What Impact Will A Decline In Smokable Products Volume Have On Altria’s Revenue?

A number of proposals are being considered for raising the tax on cigarettes and cigars in the US currently. As part of the President’s Budget for Fiscal Year 2017, a new program called Preschool for All was proposed, with funding for this coming from an increase in both the federal tax on cigarettes, and a tax increase on other tobacco products, including cigars. While the federal tax on cigarettes currently is $1.01 per pack, the proposed budget would see that increase to $1.95. In addition, other tobacco products, including cigars, would see their respective federal taxes increased to match how cigarettes are taxed. For cigars, this would mean the tax rate would increase to 93.72 cents per cigar. Currently, cigars are taxed at 52.75% of the wholesale cost capped at 40.26 cents per cigar. This would increase to 102.2% of the wholesale price, capped at 93.72 cents per cigar. The Campaign for Tobacco-Free Kids says studies have shown that a 10 percent price increase generally lowers consumption between 3 percent and 5 percent, and slightly more among children. As per this statistic, if we reduce the number of smokable products sold by Altria (NYSE:MO) by 3%, 5%, and even 10%, the resultant decline in revenue is shown. In such a case, we are assuming the company would correspondingly increase the smokable product’s price along with an increase in the taxes.

Have more questions on Altria? Have a look at the links below:

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• How Did The Different Segments Of Altria Perform In Q1 2016?
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• How Will Altria’s Revenue And EBITDA Change In The Next 3 Years?
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• Altria: Year 2015 In Review
• How Has Altria’s Shipment Volume, By Brand, Changed Over The Past 3 Years?
• How Has Altria’s Retail Share In Smokable Products And Smokeless Products Changed Over The Last Year?
• What is Altria’s Revenue And EBITDA Breakdown?
• What is Altria’s Fundamental Value Based On Expected 2016 Results?
• By What Percentage Did Altria’s Revenue & EBITDA Grow In The Last 5 Years?

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