Billy Gifford
Chief Executive Officer at Altria Group
Thanks, Mac. Good morning and thank you for joining us. Altria's momentum continues to build as we pursue our vision to responsibly lead the transition of adult smokers to a smoke free future. In the second quarter, our company's innovative smoke-free products delivered strong share and volume performance and we hit meaningful milestones that we believe set us up for future success. NJOY received the first and only marketing granted orders from the FDA for menthol e-vapor products. And we submitted PMTA applications to the FDA for next generation NJOY and on! products. Our traditional tobacco businesses remain resilient despite a challenging operating environment. They're highly cash generative businesses supported continued investments in our innovative products efforts, and we returned significant value to shareholders during the first half of the year. With more than $5.8 billion delivered to shareholders through share repurchases and dividends. And we believe our dedicated teams have us on track to deliver against full year financial guidance.
This morning, my remarks will focus on NJOY's encouraging second quarter results. The state of the e-vapor category illicit market activity and enforcement actions and strong second quarter results from [indecipherable]. I'll then turn it over to SAl, who will provide further detail on our financial results including the outlook, the performance of our traditional tobacco businesses and capital allocation.
Let's begin with the evapor category. In June, we celebrated the one year anniversary of welcoming NJOY into the Altria family of Companies. Since that time, we've combined our industryleading capabilities with NJOY's competitive product offering and are thrilled with the progress we've made.
Let me briefly recap some of our accomplishments. We strengthened NJOY's supply chain to enable our expansion plans. Tripled NJOY's retail footprint to over 100,000 stores secured premium positioning at retail and more than 80% of contracted stores through NJOY's first trade program. Launched a variety of trial generating activities with compelling results and introduced a new brand equity campaign with impactful consumer messaging.
As a result of these efforts, NJOY saw continued traction at retail during the second quarter and first half as evidenced by volume, momentum and share growth. NJOY consumables shipment volume was approximately 12.5 million units for the second quarter and 23.4 million units for the first half. NJOY device shipment volume was approximately 1.8 million units for the second quarter and 2.8 million units for the first half. Both consumable and device shipment volumes increase sequentially with consumables increasing by 14.7% and devices by 80%.
To generate trial in the second quarter NJOY paired equity messaging about its attractive product proposition with promotional support and saw compelling results at retail. For the second quarter NJOYs retail share of consumables was 5.5 share-points, up 1.3 share-points sequentially. NJOY's retail share of consumables grew in each of the past 9 months. We're also encouraged by NJOY's device share, which we believe is an important indicator of trial and a potential leading indicator of longer term adoption. As a result of trial-focused investments in the second quarter, NJOY expanded its share of devices and the multi outlet and convenience channel to 25.4 share-point, more than doubling its share of devices sequentially. We plan to continue investing behind NJOY's value proposition and equity to build awareness and generate trial. At retail, approximately two-thirds of fixture resets are now complete. And we've amplified NJOY's visibility and secured premium positioning through its trade program. NJOY is also reaching increased numbers of adult consumers through its events, infrastructure and digital marketing programs. Through these engagements and NJOYs equity campaign. We can continue to position NJOY as a competitive alternative for adult smokers and vapors to responsibly grow NJOY over the long term.
On the regulatory front, in June, NJOY received marketing granted orders from the FDA for 4 menthol e-vapor products. NJOY has the first and only menthol e-vapor products authorized by the FDA, a significant accomplishment for the NJOY team and a testament to the quality of NJOY's robust science and evidence-based applications. Under the terms of our acquisition of NJOY upon receiving these authorizations, we made cash payments totaling $250 million in July.
Now all inmarket NJOY products are covered by marketing granted orders from the FDA. In addition, NJOY submitted a supplemental PMTA to the FDA to commercialize and market the NJOY a 2.0 device. Which incorporates access restriction technology designed to prevent underage use.
NJOY also resubmitted PMTAs for blueberry and watermelon pod products that work exclusively with the 2.0 device. These submissions marked further milestones in pursuit of our vision. And NJOY looks forward to responsibly providing flavored e-vapor options for adult smoker and vapors once authorized. NJOYs momentum and the results are even more encouraging in the context of the broader e-vapor category, which continues to be overrun by illicit disposable products due to a lack of effective regulation and enforcement.
At the end of the second quarter, we estimate the e-vapor category included approximately 19 million vapors, up over 3 million vapors versus a year ago. During the same period, disposable vapors increased by 4 million to approximately 12 million vapors. Through the first half of 2024 we estimate the category grew by approximately 40% driven by illicit flavored disposable products, which we believe now represent more than 60% of the category. We estimate pod-based volumes decline by approximately 15% in the first half of 2024 and now represents approximately 15% of category volumes. We are beginning to see the robust supply chains and lack of enforcement that supports the illicit e-vapor market enable increased illicit activity across multiple tobacco categories. Including nicotine pouches and cigarettes that are available to US consumers.
In fact, we've identified more than 350 illicit nicotine pouch cues across both retail and e-commerce with new brands launching every month. This illicit market echoes the beginning of the listed e-vapor market several years ago. In addition, we believe illicit cigarettes are becoming more prevalent in the US and are evading regulation and taxation. We periodically conduct discarded pact studies and select geographic markets.
One such study in California found more than 25% of discarded cigarette packs were non-domestic products originating primarily from duty-free channels and China. The FDA's inaction, lack of enforcement and slow pace of smoke-free authorizations continues to enable bad actors who are blatantly disregarding regulations. For our part, we continue to actively engage with regulators, federal and state lawmakers, our trade partners and other stakeholders to build awareness of these issues and drive marketplace enforcement. This month, we sent the FDA data that supports our increasing concern that illicit market actors are expanding into the nicotine pouch category.
Our hope is that this information demonstrates the need for the FDA to direct enforcement actions against illicit nicotine pouch products in addition to illicit e-vapor products. We believe it is critical that the FDA acts decisively to regain control over the oral nicotine pouch category to prevent another widespread illicit market from taking hold.
At the federal level, we saw some positive actions in the second quarter. For example, in June, the Justice Department and the FDA announced the creation of a federal multi-agency task force, which is expected to coordinate and streamline efforts to bring all available criminal and civil tools to bear against the illegal distribution and sale of e-vapor products. We have been advocating for multi-agency collaboration and view this announcement as a much-needed course correction for enforcement efforts. In addition, we continue to see other actions at the federal level, including e-vapor import refusals, civil monetary penalties and warning letters issued to manufacturers, retailers and wholesalers of illicit products.
In the absence of effective FDA enforcement today, many states are stepping up to address this issue. As of today, 11 states have passed legislation requiring manufacturers to certify that they are compliant with FDA requirements and four states are considering similar legislation. Enforcement has started in four states with the balance set to begin in the second half of 2024 and 2025. When properly implemented and comprehensively enforced, we believe state registry bill scan be effective. We continue to believe in the promise of a responsible and fully regulated tobacco industry. As we stated in the past, regulation without enforcement is indistinguishable from no regulation at all. We're hopeful to see more meaningful action and enforcement activity over the next year.
Let's turn back to the oral tobacco category where oral nicotine pouches grew 12.3 share points year-over-year, and now represent nearly 42% of the category. All nicotine pouches were the primary contributor of the estimated 9% increase in oral tobacco industry volume over the past six months. Helix participated in the category growth. Growing on reported ship of volume by 37% to 41 million cans during the second quarter. Helix continues to invest strategically and responsibly behind on!. This spring, Helix launched a new trade program that secured the number one retail fixture position for nearly 80% of on!s volume, creating broader visibility of the on! brand. And in June, Helix introduced a fresh new look for on! packaging and a new equity campaign. It's on to further differentiate the brand.
Encouragingly, we saw consistent on! share momentum throughout the quarter. On!'s retail share grew in each of the past three months to 8.1% for the quarter, an increase of 1.2 share points versus the prior year and a one share-point sequentially.
Helix remains focused on long-term profitability and delivered these impressive results while reducing on promotional spending year-over-year. We are very excited about the prospects and potential for on! PLUS. An innovative pouch product made using a proprietary software material which is designed for adults who dip and do users with cigarettes. Early international results continue to show that on! PLUS is a growing competitive player in the nicotine pouch space in Sweden and the United Kingdom. In both markets on! PLUS has been incremental to our total portfolio sourcing mainly from competitive brands with minimal cannibalization.
In Sweden, levels of trial are increasing. And e-commerce repurchase rates are strong above 30%. Supported by these results, we expanded on! PLUS distribution beyond e-commerce into 2000 key retail accounts in Sweden, including Circle K and ICA. In the UK following the launch of on! PLUS, the on! portfolio is the number two brand in the e-commerce. And Helix recently secured on! PLUS distribution in a thousand retail stores. Consumer feedback indicates that consumers enjoy the innovative on! PLUS pouch and view it as a unique point of differentiation in the category.
Turning back to the US market, Helix submitted PMTAs to the FDA for on! PLUS in June. The PMTAs were submitted for three varieties, tobacco, mint and wintergreen, each in three different nicotine strength options. We believe our innovation in the nicotine pouch space can be a meaningful contributor to our Smoke-free goals once authorized in the US.
In summary, it was an exciting quarter for Altria. We made significant progress toward our vision with in-market products and achieved important milestones to prepare for future success. We're confident in the long-term outlook for our smoke-free portfolio. And we have a significant opportunity to responsibly lead the transition of adult smokers to a smoke free future.
I believe we have the appropriate strategies in place to execute our growth plans, and I want to thank all of our employees who continue to work tirelessly to make our vision become a reality.
I'll now turn it over to Sal to provide more detail on the business environment and our results.
