British American Tobacco Plc will begin 2023 with a higher-than-typical list price increases on traditional cigarettes, snus and moist snuff products from its Reynolds American Inc. business units.
However, there are no price increase for Reynolds’ electronic cigarettes and other vaping products, according to Goldman Sachs analyst Bonnie Herzog’s analysis report sent to investors Tuesday.
Herzog’s reports are based on “industry trade contacts” that typically are accurate. The price hikes are to go into effect Jan. 2.
The list price is what wholesalers pay manufacturers for their traditional cigarette products. The increase typically is passed on to customers at retail.
The next list-price hike comes on top of four increases in both 2021 and 2022.
For Reynolds’ top-selling brand Newport, the list price is up 15.6 cents per pack, while the non-menthol brand of Newport is going up 25.6 cents per pack.
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Newport is the No. 2 brand in the U.S., trailing just Philip Morris USA’s Marlboro.
The same 15.6-cent increase is set for No. 3 Camel and the box version of No. 4 Pall Mall, while Pall Mall non-filter and Vintage Gold styles are increasing by 38 cents per pack.
Altogether, Reynolds has raised its list price by up to $1.21 over the last 14 months for many of its top brands, as well as a combined $1.78 since January 2020.
For Natural American Spirit, there will be a 15.6-cent increase for most Natural American Spirit styles, except for dark green, gold, green, sky and turquoise, which are going up 23.6 cents per pack.
Reynolds also hiked by $1.03 per pack its heat-not-burn traditional cigarette Eclipse, which is sold in limited stock.
“While the timing of the increase is largely as expected, as it follows BAT’s typical quarterly cadence, the magnitude of the price increases, especially on smaller brands, came in a little higher than expected,” Herzog wrote.
Herzog said she expects Reynolds and Philip Morris USA may stay on a similar quarterly list-price increase pattern in 2023 “as the industry continues to successfully implement price increases to offset ongoing volume pressures.”
Although Herzog acknowledged that inflationary impacts on smokers’ disposable income may lead some to shift toward discount brands, she expects top-selling brands, such as Reynolds’ Newport, Camel, Pall Mall and Natural American Spirit “have a very loyal customer base and strong/effective promotions should be able to keep those consumers within the franchise.”
“However, given the concerns surrounding the health of the low-income consumer, we believe investors may see some risk to cigarette manufacturers’ ability to continue to pass on such strong pricing in this environment.”
Other sizable per-pack price increases include:
* $1.04 for Kamel Red.
* 70 cents for Camel non-filter, Lucky Strike non-filter, Capri, Dunhill and State Express 555.
* 62 cents for Carlton, More, Tareyton and True.
* 58 cents for Misty.
* 49 cents for GPC, Monarch and Old Gold.
* 38 cents for Kent, Now and Vantage.
* 15.6 cents for Doral.
There’s also a 10-cent per pouch increase for the Natural American Spirit RYO styles, along with a 40-cent per tin.
For Camel Snus, the price increase is 13 cents per tin, along with 9 cents per tin for Grizzly Snus.
The price increase is 8 cents per tin for moist-snuff Grizzly and Hawken, and 13 cents per tin for Kodiak.
Many of the Reynolds traditional cigarette list-price increases are “equivalent to about four times the total cost of production just since the beginning of last year,” said David Sweanor, an adjunct law professor at the University of Ottawa and the author of several e-cigarette and health studies.
“Anyone who thinks these companies seek to speed the transition of the market from ultra-lucrative cigarettes to money-losing safer alternatives, and to transition from perhaps the most successful cartel-like business ever to one where competition and regulation leaves them hugely vulnerable to ‘doing a Kodak,’ is missing the whole point of the goal of corporations.”