I think when you think about e-vapor, we’ve certainly seen competitors step up their promotional spend as we have expanded distribution of NJOY. We’ve shared with you, if you will, the consumer research that we did prior to the acquisition. We feel good about the proposition we have with NJOY and the early consumer feedback we have on the product in the marketplace. So we look forward to being able to continue to engage with the consumer as we move through 2024.
Operator: We’ll hear next from Bonnie Herzog with Goldman Sachs.
Bonnie Herzog: Murray definitely all the best to your retirement.
Billy Gifford: I’m sure he will appreciate that, Bonnie. Thanks.
Bonnie Herzog: Yes. I just — I had a quick follow-up question on your smokeable segment. I guess, Billy and so, I mean, could you guys give us a sense of what’s factored into your EPS growth guidance this year? I guess I’m thinking about it on the low end of your guidance range. Just does the low end assume essentially no dollar profit growth for smokeable, just trying to understand maybe how much flexibility you have to kind of hit some of these ranges?
Billy Gifford: Yes. I appreciate your question, Bonnie. You’ll recall we don’t really offer guidance down to the level because we’re balancing that. That’s why we put forward the enterprise goals. Remember, one is the overall margin for the portfolio of products because, as I mentioned earlier, each of those categories have been being different points of investment. What we strive for in the combustible segment is to maximize profitability in the long-term and we’re going to make appropriate investments in Marlboro and investments in the growth categories. And so we try to lay for you, if you will, the groundwork of how we’re going to manage the business through time.
Bonnie Herzog: And then I did want to ask about your smoke-free vision. Just hoping for maybe a little more details on the vision and where you expect by the end of the year in terms of progress. You touched on NJOY and the Navy. A little bit more color and update on your JV with JTI et cetera. And then I’m also trying to understand how to think about required investments this year versus last year. Can you give us a sense if spending behind your vision will accelerate in ’24? And if so, are your core smokeable and I guess, all tobacco business is strong enough to support this stepped up spending and your ability ultimately to generate EPS growth. I think that’s one of the key questions here.
Billy Gifford: Yes, there was a lot in that question, Bonnie, so I’ll try to unpack it, but follow-up if I missed the piece. So I’ll start in the reverse order. Yes, we do more like our core businesses are very strong when you look at the strength of Marlboro in the marketplace, you look at the aspiration of Copenhagen and MST and you look at the performance of those businesses through time, you see that they’re very strong and continue to be strong. As far as investments, I’ll speak — you ask about Ploom. We shared in our remarks, we’re continuing to work on the application there. We expect to file that in the first half of 2025. It’s just the application process and compiling it and the studies that are involved with that.
But we feel good about what we’ve seen with interactions with the consumer to this point. As far as the NJOY, certainly, you can expect more investment in 2024 than you did in 2023. Some of that’s just the nature of we didn’t close it until June 1, but now we’re in 75,000 stores. And so we’re really looking forward to having that in the stores where consumers are shopping, having it displayed much more prominently than it ever has been we secured, as I mentioned, the great spot on the fixture. But having that in the consideration set, we feel like once we get that in consumers’ hands, consumer research would tell us that they will convert through time for the product because they enjoy it.
Operator: [Operator Instructions] we’ll go now to Callum Elliott with Bernstein.
Callum Elliott: Another one on price mix, but maybe from a slightly longer-term perspective. We’ve obviously seen a divergence. I think I would describe it this year between your pricing strategy and some of your big peers. And it seems like the peers are signaling that they’re set to continue on their path. So I guess this is for Billy. My question is do you see a strategic imperative to react to some of that more competitive pricing? And maybe is that what we’re seeing in the big step down in sequential price mix this quarter? Or are you content over the longer term to continue this divergence?
Billy Gifford: Yes. I appreciate your question. I think if you recall, as we progressed through 2023, we highlighted for you pockets of the U.S. where we felt like we needed to make some investments. Some in the menthol segment, we saw some competitors getting a bit aggressive in the menthol space, and we made those investments. And some was related directly to the discount category and some of the aggressiveness there. I think overall, when you look at Marlboro and its steadiness and share and its growth in the premium segment, you can see with the RGM capabilities and the data analytics that we have, we’re able to be very efficient and effective with spending in the marketplace. Trying to get, if you will, to the individual consumer so that we can deal with the individual consumer that is facing those either competitive decisions with the aggressiveness that they take or with just their economic situation.
And I think you see that we’ve actually been able to implement that very well, again, with the steadiness of Marlboro and the investments that we’ve made.
Sal Mancuso: I touched on this in our opening remarks that the utilization of the breadth of Marlboro’s brand family and utilizing SKUs to interact with consumers who are under economic pressure has occurred in the past. It’s happened with special blend as an example, during difficult economic times. So you mentioned — you called it a divergence, but I would say this is something that we’ve done in the past, and we’ve been able, as the economy improves to margin up those SKUs, but also see consumers return to mainline Marlboro.
Callum Elliott: I guess I’m just slightly surprised because I think your table in the quarterly metrics disclosures suggest that the macroeconomic pressure has actually lessened this quarter, whereas obviously, the price mix suggests that that trade down has accelerated in a very meaningful way.
Billy Gifford: Yes, I think you have to think about it as headwinds tailwinds. Certainly, gas prices have declined, so you can take the gas prices being a bit of a tailwind. You also have to think about the debt load and the cumulative impact of inflation on the total basket that our consumer purchases. It’s that cumulative impact that’s affected the discretionary income. And then I mentioned that load, just because from a debt load standpoint, the increase in interest rate also affects the discretionary income. So I think overall, if you think about the discretionary income, its down.
