Item 1. Business.

General Development of Business

When used in this Annual Report on Form 10-K (“Form 10-K”), the terms “Altria,” “we,” “us” and “our” refers to Altria Group, Inc. and its subsidiaries, unless the context requires otherwise.

Altria’s Vision by 2030 is to responsibly lead the transition of adult smokers to a smoke-free future (“Vision”). Altria is Moving Beyond SmokingTM, leading the way in moving adult smokers away from cigarettes by taking action to transition millions to potentially less harmful choices - believing it is a substantial opportunity for adult tobacco consumers, Altria’s businesses and society.

Altria’s wholly owned subsidiaries include Philip Morris USA Inc. (“PM USA”), which is engaged in the manufacture and sale of cigarettes in the United States; John Middleton Co. (“Middleton”), which is engaged in the manufacture and sale of machine-made large cigars and pipe tobacco and is a wholly owned subsidiary of PM USA; UST LLC (“UST”), which through its wholly owned subsidiary U.S. Smokeless Tobacco Company LLC (“USSTC”), is engaged in the manufacture and sale of moist smokeless tobacco products (“MST”) and snus products; Helix Innovations LLC (“Helix”), which operates in the United States and Canada, and Helix Innovations GmbH and its subsidiaries (“Helix ROW”), which operate internationally in the rest-of-world, are engaged in the manufacture and sale of on! oral nicotine pouches; and Philip Morris Capital Corporation (“PMCC”), which maintains a portfolio of finance assets, substantially all of which are leveraged leases. Other Altria wholly owned subsidiaries include Altria Group Distribution Company, which provides sales and distribution services to Altria’s domestic tobacco operating companies, and Altria Client Services LLC (“ALCS”), which provides various support services in areas such as legal, regulatory, consumer engagement, finance, human resources and external affairs to Altria.

On October 1, 2021, UST sold its subsidiary, International Wine & Spirits Ltd. (“IWS”), which included Ste. Michelle Wine Estates Ltd. (“Ste. Michelle”), in an all-cash transaction with a net purchase price of approximately $1.2 billion and the assumption of certain liabilities of IWS and its subsidiaries (the “Ste. Michelle Transaction”).

In 2019, Helix acquired Burger Söhne Holding and its subsidiaries as well as certain affiliated companies that are engaged in the manufacture and sale of on! oral nicotine pouches. At closing, Altria owned an 80% interest in Helix, for which Altria paid $353 million. At December 31, 2021, Altria owned 100% of the global on! business as a result of transactions in December 2020 and April 2021 to purchase the remaining 20% interest in (i) Helix ROW and (ii) Helix, respectively. The total purchase price of the December 2020 and April 2021 transactions was approximately $250 million.

Altria’s reportable segments are smokeable products and oral tobacco products. The financial services and the innovative tobacco products businesses are included in an all other category due to the continued reduction of the lease portfolio of PMCC and the relative financial contribution of Altria’s innovative tobacco products businesses to Altria’s consolidated results. Prior to October 1, 2021, wine products produced and/or distributed by Ste. Michelle constituted the reportable wine segment. For further information, see Note 15. Segment Reporting to the consolidated financial statements in Item 8. Financial Statements and Supplementary Data of this Form 10-K (“Item 8”).

Altria’s investments in equity securities consist of Anheuser-Busch InBev SA/NV (“ABI”), Cronos Group Inc. (“Cronos”) and JUUL Labs, Inc. (“JUUL”). Altria accounts for its investments in ABI and Cronos under the equity method of accounting using a one-quarter lag. Altria accounts for its equity investment in JUUL under the fair value option.

For further discussion of Altria’s investments in equity securities, see Note 6. Investments in Equity Securities to the consolidated financial statements in Item 8 (“Note 6”).

Description of Business

Portions of the information relating to this Item are included in Operating Results by Business Segment in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K (“Item 7”).

Tobacco Space

Altria’s tobacco operating companies include PM USA, USSTC and other subsidiaries of UST, Middleton and Helix.

The products of Altria’s tobacco operating companies include: (i) smokeable tobacco products, consisting of combustible cigarettes manufactured and sold by PM USA and machine-made large cigars and pipe tobacco manufactured and sold by Middleton; and (ii) oral tobacco products, consisting of MST and snus products manufactured and sold by USSTC and oral nicotine pouches manufactured and sold by Helix.

*▪*Cigarettes: PM USA is the largest cigarette company in the United States and substantially all cigarettes are manufactured and sold to customers in the United States. Marlboro, the principal cigarette brand of PM USA, has been the largest-selling cigarette brand in the United States for over 45 years. Total smokeable products segment’s cigarettes shipment volume in the United States was 93.8 billion units in 2021, a decrease of 7.5% from 2020.

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*▪*Cigars: Middleton is engaged in the manufacture and sale of machine-made large cigars and pipe tobacco. Middleton contracts with a third-party importer to supply a majority of its cigars and sells substantially all of its cigars to customers in the United States. Black & Mild is the principal cigar brand of Middleton. Total smokeable products segment’s cigars shipment volume was approximately 1.8 billion units in 2021, essentially unchanged from 2020.

*▪*Oral tobacco products: USSTC is the leading producer and marketer of MST products. The oral tobacco products segment includes the premium brands, Copenhagen and Skoal, and value brand, Red Seal, sold by USSTC. In addition, the oral tobacco products segment includes on! oral nicotine pouches sold by Helix. Substantially all of the oral tobacco products are manufactured and sold to customers in the United States. Total oral tobacco products segment’s shipment volume was 820.3 million units in 2021, essentially unchanged from 2020.

*▪*Innovative tobacco products: In December 2013, Altria’s subsidiaries entered into a series of agreements with Philip Morris International Inc. (“PMI”), including an agreement that grants Altria an exclusive right to commercialize certain of PMI’s heated tobacco products in the United States, subject to the U.S. Food and Drug Administration’s (“FDA”) authorization of the applicable products. PMI submitted a pre-market tobacco product application (“PMTA”) and modified risk tobacco product (“MRTP”) application with the FDA for its electronically heated tobacco products, comprising the IQOS Tobacco Heating System. In 2019, based on FDA authorized PMTAs, PM USA began commercialization of the IQOS Tobacco Heating System in select markets.

In connection with a patent dispute, the U.S. International Trade Commission (“ITC”) issued a limited exclusion order barring the importation of the IQOS devices, Marlboro HeatSticks and infringing components into the United States and a cease and desist order barring domestic sales, marketing and distribution of these imported products effective November 29, 2021. In December 2021, defendants appealed the orders to the U.S. Court of Appeals for the Federal Circuit. Due to this litigation, PM USA removed the IQOS devices and Marlboro HeatSticks from the marketplace. PM USA does not expect to have access to IQOS devices or Marlboro HeatSticks in 2022. For a further discussion of the ITC decision, see Note 18. Contingencies to the consolidated financial statements in Item 8 (“Note 18”).

In October 2021, the FDA authorized the marketing and sale of four of USSTC’s Verve oral nicotine products, including Green Mint and Blue Mint varieties, representing the first flavored product authorizations issued by the FDA for newly deemed products. These products are not currently marketed or sold.

*▪*Distribution, Competition and Raw Materials: Altria’s tobacco subsidiaries sell their tobacco products principally to wholesalers (including distributors) and large retail organizations, including chain stores.

The market for tobacco products is highly competitive, characterized by brand recognition and loyalty, with product quality, taste, price, product innovation, marketing, packaging and distribution constituting the significant methods of competition. Promotional activities include, in certain instances and where permitted by law, allowances, the distribution of incentive items, price promotions, product promotions, coupons and other discounts.

The Family Smoking Prevention and Tobacco Control Act (“FSPTCA”) provides the FDA with broad authority to regulate the design, manufacture, packaging, advertising, promotion, sale and distribution of tobacco products; the authority to require disclosures of related information; and the authority to enforce the FSPTCA and related regulations.

In the United States, under a contract growing program, PM USA purchases the majority of its burley and flue-cured leaf tobaccos directly from domestic tobacco growers. Under the terms of this program, PM USA agrees to purchase the amount of tobacco specified in the grower contracts that meets PM USA’s grade and quality standards. PM USA also purchases a portion of its tobacco requirements through leaf merchants.

USSTC purchases dark fire-cured, dark air-cured and burley leaf tobaccos from domestic tobacco growers under a contract growing program. Under the terms of this program, USSTC agrees to purchase the amount of tobacco specified in the grower contracts that meets USSTC’s grade and quality standard.

Middleton purchases burley, dark air-cured and flue-cured leaf tobaccos through leaf merchants. Middleton does not have a contract growing program.

Altria’s tobacco subsidiaries believe there is an adequate supply of tobacco in the world markets to satisfy their current and anticipated production requirements.

For further discussion of the foregoing matters, the tobacco business environment, trends in market demand and competitive conditions, and related risks, see Item 1A. Risk Factors of this Form 10-K (“Item 1A”) and Tobacco Space - Business Environment in Item 7.

Financial Services Business

In 2003, PMCC ceased making new investments and began focusing exclusively on managing its portfolio of finance assets in order to maximize its operating results and cash flows from its existing lease portfolio activities and asset sales. Altria expects to complete the wind-down of this business by the end of 2022.

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Other Matters

*▪*Customers: For a discussion of PM USA, USSTC, Helix and Middleton’s largest customers, including their percentages of Altria’s consolidated net revenues for the years ended December 31, 2021, 2020 and 2019, see Note 15. Segment Reporting to the consolidated financial statements in Item 8 (“Note 15”).

*▪*Executive Officers of Altria: The disclosure regarding executive officers is included in Item 10. Directors, Executive Officers and Corporate Governance - Information about Our Executive Officers as of February 15, 2022 of this Form 10-K.

*▪*Human Capital Resources: We believe our workforce is critical to achieving our Vision. Attracting, developing and retaining the best talent with the skills to make significant progress toward our Vision is a key business priority. Moreover, we recognize the importance of doing business the right way. We believe culture influences employee actions and decision-making. This is why we dedicate resources to promoting a vibrant, inclusive workplace; attracting, developing and retaining talented, diverse employees; promoting a culture of compliance and integrity; creating a safe workplace; and rewarding and recognizing employees for both the results they deliver and, importantly, how they deliver them.

Oversight and Management

Our Human Resources department is responsible for managing employment-related matters, including recruiting and hiring, onboarding, compensation and benefits design and implementation, performance management, advancement and succession planning and professional and learning development. Our inclusion, diversity and equity (“ID&E”) programs are managed by our Corporate Citizenship department. Our Board of Directors (“Board of Directors” or “Board”) and the Compensation and Talent Development Committee provide oversight of human capital matters, including reviewing initiatives and programs related to corporate culture and enterprise-wide talent development, including our ID&E initiatives.

Inclusion, Diversity and Equity

We recognize the critical importance of ID&E in pursuing our Vision and believe in the value of a workforce composed of a broad spectrum of backgrounds and cultures. In 2020, we established the following aspirational Inclusion & Diversity Aiming Points to help guide our efforts:

▪Be an inclusive place to work for all employees, regardless of level, demographic group or work function.

▪Have equal numbers of men and women among our vice president and director-level employees.

▪Increase our vice president and director-level employees who are Asian, Black, Hispanic or two or more races to at least 30%.

▪Increase our vice president and director-level employees who are LGBTQ+, a person with a disability or a veteran.

▪Have diverse functional leadership teams that reflect the organizations they lead.

As of December 31, 2021, women represented 32% of vice president-level and 41% of director-level roles; Asian, Black, Hispanic or employees of two or more races represented 24% of our vice president-level and 26% of our director-level roles.

Compensation and Benefits

Our compensation and benefits programs are designed to help us attract, retain and motivate strong talent. However, we recognize that the decreasing social acceptance of tobacco usage may impact our ability to attract and retain talent. We work to manage this risk by, among other things, targeting total compensation packages to be above peer companies for which we compete for talent. Depending on employee level, total compensation includes different elements – base salary, annual cash incentives, long-term equity and cash incentives and benefits. Our goal is to provide total compensation packages between the 50th and 75th percentiles of total compensation packages paid to employees in comparable positions at our peer companies upon attainment of business and individual goals.

We are committed to pay equity across our companies. Based on the most recent annual analysis we conducted in November 2021, adjusting for factors generally considered to be legitimate differentiators of salary, such as performance and tenure, salaries of our female employees were 99.6% of those of our male employees, and salaries of our non-white employees were 99.9% of those of our white employees.

In addition to cash and equity compensation, we offer generous employee benefits such as significant company contributions to deferred profit sharing plans, consumer-driven health plan coverage, vacation and holiday pay, disability and life insurance, and up to 12 weeks paid parental and family leave for birth, adoption and foster placement and an additional six weeks paid leave for birth mothers. Our benefits also include mental health and wellness benefits and family creation assistance benefits, such as adoption assistance and coverage for fertility treatments. In response to the COVID-19 pandemic, for 2020 and 2021, we expanded dependent care coverage to include $5,000 employee reimbursement for remote learning and other dependent care costs. In addition, we offered financial incentives to our employees to encourage vaccination against COVID-19. While there is some variability in employee benefits across our companies, the examples we provide are available to most employees.

We are also committed to investing in the educational development of our workforce through an unlimited tuition refund program for job-related courses or company-related degrees.

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Attracting, Developing and Retaining Talent

Our salaried entry-level recruitment efforts focus on recruiting relationships with universities, internship opportunities and partnerships with organizations that support diverse students. We complement these recruiting efforts with hiring experienced employees with demonstrated leadership capabilities.

To help our employees succeed in their roles and develop in their careers, we emphasize ongoing training and leadership development opportunities. Building skills that drive innovation and aligning our employees to our Vision is important for our long-term success. The Human Resources department leads our learning and development efforts partnering with learning professionals embedded in functions throughout our operating and services companies. Employees have access to a wide variety of development programs, including new employee onboarding, classroom and self-guided training programs, technical training, including training to maintain professional certifications, and our educational refund program for continuing education.

We regularly conduct anonymous employee engagement surveys to seek feedback on a variety of topics, including employee satisfaction, support from leadership, corporate culture and culture of compliance. In addition, in 2021, we conducted quarterly employee surveys to gauge topics such as employee well-being in light of the COVID-19 pandemic, inclusion and workload. Survey results, including comparisons to prior results, are shared with our employees and our Board and are used to modify or enhance our human capital management programs.

Workplace Safety

Our goal is for every Altria employee to have an injury-free career, which is supported by our Safety Management System (“SMS”). We strive for continuous improvement in our employee safety program through SMS infrastructure. Our Occupational Safety and Health Administration recordable injury rate for 2021 was 1.7% (versus 1.9% for 2020) and remains below the benchmark for companies in the U.S. Beverage and Tobacco Product Manufacturing industry classification.

In response to the COVID-19 pandemic, we implemented safety measures aligned with Centers for Disease Control and Prevention guidelines to help protect our employees, including remote work for non-manufacturing salaried employees and additional cleaning and sanitation practices. We also established a COVID-19 Task Force and a Return to Workplace team to facilitate the decision-making process as we navigated the evolving COVID-19 environment and its impacts on our employees.

Number of Employees and Labor Relations

At December 31, 2021, we employed approximately 6,000 people (a decrease from approximately 7,100 at December 31, 2020 driven by the sale of the wine business). Thirty percent of our employees were hourly manufacturing employees and members of labor unions subject to collective bargaining agreements. We believe we engage and collaborate effectively with our hourly employees, as demonstrated by the positive working relationship between our companies and the unions. We also have long-term agreements that resolve any collective bargaining dispute through binding arbitration, which further demonstrates the trust-based relationship with the unions.

Supply Chain Human Capital Matters

We support efforts to address human capital concerns in the tobacco supply chain. For example, in our domestic tobacco supply chain, we use on-farm good agricultural practices assessments to assess growers’ compliance with practices related to labor management. Our tobacco companies also establish contract terms and conditions with tobacco growers addressing child and forced labor and conduct social compliance audits in high-risk tobacco growing regions.

More information about efforts discussed in this section can be found in our Corporate Responsibility Reports at www.altria.com/responsibility.

*▪*Intellectual Property: Trademarks are of material importance to Altria and its operating companies, and are protected by registration or otherwise. In addition, as of December 31, 2021, the portfolio of United States patents owned by Altria’s businesses, as a whole, was material to Altria and its tobacco businesses. However, no one patent or group of related patents was material to Altria’s business or its tobacco businesses as of December 31, 2021. Altria’s businesses also have proprietary trade secrets, technology, know-how, processes and other intellectual property rights that are protected by appropriate confidentiality measures. Certain trade secrets are material to Altria and its tobacco businesses.

*▪*Government Regulations: Altria and its subsidiaries are subject to various federal, state and local laws and regulations. For discussion of laws and regulations impacting Altria’s tobacco operating companies, see Tobacco Space - Business Environment in Item 7.

Altria and its subsidiaries (and former subsidiaries) are also subject to various federal, state and local laws and regulations concerning the discharge of materials into the environment, or otherwise related to environmental protection, including, in the United States: the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act (commonly known as “Superfund”), which can impose joint and several liability on each responsible party. Subsidiaries (and former subsidiaries) of Altria are involved in several matters subjecting them to potential costs of remediation

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and natural resource damages under Superfund or other laws and regulations. Altria’s subsidiaries expect to continue to make capital and other expenditures in connection with environmental laws and regulations. As discussed in Note 2. Summary of Significant Accounting Policies to the consolidated financial statements in Item 8 (“Note 2”), Altria provides for expenses associated with environmental remediation obligations on an undiscounted basis when such amounts are probable and can be reasonably estimated. Such accruals are adjusted as new information develops or circumstances change. Other than those amounts, it is not possible to reasonably estimate the cost of any environmental remediation and compliance efforts that subsidiaries of Altria may undertake in the future. In the opinion of management, however, compliance with environmental laws and regulations, including the payment of any remediation costs or damages and related expenditures, has not had, and is not expected to have, a material adverse effect on Altria’s consolidated results of operations, capital expenditures, financial position or cash flows.

Available Information

Altria is required to file annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission (“SEC”).

Altria makes available free of charge on or through its website (www.altria.com) its Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after Altria electronically files such material with, or furnishes it to, the SEC. Investors can access Altria’s filings with the SEC by visiting www.altria.com/secfilings.

The information on the respective websites of Altria and its subsidiaries is not, and shall not be deemed to be, a part of this Form 10-K or incorporated into any other filings Altria makes with the SEC.