Tobacco giant Gallaher has been attacked by rival Imperial Tobacco for starting a cigarette price war after cutting the price of its leading brand Mayfair.
Gallaher increased the price of Mayfair only two months ago, but has been forced to make a U-turn after sales suffered against Imperial’s budget-price brands.
Imperial has accused Gallaher of taking value from the market and hurting smaller retailers in its determination to challenge Imperial’s Richmond cigarette brand.Richmond was launched in 1999 but is already the fifth-biggest brand, growing by 53 per cent in the year to June 30, to &£421.8m, according to Imperial’s figures.
Graham Blashill, managing director of Imperial, says: “We’re considering our options. We’re very disappointed that Gallaher is chasing market share by reversing a price increase implemented just two months ago, reducing distributors’ profit margins.”
Industry insiders say Gallaher is limited in its ability to challenge Richmond following the ban on cigarette advertising. The ban has meant that price is one of the few ways cigarette brands can compete on-shelf.
Gallaher lost its market-leading position in 2001 as smokers traded down to Imperial’s cheaper brands.
Meanwhile, cigarette paper manufacturers have agreed a code of advertising conduct with the Advertising Standards Authority (ASA). The code is similar in content to the self-regulating rules for cigarette advertising prior to the ban.Last week, the ASA dismissed a complaint by papers-maker Zig-Zag that advertising for Imperial’s Rizla papers condoned drug taking.