Cigarette Pricing Action Continues

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Cigarette Pricing Action Continues


WINSTON-SALEM, N.C. -- Reynolds American Inc. (RAI) is falling in line with other major tobacco companies, taking a pricing action of its own. The Winston-Salem-based company's subsidiary, R.J. Reynolds Inc. (RJR), instituted a 7-cent cigarette list price increase on its brands, including Camel and Pall Mall.

The uptick went into effect after cut-off time Tuesday, according to Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC.

In addition, the company raised the price of its Camel Snus by 6 cents per tin. That increase matches Philip Morris USA's (PM USA) move to increase the price of its Marlboro Snus.

RAI's Santa Fe Natural Tobacco Co. also raised its list prices on all styles of Natural American Spirit cigarettes by 7 cents per pack, and roll-your-own products by 10 cents per pouch and 40 cents per tin. In another price hike, American Snuff raised its smokeless list price by 6 cents per can on Grizzly, Hawken, Kodiak and Cougar.

It has been a busy week around cigarette prices. As CSNews Online reported Tuesday, Richmond, Va.-based The Altria Group Inc. decreased its off-invoice promotional allowances by 7 cents per pack on its Marlboro and L&M brands. In addition, its PM USA subsidiary increased its cigarette list prices on all other brands by 7 cents per pack and Marlboro Snus Tins by 6 cents. The price changes will take effect on orders shipping on or after Dec. 1.

Lorillard Inc. also jumped into the action. The Greensboro-based company led the pricing moves last week with a 6-cents-per-pack pricing action, on average, reducing its buydown per pack at retail and effectively introducing a price increase, although it will introduce a buydown in some states.

This week, however, it followed that move by increasing the price of its Newport Menthol and Non-Menthol brands by 1 cent and hiking the price of its other cigarette brands, including Maverick, by 7 cents. The bottom line is that Lorillard's prices are effectively ticking up 7 cents per pack, Herzog added. The changes take effect with orders billed Wednesday.

"Overall the cigarette promo decreases/list price increases that Lorillard, Altria and now RAI have taken are positive and indicate continued pricing power," she said. "Given that consumption will likely continue to decline in the mid-single-digit range, pricing is necessary to drive topline growth."