Cigarette companies increase list price on cigarettes

Altria Group Inc. is moving through a price hike of 6 cents per pack over all of the cigarette brands of the company. It is the second time the cigarette company rises prices on the tobacco products this year.

Cigarette price Increase

Altria, Reynolds American and Lorillard increased prices on their cigarette brands by 6 cents per pack.

The producer of Marlboro and Chesterfield cigarettes affirmed it would enforce the price hike on shipments starting with December 3. The step was later equaled by competitors Reynolds American Inc. and Lorillard Inc., which have as well doubled prices in 2012.

Reynolds American affirmed it would increase the price on all cigarette brands by 6 cents per pack. In addition, the price of Camel Snus will be increased by 5 cents per tin. Lorillard, at the same time, increased the list price by 6 cents per pack for all cigarette brands except for Old Gold.

The list-price increases introduced by Reynolds American and Lorillard each become operational on Friday.

Altria, the biggest U.S. cigarette maker, usually leads on pricing decisions. In June, the company lifted the list price on cigarettes by 6 cents per pack, a hike that was met by Reynolds American, the maker of Camel cigarettes.

At first look, the price increases could lessen concerns investors and experts have lifted in recent months about the power of earnings produced by domestic cigarette firms. All three tobacco companies have increased price offers in order to defend market share as customers stay under pressure because of a weak economy.

Though all three companies passed two times of list price hikes last year, the higher prices haven’t actually hurt customers. Altria has really kept a lid on the price for Marlboro per pack along with pricing promotions that have made it easier for the company gain market share.

Stifel Nicolaus analyst Christopher Growe said he was pleased by Altria’s pricing decision given the increased offers in recent months. Though Reynolds American and Lorillard eventually lifted their list prices, Mr. Growe expects those competitors will preserve spending on promotions to continue to be competitive.

UBS analyst Nik Modi said that pricing is a crucial factor to the sector’s income and stock performance. Mr. Modi said in the end, the larger cigarette companies should able to take market share from deep-discount companies that are fighting with higher costs associated with new Food and Drug Administration rules.

Shares of Altria went up 0.5 per cent to close at $33.57 on November 29. Reynolds American’s stock slipped 0.4 percent to $43.45 while Lorillard ended the session down a penny to $120.41. Among the three stocks, Altria has had the best performance so far in 2012.

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