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June/
July 2000

RETAILER & TOBACCO INDUSTRY NEWS (cont.)

Santa Fe, Alternative Cigarettes Asked by Regulators to Revise Advertising

WASHINGTON, DC - Santa Fe Natural Tobacco Co. of Santa Fe, N.M., and Alternative Cigarettes, Inc. of Buffalo, N.Y., have agreed to stop advertising their products as safe alternatives to regular cigarettes under a settlement reached with the federal government.

The settlement comes after the Federal Trade Commission lodged separate complaints against the two companies alleging that their advertisements are deceptive because they imply their products are safer to smoke than cigarettes.

From now on, when the companies make a "no additives" claim, they also must print on the package, "No additives in our tobacco does NOT mean a safer cigarette." Both companies also agreed to post a label on herbal cigarettes saying "Herbal cigarettes are dangerous to your health. They produce tar and carbon monoxide." The settlements didn't constitute an admission of guilt that any laws were broken.

Robin Sommers, president and c.e.o of Santa Fe Natural, said the company began voluntarily placing a disclosure statement on its packages as early as 1997, but agreed to the changes requested by the FTC for the sake of uniformity on industry warning labels. Sommers added that, "we do not agree that any of our past additive-free statements were deceptive or misleading in any way."

The proposed settlement would require both companies to notify distributors and retailers that they should stop using existing promotional material that make the challenged claims.

The settlement is not the first time federal authorities have taken issue with no-additive cigarettes. In March 1999, the FTC settled with R.J. Reynolds Tobacco Co., requiring the same disclosure statement on all Winston products that contain no additives.

Herbal cigarettes, in contrast, have largely avoided any top of regulator scrutiny, and are currently not required to bear any warning labels.

The FTC will decide whether to make the proposed agreements final after a public comment period expires on May 30.


Swedish Match Completes Closing on General Cigar Deal

STOCKHOLM, SWEDEN - Swedish Match AB completed its 64% purchase of General Cigar Holdings, Inc. on May 11, with General Cigar becoming a private company. Stockholders received $15.25 per share. The transaction followed an overwhelmingly favorable vote by the General Cigar stockholders at a special meeting held on May 8th, 2000.

The Cullman family retains ownership of the remaining 36% and will continue to manage the enterprise.

The closing took place in New York, where Edgar M. Cullman, Jr., General Cigar's chief executive officer, and Swedish Match chief executive officer Lennart Sunden said, "We celebrate our constructive work together, and look forward to our continuing cooperative efforts in developing the global premium cigar business in the future."

General Cigar produces the number one selling premium cigar in the United States, Macanudo, and several other leading premium brands in the US, including Partagas, Punch, Hoyo de Monterrey, and Cohiba. Swedish Match is an international group and manufactures a broad range of tobacco products, matches and disposable lighters which are sold in approximately 140 countries.


Fuente "Seconds" 100% Fake
Company Fights Latest Counterfeiting Outbreak


TAMPA, FL - In a letter sent to all Fuente and Newman retailers, Carlos Fuente, Sr. and Carlos Fuente, Jr. explained that the company does not release any second-quality cigars in an attempt to warn retailers of counterfeit "Arturo Fuente Seconds," which have been showing up at tobacconists during the past several months.

The Fuentes said that any cigars that do not meet their standard for release are either destroyed or given to employees for personal use. In order to curb the proliferation of counterfeiting, the Fuentes have adopted a policy to eliminate any retailer caught selling counterfeit Fuente cigars from their retail program.

The measure was taken by the Dominican Republic-based producer to help alleviate what it is calling a "widespread problem."

"If anyone offers you 'Arturo Fuente' seconds - or any other counterfeit Arturo Fuente cigars- please bring this matter to our attention as soon as possible," the manufacturer has asked retailers.

Fuente isn't the only mid-sized manufacturer battling counterfeits recently. Nicaragua-based Padrón has also notified retailers of counterfeit Padrón 1964 Anniversary Series that have appeared in bundles in California, and most recently in carefully recreated boxes on both Internet retail and auction sites.


Oliver Twist Teams With RBJ Sales

DRESDEN, TN - Danish smokeless tobacco manufacturer House of Oliver Twist has named RBJ Sales, Inc., of Dresden, Tenn. as the primary importer and distributor of Oliver Twist smokeless tobacco products.

The two family-owned companies will join efforts in distributing and promoting the unique Danish smokeless tobacco products on the American market. The agreement is effective as of June 1st.

House of Oliver Twist, based in Odense, Denmark is owned by the Danish Nielsen family. RBJ Sales, Inc., is owned by the Stoker family.

Oliver Twist smokeless tobacco will still be available through distributors like Arango, H.J. Bailey, Phillips & King and other distributing companies, but retailers with additional questions may contact RBJ Sales, Inc. at (888) 243-9377.


800 JR Cigars Posts Increase in Profits, Sales in 1999

WIPPANY, NJ - Tobacco retailer and distributor 800 JR Cigar, Inc. announced positive year-end results for fiscal 1999.

The company's net sales were $317 million for 1999, up from $286.5 for 1998, or an increase of 10.6%. Retail sales increased 3.1% to $160.5 million for 1999 from $155.7 million in 1998. The increase in retail sales was due primarily to a $7 million, or 27.3%, increase in retail cigar store sales from 1998, and $3.7 million of Internet sales which did not exist in the prior year. These increases were partially offset by a 9.4% decrease in mail order sales.

Wholesale sales increased 19.7% in 1999 to $156.5 million from $130.8 million in 1998. The increase was attributed primarily to a $25.1 million, or 34%, increase in cash-and-carry cigarette sales.

Gross profit was $55.3 in 1999, up 4.7% due to the increase in sales volume. As a percentage of net sales, gross profit decreased to 17.4% for 1999 from 18.4% for 1998, primarily due to greater sales of lower margin cigarettes and an unanticipated slackening in the demand for premium cigars.

"We are encouraged by the continuing rebound in our quarter-to-quarter earnings," said company president and c.e.o. Lew Rothman.



SMOKESHOP - June 2000