Categories Earnings Call Transcripts

Altria Group Inc (MO) Q4 2020 Earnings Call Transcript

MO Earnings Call - Final Transcript

Altria Group Inc (NYSE: MO) Q4 2020 earnings call dated Jan. 28, 2021.

Corporate Participants:

Mac Livingston — Vice President, Investor Relations

Billy Gifford — Chief Executive Officer

Sal Mancuso — Executive Vice President, Chief Financial Officer

Analysts:

Nik Modi — RBC Capital Markers — Analyst

Bonnie Herzog — Goldman Sachs — Analyst

Vivien Azer — Cowen — Analyst

Michael Lavery — Piper Sandler — Analyst

Chris Growe — Stifel — Analyst

Owen Bennett — Jefferies — Analyst

Steve Powers — Deutsche Bank — Analyst

Gaurav Jain — Barclays — Analyst

Robert Rampton — UBS — Analyst

Adam Spielman — Citi — Analyst

Priya Ohri-Gupta — Barclays — Analyst

Jennifer Maloney — The Wall Street Journal — Analyst

Presentation:

Operator

Good day, and welcome to the Altria Group 2020 Fourth Quarter and Full Year Earnings Conference Call. Today’s call is scheduled to last about one 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. [Operator Instructions]

I would now like to turn the call over to Mac Livingston, Vice President of Investor Relations for Altria Client Services. Please go ahead, sir.

Mac Livingston — Vice President, Investor Relations

Thanks, Laurie. Good morning and thank you for joining us. This morning, Billy Gifford, Altria’s CEO; and Sal Mancuso, our CFO will discuss Altria’s fourth quarter and full year business results.

Earlier today we issued a press release providing our results. The release, presentation and quarterly metrics are all available on our website at altria.com.

During our call today, unless otherwise stated, we’re comparing results to the same period in 2019. Our remarks contain forward-looking and cautionary statements and projections of future results. Please review the forward-looking and cautionary statement 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.

Altria reports its financial results in accordance with US Generally Accepted Accounting Principles. Today’s call will contain various operating results on both a reported and adjusted basis. Adjusted results exclude special items that affect comparisons with reported results. Descriptions of these non-GAAP financial measures and reconciliations are included in today’s earnings release and on our website at altria.com.

Finally, all references in today’s remarks to tobacco consumers or consumers within a specific tobacco category or segment refer to existing adult tobacco consumers, 21 years of age or older.

With that, I’ll turn the call over to Billy.

Billy Gifford — Chief Executive Officer

Thanks, Mac. Good morning and thank you for joining us. Altria delivered outstanding results in 2020 and managed through the challenges presented by the COVID-19 pandemic. Our Tobacco businesses were resilient and our employees demonstrated unwavering commitment to their work, colleagues and communities. Our employees continued to move Altria forward, and we believe we’re making steady progress towards — toward our 10-year vision to responsibly lead the transition of adult smokers to a noncombustible future.

We continue to execute against the strategies we previously shared, including maximizing profits in our combustible businesses. Responsibly expanding our non-combustible products and demonstrating science-based leadership in the external environment. We remained active in our communities, supported relief efforts for the pandemic and the West Coast wildfires. We’re committed to driving positive change and addressing racial and economic inequities.

Change starts from within, and our employees are leading our efforts to build a more diverse, inclusive and equitable organization. Our 11 employee resource groups are helping promote cultural awareness and diversity in our workplace and within our communities. Two of these organizations, Mosaic and Si! were recently recognized for their contributions by the National LGBT Chamber of Commerce and by the Virginia Hispanic Chamber of Commerce, respectively.

We also acknowledge the importance of addressing environmental challenges and we’ve established ambitious goals for 2030. Last month we were among the 1% of companies awarded a AA rating from CDP for Climate and Water Stewardship. We’re proud of these efforts and I look forward to sharing more details about our ESG initiatives next month at CAGNY.

2020 was a dynamic year in the Tobacco industry, with notable changes in each category. Tobacco consumers continue to adopt non-combustible alternatives to cigarettes, most significantly in the old tobacco space with rapid growth and all nicotine pouches off of a small base and a return to moderate volume growth in moist smokeless tobacco. The Heated Tobacco category also showed encouraging signs of smoker interest though it remains in its early stages. The e-vapor category, however, which has been the biggest driver of smoker conversion over the last several years contracted in 2020 as it continued to undergo a transition period pending FDA market determinations. And in combustibles, cigarette volumes were a lot of change from 2019 as the COVID-19 pandemic altered smoker behaviors and purchasing patterns.

Looking at the Tobacco space in total, estimated equivalized volumes remained stable. In fact, over the last five years, we estimate the total tobacco volumes have only decreased by 1% on a compounded annual basis. While 2020 represented a pause in some industry trends away from combustible products, our plans to achieve our 10-year vision remains centered around building a deep understanding of evolving tobacco consumer preferences, meeting these preferences by expanding the awareness and availability of our non-combustible product portfolio and when authorized by the FDA engaging with smokers to educate them on the benefits of switching to alternative products.

Let’s now turn to our 2020 business results. Altria’s full year adjusted diluted earnings per share grew 3.6% driven by strong performance from our Tobacco businesses. We also returned nearly $6.3 billion in cash to our shareholders in the form of dividends, and our Board increased the dividend for the 55th time in the past 51 years. Our smokeable products segment continues to be the engine that powers our 10-year vision, generating significant cash that can be invested in non-combustible products and return to shareholders. This segment has demonstrated strong profit growth in a variety of marketplace conditions. Over the last five years, smokeable segment adjusted OCI has grown by 5.5% on a compounded annual basis and this segment has delivered excellent financial performance across various volumes and market share dynamics. We continue to be pleased with the performance of our combustible businesses and Sal will provide more details on the segment in his remarks.

Moving to our non-combustible offerings. We’re pleased with the continued strength of USSTCs moist smokeless tobacco business and the encouraging results from our other non-combustible products. We believe our products and investments with the old tobacco e-vapor and heated tobacco categories present compelling options for the millions of US smokers looking for alternatives to cigarettes. In old tobacco, we believe we have an unmatched portfolio of MST and oral nicotine pouch products.

Copenhagen remains the leading oral tobacco brand and delivered strong volume and profit performance for the year. We’re also excited about the potential for on! and believe it’s a satisfying product for both smokers and dippers. Helix made significant progress in its first full year of operations. Over the last 12 months, our talented regulatory affairs team assist the Helix in following PMTAs for the on! portfolio, which we believe demonstrate that the products are appropriate for the protection of public health. Our highly skilled engineers and machine operators supported Helix in establishing a manufacturing footprint for on! in our Richmond facility and Helix has reached annualized capacity for on! of 50 million cans. The team continues to install machinery and Helix expects unconstrained manufacturing capacity for the US market by mid-year 2021. And the Helix brand management and AGDC’s sales teams collaborated to steadily increase the retail distribution of on! during the year and executed innovative trial generating promotions that demonstrates the ability for on! to gain traction with smokers and dippers.

On! was sold in approximately 78,000 stores at the end of 2020, up nearly 40% from the third quarter and with the 5 times the store count from the end of 2019. In stores with distribution, on! achieved a retail share of 2.4 percentage points of the old tobacco category in 2020 with significant growth coming in the second half of the year. Helix has strong plans for the year ahead and is focused on removing capacity constraints, reaching its retail distribution targets, building brand equity and converting smokers. We’re confident in the on! proposition and believe its satisfying range of nicotine strengths and flavors and unique packaging position it well for success in the rapidly growing nicotine pouch space.

Moving to e-vapor. We estimate the total category volumes decreased by 10% for the full year. The category continues to undergo a transition period as FDA prepares to make market determinations on the thousands of PMTAs filed by the September 2020 statutory deadline. We continue to believe that e-vapor products can play an important role in tobacco harm reduction and that sustainable e-vapor category will be one that consists solely of FDA authorized products. We believe the categories long term trajectory will be determined by regulatory decisions, legislative and tax policy and innovation that best addresses smoker and vapor preferences.

In the heated tobacco category, PM USA continues to expand IQOS and Marlboro HeatSticks responsibly and in a disciplined manner. PM USA’s 2020 accomplishments included, launching in Charlotte with a more disruptive retail fixture, expanding the retail distribution of HeatSticks to approximately 1,000 total stores, introducing devices into select Charlotte convenience stores, developing an array of new digital tools, including mobile video chat capability which gives PM USA’s customer care experts a virtual option to build connections and support age verified smokers through their conversion journey and communicating with smokers using the FDA authorized reduced exposure claim about the benefits of switching from cigarettes. We’re excited that the FDA has authorized the IQOS 3 device for sale in the US. The new device offers several enhancements compared to the current 2.4 version, including a longer battery life and a faster recharging time. PM USA expects to begin selling the new device shortly and it would be available across all existing retail channels in the Atlanta, Charlotte and Richmond markets. PM USA also recently introduced new packaging for HeatSticks and has renamed the three currently authorized HeatSticks SKUs as Amber, Blue Menthol and Green Menthol. The new packs feature a cleaner look and PM USA believes the naming convention will facilitate HeatStick linage — line extensions in the future should additional variance be authorized by the FDA.

PM USA is focused on expanding the availability and awareness of IQOS, achieving its contractual performance requirements and remains on track with its 2021 plans to expand IQOS and HeatSticks into four new metro markets and surrounding geographies. We believe that PM USA has the right approach to maximize its first mover advantage, while we’re responsibly positioning the US heated tobacco category for long-term growth and profitability.

Let’s now turn to our financial outlook for 2021. Our plans for the year ahead, include accelerating investments in support of our 10-year vision, which we expect to fund through the financial strength of our tobacco businesses. The external environment remains dynamic however, and we’re monitoring various factors including unemployment rates, fiscal stimulus, tobacco consumer dynamics, including stay at home practices, disposable income, purchasing patterns and adoption of non-combustible products, regulatory and legislative developments, the timing and breadth of COVID-19 vaccine deployment and expectations for adjusted earnings contributions from our alcohol assets. Taking these factors into consideration, we expect to deliver 2021 full-year adjusted diluted EPS in a range of $4.49 to $4.62. This range represents an adjusted diluted EPS growth rate of 3% to 6% from a $4.36 base in 2020.

Our 2021 guidance incorporates planned investments to drive smoker conversion to non-combustible products, including continued marketplace investments to expand the availability and awareness of our non-combustible offerings, building an industry-leading consumer engagement system that enhances data collection and insights in support of conversion and increased non-combustible product research and development. We expect our 2021 adjusted EPS growth to come in the last three quarters of the year, primarily due to prior-year comparisons which includes one fewer smokeable products shipping day in the first quarter.

Altria’s tobacco businesses delivered excellent results over the past year and I’d like to thank our employees for their hard work. Their dedication drives our strong performance and it’s their passion and commitment that makes me excited for Altria’s future.

I’ll now turn it over to Sal to provide more detail on the business environment and our financial performance.

Sal Mancuso — Executive Vice President, Chief Financial Officer

Thanks, Billy. Let me begin by providing an update on US Tobacco consumers. Economic conditions remain challenging for consumers in the fourth quarter as unemployment rates remained high and the enhanced benefits from the original pandemic assistance package were fully exhausted. However, we believe, consumers continued their stay at home practices in the fourth quarter contributing to more tobacco usage occasions and higher tobacco discretionary spending. At retail, we estimate that the fourth quarter, the number of tobacco consumer trips to the store was slightly lower than prior levels, but Tobacco expenditures per trip remained elevated versus the year ago period.

Turning now to our businesses. The smokeable products segment delivered excellent financial and marketplace results in 2020. The segment grew full year adjusted OCI by over 10% and expanded its adjusted OCI margins by almost 2 percentage points. The smokeable segment also achieved robust net price realization of 6.7% for the year, with PM USA’s revenue growth management framework continuing to enhance the segment’s top line performance.

Smokeable segment reported domestic cigarette volumes declined by 0.0 — I’m sorry, 0.4% in 2020 versus the prior year. When adjusted for trade inventories, calendar differences and other factors, we estimate that full year segment cigarette volumes declined by 2%. At the industry level, we estimate that full year domestic cigarette volumes were unchanged versus the prior-year after adjusting for the same factors. Looking ahead, we expect 2021 cigarette industry volume trends to be most influenced by smokers stay at home practices, unemployment rates, fiscal stimulus, cross-category movement, the timing and breadth of COVID-19 vaccine deployment and consumer purchasing behavior following the vaccine. Due to the uncertain timing and magnitude of each of these dynamics, we’re not providing a cigarette industry outlook. We believe the degree of cross category movement will be influenced by several factors, including consumer perceptions of the relative risks of non-combustible products compared to cigarettes, FDA determinations on PMTA filings and legislative actions. We will continue to monitor these factors and update you on the pandemic driven in underlying smoker behaviors that we observed in the category.

Turning to marketplace performance. Marlboro’s fourth quarter retail share was 43.3%, up 0.2 share points versus the prior year and unchanged sequentially. Marlboro continue to benefit in the fourth quarter from smoker preferences toward familiar products during disruptive times and continued lower promotional spending among competitive brands versus the first half of 2020. For the full year, Marlboro’s retail share declined 0.3 share points to 43%. Marlboro’s full year share performance was impacted by the movement of older consumers coming back into cigarettes from e-vapor which we observed at the beginning of 2020. This demographic has a greater tendency to purchase discount cigarettes than the category average, which increased discount segment share to start the year. We continue to be pleased with Marlboro’s performance and believe its leading brand equity positions the brand well to deliver on its long-term profit potential. In discount total segment retail share was 24.5% in the fourth quarter unchanged versus the year ago period and up 0.2 share points sequentially. For the full year discount segment retail share increased 0.3 share points to 24.5% driven by the cross category movement observed at the beginning of 2020 in growth in deep discount products.

Moving to cigars Middleton provided a strong contribution to the smokeable segments financial results and continued to successfully navigate the regulatory environment. Reported cigar shipment volumes increased 9% for the year and Black & Mild remained the leading tipped cigar brand. Middleton has also received market orders or exemptions from FDA covering over 97% of its volume.

Turning to non-combustible. We’re very pleased with the performance of the oral tobacco products segment. Segment adjusted OCI increased 7.3% for the year and it maintained its strong adjusted OCI margin of 71.7 percentage points, despite increased investments behind on!. Reported oral tobacco segment volumes increased by 1.2% in 2020 driven by on! oral nicotine pouches. In MST, Copenhagen reported shipment volumes were unchanged versus the prior year. When adjusted for calendar differences, trade inventory movements and other factors, full year oral tobacco segment volumes increased by an estimated 1%. Full year 2020 retail share for the oral tobacco segment was 49.8% down 2.7 percentage points due to the increased adoption of oral nicotine pouches. We remain pleased with the performance of Copenhagen in the MST category and we’re excited about the growth potential of on! as we continue to expand capacity and distribution.

In alcohol, the pandemic negatively impacted the 2020 financial performance of both Ste Michelle and our equity investment in ABI. Ste Michelle’s full year adjusted OCI decreased approximately 30% driven primarily by lower on premise and direct to consumer sales, partially offset by higher pricing. And in beer, we recorded $157 million of adjusted equity earnings in the fourth quarter representing Altria’s share of ABI’s third quarter 2020 results and a decrease of more than 19% from the same period last year. For the full year we’ve recorded $540 million in adjusted equity earnings from ABI, down over 36% from 2019.

In our all other operating category we recorded $172 million in adjusted losses for the year, more than half of which related to non-cash reductions in the estimated residual value of certain assets at Philip Morris Capital Corporation. As of year-end 2020, the net finance assets balance for PMCC was $320 million. We expect to continue reducing this balance in 2021 through rent and asset sales and fully and expect to fully complete the PMCC wind down by the end of 2022.

Moving to capital allocation. Our balance sheet remains strong and our tobacco businesses are highly cash generative. Dividends remain our primary vehicle for returning cash to shareholders. And our long-term objective is a dividend target payout ratio of approximately 80% of adjusted diluted earnings per share. We believe our dividend target payout ratio provides significant shareholder return while allowing for flexibility in our capital allocation. We performed rigorous analysis to determine the best use of excess cash, including evaluating options for reinvesting behind our 10-year vision, refinancing our long-term debt and repurchasing shares.

Yesterday, our Board authorized a new $2 billion share repurchase program, which we expect to complete by June 30, 2022. The new authorization reflects the significant value, the board believes exists in our shares today.

With that we’ll wrap up. And Billy and I will be happy to take your questions. While the calls are being compiled, I’ll remind you that today’s earnings release and our non-GAAP reconciliations are available on altria.com. We’ve also posted our usual quarterly metrics which include pricing, inventory and other items.

Operator, do we have any questions?

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Nik Modi of RBC.

Nik Modi — RBC Capital Markers — Analyst

Yes, good morning everyone.

Billy Gifford — Chief Executive Officer

Good morning, Nik.

Nik Modi — RBC Capital Markers — Analyst

Just two questions. Hey, good morning, Billy. Just two questions from my side. Just if you guys can give us maybe a state of the union of what you’re seeing from the excise tax front that would be helpful? And then the broader question is just on Marlboro, I mean, very good share performance, which could be surprising, given some of the stimulus that was kind of — was over. We didn’t — we had a kind of an air pocket in terms of government stimulus. What really drove that? I mean you spoke in your prepared comments about well-recognized brands, but I’m just trying to get underneath if there is other drivers like price cap management or the Marlboro Rewards program and how that played a role in terms of kind of shifting the share trajectory, because it’s been losing shipper number of quarters now? Thanks.

Billy Gifford — Chief Executive Officer

Yes, thanks for the questions Nik, we’ll take them in order. On the excise tax front, I would remind you that we had two state excise tax increases happen at the beginning of this year. Certainly with the bill that the states have racked up responding to COVID, certainly it would be a little bit more challenging excise tax environment. We have a great government affairs team as you know Nik and they engage on both sides of the aisle across the states and really know how to engage on that. From that standpoint, though, I think right now most governments are focused on how to get the COVID-19 pandemic under control. And so there is a little bit of chatter across the states, but nothing to point out at this point, but certainly it will be a challenging environment as they look to pay the bills related to their response to COVID-19.

On Marlboro, Nik, I think what you saw was and Sal highlighted in his comments, people were concerned at the beginning of the year. We tried to highlight for the analyst and investor community that what we saw was consumers moving back from e-vapor back into cigarettes in both premium brands and discount brands benefited from it, but because it tended to skew older adult smoker coming back, we know that they have a proclivity towards discount brands. We didn’t panic when that was taking place. We knew what — felt like we knew what was behind that, and I think you’ve just seen the strength of the Marlboro brand through time. Certainly there were some competitive premium brands that had some extra resources in the marketplace at the beginning of 2020. We folks saw those lessen as we progressed through 2020. And to your point, the programs we have in place and the Marlboro brand team do an excellent job of engaging with the consumers and really building loyalty through time, whether you — you mentioned the rewards program, but other programs as well, and I think that’s the strength of the mobile brand and we’re excited about where it stands.

Nik Modi — RBC Capital Markers — Analyst

Great, thanks guys. I’ll pass it on.

Operator

Your next question comes from the line of Bonnie Herzog of Goldman Sachs.

Bonnie Herzog — Goldman Sachs — Analyst

Thank you. Good morning, everyone.

Billy Gifford — Chief Executive Officer

Good morning, Bonnie.

Bonnie Herzog — Goldman Sachs — Analyst

So I guess my first question is on your APS guidance. I guess I’ll be curious to hear, what does your guidance assume in terms of the tax increases that you just touched on, I mean, I’m wondering Billy if it does consider a potential federal exercise tax increase may be at the low end. And I guess I’m a bit surprised you were unable to provide even a wide range for your cig volume expectations this year. I certainly understand there is a lot of uncertainty right now in our world, but you must have I guess some sense of the range of your cig volume again given your EPS guide. So maybe you could touch on that for us a bit just at a high level, whether or not you expect cig volumes this year will possibly revert back to historical declines, maybe below historical declines given the tough comps and the potential for greater excise tax increases? Thanks.

Billy Gifford — Chief Executive Officer

Yes. Thank you Bonnie. And I will take those in turn as well. On the EPS guidance, really when you think about the EPS guidance and I know you are including king of the cigarette volume in that, look we run a range of scenarios around that. We really look at what do we base our expectations, we have a very strong forecasting group. They forecast across the various categories and then we run a range of range of scenarios around that, upside and downside and we think about, okay, what do we feel confident about in providing a short range of EPS guidance for the year and that’s where we landed. As far as cigarette volume, it wasn’t that we didn’t have a forecast for volume. We feel very good about the way we go about forecasting volume, but to your point there are lot of uncertainties and a lot of fluidness in the environment, whether that’s the consumer and how they are all engaged with some of these non-combustible categories as they continue to grow or to the things we highlighted in our remarks, whether it’s unemployment or physical stimulus if the government passes that, so there are range of factors there.

What we think really focusing on the consumer and that’s what we try to do and are trying to do is really give more information about how we are focused on the consumer and wondering where did they go and that’s exactly why we implemented the portfolio strategy is really looking at the consumers going to make different decisions depending on where they are at in their journey and how do we really focus on the consumer and have the best products and best brands in each of those categories as they make decisions. Don’t get me wrong, this cigarette as I said in my remarks really fuels the engine for fueling the 10 year vision, but we think what you should [Indecipherable] is there a success in meeting the consumer where they are at, regardless of what category they are in.

Bonnie Herzog — Goldman Sachs — Analyst

Okay. That that’s helpful. I appreciate that. And then speaking of your 10-year vision, I did want to — just maybe ask you to help us with that and may be update us on where your outlook, I know it’s in the beginning but are there any guide posts you could share with us that your expecting to speak to your business, maybe even the next three to five years and I’m asking because obviously, per your guidance and your comments you are entering a period near terms over your stepping up spend to kind of accelerate this plan, so it would help us to understand maybe some targets like, for you to convert your business to the non-combustible products as you mentioned. Is it fair to assume 20%, 25% for instance in the next, I don’t know again three, five or five plus years. And then as you execute on that vision, are you also open to or considering future M&A to even accelerate this further or should we just assume this will all be done organically? And then I too want to hear about how you are incentivizing your employees to execute? Thanks.

Billy Gifford — Chief Executive Officer

Sure. Look, I’ll take them in the reverse order. As far as the employees, they have such passion but you’re right incentivizing them in the right direction certainly directs that passion. We’ve shared that 10-year vision that we have and how we expect to progress through time with our employee base. They’ve — they are passionate about it and they are exited to support that and we think we have the right incentive program in place to warrant that excitement.

As far as model stones I again I won’t go into a specific numerical value. Remember from an overall objective we are looking to balance strong growth EPS growth for our investors in the associated cash involved with that. But at the same time making investments over the long term to advance our non-combustible portfolio, so what we’re really trying to do is have that balance and so we are certainly going to share with you through time how we are making progress, but it’s really about the journey of the consumer. So if you think about really driving awareness of the consumer for new categories, then sending trial, ultimately purchase and then at the final stage conversion to these new categories. That’s the way we are thinking about the consumer journey and we are really investing to get to as close to the consumer as we can, because each consumer is going to be in a different point in that journey and make different decisions across the category — categories. And that’s exactly the portfolio approach. And different actions are taken whether they are regulatory actions, whether they are — consumer is really enjoying a category, has been able to be agile enough to not starve any category that’s growing and make the appropriate investments there. So that’s how we think about the consumer journey and you will see us share more through time of how we are progressing with those consumer journeys.

Bonnie Herzog — Goldman Sachs — Analyst

Okay. Thanks. So I’ll just maybe quickly on the M&A, would you be open to that as — I guess something about the next year is that the way to just further accelerate that, whether you’ve developed internally or would you be open to looking outside?

Billy Gifford — Chief Executive Officer

Yes. We’ll keep our eyes open for everything, but we are extremely exited about the portfolio products that we have currently and it’s really a focus on execution and to your point that’s exactly why we talked about the investments in our product development is making sure that we are staying abreast with the consumer and really keeping pace and meeting their needs and desires.

Bonnie Herzog — Goldman Sachs — Analyst

All right. Thank you. I’ll get back in queue. Appreciate it.

Billy Gifford — Chief Executive Officer

Thank you.

Operator

Your next question comes from the line Vivien Azer of Cowen.

Vivien Azer — Cowen — Analyst

Hi, good morning.

Billy Gifford — Chief Executive Officer

Good morning Vivien.

Vivien Azer — Cowen — Analyst

So I wanted to also switch base on combustibles please. So if we’re looking at wholesale inventories for both you and the industry, they remain elevated at year-end relative to where you guys closed out each of the last two years. Appreciate some of that probably is just safety stock because of COVID. But how should we think about inventory levels as we head into 2021 please? Thanks.

Billy Gifford — Chief Executive Officer

Yes, thanks for the question Vivien. I think you nailed it. I think it was as wholesalers and retailers were making decisions around where they stood with the COVID-19 pandemic and what — because different parts across the US, the surgeons that are taking place in different state government decisions about shutdowns and the consumer mobility in the marketplace. And so I think certainly there was a slight level of increase over what you’ve seen in previous years as they took those thing to consideration. Certainly as we’ve always said through time those wholesale inventories tend to balance out and so we’ll see as we progress through the COVID-19 pandemic and the vaccination rollout how wholesalers and retailers decide to what levels are appropriate for them.

Vivien Azer — Cowen — Analyst

Understood. Thank you so much for that. And my follow-up question is on old tobacco. So [Technical Issues] suggested industry volume growth in the quarter and the year. I was wondering whether you could unpack that at all and provide some color on what — how much of that growth came from modern oral so we could have a better sense of what’s happening with underlying MST? Thanks.

Billy Gifford — Chief Executive Officer

Yes, I would say, look both pieces of that category did grow during the year, but certainly the vast majority was the onset of the novel old products, whether it’d be on! or Zen or other products in that space. And so that’s the vast majority, but both segments of that category did grow. So we feel good about the offerings we have and brands in the traditional MST and Copenhagen continues to lead that category, and we feel great about its position.

Vivien Azer — Cowen — Analyst

Understood. Thank you very much.

Operator

Our next question comes from the line of Michael Lavery of Piper Sandler.

Michael Lavery — Piper Sandler — Analyst

Good morning. Thank you.

Billy Gifford — Chief Executive Officer

Good morning, Michael.

Michael Lavery — Piper Sandler — Analyst

Could you just talk a little bit about what you’re seeing with IQOS and what engagement is really proving the most effective, whether it’s in the stores or digital or mail or anything else? And how does the IQOS 3 launch impact any of your marketing approach?

Billy Gifford — Chief Executive Officer

Yes, it’s a great question Michael. Look, we’re very excited about what we’ve experienced in the first three lead markets. From a standpoint of the exact way to engage with the consumer, what’s most important we found is the consumer education, that they understand what the IQOS device delivers in the Marlboro HeatSticks, what flavor expectations they can have, and then really how to use the device. So from that standpoint we’re trying many things, because remember we launch in densely populated areas. So you have one strategy there. But then as you move from those densely populated areas out that’s exactly why we were testing the device sales in convenience stores to really meet consumers where they are. And as you get to more rural locations really have an outlet to engage with the consumer.

We actually use all of those measures that you mentioned, whether it’s direct mail, whether it’s retail stores, the devices in the convenience stores, whether it’s corners and various places, whether it’s the mobile units and certainly in Charlotte, we have used the mobile units to a larger extent, because what we found is as you meet a certain capacity you can actually move those mobile devices — mobile units from one location to another and really maximize the number of consumers you’re engaging with. Now certainly in the COVID world, we had some challenges there, because there is a lot of engagement, one-on-one with the consumer, but our team implemented digital tools, we talked about the mobile chat capability that they installed and so we’re excited to continue to expand and we’ll have more to say on that.

Michael Lavery — Piper Sandler — Analyst

Okay, great, that’s helpful. And then could you just give your latest thinking on Cronos and would you expect to take full control if federal law were to change?

Billy Gifford — Chief Executive Officer

Yes, I’m not going to speak to taking control or any M&A activities. Certainly we think Cronos has — is positioning themselves well to take a role in the US if it becomes federally legal. I think it’s important to step back and really state what we believe. We believe it should be legal at the federal level, but it’s got to have the right regulatory framework. So if you think about that total framework, what it should address is, it should address underage use, it should establish industry product standards and that includes safety standards, it really needs to be guided by the science, so that from a standpoint of everything should be science driven and it really should deal with the social justice issues that are involved in that space. And so, we believe it should be federalized in legal level. We support that. We are engaged with that. But it’s going to have the right comprehensive framework surrounding it.

Michael Lavery — Piper Sandler — Analyst

Okay, great. Thanks very much.

Operator

Your next question comes from the line of Chris Growe of Stifel.

Chris Growe — Stifel — Analyst

Hi, good morning.

Billy Gifford — Chief Executive Officer

Good morning Chris.

Chris Growe — Stifel — Analyst

Hi. I just had a question for you. First of all, you’ve had an elevated rate of price realization in the cigarette business in particular. And as we enter the year, certainly as you lap — increases that occurred in 2020 as well as presuming you take increases in 2021 beyond what you’ve done already, it seemed to provide the backdrop for an even stronger rate of profit growth. So I want to understand, without getting into numbers I realize that’s going to be hard to get into, but just understand the concept of the desire behind the higher level of pricing and what you can do with that? So is there a heavier rate of investment in the business is going to help fund more of your expansion of on! and the non-combustible sort of the 10-year vision. I’m just tyring to understand the pricing strategy as its evolving here?

Billy Gifford — Chief Executive Officer

Yes. I appreciate the question. I’ll be careful Chris as you mentioned not to get into future pricing strategies. Look, we recognized that pricing is an important part of the algorithm. I would remind you that the strategy for the combustible segment both cigarettes and cigars is to maximize profitability over the long term while balancing investments in Marlboro and the funding the growth of our non-combustible portfolio. So certainly profitability in the traditional tobacco space is what we’re using to invest in the future in these non-combustible product arena. And so certainly we’ll look at that.

From a standpoint of when you look at pricing a couple of the factors that we think about pricing as we move forward is really where are our consumers on an economic standpoint? What are they feeling? How do they feel? What are they thinking about? It’s the strength of our brands. How do we think about our brands and the strength in the consumers’ mind. And then certainly business performance and objectives factor into that.

I think when you look at price realization over the past couple of years, I think it’s important to remember that’s not all this price. It also has the price efficiencies we’ve been able to garner from the advanced analytics that we put in place. And so with the amount of data that we get in and the advanced analytics that we’ve invested and I think you’re seeing the benefit in price realization of being more efficient, but just as effective, if not more in the marketplace with the promotional spend that we have. So it’s a combination of both and we are extremely excited about what our advanced analytics team has been able to accomplish.

Chris Growe — Stifel — Analyst

Okay. Thank you for that. I had one other question. That’s — and I hope it’s not too general. But this is the — I’m just curious as I look at like the cross-category movement, which was a modest factor throughout 2020. Is that more difficult to forecast in 2021? Again, I hope that’s not obvious meaning that, but I guess I’m getting to, is this a year where you’re categories such as Modern, oral or heated tobacco, especially as they grow and become larger could have a larger effect on the cigarette category as an example. So, is this the year where you see the potential for that transition acceleration in some of those categories that could further influence cigarette volumes in 2021 or is it just too soon for that?

Billy Gifford — Chief Executive Officer

Yes, I don’t think it’s too soon for that Chris. I’m hesitant to try to give much more on cigarette volume guidance. I think you’re exactly right. The success of those categories and our success in them will certainly impact the cigarette category it’s in line with our vision, but when you step back Chris, that’s exactly why we really went with this portfolio approach of products. It’s about meeting the consumer where they’re at. Each consumer is going to make different decisions and that’s that objective we have a balancing strong growth in the associated cash for our investors and investing in these categories. As we progress through the year and we see a consumer following of one of these categories, we want to make sure we’re not starving it for investments. So it provides us the flexibility we need to — we feel to make the right decisions as we progress through the year.

Chris Growe — Stifel — Analyst

Okay, thank you for your time today.

Billy Gifford — Chief Executive Officer

Thank you, Chris.

Operator

Your next question comes from the line of Owen Bennett of Jefferies.

Owen Bennett — Jefferies — Analyst

Good morning, guys. Hope you all are well?

Billy Gifford — Chief Executive Officer

Good morning, Owen.

Owen Bennett — Jefferies — Analyst

Just a quick one from me on your notes the increase in the R&D spend around non-combustibles. And I’m assuming it’s obviously can’t be around vapor given and the agreement with JUUL. So I just wondering what this R&D centers on? Is it your own heated product, is it advancements in modern oral, is it something else entirely? Thank you.

Billy Gifford — Chief Executive Officer

Yes, you’re exactly right, Owen. I thank you for the question. You’re exactly right from an e-vapor standpoint with the agreement we have in JUUL. We’re not looking at product development in that space. But it really is staying — the keen focus is on the consumer and staying where the consumer is going and so it’s across these categories that are growing is where we want to have product development to make sure we’re keeping pace with the consumers’ needs and desires. And so I think any CPG having a strong product development is important, and that’s why we think it’s important for us to invest in that area.

Owen Bennett — Jefferies — Analyst

Okay. And would that be, I mean even kind of potentially looking at developing your own heated [Indecipherable]. Is that a possibility in the future?

Billy Gifford — Chief Executive Officer

Yes, I’m not going to get into specifics. You know that it’s in the non-combustible space is where we’re investing. And it’s really about looking how the investor is what their design and what needs are unmet and developing against that. And so that’s about as far as I’m going to go today. I think as we make progress in that space and we feel excited about the progress we made thus far, we’ll share more when it’s appropriate.

Owen Bennett — Jefferies — Analyst

Okay, thanks very much. Appreciate it.

Billy Gifford — Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Steve Powers of Deutsche Bank.

Steve Powers — Deutsche Bank — Analyst

Yes. Hey, good morning. Thanks.

Billy Gifford — Chief Executive Officer

Good morning.

Steve Powers — Deutsche Bank — Analyst

Good morning. So Billy, when you — I guess when you step back and you sum up the elective investments that you seem to be prioritizing in ’21 both towards the vision of a non-combustible future and the new product development, but also just the enhanced analytics around consumer insights and revenue growth management is there any way to mention maybe even just relative to similar investments in prior years, whether you are — whether we should be viewing ’21 as a year of acceleration — investment acceleration on those fronts. Or is it — would you frame it more as a steady-state glide path if you drew a line through the last years?

Billy Gifford — Chief Executive Officer

Yes, I think to characterize it either way Steve. We feel like we’ve made the appropriate investments, certainly it stepped up. But I wouldn’t say that we’re just gliding along. We’re going to move where the consumer moves. And so it’s that keen focus on the consumer. It’s about driving the portfolio that we have. And so if you think about investments around on! and in the heated tobacco space with IQOS, Marlboro HeatSticks, it’s about driving investments there, driving awareness, getting the distribution we desire at retail and having it in the consumers’ consideration.

When you go to the next category about this digital platform, it’s really about thinking about how do you — we’ve made great strides in analytics and I think you’ve seen the benefit in the performance of our businesses. Now it’s about those insights being really focused on the consumer. How do we get as close to the consumer and understand where each consumer is that on there — is that on their journey to conversion for whatever category they’re choosing and making sure that we are able to communicate and keep pace with them in that journey.

And then the final one is as we’ve seen in all of these categories continued development around the product space is extremely important to the consumer and investing there to make sure we’re keeping pace with the consumer. So that’s how we’re thinking about it. We are extremely excited about the portfolio we have. It’s about getting it there to have it in the consumers consideration set, meeting them where they’re at and communicating with them along the journey and then making sure that our products keep pace with the consumers future walks and desires.

Steve Powers — Deutsche Bank — Analyst

Okay. Okay. If I could just, maybe, I think this is probably for Sal. Just a couple of cleanups. Just as I think about 2020 cost base, clearly there were some incremental COVID related costs in that base and you had also some COVID related savings. As you think about the move into ’21, is there a way to net out those dynamics in your base case? And then also any — if there’s any way, any advice you might have for us on the outside as to how we should think about the earnings impact as we go forward. Just as you continue to wind down the PMCC business? Just — how we should think about that flowing to the P&L? Thanks.

Sal Mancuso — Executive Vice President, Chief Financial Officer

Sure, Steve, and good morning. As far as the cost base in 2020, remember we were lapping the cost reduction program that we implemented in 2019. And that’s of course cost management remains top of mind for us. When you think about 2021, we think we have the right structure for the business in the right size of the business. It’s really about reallocating our spending right? So we’re moving spending from the combustible business as we invest into the non-combustible business. And our employees do a terrific job of thinking about efficiencies on their infrastructure and their processes and how that frees up resources to reinvest in our 10-year vision and in our non-combustible platform. So the right size organization we feel really good about it. We have terrific employees. They’ve done a wonderful job of continuing to provide productivity during the pandemic, and so that’s how I would think about 2021 costs.

As far as PMCC, the folks at PMCC over the last many years have done a wonderful job of really unwinding that business. And it has been lumpy at times we’re selling assets. When you think about ’21 and ’22, we’ve got the net finance assets at a low level. It’s significantly lower than when we began to wind down that business. And really it’s about rents received and the sale of assets. So there might be some lumpiness in there, but we feel good about the portfolio that remains and the ability to unwind the business. And we expect to be completely wound down in 2022.

Steve Powers — Deutsche Bank — Analyst

Okay. Thank you both. Appreciate it.

Billy Gifford — Chief Executive Officer

Thank you.

Operator

Your next question comes from Gaurav Jain of Barclays.

Gaurav Jain — Barclays — Analyst

Good morning Billy. Good morning Sal.

Billy Gifford — Chief Executive Officer

Good morning.

Gaurav Jain — Barclays — Analyst

I have three questions. So first is on the EPS guide for next year which is 3% to 6% and in that there is some component of share repurchases, about 1% to 2%. So you are pre-tax PBT — PBT guidance for 2% to 5% growth. So how are you incorporating the ABI equity income in that, because that fell off quite a lot this year. And if I just look at consensus numbers they ask for a very steep bounce back in ABI net income. So could you just help us understand that?

Billy Gifford — Chief Executive Officer

Yes, Gaurav I’m going to be careful not to get into the particular components. There is always puts and takes across the P&L. I think what’s most important is, as I stated earlier, it is objective to have strong growth. But then make appropriate investments in these — in our non-combustible portfolio. So as you think about as we progress through the year, if one area or another proposed well and then that affords us as we’re progressing through the year to make changes if necessary, but it also affords us the opportunity to invest in areas that we are seeing the consumer gravitate towards so that we’re not starving any particular category for investments.

Gaurav Jain — Barclays — Analyst

Sure. That’s helpful. Now, second is on the price increases in the US industry recently. So your primary competitor is now pricing before you and it doesn’t seem you are following all the price increases in all the states. Does — I mean is there — is that the pricing balance and the industry could deteriorate as we go forward.

Billy Gifford — Chief Executive Officer

Yes, Gaurav, to be quite honest, we really don’t pay attention to who goes first, who goes second or what order, really and I mentioned this earlier, the major factors that go into our pricing considerations are nothing from a competitive standpoint, it’s really about how our consumers are from their economic position. What are they feeling? How are they positioned and how do they feel about their future prospects? The next is the strength of our brands. How do we feel about our brands in the marketplace and in the consumers’ mind. And then it is around performance — business performance and objectives. Those are the three factors we think about when we build our plan around pricing and that’s what drives our pricing decisions.

Gaurav Jain — Barclays — Analyst

Sure, that is very helpful. And my last question is just on the IQOS packaging, which you shared on Slide 15. So I don’t see any of the MRTP risk messages that were authorized by the FDA. So would there be a new packaging, which will incorporate that and is Philip Morris involved in the free design or is this under you’re sort of consideration that you could put whatever branding and packaging that you would like?

Billy Gifford — Chief Executive Officer

Yes, certainly we collaborate with PMI but those decisions are ours. And so from that standpoint, we wanted to make sure we had the flexibility as we move forward. We will be communicating the MRTP with consumers and we want to do it in the most effective way that has an impact on them. And so we’ll be rolling that out and we started that process in some of our markets and what we saw in researches it does bear into the consumers’ mind of deciding to engage with the concept of the IQOS and the Marlboro HeatSticks as well as their desire to stick with it. And so we’re looking forward to bringing that MRTP a more used to avenues that we think commerce advantageous for us to get that message across to the consumer.

Gaurav Jain — Barclays — Analyst

Okay, thanks a lot.

Billy Gifford — Chief Executive Officer

Thank you.

Mac Livingston — Vice President, Investor Relations

Hey Laurie, before we go to the next question, we’re aware that we had a technical issue on the webcast. And just want to make sure that investors listening on the webcast are aware that we’re going to work to get our transcript and replay up very quickly following the call. So I appreciate your patience on that.

Operator

Your next question comes from the line of Robert Rampton of UBS.

Robert Rampton — UBS — Analyst

Hi, good morning. Thank you very much for taking my questions. Three questions from me. The first is, so looking at over the quarter I mean, for the first time, it seems like lowest effective price and the net pack price moved in opposite directions. Curious to understand what drove this? Does it mean you’re broadening the Marlboro price ladder and if so interested to hear why now?

Billy Gifford — Chief Executive Officer

Yes, I think when you think about our pricing decisions, we — as I mentioned earlier, the things that factor into our pricing decisions and then that air price realization is really around the list price increases we take and the efficiencies garnered across our promotional spend. I think when you look at the rest of the pricing decisions they’re independent of us as manufacturers make those pricing decisions. And then of course you have state excise taxes they get added to that and then how retailers themselves are competitive in the marketplace. So there are a lot of factors that go into that. And we feel good about where we’re at.

Robert Rampton — UBS — Analyst

Okay. Cool. The second question. So in your — in the annex you provide — you suggest that macro factors were of 4% tailwind to industry volumes for 2020, which you said was primarily driven by stay at home. In the event stay at home men’s [Phonetic]. I’m just trying to get an understanding of how that evolved? Does it go to minus 4% or 0%. I mean I’m not looking for a guide here, I’m just trying to better understand what you think the sensitivities are around the big uncertainties that you flagged, if you could — anything you can share here maybe the experience and given states would be very helpful?

Billy Gifford — Chief Executive Officer

Sure. And so really what we think drove that was exactly what you mentioned and we had highlighted, which was stay at home practices, which consumers themselves face less social friction. They also were benefiting from more discretionary income related to those stay at home practices. So less discretionary whether it’d be movie tickets or going out to eat or even gas. And so as we progress through the year, as we see consumers respond to how their behavior is related to how comfortable they feel returning to some of those discretionary other items or even they decided to go fully back to work versus work remotely, it’s something that we’ll be monitoring and whether the consumer decides to adapt their life a bit through those changes or whether they go back to, I’ll call it completely normal state pre-COVID and so that’s something that we’ll be monitoring, but certainly in our guidance we ran a range of scenarios and feel comfortable that we have levers across the business to be able to respond to that regardless of what are those scenarios occur.

Robert Rampton — UBS — Analyst

Okay. And then sorry, my final question, just on heated tobacco. Any chance you can give us an update on the tax reductions you’ve secured in terms of number of states and the magnitude? Thank you very much.

Billy Gifford — Chief Executive Officer

Yes. So our government affairs team has been able to secure that reduction in six states. And then of course there is a slight definition change in the State of Virginia. So if you count that as a reduction, it would be seven states, but six that are part of, if you will, once it receives designation from the FDA a step down taxation.

Robert Rampton — UBS — Analyst

And sorry just a quick follow-up on that. Is that, because I understand there was a kind of tearing element that with some saying 25 to 50 depending on what type of MRTP you get, is that still a fair way of thinking about it?

Billy Gifford — Chief Executive Officer

It is. It varies by state, but that is a fair way to think about it.

Robert Rampton — UBS — Analyst

All right, thank you very much. Appreciate you taking time.

Billy Gifford — Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Adam Spielman of Citi.

Adam Spielman — Citi — Analyst

Hello. Thank you. Just a handful of questions really, two or three. Just to make sure I understand what you said. The first one is talking about Slide 10 of the presentation. That’s the one where you have — it’s about on! and heading is building on momentum and I just want to make sure I’ve understood it. I think the left hand side is saying there are more stores where you sell on!, on the right hand side you’re saying within stores you have a higher market share. So I should — the question is, am I right to believe this is a double effect, you’ll see — you’ve got a higher percentage in more stores and therefore it is sort of most risk lucrative effect and overall it looks better than the first two charts alone. Is that the right way of thinking about that slide?

Billy Gifford — Chief Executive Officer

That is the right way of thinking about it Adam. What we show in the left side is cumulative distribution in stores. And then on the right side, what we’re showing is the quarterly share in those stores with distribution. So yes.

Adam Spielman — Citi — Analyst

Fine. And then on the slide, what number it is. There is a slide on the sort of extra pack you give, that says oral tobacco industry volume growth estimates. And in Q4, it’s 6% versus Q3 it was 7%. So it’s growing and then shrunk again. And I was just wondering if there’s any explanation about why it’s slightly lower in Q4?

Billy Gifford — Chief Executive Officer

Yes, I think you’ll see fluctuations through time Adam, nothing grows in a straight line. And so you’re going to have distribution efforts that will accelerate that in periods of time. And then you will have — as distribution levels out in some areas, you will have fluctuations. I think we try to provide this, but if you think of this more as a line through time is a better way to think about continued distribution and growth in all. I think it shows the desire of the consumer to find a non-combustible product that satisfies them and as they move to those you’re going to see through time growth in these categories.

Adam Spielman — Citi — Analyst

And fine. Thank you. And just a final quick clarification question. I think Sal said, I just want to make sure I’ve got this right. That although there is clearly an incremental investment in 2021 in non-combustibles, we should think about this mainly as a re allocation from expense that would have been spent on combustibles, for example, some of the sales force transition across and spend more time?

Sal Mancuso — Executive Vice President, Chief Financial Officer

Good morning, Adam. I would — let me clarify for you. We are increasing some of our investments in our non-combustible. Some of that will be offset through reallocation, but I don’t want you to take away from my comments that is 100% funded by reallocation. So it helps us be more efficient across the full P&L, but as we stated in our earlier remarks, we are increasing our investment to achieve our 10-year vision.

Adam Spielman — Citi — Analyst

Okay. And if I could — that’s very helpful. Thank you, very clear. Can I just come back to clarify on ! I didn’t really understand before, I know you’re not going to give me the precise number of dollars and cents, but if I think about the increment in investment in 2021, is that roughly the same as the increment of investments in 2020 in the non-combustible area? Or is it more or less? In other words is this — is the investment accelerating or moving at the same speed or are we moving to sort of a more steady state situation?

Billy Gifford — Chief Executive Officer

Yes Adam. I will be hesitant to compare it. We think we’re making the appropriate investments and it goes back to really balancing strong growth for the investor and the related cash and the appropriate investments there. And so we’re going to make the appropriate investments. We’re never going to starve that category for investment that we think we’re making significant progress in, and so we’re going to make the appropriate investments. I hesitate to say, because the timing can be different during the year and so one quarter compared to a previous quarter or vice versa. But certainly we feel good about the investments we’ve made.

Adam Spielman — Citi — Analyst

Okay, thank you.

Operator

[Operator Instructions] Your next question comes from the line of Priya Ohri-Gupta of Barclays.

Priya Ohri-Gupta — Barclays — Analyst

Hey, good morning and thank you so much for the question.

Billy Gifford — Chief Executive Officer

Good morning.

Priya Ohri-Gupta — Barclays — Analyst

I was wondering if you could walk us through how we should think about your cash balance just given the elevated nature at year-end. You have a few sort of things that are earmarked for that use that you haven’t — Billy, you know have maturity coming up, share repurchase program, increased investments behind the non-combustible side. So how should we think about each of those relative to the elevated cash balance and sort of that cash balance getting back to more normalized levels? Thank you.

Sal Mancuso — Executive Vice President, Chief Financial Officer

Good morning. This is, Sal. I think you characterized it fairly. We do have an elevated cash balanced and we have had typically — Billy I have talked about throughout 2020 desire to have an elevated cash balance as we manage through the pandemic. Remember last year, the Board of Directors rescinded on the share buyback program and we were very focused on it. And I think you’ve articulated the uses of cash for this year. We’re excited that the — and really pleased that the Board of Directors authorized a new $2 billion share repurchase program, which we expect to complete by June 30, 2022. So we’re excited about that. I think it’s the appropriate level. It reflects the value in our shares and enhances shareholder value. But we also maintain capital allocation flexibility. We remain committed to the 80% target payout ratio for our dividends against adjusted earnings per share. And when you think about our cash position in a typical year after paying the dividend, making the necessary investments capital investments in our business, we traditionally have about $1 billion in excess cash and we will run through our capital allocation analysis to determine the best use of that of that cash.

Priya Ohri-Gupta — Barclays — Analyst

That’s helpful. And I guess if we think about sort of refinancing versus using the cash to pay down your upcoming maturity, could you walk us through some of the considerations that go into that specific decision?

Sal Mancuso — Executive Vice President, Chief Financial Officer

Yes, and I don’t want to get ahead of myself on how we think about debt refinancing or debt retirement. What I would tell you is that we take into a lot of factors as many companies do, market conditions, best use of capitals to enhance shareholder value. So we have a very talented treasury team. They work really hard on staying ahead of our debt maturities and thinking about capital allocation and the best use of our capital going forward.

Priya Ohri-Gupta — Barclays — Analyst

Okay. That’s helpful. One final, just follow-up for me. How do you think about share repurchases in an accelerated manner versus sort of ongoing rate over the course of — sort of the next 18 months?

Sal Mancuso — Executive Vice President, Chief Financial Officer

Yes, I don’t think it’s helpful for me to share how quickly or the pace that we buy our share — our shares back in a share repurchase program. I would tell you that we have communicated that it’s an 18-month program and we will buy our shares. And you’re right, it does depend on market conditions when it comes to the pace of share buyback, but I really don’t think I should really provide much more detail than that.

Priya Ohri-Gupta — Barclays — Analyst

Thank you so much.

Operator

Your next question comes from the line of Jennifer Maloney of The Wall Street Journal.

Jennifer Maloney — The Wall Street Journal — Analyst

Hi, good morning.

Billy Gifford — Chief Executive Officer

Good morning, Jennifer.

Jennifer Maloney — The Wall Street Journal — Analyst

I wonder if you could talk about how you think consumer behavior may or may not change. I know that you talked about different scenarios that you could envision, but a lot of consumer goods companies say that they expect there to be some permanent change in the way we behave moving forward even after the vaccine? People might continue to snack more or they’ll work home part of the week. So what’s your best guess as to how much of this change in consumer behavior is sticky and how much we go back to the way things were?

Billy Gifford — Chief Executive Officer

Yes, it’s a great question, Jennifer. There is something that we’re going to monitor and gauge with our consumers on a regular basis to be able to assess that. When you think about our consumer, they tend to be a bit at the lower end of the [Indecipherable] economic status. And so from that standpoint they definitely need to be able to work. It depends on their trade of what they are participating in the workforce and how readily available they can choose to be completely remote versus having to report in at times. So I think it’s going to vary greatly and it remains to be seen how much they adjust their lifestyle back to, I’ll call it normal pre-COVID to now, even past a COVID pandemic, how much they adapt and change. So I think it remains to be seen and it’s something that we’ll be engaged with our consumers to be able to assess through time.

Jennifer Maloney — The Wall Street Journal — Analyst

If people are smoking more now and their discretionary spending goes down because they want to spend more at the movie theater. How much of a lever is the discretionary spending and how much of a lever is the fact that they are now sort of accustomed to and dependent on a higher number of cigarettes per day and that might be difficult to cut back moving forward?

Billy Gifford — Chief Executive Officer

Yes, I mean, I think you can go back to ’15, 2015 and if you look at that really what we saw take place was that the precipitous drop in gas prices, gave our consumers extra discretionary spend. So, to be able to answer your discretionary spend, go back in time and so as we saw them adapt to that certainly they added occasions to their day, but then they adapted those occasions back out. I think it’s important to remember the underlying from the prevalence that trend is pretty steady. It hasn’t changed. So it really is extra tobacco usage occasions in their day and it goes back to your first question is how do they adapt their lifestyle, how quickly do they return to other types of discretionary spend, depending on — that would be dependent on how they think about their usage occasions in a day.

Jennifer Maloney — The Wall Street Journal — Analyst

All right. Thanks very much.

Billy Gifford — Chief Executive Officer

Thank you.

Operator

Thank you. At this time, I would like to turn the call back to management for closing comments.

Billy Gifford — Chief Executive Officer

Thank you, Laurie. Altria’s tobacco businesses have a track record of delivering strong and consistent financial performance in challenging environments. Our outstanding 2020 results demonstrate the resilience of our business and we continue to reward our shareholders by returning a significant amount of cash in the form of dividends. We have strong plans for 2021, in pursuit of our 10-year vision and believe our tobacco business platform has the winning brands and is unmatched. Thanks again for joining us. Please stay safe and contact our Investor Relations team if you have any further questions. Thanks very much.

Operator

[Operator Closing Remarks]

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