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Will Altria Successfully Address Stagnating Market Share?

Dec. 06, 2018 12:32 AM ETAltria Group, Inc. (MO)CRON, CRON:CA58 Comments
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Wealth Insights


  • Altria Group has thrived despite a declining smoker demographic because it has grown its market share over the span of decades.
  • With that trend leveling off, Altria needs to diversify its business in order to grow over the long term.
  • With potential deals with Juul Labs and Cronos Group in the works, investors need to pump the breaks a bit before becoming excited.
  • Both potential targets carry risks with them ranging from valuation, to industry make up.
  • Investors looking to enter the stock can benefit from what is currently an open window opportunity. The stock is attractively valued.

US tobacco company Altria Group (NYSE:MO) has been in the news recently with multiple reports of various merger and acquisition talks. The company appears to be addressing a troubling trend that has seen its Marlboro market share stagnate over the past handful of years. The company's flagship brand had been gobbling up market share for years, which has helped offset macro-level trends of declining cigarette use. With this market share growth reversing, the company is being pro-active in diversifying its business to strive for long term growth. While there are reasons to get excited about future prospects, investors should pump the breaks a bit. There are some things that investors should keep in mind as these ventures play out further.

Smoking Is Declining In America

The concept of fewer Americans smoking cigarettes is nothing new. A declining smoking rate has been a known trend for years. This doesn't mean that smoking is dead however. According to the CDC, there are still approximately 38 million Americans that smoke cigarettes.

source: Gallup

In recent years this trend has accelerated for a couple of reasons. Years of anti-smoking propaganda combined with alternatives to smoking such as vaporizers and electronic cigarettes have reduced the "start up rate". In other words, people aren't necessarily quitting - simply smokers are dying faster than new smokers are picking up the habit.

Altria Has Thrived Despite This

Altria has countered this trend for years in two ways. First, the addictive nature of tobacco gives Altria the ability to consistently raise prices without suffering much pushback from customers. People are simply going to find a way to fund their smoking habit.

Net Price of Marlboro Cigarettes as of 3rd Quarter Per Pack (by Fiscal Year)

2015 $6.16
2016 $6.28
2017 $6.64
2018 $6.79

Second, the company

This article was written by

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I provide straight forward insights on stocks and markets using fundamental analysis and common sense. - Bachelor's degree in Business Administration with a concentration in Financial Analysis. Been investing and following the markets for more than a decade.- Wealth Insights is an investor, and investment author. His content is not geared to anyone's specific investment goals, time horizons, or risk tolerance. Content is for illustrative purposes only, and is not intended to displace advice from a fee based financial adviser. It is not to be taken as investment advice, or influence investor decision making. Accuracy of data is not guaranteed.

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