BAT Malaysia Makes U-turn on Cigarette Price Hike

Source from:  The Sun Daily  09/23/2014

Two weeks after increasing prices of all its cigarette brands by RM1.00 for a pack of 20's, British American Tobacco Malaysia (BAT Malaysia) yesterday said it will revert to their old pricing "to remain competitive".

"Our last price increase was to alleviate mounting inflationary cost pressure amplified by progressive loss of legal domestic volumes over the years to illegal trade, decline in contract manufacturing volume and an overall very competitive trade and distribution channels," managing director Stefano Clini (pix) said in a statement yesterday.

"However, in order to remain competitive, we have decided to revert to our prices before Sept 8," he added.

With the revision, a 20-stick pack of Dunhill, Kent and Benson & Hedges is back to RM12 while the Peter Stuyvesant and Pall Mall packs are priced at RM10.50.

Lucky Strike Plan and Rothmans International cigarette packs are priced at RM12.50 each.

It remains to be seen if the news will see a similar action by competitor, JT International Bhd (JTI), who also revised their prices upwards just days after, on Sept 12, to match BAT's price increase.

Philip Morris (M) Sdn Bhd had decided to maintain the price of its cigarettes, breaking away from the industry's traditional trends of raising prices in unison.

JTI sells cigarette brands Mevius, Winston, Salem and Camel in Malaysia, while Philip Morris brands are Sampoerna, Marlboro and L&M.

In the two weeks since BAT raised its price by RM1.00, the stock had slipped by 2.4% to RM70.24 on Sept 19 from RM72.00 on Sept 8.

Yesterday's announcement, lifted BAT's share price slightly by 0.51% to RM70.60 with 128,900 shares traded.

It is unclear if BAT may reconsider again with the upcoming budget announcement, as one analyst predicts that cigarette makers may see another round of excise tax increases as the government seeks to raise revenue.

"We are not expecting many new policies to affect the consumer sector, apart from a hike in taxes for the tobacco and brewery sub-sectors.

"Within the tobacco sub-sector, the impact on BAT would be limited given that the company is more receptive to embarking on aggressive pricing strategies to mitigate the impact (if any)," AllianceDBS Research said in a recent report. Enditem