Altria’s “MLP” Program Is Good For The Big 3

I read this recently on a Nik Modi’s news letter – Altria’s “MLP” Program Is Good For the Big 3

Nik states, “As we discussed in our note entitled “Is Altria’s “MLP” Program Good For Stocks?”, we believe Altria’s pricing program is a net positive for Altria, Reynolds and Lorillard. While we still have to get some perspective from the trade, we see a rather meaningful upside bias to our 2H11 volume estimates for all 3 companies.”

This topic has caused much conversation and I’m surprised that no one has blogged about this topic.
So what are your thoughts?
I’m thinking some anonymous retailers might have a lot to say!
Let’s hear it!

14 comments ↓

#1 Lou Maiellano on 05.25.11 at 3:56 PM

Well I’ll get it started with a question. I wonder what my old company is doing with a program built on proper retail margins with getting “market share”. Especially when the pie keeps shrinking!

#2 Goodtime Charley on 05.26.11 at 2:21 AM

The decision of Philip Morris has been done in an attempt to stop their bleeding as they continue to lose volume faster than Reynolds. Retailers that think they will grow volume will be very disappointed when they find they will not grow volume. They (PM) do not understand they themselves are eroded the Marlboro brand with their now “expected” promotions on Special Blends. Folks this pricing issue will not grow volume. I do agree that the other tobacco companies will benefit but Lorillard will be the winner. If I was a retailer today I’d look to find brands that I could make more margin on then Marlboro and focus heavily to switch consumers to brands other than Marlboro.

#3 jredheadgirl on 05.26.11 at 1:39 PM

I have two questions:

1) What is the “MLP” program?

2) What is so special about Marlboro’s Special Blend? How is it any different as compared to regular Marlboro’s? I have noticed that they (specifically) are priced lower than a lot of other brands. How do they manage to do this? Now that tobacco is “regulated” by the FDA in the U.S., does this mean that these new cigarettes are a reduced risk product? I doubt that, but I have to wonder as one would think that the incentive (with FDA regulation) would be to make new and novel products (that carry less risk than traditional brands) cheaper as a way of luring smokers to make the switch.

Ok, lol…that was more than two questions:-)

#4 Lolita on 06.01.11 at 3:11 AM

Philip Morris is afraid of losing their position in the tobacco market.

#5 Vapor Vixen on 06.02.11 at 11:04 AM

It’s all about share! What position are they in danger of losing? There is a sizable gap especially with RAI lack of performance.

#6 CStore Guy on 06.03.11 at 11:19 AM

I know that 7-11 walked away from the program.
I own several locations and I choose to not participate because by my calculations any supposed gains in volume would in no manner make up for my loss in profits.
I agree with the Goodtime Charley. I recently took in brands by Liggett & JTI and they are growing and I make extremely nice margins on their brands.

#7 Screw the retailer on 06.08.11 at 3:48 PM

That’s right folks Philip Morris once again proves that they worry about no one but Philip Morris. Is there a “bail out” program available?

#8 Murlisea on 06.15.11 at 2:41 AM

Very hot discussion!^)

#9 OTP Kid on 06.23.11 at 3:58 PM

Kwik Trip declined participation as well from what i heard

#10 Numbers Guy on 06.24.11 at 1:37 AM

Well they call the program Momentum and I think that’s pretty funny because the only momentum that Altria has in the deterioration of their flagship brand. It is good to see retailers saying enough is enough! The decline of the Marlboro brand is interesting in that in some ways all that Altria has encouraged has come back to bite them in their ass! Have to love it. In looking at the numbers folks the Marlboro brand is fighting amongst it’s own brands with the significant emergence of the Marlboro savings brands (Special blends & 72’s). So one day when the Altria rep says you need the Marlboro flagship you will probably point out that their ship is sinking!

#11 OTP Kid on 06.24.11 at 12:04 PM

I agree, Marlboro is definitely on the way down, and that’s in spite of them turning the brand into a mid-price product with all of the ongoing dicounting they do with it.

They are lucky that RAI and CW don’t know what they’re doing, or the decline would be even quicker.

#12 PA Retailer on 06.29.11 at 3:35 AM

Well I’ve got a bunch of stores that make good margin and no way that program would work for me at all. Go to where the sun don’t shine Altria. Your on the decline in my stores anyway. Lorillard & Liggett just keep ripping into your business with a lil help from Pall Mall! Hey Numbers Guy it’s pretty funny that they call it “Momentum”. I think it’s going the wrong way. You know I was reading the Convenience Store News today and I wonder do they pick numbers out of the air. The premium business is not an 83.5% share. It’s more like a 70% share.

#13 PA Retailer on 06.29.11 at 3:38 AM

I had one of my other manufacturer show me that the Marlboro brand actually which is “premium” has over 20% of that “premium” actually priced at the low end of the “discount” level.
It’s why I always have figured a way to give my customers what they want not what the manufacturers want.

#14 Sanjib on 11.23.11 at 1:57 AM

This program is aweful. While tobacco use is declining every year where would the retailers get additional volume from ? The target customer base of any retail location is almost pre-determined. They should not expect customers from 10 miles apart would stop at your store for 30 cents per pack cheaper. The volume will not go up for any retail location. Retailers must drop this contract everywhere and let the company burn like their tobacco. Per pack dollar profit reduction will directly hit the bottom line. Retailer must file a class action suit against the company for twisting the market and realize all lost income.

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