Investor Day June 23, 2015 For Investor Relations Purposes Only - - PowerPoint PPT Presentation

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Investor Day June 23, 2015 For Investor Relations Purposes Only - - PowerPoint PPT Presentation

May 17, 2023 568 likes •2.39k views

Investor Day June 23, 2015 For Investor Relations Purposes Only Safe Harbor Statement Statements, including earnings guidance, in this presentation that are not reported financial results or other historical information are forward - looking

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June 23, 2015

Investor Day

For Investor Relations Purposes Only

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Safe Harbor Statement

Statements, including earnings guidance, in this presentation that are not reported financial results

  • r other historical information are “forward-looking statements” within the meaning of Private

Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current plans, estimates and expectations, and are not guarantees of future performance. They are based

  • n management’s expectations that involve a number of business risks and uncertainties, any of

which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Altria undertakes no obligation to publicly update or revise any forward-looking statement other than in the normal course of its public disclosure obligations. The risks and uncertainties relating to the forward-looking statements in this presentation include those described under “Risk Factors” in Altria’s Annual Report on Form 10-K for the year ended December 31, 2014 and under “Cautionary Factors That May Affect Future Results” in its Quarterly Report on Form 10-Q for the period ended March 31, 2015. Reconciliations of non-GAAP financial measures included in this presentation to the most comparable GAAP financial measures are available on Altria’s website at altria.com.

For Investor Relations Purposes Only

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Altria IR App

Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.

For Investor Relations Purposes Only

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Agenda

  • Introduction and Overview
  • Financial Update
  • Consumer Engagement and Sales and Distribution Capability
  • Questions and Answers
  • Break
  • Panel Discussion: Navigating the External Environment
  • Investing in Premium Brands: Focus on Marlboro
  • Questions and Answers
  • Lunch: The Marlboro Experience

For Investor Relations Purposes Only

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Other Team Members

Marlboro Brand OpCo Presidents AGDC

For Investor Relations Purposes Only

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For Investor Relations Purposes Only

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For Investor Relations Purposes Only

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For Investor Relations Purposes Only

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Recognized as a Best Employer

Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.

For Investor Relations Purposes Only

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For Investor Relations Purposes Only

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Altria’s Goals

Long-term Financial Goals

  • Grow adjusted diluted EPS at an average annual

rate of 7% to 9%

  • Maintain a target dividend payout ratio of

approximately 80% of adjusted diluted EPS

For Investor Relations Purposes Only

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Consistent Adjusted Diluted EPS* Growth

$1.75 $2.57

2009 2014 +8.0%

CAGR

Source: Altria company reports *For reconciliation of non-GAAP to GAAP measures visit altria.com

For Investor Relations Purposes Only

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Dividend Payout Ratio

Source: Bloomberg and Thomson Reuters

80.9% 79.7% 78.4% 73.2% 69.8% 60.7% 59.8% 56.6% 53.8% 52.6%

MO PM RAI LO KRFT GIS KO PEP HSY DPS

S&P Food, Beverage and Tobacco Index

NOTE: Altria’s dividend payout ratio is based on the current annualized dividend (Last increased August 2014) of $2.08 / $2.57 2014 adjusted diluted EPS. In addition, Altria’s announced targeted dividend payout ratio is ~80% of adjusted EPS. All dividend payout ratios have been calculated using each company’s current annualized dividend rate / 2014 actual and estimated consensus adjusted diluted EPS. Dividend payout ratio ranks companies in the Food, Beverage and Tobacco Index in these respective categories as of May 12, 2015. Source: Bloomberg and Thomson First Call

For Investor Relations Purposes Only

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An Attractive Dividend Yield

Source: Bloomberg, Standard and Poor's Note: As of June 15, 2015

4.4% 2.4% 2.0%

Altria 10-year U.S. Treasury S&P 500

Altria’s dividend yield was higher than virtually all S&P Food, Beverage and Tobacco peers.

For Investor Relations Purposes Only

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Strong Dividend Growth

Note: Year-end annualized rate: 5-year CAGR. Dividend is based on the current annualized dividend (Last increased August 2014)

Altria increased its dividend 48 times in the past 45 years.

Source: Altria company reports

$1.36 $2.08 2.9% 8.6% 7.9% 7.3% 9.1% 8.3%

$0.00 $2.10 2009 Feb-10 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 2014 +8.9%

CAGR

For Investor Relations Purposes Only

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Remarkable Record of Value Creation

Source: Bloom Partners

$360 $32,000 $510,000

1970 S&P 500 (through Mar 2015) Altria (through Mar 2015)

Note: Includes spin-offs and dividend reinvestment

For Investor Relations Purposes Only

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Our Financial Heritage

Source: CNN Money Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.

For Investor Relations Purposes Only

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230% 105% 116%

Altria Group S&P 500 S&P Food, Beverage & Tobacco

Total Shareholder Return 2010-2014

Source: Bloomberg 12/31/2009-12/31/2014 Note: Total shareholder return is simple price appreciation plus the reinvestment of the dividend as of the ex-dividend date.

For Investor Relations Purposes Only

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Altria’s Strategies

Grow new income streams with innovative tobacco products Maximize income from core premium tobacco businesses over the long term Manage diverse income streams and strong balance sheet to deliver consistent financial performance

For Investor Relations Purposes Only

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Altria’s Strategies

Grow new income streams with innovative tobacco products Maximize income from core premium tobacco businesses over the long term Manage diverse income streams and strong balance sheet to deliver consistent financial performance

For Investor Relations Purposes Only

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Altria’s Strategies

Grow new income streams with innovative tobacco products Maximize income from core premium tobacco businesses over the long term Manage diverse income streams and strong balance sheet to deliver consistent financial performance

For Investor Relations Purposes Only

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Smokeable Products Segment

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$6.0 $6.9

2011 2014

40.3% 44.1%

2011 2014

Smokeable Products Income Growth

Adjusted OCI* - $ in Billions

+4.4%

CAGR

Adjusted OCI* Margins

+3.8pp

Source: Altria company reports *For reconciliation of non GAAP to GAAP measures visit altria.com

For Investor Relations Purposes Only

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44.1% 46.4%

Q1 2014 Q1 2015

$1.5 $1.7

Q1 2014 Q1 2015

Smokeable Products Income Growth

Adjusted OCI* - $ in Billions Adjusted OCI* Margins

+2.3pp

Source: Altria company reports *For reconciliation of non GAAP to GAAP measures visit altria.com

+12.6%

For Investor Relations Purposes Only

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44%

Marlboro

Marlboro Retail Share Leadership

Source: IRI/MSAi, Cigarettes ending 3/31/15

Next 10 Largest Cigarette Brands = 43%

For Investor Relations Purposes Only

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Cigarette Retail Share Leadership

Source: Period ending 3/31/15; IRI/MSAi

51%

PM USA

Q1 2015

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$896 $1,060

2011 2014

Smokeless Products Adjusted OCI* Growth

Source: Altria company reports

+5.8%

CAGR

*For reconciliation of non GAAP to GAAP measures visit altria.com

$ in Millions

For Investor Relations Purposes Only

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Smokeless Products Segment Performance

  • Leading premium brands with over 51% retail share
  • Adjusted OCI* margins over 60%

Source: Altria company reports as of Q1 2015 *For reconciliation of GAAP to non-GAAP measures visit altria.com

For Investor Relations Purposes Only

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Altria’s Strategies

Grow new income streams with innovative tobacco products Maximize income from core premium tobacco businesses over the long term Manage diverse income streams and strong balance sheet to deliver consistent financial performance

For Investor Relations Purposes Only

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Harm Reduction Progress

Many elements are in place to make

  • ur harm reduction vision a reality.

~90% ~60% Awareness Trial

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Approach to Tobacco Products and Technologies

  • Products, distribution and brand-building
  • Optimizing supply chain
  • Partnering with PMI

We’re applying our substantial capabilities to succeed in the long term.

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  • Developing regulatory

science

  • Engaged in the

modified-risk tobacco product application process

Approach to Tobacco Products and Technologies

For Investor Relations Purposes Only

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Long-Term Adjusted Diluted EPS* Performance

8.6% 7.9% 7.8% 7.7% 8.0%

2010 2011 2012 2013 2014

Source: Altria company reports *For reconciliation of non-GAAP to GAAP measures visit altria.com Note: Year-over-year percent change

For Investor Relations Purposes Only

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1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

An Ever-Changing Industry

2009 Federal Excise Tax Increase FDA Regulation enacted 1998 Master Settlement Agreement signed 2004 RJ Reynolds and Brown & Williamson Tobacco merge

For Investor Relations Purposes Only

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36.9 43.8

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Marlboro Camel Winston Newport

Marlboro Long-Term Performance

+6.9pp

Source: MSAi Shipments; IRI/Capstone IRP and TRP; IRI/MSAi Note: IRI/MSAi was implemented to read market share in 2011. Share prior to that reflects estimates based on share changes derived from previous services. Pall Mall includes premium and discount versions.

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1,081% 190% 330%

Altria Group S&P 500 S&P Food, Beverage & Tobacco

Total Shareholder Return 1998-2014

Source: Bloomberg 12/31/1997-12/31/2014 Note: Total shareholder return is simple price appreciation plus the reinvestment of the dividend as of the ex-dividend date. Excludes spin-offs.

For Investor Relations Purposes Only

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For Investor Relations Purposes Only

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Altria’s Strategies

Grow new income streams with innovative tobacco products Maximize income from core premium tobacco businesses over the long term Manage diverse income streams and strong balance sheet to deliver consistent financial performance

For Investor Relations Purposes Only

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Agenda

  • Diverse business model
  • Strong balance sheet
  • Productivity efforts

Long-term Financial Goals

  • Grow adjusted diluted EPS at an average annual rate of 7% to 9%
  • Maintain a target dividend payout ratio of approximately 80% of adjusted

diluted EPS

For Investor Relations Purposes Only

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Diverse Business Model

27% Economic Interest

Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.

For Investor Relations Purposes Only

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  • U. S. Tobacco Manufacturers’ Profit Pool

$11.8 $15.5

2009 2014 +5.5% CAGR

Source: ALCS estimates; other public company reports

$ in Billions

For Investor Relations Purposes Only

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2014 Share of the U.S. Tobacco Profit Pool

Note: Altria’s Profit Pool share is calculated by combining the adjusted OCI* for Altria’s Smokeable & Smokeless Products segments divided by Total Profit Pool. *For reconciliation of non-GAAP to GAAP measures visit altria.com

51% 22% 14% 12%

Altria Reynolds American Lorillard Other

Source: Altria company reports; ALCS estimates; other public company reports

For Investor Relations Purposes Only

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Alcohol Assets

Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.

For Investor Relations Purposes Only

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  • Ste. Michelle Wine Estates Strategy

Grow income by expanding its share and distribution of premium wines.

For Investor Relations Purposes Only

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  • Ste. Michelle Wine Estates

For Investor Relations Purposes Only

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Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.

  • Ste. Michelle Wine Estates

For Investor Relations Purposes Only

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  • Ste. Michelle Wine Estates

Source: Altria company reports * For reconciliations of non-GAAP to GAAP measures visit www.altria.com

Adjusted OCI* - $ in Millions $73 $134

2009 2014 +12.9%

CAGR

18.9% 21.6%

2009 2014 +2.7pp

Adjusted OCI* Margins

For Investor Relations Purposes Only

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Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only. Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.

For Investor Relations Purposes Only

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Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.

Global Beer Profit Pool

$ in Billions

$32.1 $36.2

2012 2015 +4.1% CAGR

Source: Bank of America Merrill Lynch Global Research

For Investor Relations Purposes Only

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SABMiller Strong Income Growth

Source: Altria company reports

$600 $1,006

2009 2014 +10.9%

CAGR

Equity Earnings - $ in Millions

In 2014, Altria recorded pre-tax earnings of more than $1 billion.

For Investor Relations Purposes Only

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SABMiller Market Value

Source: Bloomberg as of June 15, 2015

$3.4 $22.1

Jul-02 Jun-15

$ in Billions

Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.

For Investor Relations Purposes Only

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Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.

For Investor Relations Purposes Only

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Philip Morris Capital Corporation

$9.4 $1.7

2002 2014

Source: Altria company reports

Net Finance Receivable - $ in Millions

Note: Net Finance Receivable reflects PMCC’s investments in finance leases excluding the allowance for losses.

61 55 49 38 29 24

2009 2010 2011 2012 2013 2014

Year-end Portfolio

(# of Lessees/Transactions)

For Investor Relations Purposes Only

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Strong Balance Sheet

  • Manage difficult capital market conditions
  • Make acquisitions
  • Manage our debt maturity towers
  • Return cash to shareholders

Our strong BBB+ credit rating allows us to competitively access the capital markets to cover short-term cash needs.

Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.

For Investor Relations Purposes Only

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Strong Balance Sheet

  • Debt covenant of not more than 3 to 1
  • $1 billion in long-term debt coming

due in September 2015

Note: Debt to EBITDA calculated in accordance with credit agreements. *For reconciliation of non-GAAP to GAAP measures visit altria.com

1.7x

Mar 2015

Debt-to-EBITDA*

Source: Altria company reports

For Investor Relations Purposes Only

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Dividend Growth

$1.36 $2.08

Aug-09 Aug-14 +8.9%

CAGR

Source: Altria company reports Note: Dividend is based on the current annualized dividend (Last increased August 2014)

In 2014, we paid shareholders $3.9 billion in dividends.

$ per Share

For Investor Relations Purposes Only

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Share Repurchase Programs

Source: Altria company reports

$ in Billions

$4.2

Mar 2011 – Mar 2015

Through recent share repurchase programs, we reduced outstanding shares by ~6%.

Note: From March 31, 2011 through March 31, 2015

For Investor Relations Purposes Only

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Share Repurchase Programs

Source: ALCS

$32.89 $50.02

Average Share Repurchase Price Altria Share Price

At the end of the first quarter, we had $326 million remaining in our $1 billion share repurchase program.

Mar 2011 – Mar 2015

Note: Altria Share Price as of March 31, 2015. $32.89 represents weighted average share repurchase price

For Investor Relations Purposes Only

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Returning Cash to Shareholders

Source: Altria company reports

$18.1 $4.2 $22.3

Jan 2010 – Mar 2015 Share Repurchase Dividend

$ in Billions

For Investor Relations Purposes Only

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Improving Productivity

2007 - 2013

~$2 Billion

Source: ALCS

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Improving Productivity

  • Improved efficiency of manufacturing

machinery

  • Standardized technology systems to

reduce maintenance costs

  • Redesigned 100+ processes
  • Eliminated more than 18,000 hours
  • f work

Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.

For Investor Relations Purposes Only

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Smokeable Products Cost Management

Source: Altria company reports * For reconciliations of non-GAAP to GAAP measures visit www.altria.com

Controllable Costs/1000 Units* $28.73 $29.57

2009 2014 +0.6%

CAGR

~$100 ~$300

2014 2015 FETRA Expense Savings - $ in Millions

Note: FETRA refers to the Fair and Equitable Tobacco Reform Act of 2004. Reflects savings versus prior year

For Investor Relations Purposes Only

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Balancing Productivity and Disciplined Investment

1,500 3,000 Q4 2013 Q1 2015 ~(7)%

Manufacturing Headcount

Source: ALCS Note: Headcount includes PMUSA, JMC, and USSTC hourly employees

For Investor Relations Purposes Only

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Investing For Our Future

  • Product development, distribution, and brand-building for innovative tobacco

products

  • Funding regulatory science needed to advance our harm reduction goals

We are maximizing our core businesses and growing income, while investing for our future.

For Investor Relations Purposes Only

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Flexible Organizational Structure

Our shared services model allows us flexibility to support our operating companies as they change.

For Investor Relations Purposes Only

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A Compelling Investment

Diverse Business Model

  • Provides consistent performance

through all business environments Strong Balance Sheet

  • Allow us to continue returning

cash to shareholders Focus on Productivity

For Investor Relations Purposes Only

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2015 Guidance

  • Altria reaffirms its guidance for 2015 full-year adjusted diluted EPS in the range
  • f $2.75 to $2.80, representing a growth rate of 7% to 9% from an adjusted

diluted EPS base of $2.57* in 2014.

Source: Altria company reports *For reconciliation of non-GAAP to GAAP measures visit altria.com

For Investor Relations Purposes Only

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Altria Group Distribution Company (AGDC)

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AGDC

Sales and Distribution Consumer Engagement

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Engaging Adult Tobacco Consumers

  • Managing our database of ~20 million adult tobacco consumers
  • Using this tool to engage through various channels

Source: AGDC

For Investor Relations Purposes Only

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Digital Engagement

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Top-Ranked Websites

Source: iPerceptions Study

A third-party review ranked these websites in the top 10 of 100 branded websites.

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Adult Tobacco Consumer Experiences

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Engaging Adult Tobacco Consumers

  • Direct mail
  • E-mail
  • Programs in adult-only facilities
  • Sweepstakes entries
  • Coupons

211 256

2013 2014

Interactions (in millions)

+21%

Source: AGDC

For Investor Relations Purposes Only

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AGDC’s Retail Presence

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AGDC’s Competitive Advantage

Efficient and Adaptable Model Innovative Tools & Resources Highly Skilled People Effective Trade Alignment

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Our Sales and Distribution System

Expanding existing brands and launching new innovative products Communicating brand equity and news Promoting responsible retailing Executing price and product promotions

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Our goal is to gain trade alignment by promoting and demonstrating mutual success.

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Efficient Cigarette Distribution Model

Richmond Manufacturing Center

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Efficient Cigarette Distribution Model

Bonded Warehouse

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Efficient Cigarette Distribution Model

21 Public Warehouses

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Efficient Cigarette Distribution Model

600+ Direct Buying Locations

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Retail

Efficient Cigarette Distribution Model

In 2014, we distributed 125 billion cigarettes at a cost

  • f less than five cents per pack.

AGDC "Best-in-Class" Typical

<2% ~3-5%

Source: Warehouse Education Research Council Analysis Note: Distribution costs as of December 31, 2014 (as a % of net revenue, net of FET).

Distribution Costs

For Investor Relations Purposes Only

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Breadth and Scale of Coverage

  • Call Center provides ongoing

support for lower-volume stores.

  • 240,000 Retail Stores
  • 95% Industry Volume Coverage

Source: AGDC

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Sharpening Our Shared Services Model

  • Expanded Responsibilities
  • Reduced Costs
  • Generated Capacity
  • Expanded Retail Coverage
  • Improved Processes and Systems

2007 2015

AGDC Organization Size

~(20)%

Source: AGDC

For Investor Relations Purposes Only

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70.5%

C-Stores Tobacco Supermarket Drug Dollar Mass Merch Other

Trade Class Tobacco Volume Contribution

Balance of Trade Classes = 29.5%

Source: MI Connect STARS week ending 12/28/14 Note: Tobacco: Includes Cigarettes, Cigars & Smokeless Only workload for FY 2014

For Investor Relations Purposes Only

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Convenience Store Overview

Source NACS Convenience Trends Jan-Apr 2014, *Nielsen Co. 2012, 2013 NACS CTP (Fuel Included)

~150,000 c-stores in the U.S. $700 billion in annual revenues ~160 million consumer transactions per day ~50% of c-store shoppers are in the 21-39 age demographic

For Investor Relations Purposes Only

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Source: NACS Convenience Trends 2014

36%

Sales Revenue

17%

Gross Profit Dollars

Tobacco Impact inside C-Stores

Other Foodservice Snacks and Candy Beer Packaged Beverages Tobacco Other Foodservice Snacks and Candy Beer Packaged Beverages Tobacco

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Adult Tobacco Consumer Cross-Purchasing

48% 30%

Average Tobacco Consumer Average Other C-Store Consumer

Source: 2014 VideoMining Study; 2014 Retail Experience Survey

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Adult Tobacco Consumer Market Basket

Source: 2014 VideoMining Study; 2014 Retail Experience Survey

~$25 ~$6

Average Tobacco Consumer Average Other C-Store Consumer

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AGDC Advantages

Leadership Brands Innovative Tools Talented People

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PM USA Retail Leaders Program

  • Offers incentives and promotional

resources to help retailers grow their business

  • PM USA achieves acceptance of new
  • fferings and promotions
  • PM USA receives best-in class

visibility and product placement

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SLIDE 100

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Retail Look

Desired retail look in over 90%

  • f PM USA volume

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2015 PM USA Retail Program Options

  • Increased funding on Marlboro
  • Resources to drive volume and improve retailer margins
  • Integration with retailer loyalty programs
  • Incentives for supplying scan data

For Investor Relations Purposes Only

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Outstanding Execution Results

Source: MIConnect STARS Data Week Ending 12/27/14 Note: Includes distribution as % of targeted stores

We consistently achieve 85%+ distribution within two weeks.

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Flexible Merchandising Solutions

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MarkTen Curb-to-Counter Visibility

  • 130,000+ stores
  • 85% of stores achieving

visibility targets

Source: AGDC

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Actionable Insights

Source: AGDC

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Market Analytics

Our sales team helps retailers capitalize on insights.

Sample Data

Source: AGDC

For Investor Relations Purposes Only

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Reviewing Category

Industry PM USA Marlboro 3.5% 3.2% 3.1% 4.3% 4.6% 4.9% Store Market

% Volume Change

Current vs. Previous 13 weeks

Source: AGDC

Sample Data

For Investor Relations Purposes Only

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Marlboro Volume Composition

  • Avg. CPW

4wm

  • Avg. CPW

Current 13 wks % Vol. vs. Previous 13 wks

Marlboro Menthol

29.8 29.7 5.2%

Marlboro Gold

22.9 22.7

  • 3.4%

Marlboro Special Blend

12.8 12.7 4.1%

Marlboro Regulars

11.0 11.2 4.7%

Marlboro Balance

11.8 11.9 5.3% Total Marlboro 88.3 88.2 3.1%

Source: AGDC

Sample Data

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SLIDE 110

Identifying Solutions

Price Availability Visibility

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SLIDE 111

Our People

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SLIDE 112

University Recruiting Program

  • 17 focus schools
  • Immersive internship
  • On-campus engagement

Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.

For Investor Relations Purposes Only

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SLIDE 113

Sales Recruiting Success

  • 100+ interns annually
  • 85% acceptance of full-time offers

in 2014

  • Often results in leaders who rise

rapidly at AGDC

Source: ALCS

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SLIDE 114

Sales Recruiting Success

  • 100+ interns annually
  • 85% acceptance of full-time offers

in 2014

  • Often results in leaders who rise

rapidly at AGDC

Source: ALCS

For Investor Relations Purposes Only

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SLIDE 115

AGDC Leadership Team

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SLIDE 116

Trade Engagement

Executive Summit Retail Council

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SLIDE 117

Measuring Success: Customer Feedback

Source: 2014 ALCS MICR Trade and Shopper Insights

88% 69% 44%

0% 100% AGDC Competitor A Competitor B

“… is better than other CPG reps”

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SLIDE 118

AGDC’s Competitive Advantage

Efficient and Adaptable Model Innovative Tools & Resources Highly Skilled People Effective Trade Alignment

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SLIDE 119

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SLIDE 120

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SLIDE 121

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SLIDE 122

Agenda

  • Update on smokeless and cigars performance
  • Evolution of e-vapor portfolio
  • Progress and results on Marlboro

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SLIDE 123

Pre-Acquisition Share Performance

70% 68% 64% 60% 56% 53% 50% 47% '01 '02 '03 '04 '05 '06 '07 '08

Source: USSTC RAD/SVT ending December 2008

Copenhagen & Skoal Combined

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SLIDE 124

2009 Copenhagen Position

22.6%

2009

Source: IRI InfoScan

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SLIDE 125

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SLIDE 126

Copenhagen Retail Share Performance

22.6% 30.7%

2009 2014 +8.1pp

Source: IRI InfoScan

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SLIDE 127

Copenhagen Share Growth

30 2009 2014 ~+10pp

Among Dippers 21-29

Source: IRI InfoScan

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SLIDE 128

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SLIDE 129

Skoal Retail Share Performance

Source: IRI InfoScan

(1.4) (1.1) (0.8) (0.5) (0.5)

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

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SLIDE 130

Smokeless Products Strategy

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SLIDE 131

Smokeless Products Adjusted Volume Growth

900 2009 2014

Source: IRI InfoScan, ALCS Estimate

~5% CAGR

Note: Volume adjusted for trade inventory changes, calendar differences and product discontinuation.

Cans in Millions

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SLIDE 132

47.2% 51.0%

2009 2014

Copenhagen and Skoal Retail Share Growth

Source: IRI InfoScan

+3.8pp

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SLIDE 133

Smokeless Adjusted OCI* Growth

Source: Altria company reports

$632 $1,060

2009 2014

$239 $251

Q1 2014 Q1 2015 +10.9% CAGR +5.0%

*For reconciliation of non-GAAP to GAAP measures visit altria.com

$ in Millions

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SLIDE 134

49.5% 63.4%

2009 2014

Smokeless Adjusted OCI* Margins

+13.9pp

Source: Altria company reports *For reconciliation of non-GAAP to GAAP measures visit altria.com

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SLIDE 135

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SLIDE 136

Profitable Growth for Black & Mild

  • Category growth dominated by

low-priced untipped cigarillos

  • Middleton has grown Black & Mild’s

share of high-margin tipped cigarillos

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SLIDE 137

Delivering Black & Mild Variety

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SLIDE 138

Cigars Reported Shipment Volume Growth

Source: Altria company reports

1,198 1,271

2013 2014

274 302

Q1 2014 Q1 2015 +6.1% +10.2%

Sticks in Millions

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SLIDE 139

Black & Mild Retail Share of Tipped Segment

Source: IRI InfoScan

89% 91%

2013 2014 ~+2pp

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SLIDE 140

Our Aspiration and Approach in E-Vapor

  • Long-term success
  • Financial discipline
  • Adult tobacco consumer focused

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SLIDE 141

E-Vapor Desired Attributes

  • Fullness of vapor
  • Familiar taste and form
  • Flavor variety
  • Dependable quality
  • Good battery life
  • Long-lasting cartridge
  • Reasonable value

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SLIDE 142

MarkTen XL Features

  • Longer-lasting cartridge and battery
  • Familiar taste and form
  • More flavor variety

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SLIDE 143

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Green Smoke Product Features

FlavorMax™ is a suite of technologies which creates consistently fresh, full-bodied flavors and a rich vapor. Optimized Flavor Delivery Sealed for Fresh Flavor

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SLIDE 145

Expanding Green Smoke Retail Presence

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SLIDE 146

Partnering with PMI

  • Began providing e-vapor products to PMI for international markets in Q1 2015

Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.

For Investor Relations Purposes Only

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SLIDE 147

A Developing e-Vapor Category

  • Current products have performance gaps
  • Category growth has slowed
  • Manufacturers awaiting regulatory guidance

Note: Third-party trademarks are the property of their respective owners and are included for informational purposes only.

For Investor Relations Purposes Only

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SLIDE 148

Portfolio Approach

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SLIDE 149

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SLIDE 150

Marlboro Repositioning

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SLIDE 151

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SLIDE 152

Marlboro Long-Term Retail Share Growth

Source: Maxwell; MSAi Shipments; IRI/Capstone – Total Retail Panel; IRP IRI Group/Capstone Projected Retail Panel; IRI/MSAi

1954 1964 1974 1984 1994 2004

Q1 ‘15

44.0

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SLIDE 153

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SLIDE 154

Active Digital Engagement

20+

Dec 2012-Present Uploads Comments Likes

Million

Source: PM USA

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SLIDE 155

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SLIDE 156

Expanded Product Lineup

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SLIDE 157

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SLIDE 158

Reinforcing Marlboro’s Premium Position

Marlboro has enhanced packaging on more than half

  • f its volume since 2011.

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SLIDE 159

PM USA Direct Marketing Approach

  • Focuses on smokers age-verified as 21 and older
  • Taking steps to limit reach among unintended audiences
  • Primarily direct mail, e-mail and Marlboro.com
  • Smokers 21 and older must confirm they want to receive communications

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SLIDE 160

Marlboro.com Digital Engagement

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SLIDE 161

Marlboro’s Mobile Presence

Marlboro.com is among the leading CPG mobile websites.

Source: comScore, Q1 2015

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SLIDE 162

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SLIDE 163

Marlboro App: Convenient Interaction

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Increased Mobile Engagement

Mobile Logins - in Millions

10 2011 2014 ~+1,000%

Note: Total mobile interactions (Adult Smokers 21+) Source: PM USA

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Increased Adult Smoker Engagement

1.1 1.4

2012 2014

Note: Touch points interactions include On-pack coupons, Mobile and Direct Mail. Source: GMR and Arc

Total Touchpoints - in Billions

+20%

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SLIDE 166

Smokeable Products Companies’ Strategy

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SLIDE 167

Marlboro Pricing

  • Increased list price in May by $0.07
  • Net pack price of $6.06 through May 31

We continue to believe Marlboro has long-term pricing flexibility.

Source: ALCS MICR

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SLIDE 168

PM USA Pricing Approach and Tools

  • Maintain competitive pricing
  • Monitor Marlboro’s price gap at

national and state levels

  • Manage the mix of full-priced and

promotional product in the marketplace

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SLIDE 169

Price Promotions

$4.50 $5.50 2013 2014 +$0.20

Marlboro Special Blend Net Price

Source: ALCS MICR

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SLIDE 170

Bonus Product Rates

0% 25% PM USA RJRT Lorillard

FY 2014 Q1 2015

Source: ALCS MICR Note: Bonus rate calculated as percentage of shipment volume.

as a % of Volume

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SLIDE 171

Smokeable Products Segment Price Realization

2011 2014

Source: Altria company reports *For reconciliation of non-GAAP to GAAP measures visit altria.com

+3.9%

CAGR

Q1 2014 Q1 2015

$126.31 Net Revenues Net of Excise Taxes /1000 Units*

+5.2%

$109.38 $122.56 $120.04

Marlboro grew retail share ~1pp from 2011-2014.

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SLIDE 172

Strong Marlboro Brand Equity

80 2010 2014 80 2010 2014 80 2010 2014

Overall Brand Equity Brand Status Brand Momentum

Source: 2014 TNS Brand Equity Study (Age Group: 21 – 54), February 2015

+3pp +3pp +3pp

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SLIDE 173

Marlboro Adult Smoker Opinions

70 2010 2014 70 2010 2014

Taste Quality

Source: 2014 TNS Brand Equity Study (Age Group: 21 – 54), February 2015

+6pp +6pp

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SLIDE 174

Unmatched Brand Equity

70 Camel Newport Marlboro 70 Camel Newport Marlboro

Source: 2014 TNS Brand Equity Study (Age Group: 21 – 54), February 2015

Overall Equity Overall Opinion

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SLIDE 175

Marlboro adult smokers are the most brand loyal among key competitive brands.

Source: ALCS CATTS – 3mm ending March 2015

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SLIDE 176

Marlboro Strong Demographics

25 50 AS 21-29 Total Marlboro

Source: ALCS CATTS – 3mm ending March 2015

Share Among Adult Smokers

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Share Trends Among Smokers 21-29

30 50 Q2 2013 Q1 2015

Marlboro

Source: ALCS CATTS Adult smoker database ending March 31, 2015

50

Q1 2015

Marlboro Camel Newport

Q1 2015

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SLIDE 178

Marlboro Green and Black Families Performance

Source: IRI/MSAi InfoScan

Marlboro Black has grown retail share in each of the past 17 consecutive quarters. Marlboro has grown its share

  • f menthol category over the

past two years.

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SLIDE 179

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SLIDE 180

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Regulation G Disclosure

  • For reconciliations and further explanations of non-GAAP financial measures, visit:

altria.com

For Investor Relations Purposes Only