Tobacco giants engage in a price war to beat higher taxes

THE cigarette war is hotting up as the Franco-Spanish tobacco company Altadis has cut the price of its chief brands by 50 to 65 cents a packet, in reply to the cuts introduced by rivals Philip Morris last week. In the meantime, the tobacconists are up in arms, claiming that they are losing out because they have a stock paid for at the higher price.
And kiosk owners are furious because they have been banned from selling cigarettes.
Altadis chairman Antonio Vázquez said that the decision to lower prices was to maintain their competitive edge in the Spanish market.
Its most popular brand, Fortuna, has a market share of 17 per cent, making it second to Philip Morris's top brand, Marlboro, with 20 per cent.
Other tobacco companies are also likely to cut their prices in Spain, while some sector sources said that there will be an increase in smuggling to other countries such as Portugal, where the difference in prices can be as much as 1.5 euros a packet. The lower prices fly in the face of government efforts to cut down smoking, which included an increase in the tax on tobacco, as well as a ban on smoking in all public places. Manuel Fernández, chairman of the Spanish Tobacconists' Association, called on the government to introduce “stability” to the prices, claiming that there was a war between the tobacco companies and the government. Analysts of the sector said that Altadis had had no choice other than to lower its prices after Philip Morris took the first step.
The Consumers Union of Spain (UCE) said the price cut was “scandalous”, while the Smokers for Tolerance Club hailed it as “good news.” And on the Madrid stock market, Altadis shares went up 2.10 per cent, closing at 34.93 euros.