Wells Fargo projects cigarette industry volume to decline -3.5% for the full year.
Cigarette industry pricing continues to offset volume weakness, as headwinds from California’s $2 per pack cigarette excise tax continue, according to a report by Wells Fargo Securities that examined Nielsen ‘All Channel’ Data through Nov. 4, 2017.
According to Wells Fargo, cigarette dollar sales increased +0.9% during the four-week period ending Nov. 4, 2017 (vs +0.9% for 12-weeks) despite a pickup in industry volume decline after California’s tax hike on April 1 (-4.4% vs -3.5% for 12-weeks).
As expected, cigarette industry pricing more than offset the pressure (+5.5% vs +4.5% for 12 weeks) as one point of pricing has roughly three times the impact on earnings than one point of volume growth for cigarette manufacturers.
“We project total cigarette industry volume to decline -3.5% for the full year, which is at the mid-point of historical declines of 3-4%,” said Bonnie Herzog, managing director – equity research, beverage, household & personal care, tobacco & c-stores for Wells Fargo Securities LLC.
Meanwhile, smokeless tobacco dollar sales continue to gain momentum. Smokeless dollar sales grew +7.0% vs. +5.7% 12-weeks, reflecting continued consumer loyalty to the category and acceptance of the latest line extensions.
E-cigarette dollar sales rose +51.7% led by VUSE & JUUL. All channel e-cig category perform was driven by strong pricing/volume (+28.4/+18.1% vs. +27.9/+15.6% for 12-weeks).
Cigar dollar sales remained solid at +13.5% (vs. 14.3% for 12 weeks) led by Altria’s Middleton.