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October 1998
Volume 25
Number 5

RETAILER & TOBACCO INDUSTRY NEWS (cont.)

Los Angeles Sues Tobacco Companies Over Secondhand Smoke Warnings
In July, the city of Los Angeles, along with Preston Gates & Ellis, a private law firm, filed suit against 16 tobacco companies, accusing them of violating a California law by selling their products without warning consumers of the health risks of exposure to environmental tobacco smoke (ETS), more commonly known as secondhand smoke. The lawsuit is the first such legal action by a government body in the nation to target tobacco companies on the issue of the risks posed by carcinogens and reproductive toxins in ETS. Among the defendants named are General Cigar Holdings, Inc., Consolidated Cigar Corp., Swisher International Group, Inc., 800-JR Cigar, Inc., Lane Ltd., Havatampa Inc., John Middleton Inc., and Cuban Cigar Factory, Inc.

The suit, filed in Superior Court by Los Angeles City Attorney Jim Hahn, alleges that the tobacco companies are in violation of Proposition 65 - California's Safe Drinking Water and Toxic Enforcement Act - which states, "No person in the course of doing business shall knowingly and intentionally expose any individual to a chemical known to the state to cause cancer or reproductive toxicity without first giving clear and reasonable warning to such individuals."

Proposition 65 requires the governor to publish a list of chemicals that are known to the State of California to cause cancer, birth defects, or other reproductive harm. Chemicals are listed based on several criteria; information that already exists in the scientific literature; if the "state's qualified experts" - two independent committees of scientists and health professionals appointed by the governor - find the chemical has been clearly shown to cause harm; or if the chemical has been classified as a carcinogen or a reproductive toxicant by an organization that has been designated "authoritative." This includes the U.S. EPA or FDA. A chemical can also be listed if it is required to be labeled or identified as a carcinogen or a reproductive toxicant by an agency of the state or federal government.

According to Hahn, the governor listed tobacco smoke as a chemical mixture known to cause cancer in 1988. Since that time, 54 chemicals in tobacco smoke have also been added to the list. "The tobacco companies have been on notice that tobacco smoke posed serious health hazards to non-smokers since 1986 when the U.S. Surgeon General reported on the problem," said Hahn. "We know - and so do the tobacco companies - that there are dozens of chemicals in tobacco smoke that are carcinogens or reproductive toxicants."

In the lawsuit, Hahn cites several scientific studies on the dangers of secondhand smoke including a 1997 report from the California EPA, issued last year, entitled Health Effects of Exposure to Environmental Tobacco Smoke. It also cites a 1993 report by the U.S. EPA entitled Setting the Record Straight: Secondhand Smoke is a Preventable Health Risk.

The suit seeks an injunction banning tobacco companies from continuing to sell their products in the state without first giving a "clear and reasonable warning" of the health risks associated with secondhand smoke and conducting a court approved public information or corrective advertising campaign to inform the public that tobacco products expose non-smoking persons to the dangers of secondhand smoke. It also seeks civil penalties of $2,500 per person per day. Under Proposition 65, the potential penalties could exceed $2.5 billion in total. This figure is based on a 1997 California Environmental Protection Agency study that established the number of non-smokers exposed to secondhand smoke on a daily basis. The bulk of the money from the lawsuit would most likely go towards advertising on the dangers of ETS.

Cigar TV Acquired by Reliant Corp.
Reliant Corp., a Utah-based corporation, has acquired Kevin Harrington Enterprises, Inc., makers of the Cobee cigar lighter/cutter, and Cigar Television Network, Inc. Under the terms of the agreement, Reliant acquired all of the issued and outstanding stock of Kevin Harrington Enterprises and Cigar TV in exchange for shares of Reliant's common stock.

With the acquisition, the company has changed its name to Reliant Interactive Media Corp. Kevin and Tim Harrington, founders of Harrington Enterprises and Cigar TV, will assume executive management responsibility of the company. Additionally, the Harringtons will continue to head Cigar TV, now a wholly-owned subsidiary of Reliant. Reliant's headquarters will be moved to Clearwater, Florida, home of Harrington Enterprises and Cigar TV.

Cigar Television Network, Inc. has created a cigar-related, celebrity-driven television show called "Smokin' Lifestyles," hosted by E! Entertainment Television's Downtown Julie Brown and Larry Manetti of "Magnum PI." Rhonda Shear, host of USA Network's "Up All Night," acts as the show's field reporter. Segments featuring product previews, travelogues, and industry information are included in each show.

"Smokin' Lifestyles," which covers the dynamic cigar industry, debuted on August 29 and now airs monthly on 38 national television networks. Guests of the debut episode included Mickey Rooney, Burt Reynolds, and boxer Ray "Boom Boom" Mancini. The premier episode also included highlights from this year's RTDA Trade Show in Nashville, Tennessee.

In addition to the "Smokin' Lifestyles" show, Cigar TV also operates an Internet site, CigarNow.com, which features cigar and luxury lifestyle products. The site was previewed at the RTDA show and made its debut along with the TV show in August.

Prior to forming Harrington Enterprises, Kevin and Tim Harrington were at the forefront of electronic retailing as executives at two of the world's largest infomercial companies, Quantum Marketing, Inc. and HSN Direct, Inc. After forming Harrington Enterprises, they developed a unique dual-flame combination cigar lighter and cutter - the Cobee - which was launched in over 500 retail stores nationwide and on their Internet site.

Through the acquisition, Reliant has acquired the marketing rights to the Cobee, which will be heavily promoted on the Cigar TV show and website.


UST Closes Nashville Tobacco Museum
After years of educating visitors on the history of tobacco from the days of Columbus to the 20th century, Nashville's Museum of Tobacco Art and History closed its doors in July. The museum, owned by U.S. Tobacco Co., is being closed to make way for new company offices.

U.S. Tobacco has operated the museum since 1982. Located on the second floor of the company's complex, just a few blocks from the state Capitol, the museum attracted 15,000 visitors a year. Among the museum's many offerings were a variety of antique cigar store Indians, an elaborate display of snuff boxes, a meerschaum pipe display, as well as a listing of many famous tobacco devotees.

"People were amazed at the variety of artifacts and the representation of so many cultures," said David Wright, the museum's curator. "They appreciated the craftsmanship and beauty of the objects."


Bits and Pieces
TOKYO - Cigar imports in Japan grew 116% from a year earlier to a record 547 million yen in 1997, according to the Tokyo customs office. On a volume basis, imports increased by 33.7% to 54 tons, rising for the fourth straight year. Sales have been increasing in value since 1996, and the upward trend appears to be holding its momentum. An increase in the number of cigar smokers aged in their 20s and 30s contributed to the import growth, the customs report explained.
Las Vegas Show Expands Scope
Now International Tobacco Expo; Broader Exhibitor Base; Attendee Fees Eliminated for Licensed Retailers

The International Cigar Exposition (ICE), held in Las Vegas for the past two years, has unveiled several organizational changes designed to increase industry participation. Now called the International Tobacco Expo, the show's new name was adopted to reflect current trends in the industry in anticipation of attracting a larger exhibitor base and greater numbers of retailer attendees.

"We've been seeing changes in the industry since we started this show," said Bob Peters, the show's executive director, "and it was inevitable that we would eventually change the name so the entire tobacco industry will benefit."

ITE has established itself as a legitimate industry event in the past two years with extensive promotional campaigns and strong educational programs. The first show took place in 1997 at Caesars Palace. This year, the show moved to the Las Vegas Convention Center and featured over 500 booths. The show has attracted not only smoke shops but also liquor stores, hotels, drug stores, and other cigar retailers.

Next year, the Expo will offer new products and services for a changing market place. The addition of cigarettes, pipes, and other products will have a larger appeal for smoke shops, tobacco outlets, and other retailers selling tobacco products. The show will still have its solid core of exhibitors including the premium cigar manufacturers, accessories, and men's gifts. With that solid foundation in place the exhibit hall will have a stronger emphasis on machine-made cigars and will feature the large and specialty cigarette manufacturers.

"We're the alternative show," explains Peters. "People have supported the show because we've always been on the cutting edge and keep pace with the industry trends. We're simply implementing what the industry is asking us to do."

In the past, tobacco retailers had to pay a registration fee, up to $99 per person to attend the show. For 1999, ITE's promoters are making another commitment to the industry by offering free admission to the exhibit hall for all retailers with a tobacco license. The Expo believes this new policy will increase the number of buyers at the show.

"Retailers have told us they should not have to pay an admission fee to place orders. This new registration policy will save retailers hundreds of dollars in registration fees, money that can be spent on product for their stores," said Peters.

The International Tobacco Expo takes place April 6-8, 1999, at the Las Vegas Convention Center. For details about the International Tobacco Expo call 800-859-9247.


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