The 6-cents-per-pack (60-cents-per-carton) increase on Newport menthol, Kent and True cigarettes equates to a 1.5% price increase, according to a report from Nik Modi, tobacco analyst, UBS Securities LLC, New York, and comes on the heels of Liggett Vector Brands Inc.'s 7.5-cents-per-pack increase in October.
Lorillard has taken a cumulative 15 cents (3% to 4%) per pack in pricing [image-nocss] on Newport, according to Modi's report. "We expect Altria and Reynolds American will follow Lorillard's move in the near future," he said.
Not included in the increases were the company's Maverick brand and Old Gold brands, as well as Newport nonmenthol.
Bob Bannon, director of investor relations at Lorillard told CSP Daily News that nonmenthol may have been left out of the price change "for simplicity's sake" since the product was only launched November 1 at a special introductory price. "They've certainly been positively perceived by our customers, but I think it's probably too early to tell in terms of how they'll ultimately perform in the marketplace," he said.
Maverick, Modi said in his report, has been a source of volume share gains for the past several quarters. He also noted that Lorillard raised Maverick pricing by 4.5 cents per pack in February.
Bannon could not comment on specific reasons behind the price increase, but said, "We're obviously always looking at our competitive position, and pricing certainly is part of that."
Modi said that all Big Three tobacco manufacturers should benefit from sustainable pricing. "We continue to see pricing as the key driver of tobacco profits and stock performance," he stated. "We believe Big Three tobacco is favorably positioned as the group continues to take market share from deep-discount players who are struggling in an environment with a higher cost of business largely due to new FDA regulations."
Lorillard, Greensboro, N.C., is the third-largest manufacturer of cigarettes in the United States. Founded in 1760, it is the oldest continuously operating U.S. tobacco company. Newport, Lorillard's flagship menthol-flavored premium cigarette brand, is the top-selling menthol and second-largest selling cigarette in the United States. In addition to Newport, the Lorillard product line has four other brand families marketed under the Kent, True, Maverick and Old Gold brand names.
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