DON'T BURY CIGARS IN ANTI-CIGARETTE TAXES AND REGULATIONS" - Norm Sharpe, Executive Director, Cigar Association of America
Challenges Ahead
by Bob Ashley

Working quietly behind the scenes of the RTDA and the industry at large, the Cigar Association of America is at the forefront of leading tobacco's battle against unruly taxation and highly-restrictive regulation. It's a never-ending battle that grows more complicated every year.

In the last two decades, the Cigar Association of America (CAA) has evolved from focusing on promoting a more positive image of the cigar industry and its customers to defending the domestic cigar marketplace before lawmakers and regulators at the federal and state levels.

"There is a greater emphasis on government relations at the federal and state levels in order to deal with issues such as higher taxes, warning labels, bans on self-service displays and continuing, intensive anti-tobacco agitation," CAA executive director Norman Sharp, told about 150 people who attended a "What's New in the Cigar Industry" seminar during the Retail Tobacco Dealers Association 69th Annual Trade Show in August in Tampa, Fla.

Sharp predicted the industry will also likely continue to face tax increases, most probably from the states. Sharp said that in 1980, only 18 states taxed cigars. Today, taxes on cigars are imposed by 44 states at rates that range from 2 percent on the wholesale price to 75 percent.

"When excise tax increases are proposed on cigarettes - whether it be at the federal or state level - chances are that cigars and pipe tobacco will also be included," Sharp said. Sharp told retailers that although the premium cigar market is not growing to the degree it did during the mid-1990s cigar boom, overall cigar sales have continued to rise for each of the last seven years - from 2.1 billion in 1993 to 3.8 billion in 2000, an increase of 82 percent.

Flat imports from ten key cigar-making countries this year are good news, Sharp said. "It suggests that the premium market is stabilizing," he said. "Today there are more cigar smokers than prior to the boom. But they tend to mirror the average - that is, they smoke less than one a day."

The association, founded in 1937, has 58 members and an annual budget of around $3 billion. Its work is done quietly in Washington, D.C. and in more than two dozens state capitals. "To some of you, our name may be more familiar to you than our achievements," Sharp said. "And that's fine, because we prefer to work quietly behind the scenes."

The association has been required to increase its presence at the state level, Sharp said, because of the demise of The Tobacco Institute after cigarette manufacturers agreed to settle the national class-action lawsuit.

"In 1980, we did not have a single lobbyist at the state level," Sharp said. "Today, we are represented in 25 states and have boosted our representation at the federal level.

Sharp said the CAA opposes Philip Morris' efforts to give the U.S. Food and Drug Administration (FCA) authority over cigarettes. "Some speculate that Philip Morris wants this for legal, competitive reasons, as well as public relations," Sharp said.

Also, Philip Morris supports bans on self-service displays because it controls most of the shelf space behind the counter, Sharp said. "Any FDA regulation of cigarettes might also lead to a ban on self-service displays at the federal level," Sharp said.

At an idea exchange following Sharp's seminar, some tobacco retailers asked that the RTDA communicate better with its members, suggesting frequent email updates from the association's executive board as well as a password-protected chat room on the RTDA website. Others expressed concerns about the effects of taxation and competition from Internet discounters.

SMOKESHOP - October/November, 2001