NEW YORK – The major tobacco manufacturers are initiating price increases, effective as of mid-November shipments, according to an industry analyst.
Citing industry contacts, Bonnie Herzog, managing director of beverage, tobacco and convenience-store research for Wells Fargo Securities, New York, said Philip Morris USA initiated a cigarette list-price increase of 2% to 3%, or 8 cents a pack, effective with shipments on or after Nov. 13. At least three other tobacco companies followed Philip Morris’ lead.
“This is not a surprise to us given the $2-per-pack tax increase that was just approved by voters in California,” Herzog said in her newsletter. The new California tax won’t go into effect until April 1, 2017.
Voters in California opted to raise their cigarette taxes by $2 a pack, a 230% increase to $2.87. In three other states, Colorado, Missouri and North Dakota, voters said no to proposed tax increases.
Winston-Salem, N.C.-based Reynolds American; Greensboro, N.C.-based ITG Brands; and Mebane, N.C.-based Liggett Tobacco followed Philip Morris with their own 2% to 3% or 8-cents-a-pack increases on key cigarette brands; ITG also intiated a 2% to 3% or 16-cent increase on its other brands.
“Bottom line: These price increases are positive, indicating the industry’s pricing power and its ability to offset any volume declines associated with the coming tax increase in California,” Herzog said.