Cigarette Prices to Increase by 6 Cents per Package

Published on December 17th, 2012 00:00
cigarettes prices increase

Cigarette prices are increasing once again, with the two biggest cigarette producers providing assurance that an additional 6 cent per package boost won’t discourage smokers in a depressed economy. Reynolds Tobacco and Philip Morris affirmed a few days ago that they are increasing their prices by 6 cents on all their cigarette brands. Reynolds’ price raise becomes effective today, while Philip Morris’ price increase is set for Tuesday. Lorillard is bringing up the prices by 6 cents per package on its Kent, Maverick, and Newport cigarette brands.

Despite the fact that the price is targeted toward wholesale and direct customers, they are likely to move most or all of these kinds of boosts on to consumers. “I am not able to estimate how this will impact the price at retail, as we don't fix that price,” Reynolds representative Richard Smith stated. For instance several months ago, Philip Morris and Reynolds increased the prices by 6 cents on the majority of its cigarette brands, whilst Lorillard raised its prices by 8 cents.“In general, this kind of price increase is optimistic and signifies the industry proceeds to possess enough pricing strength. Considering the fact that consumption will likely keep on decreasing, pricing is essential to generate top-line increase.”

The pricing actions also mirror manufacturers' methods for dealing with increased state and federal excise duties. For instance, the boost was Reynolds' 9th since September 2007. Stephen Pope, world market strategist, explained the manufacturers are relying mostly on smokers of low cost cigarette brands and those who purchase packages based on price to take in the raise in a “what can I do about it” approach.

Simultaneously, he stated reviews have demonstrated every 10 % boost in a package of cigarettes is likely to generate a common 4.8 % drop in consumption. He added it is a good idea for Reynolds and Lorillard to go with any Philip Morris raise with their premium brands and what he referred to as “loyalty brands,” as for instance Reynolds’ Winston, Camel and Pall Mall.  “Actually, I believe that they should indeed surpass any step Philip Morris makes regarding premium cigarette brands,” Pope said. “Obviously with so many events approaching in holiday season, this would be the right moment to be decisive, mainly if they make a decision to decrease prices in January as a counter to New Year resolutions.”

Included in Herzog’s entire industry revise, she is expecting that industry cigarette volumes “have to be solid offered inventory building by wholesalers ahead of time of the given price rise.” She stated that the manufacturers’ income flow should advantage the following year by their choices to decrease promotional expending, which is likely to mainly be price discounts. Herzog is expecting that Philip Morris will stay ambitious in its goal of smokeless market share advantage.

By Joanna Johnson, Staff Writer.
Copyright © 2012 All rights reserved.

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