Altria/ Philip Morris USA is increasing cigarette prices on its core brands by $0.07 per pack (approximately a 2-3% increase), or 70 cents per carton on all brands except L&M, according to a report by Wells Fargo Securities LLC.
“L&M will see a $0.07 per pack promotional decrease, which is effectively a price increase (L&M’s off-invoice allowance is going to $0.08/pack from $0.15/pack),” noted Bonnie Herzog, managing director, beverage, tobacco and convenience store research for Wells Fargo.
This action is to be effective with shipments on or after Nov. 16, 2014.
“We expect the tobacco stocks to react favorably tomorrow to news of this list price increase. We reiterate our ‘Overweight’ rating on the tobacco sector and this announcement supports our thesis of continued strong pricing power for the tobacco industry,” said Herzog.
She added, “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.”