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April 1998
Volume 25
Number 2

RETAILER & TOBACCO INDUSTRY NEWS (cont.)

FTC Requests Financial Data on Sales, Advertising From Major Cigar Companies
the Federal Trade Commission has taken its first major steps towards tightening regulations against the cigar industry, which has been mostly overlooked in the recent wave of regulatory bills concerning tobacco. The tobacco bills now pending in Congress focus mainly on cigarette smoking.

The FTC has ordered the top cigar manufacturers in the country to provide the government with detailed financial reports on annual sales and advertising expenditures over the last two years. The five companies affected are Swisher International Group Inc., of Darien, CT; Consolidated Cigar Co., of Fort. Lauderdale, FL; General Cigar Co., of Bloomfield, CT; Havatampa, Inc., of Tampa, FL; and John Middleton, Inc., of King of Prussia, PA.

The commission is requiring the manufacturers to report the total number of cigars sold, the total dollar volume of cigar sales, all expenditures on cigar advertising, merchandising, and promotions, including any money spent on product placement in movies.

Similar information has been collected from the cigarette industry since the 60s and from the smokeless tobacco industry since the mid-80s. However, unlike cigarette and smokeless tobacco data, the cigar orders require that advertising and promotional expenses be allocated by brand, rather than by the cigar varieties within each brand. The orders also require the cigar manufacturers to provide information on the characteristics of each different variety of cigar marketed within each brand, including product size, product style, individual cigar weight, the types of tobacco used, the method of curing the tobacco, and the addition of any flavorings. This information will be useful in determining the sales trends for different cigar types and sizes, according to the FTC, and will only be disclosed in aggregate form. Privileged or confidential commercial or financial information will not be disclosed without a company's consent.

Norman Sharp, president of the Cigar Association of America, as well as the organization's Washington lobbyist, feels that too much importance has been given to the promotional and advertising efforts of the cigar industry considering last year it spent a fraction of what R.J. Reynolds Tobacco pours into cigarette advertising annually. Since cigar manufacturers spend $6 million a year on cigar ads compared to the $500 million spent by cigarette companies, few in the industry feel the order will have a major impact on cigar advertising.

But Federal regulators are alarmed at the reported rise in cigar smoking among young people in recent years. Reports released by the Centers for Disease Control and Prevention on cigar smoking by teenagers provided data that contradicted the industry's longtime argument that cigar smoking is an adult pastime. In a 1996 survey, 27 percent, or six million U.S. teens, aged 14 through 19, were reported to have smoked at least one cigar in the previous year.

Dominican Cigar Acquires Tio Cigar Corp.
Dominican Cigar Corp. has acquired Tio Cigar Corp., a producer of handmade premium cigars under the Tio Mariano brand name. Tio Cigar is headed by Dominican tobacco farmer Jose "Tio" Mariano, and was previously owned by Colmena Corp. The acquisition was an asset purchase and includes an inventory of 120,000 cigars, as well as Tio Cigar's existing client base. Dominican Cigar will also assume control of Tio Mariano's 10,000-square-foot cigar manufacturing facility in Santo Domingo, Dominican Republic. Tio Mariano is the head of the farmer's union in the Dominican Republic - the National Agricultural Bureau - which he founded in 1967.

The company has also entered into an agreement with Integrated Merchants Services of Coral Springs, Florida, to begin a 40,000-plus member humidor consignment revenue program. Dominican Cigar will provide large display humidors to retailers in exchange for a minimum product purchase. "This is our entree into the retail business without incurring the overhead costs of a national sales force," said Don Platten, c.e.o. of Dominican Cigar Corp.

The company manufactures premium, handrolled cigars under the Sir Don and Adolfo brand names.


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