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R.J. Reynolds Increases Wholesale Prices of Some Cigarette Brands

Posted on: Tuesday, 20 December 2005, 21:00 CST

By Brian Louis, Winston-Salem Journal, N.C.

Dec. 21--R.J. Reynolds Tobacco Co. said yesterday that it would increase the wholesale price on a number of its "non-support" cigarette brands such as Vantage, Lucky Strike and More.

The increase, which goes into effect next month, does not affect the price of its two most important brands, Camel and Kool, which receive the majority of the company's advertising and marketing spending.

It also does not affect its "selective support" brands, such as Doral, Salem and Winston, which receive a limited amount of marketing support. The company's "non-support" brands do not receive marketing dollars.

David Howard, a spokesman for Reynolds, said that the company does not comment on its pricing strategies.

Howard said that the wholesale price on a number of brands will increase 7.5 cents a pack, including Eclipse, Lucky Strike, Vantage, More and Now. The price for Viceroy will increase by 10 cents a pack. Other brands, including Monarch, Misty and GPC, will increase by 5 cents a pack.

Last week industry leader Philip Morris USA Inc. said that it would reduce the discount it gives to wholesalers on its four main brands by 5 cents a pack, according to Bonnie Herzog, an analyst at Citigroup Investment Research. The brands affected are Marlboro, Parliament, Virginia Slims and Basic.

The increased prices to wholesalers will likely be passed on to retailers and eventually to the consumer. Cigarette prices have risen in North Carolina this year in large part because of a jump in the state's cigarette tax from 5 cents a pack to 30 cents a pack. It will increase another 5 cents to 35 cents on July 1, 2006.

It has been about a year since cigarette companies last raised prices and reduced discounts on cigarettes. For more than two years before that, the industry had lost the ability to increase prices because of the popularity of deep-discount cigarette-makers.

The return of pricing power should mean larger revenue and profit for cigarette companies.

"These price increases give us continued confidence in the improving fundamentals for U.S. major cigarette manufacturers," Herzog said in a report on Monday.

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Copyright (c) 2005, Winston-Salem Journal, N.C.

Distributed by Knight Ridder/Tribune Business News.

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RAI, BTI, BATS, MO,

Source: Winston-Salem Journal

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