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    Lorillard Ups Cigarette Prices; Others Soon to Follow

    One analyst explains that the price increases are necessary to drive growth.

    GREENSBORO, N.C. -- Lorillard is taking the lead in hiking up cigarette prices, and industry buzz has other cigarette manufacturers following close behind.

    Bonnie Herzog, managing director of beverage, tobacco and consumer research at Wells Fargo Securities, said the company has confirmed that Lorillard increased its prices 5 cents per pack on Newport Menthol, 11 cents per pack on Newport Non-Menthol and 8 cents per pack on its other brands except Maverick.

    Lorillard last raised prices in late November, as CSNews Online previously reported. At that time, the locally headquartered tobacco company upped prices 6 cents per pack, or 60 cents per carton. The company did not touch the price of its non-menthol brands because they were new to the market.

    R.J. Reynolds and Philip Morris USA soon followed with price hikes of their own, and Herzog expects the same thing to happen this time. "We expect both PM USA and RJR will take pricing up in the next few days, no later than Wednesday, July 6," she said, adding that PM USA typically announces on Wednesdays.

    "Overall, this price increase is positive and the industry still does have pricing power," Herzog explained. "Given that consumption will likely continue to decline in the mid-single digit range, pricing is necessary to drive top-line growth."

    She further explained that, assuming PM USA and RJR follow with similar price increases, Wells Fargo Securities predicts the gap between premium and deep discount brands will widen slightly (to around 33 to 34 percent) from its current narrow level (30 to 32 percent) after the price increase on low-end and mid-priced brands taken by Commonwealth Brands and Liggett a few weeks ago.

     

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