Winston-Salem, N.C.-based Reynolds "[image-nocss] is using a combination of list price increases and promotion reductions to accomplish the price change. Camel [Kool, Winston and Salem] will see a 44-cents-per-pack price increase and 27-cents-per-pack reduction of promotions. Pall Mall and Doral will see a 41-cents-per-pack price increase and 30-cents-per-pack promotion reduction. All other brands (about 12% of the volume) will see a net price increase of 78 cents per pack," said Credit Suisse tobacco analyst Thilo Wrede said in a research note. "The changes will go into effect on March 16 for the third increase in three months. No changes have been announced for the MST [moist smokeless tobacco] brands yet, as [PM USA's] MST price reductions are going into effect only at the end of March."
Greensboro, N.C.-based Lorillard "is increasing list prices on its brands by 71 cents a pack ahead of the FET [61-cents-per-pack federal excise tax] increase on April 1," said Wrede. "It is following the example of market leader [PM USA] and announced the price increase on Friday, the same day that [Reynolds] also announced an effective increase of the same magnitude."
He added, "The price change [gives Lorillard] a three-week window during which the new FET is already included in the manufacturer price without [Lorillard] having to pay the higher tax rate."
Richmond, Va.-based PM USA last week announced plans to raise prices on Marlboro and several other cigarette brands by 71 cents a pack, a move it said was primarily intended to cover the costs of the FET increase, a result of the passage of legislation expanding the State Children's Health Insurance Program (SCHIP).
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