Tobacco giant Gallaher is holding down prices of its low-cost brands, in a bid to hold onto market share in the run up to flotation.
Gallaher is holding the price of its most recent cigarette launch Sovereign, adding 2p to the price of Mayfair its economy brand, and increasing that of other premium brands, such as Silk Cut and Benson & Hedges, by 4p.
In contrast, its rival Imperial, which is poised to overtake Gallaher as the market leader, is adding 3p across its range.
One source says: “Gallaher is widening the gap between its premium and economy brand. It is willing to spend very highly in the short term in the growing low-price area.”
After the flotation in the aut- umn, insiders expect prices on these economy brands to rise, to increase profitability.
Gallaher has seen its UK market share decline to about 39 per cent, with Imperial holding about 38 per cent.
Last October, US parent company American Brands announced it would demerge Gallaher and list it on the Stock Exchange. It is expected to be valued at about 2.5bn.