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Oct./Nov.
2001

TOBACCO INDUSTRY NEWS

Esteli Cigar Pushes for Major Expansion
New Pre-Industry Facility Opens; More Farmland Acquired


ESTELI, NICARAGUA - Kiki Berger, tobacco grower and manufacturer of premium cigars in Estelí, Nicaragua, has more than doubled his holdings in tobacco farmland, with the acquisition of some of the most fertile land in the area. Berger has also completed construction of his 11,000 square-foot pre-industry building for the preparation of tobacco leaf; prior to bunching and rolling.

Both are the first stage in Berger's comprehensive plan to enlarge his total operation to match some of the largest cigar factories in Central America. His Esteli Cigars, S.A. factory has been producing private label cigars for some of the best-known boutique brands, including Cupido Cigars and 5 Vegas. Berger also just introduced the first cigar under his own name, the Don Kiki 2000 Limited Reserve.

"The growth of Cupido, 5 Vegas, and our other lines has severely strained our farm and factory output," reports Berger. "The introduction of the first of my new line of Don Kiki cigars at RTDA Tampa, mandated the expansion.

"The new farm was a real find," Berger says. "Its 250 acres have not been tilled in sixty years, and has only had cattle on it, so the land is fertile beyond belief. It is right across from my other eighty acres of tobacco land, on the outskirts of Estelí." Berger has cleared the land and has planted Havana Criollo, the same tobacco used for wrapper on the new Cupido Criollo cigar. Berger says this member of the Corojo strain is first-generation Cuban-seed tobacco, imported directly from the island.

The new pre-industry building is state-of-the-art, employing a straight-through flow pattern for efficiency. Bulks of aging tobacco leaf - pilons - occupy a storage area in the front end of the line. Workers then sort, vein-strip, ferment, and combine the leaves into hands for bunching. These hands exit the other end, into the yet-unbuilt factory. Phase two, a Cuban-style curing barn, is now under construction. Following this, the modern factory and Berger's residence will complete the project.

"The expansion in my facility is ambitious, but the existing and future growth of the Esteli Cigars demands it," says Berger. "The comprehensive upgrade should take the company well into the 21st Century."


Arango Expands Warehouse Space by 45%
NORTHBROOK, IL - Arango Cigar Co. has announced a 45% expansion in their new warehouse facility in Northbrook, Illinois. Arango moved to this larger building in July, 1998. Mike Gold, president of Arango, reports completion of a 6,500 square-foot addition to the existing 14,000 square-foot warehouse, office, and showroom for retailers. The expansion also doubles the number of loading docks from two to four, to expedite movement of the larger volume of products the company now distributes.

"We were pleasantly surprised to outgrow our new building in such a short time," says Gold. "The marketplace success of several of our product lines has far surpassed even our optimistic projections for Arango's growth."

Gold cites a doubling in sales of several roll-your-own (RYO) tobacco and accessory lines, including tobaccos from Peter Stokkebye International, as a major contributing factor. Arango saw a 15% growth in Smokers Candle, a product designed to eliminate smoking odors, as well as Credo humidification products including the new Pipe Rondo, a humidification element designed for pipe tobacco jars. Arango is Credo's sole U.S. importer.

Arango has also teamed up with Alfred Dunhill Pipes, Ltd., to import and distribute many of Dunhill's accessory items previously distributed by Lane, Ltd., including flints for all Dunhill lighters.

Arango Cigar Co., established in 1932, is a full-line national distributor of the entire spectrum of smoke shop items, including cigars, pipes, tobaccos, and accessories.


Canada's Rothmans Inc. to Acquire Santa Fe Natural Tobacco Company for $275 Million

TORONTO - Rothmans Inc. announced that it has entered into an agreement to acquire 100% of the shares of privately-held Santa Fe Natural Tobacco Company, inc. of Santa Fe, New Mexico for $275 million.

Santa Fe, which was founded in 1982, manufactures additive-free Natural American Spirit products. Over the past five years, the company has shown strong growth in volume and net sales.

The company's products are sold in the U.S. and other profitable worldwide markets including Japan, Australia, continental Europe, and the United Kingdom. Approximately 80% of its sales are in the U.S. through about 400 wholesale distributors and 39,000 retailers, representing approximately 8% of the available sales outlets in the country. Santa Fe's c.e.o., Robin Sommers, and executive vice president, Leigh Park, have agreed to maintain those positions until December 31, 2002, upon completion of the offer. It is expected that Sommers will join the board of directors of Rothmans, Inc.

"Santa Fe has grown sales at a compound annual rate of more than 34%... since 1996, but we believe there is still great potential for future growth since its current sales represent less than 1% of the massive U.S. cigarette market and its international distribution is in the early stages of growth," said John Barnett, president and c.e.o. of Rothmans, Inc.

The purchase price is subject to adjustment based on Santa Fe's financial performance until the end of 2005. The transaction is subject to approval by Santa Fe shareholders, regulatory approval, and completion of due diligence by Rothmans.

Rothmans Inc. is a publicly traded Canadian company that operates through 60%-owned Rothmans, Benson & Hedges, Inc., Canada's second-largest tobacco company.


Grand Opening of New Tabacalera Perdomo Headquarters Marked with Celebrations

MIAMI LAKES, FL - Tabaclera Perdomo celebrated the relocation of its corporate headquarters to a larger facility in Miami Lakes with a weekend of festivities on Fried, July 27 and Saturday, July 28.

Dubbed "insanity weekend" by Tabacalera Perdomo's director of marketing, Billy Perdomo, the celebration was kicked off with a "Cigar Gala to Remember," a cigar dinner at Don Shula's Steakhouse in Miami Beach on Friday night. A five-course meal was served to a standing room-only crowd of 83 people.

On Saturday, Perdomo's new headquarters and showroom was opened to the public. "We had in excess of 200 people in the showroom," said Nick Perdomo, Jr., president and c.e.o. Three radio personalities broadcast live from the facility, including former sports radio personality and former Miami Dolphin Jim "Mad Dog" Mandich. Tours were given of the walk-in humidor, and Bacardi Corporation served Hatuey Beer, Bacardi 8 Anos rum, Bombay Sapphire gin, and the new Bacardi "O" rum. Boxes of cigars and sports memorabilia were raffled hourly.


German Inter-Tabac Show Maintains Size
DORTMUND - Despite opening only days following the terrorist attacks in the U.S., attendee levels at the annual Inter-tabac trade fair held in Dortmund, Germany nearly matched those of last year. Show producers note that 5.5% of attendees came from North America, and over 13% came from outside Germany, making attendance at this year's show a strong statement in light of September 11 events. In all, 4,121 visitors were in attendance.

Particular demand was seen for cigarillos and cigars (60.1% of visitors were primarily interested in these), smokers accessories including lighters and ashtrays (53.9%), cigarettes (35.2%), and fine cut/pipe tobacco (33.2%).


Swedish Match Restructures Cigar Operations; Aquires European Dry Snuff Business

STOCKHOLM - Swedish Match said it will concentrate its Belgian cigar manufacturing operations at its production facility in Houthalen, Belgium, and Pandaan, Indonesia. This restructuring will result in a reduction of the Belgian manufacturing workforce by approximately 160 employees.

The integration of the company's two Belgian operations in Houthalen and Overpelt and concurrent manufacturing investments are part of an ongoing effort to modernize and improve efficiencies in the company's manufacturing units.

Swedish Match also announced its purchase of the smokeless tobacco trademarks of Premium Tobacco Traders Ltd., including Singelton and Rumney's. With this purchase Swedish Match will market dry snuff products in Germany, Switzerland, and France. These products have previously been distributed by the Burger group.

"This transaction further enhances our position as the only worldwide player in the smokeless tobacco category," said Lennart Sundén, c.e.o. of Swedish Match.



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