Altria (NYSE: MO) isn’t a household name in the consumer staples sector, but its main brand is probably one you know. Indeed, its Marlboro cigarette brand has a nearly 42% share of the U.S. cigarette market. Add in a 7.3% yield backed by a growing dividend, and you can see why investors would be attracted to Altria’s shares. Could a $10,000 investment help get you to millionaire status? Maybe, but you need to balance the reward against the risk before jumping in.
Altria is a consumer staples company because the tobacco products it makes are bought frequently by consumers regardless of the market environment. That has something to do with the nature of nicotine, of course, since tobacco, unlike food and personal care items, is not really a necessity. The main tobacco product that Altria sells is cigarettes.
Cigarette consumers tend to be very brand loyal, so the huge market share Altria enjoys with Marlboro is a big benefit over the competition. That said, Altria only operates in North America. It spun its foreign operations off as Philip Morris International (NYSE: PM) a number of years ago. So the company’s entire future rests largely on its ability to execute in just a single region.
Thus, when you step back, Altria has one major product with one major brand that operates in just one major market. That’s a lot of concentration and should cause most conservative investors to pause. What if something goes wrong with the one product with the one brand in the one market? It might look something like a multiyear decline in cigarette volumes that leads to a decline in Marlboro’s market share as more competition enters the broader tobacco market.
This is exactly what is happening to Altria today. The company’s cigarette volume fell 10.2% in 2024 (Marlboro’s decline was “just” 9%). Marlboro’s market share fell from 42.2% in 2023 to 41.7% in 2024. And Philip Morris International is increasingly competing with Altria in non-cigarette tobacco products.
Altria isn’t ignorant to the very material issues it faces. It has tried to bring in new products with more growth opportunities, including an investment in vape maker Juul and in a marijuana company. Both of those attempts to diversify beyond cigarettes flamed out, leading to billions of dollars worth of write-offs. It hasn’t given up, though, recently buying vape maker NJOY.
NJOY was further along in its development than Juul and the investment has been working out better. For example, NJOY ended 2024 with a 15.3% volume increase in the fourth quarter and a 2.8-percentage-point gain in market share to 6.4%. Both of those numbers were largely driven by Altria plugging NJOY into its strong and well-established distribution network. But they show the opportunity relative to the ongoing declines in the cigarette space.
