Altria Group Inc. chief executive discusses FDA’s authority over tobacco industry

On the Call: Altria Group CEO Michael Szymanczyk

RICHMOND, Va. — The number of cigarettes sold by their manufacturers has been volatile over the past year as retailers and wholesalers adjusted orders due to a one-time federal tax on inventory in April 2009.

Still tax increases, smoking bans, health concerns and social stigma have made the cigarette business tougher. Smokers also have cut back further as they weather the weak economy, high unemployment and higher prices for smokes.

For the second quarter, Altria Group Inc.’s total cigarette volume fell 10.2 percent to 36.5 billion cigarettes from last year. But sellers had restocked in last year’s quarter following the one-time tax. Adjusting for that, volumes fell 3.5 percent compared with its overall industry estimated decline of 4.5 percent.

Volumes are expected to ease back to annual drops of 3 percent to 4 percent over the next few years.

In a conference call with analysts regarding the nation’s biggest cigarette maker’s second-quarter results, CEO Michael E. Szymanczyk talked about the company’s outlook on industry cigarette volumes.

QUESTION: Are volumes becoming more in line with expected annual declines?

RESPONSE: The way to look at the cigarette business is it remains on track with historical price elasticity calculations. … Whether it’s 4.5 (percent) or not I think depends somewhat on factors outside of our control, like state excise taxes. Certainly I think it’s fair to say that it’s begun to stabilize post the FET (federal excise tax increase) into kind of a more normalized level. … It looks pretty normal at this point in time.

(This version corrects the timing of federal inventory tax.)