Wells Fargo Anticipates Cigarette Price Rise
Could the next increase in the price of cigarettes appear in September?
Convenience store retailers should expect the next cigarette price hike to come earlier than the normal November cycle, according to a report from Wells Fargo Securities LLC.
Wells Fargo surveyed its contacts with tobacco retailers and wholesalers representing approximately 60,000 convenience stores in the United States to gauge expectations for the next round of cigarette price increases.
Bonnie Herzog, Managing Director – Equity Research, Beverages, Household and Personal Care, Tobacco and Convenience Stores for Wells Fargo, said: âAccording to our contacts, the next increase in the price of cigarettes is expected to be led by PM USA during the week of September 18 at $ 0.08 / pack (+ 2-3%). We agree as we don’t expect manufacturers to wait until the normal November cycle to experience a price increase, especially given the severity of the second quarter volume drops, âwhich were linked to the disproportionate impact of the excise tax increase of $ 2 per packet in California. .
âAs has been the case in previous fiscal cycles, we expect the industry to further mitigate tax-induced volume declines in California with list price increases, partially offset by greater promotional efforts. Longer term, we expect a further decline in fuel cigarette volumes if the US Food and Drug Administration succeeds with its new mandate on nicotine. However, we believe this could be mitigated by the fact that smokers potentially smoke more in an effort to get the nicotine levels they need – an “unintended consequence” – and increased conversion to reduced risk products ” , she added.