RICHMOND, Va. -- U.S. Smokeless Tobacco Co. (USSTC) is raising the prices on all of its OTP (other tobacco products) with the exception of certain Skoal Tobacco Blends, according to an industry analyst.
A subsidiary of Richmond, Va.-based Altria Group, USSTC announced a 7- to 12-cents-per-can increase on most of its core smokeless tobacco brands but, at the same time, said it would decrease its per-can list price of certain Skoal Tobacco Blends by 77 cents, according to Bonnie Herzog, managing director of beverage, tobacco and convenience-store research for Wells Fargo Securities LLC, New York, in a recent research report.
The changes amount to a 2% to 3% increase in list prices for its core SKUs, including moist smokeless tobacco, snus and dry snuff tobacco (Copenhagen, Skoal and Red Seal brands), while decreasing the list price on Skoal Tobacco Blends (including Skoal Apple, Berry and Citrus Blend Pouches).
List-price increases affect USSTC’s more “value” or discount segment of its smokeless platform (a 12-cents-per-can increase on Copenhagen Popular Price brands and Skoal Xtra/Skoal Snus; a 7-cents-per-can increase on WB Cut; and a 42-cents-per-tub increase on Husky Tubs), and narrows the gap between premium and value brands.
USSTC is also revising certain special price promotions on Skoal, which are to offset these price changes, Herzog said. The list-price changes will be effective with shipments on or after Dec. 6.
She expects other smokeless tobacco manufacturers to follow suit with similar list-price changes. “On balance, we believe the list-price changes reflect the industry’s continued strong pricing power, which remains a critical driver of revenue and earnings growth as manufacturers realize almost three-times the leverage on earnings from a point of pricing than a point of volume.”
Herzog also commented further on the Skoal decreases, saying that while USSTC does not break out brand performance by SKU, Skoal’s overall performance has been “largely underwhelming.” In the past five years, Skoal has lost 4.2 percentage points of retail market share and has seen its volume decline, she said.