Rising price of cigarettes leads to fourth tier hike

NEW YORK – Tobacco sales in convenience stores are under pressure, according to Wells Fargo Securities LLC.

Her first trimester Tobacco talk The survey revealed that the overall environment has become slightly more competitive because:

• Cigarette players compete for declining cigarette volume;
• The recent, stronger-than-expected price increase in March has boosted prices down to discount and fourth-tier brands; and
• Cigarette makers are stepping up promotional activities to ease pressure on stocks.

Tobacco talk survey of retailers and wholesalers representing approximately 65,000 convenience stores in the United States.

The Marlboro brand of Philip Morris USA (PM USA), in particular, is feeling the pressure, according to Bonnie Herzog, general manager of tobacco, beverage and convenience store research at Wells Fargo Securities.

However, the analyst pointed out that Wells Fargo Securities remains optimistic that Marlboro’s share may stabilize this quarter.

PM USA is an operating company of Altria Group Inc, based in Richmond, Virginia.

“Despite strong headwinds over the past year, the Marlboro brand remains incredibly profitable thanks to Altria’s strong pricing power,” she said.

As Herzog noted, Altria is transforming its business into a growth and risk reduction driven platform comprised of smokeless, electronic steam and unburnt heat / iQOS products.

“Although we see JUUL as a growing threat, we believe that Altria has an option in executing its long-term strategy, including future acquisitions to expand its portfolio of reduced-risk products which will be anchored by iQOS, ”she explained.

According to Herzog, retailers continue to express their frustration with Marlboro – particularly “price confusion” and a “tough retailer program”. Retailers are also “a little more pessimistic about how much they expect Marlboro to lose in 2018,” she added.

The sentiment, she explained, runs counter to an early trend found in Nielsen data showing a gradual release of pressure.

Wells Fargo Securities, Herzog noted, expects 2018 to be a year of recovery for the Marlboro brand as volume and market share improve following the California tax increase in April 2017.