Philip Morris Raises Prices, Cuts Allowances

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Philip Morris Raises Prices, Cuts Allowances

By Mehgan Belanger

RICHMOND, Va. -- Effective Dec. 15, Philip Morris USA, a subsidiary of Altria Group Inc. and the largest cigarette maker in the U.S., raised its list prices for some of its brands, while also making promotional spending adjustments on other brands.

"We periodically change promotional allowances to address competitive trends in the marketplace. In some cases, that means more allowances in certain geographies and less in others," company spokesman David Sylvia told CSNews Online. "We are always looking at how we can best use promotional allowances to respond to trends. [These adjustments] fit with this strategy of moving promotional allowances around to meet trends."

Off-invoice promotional allowances at the wholesale level were cut by five cents per pack—or 50 cents per carton—on its Marlboro and Basic cigarette brands, Sylvia said. Meanwhile, reward funds for its Retail Leaders levels three, four and five, were cut by 50 cents per carton on Marlboro and Basic brands.

However, in some markets, the company increased special promotional allowances for those levels of retail participation on all Marlboro cigarette products, said Sylvia, declining to list the geographies due to competitive reasons.

List prices were raised by five cents per pack on the Parliament, Virginia Slims, Chesterfield and Merit cigarette brands, he said.

The price increases were "relatively modest and in-line with our view that only a modest net price increase to the manufacturers is likely for 2009," said Goldman Sachs tobacco analyst Judy Hong in a research note cited by Reuters.