Wholesalers Stock Up on Cigs Before Expected Price Hike

NEW YORK -- A possible 6-cent increase per pack price increase is still a few weeks away, but many wholesalers are beginning to stock up on cigarettes before any hike goes into effect.

The stockpiling measures come as Wells Fargo Securities LLC said it anticipates a cigarette list price increase of 6 cents – or possibly even 7 cents -- to occur the week of Dec. 10. The firm expects the move to be led by Philip Morris USA, as CSNews Online previously reported.

"We have heard from several of our tobacco wholesaler contacts that cigarette inventory is running very high this month," noted Bonnie Herzog, managing director of beverage, tobacco and consumer research at Wells Fargo Securities. "We believe this bodes well for industry volume trends in [the fourth quarter]. Therefore, we have further conviction industry top line will improve during [the fourth quarter] driven by stronger volume trends, higher list prices, and easing promotional spending."

Wells Fargo Securities also expects cigarette net prices to accelerate in fiscal year 2013 based on the past three years of deceleration. In addition, Wells Fargo Securities expects promotion pressure to ease in the new fiscal year given The Altria Group's recent pullback, as CSNews Online previously reported.