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April,
2005

TRENDS AND TRENDSETTERS IN SPECIALTY TOBACCO RETAILING
Agreement Ends the Use of Credit Cards for Internet-based Cigarette Sales
Cigar, OTP - Even Brick & Mortar - Sales Become Entangled

Washington, DC - Credit card companies have stopped handling Internet sales of cigarettes following a nationwide agreement reached by state attorneys general and the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives.

The agreement, which was signed March 17 and took effect immediately, seeks to prevent the sale of cigarettes and other tobacco products over the Internet and is aimed at those who try to avoid sales taxes or who sell to underage customers.

Virtually all card companies, including Visa, MasterCard, American Express, and Discover, no longer will process orders placed through Web sites nationwide and overseas that sell cigarettes and smokeless tobacco products. Customers can still use checks, money orders or some other payment method.

New York Attorney General Eliot Spitzer began the initiative in August 2004 when he contacted credit card companies and requested that they stop processing transactions for Internet retailers selling cigarettes into New York. The recent negotiations with the companies were led by the Attorneys General of New York, California, and Oregon, with additional participation by representatives from 10 states.

Virtually all Internet cigarette sales violate other state and federal laws, including tax laws, the federal Jenkins Act (which requires that such sales be reported to state authorities), federal mail and wire fraud statutes, and the federal Racketeer Influenced Corrupt Organization (RICO) law. Many of the sales made by foreign websites also violate federal smuggling, cigarette labeling, money laundering and contraband product laws.


Synergy Brands to Open First 'Cigars Around the World' Retail Outlet in Miami Lakes
Miami Lakes, FL - Cigars Around the World, a wholly-owned subsidiary of Synergy Brands, Inc. says it will open a major retail outlet in Miami Lakes, Florida - the first retail store for the Internet retailer.

The facility will blend the retailing of both brand name and private label handmade premium cigars, as well as the proprietary brands of Synergy Brands' Gran Reserve Corp. division, which include the Suarez Gran Reserve, Mike Ditka, and Breton labels.

As part of the project, Gran Reserve is also entering into a joint venture with Tabacalera La Caya, a major private label cigar distributor from the Dominican Republic, to operate the new retail facility. La Caya currently produces many of Gran Reserve's brands, and also provides major mail-order catalogs with private label cigars.

Bill Rancic, founder of Cigars Around the World and the first-season winner of Donald Trump's "The Apprentice" TV series, explains that Miami Lakes is a major sports hub in South Florida and is a "perfect location for our Cigars Around the World retail store."

Mair Faibish, President of Synergy Brands, added, "Cigars Around the World has been selling its cigars throughout the country in restaurants, country clubs, golf clubs, and other sporting venues. It was only natural that we would want to expand this business into the retail sector."

The 6,000-square-foot retail cigar lounge will feature private cigar lockers and provide "a venue for cigar lovers for sports and entertainment" through special events, including cigar dinners and broadcasts of major sports events. The facility is expected to officially open in the spring of 2005.


Grand Havana Room Considers Miami Location
Miami, FL - Grand Havana Enterprises, Inc., which owns and operates private membership cigar clubs in Beverly Hills and New York City, has entered into a licensing agreement with an unnamed third party to establish and operate a Grand Havana Room in Miami.

The agreement provides for an initial license fee to be paid to Grand Havana Enterprises, as well as ongoing royalty payments based on sales, but does not become effective unless a definitive lease is entered into for the new location by May 23.

"There can be no assurance that the third party entity will enter into such a lease," the company noted in a statement.

Based in Los Angeles, Grand Havana Enterprises also owns and operates a Grand Havana House of Cigars retail store in Beverly Hills.

For the three-month period ended December 26, 2004, the company had net income of $317,643, up 9 percent from the year-earlier period, attributed to increased membership and club usage at the Grand Havana Room in New York City. Revenues for the quarter were up 4.3% to $2.3 million compared to 2003.


Bits & Pieces
  • Robb Hunter Cigars of Tampa, Fla., made a repeat appearance at Super Bowl XXXIX at AllTel Stadium in Jacksonville, Fla., as the official cigar provider, rolling fresh cigars for NFL fans attending the big spectacle. Hunter, a Tampa native who is a partner with a Memphis restaurant management company, tapped friendships from his own NFL days as a kickoff return specialist for the Los Angeles Raiders to seal his first deal to provide cigars for Super Bowl XXXII in San Diego in 1998. The venture proved to be a success, and when the game came to his hometown of Tampa a few years later, Hunter used local ties to repeat the deal, adding a special cigar band that year. Typically, Hunter says he sells a few thousand cigars on game day, rolling them to any length desired. For 2005, Hunter offered the Super Cigar at $10 - $15 a piece, or up to $100 for a box.
  • Montana Gov. Brian Schweitzer hand-delivered a new liquor license to the owner of the landmark M&M Cigar Store in Butte, Mt. in March, using bolt cutters to cut the chain that held the saloon's doors shut for nearly two years. Not actually a cigar store, the local euphemism arose during prohibition to identify establishments that still served liquor to the miners who populated the region.

SMOKESHOP - April, 2005