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SCOTT JAGOW: Today, Philip Morris raises the price of its cigarettes 10 cents a pack. Philip Morris is doing this, well, because it can, and it’ll soon have some new bills to pay. Steve Tripoli reports.
STEVE TRIPOLI: Even though smoking’s declining in this country, that’s not the case for Philip Morris brands like Marlboro, Basic and Virginia Slims.
Standard & Poor’s analyst Raymond Mathis says that’s where basic economics kicks in.
RAYMOND MATHIS: They have pricing power. They have captured more than 50 percent of the market at this point. So they’re doing quite well relative to the rest of the market.
Mathis says the company’s also girding for increased payments from the so-called Master Settlement of a lawsuit by the states. So, a slice of the price hike will go there.
MATHIS: We guess it’s about 5 to 6 cents out of a dime. And you know all of these costs get passed along to the consumer.
That leaves the states in a kind of contradictory position with consumers.
MATHIS: They want to discourage smoking, to a certain extent. However they don’t want it to shut down completely because not only do they gain a lot of revenue from excise tax, but with the Master Settlement agreement there’s additional revenue coming in.
Mathis says state balance sheets would be hurting if all those smokers they make money from went away tomorrow.
I’m Steve Tripoli for Marketplace.
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