Altria and its subsidiary Philip Morris USA have announced a cigarette list price increase of 16 cents per pack for some of its main brands.
Marlboro, Basic, L&M and L&M Simple Tobacco will see the 16-cent increase while Benson & Hedges, Merit, Nat’s, Parliament and Virginia Slims will see a 21-cent-per-pack increase starting Monday, according to research note from Goldman Sachs Managing Director Bonnie Herzog.
This increase follows the Richmond, Virginia-based tobacco company's 16-cent-per-pack increase in April and its 15-cent-per-pack increase in January. British American Tobacco’s latest price increase took effect in July.
“Broadly [Altria’s] price increase today is a bit surprising considering it’s [Altria’s] third price increase so far this year, suggesting to us that volume pressures are likely greater than anticipated,” Herzog 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.”
While there is some increased risk of potential downtrading to cheaper brands, she said brands like Marlboro with a loyal customer base and strong promotions should be able to keep the customers in the franchise.
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