BAT and JTI backpeddle on cigarette prices


PETALING JAYA: Top tobacco companies British American Tobacco (M) Bhd (BAT) and JT International Bhd (JTI) have decided to revert to their old prices, a move which may have been influenced by Philip Morris (M) Sdn Bhd’s decision to maintain its cigarette prices.

Yesterday, BAT cited the need “to remain competitive” for the revision to pre-Sept 8 prices.

“Our last price increase (by RM1 for a pack of 20s) was to alleviate mounting inflationary cost pressure. This was amplified by a progressive loss of legal domestic volumes over the years to illegal trade, a decline in contract manufacturing volume and an overall competitive trade and distribution channel,” BAT managing director Stefano Clini said in a statement.

“However, in order to remain competitive, we have decided to revert to our prices before Sept 8,” he said.

“BAT will continue to produce high-quality products for discerning consumers despite the challenges,” Clini added.

Meanwhile, JTI told StarBiz that the company had also made a downward revision.

“We have revised prices of our products to their previous prices with effect from Sept 22. We are not in a position to comment further on this matter,” JTI said when contacted.

With the revision, BAT’s premium brands, which include Dunhill, Benson & Hedges and Kent, are now priced at RM12, while its value-for-money-segment brands like Peter Stuyvesant and Pall Mall are priced at RM10.50. JTI’s brands such as Mevius and Salem are priced back to RM12 per box and Winston at RM10.50.

The downward revision by both BAT and JTIcaught the market by surprise.

According to RHB Research Institute analyst Fong Kah Yan, for the past 10 years, tobacco firms in Malaysia have never gone back on their pricing.

“It is a surprise. This could be due to Philip Morris’ decision to maintain its pricing and not follow the move by other players,” she told StarBiz over the phone.

She noted that historically, when BAT increased its prices, JTI and Philip Morris would follow suit.

BAT had raised its cigarette prices by RM1 per pack on Sept 8, which was later followed by JTI on Sept 12.

However, Philip Morris kept prices unchanged, a breakaway from the industry’s traditional practice of raising prices in unison.

Philip Morris’ brands which remained unchanged are Sampoerna, Marlboro and L&M.

Despite the downward revision, Fong said cigarette volume sales would continue to shrink.

“We expect volume sales to go down, but not as much as last year,” she explained.

Total sales dropped 12% for the nine-month period between October 2013 and June 2014 compared with the previous nine months between January and September 2013.

BAT closed 36 sen higher at RM70.60 yesterday, with 128,900 shares being traded.

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