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December,
2006

TOBACCO INDUSTRY NEWS
Production, Distribution, Regulation, Trade...

Fire Destroys Little Havana’s New La Tradition Cubana, Palmas Puro Cigar Shop; Owners Relocate within Miami

Miami — A fast-moving fire destroyed a strip mall in the 1900 block of South West 8th Street in Miami’s Little Havana, devastating the longtime cigar shop of La Tradicion Cubana. The business, owned by Luis Sanchez, had just recently formed a partnership with Gregory Maya’s Palmas Puro Cigars, renovating the storefront facility with a new humidor and offices.

On Sunday Nov 19th at approximately 9:30 a.m., the three-alarm fire burned uncontrollably for close to three hours. “There was nothing much the army of firefighters could do to save any of the businesses,” said Greg Maya, owner of Palmas Puro. Investigators have since concluded that the cause of the fire was in arson, marking the third arson case this year within Little Havana which has been struck by six major fires.

“Luis and I sorted through the rubble a couple of days after and collected whatever we could, which was not much,” said Maya. “Other than a computer backup disk, some files, and our cigar store indian, everything else had been burned and lost.”

Cigar-making operations, opened earlier this year, are located in the Dominican Republic, so the company has been able to continue manufacturing — receiving orders and shipping cigars as needed.

“Luis and I set out as quickly as we could to look for a new office/warehouse in order to get back to business A.S.A.P.,” said Maya in announcing the opening of a new Miami facility. “This new location allows us to have a bigger and better cooler/ humidor, ample-sized office, warehousing and storage and shipping facilities. These ‘upgrades’ will complement our steady growth and allow for further development of more U.S. markets and those overseas,” said Maya.

The first shipment of cigars at the new facility was slated for early December. “In less than three weeks time we have lost everything and re-opened our business.”

Palmas Puro Cigars/La Tradicion Cubana, 13375 Southwest 128th St., Unit 103, Miami, Fla. 33186, Tel: (800) 806-6719, E-mail- gregm@palmaspurocigars.com, Web: www.palmaspurocigars.com.


Japan Tobacco Makes Bid to Buy Britain’s Gallaher Group

Tokyo — Japan Tobacco, the world’s third-largest cigarette maker behind Philip Morris and British American Tobacco, has agreed to buy Gallaher Group for $14.7 billion in the biggest-ever international takeover by a Japanese company.

Gallaher, the owner of Benson & Hedges and Silk Cut cigarettes, said it had been approached the former state-owned business, which made its offer at a 27% premium to Gallaher’s share price prior to the UK company’s announcement a week earlier that it was in discussions regarding a takeover.

The acquisition would give Japan Tobacco the biggest share of the Russian cigarette market, passing Altria Group, Credit Suisse said. Analysts said the takeover might spur a competing bid for the Weybridge, England-based company from buyout firms or Altria, the world’s largest cigarette maker.

“There is an increasing need to gain scale in global tobacco, and more specifically in Europe and Russia,” said David Hayes, an analyst at Lehman Brothers in London. “We will see if others choose to become involved.”

Gallaher employs 12,000 people worldwide and makes cigarettes for the U.K. market at Lisnafillan, Northern Ireland, where it also produces Virginia-blended cigarettes for export. All the group’s cigar brands are produced at Gallaher’s U.K. cigar factory, JR Freeman, in Cardiff.

Citigroup Investment Research European Tobacco analyst Adam Spielman believes further consolidation in the sector becomes more likely if Gallaher is purchased but that only one more acquisition is possible. Most likely: a hostile takeover of Altadis S.A.


Cojimar Announces Ownership Change, Executive Appointment, New Sales Programs

Miami, FL — The Cigar Connection, a manufacturer of Dominican Republic flavored cigars, has announced its acquisition by Rosie Perez, president of the company, with confidential partner. The acquisition includes the Cojimar brands, all associated cigar and tobacco products, and all sales, manufacturing, and distribution, operations. Under the direction of Perez for the last 10+ years, The Cigar Connection has been one of the leading manufacturers committed to the evolution of flavored cigars in the premium cigar category.

“I honestly feel that Cojimar and The Cigar Connection offer a premium flavored cigar product for any venue and price range,” says Perez. “We work hard to create long-filler Dominican blends for a premium flavored cigar that is aromatically pleasing and smoothly flavorful. The challenge is to integrate the flavor so as not to overwhelm the great tastes of the Dominican tobacco and Connecticut shade wrapper.”

In addition, Laurie Silverman, with over 12 years experience in the cigar sector, has been hired as sales and marketing manager. “My goals are to introduce new in-store promotions focused on drawing customers and increasing post-event product sales in the retailer shops,” said Silverman. “In addition, I hope to develop additional marketplaces as opportunities and politics allow.”

Added Perez, “We sincerely appreciate the retailer support over the years, which made this acquisition possible and expect great things coming into the Holiday Season and for 2007.”

The company has recently introduced new shelf-friendly packaging and flavored collections which expand the product’s appeal to the premium cigar smoker. Also available are are collection tins and sampler packs, which are ideal as gifts.

“We look forward to increasing our presence in premium cigar humidors,” said Perez.

The Cigar Connection, Inc., Miami, Fla., Toll-free: (800) 348-8286, Tel: (305) 406-2461, Fax: (305) 406-2447, Email: rosiepz@aol.com.


Don Salvatore Enlists Consumers in Fight

Chicago, IL — Don Salvatore is reaching out to consumers to join the fight against smoking bans and excessive taxation that are sweeping the country in support of tobacconists nationwide.

With backing from Retailer Tobacco Dealers of America (RTDA), Don Salvatore is now placing legislative action forms in all of its product shipments so that consumers are armed with the proper tools to oppose legislation.

This form has detailed information on how to access and utilize the Legislative Action Center created by RTDA on its website (www.rtda.org), where visitors can view pending legislation in their specific state and across the country; look up local representatives; or sign up for the Legislative Action Center’s mailing list. Visitors also have the opportunity to write a letter voicing their opinions on pending anti-tobacco laws and e-mail or mail it to local and state representatives.

“Every voice counts,” notes the company in a statement. “Protect your freedom, protect your liberty, and join us in the fight! We can have our voices heard!”


Venezuelan Cigars: Is the U.S. Finally Ready?

Miami, FL — Venezuela has traditionally relied on oil for export income and has let high-quality crops such as cocoa and coffee fall by the wayside. The story with tobacco is similar. Almost all Venezuelan cigars cater to the country’s domestic market, where visitors are sometimes startled by the rural Venezuelan habit of popping the lit end into their mouth. The custom is believed to have started with washerwomen trying not to get ash on clothes or spatter the lit tip.

In the late 1990s, a U.S. entrepreneur found that there was plenty of potential for introducing Venezuelan cigars to Americans who would smoke them the normal way. New York lawyer Michael DeLisa, whose Venezuelan grandmother rolled cigars, set up a factory in the tuna canning port of Cumana in 1997, exporting the vast majority of his annual output, as well as other brands from Cumana, such as Crispin Patino from the Bermudez factory. Other brands included Don Quijote and La Cumanesa. There was little trouble finding buyers.

“In our first five days, we had the whole year’s output committed,” DeLisa said. The main challenge in exporting Venezuelan cigars was strengthening the taste. “The palate here is very much lighter, it does not match our export markets,” DeLisa told Reuters in Caracas. DeLisa says he moved production from private homes where women rolled cigars into a factory environment where training could be offered. He has since shifted his production from Bermudez to Venezuela’s Caribbean island of Margarita.

On leaving Cumana, DeLisa concentrated on his sideline as a boxing historian, writing “Cinderella Man,” which was turned into a film in 2005 with Russell Crowe as 1930s heavyweight champion James Braddock.

However, he is now back setting up a workshop on Margarita, bringing in Cuban workers to train up a work force more isolated from the infighting in Cumana, and forecasts this should crank output up to one million cigars a day.

Venezuelan cigars will make a return to the U.S. market when DeLisa’s Don Sebastian are launched in Miami, where the Latin American emigres have a strong appetite for puros.

Miguel Patino, president of the Bermudez tobacco factory, says he no longer has a foothold in the U.S. market, reaching only Spain and Germany outside Latin America. Yet, he still exports more than 70 percent of the 4,000 boxes he sells each year. For smokers looking for a Venezuelan cigar today, their best bet is to head to a big Las Vegas boxing fixture where DeLisa has crossed over the two interests in his life. At ring sides there is already a strong following for his Champion cigars.


E Tobacco to Launch Cigarette Enhanced with Vitamin E

South Boston, VA — Vitamin-enhanced products have been around for a while now, but if the founders of E Tobacco LLC get their way, cigarettes enhanced with Vitamin E will be just as common someday.

The company stresses that the added Vitamin E does not mean a safer cigarette, but there are distinct benefits to “E” brand, the cigarette it is launching.

“The effect of the patented vitamin E additive in our premium blend is such that when the vitamin E vaporizes into the smoke, it mitigates against the chemical assault that takes place between tobacco smoke and the live cells of the palate, nose, throat and lungs,” said Joseph Russo, c.e.o. of E Tobacco. Russo holds worldwide patents on the concept.

In addition, said Russo, “Compared to conventional premium cigarettes, E’s are less irritating; have a better, fresher, cleaner taste; fight stale tobacco odor; are less offensive to non-smokers; and may reduce smoke-related aging and wrinkling of skin.”

E Tobacco’s e.v.p. John Czerewko noted that a report from the Linus Pauling Institute of Oregon State University confirms that vitamin E tends to disappear more quickly in smokers than non-smokers. E cigarettes, he said, may be one way for smokers to overcome that loss.

According to Maret Traber, a professor in OSU’s Linus Pauling Institute involved with the report and a national expert on vitamin E, “It’s increasingly clear that many people have health habits, such as smoking or poor diet, which can leave them with inadequate levels of vitamin E. And vitamin E has clear value in helping to prevent serious degenerative disease.” Further, Traber concludes, “In lung tissue, vitamin E is one of the first lines of defense against the free radicals generated by cigarette smoke”.

E cigarettes, manufactured in Virginia, completed its beta testing stage in small, multi-state, geographic areas of the United States, said Czerewko. He added they are presently seeking funds in private placement equity for the U.S. launch.

More information on the availability of E’s as well as scientific research can be found at the company’s Web site, www.etobacco.com.


Wellstone Filters Closes Operations

Timberlake, NC — Wellstone Filters, Inc., which was expecting an infusion of funding from an investor that never materialized, has eliminated all but one employee, moved out its offices north of Durham, and stopped marketing its cigarettes made with high-tech filters that remove some toxins from the smoke.

As of Sept. 30, the startup had only $1,471 remaining in cash and equivalent assets. But the company’s board of directors plans to change the company’s name, consolidate its stock, and triple the number of shares it can issue, according to documents filed with the Securities and Exchange Commission. The company will send letters to shareholders detailing the plans in January, it said in the filing, which didn’t reveal the new name.

Company c.e.o. Jeremiah Hand, who with his wife owns 64.5 percent of Wellstone’s stock, is the company’s last employee and appears to be its only director. Jim Verdonik, a Durham securities lawyer, said Wellstone could be positioning itself for a merger or acquisition. James Cox, a securities law professor at Duke University, said the company could be trying to raise money from private investors.

Wellstone consolidated its shares in June at the request of a potential investor that didn’t follow through with the funding, according to a quarterly SEC filing. Despite earlier share consolidation, Wellstone’s stock price has fallen 99 percent since January 2006, when the company started selling its cigarettes, pricing them at less than the cost of manufacturing to attract customers, the company wrote in its most recent quarterly filing. The company had 20 employees across the country in May and visions of ramping up to more than 100 by the end of the year.


Philip Morris: “Don’t Give Our Brands a Part in Your Movie”

richmond, va — Philip Morris USA is asking entertainment industry decision-makers to voluntarily eliminate the use of its products from their productions with a new trade print advertising campaign. Designed to raise awareness of Philip Morris USA’s positions on product placement and the use of its brand imagery, the campaign also encourages the industry to reduce or eliminate smoking scenes in movies directed at youth.

“Movies have the power to amuse, delight, teach and inspire. However, some studies suggest they may also influence a child’s decision to smoke,” said Jennifer Hunter, vice president, Youth Smoking Prevention and Cessation Support for Philip Morris USA. The ads are appearing in Daily Variety, The Hollywood Reporter, and other trade publications beginning the week of November 13th.

Since 1990, Philip Morris USA’s policy has been to deny all requests for permission to use or display its brands in movies and television shows intended for general audience.


CAO Keeps NIAF Fete Smoking

nashville, tenn.— CAO was chosen as the exclusive cigar sponsor to the 31st Annual National Italian American Foundation (NIAF) Convention, held October 20–21 at the Hilton Washington & Towers in Washington, D.C.

President George W. Bush made an appearance at the pre-show gala featuring Frankie Valli and the Four Seasons, which continued a three-decade tradition of every U.S. president attending the Foundation’s gala weekend. A grappa and CAO cigar bar was a popular stop for VIP guests of the evening, featuring specially-created CAO Italia cigars adorned with a gold secondary band emblazoned with the NIAF logo.

CAO chief financial officer Adam Shepard (left) presented Italy’s Ambassador to the United States, Giovanni Castellaneta, with a personally inscribed CAO Italia Humidor containing 100 CAO Italia Gondola cigars.


Leon Jimenes Sells Dominican Republic Cigarette Operations to Philip Morris

Santo Domingo - Industria de Tabaco Leon Jimenes S.A., the Dominican Republic’s largest cigarette manufacturer, is now the sole property of Philip Morris International Inc., officials said.

The announcement completes a reorganization plan in which Philip Morris’ parent, New York-based Altria Group, Inc., traded its interest in the Dominican national brewery for the cigarette business and $427 million in cash.

The Dominican company produced Marlboro cigarettes under license and the locally popular brand Nacional, said Teodoro Hidalgo, a spokesman for E. Leon Jimenes C. por A. — the former parent company of Industria de Tabaco Leon Jimenes.

Before the reorganization, Altria held a 47.5% interest in E. Leon Jimenes and its three subsidiaries: Industria de Tabaco; Cerveceria Nacional Dominicana, C. por. A. which produces Presidente beer; and its 103-year-old cigar company, said an Altria spokesman Nicholas M. Rolli.

In exchange for taking full control of the cigarette business, Altria has given up its stakes in the cigar and beer divisions it held for nearly four decades, he said.

“By having 100% ownership of the cigarette business…we can expand the operations in that whole Caribbean basin and use the Dominican Republic as a regional hub,” Rolli said by phone from New York.

Handing over the cigarette business will also help E. Leon Jimenes’ beer and cigar divisions grow, company president Jose Leon said in a statement.


General Tobacco Adds Spanish Campaign

miami — General Tobacco has rolled out its first Spanish-language campaign in response to the success achieved by its product, Bronco, in the Hispanic market throughout the U.S. The Spanish campaign, entitled “Sabor con Actitud,” began throughout Hispanic markets in the U.S. that saw the most growth since its inception, namely Florida, California, and Texas. The Spanish campaign will be coupled with an English campaign entitled “Big, Bold Taste.”

“The Hispanic market is incredibly important to us at General Tobacco,” said Doreen Colondres-Henriquez, Marketing Director for General Tobacco. “It is a group we feel we identify with due to the location of our headquarters and the heritage of our founder and president, Vidal Suriel.”


Montecristo Conquers Machu Picchu, Kilimanjaro

FT Lauderdale, FL - The flags of many nations have been flown at the summit of Mt. Everest. But Kilimanjaro, Africa’s tallest mountain, and Machu Picchu in Peru, have hosted a flag of a far more unusual nature — the yellow, red, and gold Montecristo logo familiar to cigar smokers. The task was made possible by Luke Rothman, son of tobacconist Lew Rothman, and Luke’s brother-in-law John Hankin, who decided to combine their passions for Montecristo and exotic exploits in an unusual way.

It was no coincidence that they chose African and Peruvian mountains: Altadis U.S.A. manufactures the limited edition Montecristo Afrique with Africa Cameroon wrapper a filler tobacco grown at the base of Mt. Kilimanjaro and Peruvian Ligero tobacco.

The first leg of the adventure was completed on March 14, 2003, when — accompanied by their guide, Fred Chikima — Rothman and Hankin hiked to Kilimanjaro’s Uhuru peak. “Once we reached the peak and planted the flag, we were ready for a celebratory smoke,” said Rothman, “but in the cold and wind at 19,340 feet, we couldn’t manage to light our cigars.”

Their next challenge was Machu Picchu, the ancient Incan ruins almost 8,000 feet high in the Andes, where earlier this year Luke and two friends — Jorge Rodriguez and Owen Lee — placed the same Montecristo flag Luke had carried to Kilimanjaro.

Luke Rothman, John Hankin, and guide Fred Chikima at Kilimanjaro’s Uhuru peak on March 14, 2003. Earlier this year, Rothman also reached the summit of Machu Picchu with friends Jorge Rodriguez and Owen Lee, planting the same Montecristo flag.


Ohio Now Smoke-free

Dayton, Ohio - Ohio state has become smoke-free after voters there passed an amendment in the November election. Smoking is now banned in all public places including bars, restaurants, bowling alleys, and even company-owned tractor-trailer cabs. The ban went go into effect December 7.

Officials said it is not known how the new smoking ban will be enforced. Businesses will have to voluntarily abide by the ban until enforcement guidelines have been established. The Ohio Department of Health is still working on those guidelines, which could include citations ranging between $100 to $2,500, but could take several months to finish.

The State Trucking Association is trying to convince Ohio lawmakers to cut them out of the new ban, which caught the entire trucking industry off guard.



SMOKESHOP - December, 2006