William Gifford
Chief Executive Officer at Altria Group
Thanks, Mac. Good morning and thank you for joining us. 2024 was another pivotal year for Altria, headlined by meaningful progress toward our vision, strong financial results and significant cash returns to shareholders. Our company's leading brands and talented teams enabled our core tobacco businesses to deliver solid income growth and margin expansion, while we strategically invested in our future. For the full-year, we grew adjusted diluted earnings per share by 3.4% and continued our long history of rewarding shareholders with over $10.2 billion in dividends and share repurchases. As the year progressed, our innovative smoke-free products ON demonstrated encouraging performance through volume and share growth in their respective categories. And we hit meaningful milestones that helped solidify our smoke-free portfolio and position us for sustained success in the U.S. nicotine space, including NJOY receiving the first and only marketing granted orders from the FDA for evapor products, submitting PMTA applications to the FDA for next-generation NJOY and on products, continuing preparations to commercialize Plume through our joint-venture with JT, and advocating for a responsible and well-regulated marketplace, including stepped-up enforcement against illicit market activity. My remarks this morning will focus on our view of the U.S. nicotine space, our smoke-free progress and our earnings guidance for 2025. I'll then hand it over to Sal, who will provide an update on consumer and industry dynamics, further detail on our smokable business and financial results. Let's begin with the operating environment and our view of the nicotine space. The potential for tobacco harm reduction in the U.S. is significant and consumers are seeking smoke-free alternatives at a faster pace than we've seen historically. In fact, over the past year, the estimated number of adult consumers in the e-vapor and oral tobacco categories grew to approximately 28 million, nearly as large as the adult smoker population. We estimate that smoke-free alternatives represented approximately 45% of the total nicotine space, up 5 percentage points from the prior year. For the total nicotine space, industry equivalized nicotine volumes increased for the second consecutive year and grew by approximately 2% over the past five years on a compounded annual basis. The growing adoption of smoke-free alternatives is encouraging and directly aligned with our vision and the growth aspirations of our smoke-free businesses. In addition, decades of deliberate actions to prevent youth tobacco use are yielding results, and underage tobacco usage rates are at historic lows. Together, these trends are very encouraging for public health and the harm reduction opportunity. However, the primary driver of industry and smoke-free growth continues to be the widespread availability of illicit disposable e-vapor products, which is jeopardizing the long-term opportunity for tobacco harm reduction. We estimate that the e-vapor category grew by approximately 30% in 2024 and that illicit products represent more than 60% of the category. At year-end, we estimate that there were 20 million vapors, up nearly 20% from the prior year, driven exclusively by disposable vapors. Our data also show that approximately 40% of the growth in disposable vapors came from those with no prior cigarette usage. It has become clear that two markets exist in the U.S., one for those who operate within the regulatory framework and one for those who flagrantly violate and evade the rules. In the simplest terms, we believe the regulatory structure is broken and the tobacco marketplace is not operating as Congress intended. The FDA has not authorized enough smoke-free products to meet consumer demand with legal products and regulators are not holding bad actors accountable. A listed product manufacturers, distributors and retailers have yet to experience any material consequences for violating federal laws and regulations. This dynamic continues to make the operating environment challenging for responsible manufacturers and retailers and is confusing for consumers seeking FDA authorized products. In 2023, we introduced our 2028 enterprise goals to more clearly define where we are headed. We believed our deep understanding of adult tobacco consumers, our comprehensive smoke-free portfolio and our industry-leading capabilities would help make them a reality. When we established these goals, we were aware of a small illicit e-vapor market, not dissimilar from illicit markets and other tobacco categories throughout our history. However, the illicit e-vapor market has grown to a size and scale beyond our expectations. We believe this dynamic compromises our ability to achieve our 2028 smoke-free volume and revenue goals. In addition, we believe it compromises our ability to achieve the NJOY specific financial targets we established in connection with that transaction. As a result, we are reassessing these smoke-free goals and NJOY targets and anticipate providing updates when we have more clarity on how the legitimate e-vapor market may evolve. We will be looking for signs of material progress, such as a decline in the illicit growth -- in the growth of illicit products. A meaningful increase in the number of illicit products prevented from entering the U.S. and DOJ or state AGs bringing litigation against illicit manufacturers, distributors and importers. Encouragingly, earlier this month, nine state AGs and the District of Columbia announced various actions against illicit e-vapor importers, distributors and retailers. We also believe the FDA can restore order to the market by authorizing more PMTAs to establish a legal market of alternatives for consumers and by partnering with other federal agencies to prevent illicit products from entering the country. I am optimistic that these issues can and will be addressed. Let me be clear, we remain steadfast in our commitment to our vision and to building a portfolio of FDA authorized smoke-free products for adult smokers and adult consumers currently using smoke-free products. This update to our 2028 enterprise goals does not impact our corporate financial goals or long-term growth goals. And our progress on our goals can be found in the earnings release we issued this morning. Let's now transition to our smoke-free performance, beginning with 2024 was a year of growth and learning for NJOY, and we are pleased with its performance in the context of the broader e-vapor market as NJOY grew volume and share in a competitive pod segment. NJOY's progress was driven by several actions taken throughout the year, which I'll briefly highlight. In 2024, NJOY expanded distribution base to over 100,000 stores. Secured premium position at retail and more than 80% of contracted stores through NJOY's first trade program, executed 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 consumables shipment volume grew by more than 15% to 12.8 million units in the fourth quarter. Consumables shipment volume for the full-year was 46.6 million units. And NJOY device shipment volume for the fourth quarter grew by more than 22% to 1.1 million units and was 5 million units for the full-year. In the fourth quarter, NJOY's retail share of consumables was 6.4 share points, up 2.8 share points versus the year-ago period. Grew its share of consumables by two-tenths of a share point sequentially, while the retail price increased by over 20%, indicating strong demand for the brand. Before moving on, I'll mention the litigation before the U.S. International Trade Commission. Yesterday, the ITC issued its final determination in Jule's case against. The ITC agreed with claims with respect to the four patents in this case. We disagree with the ITC's decision and continue to believe that patents are invalid and that ACE does not infringe on these patents. As a remedy, the ITC issued an exclusion order and cease and dismissed orders barring the importation and sale of ACE. The ITC's decision is currently under a 60 -day review period by the Office of the U.S. Trade Representative, which could reject the ITC's decision. Continues work on its product solution that addresses all of the patents at issue in the event the ITC's decision is not rejected. This decision would severely limit FDA authorized choices, including the only FDA authorized menthol evapor products and undermines public health, especially in context of a market that is overrun by a listed products. Regarding case against, in December, the administrative law judge issued an initial determination finding that products did not infringe on NJOY's patents. We have petitioned the ITC to review and reverse the ALJ's initial determination. We expect the ITC to issue a final determination in early-April. Moving to the oral tobacco category. In the fourth quarter, oral nicotine pouches grew 9.6 share points versus the prior year and represented over 45% of the category. Oral nicotine pouches were the primary contributor to the estimated 8% increase in oral tobacco industry volume over the past six months. Kelix continued to participate in the category growth as on reported shipment volume grew by more than 44% year-over-year to nearly 44 million cans in the fourth quarter. Performed well at retail, growing its share of the oral tobacco category by two share points year-over-year to 8.9% in the fourth quarter. Retail share was unchanged sequentially despite reduced promotional investments and increased competitive pressure. Consumer for continues to build an approximately 800,000 consumers regularly purchased on in the fourth quarter, an increase of more than 40% versus the prior year. This growth included increased sourcing from competitive pouch brands. Performance was enabled by a variety of strategic investments Helix made throughout the year, including a new trade program that created broader visibility and secured premium fixture position for nearly 80% of Orn's volume and a fresh new-look for Own Packaging and the -- its own equity campaign to further differentiate the brand. As a result of these efforts, Helix achieved profitability for the first time in the fourth quarter ahead of its 2025 goal. And we anticipate Helix will be profitable for the full-year 2025. Outside of the U.S., Owen Plus is competing in the nicotine palp space in Sweden and the United Kingdom. In both markets, OnePlus has been incremental to our total portfolio sourcing mainly from competitive brands. OnePlus' FlexTech Pouch offers a unique product experience and we are encouraged by the steady momentum that is building at retail and on e-commerce. We are using consumer insights to inform our plans as we are launching two new flavors, raspberry Lemon and watermelon mint in both markets to appeal to evolving consumer preferences. We look-forward to bringing to the U.S. once authorized. In heated tobacco, we believe we are developing a portfolio of products that will appeal to adult smokers seeking innovative and hailable alternatives to evapor products. We are moving forward with regulatory preparations to bring heated tobacco stick products to the U.S. through Horizon, our joint-venture with JT. During 2024, we made great progress towards our PMTA and accelerated our work on an MRTPA submission for Plume. We now expect to make a combined submission in midyear 2025. And in December, we commenced a small-scale test launch of Swick, our heated tobacco capsule product through e-commerce in Great Britain. We expect to use consumer insights from the test to further inform our strategies. Turning to our 2025 financial outlook. We remain committed to tobacco harm reduction in the U.S. and continue to believe there is a significant opportunity to shift millions of smokers to FDA authorized smoke-free alternatives. Our planned investment areas include market 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 2025, 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 product enforcement and regulatory litigation and legislative developments. Considering these factors, we expect to deliver 2025 full-year adjusted diluted EPS in a range of $5.22 to $5.37. This range represents an adjusted diluted EPS growth rate of 2% to 5% from a $5.12 base in 2024. Our guidance includes the impact of one fewer shipping day-in 2025, which occurs in the fourth -- in the first-quarter, assumes a limited impact on combustible and e-vapor product volumes from enforcement efforts in the illicit e-vapor market and includes the reinvestment of anticipated cost-savings related to our previously-announced Optimize and Accelerate initiative. In addition, the guidance range includes lower expected net periodic benefit income. I'd also like to welcome Rich Stoddard to our Board of Directors as announced this morning. MR. Stoddard's extensive global marketing and executive leadership experience will be a tremendous asset to Altria. I'll now turn it over to Sal to provide additional detail on our business and financial results.
