Altria is increasing its prices on all cigarette brands except for Chesterfield, effective April 23, a company spokesperson told CSP Daily News. Marlboro, Basic, L&M and L&M Simple Tobacco will increase 15 cents per pack, while Benson & Hedges, Merit, Nat’s, Parliament and Virginia Slims will increase 20 cents per pack.
This hike follows Altria’s latest 15-cent per pack increase in January and British American Tobacco’s price increase in December, Goldman Sachs Managing Director Bonnie Herzog noted in a research note.
Richmond, Virginia-based Altria’s price increase doesn’t come as a surprise as the company has been more sophisticated and targeted with its pricing strategies as well as promotional spending to offset these more frequent list price increases, especially for price-sensitive consumers, Herzog said.
“We find it interesting that BAT/[R.J. Reynolds Tobacco Co.] has not announced a list price increase following its pricing action in December, which may be in response to significant pressure on Newport volumes recently,” she said.
U.S. Smokeless Tobacco Co., an Altria company, also announced a smokeless list price increase effective April 25 of 10 cents per can/pouch on Copenhagen Mainline, Skoal MST and WB Cut. It also listed a 9-cent increase on Copenhagen popular price, Skoal snus, Red Seal and Husky cans, according to Goldman Sachs.
Herzog said she expects the price increases to broadly continue despite the pressures on the low-income consumer, increased risk from downtrading pressures and a widening relative price gap between Marlboro and the lowest effective cigarette on the market.
“We will be watching to see whether deep discount cig manufacturers also move on price,” she said. “If they don’t, the relative price gap could widen further.”
Brands like Marlboro that have a very loyal customer base and strong promotions should be able to keep its consumers, although there is an increased risk of downtrading to cheaper brands, Herzog said.
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