Philip Morris Follows Lorillard With Price Hike

RICHMOND, Va. -- Beginning Friday, smokers of Philip Morris USA cigarettes will have to fork over a little more for a pack. Right on the heels of Lorillard's price hike, PM USA is raising its prices by 9 cents per pack.

In addition, R.J. Reynolds has reduced its off-invoice promotions, effectively increasing its cigarette prices in line with Lorillard and PM USA, according to Bonnie Herzog, managing director of beverage, tobacco and consumer research at Wells Fargo Securities LLC.

PM USA's move was widely expected after Lorillard announced it was increasing the price of its Newport Menthol brand by 5 cents a pack and Newport Non-Menthol by 11 cents per pack. That news came just before the holiday weekend, as CSNews Online reported. At that time, Herzog said PM USA and R.J. Reynolds could follow suit.

"These per-pack price increases represent around a 3 to 5 percent manufacturer list price increase, in line with our expectations," Herzog said in an e-mail this morning.

As with Lorillard's increase, she explained that "these cigarette price increases are positive and the industry still does have pricing power, in our view." She again added that "pricing is necessary to drive top-line growth."

Furthermore, Herzog said Wells Fargo Securities continues to "favor Reynolds American heading into the quarter and remains encouraged by the company's fast-growing and profitable Pall Mall brand."