The Big Three Cigarette Makers are Increasing Prices

Published on August 15th, 2014 00:00

On May, 7 Altria's Philip Morris USA has declared to the trade a decline in off-invoice advertising allowances of six cents per package on Marlboro and L&M brands, decreasing the efficient off-invoice promo allocation to about two cents per package on Marlboro and 15 cent per package on L&M, stated Nik Modi, tobacco expert.

Richmond, Va.-based PM USA as well as Altria is choosing a list price boost of $1.10 per carton on Parliament and 60 cents on the rest of its portfolio, stated Modi. The modifications are efficient on shipments on or following May 11, 2014. "This price boost came approximately one month earlier than the price raise registered in 2013," he stated. "We anticipate Lorillard and Reynolds American to stick to their specific price boosts by week's end. We view the declaration as a positive one mostly for our tobacco pricing environment. We expect the Big Three cigarette makers to carry on with their trend of setting price boosts on cigarettes twice a year and keeping balanced net price realization of about 3% to 4%."

Greensboro, N.C.-based Lorillard has declared on May, 8 to the trade 6 cents per package boost on its whole portfolio, which include Newport and Maverick, Modi stated. Lorillard's price is efficient on all orders on or after May 9, 2014. Also on May 8, RJ Reynolds Tobacco declared price raises on its cigarette brands. In accordance with the PM USA's promotional decrease and Lorillard's price boost, RJ Reynolds is increasing prices all over its whole portfolio by six cents per package. Reynolds price boost will be in force on all orders on or after May 8, 2014.

Industry analyst Bonnie Herzog said, "On the whole, the cigarette promo declines/list price boosts that PM USA and Lorillard have undertaken are optimistic and suggest ongoing pricing power. Considering the fact that consumption will most likely keep on decreasing, pricing is needed to generate top-line growth."

Liggett's price is valuable on orders on or after May 12, 2014. "We anticipate the future round of price boosts to take place at the end of 2014," he added. At the same time, on April 30, Altria's U.S. Smokeless Tobacco declared that it is planning to raise prices on its moist smokeless tobacco, snus and dry snuff portfolio.

By Robert Smith, Staff Writer Copyright © 2014 All rights reserved.