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April,
2006

TOBACCO INDUSTRY NEWS
Production, Distribution, Regulation, Trade...

Reynolds American Enters Smokeless Category With Acquisition of Conwood, Camel Snus Test

WINSTON-SALEM, NC - Reynolds American, the nation's second-largest cigarette manufacturer, has agreed to buy Conwood, the nation's second largest manufacturer of smokeless tobacco products, for $3.5 billion. Acquisition of the Memphis-based company, which is owned by Chicago's Pritzker family, would give Reynolds American immediate scale and strength in the smokeless category.

"Conwood provides us with a significant, strategic platform within the growing moist snuff category that would have taken years to build," said Susan Ivey, chairman and chief executive officer of Reynolds American. "The moist snuff market has been growing at four percent to five percent for the past five years."

Conwood is the only company to compete in all five segments of the U.S. smokeless tobacco market, manufacturing moist and dry snuff, as well as loose leaf, plug, and twist chewing tobaccos. Conwood holds the No. 1 or No. 2 position in every segment of the smokeless tobacco market. Moist snuff accounts for more than 70 percent of Conwood's sales, led by both its premium-priced Kodiak brand and its rapidly growing value-priced Grizzly brand.

Reynolds also said it will test-market a Swedish-made spitless tobacco called Camel Snus starting in May in Austin, Texas and Portland, Ore. Original, Spice, and Frost varieties will be offered, and the product will be housed in chilled containers at retail to ensure freshness.

Reynolds American said it plans to combine Conwood with its Lane Ltd. unit and base the newly-formed division in Memphis. Lane Ltd. makes cigars, pipe tobaccos, and international cigarettes such as Dunhill.

Conwood traces its roots back to the 1782 founding of the Barrett Snuff Company, operates seven facilities, and employs about 900 people in Tennessee, Kentucky, and North Carolina.


Lane Limited Sells Dr. Grabow Line, Pipe Factory

TUCKER, GA. - Lane Limited, manufacturer and marketer of specialty tobacco products and an operating subsidiary of Reynolds American Inc., sold its Dr. Grabow line of pipes and pipe filters and all related assets, as well as Dill's pipe cleaners, to International Pipes & Accessories LLC (IP&A). The transaction was valued at $4.3 million.

The sale included the transfer of ownership of the Dr. Grabow manufacturing facility in Sparta, N.C., to IP&A, as well as a contract for services related to the distribution of Lane products for one year. After one year, distribution of Lane's products will transfer out of the Sparta facility.

Dr. Grabow is the best-selling brand of pipes in the United States, with its production facility in Sparta producing approximately 250,000 pipes per year.

"The closing of this sale allows Lane to more fully focus on its core business and growth strategy," said Nick Bumbacco, president and c.e.o. of Lane. "International Pipes & Accessories has a long-term interest in investing in and growing the Dr. Grabow business, while Lane will continue to focus on manufacturing and marketing premium tobacco products."

Lane employed 62 people at the Sparta facility. Under the terms of the sale, 61 employees at the facility became employees of International Pipes & Accessories LLC, while one employee remained with Lane.

Lane purchased the Dr. Grabow brand and its manufacturer, Sparta Industries (formerly Mastercraft), from United States Tobacco (UST) in 1997. UST had owned the Dr. Grabow brand since 1969 when it acquired its previous owner, Henry, Leonard & Thomas, Inc. The Sparta facility was built in 1974.


Five Indicted for Trafficking in Counterfeit Cigars

MIAMI - On March 17, 2006, a federal grand jury in Miami, Florida, returned three separate indictments against five individual defendants, alleging that the defendants conspired to traffic in, and did actually traffic in, counterfeit cigars. The cigars bore the counterfeit trademarks of Cohiba, Hoyo de Monterrey, Montecristo, Partagas, Romeo y Julieta, Trinidad, Saint Luis Rey, Bolivar, San Cristobal, Trinidad, and H.Upmann, among others.

If convicted of conspiracy to traffic in counterfeit goods, the defendants face a maximum statutory sentence of five years in prison and a $2 million fine. If convicted of trafficking in counterfeit goods, the defendants face ten years in prison and a $2 million fine.

On December 15, 2005, officers from the Miami-Dade Police Department, pursuant to arrest and search warrants, arrested the defendants and conducted searches of their homes and businesses. Seized during the search were several tractor trailer loads of cigars and materials necessary to manufacture counterfeit cigars, including cigar boxes, tubes and wrappers all bearing counterfeit trademarks.


Carolina Tobacco Completes South African Factory Move, Renovation

PORTLAND, OR - Carolina Tobacco Company (CTC), a privately held, leading manufacturer of "price-value" cigarettes sold under the brands Roger and Kingsboro, has completed the renovation of its new factory in Johannesburg, South Africa. CTC began moving into its new location in May, 2005 amid renovations to more than double its production capacity.

"We are pleased that the transition went so smoothly," stated David Redmond, president of CTC. "We were able to achieve full production levels and other efficiencies ahead of schedule." Redmond said the company's fully-owned, state-of-the-art facility has surpassed their expectations. "We are producing our high-quality brands at levels that will allow us to meet the growing demand from customers well into the future."

The privately-held, independent manufacturer of Class A cigarettes was established in 1999.

"We appreciate the patience of our customers over the past six months while we made this transition," Redmond continued. "Our new facility provides us with the flexibility to fully meet their future needs while expanding our market share and reach."


Top Tubes Canada Launched by Republic Group

GLENVIEW, IL - The Republic Group, which includes roll-your-own tobacco manufacturer TOP Tobacco LP and leading U.S. RYO/MYO sales and distribution company Republic Tobacco, has launched a filter tubes company based in Canada.

TOP Tubes Canada has begun full production at its state-of-the-art manufacturing facility located in Bois-des-Filion, near Montreal.

Stephane David, the new company's president, describes the facility as the most modern and sophisticated tube factory in the industry. "We [are] using the latest machinery and technology to produce the best quality products," he says

Joining David at TOP Tubes Canada is a highly-experienced team of operators, mechanics, engineers, and sales personnel -some of whom worked at the former CTC Canada, a market leader of MYO tubes. David spent eight years at CTC, most recently as the executive vice president of international sales and marketing. In addition, France Brunet has been named vice president of sales and marketing for Canada. Brunet is a 25-year veteran of CTC Canada. The new facility will produce tubes for sale both in Canada and the U.S.A., including the TOP and Gambler brands which will be sold in the U.S. by affiliate Republic Tobacco L.P. The name of the Canadian sales arm will be announced shortly, whose brands will include OCB, Altesse, and Rolling.

"With TOP Tubes Canada, we have added even more capacity to our group and can also keep pace with the growing demand for filter tubes," stated Republic Group Chairman, Donald R. Levin. "The healthy growth of the RYO and MYO categories in the past few years is very encouraging. We are continuing to invest in new equipment and machinery with an eye toward organic growth, along with additional growth through acquisitions," Levin said.


Toraños Mark 90th Year in Tobacco and Premium Cigars

MIAMI, FL - In 1916, Don Santiago Toraño emigrated from Spain to Cuba. His new home, the Pinar del Rio region, grew unparelled tobacco and Toraño dreamed of making his mark. Ninety years later, few cigar producers stand in the light Toraño does in terms of origin, lineage, and accomplishments.

"My great grandfather planted the seeds of not only tobacco," states company president Charlie Toraño, 38, "but also of a reputation for quality, a rich history, and a world-respected name."

Torannõ quickly became a leading supplier to the most legendary cigar names in Havana and by the 1950s, he and his three sons owned some of the largest plantations on the island. Carlos Toraño, Charlie's grandfather, took ove the business upon Santiago's death, and family holdings ultimately grew to 17 tobacco farms throughout Cuba. But when Fidel Castro seized all of the family's land in 1960, the Toraños fled the island. Carlos helped General Cigar's Connecticut farming operation for two years, but then moved to the Dominican Republic, convinced it held promise for growing choice, dark tobacco, and bringing with himCuban tobacco seeds. Upon his death in 1970, Toraño was eulogized for having created a "powerful source of money for the agricultural industry of the Dominican Republic."

Charlie's father, also named Carlos, guided the company through the next 25 years to become one of the largest private label manufacturers of premium cigars. Today it owns factories in Honduras and Nicaragua, and continues to make cigars for some of the most respected brands in the mark, as well as the family's own brands including Exodus 1959, Exodus Silver, Reserva Selecta, Signature Collection, 1916 Cameroon, and Casa Toraño.

In honor of 90 years of continuous operation, Toraño Cigars will soon release Noventa ("90" in Spanish), a special anniversary cigar using all Nicaraguan tobaccos that the Toraños began growing in Pueblo Nuevo, near Estelí, five years ago.


U.S. Smokeless Tobacco Taps DipTops Personal Spittoons for Snuff Promotion

GREENWICH, CT - U.S. Smokeless Tobacco Co., the country's largest smokeless tobacco manufacturer, has made it easier for on-the-go snuff users.

Drawing from the convenience of cup-holders, the company has entered into a deal with DipTops LLC, to purchase several thousand DipTops with USST's logo.

A web-based distributor located in Livermore, Calif., DipTops produces the patented "personal spittoon," a snuff disposal system that snaps on to a conventional beverage can, making it easier to spit into the can and more difficult to spill the contents. USST will distribute the customized DipTops at sporting events and could potentially roll them into retail channels, exlplains DipTops c.e.o. Anthony Bautista.

"We are very excited about this promotion," said Bautista, who founded his business last year. "This promotion will help inform consumers about our product and will help increase sales in the c-store industry."

He told CSP Daily News, "We have grown fast. In little more than a year, our product is now in over a dozen major retail chains and is carried by almost 100 distributors in the U.S. and Canada. With OTP a growing category in convenience stores, we also see this as an ideal accessory."


CF Dominicana Launches New Wholesale Division

NEW YORK-CF Dominicana Cigar Co., which produces cigar roller events in major cities with live cigar rollers and custom digital cigar bands through its Cigar Catering program, has created a new wholesale division to supply retail stores with custom-banded cigars. The company will provide its CF Dominicana cigars double-banded with a free second band personalized with a customer's initials. In addition to the new wholesale pricing, the company is providing the customer initial bands free of charge. Retailers may order cigars at www.cfcigars.com or at toll-free: (888) 467-8400.


SMOKESHOP - April, 2006