Philip Morris raises some U.S. cigarette prices..

December 12, 2008 - Philip Morris USA, a unit of Altria Group Inc., the largest U.S. cigarette maker, raised prices on some of its brands and made adjustments in its promotional spending that could result in higher prices for top-selling Marlboro in some markets. Parliament, Virginia Slims, Chesterfield and Merit were raised by 5 cents a package. It also cut certain promotional allowances on Marlboro and Basic cigarettes by 5 cents per pack, Philip Morris spokesman David Sylvia said.

But in other markets, the company increased special promotional allowances on certain types of Marlboro offerings, which could result in lower prices in those markets. Philip Morris gives retailers and distributors promotional allowances that tend to be passed on to consumers in the form of higher or lower cigarette prices, although such price changes are not automatic.

The price increases were "relatively modest and in-line with our view that only a modest net price increase to the manufacturers is likely for 2009," Goldman Sachs tobacco analyst Judy Hong said. in a research note. Also on Thursday, December 11, 2008, Hong downgraded her view on the tobacco sector to "neutral" from "attractive," saying a likely increase in the federal excise tax in cigarettes could lead to a 7 percent decline in industry-wide volume in 2009.

Rising unemployment could also cause some consumers to trade down to lower-priced cigarettes and also any price increases cigarette makers could take on top of the tax increase, Hong said.

Reference: Philip Morris raises some U.S. cigarette prices, Reuters, 12/11/2008.

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