RICHMOND, Virginia –Altria is raising cigarette prices by 15 cents a pack for Marlboro, Chesterfield, Basic, L&M and L&M Simple Tobacco brands, in addition to other increases, according to Goldman Sachs.
The price increase takes effect Oct. 16 and follows the Richmond, Va.-based tobacco company‘s 15-cent-per-pack increase in July and British American Tobacco’s increase in August, a said Bonnie Herzog, chief executive of Goldman Sachs.
There will also be a 20 cent per pack increase on Benson & Hedges, Benson & Hedges Menthol Green, Merit, Nat’s, Parliament and Virginia Slims.
“Overall, this price increase is not a surprise and we believe [Altria] has become more sophisticated and targeted with its pricing strategies as well as its promotional spend to offset these more frequent price increases, especially for price-sensitive consumers,” Herzog said.
Herzog said she will be watching to see if makers of deep-discount cigarettes also move on price. There is now a wide relative price gap between the Marlboro and the lowest effective cigarette on the market, so if they don’t, the relative price gap could widen further, she said.
“Looking forward, we continue to expect strong net price realization for the industry given the strong pricing power of manufacturers. While there is an increased risk of lower potential sales (especially given still-high gas prices), we believe brands like Marlboro with a very loyal customer base and strong/effective promotions should be able to keep those consumers within the franchise,” Herzog said.
Altria is one of the largest tobacco producers in the country. Its companies include Philip Morris USA, US Smokeless Tobacco Co., John Middleton, Ste. Michelle Wine Estates and Philip Morris Capital Corp.
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