Altria Group Inc (NYSE:MO) has introduced a new product called Verve – a chewable, spit-free, oral product that contains nicotine but no tobacco – in select markets in the U.S.  The company has upped its focus on smokeless products in recent years as they offer considerable growth potential and attract lower excise taxes than cigarettes. Separately, in some good news for the company, Altria has won the case involving Marlboro Lights in Minnesota.
We have a $32.60 price estimate for Altria, which is slightly above the current market price.
Focus on Smokeless Products
The new product, Verve, is in line with the company’s policy of developing lower risk, smokeless products. To develop innovative non-combustible nicotine containing products, Altria even entered into an agreement with Okono, an affiliate of Fertin Pharma, in 2011. In the same year, Altria also launched Skoal X-tra varieties and two new Skoal Snus products which helped boost its volume. Even the Copenhagen brand benefited from Wintergreen pouches introduced in 2011. Unlike the cigarette volumes, which have been declining for several years now, we expect the volume for smokeless tobacco products to increase at an annual rate of 4% in the coming years.
Altria Wins ‘Lights’ Case
Altria has won a Minnesota case involving the ‘Lights’ cigarettes. The case was filed over 10 years ago and it represented smokers who had purchased Marlboro Lights in Minnesota from 1971 to 2004. In the lawsuit, the plaintiffs claimed Philip Morris USA (owned by Altria Group Inc) misled consumers into believing that Lights cigarettes were less harmful than regular cigarettes. This is good news for the company as it will have more cash to pay as dividends to its shareholders. Notes:
- Altria’s New Nicotine Lozenge Shows Need for FDA to Regulate All Tobacco Products so Consumers Aren’t Big Tobacco’s Guinea Pigs, sacbee.com, May 22, 2012 [↩]
- Altria ‘Lights’ Case Victory, More Cash For Dividends (MO, RAI, LO, PM), 247wallst.com, May 30, 2012 [↩]