Friday, June 22, 2012

Big Tobacco Lift Prices of its Key Cigarette Brands

Altria, producer of Marlboro and Parliament cigarette brands, will pass the price raise on June 18. Reynolds American, who makes such famous brands as Cameland Winston, will make its price boost effectual at the end of the week. The pricing move by the two leading U.S. cigarette manufacturers by profit is the first turn the industry has undertakes this year.All three tobacco giants have passed two turns of price increases in 2011. The growth has come just at the time when state excise duties have been quietly weakened and as some experts underline domestic cigarette retail prices are not the same as international income-adjusted average levels.
Industry experts in last weeks had been calling for the tobacco companies to raise prices, an action required to help boost profitability as cigarette volumes proceed to drop. Many estimate that Lorillard will follow the example of its main competitors over the next days as the Big Tobacco often moves on pricing within a small window. A Lorillard representative declared that the company is not ready to comment on coming pricing actions. Reynolds American said the same, though it had told earlier about the attempt to increase prices, including a 10% increase on smokeless product Camel Snus.
Analyst Bonnie Herzog has already included Altria’s estimated price growth into the bank’s revenue estimates. Ms. Herzog stated that the tobacco industry’s 2Q cigarette volume will be positive as wholesalers have been building up their inventories within several weeks in anticipation of price boost and because of the fact that inventory levels were not so high at the beginning of the quarter. In case the price growth was to be matched mostly by Reynolds American and Lorillard, Citi expert Vivien Azer declared a 6 cent raise would constitute a 1.5% boost for Reynolds American’s Camel brand and 1.6% for Pall Mall in comparison with 1.5% for Lorillard’s Newport.
As about Altria’s Marlboro, which comprises 85% of the company’s whole volume, the raise seems to be a 1.6% boost, Ms. Azer stated. That is a 2.5% increase since June 2011, but at the same time higher than December’s raise. Altria’s shares constituted 1.3% to $33.50, while Reynolds American raised 1.6% to $41.33 and Lorillard boosted 1.5% to $125.06.

Wednesday, June 13, 2012

Bangladesh Has the Cheapest Prices for Cigarettes In the World

In a striking discovery, a report states cigarette prices have been decreasing steadily since 2003 in Bangladesh due to “incorrect” taxation, encouraging new users. It states the real prices have, indeed, dropped as the different taxes were charged on various price slabs and were never grounded on inflation.

Raising real incomes have made the smoking products affordable, the report states and advices special cigarette tax of Tk 34 for 10 cigarettes, Tk 4.95 for 25 bidis and concluding the present price slabs. “It would support about 7 million cigarette and 3.5 million bidi smokers to stop smoking and keep 10 million teenagers away from starting lighting up,” stated Professor Abul Barkat, at the press conference.

Professor Barkat added, “If the government passes the policy, it will generate Tk 15 billion more in tax profit from cigarettes and Tk 7.2 billion from bidis.” He also said that the most effective method to decrease smoking is to boost the price of smoking products through tax increases and guaranteeing that the tax boost are reflected in prices. Decreasing cigarette and bidi prices lead to rise in smoking while lifting prices will drop tobacco consumption. For instance a 10% growth in mean cigarette prices in Bangladesh will reduce about 5% of smokers, while a 10% in bidi prices will decrease their use by approximately 7%.

As cigarette manufacturers fight each year to stop tobacco tax increase in order to keep their sales unchanged, anti-smoking activists stood against the move this year. The government increased cigarette prices in various slabs and additional taxes imposed on cigarettes vary from 33% to 55% in four tiers. Such a difference in price tiers, anti-smoking activist’s state, rather helped people to switch from expensive to lower cost smokes.

Cigarette consumption has increased by 40% between 1997 and 2010 from about 48.8 billion to approximately 69.6 billion cigarettes in Bangladesh. As cigarette manufacturers state that they pay Tk 73 billion for healthcare and lost productivity costs. Employment in tobacco growing sector and manufacturing comprises only 0.5% of the whole labor force. Concerning about the loss of profit, the Ministry of Finance currently postponed its plans for a more sever tobacco control law.

Bangladesh occupies the 20th place in the tobacco-manufacturing countries rating and also has the cheapest cigarettes in the world.