Altria Adds a Dime

Increases wholesale prices on smokeless brands 10 cents.

Altria Group Inc., the largest U.S. tobacco company, has announced to its trade customers a list price increase of 10 cents per tin on each of its smokeless brands including the recently launched Copenhagen Long-Cut Wintergreen, according to a note to investors by UBS Investment Research analyst Nik Modi.

The list price on Copenhagen Long-Cut Wintergreen goes from $1.45 to $1.55 (a 6% increase), and the base Copenhagen and Skoal list prices go from $2.39 to $2.49 (4% increases). Husky list prices remained the same at $1.55, he said.

“We believe that share gains in MST [moist smokeless tobacco] remain Altria’s priority, as the company has stated on numerous occasions that they are targeting MST growth in-line with the overall category (6% to 7%). Altria’s decision to take price—even on their primary share vehicle in Cope WG—could be a sign that overall MST trends have been better than expected,” wrote Modi.

He added, “We expect Reynolds to follow Altria’s pricing actions in smokeless shortly, with Kodiak and Grizzly.”

Altria raised prices on all 18 of its cigarette brands on May 10. Altria’s Philip Morris USA division will charge wholesalers eight cents a pack more for Marlboro Gold, Virginia Slims and other brands, said David Sylvia, a spokesperson for the company. (Click here for previous CSP Daily News coverage.)

Richmond, Va.-based Altria held its 2010 Annual Meeting of Shareholders last week, the company said. Chairman and CEO Michael E. Szymanczyk said Altria used its mission and values framework to manage through last year’s challenging environment. Altria said it expects the first half of 2010 to be more challenging for income growth comparison purposes than the back half of 2010.

And he expressed confidence yesterday that the nation’s largest tobacco company can defend itself against a wave of smoker lawsuits in Florida, added a report by The Richmond Times-Dispatch.

Altria is “bullish” that it can successfully fight thousands of lawsuits filed in Florida against cigarette companies, Szymanczyk said.

“Litigation is part of this business,” he said after one shareholder, lawyer and tobacco-control advocate Edward L. Sweda Jr., asked whether the company would reconsider its practice of refusing to settle lawsuits, considering the scope of the cases in Florida.

About 9,500 individual claims have been filed in state and federal courts since the Florida Supreme Court decertified a statewide $145 billion class-action lawsuit in 2006.

Lawsuits against the company “remain a challenge,” Szymanczyk said. “But if you look at the past decade, the company has had success defending its shareholders’ interests.”

Last week, a Duval County, Fla., jury today ruled in favor of PM USA in a lawsuit filed by the family of a smoker following a 2006 Florida Supreme Court decision that decertified a class action but allowed former class members to file individual lawsuits.

“We believe that the jury correctly decided that the plaintiff failed to prove her case,” said Murray Garnick, Altria Client Services senior vice president and associate general counsel, speaking on behalf of PM USA.

At trial, the court allowed the jury to rely on general findings made in the decertified class action that are totally unrelated to the plaintiff in this case.

“The jury reached the correct result despite the fact that the trial court adopted an unfair trial plan that eliminated any requirement that the plaintiff prove that PM USA did anything wrong to recover damages,” said Garnick. “Each federal trial court that has reviewed the trial plan used in these state cases has found that they violate Florida law and are unconstitutional.”

About 4000 Engle-related claims are pending in federal court and have been put on hold pending a federal appeals court review of the state-law and constitutional issues that arise from allowing the plaintiff to rely on prior Engle jury findings.

The case is Gil de Rubio v. PM USA, et. al.

Of the Florida cases that have gone to trial, verdicts in seven lawsuits have gone against PM USA, according to the Times-Dispatch, citing company’s most recent quarterly report.

Meanwhile, Szymanczyk said Altria is seeking to work with the U.S. Food & Drug Administration (FDA) as the agency implements new regulations on tobacco products. Altria supported the legislation passed by Congress last year.

One of the company’s critics at the meeting questioned why Altria, in March, sought to remove four of the 12 members of a scientific advisory board that is studying issues such as the health effects of menthol cigarettes. “It seems there is a contradiction, when the company is trying to get rid of people who are concerned about public health and advising the FDA,” said Reverend Michael Crosby, a priest and tobacco-control activist from Milwaukee.

In its request to the FDA, Altria argued that the four panel members had conflicts of interest, including having served as paid experts for plaintiffs in lawsuits against tobacco companies. The FDA denied the company’s request to remove them from the board, said the report.

“We are participating” in the FDA’s regulatory process, Szymanczyk told about 130 shareholders who attended the meeting at the Greater Richmond Convention Center. “And part of participating involves representing shareholder interests.”

Altria directly or indirectly owns 100% of each of PM USA, U.S. Smokeless Tobacco Co., John Middleton, Ste. Michelle Wine Estates and Philip Morris Capital Corp. PM USA cigarette brands include Marlboro, Alpine, Basic, Benson & Hedges, Bristol, Cambridge, Chesterfield, Commander, Dave’s, English Ovals, Lark, L&M, Merit, Parliament, Players, Saratoga and Virginia Slims.. Moist smokeless tobacco brands include Copenhagen, Cope, Copenhagen Pouches, Skoal, Skoal Bandits, Skoal Pouches, Red Seal and Husky. Cigar brands include Black & Mild, Middleton’s, Gold & Mild and Prince Alberts.


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