria had $26.2 billion of total debt at the end of 2023. Although that sounds like a lot, it was manageable for the stable company. It ended the year with a debt-to-earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio of 2.2, around its 2028 enterprise goal of maintaining a leverage ratio of roughly 2.0 times.
