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.