Altria Raises Cigarette List Prices

RICHMOND, Va. -- Retailers will see the list price rise for virtually all of Altria’s cigarette brands—including Marlboro, Basic and Benson & Hedges—as of March 19, according to analysts.

The 2% to 3% increase, which will mean an 8-cent-per-pack increase for most brands, will coincide with excise-tax increases in California and Pennsylvania, as well as struggles from a recent product recall at Altria subsidiary U.S. Smokeless Tobacco Co., according to Bonnie Herzog, managing director for beverage, tobacco and convenience-store research, Wells Fargo Securities LLC, New York.

The tax hikes in those two states alone will cut industry volumes by an estimated 1%, with the more devastating blow coming from California’s $2-a-pack tax increase, Herzog said.

Although the major tobacco companies typically increase prices in May and November, Nik Modi, managing director of tobacco, household products and beverages for RBC Capital Markets, New York, had predicted the increase from Richmond, Va.-based Altria Group Distribution Co. would happen earlier this year due to the looming California tax.

Here are a few more tobacco-related predictions for the coming weeks …

Modi expects other major tobacco manufacturers—including Reynolds American Inc., Winston-Salem, N.C., and Imperial Tobacco, Bristol, England—to follow Altria’s lead, announcing price increases in the coming days.

The major tobacco manufacturers will stick with a “focus brands” strategy, where they will put emphasis and promotional efforts on their major or “focus” brands at the expense of lower-volume brands in their portfolios, Modi said. These focus brands include Marlboro, Newport, Camel, Pall Mall, Winston, Salem and Kool.

In a recent survey conducted in partnership with CSP, RBC officials said 61% of retailers believed tobacco manufacturers’ promotional activity will remain the same in 2017, with 31% predicting a decrease.

While most brands in Altria’s portfolio will see an increase of 8 cents per pack, its Parliament brand will increase 12 cents per pack. The Altria brands seeing an 8-cent increase per pack include Marlboro, Basic, Benson & Hedges, Cambridge, Chesterfield, Commander, Dave’s, English Ovals, L&M, Lark, Merit, Player’s, Saratoga and Virginia Slims.