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August,
2006

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

Supreme Court Confirms General Cigar's Ownership of Cohiba Trademark in the U.S.

NEW YORK, N.Y. - The U.S. Supreme Court has denied Cubatabaco's petition for review in the dispute over ownership of the Cohiba trademark in the United States.

As a result of the Supreme Court's June 19, 2006 ruling, the February 2005 decision of a United States Circuit Court of Appeals, which confirmed General Cigar's exclusive ownership of the Cohiba mark in the United States, is final and is law of the case, a General Cigar statement declared.

The ruling "affirms what we have believed all along," said Gerry Roerty, vice president and general counsel of General Cigar, "that Cubatabaco had no standing to challenge General Cigar's ownership of the Cohiba mark in the United States. Now that the Supreme Court has confirmed that General Cigar is the only legitimate owner of the Cohiba brand in the United States, we will enhance our ongoing nationwide initiatives against manufacturers, distributors and retailers of counterfeit Cohiba cigars."

General Cigar received its first registration of the Cohiba trademark in the United States in 1981, and obtained an updated registration in 1995. The company has been selling its Dominican Cohiba cigar in the United States for more than two decades.

Cubatabaco filed the lawsuit in 1997 against General Cigar, claiming rights to the Cohiba name in the United States under U.S. law and international treaties, although Cubatabaco had failed to take any legal action against General Cigar for nearly 20 years.

In response to the Supreme Court ruling, Cubatobacco announced it will continue to fight for the rights to the Cohiba trademark in the U.S. It has applied for U.S. government permission from the Treasury Department's Office of Foreign Assets Control, which administers the U.S. blockage on trade with Cuba, to seek judicial protection for the trademark despite the blockade. A court of appeals in New York state vacated an April 2004 U.S. District Court in New York judgment in Cubatobacco's favor on the ground that a U.S. government license was needed to grant relief to Cubatobacco.


Engle Class is Decertified, Punitive Damages Removed

TALLAHASSEE, FLA. - The latest decision handed down in the long-running Engle case was largely good news for the industry. The highly anticipated legal ruling went in favor of cigarette manufacturers in July when the supreme court of Florida upheld a decision to disallow a massive punitive-damages award against cigarette makers.

Major cigarette manufacturers including Philip Morris, Reynolds American, Loews, and Vector Group won't have to pay $145 billion in punitive damages. The Florida supreme court agreed with a lower-court ruling that the case shouldn't have been certified as a class action and said the award was excessive.

In 1994, a doctor named Howard Engle and a small group of other plaintiffs sued cigarette makers and the case eventually went to trial. In 2000, a jury said manufacturers had lied about their products and assessed the huge monetary penalty, but an appellate court threw out the $145 billion award in 2003.


Partners form Panama Tabac Group S.A. Amid Growing Interest in Panamanian Cigars, Leaf

TAMPA BAY, FLA. - Two principals of the cigar industry have joined together in a new company in response to increasing demand for their product lines, both in the U.S. and overseas. The new venture, Panama Tabac Group S.A., made its first public appearance at the Retail Tobacco Dealers of America (RTDA) convention in Las Vegas in July.

Fred A. Edwards of J. Donovan Leigh, Ltd. and David Reynaga of Joyas de Panama S.A. have brought their experience together to promote Panamanian tobacco and cigars. "By combining our expertise and experience, we will be able to bring the long held secret of the great quality of the Panamanian tobacco product to the cigar connoisseurs around the world," said Reynaga.

Edwards has been in the tobacco business over 30 years. His family began growing tobacco in Kentucky in the late 1700's and he has continued the tradition of growing, blending, and marketing tobacco products. "I believe the Panamanian tobacco and cigars are one of the enigmas of the tobacco world," Edwards says. "Its quality far exceeds many other well-known tobaccos and that is a shame for the cigar smokers who have not experienced this great product."

The partner's first goal is to increase the promotion and sales of the current line of cigars produced at the Joyas de Panama factory. "We need to increase the awareness of not only our line of cigars, but also the factory and influence of Miriam Padilla," says Reynaga. "Ms. Padilla was influential in the establishment of the cigar business in Panama, and has carried her knowledge and experience forward to our new company."

Edwards said they will also develop new blends that he believes will be "ranked among the world's finest cigars."


Judge Kessler Issues Dept. of Justice Tobacco Lawsuit Opinion; Appeals Could Take "Years"

On August 17th, U.S. District Judge Gladys Kessler issued her long-awaited opinion in the Justice Department's civil racketeering lawsuit against eight leading cigarette manufactures, prescribing a number of non-financial remedies. None of them will be enforced until the company has exhausted all of its appeals, however, according to Citigroup tobacco analyst Bonnie Herzog.

Kessler ruled the that manufacturers must make corrective statements on the negative health effects of smoking, the addictiveness of cigarettes, the lack of health benefits associated with "light" or "low tar" cigarettes, the exploitation of cigarette designs to optimize nicotine intake, and the negative side effects of secondhand smoke. The statements would be required on the defendants' corporate websites, on prominently visible "countertop displays," at the point-of-sale, on "onserts" on each pack of cigarettes, published in the Sunday edition of most all major newspapers in the U.S., and broadcast in 15 second advertisements on a major television network.

Manufacturers are prohibited from any false or misleading statements that misrepresents information regarding cigarettes, including health and safety, and persuades people to buy cigarettes. The use of "light," "ultra light," "mild," or "low tar" as health descriptors is forbidden.

"We are fairly optimistic that the higher court will find that Judge Kessler over stepped her judicial boundaries with the remedies she ordered, such as limiting what descriptives are available to the industry to label their products," says Herzog. "This is the role of the federal government."


Crossline Distributors, Phillips & King Merge

MOORPARK, CALIF.- Hugh Cassar, chairman of Phillips & King International, and David Filipenko, president of Crossline Distributors of Blaine, Washington, announced in June the joining of the two companies to create "the industry standard" full-service distributor of specialty and imported tobacco products including cigarettes, cigars, pipe tobacco, and accessories. The move expands the one-stop resource capabilities of the previous groups, while continuing their practice of extremely competitive pricing, fast efficient ordering, and same-day shipping.

Centralized fulfillment from Phillips & King's expanded warehouse in Moorpark, Calif., creates new efficiencies in same-day order completion. Former Crossline sales operations in Blaine, Washington, are now managed from Phillips & King's offices in Moorpark.

Salesperson responsibility changes have resulted in a more efficient service organization for the company's newly expanded customer base. Crossline online customers are now directed to the newly-created and feature-filled Phillips & King web site to track and place orders, receive special online promotions, and view the companies extensive product catalog.

Retail customers now benefit from a broader product selection of nearly 9,000 tobacco items and accessories in stock. Economies of scale allow the company greater buying power with existing and future vendors.

"Phillips & King and Crossline have been competitors as well as partners for a number of years, doing wholesale business across a wide range of products," said Cassar. "The more we talked about joining forces, the better the idea of combining Crossline with P&K sounded to both of us."

Specialty cigarette and little cigar segments have been growing at more than 10% in 2006 while the mainstream tobacco categories have experienced little to no growth, notes Cassar. The larger Phillips & King better is positioned to provide these higher quality tobacco products customers are looking for.


Stanford J. Newman Dies at 90

TAMPA, FLA - J.C. Newman Cigar Company leader Stanford J. Newman, an icon of the Tampa cigar industry, died peacefully on August 19 after experiencing cardiac arrest while working at his office. "Loved by all who knew him, Stanford was a leader, a mentor and a visionary who will be truly missed," said Newman's family in a statement. Starting with the company in 1934 and having just celebrated his 90th birthday in June, Stanford was the oldest cigar man in the business, having remained firmly active in the company business, the only cigar manufacturer since 1895 still owned by its founding family. As chairman of the board, he continued to work everyday and oversaw every aspect of the Tampa-based cigar manufacturing operation.

Born in Ohio in 1916, the son of an immigrant cigarmaker, Newman once said, "To be successful in business, you have to have some original ideas. Besides working hard, you have to be innovative."

Newman worked his way through Case Western Reserve University selling cigars for his father, J.C., in downtown Cleveland, working strictly on commission. After three years in the Army Air Corps as an airplane engine mechanic, he returned to the family business with his brother, Millard.

The family made cigars for more than five decades before deciding to move south in 1953 to be closer to Cuba, the primary source of the company's tobacco. Newman's father sent him to scout a vacant factory: the Ybor City clock tower, where the business still resides today.

At the turn of the 20th century, the cigar business Newman's father ran was notably different from others of the era: He hired employees who operated machinery rather than hand rolling cigars. Buying the Cuesta-Rey brand in 1958 made the family a national competitor. Newman's Cuesta-Rey cigar No. 95 put the company on the map when it became the top selling premium cigar in the United States in the mid 1960s.

In the 1990s, Stanford shifted the focus from machine-made brands to high-end, premium, hand-rolled lines in time for the next cigar boom.

"His life bloomed in the last decade," said Eric Newman, the company's president.

Newman served as president of the Cigar Manufacturers Association of Tampa for 20 years, frequently reminding legislators that cigars were Florida's home industry and should not be taxed, son Bobby said. He was named Florida Entrepreneur of the Year by Ernst & Young in 2001.

He was a 40-plus-year member of Ye Mystic Krewe of Gasparilla, a member of the Tampa Yacht and Country Club, a former board member of Congregation Schaarai Zedek, and past board member and treasurer of Berkeley Preparatory School. In addition to his two sons, Newman is survived by his wife of 60 years, Elaine, and three grandsons.

Contributions may be sent to the Cigar Family Charitable Foundation, www.cf-cf.org, P.O. Box 76246, Tampa, Florida 33675 or the Elaine Newman Scholarship Fund at Berkeley Preparatory School, 4811 Kelly Rd., Tampa, Florida 33615.


Tobacco Plus Expo, Reflecting Wider Scope, Replaces N.A.T.O. Conference & Expo

LAS VEGAS - Reflecting the expanded direction of the former N.A.T.O. Conference & Expo, the annual Las Vegas trade show that has targeted tobacco outlets as well as other tobacco retail channels, has been renamed the Tobacco Plus Expo.

Endorsed by the NATO Association and Tobacco Outlet Business magazine, Tobacco Plus Expo will target a much broader focus for both exhibitors and retail buyers. The core of tobacco outlet membership will likewise be expanded to other classes of trade where tobacco products are sold. Tobacco Plus Expo is the largest retail tobacco event in the U.S. that attracts thousands of retailers and wholesalers. The exhibit hall has consistently attracted more non-tobacco products, which in turn has attracted more retailers and wholesalers in the convenience store, tobacconist and supermarket categories.

"Tobacco Plus Expo is a name that describes the future growth of the show," said Marilene Rivera, sales manager at Reuter Exposition Services. "It represents expansion for both exhibits and attendance."

Tobacco Plus Expo is an important event for anyone in the tobacco industry that derives revenue from tobacco and tobacco products. But exhibitors that sell non-tobacco items have been also very successful at recent shows, with many expanding their exhibit space to accommodate more merchandise.

International participation continues to be an important growth factor for Tobacco Plus Expo. The most recent show in March drew participants from 22 countries outside of the U.S. These international buyers represent a large percentage of sales for manufacturers of both tobacco and non-tobacco products. Show dates for Tobacco Plus Expo are April 26-27, 2007 at the Las Vegas Convention Center in Las Vegas, Nev.

Contact: Marilene Rivera, Sales Manager, Reuter Exposition Services, Tel: (888) 737-3976, Fax: (203) 483-5778, Email: marilene@reuterexpo.com, Web: www.tobaccoplusexpo.com.



SMOKESHOP - August, 2006