Cigarette Prices Could Rise in December

NEW YORK -- Talk continues that cigarette prices could tick-up next month, with the Wells Fargo Securities LLC's latest Tobacco Talk survey expecting the increase to take place the week of Dec. 10.

The tobacco wholesaler and retailer survey found that Philip Morris USA will likely lead a list of price increases -- pegged at six to seven cents per pack -- in mid-December. The move is expected to drive industry revenue and profit pool growth even if a portion of the list price is "promoted away," according to Bonnie Herzog, managing director of beverage, tobacco and consumer research at Wells Fargo Securities.

Many retailers are also loading inventory in anticipating of an upcoming price changes, further fueling speculation of the cost of cigarettes will inch up. But any increase should relieve promotional pressure, Herzog said.

"A price increase demonstrates the health of the industry's pricing power which is crucial to offsetting volume declines in our view," she said.

Wells Fargo Securities also expects cigarette net price to accelerate in fiscal year 2013 based on the past three years of deceleration. In addition, Wells Fargo Securities expects promotion pressure to ease in the new fiscal year given The Altria Group's recent pullback, according to Herzog.