Altria's Pricing Strategy Cushions Against Falling Volumes Amid Industry Decline

Altria Group has reported a 10.2% drop in domestic cigarette shipment volume for its smokeable products segment, but its adjusted operating companies income improved 4.2% for Q2 and 3.5% for H1 due to strong net price realization. The company is relying on pricing to counter declining volumes, indicating brand loyalty and a focus on maximizing revenues. Philip Morris International has also shown pricing power, with organic net revenue growth of 6.8% and adjusted operating income growth of 14.9%. Turning Point Brands is shifting focus to high-growth product categories, with Modern Oral nicotine pouch revenues increasing eightfold YoY.

Altria Group, Inc. (MO) and Philip Morris International Inc. (PM) are navigating the challenges of declining cigarette volumes in the tobacco industry by leveraging their pricing power to maintain profitability. Altria reported a significant 10.2% drop in domestic cigarette shipment volume for its smokeable products segment in the second quarter of 2025, yet its adjusted operating companies income improved by 4.2% for Q2 and 3.5% for H1 [1]. This seemingly contradictory performance is attributed to Altria's strong net price realization, which was an impressive 10% for the quarter and 10.4% for the first half. This strategy highlights brand loyalty and a focus on maximizing revenues from each unit sold.

Philip Morris International also demonstrated robust pricing power, delivering organic net revenue growth of 6.8% (more than 8% excluding the Indonesia technical impact) and organic adjusted operating income growth of 14.9% in the second quarter of 2025. The company's performance was driven by higher combustible pricing and modest smoke-free gains [1].

Turning Point Brands, Inc. (TPB), another player in the industry, is shifting its focus toward high-growth product categories. In the second quarter of 2025, Modern Oral nicotine pouch revenues increased nearly eightfold year over year, reflecting the company's strategic investments in sales and marketing to expand distribution for its FRE and ALP brands [1].

Altria's stock has gained 13.3% in the past month compared to the industry's growth of 8.6%, trading at a forward price-to-earnings ratio of 12.33X, down from the industry's average of 15.78X. The Zacks Consensus Estimate for Altria's 2025 and 2026 earnings per share has inched up by 2 cents each in the past 30 days to $5.39 and $5.55, respectively [1].

Steward Partners Investment Advisory LLC increased its stake in Philip Morris International by 5.7% during Q1, acquiring an additional 6,217 shares, bringing its total holdings to 115,173 shares valued at approximately $18.28 million. Wall Street analysts show a consensus rating of "Moderate Buy" for Philip Morris International with a price target of $186.27, indicating positive expectations for the company's stock performance [2].

References:
[1] https://www.nasdaq.com/articles/altria-bets-pricing-cushion-against-falling-volumes
[2] https://www.marketbeat.com/instant-alerts/filing-steward-partners-investment-advisory-llc-acquires-6217-shares-of-philip-morris-international-inc-pm-2025-08-18/