Altria Takes Early Cigarette List Price Hike

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Altria Takes Early Cigarette List Price Hike

03/16/2017

RICHMOND, Va. — The calendar may only say March, but Altria Group Inc. has already raised the list price on its Philip Morris USA (PM USA) cigarette brands.

Citing its industry contacts, Wells Fargo Securities LLC said PM USA will take an effective cigarette list price increase of 8 cents per pack on March 19. The change equals an approximately 2 percent to 3 percent increase, according to Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities.

"Although this is earlier than we anticipated given PM USA typically takes list price increases in May and November, it makes sense as the increase should help to offset the impact of the California and Pennsylvania state excise tax increases," Herzog said.

The change can potentially offset the impact of potential profit losses from U.S. Smokeless Tobacco Co.'s (USSTC) product recall, she added. USSTC is an operating company of Richmond-based Altria.

California's state cigarette excise tax is set to jump $2 on April 1. Known as California Healthcare, Research and Prevention Tobacco Tax Act of 2016, the measure also places an equivalent tax increase on other tobacco products and electronic cigarettes containing nicotine.

Pennsylvania's levy jumped to $2.60 per pack on Aug. 1.

According to Herzog, the two tax increases could reduce industry volumes by approximately 1 percent this year. 

"Of the two, California's tax hike is the more impactful of the two as California represents about 8 percent of total U.S. industry volume, making it the second largest state by volume," she said.

The PM USA brands effective by the list price increase are: Marlboro, Basic, Benson & Hedges, Cambridge, Chesterfield, Commander, Dave's, English Ovals, L&M, Lark, Merit, Player's, Saratoga, Virginia Slims.

The Parliament brand will see a 12-cent per pack increase.

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.