2020 cagny investor presentation

2020 CAGNY Investor Presentation

Safe Harbor Statement

Statements, including earnings guidance, in this presentation that are not reported financial results or other historical information are “forward-looking statements” within the meaning of Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current plans, estimates and expectations, and are not guarantees of future performance. They are based on management’s expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Altria undertakes no obligation to publicly update or revise any forward-looking statement other than in the normal course of its public disclosure obligations. The risks and uncertainties relating to the forward-looking statements in this presentation include those described in Altria’s publicly-filed reports, including its Annual Report on Form 10-K for the year ended December 31, 2018 and its Quarterly Report on Form 10-Q for the periods ended March 31, 2019 and September 30, 2019, and under “Forward-looking and Cautionary Statements” in today’s earnings release.

Reconciliations of non-GAAP financial measures included in this presentation to the most comparable GAAP measures are available on Altria’s website at altria.com.

2For Investor Presentation ONLY | CAGNY 2020 | 02.19.2020 |

3

Tobacco Space Estimated VolumeEquivalized Volume in Billions

For Investor Presentation ONLY | CAGNY 2020 | 02.19.2020 |

Sources: CMI Estimates; IRI MOC; Capstone; ComScore, MerkleEQ Estimation – For purposes of this theoretical analysis the following are assumed to be equivalent: 1 pack of cigarettes = 1 can of MST/Snus/TDN = 10 Cigars = 1 E-Vapor cartridgeCombustible contains Cigarettes and Cigars; Oral Tobacco contains MST, Snus and oral TDN

16.7 16.9 16.6 16.3 16.2 16.0

2014 2015 2016 2017 2018 2019

Combustible Oral Tobacco E-Vapor

(0.9%)5yr CAGR

For Investor Presentation ONLY | CAGNY 2020 | 02.19.2020 | 4

Adjusted Diluted Earnings Per Share* Performance

* For reconciliation of non-GAAP to GAAP measures visit Altria.com

Source: Altria company reports

$2.57

$4.22

2014 2019

+10.4%CAGR

Core Tobacco Business Operating Performance

46.4%56.5%

2014 2019

$8.0 B

$10.8 B

2014 2019

* For reconciliation of non-GAAP to GAAP measures visit Altria.com


+6.2%CAGR +10.1pp


Smokeable and Smokeless Segments Combined Adjusted OCI* Margins

Smokeable and Smokeless Segments Combined Adjusted OCI*

Significant Cash Returns to Shareholders

$2.08

$3.36

2014 2019


+10.1%CAGR

Note: reported annualized dividend per share based on latest declared dividend

Dividends Per ShareCash Returned to Shareholders

$25 B

$7 B

$32 B

2015 - 2019

Dividends Paid Shares Repurchased

Unmatched Noncombustible Brands & Investments

U.S. Smokeless Tobacco Co. & Copenhagen

Most profitable MST company with the # 1 brand

IQOSExclusive license to the only

FDA authorized heated tobacco system

JUULStrategic investment in the

leading e-vapor manufacturer

on!Broadest portfolio of oral

nicotine pouches

All-third party trademarks remain the property of their respective owners.



10-YEAR VISIONResponsibly lead the transition of adult smokers

to a noncombustible future.

Lead the industry in operating responsibly and preventing underage use of adult products.

Develop and expand our portfolio of FDA-authorized, noncombustible products and actively convert adult smokers to them.

Maximize the profitability of our combustible products while appropriately balancing investments in Marlboro with funding the growth of our noncombustible portfolio.

Seize leadership in the external environment through communications, engagement, science-based policy and regulatory solutions.

9

To Achieve Our Vision, We Will...


(87%)

28.3%

3.7%0%

30%

1991 1994 1997 2000 2003 2006 2009 2012 2015 2018


Generational Lows in Youth Smoking RatesMonitoring The Future – 8th, 10th and 12th Grades Combined

Source: See detailed tables for 8th, 10th, 12th grades combined: http://www.monitoringthefuture.org/data/19data/19drtbl7.pdf

http://www.monitoringthefuture.org/data/19data/19drtbl7.pdf


We Must Earn Our License To Operate Every Day

January 2019Altria launches

national campaign

July 2019Half of U.S. Population governed

by Tobacco 21 state laws

December 2019Congress enacts federal Tobacco 21 legislation

12

Our Underage Tobacco Prevention Efforts


13

Noncombustible Brands & Investments



JUULStrategic investment in the

leading e-vapor manufacturer

IQOSExclusive license to the only FDA

authorized heated tobacco system

on!Broadest portfolio of oral nicotine pouches

We believe the recent agreement with JUUL better positions both companies for future success

We continue to expect the FTC to complete its review in the first half of this year

14

Path Forward for our JUUL Investment


0.1 0.5

0.9 1.1 1.0 1.1

1.61.9

0.0

2.5

2015 2016 2017 2018 2019

15

Historical E-Vapor Category PerformanceEstimated Equivalized Volume (in billions of units)


Source: ALCS CMI estimates

Volume equivalized to cartridges (1 disposable = 1 cartridge = 1mL e-liquid) Estimated category volume and share are subject to revisions based on the latest available data

JUUL Industry Balance

In order to receive authorization, a manufacturer will have to submit significant scientific data to support that a product is appropriate for the protection of public health

The PMTA standard is a high bar that we believe is warranted

16

May 2020 PMTA Deadline for Newly Deemed Products


A market ultimately consisting solely of FDA authorized products

Clear FDA marketing guidelines and ongoing post-market surveillance to help ensure that products do not reach unintended audiences

Pro-active regulatory enforcement against noncompliant manufacturers and new entrants trying to avoid pre-market regulatory requirements

Uniform rules and regulations that apply to all e-vapor types, manufacturers and retail trade classes

17

We Believe The E-Vapor Category Needs:


18

2019 National Youth Tobacco Survey Results


53.7%

24.2%

10.1% 9.4%2.6%

0%

70%

* ALCS analysis of 2019 NYTS data

Device type used most often among past 30-day high school and middle school e-cigarette users*

Pre-filled pods

Refillable tank

Modsystem

Unknown / NA

Disposable

~37%

17.5%15.2%

0%

35%

Retail source of e-cigarettes among past 30 day high school and middle school e-cigarette users*

Gas Station / Convenience

Store

Vape Shop / E-Cigarette Only Store

40%

Current U.S. Adult Smokers


U.S. Adult Smoker Experience With E-Vapor Products

Source: National Center for Health Statistics. National Health Interview Survey, 2018. Public-use data file and documentation. https://www.cdc.gov/nchs/nhis/data-questionnaires-documentation.htm.

We believe adult smokers are looking for alternatives to cigarettes beyond just the e-vapor category

40% of current U.S. adult smokers have tried, but ultimately rejected e-vapor products

We believe IQOS and on! could be satisfying alternatives for these adult smokers

U.S. Adult Smokers Who Have Tried,But Rejected E-Vapor Products

21

IQOS Consumer Journey


Awareness

Engagement

Trial

Purchase

Conversion

22

IQOS Consumer Journey - Awareness


40%

31%

Adult Smoker Awareness

IQOS2H 2019 - Atlanta

MarlboroSmooth Ice

1H 2019 - National

Source: ALCS CMI Estimates


23

IQOS Retail EcosystemBoutiques Mobile Pop-Up

CornersHeatSticks®

RetailersPods

Kiosks



Experts

24

IQOS Consumer Journey – Engagement, Trial & Purchase


Awareness

Engagement

Trial

Purchase

Conversion~60%

~55%

Source: GMR Queue Extract through 02/01/2020, GMR Sales Extract through 02/01/2020

5%

25

IQOS Purchaser Consumer ProfileAtlanta Lead Market


71%

29%

40-59

60+

31%

21%

43%

21-29

30-39Male Female


Age Gender

65%

4%

26

IQOS Purchaser ProfileCigarette Brand by Engagement Channel – Atlanta Lead Market


Experts

72%

6%

Boutiques

Camel

Corners/Pods/MRU

Marlboro Newport

32%

61%

7%

37%

48%

15%

OtherNAS

9%

17%5%

62%

18%

10%4% 7%

3%

38%

28%

19%

8%7%


27

Charlotte, NC IQOS Expansion



28

IQOS 3 Submission


PMI plans to submit a supplemental PMTA for the IQOS 3 device

The IQOS 3 device has a shorter battery charge time versus the currently authorized 2.4 device


29

on! Manufacturing – Richmond, VA


Our Richmond Manufacturing Center is a state-of-the-art, FDA-compliant facility that’s a key competitive advantage to our success as an enterprise

We expect to have annualized capacity of 50 million cans by mid-year and 75 million cans by the end of the year

30

on! Packaging & Portfolio


All Seven Flavors Available in Five Nicotine Strengths


on! Actual Use Study – Behavioral Switch: Cigarettes/Smokeless to on!

28%

72%

Adult Smokersn= 399

Adult Dippersn=353

(Base: Completed Phase 2); Users had expressed interest in on! after brief trial period. Phase 2 Study participants were provided on! in various nicotine levels and flavor varieties. Among those participants who started using on! (20 or more pouches during Phase 2), the % of participants who reported (1) not smoking cigarettes/using smokeless tobacco during Week 6 and (2) using on! in some capacity during Week 6.

32

Adult Tobacco Consumer Basket AnalysisTobacco Basket Volume Composition in Four Weeks Prior to First on! or Zyn Purchase


Cigarettes MST & Snus Nicotine Pouches

50%

34%

on!

16%16%

Zyn

39%

58%

3%

Source: POS Scan data April – December 2019 (Top 5 Convenience Chain By Smokeless Volume)


Percent Reduction in HPHC levels of on! 4 mg Mint Product Compared to General® Snus in Market

0%

20%

40%

60%

80%

100%

NNK NNN B(a)P Arsenic* Cadmium* Acetaldehyde Formaldehyde

>83% >97% >99% >97%

*Arsenic and Cadmium were below the limit of quantification (BLOQ) in on! products. The limits of quantification (LOQ) were used to estimate the percent reduction. Results show HPHC reductions in our 4mg Mint on! product and may vary for other SKUs.

General® snus HPHC data source: FDA reviewer notes - Chemistry Review of Pre-market Tobacco Applications (PMTAs) Submitted by Swedish Match North America for Snus Smokeless Tobacco Product, 10/30/2015 (obtained by Freedom of Information Act request). Data used for comparison are mean values of eight General® snus products on a wet weight basis.

All-third party trademarks remain the property of their respective owners.HPHC levels are compared on per unit of use basis.

Not Detectable

*


Our World-Class Sales Organization

A leading sales force of over 1,600 employees

Cigarette Portfolio

Highly profitable niche brands

Altria’s Enhanced Business Platform

CombustibleTobacco Portfolio

Noncombustible TobaccoBrands & Investments

MarlboroLeading

cigarette brand

Black & MildLeading

tipped cigar brand

CopenhagenLeading MST brand

IQOSGlobal heated tobacco

leader(U.S. license)

JUULLeading e-vapor brand(strategic investment)

on!Oral nicotine pouches

(tobacco-derived nicotine)

ComplementaryAssets

Top 10 domestic wine producer

~10% investmentglobal beer industry leader

Emerging global cannabinoid company(strategic investment)




Key Macro-Economic Indicators

Source: US. Department of Labor, Bureau of Labor Statistics & The Conference Board, Consumer Confidence Survey

Unemployment Rate Total Consumer Confidence Housing Starts (in millions)

5.3% 4.9% 4.4% 3.9% 3.7%

0%

10%

2015 2017 2019

98 100 120 130 128

0

180

2015 2017 2019

1.1 1.2 1.2 1.2 1.3

0

2

2015 2017 2019

37

Consistent Cigarette Prevalence TrendsAdult Smoker Prevalence - Past 30 day, 12 month moving


10%

25%

Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19

Source: Age 21+, P30D ATCT Jul 2013 to Dec 2019`

Q1 2019 Q2 2019 Q3 2019 Q4 2019


Estimated Adjusted Cigarette Industry Volume Decline Rates

FY 2018 FY 2019

(4.5%) (4.5%)

(6.0%)(5.5%)(5.5%)

Source: Altria Company Reports

Annual Quarterly

(4.5%)

39

Cigarette Industry Volume Decomposition Estimates

For Investor Presentation

ONLY | CAGNY 2020 |

02.19.2020 |

Source: ALCS CMI estimates 1 Macroeconomic & Other Factors had no impact to the cigarette industry volume decline rate for 20172 Macroeconomic & Other Factors was a 0.2% tailwind to the cigarette industry volume decline rate for 20193 Includes approximately 1% historical movement across tobacco categories

-2.5% -2.5% -2.5%

-1.3% -1.1% -1.2%-0.5%-0.2%-0.4%

-2.0%

2017 2018 2019

Secular Decline Cigarette Price ElasticityMacroeconomic & Other Factors Additional Cross Category Movement

Our 2020 U.S. cigarette industry volume decline rate estimate is 4% to 6%.

(4.0%) (4.5%)

3

1

(5.5%)2


0%

5%

10%

15%

2001 2003 2005 2007 2009* 2011 2013 2015 2017 2019

40

Total Cigarette Industry Effective Pack Price Estimated % Change vs. Prior Year


Note: Estimates are subject to revision based on restatementsSources: ALCS CMI Estimates; SymphonyIRI Group/Capstone; IRI Unify*2009 not shown to scale. Retail prices increased by an estimated 22% YoY due to a Federal Excise Tax increase of $1.01 per pack

FET

CASET

0

100

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Deep Discount Branded Discount Premium

Sources: ALCS CMI Estimates; SymphonyIRI Group/Capstone; IRI Unify

41

75.9

24.1

75.8

24.2

Premium and Discount Cigarette Categories – Annual Retail Share


Note: Estimates are subject to revision based on restatements


Exceptional 2019 Core Tobacco Business Performance

$8,449$9,173

2018 2019

50.6% 54.5%

2018 2019

8.6% +3.9pp


* For reconciliations of non-GAAP to GAAP measures visit Altria.com.

Note: Reported annualized dividend per share is based on the latest declared dividend.

Adjusted OCI (in millions)* Adjusted OCI Margins*

43

Smokeable Products Segment Financial Performance


44

Marlboro Share Stability


43.2 43.2 43.1

Q4 2017 FY 2018 FY 2019

IRI/MSAi Info Scan Cigarette 2019-Blended, as of 12/29/19

45

Marlboro Bold Ice


46

Marlboro RewardsOver 2.5 million adult smokers enrolled; 200 million pack codes entered



PM USA Discount Portfolio

$1,464$1,606

2018 2019

68.7% 71.7%

2018 2019

+9.7% +3.0pp


* For reconciliations of non-GAAP to GAAP measures visit Altria.com.

Adjusted OCI ($ in millions)* Adjusted OCI Margins*

48

Smokeless Products Segment Financial Performance


49

CopenhagenAdult Dippers describe Copenhagen Packs as “the perfect mix between long cut and a pouch”


Source: CMI Consumer Research (January 2019)

Beginning Q1 2020, we expect to rename the “smokeless products” financial reporting segment to the “oral tobacco products” segment

Our oral tobacco product segment will include financial results, volume and retail share performance from our MST and Snus products as well as on! oral nicotine pouches

50

Oral Tobacco Products Financial Reporting Segment


51

24

86

164

2011 - 2017 2018 2019

Continued Constructive Engagement with FDA274 Total Substantial Equivalence Market Orders Received For Cigarettes & Smokeless Products


52

Substantial Equivalence (SE) Process For Cigars


Cigars

% of Volume With Pre-Market Authorization* We are pursuing regulatory clearance for our

cigar portfolio through the SE process

We believe Middleton is the best positioned cigar manufacturer to navigate the FDA framework

Middleton has been proactively engaging with the FDA and was the first cigar manufacturer to receive a SE market order following the August 2016 deeming date

>80%

*Middleton intends to submit SE applications for the vast majority of its remaining volume by the May 2020 deadline

53

Note: Third party trademarks are the property of their respective owners and are included for informational purposes only.

Complementary Alcohol Assets


Trademarks used for discussion purposes only.All third-party trademarks remain the property of their respective owners.


We remain very excited about the opportunity for Cronos to position itself for future leadership within the cannabis industry

In the U.S., we support federal legalization of cannabis under an appropriate regulatory framework

We intend to work with policy makers and regulators to establish a responsible operating environment

55

Committed to maintaining an investment grade credit rating

Committed to an 80% dividend payout ratio target

2019 marked our 54th dividend increase in the past 50 years

We’ve generally produced ~$1 billion of cash annually in excess of dividend payments

Committed to a Strong Balance Sheet and Balanced Capital Allocation


Note: Dividend payments and increases remain subject to the approval of Altria’s Board of Directors

*For reconciliation of non-GAAP to GAAP measures visit Altria.com

Net Debt toEBITDA*

Weighted Avg.Coupon

Credit Metrics as ofDecember 31, 2019

2.3x

4.2%

* For reconciliation of non-GAAP to GAAP measures visit altria.com

We reaffirm our full-year 2020 adjusted diluted EPS* guidance of $4.39 to $4.51. This range represents a growth rate of 4% to 7% from a 2019 adjusted diluted base of $4.22*.

2020 Adjusted Diluted EPS Guidance



Altria Stock Forward Price to Earnings Multiple

8.4

20.3

10.7

5

25

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Jan2020

NYSE: MO2009 – 2019 calculated using the end-of-year stock price divided by the next twelve months consensus estimate for adjusted diluted earnings per share Jan 2020 calculated using the end-of-the-month stock price dividend by the next twelve months consensus estimate for adjusted diluted earnings per share Source: FactSet

2020 cagny investor presentation

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