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August 1998
Volume 25
Number 4

RETAILER & TOBACCO INDUSTRY NEWS (cont.)

U.S. Colibri Group Acquires Colibri England
Reunites Brand Worldwide After 30 Years

In March, the Colibri Group of Providence, Rhode Island, acquired Colibri England, enabling the company to sell its branded products worldwide. The Colibri Group purchased the Colibri brand name from Colibri of London, England, in 1968 for exclusive sales in the U.S.

Colibri England's current sales are through distributors in 45 countries in addition to the U.S. and duty free shops. The Colibri Group will maintain its international sales office in London under the leadership of Howard Hodgson, former chief executive of Ronson International. Warehouse and worldwide distribution functions will be transferred to Rhode Island. In addition, all export sales will also be managed from the Rhode Island facility. The acquisition will create approximately 30 new positions, Colibri says.

"We intend to promote Colibri as a worldwide, mid-priced luxury brand," said Fred Levinger, c.e.o. of the new international Colibri Group.

Colibri is the leading gift lighter, pocket watch, and men's jewelry brand in the U.S., as well as a world leader in writing instruments. The Colibri Group, which also sells the Van Dell, Krementz, Shiman, Dolan & Bullock, and Linden brands, posted $90 million in sales in 1997. The company employs 650 people and has three locations in Rhode Island including its headquarters; a factory in Newark, New Jersey; and a new international sales office in London.

Blue Mold Threatens Northeast Tobacco Crops
Blue mold fungus is once again threatening the tobacco fields along the Connecticut River. The fungus, which hit Connecticut farms harder than those in Massachusetts last season, was discovered in a field and greenhouse in Hadley, Mass., in June.

In 1997, the blue mold outbreak destroyed almost 30 percent of the total Connecticut Valley crop and up to 40 percent of the shade tobacco grown in Connecticut. While no sign of the fungus has appeared in Connecticut fields thus far, agriculture officials are keeping a close watch throughout the river valley on the delicate shade tobacco. According to James LaMondia, a plant pathologist at the Connecticut Experimental Station in Windsor, Conn., the source of this new contamination is unclear.

Blue mold thrives in wet, humid conditions and is spread primarily through the air. This year's wet weather has caused it to spread farther and faster, according to researchers at the North Carolina State University. Until last summer's Connecticut outbreak - the first in 20 years - the deadly blue mold spores were rendered impotent by the heat of late summer by the time they reached the Connecticut Valley.

Nat Sherman Ad Campaign Promotes Industry Pride
Nat Sherman, legendary tobacconist and cigar manufacturer since 1930, has unveiled a new ad campaign, appealing to the professional pride of all who are involved in the business of selling tobacco.

The headline of the two-page spread ads, featured in a number of industry publications, is a quote from the company's founder from 1931: "I don't just sell cigars. I'm a Tobacconist." The body copy adds, "The Tobacconist knows to respect himself and his profession and proves every day that tobacco is an art." The idea of the ad is to promote pride in the tobacco industry and to remind tobacconists that conducting business "with high professional standards of ethics and expertise will yield personal rewards no one can tax or legislate."

This theme was also voiced by Joel Sherman, president of Nat Sherman, in his speech to retailers at the TAA's 30th anniversary convention in April. He challenged tobacco shop owners to recognize that "ego keeps us going" and that retailers have to take responsibility for their rights and their future success.


Victor Sinclair Creates Retail Store at New Florida Golf Resort
Victor Sinclair Cigars will open its first retail store this fall at the World Golf Village, a new, world-class golf resort in St. Augustine, Florida. The store will offer a wide selection of the company's extensive line of products as well as other popular cigar brands and tobacco-related products.

The 1,500-square-foot store will feature a glass-enclosed, humidified cigar storage area, fitted with Spanish cedar shelving able to hold 125-150 open boxes; wood and glass display counters; clothing displays; a bar; and private cigar lockers. A cigar lounge with a big-screen TV and comfortable couches and chairs is also planned.

"We are proud to be the tobacconist at the World Golf Village," said Victor Long, president of Victor Sinclair. "We have found that the golfing public is a very attractive niche market, and opening our first retail location at golf's new home is a tremendous opportunity."

Victor Sinclair Cigars has a long relationship with the sport of golf including its sponsorship of PGA touring pro Jimmy Johnston, who carries a Victor Sinclair Cigars golf bag on tour and distributes samples of the company's brands to players, and Nike Tour player Brent Schwarzrock. The company also supplies the Tournament Players Championship (TPC) network of golf courses with products, makes private-label brands for events such as the Presidents Cup, and stocks humidors for a number of noted courses including Sea Island and Augusta National.

World Golf Village, which opened in May, is the centerpiece of the Saint Johns Development, a 6,300-acre planned community. The resort will include the 75,000-square-foot World Golf Hall of Fame and Imax Theater and the PGA Tour Production's new headquarters.


Cigar Glut Continues to Hold Down Profits
According to some of the major manufacturers, the glut of premium cigars that has caused overstock conditions throughout the industry is not dissipating as quickly as was hoped. As a result, manufacturer's sales of tobacco products are recovering at a much slower rate than was anticipated.

Swisher International Group, Inc., one of the world's largest manufacturers of cigars, has shown slightly improving sales of mass market large cigars and continued growth of little cigars, but their premium cigar segment is recovering more slowly than expected. Sales of chewing tobacco and moist snuff are also softer than anticipated. The company projects that as a result of these factors, earnings in 1998's second quarter, while exceeding first quarter earnings per share, will fall below last year's results as well as analysts' current projections.

The slower than anticipated sales revitalization has also caused Consolidated Cigar Company's rating to be downgraded by industry analysts. The company went from neutral to a speculative buy according to Michael R. Lehmann of Robert M. Cohen & Company. Lehmann noted that Consolidated's earnings pre-announcement confirmed his concern that the glut of cigars in the market was still at higher levels than expected.

As the company expected, General Cigar Holdings, Inc.'s earnings per share for the second quarter were lower than analysts' estimates. The company recently reported a second quarter net income of $.24 a share. While not reaching analysts estimates of about $.30 a share, the company did show an increase in net income and sales over last year's second quarter.

According to Edgar M. Cullman, Jr., president and c.e.o. of General Cigar Holdings, the company believes the oversupply of premium cigars is beginning to diminish as retailers and wholesalers balance their inventories against demand. "We anticipate a more orderly marketplace but one that is increasingly more price sensitive than we experienced in 1997," said Cullman. "However, in retrospect, 1997 was a very exuberant year in the cigar industry and we may find it difficult to equal our performance again in 1998."


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