Altria Group Inc.’s Philip Morris USA is pushing through a price increase of
six cents per pack across all of the company’s cigarette brands, the second round of price rises this year, reported Dow Jones. The maker of Marlboro and L&M cigarettes confirmed it would enact the price increase on shipments effective December 3rd. The move was matched by rivals Reynolds American Inc. and Lorillard Inc. for the second time in 2012, said the news agency.
Reynolds American confirmed it would raise the list price on all cigarette brands by six cents per pack and increase the price of Camel Snus by five cents per tin. Lorillard,
meanwhile, raised the list price by six cents per pack for all cigarette brands with the exception of Old Gold, which the company left unchanged. The list-price hikes enacted by Winston-Salem, N.C.-based Reynolds American and Greensboro, N.C.-based Lorillard each go into effect on Friday.
All three firms have heightened price promotions in a battle to win or defend market share as consumers remain under pressure due to a weak economy, Dow Jones said. Though all three players enacted two rounds of list price increases last year, over that
same period, the higher prices have not necessarily hurt consumers. Richmond, Va.-based Altria has kept a lid on the per-pack price for Marlboro with pricing promotions that have helped the company gain market share.
Stifel Nicolaus analyst Christopher Growe said he was relieved by Altria’s pricing decision given the heightened promotions in recent months. Though Reynolds American and Lorillard ultimately raised their list prices, as many observers expected, Growe said he expects those rivals will keep spending on promotions to remain competitive.
UBS analyst Nik Modi in a research note cited by Dow Jones said pricing is a key driver to the sector’s profits and stock performance. Modi said ultimately the larger tobacco firms should be in a
position to take market share from deep-discount peers who are struggling with higher costs related to new FDA regulations. (CSP Daily News: www.cspnet.com)