Altria leads the industry with the first price increase this year; a sign of tobacco continues to command strong pricing power.
- Reynolds American and Lorillard are not raised prices this year, although analysts expect they will be.
- Altria Group Inc. MO 1.23% is pushing through a package of six per cent increase in prices of all tobacco manufacturers’ brands, a move that still does not match rivals Reynolds American Inc. RAI 1, 80%, and Lorillard, Inc. LO 1, 41%.
The maker of Marlboro tobacco and L & M product prices increase since June 18. This step is a sign of tobacco continues to command strong pricing power; the first round of the price action of the manufacturer has taken this year.
All three players made two rounds of price increases last year in July and December. The increase came at a time when state excise taxes have been fairly muted, and some analysts say, domestic retail prices for cigarettes are well below the global “income adjusted” average.
Analysts in recent weeks have been demanding for the players in the industry to raise prices, a step necessary to help the recovery of profitability, industry cigarette volumes continue to decline. Many expect, Reynolds American and Lorillard will follow the example of Altria in the next few days, often as a trio moves on pricing in a small window.
Representatives from Lorillard and Reynolds American reported Dow Jones Newswires; they are not kept pace with Altria, and did not comment on plans for the future pricing.
Wells Fargo analyst Bonnie Herzog has included expected prices for Altria in the income of the bank estimates. Ms. Herzog expects the second quarter cigarette volume in the industry will be strong as the wholesalers were building their reserves over the past few weeks in anticipation of price increases and due to the fact that inventory levels were low at the beginning of the quarter.
If the price increases were to be uniformly consistent Reynolds American and Lorillard, Citi analyst Vivian Azar said Reynolds would be of great benefit. Ms. Azar said the six per cent would mean an increase of 1.6% lift for the brand Camel Reynolds American, and 1.8% for Pall Mall, as compared to 1.4% in Newport Lorillard.
For Marlboro Altria, which represents 87% of the total company, the increase of 1.5% proved to be a campaign, Ms. Azar said. This is lower by 2.4% more than July last year but slightly ahead of the increase in December.
Altria shares were up 0.3% to $ 33.38, while Reynolds American rose 0.8% to $ 42.07 and Lorillard was 0.6% up to $ 124.