Altria Group, Inc. (NYSE:MO) Q3 2023 Earnings Call Transcript

And then I think adopting comprehensive border programs to prevent importation. A lot of these products are imported, they’re imported illegally, and then they’re sold illegally. So they seem to be very, very simple. That’s why I’m optimistic that the FDA will take action and be able to work to bring order to the retail environment.

Owen Bennett: And then when they spoke about statutory changes, do you see any possibility of that happening?

Billy Gifford: They have the tools in the authority now for illegal products in the marketplace. So certainly, we would be open to statutory changes. But I mean, when you think about it, they have the ability to do that now, Owen. So it seems like — and I highlighted those four simple steps. They have the tools and they have the authority to do it today.

Owen Bennett: Okay. Fine. And then just my second question, on the QC [ph] metrics, you showed a slide highlighting the spike in the number of adult vapors. This has replaced the slide you showed historically that actually showed estimated industry rate volumes. Can you maybe talk about what the volume number was for the quarter? I just want to get a better idea of what the vape impact would be on cigarettes from an absolute volume perspective? Thank you.

Billy Gifford: Yeah. What we tried to do, the reason we went with the vapors as we had previously didn’t share the volume is the nature of this illicit marketplace. It’s hard to track that’s the nature of it being illicit. It’s going through different distribution channels than what typical products go through because it’s illegally getting to the marketplace. I think when you think about the impact of the cigarette volume, what we tried to do on the decomp is show you that we estimate it to be between 1.5 to 2.5 over the last 12 months. So we tried to provide you with that data. Again, as I mentioned earlier, I know that’s a bit of a wide range. We’re trying to fill what we feel like there are some data gaps so that we have a better read of what’s taking place in the marketplace through distribution channels that is different than typical products.

Owen Bennett: Okay. And then any broad guess of what the sequential volume increase was industry-wise in the second quarter, given kind of the big variance?

Billy Gifford: Yeah. It’s — again, it’s tough just because of the nature, all of the growth. We feel like most of the growth that occurred in the e-vapor space. What we saw was pod industry was down slightly. Overall, e-vapor was up, and that growth was coming from the illicit disposables that are in the marketplace.

Owen Bennett: And then how overall was it? The overall e-vapor?

Billy Gifford: Yeah. Again, with the inability to be able to estimate the total market space because of the illicit product in the marketplace, we didn’t want to put an overall growth. We have an estimate, but we don’t want to put an overall growth.

Sal Mancuso: Hey, Owen. This is Sal. And I would also point out, not only is it flavors in this illicit disposable category, flavors are really not in line with regulations. They’re flavors like bubblicious cotton candy. I mean, they — I agree with Billy the need for enforcement is very important, and we need it to happen. We’d like it to happen as soon as possible.

Owen Bennett: Okay. Thanks gens. It’s very helpful. Appreciate it.

Billy Gifford: Thank you.

Operator: [Operator Instructions] We will take our next question from Matt Smith with Stifel. Please go ahead.

Matthew Smith: Hi. Thank you, operator, and good morning all.

Billy Gifford: Good morning, Matt.