Altria and its subsidiary Philip Morris USA have announced a series of cigarette price increases across its portfolio, including a roughly 20 to 25 cents per pack hike on Marlboro and a 20 cents per pack increase on L&M cigarettes, according to a notice from Goldman Sachs.
It also includes a 25-cents-per-pack increase on Benson & Hedges, Merit, Parliament and Virginia Slims.
The company held pricing flat on its Basic brand, which continues to serve as a value-focused offering to retain price-sensitive consumers, the Wednesday notice said.
The price changes took effect on Sunday, Goldman Sachs Managing Director Bonnie Herzog said. This marks the Richmond, Virginia-based company’s second increase this year.
The price increase follows Altria’s “typical quarterly cadence, so it doesn't come as much of a surprise, although the increase is a bit sharper than prior increases, likely given the ongoing pressures on cigarette volumes,” Herzog said. “Having said that, we believe Altria’s sophisticated and targeted pricing strategies as well as promotional spending should help to offset the frequency of list price increases, especially for price sensitive consumers.”
Herzog said she expects British American Tobacco (BAT) to follow soon with a similar price increase on cigarettes. BAT owns Winston-Salem, North Carolina-based Reynolds American Inc., the parent company of R.J. Reynolds Tobacco Co.
Herzog said she will be watching to see whether deep-discount cigarette manufacturers also move on price. “If they don’t, the relative price gap could widen further,” Herzog said.
While there is some increased risk of potential downtrading, Herzog said brands, like Marlboro, with a loyal customer base and strong promotions should be able to keep those consumers within the franchise.
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