Two Major Cigarette Makers Raise Prices

Philip Morris Cos. and R.J. Reynolds Tobacco Holdings Inc., the two biggest U.S. cigarette makers, raised prices to distributors by about 7% to boost profit and pay for rising taxes and payments for a legal settlement. The 13 cent-a-pack price increase is the tobacco industry’s seventh in about two years. Analysts said the latest boost could add 15 cents to 18 cents a pack for smokers. Much of the money raised by higher prices will go to the companies’ bottom lines or be used in promotions such as discounts, analysts said. It will also cover increases in payments tied to the industry’s $206-billion settlement of health-related lawsuits in November 1998 as well as federal excise taxes. News of the price hikes came after the markets closed. On the New York Stock Exchange, Philip Morris fell 25 cents to close at $24.25, while RJ Reynolds closed unchanged at $19.81.