Reynolds & Lorillard Join in Price Increases

WINSTON-SALEM, N.C. — Reynolds American Inc. (RAI) and Lorillard Inc. are implementing cigarette list price increases of 7 cents per pack. The move, which equals more than a 2-percent increase, comes one day after The Altria Group Inc. implemented a list price increase of its own on its core cigarette brands and Marlboro snus tins.

These actions are effective for orders billed after the May 14 cutoff or starting May 15, according to Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities LLC.

"Overall, the cigarette list price increases that Altria and now Lorillard and RAI have taken are positive and indicate continued pricing power, in our view. Given that consumption will likely continue to decline, pricing is necessary to drive top-line growth," Herzog explained.

RAI's price increase also includes Santa Fe Natural Tobacco Co., she noted.

"These price increases ... demonstrate the industry still has very strong pricing power, and this is coming on the heels of several quarters of very strong pricing," Herzog added.