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RICHMOND, Va. — In reporting the company's fourth-quarter and full-year 2015 results on Thursday and dubbing it "yet another year of excellent business results," Altria Group Inc.'s Chief Executive Martin Barrington also touched on some key issues facing the tobacco industry as a whole.
Overall, the industry pulse was strong in 2015. Macro economic trends and consumer confidence played a role in that, he acknowledged.
"We go into the year believing, as a whole, that the adult tobacco consumer continues to feel better going into 2016, as they did in 2015. Unemployment is down, housing starts are up, the effect of gasoline prices — we see improved adult tobacco consumer confidence," Barrington explained. "Now, of course, that effect was felt in 2015 and we doubt we are going to see the same effect as year-over-year to 2016. But it's good news, I think, that the adult tobacco consumer goes into 2016 with those positive feelings."
He did caution, however, that changes could happen in the macro environment and there is speculation in some sectors about recession clouds looming. "That obviously would change everything, but we go into the year feeling pretty good about the adult tobacco consumer," the chief executive noted.
One not-so-bright spot behind the back bar in 2015 was the vapor segment. Calling it an interesting and emerging segment, Barrington said Altria is taking a disciplined approach to vapor.
"We know that there is consumer interest, so you want to have products there and you want to be investing and you want to be learning. But you always want to [balance] that with discipline, because we're trying to do it within the guidance we are trying to provide about how we are growing all our businesses long term," he said.
"I think we've done a better job of that with MarkTen recently and especially with MarkTen XL. It's a better product; it's been very well received by the consumer," he continued. "We are getting good results in our lead markets so we are rolling out and expanding with discipline and trying to spend appropriately, but not overspending."
On the subject of vapor products, he said Altria has not received any update from the Food and Drug Administration (FDA) or the White House Office of Management and Budget on when the deeming regulations would be finalized.
Meanwhile, the tobacco industry is also keeping its eye on another regulatory issue: raising the minimum age to buy tobacco products.
"Our position to begin with is, of course, there should be minimum age laws. We were the company that went around and led the effort on that, making sure there were minimum age laws in place everywhere and that they were vigorously enforced," Barrington said. "We spent an awful lot of time and energy and resources on that. It's completely appropriate and we support that."
At this point, Altria supports 18 as the minimum purchasing age. Barrington pointed out that an overwhelming majority of states use 18 as their minimum age, the Master Settlement Agreement from the 1990s used 18, and the Family Smoking Prevention and Tobacco Control Act sets the minimum age at 18.
The Family Smoking Prevention and Tobacco Control Act gave the FDA the task of contemplating if the age should be raised — something the agency is currently doing.
"Our view on that is they should let FDA do that job and send a report over to Congress. Then, we can have an intelligent debate about whether the age should be raised or not. This sort of ad-hoc approach of locality here or state there doesn’t seem to make good public policy sense to us," according to Barrington.
The Altria Group Inc. is the parent company for Philip Morris USA, John Middleton, U.S. Smokeless Tobacco Co., Nu Mark and Ste. Michele Wine Estates. Altria also holds a continuing economic and voting interest in SABMiller.
The brand portfolios of Altria’s tobacco operating companies include Marlboro, Black & Mild, Copenhagen, Skoal, MarkTen and Green Smoke.