Cigarette Makers Raise Prices
Philip Morris raised the wholesale price on all its major
cigarette brands by 18 cents a pack over the weekend, the second
largest cigarette price increase in history. RJ Reynolds, Brown
& Williamson and Lorillard Tobacco Co. immediately matched the
increase, which goes into effect today.
The increase will help
the companies offset a 10-cent-per-pack federal excise tax
starting in January and a four-cent-per-pack increase in legal
settlement payments next year. The price increase could reduce
sales of Philip Morris's cigarettes by six percent in the US,
according to Bonnie Zoller, an analyst for Credit Suisse First
The retail price of a pack of cigarettes will go up about 22
cents, and will average $2.65 in 2000, nearly $1 more than in
1997, estimates tobacco analyst David Adelman of Morgan Stanley
Dean Witter. But analysts believe that promotional discounts
offered by the companies will soften the blow to consumers.
"Consumers will only gradually feel the price increase,"
predicted Martin Feldman, an analyst at Solomon Smith Barney.
On news of the increase, Philip Morris shares rose 18.75 cents
to $37.75; RJ Reynolds shares fell 12.5 cents to $28; Loews
shares fell 87.5 cents to $78.62; and BAT shares remained
Bloomberg News, (8/30/99) "Philip Morris, Rivals Raise U.S. Cigarette Prices (Update4)"
AP, (8/30/99) "Cigarette Packs to Jump 22 Cents", Justin Pope Associated Press Writer
WALL STREET JOURNAL, (8/31/99) "Major Makers Of Cigarettes Raise Prices", Gordon
Fairclough, p. A3
NEW YORK TIMES, (8/31/99) "Cigarette Makers Lift Wholesale Prices 8 Percent", p. C5