Tobacco Cos. Take Cigarette Price Hikes
NEW YORK — Cigarette list prices are going up, a common move on the part of tobacco companies this time of year.
Philip Morris USA was the first to announce a hike, increasing the list price 7 cents per pack, or 70 cents per carton. The move spreads across all core PM USA brands, including Marlboro but not Marlboro snus tins, according to Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC.
This list price increase will be effective with shipments on or after Nov. 15. From a timing perspective, this price increase is in-line with PM USA's cigarette price increase last year which was announced on Nov. 12, 2014 and became effective on Nov. 16, 2014, Herzog said.
"We also find PM USA's timing interesting given that Reynolds American Inc.'s new retailer contracts become effective next week as well as given ITG Brands LLC's stepped up promos behind Winston," she added.
Within days, RAI and ITG followed with similar moves.
R.J. Reynolds Tobacco Co. (RJRT) took a 7-cent per pack increase on its key growth brands: Camel (excluding Non-filter), Pall Mall Box (Savings), Newport, Doral and Red Kamel.
However, the RAI operating company took a nearly 9-cent increase on Camel Non-Filter, Pall Mall (Full Price) and several other non-growth brands which is to be offset by slightly higher discount terms on these non-growth brands except for the brands acquired from Lorillard, according to Herzog.
RJRT's price increase became effective on orders placed after Nov. 12.
ITG also announced a 7-cent per pack increase on Winston, Kool, Salem, and Maverick effective Nov. 13. The company made no changes to its current off-invoice discount values for any of its brands and reminded its customers that the full value of all off-invoice promotional allowances must be passed on to their customers, Herzog said.
In addition, she added that Santa Fe Natural Tobacco Co. hiked its Natural American Spirit brand 7 cents a pack. The move became effective for orders after Nov. 12.
In another move, Liggett also took a 7-cent per pack price increase on its brands except on Eagle 20's, she added.
"Given that underlying cigarette industry consumption will likely revert towards its long-term trend of declining, pricing remains a critical driver of revenue and earnings growth," Herzog said.