Altria Group recently lowered the price on some of its tobacco products, growing its total cigarette market share. Reynolds American and Lorillard will also drop cigarette cost in an effort to gain back market share, Dow Jones Newswire reports. Lorillard and Reynolds American both pointed to a competitor (Altria, although not specifically named) for the recent influx of cigarette promotions.
Currently, Altria has around half of the U.S. tobacco market. Analysts wonder if this competitive pricing trend will hurt earnings growth in the near future. Both Lorillard and Reynolds American only registered small bumps in third-quarter earnings, while Altria reported a 3% profit jump. Thomas Mullarkey, an analyst with Morningstar, predicted aggressive pricing will commence for the next two to four quarters, but that it will taper off in the long term.
Reynolds American will keep pricing stable on Camel and Pall Mall, while promoting specific brands and styles, and offering certain geographical areas different price points. Meanwhile, Lorillard said it would not be closing the gap too much between premium Newport and its competition. “The cost of business has been raised, not by us, by our competitor,” said Murray Kessler, CEO/chairman of Lorillard. “We're not trying to get more aggressive by reducing prices below them.”
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