RJ Reynolds Tobacco Co. is implementing sweeping price increases for most of its traditional and e-cigarette brands, an industry analyst revealed Monday.
This is Reynolds’ second per-package price increase for 2022 and follows four increases made in 2021.
Goldman Sachs analyst Bonnie Herzog released a detailed analysis to investors indicating that a 12-cent increase in Reynolds’ list price takes effect Friday.
List price is what wholesalers pay manufacturers for their traditional cigarettes. The increase is generally passed on to retail customers.
Herzog said some traditional cigarette list price increases would be as high as 22 cents for certain styles of Natural American Spirit.
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.
People also read…
This 12-cent increase relates to Newport, the No. 2 traditional cigarette brand in the United States, as well as Camel No. 3 and Pall Mall No. 4, particularly the Pall Mall style of box savings.
The 12 cent hike also covers Capri, Carlton, Doral, Dunhill, Eclipse, Lucky Strike, Misty, More, State Express 555, Tareyton and True.
The following brands will increase by 20 cents per pack: Kamel Red, Pall Mall Vintage Gold 100 (full price soft pack), Pall Mall Classic Non-Filter (full price soft pack), GPC, Monarch, Kent, Now, Old Gold and Advantage .
For Natural American Spirit there will be a 10 cent increase per bag for the NAS RYO brand, a 14 cent increase per pack on most styles except dark green, gold, green, sky and turquoise , which increase by 22 cents per packet.
For Vuse Alto e-cigarette products, single pod packs will increase by $1.60 per carton, while two pod packs increased by $1.55 per carton and four pod packs by $6.30 per carton.
“Overall, we expect Altria and other cigarette manufacturers to follow this price increase,” Herzog said.
“Looking forward, we continue to expect strong net price realization for the industry given the strong pricing power of manufacturers.”
Herzog said “there is an increased risk” that smokers will turn to lower-priced traditional cigarettes, especially with gasoline prices reaching record highs per gallon.
“We believe in 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.
“Ultimately, price increases are generally viewed favorably and are a key driver of revenue and profit growth for tobacco companies.”
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.”
Pricing strategy
List price increase is a strategy that has gone from a semi-annual occurrence beginning in 2014 to quarterly increases over the past two years.
In 2021, Reynolds saw an increase of 13 cents per pack on January 28, increases of 14 cents per pack in April and July, and an increase of 15 cents in October.
The first price increase of 14 cents per pack in 2022 took effect on January 3.
In total, Reynolds has increased its list price by 72 cents over the past 15 months for many of its top brands, as well as $1.29 combined since January 2020.
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.
Comments are closed.