Marlboro Price Increase

Sep 20, 2018

RICHMOND, Va. -- A pack of Marlboros will soon cost 10 cents more and a carton $1 more, effective with shipments on Sept. 23, after Altria and Philip Morris International (PMI) announced price increases that include other cigarette products as well, according to a New York analyst.

Described as a “healthy and slightly higher than expected wholesale-list price increase” for Marlboros, Richmond, Va.-based Altria Group Inc. and New York-based PMI also announced they will raise Parliament and Virginia Slims brands by 15 cents per pack and all other brands by 50 cents per pack, reported Bonnie Herzog, managing director of consumer equity research for Wells Fargo Securities, New York.

“We believe pricing will remain a critical driver of revenue and earnings growth, particularly as manufacturers realize almost three times the leverage on earnings from a point of pricing than a point of volume,” Herzog said in a recent newsletter.

Currently, Missouri has one of the lowest tax rates and therefore averages a per-pack price of $4.38, while on the opposite end, the average price per pack in New York is $10.45, according to salestaxhandbook.com.

The Marlboro increase was slightly higher than the 9-cents-per-pack increase Altria and PMI took in March 2018, and it reflected what Herzog called the companies’ “significant pricing power.”

Timing of the increase falls in line with expectations, Herzog said, with the major tobacco manufacturers initiating two increases a year—one in the spring and one in the fall—for the past several years.

The latest, higher-than-expected increase could also pair with more aggressive promotional (as in discount or rebate) programs for retailers, in an effort to maintain Marlboro share, Herzog said.

Herzog expected that London-based British American Tobacco and its Winston-Salem, N.C.-based Reynolds American Inc. subsidiary, as well as ITG Brands, Greensboro, N.C., will follow suit in the next few days, “but possibly not as robust of an increase.”

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