Philip Morris USA and R.J. Reynolds boosting per-pack cigarette prices..

October 30, 2009 - The nation's two top cigarette-makers are boosting per-pack prices by 6 to 8 cents a pack.



Though the companies won't say why, analysts believe it is to cover new user fees charged by the U.S. Food and Drug Administration to pay for the costs of its new assignment to regulate tobacco.

The increase on what Altria's Philip Morris USA and Reynolds American's RJ Reynolds Tobacco Co. charge wholesalers seems unlikely to have a big effect on smoking, as this spring's 61.66 cent-a-pack hike in federal excise taxes did.

Last week, Altria Group Inc. chairman and chief executive Michael E. Szymanczyk told analysts the effect of that tax hike accounted for about two-thirds of the 16 percent drop in the number of cigarettes it sold in the third quarter. The rest came from wholesalers' inventory reductions.

That price effect was in line with the historical trend, he said.

Though tobacco companies don't disclose their models for forecasting the effect of price changes on smoking, economists and security analysts have estimated that every 10 percent increase in prices cuts consumption by 4 percent.

Reference: Two cigarette makers boosting pack prices
by Staff Reports, Richmond Times_Dispatch, 10/30/2009.