Altria Group Inc. (MO) is a holding company whose main subsidiaries produce tobacco products. The company traces its roots back to 1847, when Philip Morris & Co. Ltd. -- creator of the iconic Marlboro cigarette brand -- was first established. The company was incorporated in 1919, expanded throughout the 1930s, '40s and '50s, and by the 1980s had become the leading cigarette maker in the U.S. In 1985, Philip Morris Companies incorporated as a holding company and parent of Philip Morris Inc. It was this holding company that was later renamed as Altria Group in 2003, a name that the company said would better reflect the diversity of its portfolio beyond tobacco. Today, however, tobacco is still the primary business of Altria's subsidiaries, with tobacco products comprising about 98% of the company's $26.2 billion of net revenue in 2020. Altria's market cap is $87.9 billion, as of July 12, 2021.
In the past, the company has made major attempts to diversify into other lines of business, especially during the latter decades of the 20th century when consumer demand for tobacco began to decline in key markets. Philip Morris acquired a controlling interest in the Miller Brewing Co. in 1970 and purchased soft-drink maker Seven-Up Co. in 1978. Between 1985 and 2000, the company acquired General Foods Corp., Kraft Inc., and Nabisco, all of which were merged into what eventually became Kraft Foods Inc. However, these acquisitions were later divested. Kraft Foods was spun off in 2007. And the company also later sold Seven-Up and Miller Brewing.
Since these actions, the company's focus has been primarily domestic after spinning off Philip Morris International Inc. (PM) in 2008. Philip Morris has boosted sales in the domestic tobacco market both through partnerships, and also through a series of acquisitions into new areas with the potential for rapid growth. After scrapping talks to reunite, for example, the company and Philip Morris International launched IQOS, a heated tobacco product designed to provide users with the rush from nicotine, but with fewer toxins. IQOS launched in October 2020 and signals Altria's willingness to innovate in creating new products.
The company's series of acquisitions illustrate, again, its focus on shifting away from the shrinking cigarette market and, instead, moving into related markets. These include buying companies that sell smokeless tobacco, marijuana, electronic cigarettes, cigars, and nicotine pouches. We look in more detail at some of these acquisitions below. Breakdowns for revenue and profit are available for some, but not all, of these companies.
- Type of Business: Smokeless Tobacco Producer
- Acquisition Price: $10.4 billion
- Acquisition Date: Jan. 7, 2009 (completed)
UST is a holding company that was first incorporated in 1986. However, one of its main subsidiaries, U.S. Smokeless Tobacco Company LLC, traces its roots back to a tobacco shop opened by George Weyman in Pittsburgh in 1822. UST was bought by Altria in 2009. The U.S. Smokeless Tobacco purchase added two leading smokeless tobacco brands to the Philip Morris' product family: Copenhagen and Skoal. Smokeless tobacco use, unlike that of cigarettes, has been increasing since 2000.
The UST acquisition also added wine manufacturer Ste. Michelle Wine Estates Ltd. to Altria's portfolio. However, on July 9, 2021, Altria announced that it had reached an agreement to sell its wine business to private equity firm Sycamore Partners Management L.P. for approximately $1.2 billion. The all-cash transaction is expected to close during the second half of 2021. Altria plans to use the proceeds from the sale for additional share repurchases.
Cronos Group Inc.
- Type of Business: Cannabis Producer
- Acquisition Price: $1.8 billion for 45% equity stake
- Acquisition Date: Dec. 7, 2018 (announced)
- Annual Net Revenue (2020): $46.7 million
- Annual Net Loss (2020): $75.3 million
Canadian cannabis producer and distributor Cronos Group Inc. (CRON) was founded in 2012. In December 2018, Altria announced that it would acquire newly issued shares of Cronos worth $1.8 billion for a 45% ownership interest in the company. The agreement also included a warrant allowing Altria to increase its ownership to 55% over the next four years. Marijuana stocks prices have fallen tremendously since the deal. The acquisition is a further demonstration of Altria's intent to diversify. Altria's ownership interest in Cronos Group at the end of 2020 stood at 43.5%, down from its initial 45% stake due to additional shares being issued by Cronos and for which Altria did not exercise its Fixed-price Preemptive Rights to purchase additional shares at a pre-agreed price.
Juul Labs Inc.
- Type of Business: Electronic Cigarette Company
- Acquisition Price: $12.8 billion for a 35% economic interest
- Acquisition Date: Dec. 20, 2018
Silicon valley startup and e-cigarette maker Juul Labs Inc. was founded in 2015. Altria acquired a 35% stake in Juul in 2018, valuing the company at $38 billion. The acquisition demonstrates Altria's shift toward more innovative segments of the tobacco market. However, the acquisition hasn't been smooth. Vaping, the term used to describe the inhaling and exhaling of vapor produced by e-cigarettes, has come under stiffer regulatory scrutiny from health officials as a vaping-related illness has led to a number of deaths and hospitalizations. Amid these health concerns, Juul has faced mounting lawsuits over its marketing practices as vaping among teens has surged.
In April 2020, the Federal Trade Commission (FTC) filed a lawsuit against Altria claiming that the company's 35% investment in Juul violated antitrust laws. The FTC alleges that Altria and Juul made an illegal side deal that resulted in Altria pulling its own e-cigarettes from the market just prior to its investment in Juul, thus eliminating a source of competition from the market. The trial began on June 2, 2021. If Altria is found guilty of violating antitrust laws, the company could be forced to divest its stake in Juul and result in termination of the noncompete deal between the two companies.
John Middleton Co.
- Type of Business: Cigars and Pipe Tobacco Manufacturer
- Acquisition Price: $2.9 billion (announced)
- Acquisition Date: Dec. 11, 2007 (completed)
John Middleton Inc. was first established by John Middleton in 1856 as a small tobacco shop selling cigars and pipe tobacco in downtown Philadelphia. A century and a half later, Altria acquired the company from privately held Bradford Holdings. Today, John Middleton Co. manufactures machine-made, large cigars and pipe tobacco as a wholly-owned subsidiary of Philip Morris USA. The acquisition illustrates another way that the company is diversifying away from cigarettes and into sectors of the tobacco market that are growing. At the time of the acquisition, Altria said that the market for machine-made cigars had grown at an annual compound rate of 4% between 2003 and 2007.
Burger Söhne Holding AG (the “Burger Group”)
- Type of Business: Nicotine Pouch Producer
- Acquisition Price: $372 million for an 80% stake (announced)
- Acquisition Date: June 3, 2019 (announced)
Burger Söhne Holding AG, which is headquartered in Switzerland, was founded in 1864. Last year, Altria acquired an 80% stake in the Burger Group and formed a subsidiary called Helix Innovations LLC to act as the parent company of the Burger Group subsidiaries engaged in the production of a flavored nicotine pouch with the brand name, on!. The product is a pouch that users put in their mouth in order to experience a nicotine rush without the chewing, spitting, and odor of tobacco that comes from chewing tobacco.
Altria Group Diversity & Inclusiveness Transparency
As part of our effort to improve the awareness of the importance of diversity in companies, we have highlighted the transparency of Altria Group’s commitment to diversity, inclusiveness, and social responsibility. The below chart illustrates how Altria Group reports the diversity of its management and workforce. This shows if Altria Group discloses data about the diversity of its board of directors, C-Suite, general management, and employees overall, across a variety of markers. We have indicated that transparency with a ✔.
|Altria Group Diversity & Inclusiveness Reporting|
|Race||Gender||Ability||Veteran Status||Sexual Orientation|
|Board of Directors|
|General Management||✔ (U.S. Only)||✔ (U.S. Only)|
Altria Group Inc. "About Altria: At-A-Glance." Accessed Jul. 3, 2020.
The Wall Street Journal. "Altria and Philip Morris Consider What Brand to Use if They Merge." Accessed Jul. 3, 2020.
Encyclopaedia Britannica. "Altria Group." Accessed Jul. 3, 2020.
Altria Group Inc. "Form 10-K for the fiscal year ended December 31, 2020," Page 27. Accessed July 12, 2021.
The New York Times. "Kraft, From Roll-Up to Spinoff." Accessed Jul. 5, 2020.
Altria Group Inc. "Our Heritage." Accessed Jul. 5, 2020.
CNBC. "Philip Morris and Altria end merger talks following chilly response from investors." Accessed Jul. 5, 2020.
CNBC. "Altria launches Iqos tobacco device in US, and the timing couldn’t be better." Accessed Jul. 5, 2020.
Centers for Disease Control and Prevention. "Cigarette Smoking Among U.S. Adults Hits All-Time Low." Accessed Jul. 5, 2020.
The Wall Street Journal. "Altria Completes UST Acquisition." Accessed Jul. 5, 2020.
Reference for Business. "UST Inc. - Company Profile, Information, Business Description, History, Background Information on UST Inc." Accessed Jul. 5, 2020.
Centers for Disease Control and Prevention. "Smokeless Tobacco Use in the United States." Accessed Jul. 5, 2020.
Altria Group Inc. "Altria Reaches Agreement to Sell Its Ste. Michelle Wine Estates Business." Accessed July 12, 2021.
Altria Group Inc. "Altria to Make Growth Investment in Cronos Group." Accessed Jul. 6, 2020.
Business Wire. "Altria to Make Growth Investment in Cronos Group." Accessed Jul. 6, 2020.
Cronos Group Inc. "Form 10-K for the fiscal year ended December 31, 2020," Page 72. Accessed July 12, 2021.
MarketWatch. "Cronos Group Inc." Accessed Jul. 6, 2020.
Altria Group Inc. "Form 10-K for the fiscal year ended December 31, 2020," Page 73. Accessed July 12, 2021.
Altria Group Inc. "Altria Makes $12.8 Billion Minority Investment in JUUL to Accelerate Harm Reduction and Drive Growth." Accessed Jul. 6, 2020.
Cision PR Newswire. "JUUL Labs Issues Statement About Altria Minority Investment and Service Agreements." Accessed Jul. 6, 2020.
CNBC. "People are still dying from mysterious vaping illness, even as outbreak slows." Accessed Jul. 6, 2020.
CNBC. "Altria stock craters after $4.1 billion hit from Juul investment, blames growing legal risk." Accessed Jul. 6, 2020.
Federal Trade Commission. "FTC Sues to Unwind Altria’s $12.8 Billion Investment in Competitor JUUL." Accessed Jul. 6, 2020.
Wall Street Journal. "Altria-Juul Deal Goes to Trial." Accessed July 12, 2021.
Reuters. "Altria to acquire cigar maker John Middleton." Accessed Jul. 5, 2020.
Business Wire. "Altria Group, Inc. Completes Acquisition of John Middleton, Inc." Accessed Jul. 5, 2020.
John Middleton Co. "About John Middleton." Accessed Jul. 6, 2020.
Reuters. "Altria to acquire cigar maker John Middleton." Accessed Jul. 6, 2020.
Altria Group Inc. "Altria Enters Growing Oral Nicotine Products Category with on! Pouch Product." Accessed Jul. 6, 2020.
Business Wire. "Altria Enters Growing Oral Nicotine Products Category with on! Pouch Product." Accessed Jul. 6, 2020.
Crunchbase. "Burger Söhne Holding AG." Accessed Jul. 6, 2020.