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A tobacco industry analyst says that Philip Morris USA, the country's No. 1 cigarette maker, is poised to introduce a Marlboro-branded menthol that will compete directly with Newport.
Newport, made by Greensboro-based Lorillard Tobacco Co. (NYSE: CG - News), is the No. 1 menthol brand in the country and the No. 2 cigarette brand overall. No. 1 is Philip Morris' Marlboro.
Bonnie Herzog, a tobacco industry analyst with Citigroup, said in a note to investors that industry sources have told her that Philip Morris plans to introduce "Marlboro Smooth," which aims to compete with Newport.
"Our contacts stated that in a consumer test, 40 percent of Newport smokers indicated they prefer the new Marlboro Smooth and would purchase it if they had the opportunity," Herzog wrote.
She added that she anticipates the new brand will be sold at a lower introductory price for the first few months, and "then be aggressively discounted like Marlboro Menthol."
The new brand could hit store shelves by February, she wrote.
Philip Morris is a subsidiary of Altria Group (NYSE: MO - News), which is based in New York City.
by The Business Journal
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Philip Morris USA Could Raise Cigarette Prices Before Christmas, Citigroup Analyst Says NEW YORK (AP) -- Philip Morris USA may announce a price increase of 10 cents per pack, leading other cigarette makers to follow suit, Citigroup Analyst Bonnie Herzog wrote in a research note Thursday. She predicted the domestic unit of New York-based Altria Group Inc. could announce the price increase as early as Friday, with the higher prices to go into effect before Christmas. She based her prediction on the fact that Philip Morris and Lorillard recently cut wholesale orders to reduce the amount of inventory wholesalers can buy, a move she called "typical right ahead of a price increase." "We believe the industry still has some pricing power and it makes sense for the manufacturers to take pricing since all of the tobacco companies are facing higher Master Settlement Agreement payments during 2007," Herzog wrote. "Furthermore, we believe the manufacturers are more comfortable taking pricing soon given that state excise taxes did not increase substantially in 2006." Herzog noted that Philip Morris USA held a two-day meeting with sales representatives that ended Thursday. Citigroup has a "Buy" rating on Altria. The analyst also said Altria may soon introduce a new brand that extends either the Marlboro or Parliament lines. Altria shares lost 12 cents to close at $84.21 on the New York Stock Exchange. source