Billy Gifford
Chief Executive Officer at Altria Group
Thanks, Mac. Good morning, and thank you for joining us. It was a pivotal year for Altria as we made significant progress in pursuit of our vision by enhancing our smoke-free product portfolio while our businesses performed well in a challenging environment. We grew adjusted diluted earnings per share by 2.3% and continued our long history of rewarding shareholders by delivering nearly $7.8 billion in dividends and share repurchases.
Throughout 2023, we took several transformative steps that we believe position us for sustained success in the U.S.. nicotine space, including completing our acquisition of NJOY and fully integrating it into our family of companies, making exciting progress on our promising smoke-free pipeline, including launching on! PLUS internationally in Sweden, one of the world's largest modern oral tobacco markets. Continuing preparations to bring heated tobacco products to market, this includes heated tobacco stick products through Horizon, our joint venture with JT and our heated tobacco capsule product SWIC and advocating for a responsible and well-regulated e-vapor market, including stepped up enforcement against the listed disposable products.
Our vision continues to guide our actions and we believe that our growing portfolio of smoke-free products positions us well to lead in the evolving nicotine space. My remarks this morning will focus on our view of the U.S. nicotine space and our progress in each of the smoke-free categories. I'll then hand it over to Sal who will provide an update on consumer and industry dynamics and further detail on our business and financial results.
Let's begin with the operating environment. We estimate the total industry equivalized nicotine volumes increased approximately 3% for the year and approximately 1% over the past five years on a compounded annual basis driven by the growth of illicit flavored disposable e-vapor products. This new estimate marched a change from our previously provided estimates of low single-digit decline in total nicotine over the past several years. Our new estimate reflects a deeper ongoing analysis of the impact of a listed products on the e-vapor category. We have previously acknowledged the challenges associated with reading illicit market activity that takes place in less traditional channels and we believe we have deepened our understanding of market dynamics through improved data sources, information gap still remain.
As a result, we're making some informed assumptions to better reflect the dynamics at play. For example, we account for differences in liquid buying across products, device attributes and usage patterns by equivalizing e-vapor volume across different form factors. We then equivalize e-vapor volume back to cigarettes, our base unit of equivalized volume. Because of the volatility that exists in reading the illicit market, our estimates may change over time and we plan to provide you with our latest and best thinking as it evolves. Of note, our estimate focuses only on usage among age 21 plus consumers.
Looking now by category. Industry cigarette volumes declined by an estimated 8% last year primarily due to the historical secular rate of decline, the growth of the eliciting vapor products and continued macroeconomic pressures on smokers. And while we're deeply concerned about growth in the listed product use, we are encouraged that adult smokers continue to transition to smoke-free alternatives, which now represent approximately 40% of total nicotine space. E-vapor continues to be the largest smoke-free category and we have observed an increase in the number of adult vapers driven primarily by those choosing illicit products.
Based on our new estimate, the e-vapor category grew approximately 35% in 2023. We believe the category growth was largely driven by a listed flavored disposable products, which we estimate represents over 50% of the category. We estimate the pod based products declined approximately 50% and represent between 15% to 20% of the category. We continue to believe the e-vapor category is in the beginning of a reset and the steps that we've taken since closing the NJOY transaction will allow us to responsibly participate in the category's growth.
Let's briefly recap our 2023 actions with NJOY following the completion of our acquisition on June 1. First, we strengthened NJOY's supply chain to enable our expansion plans. Our teams work diligently to solidify the entire supply chain from sourcing direct materials through shipments to retail. We now expect to have capacity to support our expansion plans for NJOY moving forward. Next, we prioritize closing inventory gaps at retail and expanding distribution abates. For example, prior to closing, a number of stores had ACE pods in distributions, but no devices while other stores were missing various pod varieties.
Our teams have closed inventory gaps in stores that already had distribution, which has significantly improved in-stock conditions at retail. During the fourth quarter, we expanded distribution of ACE to over 75,000 stores surpassing our previously announced goal of 70,000 stores. These stores represent approximately 75% of e-vapor volume and 55% of cigarette volume sold in the U.S. multi-outlet and convenience channel. We also introduced NJOY's first retail trade program, which we believe will help NJOY achieve optimal visibility and product fixture space at retail. Retailers can sign up for the program at various levels with merchandising options designed to position NJOY strategically and responsibly to tobacco consumers while creating further awareness of the brand.
We are encouraged by our trade partners' response to the program with approximately 70% of stores having chosen options that secure premium positioning in the e-vapor fixture for NJOY. Fixture resets are well underway and we expect the majority will be completed in the first half of this year. We believe that achieving manufacturing capacity, supply chain security and optimal product distribution and placement at retail were necessary precursors to engaging consumers with impactful marketing and promotional offers.
Turning to NJOY's business results. NJOY consumables shipment volume was approximately 11 million units for the quarter and 23 million units since closing. NJOY's retail share in the multi-outlet and convenience channel was 3.7% in the fourth quarter. In November, we began testing trial generating bundle offers in a limited number of retail accounts and the results were very encouraging. Despite the limited reach of these offers, NJOY retail share increased three-tenths of a percentage point nationally in November and another three-tenths in December.
While still early, we are excited by NJOY's momentum and remain optimistic about its potential in the U.S. market. We expect to further expand NJOY promotions and marketing activation in the first quarter and we anticipate submitting a PMTA for NJOY's a age restricted [Indecipherable] with non-tobacco flavors in the first half of this year. We look forward to sharing more detail about our plans for the year at CAGNY.
Looking more broadly at the e-vapor category, we continue to believe that the current state of the market is intolerable for both legitimate manufacturers and consumers. As I previously stated, the total nicotine space grew in 2023 largely because of e-legal flavored disposable e-vapor products. These products are being distributed by companies violating virtually every rule and guidance the FDA has issued since 2016. We are actively engaging with regulators, state and federal lawmakers, freight partners and other stakeholders to build awareness of the serious issue and drive marketplace enforcement.
While we believe there is still significant work ahead to eliminate these illicit products from the market, we have seen some encouraging actions. In December, the FDA in collaboration with U.S. Customs and Border Protection announced the seizure of approximately 1.4 million unauthorized e-vapor products, including Health Bar and other brands that are popular with under age users. We believe that adopting comprehensive border protection programs is an important step to securing the market of illicit products. Additionally, we have worked with legislators in a number of states that have passed or are considering legislation requiring manufacturers to certify that they have either submitted a PMTA which is pending or received a marketing order in compliance with FDA regulations.
We also initiated litigation in the United States District Court in California relating to the sale of unlawful products. And although this litigation isn't facing some initial procedural challenges, we remain committed to explore and pursue all litigation opportunities against manufacturers, distributors and online retailers related to sale of unlawful products. A strong course correction is needed to protect the tobacco harm reduction for the millions of adult smokers in the U.S. We've learned from past experiences that complex issues like this require the work of many stakeholders. For our part, we are working with regulators, legislatures, law enforcement and others to address the illicit market and while the FDA and other authorities are stepping up enforcement, more action is needed.
Turning to oral tobacco. The nicotine pouch category experienced sizable growth once again resulting in an estimated 7.5% increase in total U.S. oral tobacco volumes over the past six months. In the fourth quarter, oral nicotine pouches grew 11.8 share points year-over-year and now represent more than 35% of the total U.S. for oral tobacco category. on continued to participate in the category growth. As-reported, shipment volumes increased nearly 33% in the fourth quarter and 39% for the full year. In the fourth quarter, Helix continued its focus on volume growth while improving profitability. Helix applied its analytics and revenue growth management capabilities to be more flexible and efficient with its promotional investments in the marketplace.
As a result, on's retail price increased over 47% versus the year ago period while growing its retail share by 1.1 percentage points. Encouragingly, we continue to see increasing levels of both trial and adoption of the brands with repeat purchases up more than 30% year-over-year despite the substantial increase in retail price. We remain excited about on! PLUS and its potential in the U.S. market. We believe it's long lasting flavor system and proprietary soft material are differentiators in the category. We continue to see encouraging results from the on! PLUS test launch in Sweden.
Consumer research from the fourth quarter indicates that on! PLUS is competitive with the market leading oral nicotine pouch products in Sweden and is seen as a unique offering with a strong repeat purchase rate of over 30% in the e-commerce channel. Given the success of on! PLUS net and smooth net in December, we introduced on! PLUS Berry and Citrus in 3 and 9 milligram variants in the e-commerce channel. We also plan to expand on! PLUS to additional retail accounts in Sweden. Our teams are on track to submit the PMTA for on! PLUS in the first half of this year and upon planned FDA authorization, we expect that will contribute meaningfully to Helix's growth.
In heated tobacco, we believe our compelling portfolio of products will appeal to the millions of adult smokers seeking innovative and favorable alternatives to e-vapor products. We are continuing regulatory preparations to bring heated tobacco stick products to the U.S. market through Horizon, our joint venture with JT. We remain on track to file a PMTA for Ploom in the first half of 2025 and we are making continued progress on our heated tobacco capsule product SWIC. While we believe heated tobacco products can play an important role in achieving harm reduction, the category remains non-existent in the United States.
We are encouraged by the progress we made in 2023 and we are committed to achieving long-term leadership in each of the smoke-free categories while delivering strong shareholder returns. Last March, we introduced our 2028 enterprise goals. We provided updates on our progress in this morning's press release and we expect to provide progress updates annually moving forward. We look forward to discussing our exploration of non nicotine and international nicotine markets at CAGNY later this month.
Turning to our 2024 financial outlook. Our plans include a continuation of our strategy to balance earnings growth and shareholder returns with strategic investments toward our vision. For 2024, our planned investment areas include marketplace activities in support of our smoke-free products and continued smoke-free product research, development and regulatory preparations. We believe the external environment will remain dynamic in 2024 and we will continue to monitor the economy, including the cumulative impact of inflation, tobacco consumer dynamics including purchasing patterns and adoption of smoke-free products, illicit e-vapor enforcement and regulatory litigation and legislative developments.
Considering these factors, we expect to deliver 2024 full year adjusted diluted EPS in the range of $5 to $5.15. This range represents an adjusted diluted EPS growth rate of 1% to 4% from a $4.95 base in 2023. We expect 2024 adjusted diluted EPS growth to be weighted to the second half of the year. Our guidance includes the impact of two additional shipping days in 2024 and assumes limited impact from illicit e-vapor enforcement on combustible and e-vapor volumes.
Before I turn it over to Sal, I'd like to take a moment to recognize Murray Garnick, who recently announced his decision to retire from Altria. During this remarkable career, Murray represented Altria and its subsidiaries for nearly 40 years, both as outside and in-house counsel, including his last seven as General Counsel leading the law and regulatory affairs departments. Under his guidance, we have successfully managed significant litigation challenges and established Altria as a leading advocate for tobacco harm reduction policies in the U.S.
We will continue to benefit from Murray's guidance through the first quarter. At which time, Bob McCarter will assume the role of General Counsel. Bob currently leads the management of tobacco health and other litigation. Bob has been with Altria since 2015 and spent 18 years before that representing the company as outside counsel. Please join me in thanking and congratulating Murray on an incredible career and we look forward to introducing Bob to many of you at CAGNY and in the years to come.
I'll now turn it over to Sal to provide more detail on the business environment and our results.
