Discount usa gold cigarette

Price Move Puts Squeeze on Distribs

After leading a 6-cent per pack wholes ale price increase in July, Philip Morris is pushing distributors to raise full-price and savings brands by 24 and 20 cents per carton, respectively by reducing discounts the manufacturer pays to middlemen, in a move that trade sources contend is indirectly aimed at shoving third-tier discount brands off retail shelves.

The discount payments distributors receive upfront for participating in PM's Wholesale Leaders program were reduced by about 1% effective Sept. 5. However, wholesalers will get that money back as part of the cash payments they receive at the end of every quarter for meeting sales goals. Tobacco company reps are telling their accounts the change is aimed at motivating wholesalers to report their data electronically thereby helping the manufacturer track sales movement. Those middlemen who do not do so won't recoup the lost discount with their quarterly payments. A PM spokesman said the changes, which include increasing payments from just twice a year, are aimed at strengthening the company's relationship with wholesalers and boosting the efficiency of distribution.

But some trade sources contend that PM'S ulterior motive is to tie up money distributors would have had available to buy third-tier discount brands for their accounts. Wholesalers have only so much to spend and not everyone is raising prices paid by their retail customers to make up the reduced discount.

"Our distributor called us and asked if other distributors were passing the increase along;" said a vp of a Southern tobacco outlet chain. "Several have not. One did and I told him, 'You're crazy and I'm not buying from you;"

While 20 and 24 cents is not a lot of money said one wholesaler who is absorbing the temporarily lost discount, the move is "another annoyance that makes doing business even harder."

PM is holding its own at about a 50.2% average market share for the year ended in June versus 49.5% a year earlier, per Maxwell Report. But third-tier Commonwealth has doubled share for its USA Gold and Montclair brands to 1.5% from 0.7% a year ago, while other discounters have surged to 1.6% from 1.0%, mostly at the expense of R.J. Reynolds and Brown & Williamson.

Further, make/roll-your-own products are picking up more business with each price increase, per trade sources; enough to double their share to 1% from 0.5% before the 1998 tobacco industry settlement triggered price hikes on manufactured sticks. Once set up with a kit, do-it-yourselfers can make a pack of smokes for about 75 cents versus buying regular cigarettes for about $3.

The make-your-own party is struggling with how to market at retail and stand out amid the clutter of how-to brochures and starter kits. Bugler seems to have caught a wave via eye-catching metal store fixtures and hefty rebates to retailers who put fully stocked displays in their stores. The hottest make-your-own trend is filtered cigarette tubes which "brings civilization to the less than hardcore smoker," vs. rolling papers, per Roll Your Own magazine.

Meanwhile, Nationwide Tobacco extended its Sixty 1 make-your-own brand into a discount manufactured cigarette SKU.