LONDON — British American Tobacco (BAT) has increased cigarette pack prices for the fourth time this year, according to Goldman Sachs. While the timing of the increase was largely expected, the magnitude of the price increases—especially on smaller brands—came in higher than expected, Bonnie Herzog, managing director at the New York-based investment management firm, said.
BAT is taking a 15-cents-per-pack increase on Newport menthol cigarettes, Camel and Pall Mall Box. It is taking a 25-cents-per-pack increase on Newport non-menthol cigarettes and a 38-cents-per-pack increase on Pall Mall non-filter and Pall Mall Vintage Gold. BAT took several other increases across its brands, but did not raise the price of Lucky Strike, Herzog said.
The London-based tobacco company, which owns Winston-Salem, N.C.-based Reynolds American Inc., the parent company of R.J. Reynolds Tobacco Co., also raised oral tobacco prices. Camel Snus and Grizly Snus, along with three other oral brands, are up 9 to 13 cents a tin. Natural American Spirit roll-you-own (RYO) will see a 40-cents-per-tin increase.
These changes take effect Jan. 2, Herzog said, and follow Altria’s 15-cents-per-pack increase announced in October and BAT’s latest price increase in August.
“Looking ahead, we continue to expect strong net price realization as the industry continues to successfully implement price increases to offset ongoing volume pressures,” Herzog said. “While there is some increased risk of potential downtrading and concerns that manufacturers have less pricing power today… 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.”
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