Good day, and welcome to the Altria Group 2015 4th Quarter and Full Year Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Altria's management and a question and answer session. Representatives of the investment community and media on the call will be able to ask questions following the conclusion of the prepared remarks. I would now like to turn the call over to Ms. Sarah Nokomis, Vice President, Investor Relations for Altria Client Services.
Please go ahead, ma'am.
Thank you. Good morning, and thank you for joining us. We're here this morning with Marty Barrington, Altria's CEO and Billy Gifford, Altria's CFO, to discuss Altria's 2015 Q4 and full year business results. Earlier today, we issued a press release regarding these results. For a detailed review, please see the earnings release on our website at altria.com or through the Altria Investor app.
During our call today, unless otherwise stated, we're comparing results to the same period in 2014. Our remarks contain forward looking and cautionary statements and projections of future results. Please review the forward looking and cautionary statements section at the end of today's earnings release for various factors that could cause actual results to differ materially from projections. Future dividend payments and share repurchases remain subject to the discretion of Altria's Board. The timing of share repurchases depends on marketplace conditions and other factors.
Altria reports its financial results in accordance with U. S. Generally Accepted Accounting Principles. Today's call will contain various operating results on both a reported and adjusted basis, which excludes items that affect the comparability of reported results. Descriptions of these non GAAP financial measures and reconciliations are included in today's earnings release, which is available on our website and via the Altria Investor app.
Now, I'll turn the call over to Marty.
Thanks, Sarah. Good morning, everyone. Altria had yet another year of excellent business results and outstanding shareholder returns in 2015. We continue to deliver against our 2 long term financial goals. 1st, Altria grew adjusted diluted earnings per share by nearly 9%, in line with our long term growth percent of adjusted diluted EPS.
Also during the year, we raised our dividend per share by 8.7%, aligned with our goal to raise the dividend in line with adjusted diluted EPS growth. This was the 49th time we have raised the dividend in the last 46 years. We also completed our $1,000,000,000 share repurchase program and announced a new $1,000,000,000 program that we expect to complete by the end of 2016. In Altria, SAB Miller's largest shareholder supported the approximately $107,000,000,000 business combination between Anheuser Busch InBev and SAB Miller, which will create the 1st truly global beer company. We strongly believe that the deal is in the best interest of our shareholders, offering a significant premium on our very large beer investment and continued participation in the global beer profit pool on attractive terms.
The size of the premium we capture will ultimately depend on final closing prices, exchange rates, and any proration might occur, but as an example, as of the date of the agreement in November, the terms of the partial share alternative represented an approximate 43% premium to SABMiller's share price on September 14, 2015. For 2015 Altria delivered a total shareholder return of more than 23%, significantly outperforming both the S and P 500 and the Food, Beverage and Tobacco Index. And as a reminder, our total shareholder return was 29% in 201335% in 2014. So, let's turn to the businesses that supported those results. Our core tobacco companies delivered on their objectives by growing income and strengthening their market leadership positions.
The Smokeable Product segment had a very strong 2015 with double digit income growth and Marlboro's 4th consecutive year of modest retail share growth in line with its strategy. Adjusted OCI grew nearly 11%, driven primarily by higher pricing, volume growth and the benefit of the federal tobacco quota buyout expiration. 4th quarter adjusted OCI growth was more modest due primarily to trade inventory movements and lapping the end of the quota buyout payments. The segment also expanded adjusted OCI margins in both periods with full year margins of more than 46%. Marlboro strengthened in 2015, gaining 0.02 of retail share in both the 4th quarter and the full year.
In November, PM USA expanded distribution of Marlboro Midnight Menthol nationally, offering adult menthol smokers a bold, unique menthol flavor. While it's early, we expect Marlboro Midnight Menthol to build on the very positive momentum we've seen from the Marlboro Black family, which now has grown for 20 consecutive quarters. Higher cigar shipment volume contributed to the Smokeable segment's performance in both periods. Middleton grew Black and Mild's volume by over 5% in the quarter and nearly 4% for the year, continuing to build on the brand's strength in the more profitable tipped segment. In our smokeless product segment, USSTC once again delivered on its strategy to increase income by growing volume and maintaining modest share momentum on Copenhagen and Skol combined.
Adjusted OCI grew more than 8% in the 4th quarter and nearly 5% for the full year. For the full year, higher pricing more than offset higher promotional spending and costs. Copenhagen and Skol increased their combined retail share by 0.3 for the year. We're pleased with Copenhagen's continued strength, which grew nearly a full share point in 20 15. Last year, Copenhagen was the fastest growing smokeless brand in the category.
And to build on this strength, USSTC is planning to expand Copenhagen Mint nationally later this quarter. Copenhagen Mint will be available at a popular price and USSTC will support its expansion with a strong awareness and trial generating plan. In innovative tobacco products, Newmar continued building a portfolio of tobacco products using its strong internal capabilities and its partnership with Philip Morris International. In November, based on encouraging results from lead markets, Newmark continued its disciplined expansion of Mark 10 XL e vapor products to additional select retail chains. With respect to heat not burn products, we continue to support PMI as it prepares for a 2016 product application to the FDA for a modified risk tobacco product designation.
And we look forward to discussing more about our plans for U. S. Commercialization at the appropriate time. The wine business continued to perform well. St.
Michel grew OCI almost 4% in the 4th quarter and more than 13% for the year. St. Michel's premium wines continued to be recognized as leaders in the industry, garnering more than 250, 90 plus ratings in 20 15, up nearly 40% from last year. So, 2015 was an excellent year for our premium brands, our company and our shareholders. Turning to 2016 and beyond, Altria is implementing a productivity initiative designed to maintain its operating company's leadership and cost competitiveness.
This initiative is expected to deliver approximately $300,000,000 in annual productivity savings by the end of 2017 and as a result of reinvesting some of those savings, strengthen our business capability. The savings will come from reduced spending on certain SG and A infrastructure and a leaner organization. Some of the productivity savings will be invested in important initiatives such as brand building, harm reduction and regulatory capabilities. Continually challenging our cost structure and investing in the future remain important for us as we focus on delivering strong results for the long term. As to guidance, in 2016 Altria expects to deliver full year adjusted diluted EPS in a range of $3 to $3.05 representing growth of 7% to 9% from our 2015 adjusted diluted EPS base of $2.80 This guidance does not include any impact from the proposed AB InBev and SAB Miller business SABMiller business combination as the transaction remains subject to certain approvals and the closing date has not yet been determined.
And now I'll turn things over to Billy for more detail on our performance.
Thanks, Marty, and good morning, everyone. I'll start with the Smokable Products segment. The Smokable Products segment increased adjusted OCI margins by 0.8 percentage point in the 4th quarter to 44.7 percent due primarily to higher pricing. For the full year, adjusted OCI margins in the segment expanded 2.3 points to 46.4 percent as higher pricing and the expiration of the federal tobacco quota buyout payments more than offset higher promotional spending and higher cost. PM USA's reported cigarette shipment volume in the 4th quarter declined about 2.5% as elevated trade inventory levels at the end of the Q3 moderated in the Q4.
For the full year, PM USA's reported cigarette shipment volume increased 0.5%. When adjusted for trade inventory changes and other factors, PM USA estimates its shipment volume increased 0.5% in both the Q4 and for the full year. PM USA estimates that total industry cigarette volume was essentially unchanged in the Q4 and decreased by 0.5% for the full year. In addition to retail share gains on Marlboro, L and M in the discount gained share allowing PM USA's total retail share to reach 51.4% in the quarter 51.3% for 2013. In the Smokeless Products segment, 4th quarter adjusted OCI margins expanded 1.4 percentage points to 61.4 percent driven by higher pricing, partially offset by higher promotional investments.
For the year, adjusted OCI margins expanded 0.3 percentage point to 63.7 percent as higher pricing more than offset higher promotional investments and higher costs. The smokeless segment's reported shipments increased 4% in the 4th quarter and 2.5% for 2015. After adjusting for trade inventory movements and other factors, USSTC estimates that its volume grew 3% in the 4th quarter and 2.5% for the full year, while estimated smokeless industry volume grew 2.5% for the past 6 months. For both time periods, Copenhagen volume growth was partially offset by declines for Skol and other brands. In wine, OCI margins narrowed by 0.8th of a percentage point to 24.8 percent in the 4th quarter, but expanded by 1.2 percentage points to 22.8 percent for the year.
Reported shipment volumes grew 5.9% in the 4th quarter and 6.2% for the year. Ocho recorded reported equity earnings from our SABMiller investment of $211,000,000 in the 4th quarter $757,000,000 for the year. Unfavorable foreign currency and special items were the primary drivers of the full year 2015 decline. In addition to the EPS guidance Marty provided for next year, we expect our full year 2016 effective tax rate on operations to be 35.3 percent. Additionally, we forecast capital expenditures to be in the range of $140,000,000 to $180,000,000 That wraps up our results.
Marty and I will now take your questions. While the calls are being compiled, I'll direct your attention to outro.com. Along with today's earnings release, for your reference, we posted a list of quarterly metrics, including pricing, inventory and other housekeeping items. Operator, do we have any questions?
Thank
you. Our first question comes from the line of Bonnie Herzog of Wells Fargo.
So my first question is regarding your cost savings program. I guess I was hoping you could give us a little more color on what some of the productivity initiatives are that you're going to be implementing? And then what portion of the $300,000,000 annualized savings will be reinvested? And how much if any could flow to the bottom line? And then do you expect to realize any savings this year?
Let me make a comment about that and then I'll ask Billy perhaps to comment on the detail. I think the degree of detail we're going to provide on the topic is in the release Bonnie, as you can appreciate. I think we've laid out there the areas that we're going to work on and certainly dimensionalize the amount of the productivity savings that we expect to gain. But for competitive reasons, I don't want to lay out in any greater detail where and what we're going to do with it. We do reference the fact that we have important initiatives that we're investing in for our growth.
As you know we're investing in reduced harm products that requires regulatory capability and we always invest in our brands. So I think that's the way to understand it and as the year flows through I think you'll see more. Billy, do you want to comment about understand it and as the year flows through, I think you'll see more. Billy, do you want to comment about timing?
Yes, I think the only thing I would add to that Bonnie is that we have incorporated those savings that we expect in this year into our guidance of the $7,000,000 to $9,000,000 that we provided earlier.
Okay. So there is some. You just spelled out that the $300,000,000 would be reached by FY 'seventeen. So I wanted to clarify that there is going to be some that you'll realize this year. Okay.
Second question is on menthol. I guess I was hoping you could give us a sense a sense of how the menthol category performed in the quarter and specifically how Marlboro menthol performed?
Yes, the menthol segment continues to grow moderately as you know and we continue to grow our share of the menthol segment where we're under indexed and have opportunities. So we're pretty pleased with our menthol performance.
So overall, Marlboro Menthol is taking share or just like you said, where it's under indexed, possibly in certain regions?
Yes. What I've said is that the segment continues to grow modestly and that we continue to grow our share of it and obviously Marlboro is a key way that we do that.
And then Marty, if I may, just my final question is on total tobacco consumption for the industry last year. Given the strong industry cigarette volume and then the decelerating smokeless volume, do you have a sense of the underlying total tobacco consumption when considering both of these categories, I guess, from last year? And then how sustainable do you think the strong underlying cigarette volume trends are? What are your expectations for industry cigarette volume in 2016?
Yes. I'm familiar with the number for total tobacco volume I think from the last government figures I've seen, but I haven't seen them yet for 2015. So I don't want to hazard a guess on that, although obviously we know that the cigarette volume flattened because of the effects that we talked about in 2015. In terms of cigarette volume, the long term trend is 3 to 4. Long term trends tend to persist over the long term.
We know that 'fifteen was a little bit different for a variety of factors. I think the question for 'sixteen Bonnie is, if you expect it to revert back to historical levels at what pace. We continue to see a stronger adult tobacco consumer right now. So we'll have to see what that pace is. But I think over time you would expect for it to return to long term trend.
Okay. So if I'm hearing you correctly, 2016 may be above historical trends, but as the year progress and maybe as we look out in the future, it would return to that minus 3, minus 4 decline rate.
What I mean to say is that I think long term trends tend to revert to the mean, the long term trend has been 3 to 4. The pace at which it returns to 3 to 4 in 2016 and beyond, I think it's just hard to estimate because of the anomaly of the 2015 factors. In.
Your next question comes from the line of Judy Hong of Goldman Sachs.
Thank you. Good morning.
Hi, Judy.
Just following up on Bonnie's question a little bit, just in terms of as you think about all the positive macro drivers that helped the industry broadly in 2015, I just wanted to get your color just in terms of what do you think
how do
you think those macro drivers will play out in 2016 and the industry fundamentals compared to really 2015?
Yes, that's a good question, because I think you do have to distinguish the year over year effect from what the status of the consumer is. 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. Obviously unemployment is down, housing starts are up, the effect of gasoline prices, we see improved adult tobacco consumer confidence. Now, of course that effect was felt in 2015 and we doubt that we are going to see the same effect as year over year to 2016. But I think it's good news I think that we think that the adult tobacco consumer goes into 2016 with those positive feelings.
There is always changes that could happen in the macro environment. You see speculation in some quarters about recession clouds looming that obviously would change everything. But we go into the year feeling pretty good about the adult tobacco consumer.
Okay. And then Maury, just on the pricing environment, obviously that's been another positive trend at the manufacturer level where we've seen a pretty healthy price increases in the past few quarters. If I look at the price gap versus discount brands, it's still at one of the lowest levels consumers are in a relatively healthy shape.
Yes. I mean, our desire, as you know, is to continue to grow income in that segment while maintaining modest share momentum on Marlboro. If you look at the net pricing for the year, Judy, it's almost 5%, which is at the higher end of the historical range. I had occasion to go back and look at the 4 year average, it's about 4.25%. And so, that works.
We are always mindful of the price gap and there is competition in the industry. So with that kind of net pricing realization and attention to cost management, growing some share and the diverse business platform we have, we think that's kind of the Altria story and we like the way that's been played out over the last several years where you've seen really consistent EPS growth at about 8% through thick and thin. And we think that's the model that we should stick with.
Okay. And just my last question. So on the SCT, so obviously we've seen a little bit of a tick up in the second half. So your outlook for 20 16 in terms of the SCT environment?
Yes, we're always cautious at the beginning of the year. We saw more activity actually last year, didn't we, than we had seen in the last previous year. We took 8, I think, memory serves, we took 8 SCT increases last year. So, there are always puts and takes with them. We know that there are going to be lots of proposals.
We have a very talented government affairs team, which tries to advocate on behalf of our consumers. So, we'll have to see as we go into the year.
Got it. Okay. Thank you.
Thanks for calling, Judy.
Your next question comes from the line of Matthew Granger of Morgan Stanley.
Hi, good morning.
Good morning, Matt.
I wanted to ask a follow-up question on the productivity initiative. In the past when you've had similar programs, usually it's been in response to a factor like the FET increase that necessitated rightsizing the company to account for, I guess, a lower level of volumes. And volume trends have obviously been very stable recently.
So I guess what precipitated
the decision to implement a into the P and
L? It's our desire to grow our business for the long term and to reallocate our resources against growth initiatives. I think that you always have to be mindful of costs over time. If you have opportunities to improve in your infrastructure or to improve your organization and to invest those savings in your brands or in your products for the future or in the way you can go to the market, you should do that. And I think it's one of the reasons, Matt, that Altria has been successful over decades.
And while these programs are never easy to accomplish, that's how you grow over time. And when you see Altria's growth over time, it's because we do these programs often from strength and that is the case today. Our business is strong, but we believe we should invest in several of these initiatives now and that's the reason.
Okay. Thanks, Marty. And then just one additional question just on the smokeable segment margins. You addressed this to some extent. They were up here in the Q4, but less so than we saw in the 1st 9 months.
And you called out the lapping of the quota buyout. But just curious, whether there were any other specific areas of the business where you felt there was an opportunity to specifically reinvest here in the Q4?
Yes, Matt, I'll take that. Thanks for the question. I think when you look at margins in the smokeable category, you really have to think about there were 2 kind of primary factors. 1, we've talked about on a regular basis and that was the pension. Remember, we updated the mortality table at the end of last year and that gave us a bit of a drag on the expense side of that as we went through the year.
So that was still present. From an equity standpoint, you saw us investing. We shared some of that at Investor Day around some of the digital innovation, some of the mobile couponing efforts that we had underway. Those would be the primary factors that I would point out.
Okay. Thank you, Billy.
Your next question comes from the line of Owen Bennett of Nomura.
Good morning, guys.
Hi, Owen.
Just one question. I just wanted to know, have you seen any real significant change in the competitive dynamics over the last quarter? Obviously, with Reynolds putting into place some of the new contracts now and Imperial obviously now in the marketplace in a larger scale. Just wondering if any of those competitive dynamics have changed significantly? Thank you.
Owen, thanks for the question. I think the answer is nothing that we haven't contemplated. The brands have some new owners and the owners talked about their plans about what to do with the brands at retail. We fully contemplated that, but we haven't seen anything that I would call out as significant or material. Cool.
Thanks very much.
Thanks for calling.
Your next question comes from the line of Michael Ladria of CLSA.
Good morning.
Hi, Michael.
I just wanted to see if
you could give a couple
of clarifications on the cost savings. 2 in particular, one you called out the $90,000,000 savings on the pension. That's completely unrelated to the productivity initiative. Is that correct?
That's correct, Michael.
And then just second, a little bit of a follow-up on Bonnie's question. I realize there's competitive sensitivity and so nothing obviously too detailed. But just compared to the program from about 3 or 4 years ago, your I guess a little question on semantics. You referred to that as a cost savings program, I think. Here it's using the word productivity, which sounds a little more like ordinary type efforts.
Is there any difference in terms of very broadly how you think about these two initiatives or is it just a visit of ordinarily things that you can do periodically to update your cost base and the words and semantics aren't meaningful? How should we think about them just at a very high level, this versus the last program?
Well, I think the way to think about it is you constantly want to look at your resources, you want to make sure that they are allocated to the best possible way. If you can find productivity to invest in your growth areas while becoming more efficient in other areas, you should do that for the long term health of the business. That's how we think about productivity. And we do it all the time, but from time to time, we have opportunities to take bigger steps and we're going to be implementing this productivity initiative over 2016 2017, so that we can invest in some of these important initiatives that we've identified in the release.
Okay, great. That's helpful. And then just one more, looking at the Vapor business and some of your investments there, obviously, that category has slowed pretty considerably. How do you think about the level of investment that's appropriate there going forward?
With discipline, I think you have to you really do. I mean, you have to be disciplined about it. The category is a very interesting emerging category. 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 do that with discipline, because we are trying to do it within the guidance that we are trying to provide about how we are growing all of our businesses long term.
I think we've done a better job with that with Mark 10 recently and especially with Mark 10 XL. It's a better product, Michael. It's been very well received by the consumer. We are getting good results in our lead markets and so we are rolling out and expanding with discipline and trying to spend appropriately, but not over spending. Okay, thank you.
That's helpful. Thanks for calling in.
Your next question comes from the line of Chris Growe of Stifel.
Hi, good morning.
Hi, Chris.
Hi. I just had a question for you if I could on just understand the trade inventory movements. We knew those were coming. They were a little larger than I expected. And just to get a sense of how you exit the year and where inventory levels are.
I guess maybe related to that with inventory I'm sorry, with volumes being so strong throughout 2015, inventory levels as we exit the year, I'd be surprised if they were that they were lower. Is there any reason why those need to be up a little bit before they are even versus the prior year given the strength in volume throughout the year?
Yes, good question. Listen, they go up and they go down for us, but they usually wash out over the year as you know and I think that's what happened in 'fifteen. When we look at wholesale inventory, we really don't see anything remarkable in comparing year end 'fifteen against year end 'fourteen. As a matter of fact, if you refer, I think Chris to the sheet that we provide, you see the numbers that about spot on. You did see some depletion during the Q4, which we predicted I think in the Q3 call, but honestly, I think as we go into 2016, we just don't see anything remarkable and as I mentioned earlier, we'll have to see how the volume plays out throughout the year.
Okay. And then I just want to understand and I don't know if you've given this yet, I didn't hear it, but just the contribution to profitability from SAB in 2016 from that, and I know it assuming we'll assume it hasn't that doesn't change and the ABI deal doesn't occur. We know there's a currency drag, so I'm just trying to get a sense of do you expect it to be a contributor to profitability in the year?
Hey, Chris, this is Billy. Thanks for the question. When you think about SAB, it's always a contributor to profitability, right? We have earnings that flow through to them. As far as whether it's going to be larger or smaller than last year, we don't go to that level of detail.
Know that from a currency standpoint, we looked at how currency impacted us in 'fifteen. We incorporate that into our guidance for 'sixteen. So we feel comfortable with what we have in. So, yes, it will be a contributor to profitability.
Okay. Thank you for the time.
Thanks for calling.
Your next question comes from the line of Stephen Marascia of Capital Securities Management.
Good morning, gentlemen. A couple of
quick questions. Number 1, have your retail chains given you any kind of idea whether the expected e cig sales growth has been going according to expectations or have you had to adjust your expectation levels? And secondly, if you could, I forgot what the schedule was, but when you guys expect the feds will come out with some type of new regulations on the e cig market?
Yes, let me take the second one first. Thanks for those. As you know, FDA has been working on a steaming regulations. It's our understanding that they're over at OMB and that the process is now between OMB and FDA. And they have not said when they expect to announce.
They had said that they expected it to be in 2015, but of course we're now in 2016 and that hasn't happened. So I'm afraid I can't give you much more color than that. The process is a little opaque. I want to make sure I understand the question you had about retail. If you're asking about our product, Mark 10 XL and our lead markets, our retailers are very excited about that product.
It's been selling very well and it's got a good response. I couldn't quite tell if that's what you are asking about or if you are asking something more general.
No, more general in terms
of the overall e cig market?
Yes, well, it slowed a little bit. It had very meteoric as a category growth when it first came out. It was up over 100% year over year and then 50% the year after that. And then last year, we estimated the category growth in dollar sales was about 25%, but a lot of that was in the first half as it slowed in the second. So the category growth has slowed down, but it still remains interesting to adult tobacco consumers and interesting enough for us to want to compete there.
Okay. Thank you very much.
Thanks for calling
in. Your next question comes from the line of Deandre Parks of Western Asset.
Good morning. Could you please give us some color on as it relates to some of your high coupon debt, what your thought process is behind? How you look at that? I know you guys actually tendered for some back in the past and especially given the fact that there may be some gains. How do you look at that process?
Whether you do or do not?
Sure. Thanks for the question. Look, we're always assessing both marketplace conditions and where we stand from an overall capital position within our company. We feel very comfortable with where we're at, but we're always assessed the marketplace for opportunities to take advantage of. And to your point, we took advantage of some of that in the beginning of the year with a debt tender that we did in the Q1 of 'fifteen.
So we assess it overall, what are the cash needs of the business and what are the marketplace conditions when we make those decisions.
Okay, thank you.
Thanks for calling.
We will now open the call for questions from the media. Your next question comes from the line of Nik Modi of RBC Capital Markets.
Hey, this is actually Nikhil Nachani on Nik Modi's behalf. Just one quick question. If the ABI SAP deal does close and you guys do get some incremental benefits from that deal, how are you thinking about that in terms of letting that drop to the bottom line or reinvesting into the business? And if you do choose to reinvest some of those, what would be the priorities? Thank you.
Well, I can appreciate the question, but you can appreciate that I can't tell you that right now. We don't even have a closing date for the transaction. We're not sure where it's when it's going to close. And so you just forgive me, I don't want to get ahead of those parties transaction by speculating about the benefit to us. As you know, we think it's a very attractive transaction.
We think that the combined company is going to be a terrific company and we're really pleased to be able to participate in the company going forward. But I don't want to get into any more detail on that at this time if you'll allow me. Thanks. Sure. Thank you.
Okay. Thanks for calling.
Your next question comes from the line of Vivien Azer of Cowen and Company.
Hi, good morning.
Hi, Vivien.
So I know you don't like to talk about Marlboro's sub families in a great amount of detail. But Marty, given the significant transformation that is, gone on with Marlboro, in particular with the introduction of Black. Is it at all possible at least to kind of dimensionalize kind of the sizing of the different brand families as they contribute to total Marlboro?
No, I guess is the answer. I know you try on this, but it's just competitively sensitive about how we do this and I think what's more, I don't mean this to be cavalier like that, I just mean that what we really want to look at is the overall dimensions of Marlboro. How is it doing across all of the families? How is it doing from a total equity point of view? How is it doing in terms of the price gap it can command and so forth and so on.
And I know you know all that, so I won't repeat it. Marlboro is doing exactly what we want it to do. And you look at Marlboro Black, it has just added a whole new dimension, for example, to the brand. It's staying relevant to the current cohort of adult tobacco consumers. It commands nice price premium.
So Marlboro is great, but we're just not going to break it out at that level. I hope you'll indulge me on that.
Can't blame you for trying, but I absolutely appreciate that. No problem. From a regulatory standpoint, it seems like we've seen a bit of an uptick in terms of activity around raising the minimum purchase age for tobacco products to 'twenty one, some with success like Hawaii, some not, New Jersey. I was hoping you could comment kind of high level how you see that type of regulatory activity
evolving? Yes, I can. Our position to begin with is, of course, there should be minimum age and we were the company that went around and lead the effort on that to make sure that there were minimum age laws in place everywhere and that they were vigorously enforced and we spent an awful lot of time and energy and resources on that which was completely appropriate and we support that. We support a minimum age of 18 and if you look at the reference points, the overwhelming majority of the states use 18. The master settlement agreement from the 1990s used 18.
And when we passed the FDA bill, it was 18. And further, the FDA bill contemplated a process to study whether the age should be raised and they gave that test to FDA. FDA is now doing that and our view on that is they should let FDA do that job and send a report over to Congress and then we can have an intelligent debate about whether the age should be raised or not. But this sort of ad hoc approach of locality here or state there doesn't seem to make good public policy sense to us. So, we believe in 2018 and we also support the process that was in place from the statute to study the issue.
Super helpful. Thank you. My last question, just any comments on Green Smoke after the tests in 2015?
They're encouraging. We really, I think have improved the Green Smoke platform. We have it in a number of retail stores as you know, it's been very well received. It continues to be the leader in the e commerce space. And so we're working on that brand portfolio now, but we're very glad to have Green Smoke in the portfolio and obviously the company has helped us from a supply chain point of view immensely.
Terrific, thank you very much.
Thanks for calling.
Your next question comes from the line of Trip Nickel of Wall Street Journal.
Hey, Marty, I know you declined to provide some clarity on the productivity initiative earlier when Bonnie asked about it. But looking at that term leaner organizational structure, could be interpreted as layoffs. What do you mean by that? And will there be layoffs? If so, how many jobs would be eliminated?
Yes, let me begin by saying thanks for calling in by saying that we're going to speak with our organization later this morning and I hope you can appreciate that I want to speak to our organization about our plans here before I do in a public venue. So you have to indulge me a bit on that. But yes, we intend to have a leaner organization. What lean typically means, it means in this case is we want to have an organization that has fewer layers and we have broader spans of control in our managerial ranks. And if we can work towards those ends and we can reinvest those savings in our growth initiatives, we should do that.
It may be that we can give you more information later in the day after I've spoken to the organization, but I don't want to get ahead of it on the call.
Okay, thanks.
Thanks for calling.
Thank you. At this time, I would like to turn the call back over to Ms. Sarah Nokomis for closing comments.
Thank you, everyone, for joining our call this morning. If you have any follow-up questions, please contact us at Investor Relations.
Thank you. This does conclude today's conference call. You may now