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Home » Recent CSD Articles » Categories » Today's News » Wells Fargo Anticipates Cigarette Price Increase Wells Fargo Anticipates Cigarette Price Increase Could the next cigarette price increase appear this September? Convenience store retailers should expect the next cigarette price increase to arrive sooner than the normal November cycle, according to a report by Wells Fargo Securities LLC. Wells Fargo conducted a survey of its tobacco retailer and wholesaler contacts representing approximately 60,000 U.S. convenience stores to gauge expectations for the next round of cigarette pricing increases. Bonnie Herzog, managing director – equity research, beverage, household & personal care, tobacco & c-stores for Wells Fargo noted, “According to our contacts, the next cigarette list price increase is expected to be led by PM USA during the week of Sept 18 at $0.08/pack (+2-3%). We agree as we don’t expect manufacturers to wait till the normal November cycle to take a price increase, especially given the severity of volume declines in Q2,” which were related to the outsized impact of California’s $2-per pack increase in excise tax. “As has been the case in past tax cycles, we expect the industry to further mitigate California tax-driven volume declines with list price increases, partially offset by stronger promo efforts. Longer term, we see further downside to combustible cigarette volumes if the U.S. Food and Drug Administration succeeds with its new nicotine mandate. However, we believe this could be mitigated by smokers potentially smoking more in an effort to get the nicotine levels they require—an ‘unintended consequence’—and increased conversion to reduced-risk products,” she added.

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Tobacco use reduces overall national incomes by up to 3.6%. At the society level, direct costs are estimated from public and private medical costs of treating cigarette-related diseases. According to a study reported by Bernama in 2007, three smoking-related diseases – ischemic heart disease, lung cancer and chronic obstructive pulmonary disease – consumed about RM3.5bil of Malaysia’s healthcare budget. 5. More importantly, a 2007 study demonstrated that retailer compliance with laws limiting sales to minors appears to be significant in reducing youth access to cigarettes. In fact, the Government’s 2012 International Tobacco Control Report stated that tobacco taxes and prices have not increased at a rate high enough to offset income growth, so cigarettes are becoming more affordable to consumers. We must persist with the Government’s recommendation that the price be kept high through taxation as this works as a measure to help smokers quit and also as a deterrent to young people. As a nation, we simply cannot turn our backs on the responsibility of protecting our youths and children from any threat to their lives. Evidence from several studies suggest that the observed decline in many countries in coronary heart disease mortality, one of the most important non-communicable diseases in terms of burden of disease, is through prevention rather than treatment. This means mitigating risk factors such as tobacco use.

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