Reynolds’ latest traditional cigarette price hike set for launch on Sunday

British American Tobacco Plc has raised prices per pack for most of its traditional and e-cigarette brands effective Sunday, an industry analyst revealed on Thursday.

This would be RJ Reynolds Tobacco Co.’s third per-package price increase for 2022 and follows four increases made in 2021.

Goldman Sachs analyst Bonnie Herzog has released a detailed analysis to investors of Reynolds’ list price increases.

List price is what wholesalers pay manufacturers for their traditional cigarettes. The increase is generally passed on to retail customers.

Reynolds could not immediately be reached for comment on Herzog’s report, which she said was based on “industry business contacts” that are generally accurate.

For Newport, Reynolds’ top-selling brand, the list price is up 16 cents per pack, or 2.3%. Newport is the #2 brand in the United States, just behind Philip Morris USA’s Marlboro.

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In total, Reynolds has increased its list price by 88 cents over the past 8 months for many of its major brands, as well as $1.45 combined since January 2020.

Going up 14 cents per pack is style #3 Camel and #4 Pall Mall’s Box.

For No. 5 Natural American Spirit, the price increase is between 16 and 24 cents per pack depending on the style.

Other price increases for Reynolds traditional cigarettes will be up to 22 cents. Are concerned: Camel without filter, Doral, GPC, Lucky Strike without filter, More, Pall Mall vintage gold, Tareyton, Capri, Dunhill, Kamel Red, Misty, Now, Pall Mall classic without filter, True, Carlton, Eclipse, Kent, Monarch, Old Gold, State Express 555 and Vantage.

For Natural American Spirit, there will be an increase of 10 cents per pouch for the NAS RYO brand, as well as an increase of 40 cents per box.

For Vuse Alto e-cigarette products, two-pod packs will increase by $1.70 per carton, while the four-pod pack has increased by $3.40 per carton.

Over the past two months, Vuse has overtaken Juul as the top-selling e-cigarette, according to Nielsen’s monthly analysis of convenience store sales.

Herzog said that with Reynolds notifying sellers earlier than usual, “it could encourage pre-purchases.”

“We continue to expect strong net price realization for the industry given the strong pricing power of manufacturers.”

The frequent increase in the list price may push smokers towards more discount options, especially with unleaded gasoline prices at historic lows.

“Bottom line, price increases are generally viewed favorably (by investors) and are a key driver of revenue and profit growth for tobacco companies, especially as manufacturers make nearly three times as much less leverage on earnings one point in price than one point in volume,” Herzog said.

“However, given concerns surrounding the health of low-income consumers, we believe investors could see a risk in the ability of cigarette makers to continue to pass on such high prices in this environment.

“That said, BAT and Altria seem to be quite comfortable with elasticity as they continue to raise prices.”

The latest price hikes planned by Reynolds are just the latest example of “the cigarette money-spinning machine going full throttle,” said David Sweanor, adjunct professor of law at the University of Ottawa and author. of several studies on electronic cigarettes and health.

“It is worth considering the market implications for cigarettes as an extraordinarily and increasingly profitable business, as regulations prohibit or disadvantage low-risk alternatives.”

A Democratic-sponsored bill in the U.S. House of Representatives called the “Tobacco Tax Equity Act” would double the federal tax on traditional cigarettes. It appears to have stalled since an initial flurry of talks in September.

As fewer American adults smoke traditional cigarettes, BAT and Altria are shifting their sales more toward smokeless tobacco products, such as electronic and traditional smokeless cigarettes, moist snuff and snus.

Still, traditional cigarette makers are benefiting from the efforts of tobacco advocates targeting e-cigarettes, particularly use by those under 21, Sweanor said.

In February 2020, the Food and Drug Administration restricted closed-pod flavors to menthol and tobacco. The FDA raised the legal smoking age from 18 to 21 in December 2019.

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