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TheStreet Open House

On The Call: Altria Group CEO Marty Barrington

Stocks in this article: LO MO PM RAI

The Associated Press

Altria Group Inc., the owner of the biggest U.S. cigarette maker, Philip Morris USA, continues to focus its efforts on building its premium Marlboro brand which has been under pressure from competitors and lower-priced cigarette brands as consumers face economic challenges and unemployment remains high.

Those challenges are in addition to the tax hikes, smoking bans, health concerns and social stigma that have made the cigarette business tougher.

The Richmond, Va., company has introduced several new products with the Marlboro brand, often with lower promotional pricing. They include "special blends" of both menthol and non-menthol cigarettes to try to keep the brand growing and steal smokers from its competitors, who also have fought cigarette sales declines with promotional prices.

Altria recently introduced Marlboro Black in both menthol and non-menthol versions, which the company said distinguishes the product's "bold flavor." It also introduced Marlboro Eighty-Threes during the second quarter, which the company says provides "classic Marlboro flavor in modern, updated packaging."

While Marlboro's shipment volume declined less than one percent to 31.4 billion cigarettes in the second quarter, the top-selling brand gained 0.3 points of market share to end up with 42.9 percent of the U.S. market.

An increase of 24 percent in its discount cigarette brands such as Basic and L&M offset declines in its premium brands, as overall cigarettes volumes were flat in the quarter.

Less-expensive brands such as Pall Mall from Reynolds American Inc. and Maverick from Lorillard Inc. have attracted more smokers looking to save money.

Marlboro sold for an average of $5.71 per pack during the first quarter, compared with an average of $4.20 per pack for the cheapest brand.

In a conference call with analysts Tuesday regarding second-quarter earnings for Altria, CEO Marty Barrington discussed Marlboro's brand architecture.

QUESTION: As far as Marlboro's market share and pricing dynamics, how do you get comfort from the investments that are being made to build the brand's equity?

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