Traditional cigarette prices are going up for the third time in 2025, though slightly less than the previous increase in April.
The list price hike for Philip Morris USA went into effect Sunday, according to a report by Goldman Sachs analyst Bonnie Herzog.
The list price is what wholesalers pay manufacturers for their traditional cigarette products, and the increase typically is passed on to customers at retail.
R.J. Reynolds Tobacco Co. typically matches PMUSA price increases.
In recent years, PMUSA and Reynolds have increased their list prices between three to four times annually, but not necessarily on a quarterly basis.
Prices rose between 17 and 22 cents per pack by PMUSA, including 17 cents for its top-selling Marlboro and L&M. That's compared with between 20 and 25 cents with the April increase.
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Meanwhile, Benton & Hedges. Merit, Parliament and Virginia Slims are going 22 cents per pack.
Notably, PMUSA did not increase the list prices for its discount brand Basic.
"This increase is consistent with the previously announced Marlboro Differential List Price Initiative, which is designed to accommodate different list prices for Marlboro cigarettes based on specific Marlboro groupings," Herzog wrote.
The PMUSA price increase "doesn’t come as much of a surprise, especially given the ongoing pressures on cigarette volumes," Herzog said.
"Having said that, we believe its sophisticated and targeted pricing strategies, as well as promotional spending, should help to offset the frequency of list price increases, especially for price-sensitive consumers."
Herzog said Altria Group Inc. affiliates also have raised prices on its moist smokeless tobacco, snus and dry snuff products by a range of 12 to 25 cents per can or pouch.Â
“Both British American Tobacco and Altria seems to be fairly comfortable with the elasticity (of smoker spending) as they continue to raise prices,†Herzog said.
"We will be watching to see whether deep discount cigarette manufacturers also move on price. If they don’t, the relative price gap could widen further" compared with PMUSA and Reynolds products.
Meanwhile, Reynolds has raised its list price by at least a combined $2.37 and $2.67 per pack since January 2020.
The estimated cost of manufacturing a traditional cigarette pack is about 30 cents, said David Sweanor, an adjunct law professor at the University of Ottawa and the author of several e-cigarette and health studies.
“The companies have been raising prices in tandem for a long time, with increasing frequency and in ever larger amounts,†Sweanor said. “Government regulators appear unconcerned about this pricing strategy and how it hurts disadvantaged Americans and enriches those selling a lethal product.â€
Herzog projected that for all tobacco and nicotine industry products, traditional cigarette volumes will decline from 47% in 2024 to 20% by 2035, while overall industry revenues are projected to decline from 70% in 2024 to 50% in 2035 for traditional cigarettes.
“By 2035, we expect e-vapor to drive 42% of U.S. nicotine equivalized volume, up from 36% today,†Herzog said. “This implies that by 2035, e-vapor will be the largest volume segment in U.S. nicotine, although less than 20% in terms of revenue and less than 15% of operating profit.â€
