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June,
2010

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

Scandinavian Tobacco Group, Swedish Match Cigar Merger Advances
as Parties Sign Transaction Contract


Washington, DC - Moving one step closer in their efforts to form the second-largest cigar company in the world, Skandinavisk Holding A/A and Swedish Match AB signed a transaction contract in April to join their cigar operations and form a new, jointly-owned company.

Skandinavisk Holding will contribute its Scandinavian Tobacco Group (STG) with all its tobacco businesses (cigars, pipe tobacco, and fine cut tobacco) and will hold 51 percent of the shares in the new company. Its leading cigar brands include Café Crème, Henri Wintermans, Colts, Mercator, and the brands of C.A.O. International. Its leading pipe tobacco brands include Erinmore, Clan, W.Ø. Larsen, and Peter Stokkebye.

Swedish Match will contribute all its cigar business including General Cigar Company (but not its U.S. mass market cigars nor its minority stake in the German cigar company Arnold André), as well as its pipe tobacco and accessories business and will hold 49 percent of the shares in the new company. Its leading cigar brands include La Paz, Macanudo, and in the U.S. Partagas and Punch, as well as pipe tobacco brands Borkum Riff and Half & Half.

The combined entity will also distribute lighters and matches in selected markets.

The new company will be named Scandin­avian Tobacco Group. Anders Colding Friis, c.e.o. of the existing STG, will become c.e.o. of the new company which will be headquartered in Denmark.

“This is a major step towards our ambition to become a world leader in cigars and a leading player in smoking tobacco,” says Friis, “The new Scandinavian Tobacco Group will be a truly global company, with an outstanding brand portfolio, increased scale, and a much stronger platform from which we can drive growth and profitability.”

The new company will be a leading player in a number of markets in Europe within cigars and pipe tobacco and will hold about 30 percent of the U.S. premium cigar market. The completion of the transaction is subject to competition authority approvals which are expected to occur during third quarter of 2010.


Rocky Patel Buys 50% Stake in EO Brands,
Assumes Distribution of Espinosa y Ortega from Miami Cigar & Co.


Bonita Springs, FL - Rocky Patel Premium Cigar Co. of Bonita Springs, Fla., has purchased a 50 percent ownership stake in United Tobacco Distributors Co., a.k.a. EO Brands / Espinosa y Ortega. Effective May 10, Rocky Patel took over distribution of all EO cigar brands - 601, Cubao, Murcielago, San Juan y Martinez, and Panama Red - and now handles all sales and marketing. The cigars will continue to be made at Pepin Garcia’s My Family Cigars in Nicaragua, and EO Brands principals and founders, Erik Espinosa and Eddie Ortega, will continue to operate the company.

According to Patel, the partnership will provide a long-term opportunity for growth and broader and deeper range of EO Brands products, while immediately affording retailing customers greater customer support and resources and streamlined service from Rocky Patel sales offices. Ortega explains that Patel’s distribution networks will reduce his distribution costs and allow him to reduce his cigar prices.

Rocky Patel manufactured the first two cigars launched by EO Brands in 2005 - Vibe and Reo, both of which had been discontinued several years ago.


Augusto Reyes Relaunches U.S. Operations, Brands

Fort Myers, FL - Long-time Dominican Republic tobacco grower and cigar maker Augusto Reyes Sr. is relaunching his family’s cigar business in the U.S., developing new premium brands and blends that will debut in coming months and establishing new U.S.-based import, sales, and distribution company to service all retail accounts.

Reyes, who is president of the Santiago-based cigar factory Corporacion Cigar Export has established an entirely new U.S. division called Augusto Reyes Cigar Company, Inc. in Fort Myers, Fla. The new firm, which includes a bonded warehouse and distribution center, will handle all U.S. imports and all U.S. and European sales. All distribution and retail sales will be restricted to brick and mortar tobacco shops. Reyes’ son, Augusto Jr., serves as president of this new U.S. company, while Keith Hager, a cigar industry veteran previously with Heavenly Cigar Co., has been named vice president of sales and is the agent for all retail accounts.

The Reyes family has operated its family-owned tobacco growing and leaf brokerage businesses in the Dominican Republic for over 156 years, currently in its sixth generation, and opened its first cigar factory there 20 years ago. The family’s renewed focus on building its own brands in the U.S. market coincides with Augusto Sr.’s decision to hand the reigns to the next generation. “There’s been a changing of the guard,” says Hager. “Augusto Senior is transitioning Junior into the position of taking over everything. He’s always going to be around, but he’s really wanting his son to take over the whole business.”

Augusto Reyes Cigar Co. will be launching three different blends for retail, all produced entirely from tobaccos grown by the Reyes family on their 900 acres of farmland: Augusto Reyes Bundles, Augusto Reyes Signature Series, and Augusto Reyes Sixth Generation. At the 2010 IPCPR Trade Show, the company will be offering a new line called August Reyes Vintage Series. Each blend will have four sizes, presented in boxes of 20 cigars - robusto (5 x 52), Churchill (7 x 48), torpedo (6 x 52), and toro (6 x 54). Per-stick pricing is expected to be in the $5 to $7 range.

Augusto Reyes Cigar Company, Inc., 17162 Alico Center Rd., Fort Myers, FL 33967, Tel: (727) 271-3345, Fax: (239) 689-8226, www.augustoreyescigars.com


Beach Cigar Group Takes Over Cojimar Distribution

Miami - Beach Cigar Group has taken over distribution of Cojimar flavored cigars from the brand’s owner and manufacturer, Rose Perez, and is in the process of acquiring the company itself. Warehousing and distribution of Cojimar cigars was immediately transferred to Beach Cigar’s Miami facilities and Kaizad Hansotia, owner and c.e.o. of Beach Cigar Group and its ultra-premium Gurkha brand, anticipates the acquisition will be complete year-end.

“This will be an excellent addition to our product line,” says Hansotia. “We have always admired their cigars.”

Cojimar Cigars come in an wide variety of flavors and are handmade from Dominican filler, Honduras binder, and are capped with a distinctive sugar-coated tip. Cojimar, which for the last 15 years has been one of the top selling flavored cigars in the industry, will automatically add over 3,000 stores to their distribution network with this union. Perez will continue to manufacture Cojimar cigars at her Dominican Republic factory, and no immediate changes are planed to the product line, but Hansotia promises “big plans” for the brand in the future.


CRA Says “Vote Pro-Tobacco” in Nov. Elections

Fairfax, VA - Cigar Rights of America has launched the largest cigar enthusiast’s political effort in history: Smoke the Vote 2010. This will be the first national effort to truly impact elections on November 2, 2010, from the cigar enthusiast perspective. “It’s a process. We may not change every seat we wish, but it starts - now,” says CRA executive director Glynn Loop.

On November 2, every member of the U.S. House of Representatives and 36 members of the U.S. Senate are up for election. In addition, critical races for Governor are being held in 37 states, including major races in states such as Arizona, California, New York, Pennsylvania, Illinois, Massachusetts and Michigan.

The Smoke the Vote Grassroots Network free, and quick and easy to join: every passionate cigar smoker in America merely any pro-cigar enthusiast just needs to provide basic contact information at www.cigarrights.org in order to change some elections.

“We can begin the process of rolling back taxation, smoking ban regulations, appeal for amendments to existing law, and send a message,” says Loop, adding. “We are entering a pivotal time in protecting one of the great pleasures of life - a fine cigar.”


Reynolds American Consolidates Cigarette Facilities
and Expands Smokeless Manufacturing Operations


Tobaccoville, NC - In an effort to maximize cigarette-manufacturing efficiency and expand its smokeless tobacco production capacity in response to falling cigarette sales and rising smokeless sales, Reynolds American Inc. is making changes to several of its operating company’s manufacturing facilities.

The company will close two older cigarette factories and transfer production to R.J. Reynolds Tobacco Company’s largest facility in Tobacco­ville, N.C., starting this summer. Its Whitaker Park plant in Winston-Salem, N.C. will cease production in mid-2011, while production at an affiliate in Yabucoa, Puerto Rico will be transferred by the end of August 2010.

Meanwhile, Reynold’s American Snuff Company subsidiary is expanding its smokeless tobacco processing and manufacturing capacity. Construction began in April for a new $133 million factory in Memphis to replace the company’s current 1904 facility which will close in 2012, while its Clarkville, Tenn. plant is being upgraded to increase tobacco processing and dry snuff manufacturing capacity.

“These changes make our companies more efficient in light of the declining U.S. cigarette industry and growth in smokeless tobacco,” said Susan Ivey, Reynolds’ chairman, president and c.e.o. Ivey said the plant closings “address last year’s significant increase in the federal tax on cigarettes and new regulatory requirements.”

According to data from the U.S. Treasury’s Alcohol and Tobacco Tax and Trade Bureau, production and import of taxable cigarettes sales fell 9 percent last year while the federal cigarette tax rose by 62 cents a pack to $1.01.


Swedish Match Aims Snus at Wall Street

New York - Swedish Match says it plans to step up its snus smokeless tobacco brand marketing to consumers in the U.S., focusing on corporate workers who are forced to leave the office to smoke. The company said it will aim to double distribution of its General snus brand to about 1,200 stores domestically, ideally by year-end. In a media interview, Richard Flaherty, president of the group’s U.S. sales division, said “We are going after bankers, Wall Streeters, people who work in offices and take the elevator down and stand out in the cold for cigarettes. A perfect place for that is in New York and the big banks.” Swedish Match, which made 30 percent of its revenue slast year from snus and snuff sales, trails Altria and Reynolds American in the U.S., which distribute the Marlboro and Camel snus brands.

Swedish Match, Plasencia Group form Joint Tobacco Operation

Richmond, VA - Swedish Match AB announced it has signed an agreement with the Plasencia Group (PG) to form a new tobacco growing and procurement operation for its Swedish Match International (SMI) cigar business. Swedish Match will acquire a 20 percent interest in the newly formed Caribbean Cigar Holdings. This follows the strategic goal of Swedish Match in developing its global cigar business to be best in class. The Plasencia Group will remain in charge of operations.

PG is a family-owned tobacco growing and premium cigar production operation located in Honduras and Nicaragua, highly regarded for its leaf growing, processing, and cigar making expertise. Swedish Match International manufactures and markets both premium and mass-market cigars primarily for the U.S. market and machine-made cigars for the European and the international market.

The JV agreement provides Swedish Match International with additional tobacco expertise and increases the manufacturing flexibility of the SMI cigar business with Honduran and Nicaraguan-origin products.


Thomas F. Byrne III

This spring, the exhibition industry lost an icon in the passing of Thomas F. Byrne III. Byrne was a cornerstone in the industry, entering on the scene when trade shows were in their mere infancy and forging a 50-plus-year career.

After an honorable discharge from the Army Air Corps, Byrne landed his first job in the exhibition industry with Brooklyn, N.Y.-based Ivel Displays. Two years later, Byrne’s restless entrepreneurial spirit and growing reputation for industrial design and fabrication brought forth a partner and the founding of Structural Display Co., in Long Island City, N.Y. His renown grew nationally and internationally with his General Cigar exhibit complex at the 1964 New York World’s Fair and the simulated space shots he created for NASA.

In 1970 Byrne struck out on his own, founding Thomas F. Byrne Organization. The trade show industry continued to be his consummate passion. Taste, inventiveness, and attention to detail marked all the exhibits he created. During the 1980s and 1990s, TFBO representing a majority of the prominent tobacco companies in the exhibition arena.

Byrne was ahead of the curve in recognizing changes in the trade show industry, creating his own modular exhibit system, designing rental pavilion concepts, and publishing the first booklet of “How To’s” for successful trade show marketing while planting the seminar roots for booth training conferences for client representatives. He served on numerous advisory boards, associations, design institutes, and executive clubs.

He is survived by his wife, 6 children and 8 grandchildren.



SMOKESHOP - June, 2010