Altria and its subsidiary Philip Morris USA have announced a cigarette list price increase of 17 cents per pack on Marlboro, Basic, L&M and L&M Simple Tobacco cigarettes, according to a notice from Goldman Sachs.
It also includes a 22-cents-per-pack increase on Benson & Hedges, Merit, Nat’s, Parliament and Virginia Slims.
The price changes take effect on Oct. 15, Goldman Sachs Managing Director Bonnie Herzog said. This marks the Richmond, Virginia-based company’s fourth increase this year.
“Broadly [Altria’s] price increase today is a bit surprising considering its fourth price increase so far this year, suggesting to us that volume pressures continue,” 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.”
There is a widening relative price gap between Marlboro and the lowest effective cigarette on the market, about 45% in 2023 compared to a historical average of about 30%, Herzog said. She 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.
While there is some risk of downtrading, or consumers switching to cheaper cigarettes, brands like Marlboro with a loyal customer base and strong and effective promotions should be able to keep those consumers in the franchise, Herzog said.
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.