Analyst Predicts Cigarette Price Hike

Published in CSP Daily News

Wholesalers "building inventory" in preparation

By  Steve Holtz, Online News Director & Beverage Editor

NEW YORK -- Multiple signs suggest a cigarette price increase is on tap for the first half of December, according to a tobacco analyst.

"Our ... survey results indicate PM USA will likely lead a list-price increase of 6 to 7 cents/pack in mid-December," she wrote on Nov. 14. "This is expected to drive industry revenue and profit pool growth even if a portion of the list price increase is 'promoted away.' "

In a subsequent note released Tuesday, Herzog noted additional evidence of a likely price hike.

"We have heard from several of our tobacco wholesaler contacts that cigarette inventory is running very high this month," she wrote. "It appears wholesalers continue to build inventory positions in anticipation of a cigarette list-price increase, which we believe will occur during the week of Dec. 10. We believe this bodes well for industry volume trends in Q4. Therefore, we have further conviction industry top line will improve during Q4 driven by stronger volume trends, higher list prices and easing promotional spending."

By Steve Holtz, Online News Director & Beverage Editor
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