By Timothy S. Donahue

Top Takeaways:

• New partnership: PM USA will manufacture cigarettes with PMI affiliates.
• 2027 start: First shipments are expected early next year.
• Tax benefit: Altria expects economic gains from duty drawbacks.

Altria and PMI are collaborating again.

Altria Group and Philip Morris International entered into reciprocal contract manufacturing arrangements Monday for combustible cigarettes, a notable collaboration between the tobacco companies that have operated independently since their 2008 separation.

Under the agreement, Altria’s subsidiary, Philip Morris USA, will work with PMI’s non-U.S. affiliates to manufacture traditional tobacco products. PMI said the first shipments under the arrangement are expected in early 2027, pending operational readiness and regulatory requirements.

Neither company expects the arrangement to materially affect its 2026 financial results.

Altria said the deal is intended to improve the efficiency of PM USA’s traditional tobacco operations and generate economic benefits that can support investment in its broader strategy.

The arrangement could also help Altria develop capabilities applicable to its efforts to expand its nicotine products internationally.

Altria said the agreement supports its 2028 Enterprise Goals by “enhancing operational capabilities, generating economic benefits to support investment in our Vision, and strengthening capabilities that could be transferable to our international nicotine efforts.”

Reuters reported that an important financial component is the federal “double duty drawback” system, which allows U.S. tobacco companies exporting products to recover federal excise taxes paid on domestically sold products. The arrangement could therefore provide Altria with a tax benefit as it expands cigarette imports and exports.

PMI described the agreement as a means for the two companies to make greater use of their respective cigarette manufacturing expertise.

“The collaboration is expected to leverage the respective combustible cigarette manufacturing capabilities and expertise of both organizations while we continue to focus on delivering a smoke-free future,” PMI said.

The companies did not disclose the financial terms or identify the cigarette brands, manufacturing facilities, or international markets covered by the arrangement.

Altria and PMI emphasized that the agreement does not reunite their commercial operations. Each company will remain independently responsible for commercialization, distribution and regulatory matters.

The partnership remains significant given their history.

PMI was separated from Altria in 2008, creating independent U.S. and international tobacco companies. Altria retained Philip Morris USA and the U.S. Marlboro business, while PMI assumed responsibility for international markets. The companies later explored a potential reunion in 2019 before ending merger discussions.

Their relationship has also included disputes and evolving commercial arrangements regarding smoke-free products, particularly IQOS in the United States.

The new agreement focuses on combustible cigarettes rather than transferring responsibility for either company’s smoke-free portfolio.

For Altria, however, the potential benefits extend beyond cigarettes. The Richmond, Virginia-based company said that capabilities developed through the arrangement could eventually be applied to its international nicotine efforts.

Meanwhile, PMI has continued to invest heavily in its U.S. manufacturing network. In July, the company opened a $1.2 billion manufacturing campus in Aurora, Colorado, primarily supporting ZYN nicotine pouch production and exports.