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June/July
1999

RETAILER & TOBACCO INDUSTRY NEWS (cont.)

General Cigar Predicts Growth in Premiums
New York - General Cigar, which announced that it has finalized the sale of its mass market cigar business to Swedish Match AB, is ready to grow its premium cigar operations.

“We continue to be very optimistic about our current and future position in the premium cigar business,” c.e.o. Edgar Cullman said at the company’s Annual Meeting in New York.

Cullman spoke of General’s four growth strategies for the future: “The first two steps will be to take market share and look for targeted, well-known niche brands to add to our extremely strong portfolio of well-known brands.” General’s third step, according to Cullman, is expanding internationally with cigars made in Jamaica, Dominican Republic, and Honduras, while the fourth step involves poising the company for growth in case trade with Cuba is opened up.

Cullman also told shareholders that he anticipated increased cash flow from reduced and better managed tobacco purchasing commitments, expense reductions, and the aforementioned growth strategies. Lastly, Cullman iterated that the company is not for sale, and will not be going private either.

The Swedish Match closing took place in New York, as Edgar Cullman Jr. and Swedish Match c.e.o. Lennart Sunden shook hands on the deal.

Among the mass market brands that were sold are Garcia y Vega, White Owl, Tiparillo, and Tijuana Smalls.

Based out of Stockholm, Swedish Match manufactures a broad range of tobacco products, matches, and lighters, which are sold in about 140 countries.

WHO Attacks Cigars, Pipe Smoking
Geneva - A study by the World Health Organization (WHO) has reported that smoke from cigars and pipes can be just as damaging to health as cigarette smoke. The group recommends that the government treat cigars and pipes like cigarettes, with advertising bans, increased taxes, and strict health warnings.

“There’s a message in this for politicians, fashion models, movie stars, and sports people who glamorize and popularize cigars and pipes by endorsing these products or smoking them in public,” commented Derek Yach of the WHO.

The study reported that cigar smokers were nine times more likely to develop lung cancer than non-smokers, and pipe smokers were eight times more likely.


Swisher International Group Inc. announced its sales and earnings for the first quarter of 1999, which ended on March 31st. Net sales for the quarter were $63.2 million, up from $60.3 million during last year’s first quarter. Net income was $7.1 million, down about 9% from $7.9 million in 1998’s initial quarter.

The Listing Qualifications Panel of the Nasdaq Stock Market delisted the securities of Phoenix, Arizona-based Premium Cigars International, Ltd. The company, a marketer of premium cigars to the mass markets, is free to trade its securities on the OTC Bulletin Board.

Miramax Films bigwig Harvey Weinstein was stopped by police at Heathrow Airport after stepping off a Concorde flight from New York to London. Weinstein had reportedly been smoking a cigar and refused to heed the pleas of fellow passengers and attendees to extinguish it. Flight attendants called police to have them meet the Concorde upon its landing. Constables questioned the media guru and a summons was issued to Miramax’s London office.


Bahia, Tabacalera Tambor Join Cigar Operations
Borhani Becomes Half-Owner in Don Douglas’ Costa Rican Factory


San Jose, Costa Rica - Tony Borhani, president of Tony Borhani Cigars and owner of the Bahia cigar brand, has negotiated a deal with his contract cigar maker, Douglas Pueringer of Tabacalera Tambor S.A., Costa Rica, to combine the two companies.

Borhani will not only be a half-owner of the renamed company - Tabacalera Bahia de Costa Rica, S.A. - but he will gain nearly exclusive access to the factory¹s production capacity. Pueringer will begin to phase out production of his two other largest contract brands over the next several months: the C.A.O. L¹Anniversaire Maduro and Estavan Cruz. In June, both companies were in separate discussions with other manufacturers to take over production of their lines. A third contract brand, the limited-production Bucanero, will continue to be produced by Pueringer, according to Robert Spoden, president and c.e.o., Bucanero Cigars, Inc.

“It all happened very abruptly,” noted Jon Huber, director of promotions and public relations at C.A.O. International. Only a week before, the company had been working on samples for an upcoming line extension.

Tabacalera Tambor has manufactured Bahia under contract for Borhani since its introduction in 1995. The C.A.O. L’Anniversaire line, produced for Nashville, Tenn.-based C.A.O. International, was introduced at last year’s RTDA trade show and has enjoyed rave reviews since its inception.

Huber said that Pueringer will assist in transferring the blends to the new manufacturers, and stressed that the C.A.O. L’Anniversaire will not change. The company expects to announce the new producer at the 1999 RTDA show in July.

CORPORATE BRIEFS
Sales Up, Income Down at Holt’s Cigar
Holt's Cigar Holdings, Inc. saw its net sales rise by 5% in fiscal 1999, but watched net income decline by 7% during the same period. “Overall growth was disappointing but was directly affected by the overall slowdown in the industry during the fourth quarter and a supply problem with our major brand,” said Robert Levin, president, who was optimistic on future performance, noting the supply issue had been resolved. Net sales for fiscal 1999 reached $30.5 million, while net income declined to $3.6 million.

Austria Tabak Buys Swedish Match Cigs
An agreement has been reached to transfer the cigarette business of Swedish Match to Austria Tabak for $558 million. Included in the deal are production facilities in Malmo, Sweden, and management, marketing, and sales operations in Stockholm. The sale of the cigarette business, which includes the Blend, Right, and John Silver brands, is in line with the company redefined strategy to concentrate on cigars and smokeless products.

DISTRIBUTION
Latin American Casinos Plans Discount Cigar Wholesaling
After two years of planning and development, Latin American Casinos, Inc. hopes to soon be selling premium cigars on a national level through major food, candy, and tobacco distributors at discounts of up to 80%.

According to c.e.o. Lloyd Lyons, this will be possible through exclusive agreements with six major cigar manufacturers which collectively produce approximately 20% of the leading premium cigars on the market today. “Our cigars are the same as name-brand cigars that currently retail from $4.75 to $10.00 each,” he said. “We package the cigars in humidity controlled, clear plastic tubes, but without the names and fancy labels, these cigars can be retailed at $1.99 to $2.50 each.” Due to an influx of orders, the company believes this venture will significantly increase revenues, net profits, and shareholder value. The company expects that cigar operations will be fully operational and profitable in the third and fourth quarters of 1999.


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