Reynolds American, Lorillard Join in Cigarette Price Hikes

NEW YORK -- Just as predicted, Reynolds American Inc. (RAI) and Lorillard Inc. have joined Philip Morris USA (PM USA) in raising cigarettes prices.

RAI's 6-cent-per-pack hike across most of its brands takes effect with all orders placed today, Nov. 30. Lorillard is also implementing a similar 6-cent hike on all Newport, Maverick, Kent and True cigarettes with orders billed starting today, according to Bonnie Herzog, managing director of beverage, tobacco and consumer research at Wells Fargo Securities LLC.

As CSNews Online previously reported, PM USA was the first to announce this latest cigarette price hike. It is raising its cigarette pack prices across the board by 6 cents beginning Dec. 3.

Based on the findings of its Tobacco Talk surveys, Wells Fargo has been anticipating price increases from all three tobacco companies, but initially predicted the moves would come the week of Dec. 10. Wholesalers began stockpiling cigarette inventory before any price changes, so the timing of these increases is not surprising, Herzog explained.

Despite Lorillard's increase on its four brands, the company noted that there is no change to the $15 off invoice promotional allowance on Newport Non-Menthol -- the full value of which must be passed along to consumers, according to Herzog.

In addition, RAI's R.J. Reynolds unit is also implementing a 5-cent increase on Camel Snus tins. That move is in line with PM USA's 5-cent increase on Marlboro Snus, she added.

"Overall, these price increases are positive, indicating the industry still has pricing power," Herzog said. "Given that consumption will likely continue to decline in the mid-single digit range, pricing is necessary to drive top-line growth."