Big Three Take Cigarette List Price Hikes

NATIONAL REPORT — As expected, tobacco companies are increasing their wholesale list prices.

The Altria Group Inc. led the hikes on Wednesday with news it was increasing the list prices 7 cents per pack on all its cigarette brands. The increase is roughly between 2 and 3 percent, according to Bonne Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities. 

The list price increase will be effective with shipments on or after May 15. From a timing perspective, this price increase is roughly in-line with the tobacco company's cigarette price increase last year that became effective on May 17, 2015. 

"Overall, this price increase is positive and demonstrates the industry still has very strong pricing power, which is coming on the heels of several quarters of very strong net price realization for the manufacturers (6 to 7 percent)," Herzog said. "Given that underlying cigarette industry consumption will likely revert towards its long-term trend of declining, pricing remains a critical driver of revenue and earnings growth."

Within a day of Altria's move, the other major tobacco companies followed suit with increases of their own.

Reynolds American Inc. (RAI), ITG Brands LLC and Liggett Group are taking cigarette list price hikes of 7 cents per pack. According to Herzog, these actions are effective for orders billed after the May 12 cutoff or starting May 12 through May 16.

She added there are no changes to the current off-invoice discount values of $14.40 per carton for RAI’s Newport non-menthol styles.