Tobacco Retailers Outlook on leading Cigarettes Brands

The latest UBS-CSP Tobacco Survey shows that according to tobacco retailers Marlboro will continue boosting its share of the market thanks to its promotions, Pall Mall will post another solid performance and Newport Non-Menthol’s future is unpredictable.

In the newest edition of UBS-CSP Tobacco Survey, retailers from 50 store chains and almost 8,000 stores predict the Marlboro, the flagship brand of Philip Morris USA, to occupy the leading position in increasing market share during the fiscal year of 2012.

Nevertheless, when they were asked whether they considered the tobacco giant’s Marlboro Leadership Price Program allowed the brand to boost market share in 2011, the retailers split almost evenly, with 48% responded positively, and 51% - negatively. (The program introduced last year, offers retailers to refuse part of their usual markup in return for incentives.)

Nik Modi, senior market analyst at UBS, noted that not all retailers took part in Marlboro Program, with around 60% to 70% signing on. In addition, he admitted that with 48% of respondents who confirmed that the program helped to increase Marlboro’s market share, it meant that nearly anyone who took part in the program saw some sort of progress in the brand’s market share.

When asked about the performance of Newport Non-Menthol, introduced by Lorillard several months ago, retailers were as well split in responses; with half of the respondents said the brand would have share growth in the upcoming year.

Modi said that he is surprised by the recent Newport Non-Menthol performance, as the brand managed to hand in on the market even after the promotions ended and the price was increased.

“It seems that it has more strength than many people expected,” admitted Modi.

One of the respondents said that Newport Non-Menthol has been growing nicely since introduction. When the owner increased the price, the brand dropped during two months, but after that began to gradually rise up to its record level since the launch.

As regards R.J. Reynolds Tobacco leading brands Camel and Pall Mall, 25% of respondents said they predict Camel to get more share of the market than Newport and Marlboro; 55% of retailers confirmed Pall Mall brand has posted an increase.

Nik Modi stated the responses about Pall Mall were more positive than he predicted, but noted that brand will be under pressure, since it gains most of its share in middle- and low-value categories, where Philip Morris recently introduced promotion for its L&M brand.

To prove his point of view, Modi used a comment from one of the retailers who said that L&M promotional prices have hampered Pall Mall sales in the fourth quarter, yet the Pall Mall has been performing solidly, since it is more well-known than L&M.

However, due to the difficult economic situation the low-end category of the market is expected to post further growth until the economy gets better.