Marlboro Brand Hurt by California's Cigarette Tax Increase, Altria Says

By Jennifer Maloney Features Dow Jones Newswires

California's $2 tax increase on cigarettes in April was a "big shock to the system" that continues to weigh on Marlboro's market share in the U.S., Altria Group Inc. said Thursday.

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Marlboro, the leading U.S. cigarette brand by sales, captured 43.2% of the market in the third quarter, down from 43.5% in the previous quarter and 43.6% in the first three months of the year. Because of Marlboro's outsize share of the California market, at more than 50%, the brand was particularly sensitive to the tax increase, Altria Chief Executive Marty Barrington said on a call with analysts.

New products introduced by competitors also made a dent, he said, adding that he expects the decline to stabilize. "But it's going to take some time," he said.

Cigarette price increases, which for years have offset falling sales volumes for U.S. tobacco companies, didn't fully make up for the drop in Altria's cigarette sales in the quarter.

Revenue for its smokable products fell 2.8% while volume fell 6.2%. Nevertheless, profit on Altria's smokable products, including cigarettes and cigars, increased 7.7%, boosted by cost cuts, and their adjusted profit margin expanded 4.5 percentage points to 52.2%.

To stabilize Marlboro's market share, Mr. Barrington said, the company is reallocating marketing resources and adjusting promotional programs. Altria also said it targeted California and Washington state in its recent launch of Marlboro Black Label, a matte-packaged line of Marlboro cigarettes.

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Write to Jennifer Maloney at jennifer.maloney@wsj.com

(END) Dow Jones Newswires

October 26, 2017 14:34 ET (18:34 GMT)