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April./May
2002

TRENDS AND TRENDSETTERS IN SPECIALTY TOBACCO RETAILING
New York City Mayor Proposes 1,700% Cigarette Tax Hike
New York - Facing stiff budget shortfalls from both the national economic recession and a severe blow to local business following the terrorist attacks in Manhattan last year, New York City's new mayor Michael Bloomberg introduced his first budget, which proposes a staggering $1.50 per pack excise tax on cigarettes.

The city's current excise tax is $.08. If the tax is passed, it will mean that smokers purchasing cigarettes in New York City will pay $3.39 per pack in cigarette excise taxes alone, not including state and city sales taxes. New York State's cigarette excise tax will be increased to $1.50 per pack on April 3, 2002; when combined with the federal excise tax which was increased to $.39 on January 1, Bloomberg's proposal will raise the estimated retail price of a pack of cigarettes to more than $7.00 per pack within New York's five boroughs.

"The same logic that the mayor has used to hold all other taxes steady applies to the proposed cigarette tax increase and its impact on shoppers and retail jobs," said Michael Pfeil, vice president, communications and public affairs, Philip Morris U.S.A. "Increasing taxes on cigarettes will drive adult smokers and retail jobs to lower tax areas."

Bloomberg, who was elected mayor in November 2001, had promised not to raise taxes, saying they would destroy the city by causing residents and jobs to leave and revenues to sink.

Pfeil says increasing the cigarette tax will place a disproportionate burden on low income city residents and many small business owners who will lose business as city cigarette sales are lost to surrounding regions, Internet, and Native American reservations in order to avoid what he calls "outrageous tax rates."

The New York State legislature would have to approve the city's plan to increase its cigarette tax. It is likely to cause considerable debate, since driving a significant portion of cigarette sales out of state would cause new revenue shortfalls for New York State.


Industrial Press Hits Georgetown Art World

Georgetown, VA - To coincide with the launch of the new Industrial Press (IP) cigar from Brooklyn-based Drew Estate, an original poster-style painting - which recently appeared on the cover of Georgetown Post magazine - is currently on display at Georgetown Tobacco in Washington, D.C.

"It's a wonderfully classic example of the bold art deco posters that I deal with," says David Berkebile, owner of Georgetown Tobacco.

The artwork, reminiscent of the Alexander Rodchenko work of Bolshevik Industrial Russia, uses sharp angles and subtle mode colors. This same style is incorporated into the packaging and presentation of Drew Estate's new box-pressed IP cigars, with their sharp squared shape and muted hints of nutty flavors, according to company co-founder and Esteli resident Jonathan Drew.

"Both the cigar and artwork of Industrial Press hold true to the Drew philosophy of creating mass appeal through visually captivating design," said Drew.

Drew regards the painting as an extrapolation of the "unique and innovative packaging that has become commonplace with Drew Estate products and marketing."

Industrial Press, hand rolled in Esteli, Nicaragua, comes to market with a fully functional, patent-pending "press machine."


Blair's Opens at Site of Former Whit's Highlands Tobacco
Blair's Highland Smoke Shoppe opened Jan. 21 in Louisville, Ken. in the former home of Whit's Highlands Tobacco, the Business First of Louisville reports.

Owner Sheena Blair, who is not affiliated with Whit's, said she noticed the store closed in November and thought the location would work for her own business. Blair said she has completely renovated the building and brought in her own products and fixtures.

Those products include premium cigars, cigarillos, cigar accessories, flasks, pocket knives and Maker's Mark gifts, she said. Blair said she is also offering "Blair's Puff--Stuff Gift Baskets," which feature an assortment of cigars, accessories, and other gifts.


A Smoking Club Revival at Pheasant Cigar
Las Vegas - When brothers Carl and Paul Valentino purchased the Pheasant Cigar store in February 2001, the six-year old retail shop and cigar lounge was about to close its doors, and its private club was down to a mere 10 members.

Valentino, who had managed the store for 18 months before he and his brother decided to buy the business, said the partners sat down with members to gauge interest in the club before deciding to take it on. By year's end, it had about 30 members and was still growing. Dues are $150 a month, which includes private humidor lockers and the privilege of relaxing in a smoke-friendly atmosphere - reading in deep-cushioned leather chairs, watching TV, or socializing with other members.

"But what they are really getting for their money are the intangibles," Valentino told the Las Vegas Sun. "You are getting a network of friends you can trust."


JR Cigars Scales Back Wall Street Store
New York - JR Cigar's Wall Street retail store in lower Manhattan closed its bar and restaurant in February, a victim of an anti-smoking battle within the historic building where it occupies two floors, combined with severely depressed retail traffic in the city's financial district.

"The Wall Street store has indeed had a dramatic reduction in traffic since the World Trade Center attack," said Lew Rothman, president, J.R. Cigars, shortly after the changes. "But it represents less than 1% of the company's business, and we can surely carry it forever, if need be."

The future of the store is far from clear, however. A three-year court battle with other building tenants ultimately halted smoking within the store's bar and lounge areas. "Not sure what they expected when they rented the space to a cigar retailer," quipped Steve Saka, J.R. Cigar's website editor.

The company may yet appeal the legal decisions which favored the anti-smoking tenants, but even if ultimately successful, business in the neighborhood has changed dramatically.

"Since 9/11, the bar has been pretty desolate. In fact, the whole area is a disaster business-wise," said Rothman. With the closing of the bar and lounge, the store has also scaled back its humidor hours, eliminating evening hours.

Over 50,000 jobs were displaced in the destruction of the World Trade Center according to city officials, and New York City real estate analysts say that rent vacancies in the neighborhood have increased since then, creating further difficulties for service businesses in the area.


Zippo Takes its Wearables Online

Bradford, PA - Zippo Manufacturing is now offering a selection of Zippo clothing available for purchase online through BrandLocker.com. Visitors may access the site directly from the Zippo.com homepage by clicking on "Zippo Wearables," which takes them to the Zippo store at BrandLocker.com. Visitors may browse and purchase merchandise immediately.

BrandLocker.com is a subsidiary of Russell Specialties Corporation, Cary, Ill., a 24-year veteran of the branded merchandise industry. It is a fully equipped site that provides a secure, state-of-the-art environment for on-line product ordering and credit card transactions.

The new Zippo store on BrandLocker.com is available 24 hours a day and offers men's and lady's apparel and home accessory merchandise including sweatshirts, polo shirts, hats, golf towels, fleece jackets, and even BBQ aprons.

"This is the first time consumers are able to purchase Zippo wearables online," said Mike Martin, vice president of sales and marketing. "Previously, this shopping experience was limited to Zippo district managers and distributors."


SMOKESHOP - April/May, 2002