Billy Gifford
Chief Executive Officer at Altria Group
Thank's, Mac. Good morning and thank you for joining us. We ended a solid first half of the year and we continue on our exciting journey towards moving beyond smoking. We completed our acquisition of NJOY and delivered strong business results, growing adjusted diluted earnings per share by 5% in the first half and we returned $3.8 billion to share holders, while investing in infrastructure [Indecipherable]. We look forward to executing our commercialization plan for NJOY in the second half of the year. And we reaffirm our guidance to deliver 2023 full year adjusted diluted EPS in the range of $4.89 to $5.03. This range represents an adjusted diluted EPS run rate of 1% to 4 % from a $4.84 base in 2022.
My remarks this morning will focus on three topics; our enhanced smoke-free product portfolio including our recent acquisition of NJOY, the consumer dynamic impacting our core tobacco business and an update on the California flavor ban and its impact on the market. I'll then turn it over to Sal, who will provide further details on our business and financial results.
Let's begin with e-vapor, which has been the most successful category in the U.S. in transitioning smokers to alternative products. In June, we took a transformative step towards our goal to moving beyond smoking by completing our acquisition of NJOY. We are quite focused on responsibly accelerating U.S. smoker and vapor adoption of NJOY ACE. Currently, the only pod-based e-vapor product with marketing authorization from the FDA.
The integration and business plans are already well underway and we welcome the NJOY team to the Altria family of companies. They bring a wealth of knowledge and capabilities that complement our own, such as vapor product development, device manufacturing partnerships and international supply chain expertise. We believe their skills will accelerate our progress towards our vision and we're excited to build on their recent experience operating in this category.
[Indecipherable] limited visibility and frequent [Indecipherable] makes it difficult for the NJOY team to communicate offers and build awareness of the [Indecipherable] stores. If fact, like our [Indecipherable] stores with distribution of ACE lack complete inventory of device and all product parts used. Our world class [Indecipherable] organization of over 1,600 employees has already started using their strong trade relationships to address these opportunities.
They engage with the nation's top 25 convenient store chains by [Indecipherable] e-vapor volume to improve visibility and inventory of NJOY in stores with existing distribution. It is because of their [Indecipherable] efforts that started this week, NJOY will begin to have its own retain presence through premium picture space and improved retail inventory only a few months after we completed the transaction. And later this month, we plan to broaden distribution base to a total of approximately 43,000 stores, a 25% increase since we completed the transaction. We expect to further expand distribution to a total of 70,000 stores by the end of this year, which represents approximately 7% in vapor volume and 55% of cigarette volume sold in the U.S. multioutlet and convenience channel.
This remarkable progress is a testament to the highly talented employees across the Altria family company and I applaud the hard work and collaboration. In oral tobacco, we are encouraged by the continued growth of [Indecipherable] products, which drove the estimated 2.5% increase in total U.S. oral tobacco volumes over the past six months. [Indecipherable] share points year over year and now represents 29.1% of the total U.S. oral tobacco category.
In the second quarter, on! reported ship volume increased nearly 50% versus the year ago period and while retail share of oral tobacco increased five-tenths sequentially, reaching [Indecipherable] share points in the second quarter. This represented a growth rate of almost 45% year over year and the 15th consecutive quarter of on! share growth.
Helix delivered the impressive results while growing on!'s retail price 17% versus the year ago period. We believe on!'s ability to continue to grow share while effectively reducing its commercial investments demonstrates the strength of its product portfolio and growing brand activity. Helix is focused on strategically investing behind the brand as the category grows and continues to expect profitability in 2025.
In September, our team's [Indecipherable] international path on! PLUS, our new tobacco derived nicotine wet pouch product that features an optimized long lasting flavor system and our proprietary soft feel material. The product will be available via e-commerce in Sweden, where our team's scientific [Indecipherable] that can form a future U.S. launch.
We're excited about on! PLUS and we believe consumers will be too. While a small sample size as early research indicates, about three out or four dippers and nicotine pouch consumers in our study preferred on! PLUS [Indecipherable] on a blind basis. We are on track to follow [Indecipherable] on! PLUS in the first half of next year.
We're [Indecipherable] tobacco business. In the second quarter, cigarette industry volume decline moderated. However, the consumer dynamic reaffirmed the past year largely continued. Elevated gas prices combined with the cumulative effect of higher inflation continued pressure consumer discretionary income allowances. However, we believe we have the appropriate tool to navigate this challenging environment. For example, team U.S.A. used RDM capabilities to deploy a series of strategic investments behind the marked Marlboro Black family of products earlier this year.
Using demand analytics, the team provided additional support for price-sensitive Marlboro smokers while being efficient with their commercial investments. As a result, Marlboro's second quarter of retail share of the cigarette category grew a tenth sequentially to 42.1%.
Let's now turn to California where a ban on the sale of flavor-type products and tobacco product with flavor enhancers went into effect late last year. Our brands continued to perform well in the state. We remain concerned of the law enforcement and the negative unintended consequences of prohibitionary policies. We however continue [Indecipherable] in our first quarter remarks such as adulterated products, retailer and manufacturing noncompliance and illicit market activity. For example, roughly 65,000 OCB branded flavor cards were stolen in California in the first half of the year, more than triple the amount sold in the other 49 states combined. In comparison, OCB branded flavor card volume was [Indecipherable] in California in the year ago period when menthol cigarettes were still legally available.
To further understand consumer use of listed nicotine products, we commissioned a third-party study in California where researchers collected and analyzed nearly 20,000 discarded tobacco products. Their findings suggest that almost half of the cigarettes consumed were not tax stamped for sale in California and approximately 20% of the cigarette packs where menthol or products we believe other manufacturers recently introduced to sidestep the purpose of the law. In comparison, menthol represented approximately a quarter of the total California cigarette category prior to the ban's enactment.
And finally, while disposable e-vapor products were over represented in the study, 98% of the collective e-vapor products were flavored despite being subject to the California flavor ban and unauthorized by the FDA. These figures are alarming and indicate substantial illicit market activity. We believe the best way to prevent the listed markets is keep tobacco products legal and regulated. We have made this clear, and the public comments we submitted in response to the FDA's proposed menthol ban.
Our goal is for policymakers to embrace harm reduction as the proper framework for tobacco and nicotine product regulation. And there is a growing chorus of diverse stakeholders who agree, including consumers, our trade partners, public health advocates, criminal Justice reform advocates, law enforcement and tobacco growers. In fact, public opinion overwhelmingly supports harm reduction over prohibition. Insight shows a significant public health benefit of moving smokers away from combustible products for their smoke-free future.
We will continue to advocate for a well-regulated U.S. tobacco industry that embraces harm reduction. We have an unprecedented opportunity to lead the way in shifting millions of smokers away from cigarettes if we follow the science and foster innovation with the support of reasonable regulation. I'll now turn it over to Sal to provide more detail on our results and the business environment.
