Gallaher Tobacco, which had been marketing Amber Leaf at the special promotional price of £2.09 for a 12.5g pack, has decided to retain it as the recommended retail price, down from £2.31.
Imperial Tobacco is cutting the price of its rival Drum brand by the same amount, to £2.09, and holding the price of market leader Golden Virginia at £2.31 as manufacturers consider their strategies in the light of the imminent tobacco advertising ban.
Last week, Philip Morris, manufacturer of the Marlboro and Virginia brands, issued a shock profits warning after saying that consumers were turning away from premium brands in favour of heavily discounted cigarettes sold by smaller rivals. The company said it would invest about $600m (£382m) on US price promotions in the fourth quarter of the year.
The revelation revived memories of 'Marlboro Friday' in April 1993, when Philip Morris announced plans to cut the price of its flagship brand, sending share prices into freefall. One analyst said the price-cutting highlighted an increasingly crucial battleground for tobacco firms.
"Because so much of the sector's growth is at the value end of the market, premium brand manufacturers must consider whether they can sustain a less competitive pricing strategy," the analyst said.
Jonathan Fell, a tobacco analyst at Morgan Stanley, said price positioning at the point of sale would become increasingly important.
Golden Virginia is being backed by an outdoor ad campaign that kicks off this week. The two executions are straplined 'Roll on High Tide' and 'Roll on my Rogan Josh'.
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