November 30, 2010 - Lorillard, Inc. (LO) raised the list price for Newport (menthol only), Kent, and True by about 1.5% or $3.00 per thousand, according to analysts at Goldman Sachs. This is the third cigarette price increase of the year and highlights the pricing power of Newport, according to the firm.
from UBS Investment Research, US Tobacco - Lorillard Takes Its 3rd Price Increase This Year
�� LO Takes $0.06/Pack Price Increase on Newport, Kent, and True - Effective tomorrow, Lorillard is raising prices on Newport (menthol only), Kent, and True by $0.06 per pack – which equates to a 1.5% price increase.
Lorillard’s move follows Liggett’s $0.075 per pack price increase in early October on the majority of its brands. (Liggett increased the list price of LIGGETT SELECT, EVE, and GRAND PRIX by $0.60 per carton in January 2010, an additional $0.65 per carton in May 2010, and an additional $0.75 per carton in October 2010. (VECTOR GROUP LTD, Quarterly Report, 11/5/2010)
Thus far this year, LO has taken a cumulative $0.15 per pack in pricing on Newport (or 3-4%). UBS expect Altria and Reynolds American will follow Lorillard’s move in the near future.
�� No Change to Maverick - In this round of price increases, Lorillard left the Maverick brand unchanged. Maverick has been a source of volume share gains for the past several quarters. However, we note that Lorillard raised Maverick pricing by $0.045 per pack in February. (q3 2010 - Lorillard said cigarette volumes were up by 5.8% to more than 10 billion cigarettes, helped by gains of 2.9% at its Newport menthol brand and a 30.9% jump in sales of lower-priced brands such as Maverick. Lorillard - highlights q3 2010 earnings report..)
�� Bullish Tobacco Pricing Thesis Remains Intact - UBS continue to see pricing as the key driver of Tobacco profits and stock performance. As we (UBS) wrote in our Q-Series® piece from May 25 “How Sustainable is Cigarette Pricing?”, we believe Big 3 tobacco is favorably positioned as the group continues to take market share from deep discount players who are struggling in an environment with a higher cost of business largely due to new FDA regulations. We (UBS) believe all Big 3 names should benefit from sustainable pricing, and we favor Altria Group and Lorillard.
August 29, 2010 - U.S. tobacco companies still count on raising cigarette prices not on sales of smokeless products to earn profits..;
July 24, 2010 - Altria, RAI and PMI q2 2010 earnings boosted by higher prices...
References: Goldman Sachs Reiterate Bullish Stance On Lorillard (LO) On Latest Price Increase, StreetInsider.com, 11/30/2010; UBS Investment Research, US Tobacco, LO Takes Its 3rd Price Increase This Year, 11/29/2010.