In response to Friday’s large tax increase and failure to introduce a minimum tax PMI is actually cutting its cigarette prices substantially in Spain.

Marlboro moves from € 2.75 to € 2.35 – down 15 per cent at the retail level, and the manufacturer price per pack comes down 29 per cent. Chesterfield comes down from € 2.40 to € 2.00, and L&M from € 2.20 to € 1.75.
Following Altadis’s raising of prices yesterday, the former price gaps between PMI’s brands and its own are destroyed. Fortuna – which historically has sold for € 0.50-0.55 less than Marlboro – is now at a € 0.15 premium to Marlboro.
Analyst Jonathan Fell from Morgan Stanley says: "We think this is really an attempt by Philip Morris to force the government’s hand to introduce a minimum tax. Because most Spanish tobacco excise tax is calculated on the retail price of cigarette packs, this move will be very damaging for government revenues (e.g. the total tax per pack of Marlboro will come down 11 per cent). If the government reacts quickly this scare could be short-lived – but this destabilising of the Spanish market is likely to be very damaging to sentiment on Altadis in the near term." (ms)