RICHMOND, Va. -- The cost of lighting up has just gone up.
Smokers already hit hard by price increases stemming from the $206 billion tobacco settlement are being hit with another double-digit markup.The nation's leading cigarette manufacturers have raised wholesale prices 18 cents a pack, anticipating an upcoming excise tax increase and higher costs associated with their settlement with the states over health-care costs.
After markups, retail prices are likely to increase by about 22 cents per pack, analysts said Monday. Cigarettes now cost about $2.50 to $3.25 a pack, depending on the region of the country.
Philip Morris USA, the world's biggest tobacco maker, initiated the increase last Friday. Competitors matched the increase, which had been expected but came earlier than some analysts had predicted.
Retail prices are likely to increase immediately in some outlets, such as newsstands, where cigarettes are generally sold per pack. Increases may take longer at tobacco-only stores, said Morgan Stanley Dean Witter analyst David Adelman.
Spokesmen at Philip Morris, Brown & Williamson Tobacco Corp., and R.J. Reynolds Tobacco Holdings Inc. all confirmed the increase but refused to comment further. A spokesman at Lorillard Tobacco Co. did not return phone calls.
The price increase announced Friday to wholesalers is the second largest in industry history after a 45-cent increase last November. That increase followed a $206 billion settlement with 46 states suing the industry to recover costs of treating ill smokers. The industry previously settled for $40 billion with the four other states.
Now, the industry faces further cost increases, including a 10-cent increase in the federal excise tax set for Jan. 1, and an increase in settlement expenses from about 46 cents per pack to about 50 cents, Adelman said.
The remaining 4 cents of the price increase amount to a real increase in cigarette prices.