February 05, 2014
According to media reviews, Altria intends to increase the price of several of its cigarettes and smokeless tobacco products. The cigarette manufacturer has determined to decrease its off-invoice advertising allocation by 7 cents per package on its best selling Marlboro and L&M cigarette brands. Moreover, Altria's branch, PM USA has lifted the list prices by 7 cents per package and Marlboro Snus Tins by approximately 6 cents. The price increases, effectual from December, this year comes after the company increased the prices of its cigarettes brands in June.
Leading cigarette makers are increasing prices included in their plan to fight challenging commercial circumstances. Governments all over the world are passing bigger taxes, therefore driving companies to boost prices in order to preserve their margins.
Altria's tick of cigarette prices strongly follows Lorillard. Lorillard declared in November 2013 that it will boost prices by around 6 cents to 7 cents per package efficient starting the first week of December. R.J Reynolds, a branch of Reynolds American also observed the suit quickly and increased the price of cigarette brands such as Camel and Pall Mall by about 7 cents.
Anti-smoking promotions and limitations enforced by authorities all around the world are also posing risk to the tobacco leaders, which results in decreasing shipment volume because of reduced cigarette use around the world. We think that the dropping use will keep on in the coming years. In this circumstance, the price boost by Altria and other cigarette makers is motivating as it implies ongoing pricing power of the tobacco companies.
Altria has generally been afloat despite decreasing volumes in the cigarette industry mostly due to a favorable pricing. The company has faced unfavorable tax environment with price boosts. For instance, in 2012, Altria increased the prices of its cigarette brands twice, in July and November. The steady volume and market share of the company's products regardless of the continued price boost in numerous markets demonstrates the company's solid business model and power of its major brands.