Lorillard, Reynolds Boost Prices

Following PM USA, both companies announce six-cent increases

Published in CSP Daily News

NEW YORK -- As expected, Lorillard Inc. and Reynolds American Inc. both announced a six-cents-per-pack price increase across their respective cigarette portfolios, following the same move by Altria Group Inc. on Wednesday, said Nik Modi, analyst for UBS Securities LLC, New York, in a research note on Thursday.

Richmond, Va.-based Philip Morris USA Inc., a unit of Altria, said it is reducing off-invoice promotional allowances on Marlboro and L&M brands by six cents per pack to 15 cents per pack and 28 cents per pack, respectively, and has raised list prices on all other brands by six cents, effective June 10.

Lorillard's price increase will become effective with all orders shipped June 7, while Reynolds American's increase was effective June 6, Modi said.

"Lorillard left [its] promotional allowances on Newport Non-Menthol unchanged," he added.

"We continue to see pricing as the key driver of tobacco profits and stock performance, Modi wrote. "We believe Big Three tobacco is favorably positioned as the group continues to take market share from deep-discount players who are struggling in an environment with a higher cost of business largely due to new [Food & Drug Administration] regulations. We believe all Big Three names should benefit from sustainable pricing."

Winston-Salem, N.J.-based Reynolds American Inc. is the parent company of R.J. Reynolds Tobacco Co., with cigarette brands including Camel, Pall Mall, Winston, Kool, Doral and Salem; American Snuff Co. LLC, with smokeless tobacco brands Grizzly and Kodiak; Santa Fe Natural Tobacco Co. Inc., which manufactures and markets Natural American Spirit 100% additive-free natural tobacco products, including styles made with organic tobacco; and Niconovum AB, which markets nicotine replacement therapy products in Sweden under the Zonnic brand name.

Greensboro, N.C.-based Lorillard Inc., through its Lorillard Tobacco Co. subsidiary, is the third-largest manufacturer of cigarettes in the United States. Founded in 1760, Lorillard is the oldest continuously operating tobacco company in the U.S. Newport, Lorillard’s flagship premium cigarette brand, is the top selling menthol and second-largest selling cigarette in the U.S. In addition to Newport, the Lorillard product line has four additional cigarette brand families marketed under the Kent, True, Maverick and Old Gold brand names.

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cigarettes