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NEW YORK -- Altria Group Inc.'s Philip Morris USA (PM USA) will decrease its wholesale off-invoice promotional allowances for a number of its brands by 0.50 cents per carton, and another brand by $2 per carton, beginning on Sept. 10, 2007, Citigroup analyst Bonnie Herzog said in a note to investors.
The 0.50-cent-per-carton cut, bringing the promotion from $4 to $3.50 per carton, will be taken on Marlboro, Parliament, Basic and L&M brands effective Sept. 10 and lasting until Oct. 28, PM USA spokesman Bill Phelps confirmed.
Meanwhile, the company's Virginia Slims brand will see off-invoice promotional allowances cut in half, from $4 to $2, for the same time period, Phelps told CSNews Online. According to Herzog's note, the last time an off-invoice reduction was taken was in December 2006, by $1 per carton, to offset the increase in Master Settlement Agreements.
In addition, for all of PM USA's other brands, the list price will increase by 0.50 cents per carton, effective on Sept. 10, according to Phelps.
While he could not comment on the reasons why PM USA was decreasing the promotional allowances, he did tell CSNews Online, "We continue analyze the marketplace to determine the appropriate level of promotional level to achieve our objectives."
In her note to investors, Herzog stated the cut in promotional allowances came as a surprise "considering a federal excise tax increase is likely, but could be a precautionary measure by the company," the letter stated.
As a result of the reduction in promotional allowances, Herzog believes that competing tobacco companies will also institute similar pricing actions.