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April/
May 2000

RETAILER & TOBACCO INDUSTRY NEWS (cont.)

Consolidated, Havatampa Merging
Altadis Units to Unite under Theo Folz’s Direction


FT. LAUDERDALE, FL - Altadis S.A. has confirmed that its two U.S. units - Consolidated Cigar Corp., a holding of the former Seita corporation, and Havatampa, a holding of the former Tabacalera de España S.A. - are currently in the process of merging.

Theo Folz, formerly chairman of the board, president, and chief executive officer of Consolidated Cigar Corp., has been named chairman and c.e.o. in the U.S.A., Caribbean, and Central America of the new corporation, which had yet to be named at press time.

Consolidated, based in Ft. Lauderdale, Fla., holds a 25% share of the U.S. cigar market. The company was founded in 1918 through the amalgamation of six independent cigar manufacturers, having acquired numerous companies, brands, and assets over the years.

The company entered the premium, hand made cigar business in the 1960s through the formation of Cuban Cigar Brands in the Canary Islands with Pepe Garcia, a Cuban manufacturer whose Cuban factory was nationalized by the Castro regime. Consolidated, following numerous ownership changes in the 1980s and 1990s and a public offering in 1996, was purchased by French tobacco firm Seita for $703 million in 1998. Its portfolio of premium brands includes Montecristo, H. Upmann, Don Diego, and Te-Amo.

Tampa, Fla.-based Havatampa traces its roots to 1902, when the name was first registered by the owner of the Tampa Box Co. In 1982, the company acquired the Phillies brand from Bayuk Cigar Co., along with its manufacturing facility located in Selma, Alabama. Tabacalera S.A. de España purchased Havatampa, Inc. in 1997 and California-based Hollco-Rohr in 1998. The companies were merged under the Havatampa operation the following year. Havatampa’s premium brands include Romeo y Julieta, Saint Luis Rey, Gispert, Quintero, and Vega Fina.

Altadis S.A. was formed in December through the merger of Seita and Tabacalera de España, becoming the world’s largest cigar company.


Havana Group in Effort to Purchase Phillips & King

CANTON, OH - The Havana Group, Inc. has announced that it has entered into a Letter of Intent for the purchase of Phillips & King International, Inc., a 94-year-old tobacco distributor. Terms of the transaction were not disclosed pending resolution of P&K’s Chapter 11 proceedings.

Phillips & King is a California-based distributor of cigars, cigarettes, tobaccos, and accessories. The company is currently in bankruptcy proceedings, and the acquisition by The Havana Group is contingent upon a number of variables, including a successful reorganization of the company and The Havana Group’s completion of adequate financing.

If successful, The Havana Group intends to restructure to a web-based business-to-business wholesale distribution company. The acquisition of P&K would add approximately $14 million to the sales of The Havana Group.

The company anticipates that, while the entity recorded a profit in 1999, the consolidation will improve The Havana Group’s operating results.


New Nicaraguan Factory Under Construction for Nick’s Cigar Co.

ESTELI, NICARAGUA - Tabacalera Perdomo Cia, a subsidiary of Nick’s Cigar Co., says it is nearing completion of its new, state-of-the-art manufacturing facility in Esteli, Nicaragua. When finished, the factory will be one of the largest in Central America specializing in hand-made, long-filler cigar production.

Situated on a nine-acre compound located seven kilometers north of the original Tabacalera Perdomo cigar factory, the 75,000-sq. ft. facility is due to begin operations later this year. The compound will also include a 15,000-sq. ft. box factory and another 8,000-sq. ft. allotted for living quarters, slated for completion in mid-summer.

"Consumer demand for all of our brands, coupled with our plans for worldwide distribution, has made it vitally necessary for us to build a production facility that is second to none," stated Nick Perdomo, Jr., president and c.e.o. of Nick’s Cigar Company.

The new facility will represent a unique mix of the latest technology combined with the deep-rooted values of Cuban cigar-making tradition. Draw testing machines will test every cigar, and finished cigars will be stored and aged for a minimum of 12 months in large tobacco aging chambers lined in Spanish cedar.

A proprietary computerized environmental control system will monitor the aging chambers and keep them at optimum temperature and humidity levels. In addition, the new factory will not fumigate finished cigars, a common insect control practice at cigar manufacturers. Rather, cryogenic tobacco compartments will treat tobacco with subfreezing temperatures well in advance of the final production process, virtually eliminating any insect infestation possibilities, according to the company.


2 General Reports Lower Income, Sales in 1999; Q4 Income Jumps

NEW YORK, NY - General Cigar Holdings, Inc. reported that fourth quarter income from continuing operations rose 38% to $5.83 million on sales of $41.96 million, which decreased 18% from the year-earlier period. Income from continuing operations in the fourth quarter 1998 was $4.28 million on sales of $51.1 million.

For the full year, General Cigar reported income from continuing operations of $16.1 million, a decrease of 16%, on sales of $149.9 million in 1999, compared to income from continuing operations of $19.1 million on sales of $186.2 million in 1998. Net income in 1999 was $106.6 million, including a net gain on the sale of the company’s mass-market cigar business of $88.24 million and the income of $2.26 million from this business prior to the sale. In 1998, net income was $25.82 million including $6.74 million from the discontinued operations.

"The industry is still adjusting to intensified competition and consolidation," said Edgar M. Cullman, Jr., president and c.e.o. "Our primary marketing and sales objective is to grow market share by expanding retail shelf presence and leveraging well-known brands."

General introduced two new cigars in the fourth quarter - Macanudo Maduro and Partagas Serie S, a line of distinctively shaped Figurado cigars.

The company’s announced deal to sell a 64 percent interest to Swedish Match A.B. moved closer to completion on March 8. General received an early termination of the waiting period required by U.S. antitrust laws, an indication that regulators have found no major objections to the merger. It is anticipated that a special meeting of stockholders will be held to approve the transaction in the spring.


Swedish Match to Buy National’s Chewing Brands

RICHMOND, VA - Looking to expand its U.S. smokeless tobacco portfolio, European tobacco giant Swedish Match S.A. announced a definitive Asset Purchase Agreement with National Tobacco Co., L.P. of Louisville, Kentucky.

Swedish Match, which is based in Stockholm, Switzerland and operates a North American Division from Richmond, Virginia, will provide $165 million for the purchase of National Tobacco’s chewing tobacco brands and formulations along with the existing chewing tobacco inventory. National Tobacco’s primary chewing brand is Beech-nut, with other brands including Durango, Trophy, and Havana Blossom.

The National Tobacco chewing tobacco business, with annual sales of approximately $50 million, will be fully integrated into the existing Swedish Match production, sales, and distribution network. The integration is expected to bring added sales opportunities.


Mr. Cigar, Lighten Up Radio Celebrate 4th Anniversary, New L.A. Affiliate

ENCINO, CA - America’s longest-running talk show about cigars, spirits, and the good life celebrated its fourth anniversary with a return to the airwaves in its hometown Southern California market of Los Angeles. Lighten Up! is now broadcast live on major new affiliate and broadcasting powerhouse KRLA Talk 1110 AM.

Host Magic Matt Alan, one of the highest-rated afternoon personalities in the history of Los Angles radio, now broadcasts his weekly nationally-syndicated talk show live from the Lighten Up Lounge in his backyard studio in the hills of Encino.

"We’re just a bunch of freedom-fighting fanatics determined to bring back a sense of fun to the pursuit of physical pleasure," says Alan. "We drink, we smoke, we interrupt each other, and we think Rob Reiner is a boob."

Sponsorships in local markets are available throughout the country, an ideal opportunity for cigar retailers and manufacturers alike to reach a targeted, cigar smoking audience. Contact Lighten Up! for additional details and sponsorship availability. Lighten Up! CigaRadio, Tel: (888) 786-4948, email: mrcigar@unigrafix.com.



SMOKESHOP - April 2000