Altria Raises List Prices on Most Smokeless Products

RICHMOND, Va. — It's a mixed bag when it comes to list prices moves on Altria Group Inc.'s smokeless brands.

The Richmond-based tobacco company's subsidiary U.S. Smokeless Tobacco Co. instituted a list price increase of 7 cents per can, or about a 2-to-3 percent increase, on its core SKUs. The pricing change on moist smokeless tobacco, snus and dry snuff tobacco includes the Copenhagen, Skoal and Red Seal brands.

At the same time, the No. 1 tobacco leader decreased the list price on Skoal Tobacco Blends, including Skoal Apple, Berry, and Citrus Blend Pouches, by 77 cents per can, according to Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC.

Altria also took list price increases on the more "value" end of its smokeless platform: 12 cents per can on Copenhagen Popular Price brands, Skoal XTRA/Skoal Snus; 7 cents per can on WB Cut; and 42 cents per tub on Husky Tubs.

That move effectively narrows the relative price gap between premium and price-value brands. As of the third quarter 2016, the relative price gap between Copenhagen and the leading discount brand was 26 percent, down from 31 percent in the third quarter of 2015, Herzog said.

Altria is also revising certain special price promotions on Skoal which are to offset these price changes, she added.

According to the analyst, the price decrease on Skoal tobacco blends could help stabilize the overall weak brand performance. 

"While Altria does not break out brand performance by SKU, Skoal's overall performance has been largely underwhelming. Over the past five years, Skoal has lost 4.2 points of retail market share and has seen its volume decline at a 0.6 percent compound annual growth rate since 2012," Herzog explained.

She added Skoal Tobacco Blends represent just under 30 percent of the Skoal brand family's total number of SKUs; however, Wells Fargo Securities believes the list price decrease is justified given the brand's largely underwhelming overall performance.

"That said, we note that it has maintained fairly robust pricing across measured channels and has been narrowing the relative price gap between Skoal and Grizzly to around $9 per unit, or 17-20 percent," Herzog said.

The list price changes will be effective with shipments on or after Dec. 6, and are expected to be followed by list price changes by other smokeless tobacco manufacturers like Reynolds American Inc. and Swedish Match, Herzog noted.

Altria is the parent company for Philip Morris USA, John Middleton, U.S. Smokeless Tobacco Co., Nu Mark and Ste. Michele Wine Estates. The brand portfolios of Altria's tobacco operating companies include Marlboro, Black & Mild, Copenhagen, Skoal, MarkTen and Green Smoke.