RICHMOND, Va. —Altria is raising cigarette prices 15 cents a pack for Marlboro, Chesterfield, Basic, L&M and L&M Simple Tobacco brands, in addition to other increases, according to Goldman Sachs.
The price increase is effective Oct. 16, and follows the Richmond, Va.-based tobacco company’s 15-cent-per-pack price increase in July and British American Tobacco’s increase in August, Goldman Sachs Managing Director Bonnie Herzog said.
There will also be a 20-cent-per-pack increase on Benson & Hedges, Benson & Hedges Menthol Green, Merit, Nat’s, Parliament and Virginia Slims.
“Broadly this price increase doesn’t come as a surprise and 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,” Herzog said.
Herzog said she will be watching to see whether deep discount cigarette manufacturers also move on price. There is a wide relative price gap now between Marlboro and the lowest effective cigarette on the market, so if they don’t, the relative price gap could widen further, she said.
“Looking ahead, we continue to expect strong net price realization for the industry given manufacturers’ strong pricing power. While there is some increased risk of potential downtrading (especially given still elevated gas prices), we believe brands like Marlboro with a very loyal customer base and strong/effective promotions should be able to keep those consumers within the franchise,” Herzog said.
Altria is one of the country’s largest tobacco producers. Its companies include Philip Morris USA, U.S. Smokeless Tobacco Co., John Middleton, Ste. Michelle Wine Estates and Philip Morris Capital Corp.
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