RICHMOND, Va. — Meeting many retailers’ expectations, Altria Group has initiated a third price increase for the year, implementing the changes on shipments after Oct. 20 for its cigarette brands and other tobacco products (OTP), according to a New York analyst.
Citing industry contacts, Bonnie Herzog, managing director of consumer equity research for Wells Fargo Securities, said in a newsletter that the tobacco manufacturer will raise the list price on its cigarette brands by 8 cents a pack, translating to a 2%-3% increase at retail. The price increase means an additional 80 cents per carton on Marlboro (excluding Marlboro HeatSticks for its heat-not-burn IQOS device), Basic, Benson & Hedges Menthol Green, Cambridge, Chesterfield, L&M Lark, Merit, Parliament, Player’s, Saratoga and Virginia Slims.
Historically, Richmond, Va.-based Altria has initiated two price increases annually, so this third increase is unusual but expected, Herzog said. “This trend is important given ongoing secular declines in volume and will likely face even greater pressure under the FDA’s effort to lower nicotine levels in combustible cigs, an event we continue to view to be several years away given the complexities of issues ahead,” Herzog said, referring to the U.S. Food and Drug Administration and its ongoing regulatory activities.
Herzog expected Altria to offer retailers a promotional incentive to maintain market share.
U.S. Smokeless Tobacco Co., an Altria subsidiary, also raised list prices by 4 cents per can across its core products, including moist smokeless tobacco, snus and dry snuff tobacco, Herzog said. “Overall, we believe the price increases … are positive and demonstrate the industry’s strong pricing power,” she said.
Herzog also predicted the other major tobacco manufacturers would follow with their own price increases.