In addition, MO proved expedient in offering improved value in its discount category, attributed to the reduced discretionary spending thus far.
Therefore, it was unsurprising to see the product's market share in the US remain stable at 42.5% (-0.6 percentage point YoY or -0.6 from FQ4'19 levels). This naturally built upon Marlboro's stellar premium branding, which continued to command great consumer loyalty no matter the rising inflation. Perhaps this is why the company has been able to expand the profitability of its smokeable products by $1.68B or +18.6% over the past three years, despite the segment's minimal top-line growth of only $0.48B or 2.18%. This development was highly encouraging in our view, despite the continuous decline in the US smoker population by 4 percentage points at the same time. Most importantly, MO competently boosted the leadership of the Marlboro branding, with a stellar market share of 58.2% in the premium segment in FQ4'22, growing by 1 percentage point over the past three years. The expansion was partly attributed to the increase in Marlboro's net retail pack price by +6.4% YoY in FQ4'22. Notably, the smokeable products delivered a stellar operating income of $10.68B (+2.7% YoY) as well, comprising 89.6% (inline YoY) of the latest fiscal year's profitability. The smokeable tobacco segment comprised $22.47B (-1.7% YoY) or the equivalent of 89.5% (+1.7 percentage points YoY) of its revenues in FY2022, with the oral tobacco products accounting for the balance. The company's top and bottom line performance still heavily relied on Marlboro's legacy branding, which continued to grow its market share in the premium segment, despite the tightened discretionary spending thus far. In this article, we shall explain why we think its smokeable tobacco products will remain MO's saving grace. Despite this, its near-term prospects in the smoke-free segment were still uncertain, due to the intense competition in the US market.
It had announced a joint venture with Japan Tobacco ( OTCPK:JAPAY ) for the potential launch of Ploom HTS in the US by 2025. After the Juul and Cronos ( CRON) impairment, it appeared that the company was shifting gears and exploring other smoke-free options. We previously discussed Altria Group ( NYSE: MO) here in January 2023.
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