UPDATE: RJR, Lorillard Join PM USA in Cigarette Price Hike

Most increases effective immediately

Published in CSP Daily News

NEW YORK -- As expected, cigarette manufacturers R.J. Reynolds and Lorillard have matched or exceeded a price increase announced by Philip Morris USA this past week.

PM USA is raising the price on all of its cigarette brands by six cents per pack beginning Monday, June 18, as previously reported in CSP Daily News (see Related Content below).

RJR's price increase of six cents per pack across most brands will be effective immediately, while Lorillard's price increase of eight cents per pack on all brands will also be effective immediately.

In addition, Lorillard noted that there is no change to the $15 ''off-invoice'' promotional allowance on Newport NonMenthol, the full value of which must be passed along to customers, according to a research note from New York City-based tobacco analyst Bonnie Herzog of Wells Fargo Securities LLC.

RJR is also taking a price increase on Camel Snus of 10 cents per tin, double the price increase PM USA took on Marlboro Snus of five cents per tin.

"Overall, we believe these price increases are positive and indicate the industry still does have pricing power," Herzog said. "Given that consumption will likely continue to decline in the mid-single-digit range, pricing is necessary to drive topline growth."

Tobacco analyst Nik Modi of UBS, New York, agreed, adding, "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 [U.S. Food & Drug Administration] regulations."