Good day and welcome to 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 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 Mr. Mac Livingston, Vice President of Investor Relations for Altria Client Services. Please go ahead, sir.

Thanks, Lori [ph]. 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 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. 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.

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 continue to move Altria forward and we believe we're making steady progress toward our 10-year vision to responsibly lead the transition of adult smokers to a non-combustible 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've 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 acknowledged 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 oral tobacco space with rapid growth in oral nicotine pouches off of a small base…

Thanks Billy. Let me begin by providing an update on US tobacco consumers. Economic conditions remained challenging for consumers in the fourth quarter as unemployment rates remain 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. The tobacco expenditures per trip remained elevated versus the year ago period. Turning now to our business, the smokeable product 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 segments top line performance. Smokeable segment reported domestic cigarette volumes declined by 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…

Thank you. [Operator Instructions] our first question comes from the line of Nik Modi of RBC.

Just two questions from my side. 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 is kind of was over, we had kind of 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 it underneath there's other drivers like price gap management or the Marlboro rewards programs and how that played a role in terms of shifting the share trajectory because it's been losing share for a number of quarters now? Thanks.

Thanks for the questions, Nik. We'll take them in an order. On the excise tax front, I would remind you that we had two state excise tax increases happened at the beginning of this year. Certainly with the bills that the states have racked up responding to COVID. Certainly it will 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 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's 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 with and Sal highlighted in his comment 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 benefitted from it but because it tended to skew older adults smoker coming back, we know that they have a proclivity towards discount brands. We didn't panic when that was taking place, we felt like we knew what was behind that and I think you just seen the strength of the Marlboro brand through time certainly there is some competitive premium brands that had some extra resources in the marketplace at the beginning of 2020. We felt 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 nearly building loyalty through time whether you mentioned the rewards programs but other programs as well and I think that, the strength of the Marlboro brand and we're excited about where it stands.

Great, thanks guys. I'll pass it on.

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

So I guess my first question is on your EPS guidance. I guess I'd be curious to hear, what did 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 excise tax increase maybe at the low end. And then 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's a lot of uncertainty right now in our world. But you must have I guess some sense of the range of your cig volumes again given your EPS guide. So maybe you could touch on that for us a bit just at high level, whether or not you expect cig volumes this year will possibly revert back in historical declines. Maybe below historical declines given the tough comps and the potential for greater excise tax increases. Thanks.

Thank you Bonnie and we'll take those in turn as well. On the EPS guidance, really when you think about the EPS guidance and I know you're including kind of the cigarette volume in that. We run a range of scenarios around that. We really look at what - our base expectations. We have a very strong forecasting group. They forecast across the various categories and then we run a range of scenarios around that upside then 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 was at the - that we didn't have a forecast for volume. We feel very good about the way we got about forecasting volume. But to your point there are a lot of uncertainties and a lot of fluidness in the environment whether that's the consumer and how they engage with some of these non-combustible categories as they continue to grow or to the things we've highlighted in remarks, whether it's unemployment or the fiscal stimulus if the government passes that. So there are range of factors. What we think really focusing on the consumer and that's what we are trying to do is really give more information about how we're focused on the consumer and what or when they go and that's exactly why we implemented the portfolio strategy. It's really looking at the consumer is going to make different decisions depending on where they're 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. The cigarette as I said in my remarks really fuels the engine for fueling the 10-year vision. But we think what you should hold us accountable to is our success and meeting the customer where they're at regardless of what category they're at.

Okay, 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 maybe update us where you're out with that. I know it's in the beginning, but are there any guide posts you could share with us, you're expecting to see for your business maybe even in the next three to five years and I'm asking because obviously per your guidance and your comments you're entering a period near term here where you're 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 do want to hear about how you're incentivizing your employees to execute? Thanks.

Sure. Look. I'll take them in reverse orders, 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're passionate about it. They're excited to support that and we think we have the right incentive program in place to work that excitement. As far as milestones again I won't go into a specific numerical value. Remember from an overall objective we're looking to balance strong growth, EPS growth for investors and 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're certainly going to share with you through time, how we're 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 [indiscernible] trial, ultimately purchase and then at the final stage conversion to these new categories, that's the way we're thinking about the consumer journey and we're really investing to get to as close to the consumers as we can because each consumer is going to be in a different point in that journey and make different decisions across the categories and that's exactly the portfolio approach as different actions are taken whether they're regulatory actions, whether they're consumers really enjoying a category. Is being able to be agile enough to not starve any category that's growing and make the appropriate investments there. So that's how we're thinking about the consumer journey and you'll see a share more through time of how we're progressing with those consumer journeys.

Okay, thanks. Maybe quickly on the M&A, would you be open to that as an - something about the next year if there's a way to just further accelerate that whether you develop it internally or would you be open to looking outside capabilities?

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

All right, thank you. I'll get back in queue. Appreciated.

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

So I wanted to speak [ph] on combustibles, please. So if we're looking wholesale inventories for both you and the industry. They remain elevated at year end relative to where you guys closed out into the last two years. Appreciate some of that probably is just [indiscernible] stock because of COVID. But how should we think about inventory levels at we head into 2021 please. Thanks.

Yes, thanks for the question Vivien. I think you nailed it. I think it was as wholesalers and retailers are making decisions around where they stood with the COVID-19 pandemic and what because at different parts across the US. The surges that are taking place in different state government decisions about shut downs and the consumers mobility and the marketplace. And so I think certainly there is a slight level of increase over what you've seen in previous years as they took those things to consideration. Certainly as we 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.

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

Yes, I would say both pieces of that category did grow during the year. But certainly the vast majority was the onset of the novel [ph] oral products whether it 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, we feel great about its position.

Understood. Thank you very much.

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

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?

Yes, it's a great question Michael. We're very excited about what we've experienced in the first three - markets. From a standpoint of the exact way to engage with the consumers, what's most important we've found is the consumer education that we understand what the IQOS device delivers and 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 location 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 its retail stores, the [indiscernible] in the convenience store, whether it's corners and various places or whether it's the mobile unit. 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 units from one location to another and really maximize the number of consumers you're engaging with. Most 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.

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?

Yes, I'm not going to speak to taking control or any M&A activities. Certainly we think Cronos has positioning themselves well to take a roll in the US, if it becomes federally legal. I think it's important to step back and really stake 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're engaged with that. But it's got to have the right comprehensive framework surrounding it.

Okay, great. Thanks very much.

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

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 increase that occurred in 2020 as well as presuming you take increases in 2021 beyond what you've done already. It would seem to provide the backdrop for an even stronger rate of profit growth. So I want to understand without getting into numbers I realized that's going to be hard to get into. But just understand the concept, the desire behind the higher level of pricing in which you can do with that, so is there is a heavier rate of investment in the business, is this going to help fund more of your expansion of on! and the [indiscernible] part of 10-yaer vision. I'm just trying to understand the pricing strategy as it's evolving here.

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 mobile and funding the growth of 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 arenas. So certainly we'd 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 list 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 in. 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're extremely excited about what our advanced analytics team has been able to accomplish.

Okay, thank you for that. I had one other question that's I hope it's not too general. I'm just curious as I look at like cross category movement which was a modest factor throughout 2020, is that more difficult to forecast in 2021. Like again I hope that's how you're seeing that. But I guess on getting to just a year where your category to just 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 or acceleration and some of those categories that could further influence cigarette volumes in 2021 or is it just too soon for that?

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 though. The success of those categories and our success and we'll certainly impact the cigarette category in line with their vision. But when you step back Chris that's exactly why we really went this portfolio approached products. It's about meeting the consumer where they're at, each consumer is going to make different decisions and that objective we have balancing strong growth in the associated cash for our investors and investing in these categories. As we progressed 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's provides us the flexibility we feel to make the right decisions as we progressed through the year.

Okay, thank you for your time today.

Thank you, Chris.

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

Just quick one from me, you note 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'm just wondering what this R&D spend is on, is it your own heated product, is it advancements in modern oral, is it something else entirely. Thank you.

Yes, you're exactly right, Owen. 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' is important for us to invest in that area.

Okay and would that be, I mean even kind of potentially looking at developing your own heated products, is that a possibility in the future?

Yes, I'm not going to get into specifics, not that's in the non-combustible space is where we're investing and it's really about looking how the investor is what they're desiring 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.

Okay, thanks very much. Appreciated.

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

Billy, I guess when you step back and you sum up the elective investments that you seem to be prioritizing in 2021 both towards the vision of 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 that is mentioned maybe even just relative to similar investments in prior years whether we should have been viewing 2021 as a year of investment acceleration on those fronts or is it, would you frame it more as a steady state glide path if you drew a line to the last years?

Yes, to characterize it either way, Steve. We feel like we've made the appropriate investments certainly it's 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 the heated tobacco space with IQOS and 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 and the performance of our businesses. Now it's about those insights being really focused on the consumer, how do we get this close to the consumer and understand where each consumer is that on their journey to conversion for whatever category they're choosing and making sure that we're 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 consumers, so that's how we're thinking about it. We're extremely excited about the portfolio we have, it's about getting it there to have it in the consumer 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 consumers, future wants and desires.

Okay, if I could just maybe I think these are probably for Sal, just a couple of clean ups. As I think about the 2020 cost base. Clearly there were some incremental COVID related costs in that base and yet also some cost COVID-related savings. As you think about the move in 2021, is there way to net out those dynamics in your base case? And also if there's any advice you might have for us on the outside is 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 through the P&L? Thanks.

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 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 and 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 in. our employees do a terrific job or thinking about efficiencies on their infrastructure and their processes and how that freeze up resources to reinvest in our 10-year vision and in our non-combustible platform. The right size organization we feel really good about. 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 of 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 2021 and 2022; 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 asset. 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.

Okay, thank you both, appreciated.

Your next question comes from Gaurav Jain of Barclays.

I've three questions so first is on the EPS guide for next year which is 3% to 6%, in that there is some component of share repurchases about 1% to 2%. So your pre-tax PBT, if your PBT guide is 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?

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

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're following all the price increases in all the states. I mean, is there [indiscernible] that the pricing balance and then the streak would deteriorate as we go forward?

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 early, the major factors that go in our pricing consideration nothing from a competitive standpoint. It's really about how our consumers are from their economic positions, what are they feeling? How will they position and how do they feel about their future prospects? The next is the strength of our brands, how do we feel about brands in the marketplace and in the consumers' minds and then it is around 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.

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 would incorporate that and is Philip Morrison involved in fee design or is this under your sort of consideration that you could put whatever branding and packaging that you would like?

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, where 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're rolling that out and we started that processes in some of our markets. And what we saw and research is - it does bearing to the consumer's mind of deciding to engage with the concept of the IQOS and the Marlboro HeatSticks as well as their desire to stick with it. So we're looking forward to bringing that MRTP and we'll use the avenues that we think are most advantageous for us, to get that message across to the consumers.

Okay, thanks a lot.

Lori [ph] before we go to the next question. We're aware that we've had a technical issue on the webcast and just want to make sure 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 we appreciate your patience on that.

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

Three questions from me. The first is, so looking at over the quarters I mean for the first time it seems like lowest effective price and the net pack price moved in opposite directions. Curios to understand what drove this, does it mean you're broadening the Marlboro price ladder and if so, interested to hear, why now?

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

Okay, cool. Second question, so in the annex you suggest that macro factors were 4% tailwind to industry volumes for 2020 which you said was primarily driven by stay at home. In the event stay at home ends, I'm just trying to get an understanding of how that evolves, does it go to minus 4% or zero? I mean I'm not looking for a guide here I'm just trying to better understand what you think the sensitivities [ph] are around the big uncertainties that you flanked, anything you can share here, maybe the experience in given states would be very helpful.

Sure and so really what we think drove that was exactly what you mentioned and we had highlighted which were stay at home practices which consumers themselves faced less social friction. We're benefitting from more discretionary income related to the 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 behaviors related to how comfortable they feel returning to some of those discretionary other items or even they've 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 to those changes or whether they go back 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 ranges of scenario and feel comfortable that we have levers across the business to be able to respond to that regardless of one of those scenarios occur.

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

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, there would be seven states. But six that are part of if you will once it receives designation from the FDA step down taxation.

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

It is. It's varies by stake. But that is a fair way to think about it.

Great. Thank you very much. Appreciate you taking the time.

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

Just handful of questions really. 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. 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 it's saying within stores you have a higher market share. So the question is, am I right to believe, is this sort of double effect. You've got higher percentage in more stores and therefore it is multiplicative effect. I know [indiscernible] two charts alone, is that the right way of thinking about that slide?

That is the right way of thinking about it, Adam. What we've shown 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.

Fine. And then on the slide I don't know what number it is. There's 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 grown and then shrunk again. And I was just wondering, if there's any explanation about why slightly lower in Q4.

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'll have a distribution levels out in some areas. You'll 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 in growth and oral. 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.

And fine, thank you. And just final quick clarification question. I think Sal said, I just want to make sure I got this right, that although there is clearly an incremental investment in 2021 in non-combustible. We should think about this mainly as a reallocation from expense that would have been spent on combustibles as for example some of [indiscernible] transition across and spend more time.

Good morning, Adam. Let me clarify for you. We're 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.

Okay and if I could continue to - that's very helpful. Thank you very clear. Can I just come back to clarify in on! I didn't really understand the full [ph]? I know you're not going to give me the precise number of dollars and cents. But if I think about the increments investment in 2021, is that roughly the same as the increment of investment in 2020 in the non-combustible area or is it more and less? Is the investment accelerating or moving at a same speed or are we moving to a sort of a more steady state situation?

Yes, Adam and we'll 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 in the related cash and the appropriate investments there and so we're going to make the appropriate investments. We're never going to starve a category for investment that we think we're making significant progress in and so we're going to make the appropriate investments. I hate to say because the timing can be different during the year and so one quarter compared to a previous year or vice versa. But certainly we feel good about the investments we've made.

Okay, thank you.

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

I was wondering if you could walk us through how we should think about your cash balance, as given the elevated nature of it year end. You have a few sort of things that are earmarked for that use that you haven't $1.5 billion maturity coming up, the share repurchase program, increased investments behind the non-combustible side. How should we think about each of those relative to the elevated cash balance and to that cash balance getting back to more normalized level? Thank you.

Good morning, this is Sal. I think you characterized it fairly. We do have an elevated cash balance than we've had typically Billy and I have talked about throughout 2020 [indiscernible] desire to have an elevated cash a balance as we manage through the pandemic. Remember last year the board of directors rescinded the share buyback program and we were very focused on it. And I think you've articulated uses of cash for this year. We're excited 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. 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 maintained capital allocation flexibility. We've remained 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 a $1 billion in excess cash and we will run through our capital allocation analyses to determine the best use of that cash.

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 decisions?

Yes, and I don't want to get ahead of myself on how we think about debt refinancing or debt or time - 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.

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 that in ongoing rate over the course of sort of the next 18 months?

Yes, I don't think it's helpful for me to share how quickly or the pace that we buy 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.

Thank you so much.

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

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 company say that they expect it to be some permanent change in the way we behave moving forward even after the vaccine. People might continue to snuck 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?

It's a great question Jennifer. It is something that we're going to monitor, engage 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 economic status and so from that standpoint they definitely need to be able to work. It depends on their trade of what there are participating the workforce in, how readily available they can choose to be completely remote versus having to report in at times. So I think [indiscernible] very greatly. 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.

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're 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?

Yes, I mean I think you can go back to 2015 and if you look at that really what we saw take place was that the precipitous drop in gas price gave our consumers extra discretionary spend. So to be able to answer your discretionary spend. I will 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 undergoing trend to 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?

All right, thanks very much.

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

Thank you, Lori [ph]. Altria's tobacco business is having track record of delivering strong and consistent financial performance in challenging environment. 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 dividend. 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.

Thank you for participating in the Altria Group 2020 fourth quarter and full year earnings conference call. You may now disconnect your lines and have a wonderful day.