Analysts predict price war

The tobacco companies Philip Morris, owner of Marlboro, and Souza Cruz, which commercializes the brand Dunhill, can enter into a new price war, informs report of Bradesco BBI. The Souza Cruz may back out of adjustments to keep market, a possibility that led the Investment Bank to reduce the stock price target of $ 32 to $ 29, with 25% appreciation potential. The papers went up 1.48 percent yesterday, to $ 23,22.
Philip Morris reported that the price of cigarettes increased in nine States (São Paulo, Rio, Minas Gerais, Paraná, Santa Catarina, Rio Grande do Sul, Distrito Federal, Goiás and Mato Grosso do Sul) on day 13 due to the Industrialized Product tax (IPI). For all other locations, the new table is in force since December 2, 2013.
The readjustment of Philip Morris was 12% in 18 States, according to Bradesco, and in other localities the package price of Marlboro rose only 8%. The Souza Cruz raised the values of sale in 14% since 31 December.
Not to risk losing the 10% slice of the Dunhill on the market premium Brazilian Souza Cruz may back out of the transfer of 14%, informs the Analyst Gabriel Vaz de Lima of Bradesco. Marlboro's participation in the country's 7.1%.
The strategy would not be news. In may 2012, after a tax increase announced by the Government, the Souza Cruz has implemented a high of 24% in prices, while the American Philip Morris raised the value of each packet of Marlboro in 17%. Threatened, the Souza Cruz has reduced the readjustments of the brands Dunhill, Lucky Strike, Hollywood and Free, from 24% to 22.8% in the States with slices of most relevant market.
"In fact, we expect the Souza Cruz decrease prices in regions where it was not followed by Philip Morris. In this case, the price advance of Souza Cruz drop to 13%, compared to the 14% implemented ", informs the Bank analyst. If you go back in price readjustment, Lima estimates a 3 percent negative impact on earnings per share.
The increase was expected by the market. The IRS determined that until 2015 the IPI tax rate levied on the tobacco suffer a gradual advance. This year, since the 1st day worth 15% higher rate, and the increase will reach 10% in 2015. The expectation is that the measure take tribute to represent 67% of the value of cigarettes to consumers until the end of 2015-today, the share is 65%.
Despite the high tribute, Brazil is far from the biggest global taxes for tobacco. The 65% embedded in the price of cigarettes, according to the World Health Organization (who), are behind France (80%), United Kingdom (77%) and Italy (75%). Sought, the Souza Cruz not manifested.