Analysts Expect Philip Morris To Raise US Cigarette Prices
Philip Morris is expected to raise US cigarette prices by 10 to
20 cents per pack by mid October to help the company pay legal
settlements with the states, according to several analysts.
Philip Morris is the industry's pricing leader, and other
tobacco companies are likely to match the price increase.
The companies have raised prices five times in the last 18 months,
adding 63.5 cents per pack. Philip Morris' stock has dropped
34 percent this year, and it has been the worst performer in the
Dow Jones Industrial Average.
In January, the federal excise tax on cigarettes will increase
by 10 cents per pack. The industry is also facing a 4 cent per
pack increase in the amount it owes the states next year under
the national tobacco settlement, according to Morgan Stanley
Dean Witter analyst David Adelman.
The companies will likely
raise prices more than the necessary 14 cents, according to
Adelman. "[T]hey're going to take more than that to give
themselves extra promotional flexibility," said Adelman, who
believes the increase will be about 20 cents per pack. "That
would be a very significant increase by historical standards."
Bloomberg News, (8/13/99) "Philip Morris Expected to Raise U.S. Cigarette Prices (Update1)"