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Intan Farhana Zainul
Wednesday, Sep 17, 2014

Malaysia

Cigarette price breakaway in Malaysia?

The Star/ANN | Intan Farhana Zainul | Wednesday, Sep 17, 2014

BAT and JTI have raised the prices of their cigarettes.

PETALING JAYA- Philip Morris (M) Sdn Bhd's decision to maintain the price of its cigarettes so far hints of a breakaway from the industry's traditional practice of raising prices in unison.

Following moves by British American Tobacco (M) Bhd (BAT) and JT International Bhd (JTI) that cited cost pressure to raise the prices of their cigarettes by RM1($0.40) a pack, the delay or reluctance by Philip Morris to plug the difference in pricing is being closely watched.

A refusal to do so will hint of a break-up in the oligopolistic nature of the industry where a floor price is set by the Government. Should all three companies increase their prices by the same quantum, then their moves might attract the attention of the Competition Commission.

The Philip Morris' cigarette brands whose prices are unchanged are Sampoerna, Marlboro and L&M. BAT's brands include Dunhill, Benson & Hedges and Kent and JTI's brands are Mevius, Salem, Winston and Camel.

Despite the inaction by Philip Morris to raise its prices of cigarette brands by RM1, analysts feel it may be a matter of time before it follows suit.

"BAT is the market leader, so the other players would catch up to increase their prices as well," Kenanga Research analyst Soong Wei Siang told StarBiz.

"So when these three tobacco players raise prices together, there will no migration of consumers between cigarette brands," he said.

BAT's move in raising prices because of cost pressure is just the second time it has done so in the past 10 years. Most hikes by the tobacco industry came after the Government raised taxes or duties.

The first time BAT made the move was in June last year when prices went up by 3 per cent for all its brands.

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