Altria's premium tobacco brand Marlboro's percentage of promotion-sensitive customers lower than most due to high brand loyalty, even during weak economy, CEO says

Michelle Rivera

NEW YORK , October 27, 2011 (Associated Press) – Altria Group Inc., the owner of biggest U.S. cigarette maker, Marlboro maker Philip Morris USA, has been under pressure from its competitors and lower-priced cigarette brands as consumers face economic challenges and unemployment remains high.

That's on top of 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.

But Altria said its top-selling premium Marlboro brand lost 0.9 points of market share in the third quarter to end up with 41.7 percent of the U.S. market as it sold 10 percent fewer cigarettes. Marlboro sold for an average of $5.74 per pack during the third quarter, compared with an average of $4.22 per pack for the cheapest brand.

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

In a conference call with analysts Thursday regarding third-quarter earnings for Altria CEO Michael E. Szymanczyk discussed the company's Marlboro brand:

"If you look at Marlboro's share over the last few years, what you'd see is that there's about a share-point-and-a-half deviation spread that the brand has operated in. When we get inside the numbers, what we see is that's pretty much related to promotion-sensitive consumers. Every brand has a percentage of their makeup in promotion-sensitive consumers. Marlboro's level of that is lower than most because it has very high brand loyalty and the brand loyalty has maintained itself even as we've gone through some tough economic times."

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