In a recent analysis published by Barclays Research, concerns loom over U.S. tobacco powerhouse Altria Group's ability to meet its fiscal year 2024 earnings estimates. The report suggests that unless there is a resurgence in declining cigarette sales, Altria may fall short of its targets, with disposable vapes emerging as a significant competitor.

Barclays forecasts a substantial 10 percent decline in Altria's fiscal year 2024 cigarette shipping volumes, coupled with a projected 2 percent decrease in earnings before interest and taxes (EBIT), a key indicator of profitability.

Flavor Bans Increase Cigarette Sales

The complete removal of rival products from the market is certain to benefit Big Tobacco, even a recent FDA study showed that flavor bans increase cigarette sales. Apart from being less expensive to use, a major advantage of disposable vapes is that they are still available in the popular flavors that most adult vapers prefer.

The analysis points to a potential solution: a crackdown on disposable vape sales. Barclays suggests that if regulatory bodies like the FDA and DOJ can successfully restrict the growth of disposable e-cigarettes, there may be a chance for a rebound in U.S. cigarette volumes, allowing Altria to meet its earnings guidance of $5.00 to $5.15 per share.

Failed FDA Regulations

However, the FDA's stance on disposable vapes remains unchanged. Despite their increasing popularity and direct competition with traditional cigarettes, the FDA has not authorized the sale of any modern disposable vape products.
Unfortunately, the fallout from the failed PMTA process is beginning to make itself felt, both in terms of jobs lost and vapers funneled back onto disposable cigarettes.

Altria's support for state bills aimed at regulating vaping products sheds light on their strategy. These bills, known as PMTA (Premarket Tobacco Product Application) registries, would restrict the sale of vaping products not authorized by the FDA or awaiting PMTA review. Altria's backing of these bills aligns with their interest in curbing competition from disposable vapes and boosting cigarette sales, particularly their Marlboro brand.

Declines in smoking rates have started to stall ; if we're going to help more adults quit combustible cigarettes we have to embrace harm reduction and offer adult smokers modified risk nicotine products that don't have same risks as combusting tobacco 1/2 https://t.co/l3a1zmffqc

— Scott Gottlieb, MD (@ScottGottliebMD) February 26, 2024

PMTA Registry Bills

The introduction of over two dozen PMTA registry bills in state legislatures reflects the growing momentum behind this regulatory approach. Consumer advocacy groups like CASAA have rallied support for these bills, signaling a shift in legislative focus towards vaping regulation.

Gregory Conley recently testified at the hearing for one of these bills in Wyoming where he called out the bill for what it is, a full-on ban that will decimate businesses and protect big tobacco companies.

Altria's legal actions against competitors in the vaping market further highlight their efforts to maintain dominance. Lawsuits filed by Altria subsidiary NJOY target manufacturers, distributors, and retailers of disposable vape brands, aiming to stifle competition and protect their market share.

FDA’s Role in Impending Public Health Crisis

The FDA's role in this landscape is significant. The agency's Center for Tobacco Products (CTP) has been actively pursuing enforcement actions against independent vaping businesses, issuing warning letters and seeking penalties for non-compliance. Despite authorizing a select few vape devices owned by major tobacco companies, the FDA has maintained stringent regulations on the broader vaping market, favoring products affiliated with industry giants like Altria and Reynolds.

Altria's battle to revive cigarette sales amidst growing competition from disposable vapes underscores the shifting dynamics in the tobacco industry. Regulatory initiatives, legal maneuvers, and FDA interventions all play a role in shaping the future of tobacco consumption in the United States. As the landscape continues to evolve, stakeholders across the industry will need to adapt to meet changing consumer preferences and regulatory requirements.