RICHMOND, Va. -- Altria Group Inc. and its Philip Morris USA Inc. announced to the trade that it will raise list prices across its cigarette portfolio by seven cents per pack (70 cents per carton), or approximately 2% to 3%, across all of its core brands, effective May 17.
Reynolds American Inc. and Lorillard Inc. made the same announcement across their core cigarette brands, effective May 14 and May 15, respectively.
Altria also took a seven-cents-per-tin increase on Marlboro snus.
For its Marlboro Leadership Price (MLP) program customers, PM USA is offering an eight-cents-per-pack promotional allowance on Marlboro from May 17 to May 23.
This move “could possibly be to defend Marlboro's market share against higher promos that [Reynolds American] has been running on Winston and Kool in select markets during the month of May,” said Bonnie Herzog, managing director of beverage, tobacco and convenience store research for Wells Fargo Securities LLC, New York.
“This announcement supports our thesis of continued strong pricing power for the tobacco industry,” she wrote. “Overall this price increase is positive and demonstrates the industry still has very strong pricing power—and this is coming on the heels of several quarters of very strong pricing. Given that underlying cigarette industry consumption will likely continue its long-term trend of declining, pricing remains a critical driver of revenue and remains necessary to drive top-line growth.
Nik Modi, senior tobacco analyst at RBC Capital Markets LLC, New York, wrote, “We see this announcement as a positive for our bullish thesis on the tobacco pricing environment and expect strong fundamentals for the category to continue driven by a boost in c-store traffic and higher disposable income for low-income consumers (due to lower gas prices and wage inflation).”
Greensboro, N.C.-based Lorillard, through its Lorillard Tobacco Co. subsidiary, offers the Newport, Kent, True, Maverick and Old Gold cigarette brands. It also offers the blu eCigs electronic cigarette brand.
Reynolds American, Winston-Salem, N.C., is the parent company of R.J. Reynolds Tobacco Co., with brands including Camel, Pall Mall, Winston, Kool, Doral, Salem, Misty and Capri; American Snuff Co. LLC, maker of smokeless tobacco products, with brands including Grizzly and Kodiak; Santa Fe Natural Tobacco Co. Inc., which manufactures and markets Natural American Spirit 100% additive-free natural tobacco products; Niconovum USA Inc., which market nicotine replacement therapy products under the Zonnic brand; and R.J. Reynolds Vapor Co., which makes Vuse e-cigarettes.
Along with Philip Morris USA Inc., Richmond, Va.-based Altria owns U.S. Smokeless Tobacco Co. LLC, cigar and pipe tobacco maker John Middleton Co. and e-cigarette maker NuMark. The brand portfolios of Altria's tobacco operating companies include Marlboro, Black & Mild, Copenhagen, Skoal and MarkTen.
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