Altria Group Inc is raising the price of Marlboro and other cigarettes by more than 70 cents per pack and cutting the cost of the high-end smokeless tobacco brands it recently acquired, while its major rival stayed silent on whether it would also change prices.
The cigarette price increases from Altria’s Philip Morris USA go into effect on March 9 and are related primarily to the upcoming increase in federal excise tax, a spokesman said.
Rival Reynolds American Inc, best known for its Camel brand, is not changing its prices for now. Reynolds also did not match a smaller price increase of about 9 cents per pack Philip Morris took in February.
Altria shares rose about 4.5 percent in midday trading, while Reynolds shares fell nearly 3 percent.
In February, President Barack Obama signed a law expanding a health program to include 3.5 million uninsured children. The expansion is being paid for by raising the federal tax on cigarettes to $1 per pack from 39 cents per pack in April. Taxes on cigars and other tobacco products will also rise.
Philip Morris USA, the largest U.S. cigarette maker, said it told trade partners about the plan on Wednesday, the same day a U.S. House of Representatives panel passed legislation that would give the Food and Drug Administration new power to regulate cigarettes and other tobacco products.
The company, which is owned by Altria, is now raising prices by 71 cents per pack on brands, including Marlboro, Parliament, Virginia Slims and Basic. Other brands, such as Benson & Hedges and Merit, will see an increase of almost 81 cents per pack.
“We view today’s announcement as broadly positive since it is likely to improve investor confidence about cigarette manufacturers’ ability to protect profits and margins this year despite an anticipated volume decline,” Goldman Sachs analyst Judy Hong wrote in a note to clients.
Altria’s John Middleton cigar business is raising prices by 41 cents per pack for a five-pack of cigars immediately.
Some smokeless tobacco users will see prices go down. Altria acquired UST Inc in early January as it tries to find new sources of revenue in the face of a shrinking U.S. cigarette market.
Altria, which wants its smokeless brands to be seen as a better value versus competitors, is lowering the list price on Skoal and Copenhagen by 62 cents per can and the price of Red Seal by 27 cents per can. However, the lower-priced Husky brand will get an increase of 20 cents per can. Altria is also discontinuing the Rooster brand.
Hong said the news could be viewed as a negative for Reynolds, since the price cut on Skoal and Copenhagen is larger than expected.
A spokesman for Reynolds said the company had nothing to report on pricing changes. Reynolds last raised prices on some of its smaller cigarette brands, such as Misty and Capri, by 5 cents to 15 cents per pack in December.
Altria shares were up 69 cents at $15.76 after rising to $15.98 earlier in the session. The shares of Reynolds, whose smokeless tobacco brands include Kodiak, were down 92 at $33.01.