PM USA Price Hike

Reduces off-invoice promotional discount on Marlboro, more

RICHMOND, Va. -- Philip Morris USA on Friday effectively raised the price on Marlboro, Basic, L&M and most of its other cigarette brands by 9 cents a pack, according to Reuters. The company raised the price on Marlboro, Basic and L&M by reducing the off-invoice promotional discount given to wholesalers on those brands by 9 cents a pack. The company increased the list price on the other brands. Reductions in promotional discounts are typically passed on to consumers in the form of higher prices, said the report.

The average convenience store price for a pack of Marlboros, the top-selling [image-nocss] U.S. brand, had been $4.27 in the first quarter, PM USA spokesperson David Sylvia told the news agency.

The unit of Altria Group Inc. also reduced the off-invoice promotional allowance on Parliament cigarettes by 20 cents a pack, effectively raising prices on those cigarettes as well, the report added.

PM USA has made several price increases on various brands in the past year, as have other cigarette makers.

The last price increase on Marlboro came in September, when PM USA cut the off-invoice promotional discount on that brand and three others by 5 cents, Sylvia said.

A Deutsche Bank Securities Inc. alert called the wholesale price increase "a clear signal to both competition and the investment community that it intends to remain profit focused."

It added that the company's "lower-than-expected EBIT and higher-than-expected promotional spend in Q1 caused sector-wide weakness as investors feared the favorable pricing environment of recent years might be ending. To our minds, [the] move indicates the promotion-led share gains represented a tactical move, but not a structural shift in favorable industry pricing dynamic."

Richmond, Va.-based PM USA's cigarette brands include Marlboro, Alpine, Basic, Benson & Hedges, Bristol, Cambridge, Chesterfield, Commander, Dave 's, English Ovals, L&M, Lark, Merit, Parliament, Players, Saratoga and Virginia Slims.