Altria Leads First Round of List Price Hikes for 2018

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Altria Leads First Round of List Price Hikes for 2018

03/23/2018
The Richmond, Va. headquarters of Altria Group Inc.

RICHMOND, Va. — Altria Group Inc. is leading the pack when it comes to the first cigarette list price hikes of the year, and this one is higher than expected.

Wells Fargo Securities LLC's industry contacts are reporting that Altria's Philip Morris USA is implementing a 9-cent increase on each cigarette pack — or 90 cents per carton — across all its brands, including Marlboro.

The 2-percent to 3-percent hike is higher than the tobacco company's typical 7-cent to 8-cent jump, according to Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities.

The increase goes into effective with shipments on or after March 25 and, from a timing perspective, falls in line with Altria's typical practice of raising cigarette list prices every six months, she noted.

"We had been anticipating this price increase based on feedback in our 'Tobacco Talk' surveys and therefore maintain our [earnings per share] estimates on Altria despite the slightly higher per pack pricing as we expect Altria to promote a little more aggressively to improve Marlboro share," Herzog explained.

She added Reynolds American Inc., an indirect wholly owned subsidiary of British American Tobacco plc, and ITG Brands LLC, the U.S. subsidiary of Imperial Brands, are expected to follow suit — but the increases are not expected to be as high.

The trend of increasing list prices "is important given ongoing secular declines in volume, which will likely face even greater pressure under the Food and Drug Administration's effort to lower nicotine levels in combustible cigarettes, an event we continue to view to be several years away given the complexities of issues ahead," Herzog said.

Richmond-based Altria Group Inc. is the parent company for Philip Morris USA, John Middleton, U.S. Smokeless Tobacco Co., Nu Mark and Ste. Michele Wine Estates. The brand portfolios of Altria's tobacco operating companies include Marlboro, Black & Mild, Copenhagen, Skoal, MarkTen and Green Smoke.