Altria and Philip Morris USA have announced a cigarette pack price increase of 15 cents, Bonnie Herzog, managing director at Goldman Sachs, wrote in a research note on Jan. 10. The change is effective on Jan. 14 and affects Marlboro, primarily non-menthol, Basic, L&M and L&M Simple Tobacco cigarettes.
There is also a 20-cent-per-pack increase on Marlboro Mainline Menthol & Marlboro 72s Menthol, Benson & Hedges, Merit, Nat’s, Parliament and Virginia Slims, Herzog said. This follows Altria’s last price increase in October, and British American Tobacco’s price increase last month.
Altria’s “price increase today is a bit of a surprise considering its four cig list prices last year, suggesting to us that volume pressures continue,” she said. “Having said that, we believe [Altria] has become 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.
Citing the potential of some increased risk of downtrading, especially given pressures on the consumer, Herzog believes brands like Marlboro with a very loyal customer base and effective promotions should be able to keep those consumers within the franchise.
“However, given the concerns surrounding the health of the low income consumer, we believe investors may see some risk to [Altria’s] ability to continue to pass on such strong pricing in this environment,” Herzog said. “Having said that, British American Tobacco and Altria seem to be fairly comfortable with the elasticity as they continue to raise prices.”
As one of the country’s largest tobacco producers, Altria, Richmond, Virginia includes the following companies: Philip Morris USA, U.S. Smokeless Tobacco Co., John Middleton, Ste. Michelle Wine Estates and Philip Morris Capital Corp.
Want to learn more about the tobacco category? Check out our event CRUin Nashville Feb. 28-March 1, 2024. Sponsors can gain 15 one-to-one meetings with qualified retailers.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.