Philip Morris Slashes Prices 40 Cents a Pack : Smoking: Cuts are also expected from rival companies. Moves come at an enormous expense to the cigarette industry.

Smokers are getting another break on prices from Marlboro country and other parts of the tobacco patch.

Philip Morris said Tuesday that it will slash wholesale prices by 40 cents a pack on all its premium brands. That covers bestseller Marlboro along with well-known names such as Parliament, Merit, Virginia Slims and Benson & Hedges.

Rival R.J. Reynolds Tobacco Co. promptly declared it will revise prices on its brands, including Winston, to compete with the nation’s biggest tobacco company.

Most Marlboro smokers have already been paying less because of a price promotion that Philip Morris announced in April. Reynolds subsequently cut prices on Winston and offered deals on Camel that varied from market to market.

Many analysts had expected that the Marlboro promotion would endure well beyond its planned Aug. 8 expiration and that other tobacco makers would follow.

The moves are coming at enormous expense to the tobacco makers, however.

Even as executives outlined the new cigarette price strategy, Philip Morris Cos. Inc. reported that second-quarter earnings fell 22.2%, mainly because of a 53.1% drop in domestic tobacco earnings due to costs of the Marlboro promotion.

The earnings were consistent with analysts’ projections. Philip Morris was up 0.375 to close at $48.50. Reynolds’ parent, RJR Nabisco Holdings, was down 0.125 to close at $5.50.

The cigarette price cuts are designed to stem the market share erosion that a wide range of heavily advertised consumer products have seen in recent months. More recession-scarred consumers are saving money by buying cheaper versions of laundry detergent, disposable diapers and other items.

The movement toward low-priced products has been magnified in the tobacco industry, where years of steady price increases have opened price gaps of up to $1.50 a pack between premium and discount smokes.

The Marlboro promotion effectively reduced prices by 40 cents a pack in a bid to defend the brand’s eroding 22% share of the market.

William Campbell, president and chief executive of Philip Morris USA, said Marlboro broke an eight-month streak of share declines in April and now has about 24% of the market. Its high was 25% in mid-1991, he said.

“Our strategy is working,” he told reporters.

The promotion was applied unevenly, however, as it was conducted via coupons, direct-mail offers, free samples and dealer rebates.

To ensure that the cut is applied uniformly, Philip Morris is converting the promotion to an outright wholesale price cut.

Campbell said it should cut the average retail price for a pack of Marlboros to about $1.85 from about $2.25 before the promotion. Actual prices may vary because of different state and local taxes.

Emanuel Goldman, who follows the tobacco industry for Paine Webber, said Philip Morris is creating more coherent pricing that rivals will welcome.

“Since April 2, cigarette pricing has been a zoo,” he said. “It varied not just from city to city, but block to block.”

Philip Morris is the industry leader, with 43.6% of the U.S. tobacco market, including half the premium segment and 33% of the discount brands.