"I didn't get a lot of sleep last night," said the retailer, who added that she felt better once she realized the increase included the FET hike that will fund the [image-nocss] expansion of the State Children's Health Insurance Program. (See today's CSPTV for a related report.)
Terry Gallagher Jr., president of the Smoker Friendly chain of 85 smoke shops, said he was hoping for a bump in sales the last couple weeks of March, but the early passing along of the increase has squelched that.
"We had anticipated that maybe we'd see some pantry loading in March," he told CSP Daily News, "but with all the list prices going up to distributors over the last couple weeks, the ability for a consumer to pantry load has gone away."
Smokers who were preparing to take a hit to their wallets next month also are learning to their surprise that the era of nearly $5-per-pack cigarettes arrived early. Many tobacco companies, in anticipation of the extra 62-cent tax, decided to implement price hikes now, about three weeks early," according to a report in the Tampa Bay Times.
Tobacco giant Philip Morris, maker of popular brands Marlboro, Virginia Slims and Parliament, upped its list price 71 cents per pack this past week. R.J. Reynolds, maker of Kool, Camel and several discount brands, were expected to raise prices between 41 and 78 cents beginning today.
This, in turn, has driven up the retail price of most packs of cigarettes. At Gallagher's Colorado stores, a pack of Marlboro increased from $4.05 to $4.84.
"I knew it was going to go up, but I thought it was going to go up April 1," Richard Diaz, owner of a CITGO c-store in St. Petersburg, Fla., told the Tampa Bay Times. "I have customers taking it out on us, thinking it's us raising prices."
Tobacco companies, while acknowledging that the upcoming tax increase influenced the list price hikes, are mum about why they phased it in early.
"As a policy, we don't comment on pricing strategy," David Howard, a spokesman for R.J. Reynolds, the nation's second-leading tobacco company, told the newspaper. "We do not set the price of retail. We took a larger list-price increase."
List price applies to direct buy customers and wholesalers, Howard said. It is still up to retailers to decide the final price customers will pay, he said.
Philip Morris spokesman David Sutton said his company's 71-cent list price increase is a direct result of the new tax. "Of that 71 cents, 62 is going to the federal government," he said. "Everyone's going to have to do it. We took a business decision to implement that increase now."
Ryan Dalton, owner of Dalton's Discount Liquor & Tobacco in Joplin, Mo., said the price hikes are being applied by manufacturers now to cover the cost of a floor-stock tax retailers will have to pay April 1 on every tobacco product they have on hand, according to a report in the Joplin Globe.
But Fred Hoyt, president of the Smoke N Go chain in Abbeville, La., said it doesn't work like that.
"As I understand it, cigarette manufacturers and wholesalers are taking this profit right now, and on the existing inventory that we have right now, we're taking great markups," he told CSP Daily News. "Come April 1, we'll be taking markdowns because of the floor-stock tax. So if I had $100 worth of inventory on hand last week when the prices went up, then I got a markup of 107%, for example. But come April 1, I'll have to take a 6% decrease on any inventory that I have on hand. So I'm going to be reducing my inventory as much as possible between now and the first of the month."
For more about SCHIP and its impact on c-stores, see the April issue of CSP magazine.
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