It is a breath of fresh air as the cigarette industry have been waiting for a year: Tuesday 1 January, Marlboro increases the price of his package of 20 cents, at 8,20 euros. In march, when the first shock tax imposed by the government (which wants to increase gradually to 10 euros the price of a package of cigarettes by the end of 2020), Philip Morris International (PMI), the market leader in France with 44 % of sales, had absorbed part of the increase of taxes: instead of increasing from 1.10 euro to its flagship brand, what he should do to pass on the entire increase, PMI had limited inflation to 70 cents. With a package at 8 euros, Marlboro had the advantage of a prize round, which made him gain a few points of market share.
an increase By 20 cents, Philip Morris International inflates its margins, even if that means losing market share to the advantage of its rivals
on the flip side, PMI has trimmed its profit margin, forcing its rivals to do the same: in order to keep a price advantage compared to the leading brand, the competitors of the PMI have also limited their price increases. These pricing strategies have reduced to several hundreds of millions of euros profits of the tobacco industry in 2018. A shame, because the fiscal shock has boosted the revenues related to the sales of tobacco for tobacco shops and for the State: if prices have risen 15 % since march, sales of cigarettes have dropped by 10 % in volumes.
The second fiscal shock will take place in march, and the third in September, with each time an impact theory 50 cents. If Marlboro has increased its prices from 1 January, it is that to this date the remuneration of the manufacturers on each packet, down 11 cents, in favour of the tobacconists. By an increase of 20 cents, PMI-inflates its margins, even if that means losing market share to the advantage of his rivals: they had not anticipated the rise of Marlboro to and benefit from a price advantage that is more important. But their priority, in two months, will make up the profits lost in the past year. It’s a safe bet that the price increases, possible every two months, will multiply.
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