British American Tobacco Takes Another Cigarette List Price Hike

WINSTON-SALEM, N.C. — British American Tobacco (BAT) is expected to implement a list price hike for several of its cigarette brands in the new year.

Industry contacts told Goldman Sachs that BAT recently announced its fourth list price increase this year. The timing of the move follows the tobacco company's quarterly cadence, according to Bonnie Herzog, managing director at Goldman Sachs, but "the magnitude of the price increases, especially on smaller brands, came in a little higher than expected."

As she reported, BAT is taking a cigarette list price increase of 15 cents per pack on Newport (menthol), Camel and Pall Mall Box, 25 cents per pack on Newport (non-menthol) and 38 cents per pack on Pall Mall Non-Filter and Pall Mall Vintage Gold.

The company took several other price increases across its portfolio of brands but didn't raise the list price of Lucky Strike (box).

Separately, BAT also announced several list price increases on oral tobacco, including 9 cents to 13 cents per tin increases on Camel Snus and Grizzly Snus and three other oral brands, as well as a 10 cents per pouch increase and 40 cents per tin increase on Natural American Spirit RYO.

Winston-Salem-based Reynolds American Inc. is a U.S. subsidiary of BAT.

The increases are effective with orders and deliveries on or after Jan. 2, Herzog added.

BAT last took a price increase, ranging from 13 cents to 25 cents per pack across several brands, at the end of August. Its latest move follows Altria Group Inc.'s 15 cent per pack increase in mid-October.

"Looking ahead, we continue to expect strong net price realization as the industry continues to successfully implement price increases to offset ongoing volume pressures," Herzog said. "While there is some increased risk of potential downtrading and concerns that manufacturers have less pricing power today — with approximately 62 percent of our retailer/wholesaler contacts in our most recent Nicotine Nuggets survey believing manufacturers have less pricing power today vs. last year — we believe brands like Marlboro with a very loyal customer base and strong/effective promotions should be able to keep those consumers within the franchise."