RICHMOND, Va. -- Major tobacco manufacturer Altria Group Inc. has announced a list-price increase on all its cigarette brands of 9 cents per pack, higher than its long-term average increase of 7 cents per pack, according to an RBC Capital Markets report.
The price changes are effective with shipments on or after March 25, according to an anaylst with the New York-based investment firm. RBC expects that London-based British American Tobacco and its subsidiary Reynolds American Inc., Winston-Salem, N.C.; ITG Brands, Greensboro, N.C.; and other tobacco companies will follow Altria’s move in the coming days.
“We note that Altria and the tobacco players typically announce biannual price increases around May and November, but a year ago this cadence was pulled forward to March and September to offset the California excise tax [increase on cigarettes],” RBC reported in a research note, referring to the $2-per-pack state tax increase that went into effect in April 2017. “We would expect another price hike around September or October.”
While the price increase was higher than long-term averages, it was lower than the 10-cent increase that Altria initiated this past September.
Wells Fargo Securities, New York, described the increase as a positive move, especially in light of recent announcements from the U.S. Food and Drug Administration (FDA), Silver Spring, Md. “This trend is important given ongoing secular declines in volume, which will likely face even greater pressure under the FDA’s effort to lower nicotine levels in combustible cigarettes, an event we continue to view to be several years away, given the complexities of issues ahead,” Wells Fargo officials said.