2018 Corporate Responsibility Progress Report

Convenience Stores and the Tobacco Category Convenience stores drive about 70 percent of the tobacco volume sold, making this an important category of retailers to us. Roughly 153,000 convenience stores across the U.S. generate approximately $650 billion in annual sales, including gasoline. Every day, 165 million consumer transactions take place in a convenience store. About half of all convenience store shoppers are 21-39. The tobacco categories lead in revenue with 34 percent of inside convenience store sales, and deliver the third highest gross profit dollars at 17 percent. Importantly, about 50 percent of the time, the average adult tobacco consumer also purchases other items inside the convenience store -- that’s almost 20 points higher than the average for convenience store consumers of other product categories. Those other items round out the market basket. The average adult tobacco consumer spends just over $12 per trip, compared to $6.95 for non-tobacco convenience store purchases. So, many convenience store retailers rely on tobacco to increase foot traffic and boost in-store sales. We use these insights in achieving retailer alignment and support for our offerings. trials, and supporting adult smokers’ conversion to IQOS . Plans include: • digital and print ads for  IQOS • IQOS focused stores and mobile pop up stores • allowing adult smokers to initiate a trial period with IQOS • building a consumer engagement and customer care program, including tips on device usage and maintenance, information about where to buy HeatSticks , and encouragement to convert from conventional cigarettes • leveraging PM USA’s extensive age-verified adult smoker database, Marlboro digital tools and web analytics to identify potential IQOS consumers and communicate with them about IQOS Ste. Michelle Wine Estates works with leading industry groups committed to the responsible promotion and sale of wine to adults, including the Washington State Wine Commission, Washington Wine Institute, Wine Institute and Wine America. Among other actions, Ste. Michelle complies with the Wine Institute’s “Wine Industry Code for Direct Shipping” which addresses direct shipments of wine to adult consumers and compliance with federal and state laws. Ste. Michelle also educates its employees about age verification when serving adult consumers. Connectingwith the Trade Our tobacco companies sell their products to wholesalers, who in turn, sell to retailers and other wholesalers. Altria Group Distribution Company (AGDC) provides the sales and distribution services for our tobacco companies. Wholesalers and retailers, also known as “our trade partners,” play critical roles in our product distribution network. AGDC works with our trade partners to execute our trade programs, which help them responsibly manage their tobacco category. In 2018, the breadth of our sales coverage included about 230,000 retail stores, representing more than 90 percent of tobacco industry volume. In 2018, we executed new agreements with some retailers to carve out space behind the counter specifically for innovative tobacco products, like our e-vapor and oral nicotine products. Although we discontinued those products, we plan to use this space for JUUL e-vapor products as we capitalize on that investment. Our retail trade program is built on effective category management principles, including: • merchandising our products in an organized way; • having our brands in-stock and available; • having our most popular brands in preferred positions; • clearly communicating price and promotional offers; and • deterring access by underage purchasers. The program also includes features not required by federal law that help prevent underage access to tobacco products. These include training for store clerks on how to check IDs and requirements for retailers to place We Card® or equivalent signage. In addition, we’ve developed rigorous compliance and training systems to govern marketing material production. In some tobacco categories, Our marketing practices comply with all restrictions and regulations in the 1998 Tobacco Settlement Agreements as well as FDA regulation. Learn more on Altria.com. 31 Altria: 2018 Corporate Responsibility Progress Report | Marketing Responsibly