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October 1998
Volume 25
Number 5

RETAILER & TOBACCO INDUSTRY NEWS (cont.)

Consolidated Cigar Acquires 50% Stake in Accessory Manufacturer Cigar Savor Enterprises
Consolidated Cigar Holdings, Inc. acquired a 50 percent share of Connecticut-based Cigar Savor Enterprises LLC in August. In addition, the company is simultaneously entering into a joint venture agreement with Cigar Savor to operate what the partners believe will be the most comprehensive cigar accessory business in the U.S.

Cigar Savor Enterprises manufactures a full line of cigar accessories including the Cigar Savor, the Aerator Humidor Insert, and the Humidrawer IV. The company distributes its products through approximately 3,000 retail stores in the U.S. and in more than 30 countries worldwide. Cigar Savor has emerged as one of the premier names in cigar accessories, receiving press in national magazines as well as coverage on CNN.

"Cigar Savor Enterprises' line of accessories and its marketing capabilities makes a perfect match with Consolidated Cigar's powerful sales and distribution capabilities," said Jim Colluci, senior vice president of Consolidated Cigar Corp. "By acquiring an equity interest in Cigar Savor Enterprises, Consolidated obtains a well-established, profitable lineup of products as well as the ability to develop proprietary products that can be brought to the market relatively quickly."

The Cigar Savor product line will be sold and distributed side-by-side with Consolidated's current line of accessories, which will now be sold under the Cigar Savor brand name, according to Colluci. "With this acquisition, Consolidated Cigar Corporation becomes the only major cigar company with a full line of unique and affordable cigar accessories," he added.

Cigarette Tax Hike Would Cut Smoking Says CDC Study
According to a study released in July by the Centers for Disease Control, 3.5 million Americans would quit smoking if the price of a pack of cigarettes was raised by half. Additionally, another 2.4 million would cut down on the number of cigarettes they smoke. Minorities and young people would be the largest groups to quit or cut back.

The CDC surveyed adults for 14 years for the study, breaking down results by race, age, income, and gender. The survey found that Hispanics and smokers between the ages of 18 to 24 would be the largest segments to quit or cut back if prices were increased. According to Michael Eriksen, director of the CDC's Office of Smoking and Health, although teenagers were not included in the survey, the finding that young adults are price-sensitive when it comes to cigarettes is good news.

In June, the Senate killed a comprehensive tobacco bill that would have increased the price of a pack of cigarettes by $1.10.

Dominican Cigar Corp. in Licensing Agreement with Rap Star Mack 10
Florida-based Dominican Cigar Corp. has entered into a licensing agreement with rap performer Mack 10 to market a complete line of cigars bearing the entertainers name.

Mack 10 debuted in 1995 with his self-titled album which included the hit single "Foe Life." The album eventually went gold and was followed by a string of successful chart-topping singles. "I am proud to introduce my own private label cigars that will be featured in my upcoming music videos as well as at my concerts," the rap star said. "I am confident we should be able to sell approximately three million cigars a year." Dominican Cigar Corp. has been fighting slumping stock prices, having issued a 30-for-1 reverse stock split on September 11. "I'm pleased that Mack 10 selected Dominican Cigar Corp. to provide our quality cigars for his own private label," said Don Platten, president of Dominican Cigar. "This is just another great opportunity to expand our cigar division." Dominican Cigar Corp. also manufactures premium cigars under the Adolfo and Sir Don brand names.


Havana Group Posts Higher Quarterly Revenues
Ohio-based Havana Group, Inc., a consumer catalog business specializing in pipes, tobaccos, cigars, and related accessories, announced an increase in revenues for the second quarter of 1998. Revenues were $341,382, up from $315,158 for the same period in 1997. The company reported a net loss for the quarter of $3.43 million, compared to $34,176 in the comparable period last year. Operating losses also increased to $85,150, up from $27,518 in the same period in 1997.

According to Havana Group, the increased operating losses in 1998 are attributed to the start up costs of the company's Havana Group retail store, reduced sales and gross margins on the company's tobacco business, and a one-time charge for inventory adjustments in cigars. The net loss was due to the one-time charge of $3.35 million, which reflected the accounting treatment for the interim financing associated with Havana Group's initial public stock offering in May. The company experienced a major increase in working capital in the second quarter due to the IPO of its common stock.

Havana Group, Inc. is the manufacturer and exclusive distributor of the Magic Inch and Aerosphere smoking pipe systems and is the sole distributor of its Carey Honduran handmade cigar lines.


Colibri Group, Dunhill End 15 Year Distribution Agreement
Providence, Rhode Island-based Colibri Group announced a mutual termination of agreement with noted lighter manufacturer Dunhill. Beginning in August, The Colibri Group ceased distribution of all Dunhill products; the after-sales service of Dunhill lighters will continue until the end of 1998. The mutual separation with Dunhill comes at a time when The Colibri Group is completing a reallocation of resources with the acquisition of Colibri England in March. The company is preparing for expansion into the international market, as it now owns the intellectual property rights to Colibri worldwide.

"Our relationship with Dunhill since 1983 has been both profitable and productive," said Fred Levinger, president of Colibri. "But the time has come to bring our businesses in new directions and each company will be addressing unique challenges."

Dunhill will accommodate all after-sales service for Dunhill lighters in their New York location and will be announcing the opening of a new repair facility at the beginning of 1999.


Kentucky TV Station Pulls Retailer's Ads
In August, WFIE, a television station in Evansville, Kentucky, pulled a series of ads for a cigarette/tobacco store chain after tobacco opponents complained the spots violated a 1971 federal ban on tobacco commercials.

The TV spots for Tobacco Road, a Columbus-based chain of 130 convenience stores, began with an announcer saying, "We can't talk about some of the things we sell at Tobacco Road," then cut to scenes from an old monster movie, a performance of a lounge singer, or a shot of cute kittens. The ad ended with, "Tobacco Road ... Gas and cheap prices on, well, you know."

The ads began airing in the Evansville and Louisville markets in June. Smokefree Indiana, an antitobacco organization, filed a complaint with the U.S. Department of Justice soon after the spots were shown. The organization was also considering filing complaints with the FCC and the FTC.

The stations attorney's recommended pulling the commercials, citing the ambiguousness of the opening line according to Steve Langford, general manager of WFIE-TV. Other stations also yanked the ads but later agreed to run modified versions.


European Tobacco Trade Fair to Premier in 2000
EuroTab to Debut as First Pan-European Retail Show

Lockwood Publications, publisher of Smoke and Smokeshop magazines, announces a totally new concept for a comprehensive tobacco fair, to take place in Amsterdam in May 2000. The show, European Tobacco Fair 2000 (Eurotab 2000), will combine two types of traditional exhibitions and symposiums; a retail segment and an industrial segment. Eurotab 2000 will unite the complete integrated European tobacco industry under one roof.

The retail segment will involve European manufacturers of tobacco products and retail accessories exhibiting to visiting retailers, wholesalers, distributors, and importers. Eurotab 2000 will be a complete retail trade show, encompassing all areas of tobacco retailing. It will provide exhibitors with the opportunity to reach buyers and retailers from a large number of countries and meet distributors throughout Europe. In addition, the show will educate exhibitors on how to break into the European market and promote their products on the market.

The industrial segment will consist of European cigarette and cigar manufacturers exhibiting to suppliers of tobacco leaf, paper, packaging, and machinery. Considering the great size and dynamic nature of the entire European industry, the plan is to have an industrial show every two years. Although some machinery will be exhibited, the stands will primarily be modest informational booths.

In the coming years, business in the European tobacco industry will be rapidly changing as unification, more uniform tax codes and licensing requirements, and freer competition make it much easier to market products. Also, in recent years there has been a growing interest throughout Europe for premium, non-Cuban cigars with many countries posting increased growth in cigar consumption. Eurotab 2000 will be an exciting opportunity for tobacco product manufacturers and accessory companies to exhibit to the total European retail trade for the first time.
For more information contact: Lockwood Publications, 130 West 42nd Street, Suite 1050, New York, NY 10036, Tel: (212) 391-2060, Fax: (212) 827-0945.



SMOKESHOP - October 98