What Are Some Obstacles To Altria’s Long-Term Growth?

The nature of Altria’s business lends itself to an exorbitant level of scrutiny, taxation, and government regulation. Tobacco products are subject to substantial excise taxes, and significant increases in tobacco product-related taxes or fees have been proposed or enacted within the U.S.  Between the end of 1998 and February 22, 2016, the weighted-average state and certain local cigarette excise taxes increased from $0.36 to $1.54 per pack. During 2015, Alabama, Nevada, Kansas, Vermont, Louisiana, Ohio, Rhode Island, and Connecticut enacted legislation to increase their cigarette excise taxes. The Federal Budget released by the President in February 2016 proposes significant increases in the FET (Federal Excise Taxes) for all tobacco products. The proposed budget would increase the FET on a pack of cigarettes by $0.94 per pack, raising the total FET to $1.95 per pack, and would also increase the tax on other tobacco products by a proportionate amount. Furthermore, cigars, cigarettes, and other tobacco products face strong rules on advertising along with marketing restrictions with compulsory guidelines for health warnings on the packaging. Altria also faces a threat from a growth in illicit trade, such as the sale of counterfeit cigarettes and illegal imports.

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