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Altria Refocuses Innovative Product Efforts

Altria Group Inc. logo

Altria Group Inc. is discontinuing production and distribution of all MarkTen and Green Smoke e-vapor products and VERVE oral nicotine containing products. This decision is based upon the current and expected financial performance of these products, coupled with regulatory restrictions that affect Altria’s ability to quickly improve these products.

The Richmond, Virginia-based company says it will refocus its resources on more compelling reduced-risk tobacco product opportunities.

“We remain committed to being the leader in providing adult smokers innovative alternative products that reduce risk, including e-vapor,” said Howard Willard, chairman and CEO, Altria Group Inc. “We do not see a path to leadership with these particular products and believe that now is the time to refocus our resources. We recognize the impact this decision has on our employees and business partners, which we do not take lightly.”

Altria’s subsidiaries will begin working with their retailers, wholesalers, contract manufacturers and suppliers to ensure an orderly process. MarkTen cig-a-likes are currently in distribution at retail and through e-commerce. Green Smoke is primarily available on e-commerce with limited retail presence. VERVE is in limited distribution at retail and e-commerce.

Altria expects to record one-time pre-tax charges of approximately $200 million, the majority of which would be non-cash asset impairment charges, in the fourth quarter of 2018 as a result of this decision. These charges will be excluded from Altria’s adjusted results.

Investing For Growth

Altria has entered into an agreement to acquire newly issued shares in Cronos Group Inc., a leading global cannabinoid company headquarted in Toronto, Canada. The transaction represents a 45 percent equity stake in Cronos Group, at a price of CAD $16.25 per share, for an aggregate investment by Altria of approximately USD $1.8 billion (approximately CAD $2.4 billion).

As part of the agreement, at closing, Altria will have the right to nominate four directors, including one independent director, to serve on Cronos Group’s Board of Directors, which will be expanded from five to seven directors. The agreement includes a warrant to acquire additional ownership interest in Cronos Group at a price of CAD $19 per share exercisable over four years form the closing date. If exercised in full, the warrant would increase Altria’s ownership in Cronos Group by 10 percent to approximately 55 percent.Cronos Group Inc. logo

“Investing in Cronos Group as our exclusive partner in the emerging global cannabis category represents an exciting new growth opportunity for Altria,” said Howard Willard, Altria’s chairman and CEO. “We believe the Cronos Group’s excellent management team has built capabilities necessary to compete globally, and we look forward to helping Cronos Group realize its significant growth potential.”

Cronos Group Chairman, President and CEO Mike Gorenstein said Altria is the ideal partner for Cronos Group, “providing the resources and expertise we need to meaningfully accelerate our strategic growth. The proceeds from Altria’s investment will enable us to more quickly expand our global infrastructure and distribution footprint, while also increasing investments in R&D and brands that resonate with our consumers. Importantly, Altria shares our vision of driving long-term value through innovation and we look forward to continuing to differentiate Cronos Group in this area.

This investment positions Altria to participate in the emerging global cannabis sector, which it believes is poised for rapid growth over the next decade. It also creates a new growth opportunity in an adjacent category that is complementary to Altria’s core tobacco business.

Altria expects its investment to help Cronos Group accelerate its growth strategies, its research and development and intellectual property development. Additionally, Altria will provide expertise to help Cronos Group thrive in the growing global cannabis market. These services may include regulatory affairs, regulatory science, compliance, government affairs and brand management.

Cronos Group is a globally diversified and vertically integrated cannabis company with a presence across five continents. Cronos Group operates two wholly-owned Canadian licensed producers: Peace Naturals Project Inc., which received the first non-incumbent medical cannabis license granted by Health Canada, and Original BC Ltd., which is based in the Okanagan Valley, British Columbia. Cronos Group operates a portfolio of brands which includes Peace Naturals, a global medicinal brand and two Canadian adult-use recreational brands, COVE and Spinach. Cronos Group has multiple international production and distribution platforms across five continents.

Cronos Group has no U.S. operations, and cannabis remains illegal at the federal level. Through Cronos Group, Altria is better positioned should cannabis become federally permitted.

Altria’s wholly-owned subsidiaries include Philip Morris USA Inc., U.S. Smokeless Tobacco Company LLC, John Middleton Co., Sherman Group Holdings LLC and its subsidiaries, Nu Mark LLC, Ste. Michelle Wine Estates Ltd. and Philip Morris Capital Corp. Altria holds an equity investment in Anheuser-Busch InBev SA/NV.


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