A Marlboro cigarette.
Daniel Acker Bloomberg | Getty Images
The tobacco inventory occurred Tuesday after new Nielsen data showed that cigarette sales were sharply reduced over the past month.
The sales volume, defined by the number of packets of cigarettes sold, fell 11.2% in the four-week period that ended in May 18, according to Nielsen. Total sales declined by 6.9% to $ 59.27 billion and have now declined for 1[ads1]8 consecutive months, according to Cowen analyst Vivien Azer.
Shares in Altria hit 5% and shares of UK US tobacco traded in the US went 4% on Tuesday.  "The headline number of a 11% decline is very unpleasant," Azer said in an interview. She said that Nielsen's numbers tend to be exaggerated. Nevertheless, there is a sharp decline, and it is considerably steeper than the 4% to 5% drop tobacco companies have forecast.
The data highlights the problems that tobacco companies are in. The core business shrinks faster than expected, threatening the usual strategy of hiking prices to compensate for a decline in sales.
Altria hiked the price of a package of Marlboro cigarettes 11 cents at the end of February, bringing the average nationwide price to $ 7, Azer said. The tobacco companies have called increasing gas prices for the volume decline. The gas was on average $ 2.85 per gallon for four weeks, Azer says, adding that gas prices were higher last summer and in the fall and the decline in cigarette volume was not so steep.
Altria's Marlboro cigarettes became a bit more market share, but sales volume fell 10.9% over the period, according to Nielsen data published in a note from Wells Fargo analyst Bonnie Herzog. Meanwhile, British US tobacco's Newport cigarette volume fell 9.8%.
E-cigarettes are about to flourish, leading Altria to invest $ 12.8 billion for a 35% in the clear market leader Juul. Volume for the entire category increased 46.4% in the last period, according to Nielsen's data in Azer's note to clients.
Juul captured 74.5% of sales in the stores track by Nielsen, which includes convenience stores and pulp stores, but not vape stores or online. Altria has said it estimates Juul's market share of over 40%.
And although Juul's sales are increasing, gains do not compensate for the losses Altria experiences when someone buys a package of Juul pods instead of a package of Marlboros.
"For every package of Marlboro that converts to Juul pods, Altria loses 100% of Marlboro and gets 35% of Juul pod," Azer said. "There is no way mathematics is possible to be a perfect compensation."
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