PM USA Leads Cigarette Price Hike
Wells Fargo Securities has been expecting the per-pack uptick -- and even predicted Altria's PM USA would lead the way -- based on results of its recent Tobacco Talk industry trade surveys. The only difference is the increase is coming a week earlier than expected, according to Bonnie Herzog, managing director of beverage, tobacco and consumer research at Wells Fargo Securities.
Importantly, she pointed out, PM USA is offering Marlboro Leadership Price (MLP) option stores the opportunity to maintain their existing Marlboro retail selling prices through Dec. 15.
Wholesalers were also bracing for the price increase and began stocking up on cigarette inventory in advance of an uptick, as CSNews Online previously reported.
"We expect [fourth quarter 2012] industry cigarette volume should be strong given inventory building by wholesalers in advance of this price increase," Herzog said. "We expect overall cigarette net price realization to accelerate in 2013 and we have further conviction industry top line will improve during Q4 and beyond driven by stronger volume trends, higher list prices and easing promotional spending."
In addition to raising cigarette prices, PM USA is increasing the price on Marlboro Snus by 5 cents a tin or flip-top box.
"Overall this price increase is positive and indicates the industry continues to have pricing power. Given that consumption will likely continue to decline in the mid-single digit range, pricing is necessary to drive top-line growth," Herzog said.