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NATIONAL REPORT — The Big Three of tobacco companies are instituting cigarette price increases, seen as a positive sign by tobacco industry analysts.
Richmond, Va.-based The Altria Group Inc. is raising cigarette prices 7 cents per pack, or 70 cents per carton, on all its core brands except L&M, which will have a 7-cent-per-pack promotional decrease — effectively a price increase, according to Bonnie Herzog, managing director of tobacco, beverage and consumer research at Wells Fargo Securities LLC.
Altria's pricing action will take effect with shipments on or after Sunday, Nov. 16.
Lorillard Inc. is following suit with price increases of its own. The Greensboro, N.C.-based company is also instituting a cigarette price increase of 7 cents per pack, or 70 cents per carton, on its Newport (menthol and non-menthol), Maverick, Old Gold, Kent and True brands. The pricing action is effective with orders billed as of Friday, Herzog said.
Winston-Salem, N.C.-based Reynolds American Inc. (RAI) rounds out the action with a similar 7-cent-per-pack increase, or 70 cents per carton, across its brand portfolio. In addition, its subsidiary Santa Fe Natural Tobacco Co. is taking the same list price increase on its Natural American Spirit brands. RAI's pricing action took effect Friday.
Liggett Vector Brands, based in Mebane, N.C., likewise announced a 7-cent-per-pack cigarette list price increase.
Herzog noted that these list price increases are slightly earlier than expected based on the results of Wells Fargo Securities' Tobacco Talk industry trade surveys, and about a week earlier relative to November 2013's cigarette list price increase.
"Overall, we view this price increase as positive and it demonstrates the industry still has very strong pricing power, and this is coming on the heels of two quarters of very strong pricing," she said. "Given that consumption will likely continue to decline in the mid-single digit range, pricing remains a critical driver of revenue and remains necessary to drive top-line growth."
The "strong pricing power keeps us constructive on the health of the U.S. tobacco category," added Vivien Azer, director and senior research analyst at Cowen and Co.