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RICHMOND, Va. — Altria Group Inc.'s Philip Morris USA (PM USA) division instituted a 7-cent-per-pack increase, or 70 cents per carton, across all of its core cigarette brands, as well as a 7-cent-per-tin increase on Marlboro snus, according to a Wells Fargo Securities LLC report.
The increase equates to a more than 2-percent price hike and will be effective with shipments on or after May 17. This pricing action follows a similar 6-cent price increase PM USA instituted in May 2014.
For its Marlboro Leadership Price program customers, PM USA is offering an 8-cent-per-pack promotional allowance on Marlboro from May 17-23.
Bonnie Herzog, managing director of beverage, tobacco and convenience store research for Wells Fargo, said the move by Richmond-based PM USA proves the tobacco industry still has strong pricing power.
"Given that underlying cigarette industry consumption will likely continue its long-term trend of declining, pricing remains a critical driver of revenue and remains necessary to drive top-line growth and a point of pricing drives 2.5 times the leverage vs. a point of volume," Herzog wrote in her Wells Fargo report.
She reiterated her "overweight" rating on tobacco stocks.