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April,
2010

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

Swedish Match Reformating El Credito Cigar Factory
Most Miami Production Moved to Dominican; Lounge, Visitor Experience to Debut


Miami - The birthplace of post-Cuban La Gloria Cubana Cigars, the El Credito cigar factory on Little Havana’s Calle Ocho, is undergoing changes to reformat the 1400 sq. foot space factory founded in 1968 by the late Ernesto Perez-Carrillo Sr. into a showcase for for La Gloria brands and events.

Most cigar production is being centralized at General Cigar Dominicana in Santiago. Of the 10 rollers that had been producing cigars in Miami, two star rollers remain and are continuing to roll even during renovations, producing Artesanos de Miami cigar for sale in both the boutique as well as packed and shipped to other retail stores in the U.S. The balance of Miami’s production capacity will be rolled in Santiago.

The changes recognize the fact that Little Havana has become a tourist Mecca and that El Credito Cigar Factory is the original boutique factory that has been the cornerstone of premium cigar production within the district. “By reformatting the space, we’re better able to have rollers interact with consumers and to allow consumers to experience the El Credito brands such as La Gloria that became famous from their humble beginnings in Miami,” said a General Cigar spokesperson. “In short, we’re putting less emphasis on production and more on the overall brand experience.”

General further explained that “not everyone can get to the Dominican Republic to experience the romance of cigar rolling, so we’ll now be able to better engage consumers who visit Miami and bring people from all over the country to our experiential cigar lounge and retail boutique.”

Once completed, General Cigar said the lounge will host a variety of events featuring the La Gloria Cubana “team” consisting of cigar master Benji Menendez, Jhonys Diaz, and marketing executives Michael Giannini and Rick Rodriguez. The lounge, which will be outfitted with TVs, comfortable seating, and Cuban coffee will always be at the ready.


FDA Panel Considers Fate of Menthol Cigarettes

Washington, DC - The Federal Drug Administration (FDA) has begun a year-long review of menthol cigarettes, the only flavoring that was exempted from the recent flavored cigarette sales ban.

Under the government’s new tobacco oversite powers, a two-day public meeting was held in March, where a committee of outside experts that advises the FDA heard evidence on the effects of menthol cigarettes. Health advocates claim the taste can be more enticing and possibly addicting than regular cigarettes and whether they lure children - or others - to start smoking more than regular cigarettes.

Menthol brands account for more than 25 percent of all cigarette sales and are a to choice among black smokers: a U.S. government survey showed 83 percent of adult black smokers chose menthol, compared with 23 percent of whites.

FDA scientists presented findings to the panel from data stretching back decades on the health effects, marketing, and use of menthol cigarettes. The FDA could ban or phase out menthol cigarettes, although some anti-smoking advocates and industry analysts are skeptical that will happen. Stronger warnings also are a possibility. The panel is due to issue a report by March 2011.


FDA Issues Final Cigarette, Smokeless Sales Rule

Washington, DC - The FDA issued a final rule restricting the sale, distribution, and promotion of cigarettes (including RYO/MYO tobacco) and smokeless tobacco products to make them less accessible and less attractive to children and adolescents. The regulations do not apply to cigars.

The new rule, “Regulations Restricting the Sale and Distribution of Cigarettes and Smokeless Tobacco to Protect Children and Adolescents,” was published in March and contains a broad set of federal requirements that become effective June 22, 2010.

Retail and Distribution Regulations

  • Prohibits the sale of cigarettes or smokeless tobacco products to youths under 18.
  • Requires retailers to obtain photo identification of any customer that appears to be younger than 27 years old to verify that the customer is at least 18 years old.
  • Prohibits the sale of cigarette packages with fewer than 20 cigarettes.
  • Requires that cigarettes and smokeless tobacco products be sold in a direct, face-to-face exchange between the retailer and the customer.
  • Prohibits the sale of cigarettes and smokeless tobacco products in vending machines, self-service displays, or other impersonal modes of sales. However, vending machines and self-service displays are allowed in retail stores where the retailer ensures that no person younger than 18 years of age is present, or permitted to enter, at any time.
  • Prohibits free samples of cigarettes and allows free samples of smokeless tobacco products only in qualified adult facilities.
Marketing Regulations:
  • Prohibits manufacturers, distributors, and retailers from sponsoring any athletic, musical, artistic, or other social or cultural event, or any team or entry in those events in the brand name, logo, symbol or recognizable color of any cigarette or smokeless tobacco product.
  • Prohibits gifts or other items in exchange for buying cigarettes or smokeless tobacco products.
  • Requires that audio advertisements use only words with no music or sound effects.
  • Prohibits the sale or distribution of items, such as hats and tee shirts, with cigarette or smokeless tobacco product brand names or logos.
In January, a federal judge overturned the FDA’s regulation that cigarette and smokeless tobacco advertisements must use only black text on a white background. Nonetheless, the regulation was republished in this latest rule and is not in effect, although the FDA is currently appealing the decision. Instore color ads are permitted during the appeal process.

Tabacalera Perdomo Rolls Back Prices on Cigar Brands

Miami Lakes, FL - Last year, Tabacalera Perdomo absorbed the huge SCHIP cigar tax increase on 70 percent of its brands and reduced the price of its Perdomo Reserve line, by $25.00 to $37.50 a box. Noting that the move was a “big risk” that ultimately paid off, company president Nick Perdomo has announced another round of price decreases. Starting in April, the companyreduced the prices many of its most popular brands, including Perdomo Lot 23, Perdomo Grand Cru, and Perdomo 2 L.E. 2008, rolling back prices to circa-2007 level. “I trust that cigar smokers are smart with their hard earned dollars and will recognize Tabacalera Perdomo’s efforts to provide premium quality cigars at very affordable prices,” explained Perdomo. “As one of the few remaining family owned and operated American cigar companies, we control every aspect of the agricultural, manufacturing, and distribution of our brands. Efficiency and total quality control continue to be our top priorities, and this will not change.”

Bits & Pieces
  • A U.S. Court of Appeals ruling has reinstated the FDA's authority to stop e-cigarettes from entering the country after a lower court ruled that the agency does not have the authority to regulate electronic cigarettes.

  • Fourteen states and the District of Columbia raised cigarette taxes in 2009, but none of the new money went to programs to cut smoking and prevent tobacco-related disease, according to the U.S. Centers for Disease Control and Prevention.

  • President Obama has signed into law the Prevent All Cigarette Trafficking Act (PACT Act), which takes effect on June 30, 2010. It requires retailers which sell cigarettes and smokeless tobacco products over the Internet to: 1) verify the age of legal age of purchasers, and 2) Collect and disburse state cigarette and smokeless tobacco taxes based on the purchaser’s state of residency. By eliminating this price advantage for Internet retailers, the PACT Act is expected to significantly reduce online cigarette and smokeless tobacco products sales. The Act also prohibits the U.S. Postal Service from delivering cigarettes and smokeless tobacco products through the U.S. Mail to consumers. Violations of the law will now be a felony.


SMOKESHOP - April, 2010