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Berger & Argenti BreAks new ground JULY/AUGUST 2011 VOLUME 14 n NUMBER 4 E-cigs, snus, lozenges, sticks and strips... aternatives hold a lot of promise—if they can survive the roller coaster ride of legislation. ALSO IN THIS ISSUE Tobacco Junction on Lounging Large Tightwad Tobacco Rolls the Dice on RYO Machines TMA Report: Tobacco Turns a New Leaf PUBLISHER’S LETTER BY ed o’connor In this month’s Tobacco Outlet Business… You may be reading TOB on your way to the IPCPR show, What’s nicer than one O’Dowd? Two O’Dowds! Gerry taking place this year at the Sands Expo and Convention O’Dowd, principal, and daughter Aoife O’Dowd (pro- Center in Las Vegas, July 17-21. Here’s a preview of this nounced E-fa), director of sales, run ECMI, a cigar com- month’s issue. pany based in Ireland. If you’re familiar with Don Esteban Despite the testing challenges governing the tobacco in- Corona Tubos, Chevere, or Picasso cigars, you’re just a dustry over the past several years, positive developments degree of separation from knowing the great people that affecting your business have come into play—notably, the create and export these brands to America. Learn more so-called “harm reduction” movement is in full flower. For about the indefatigable O’Dowds and ECMI in this issue. the first time in the history of the industry, you, we, all of And while on the subject of the “Auld Sod,” have a look at us find ourselves on the “right side” of the public health is- the Auld Sod Gifts website. See www.AuldSodGifts.com sue championed by leading members of the public health and order a pack of Official Irish Shamrock Seeds. community, notably Dr. Michael Siegel of Boston Univer- We receive positive comments from you on the TOB sity and Dr. Joel Nitzkin of the American Association of Trench Marketing piece. Watch for this month’s feature on Public Health Physicians. Renee Covino’s article on this insights from Tightwad Tobacco. Trench Marketing takes watershed change, a must-read, continues her accurate you out of the world of textbooks and into the trenches and thorough reporting on the reduced-harm health ben- of real-world marketing practiced by peer tobacco retailer efits associated with smokeless tobacco and electronic professionals. cigarettes. Don’t forget to spend time with the Product Profile fea- Ever wondered if there’s a still place for start-up pre- ture section, bringing you the best new products for your mium cigar companies? In this issue be the first to learn shelves—the lifeblood of your business. about Ventura, the exciting new cigar company venture by Good selling and see you in the market! Kretek International in collaboration with Nestor Andres Plasensia. Ventura will debut at the IPCPR. Best to you, Read Jennifer Pellet Gelfand’s interview with Mike Ar- genti of Berger & Argenti Premium Cigars. Hear from Mike his plans for the company’s brand creations, Entubar and Mooch. 4 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 INSIDE THIS ISSUE INDUSTRY UPDATES News & Trends ........................................................... 12 FDA warnings, smoking ban defeated, and more. CIgar Sense Lounging Large in Texas .......................................20 Tobacco Junction owners turned a large rustic building into the 5,400-square-foot cigar lounge of their dreams—quadrupling cigar business. Features Alternatives Ride the Roller Coaster .................32 E-cigs, snus, lozenges, sticks, strips and the like bear a lot of promise for Berger & Argenti: Engineering Excellence, page 40 the tobacco industry, but they are still grossly misunderstood. These are the latest ups and downs surrounding modified-risk alternatives. Berger & Argenti: Engineering Excellence .....40 Who better to pursue the perfect stogie than an engineer turned cigar maker? ECMI Cigars: Enterprising in Ireland ...............52 Aoife and Gerry O’Dowd are building a private label empire in Ireland. TMA Conference Highlights: Tobacco Turning a New Leaf .................................64 Ever resourceful, the industry looks to adapt as FDA regulation progresses. J.C. Newman’s “Castor for Congress,” page 48 Trench Marketing: Welcome to the Machine ....74 Tightwad Tobacco’s twist on tobacco has customers lining up and the U.S. Department of the Treasury’s Alcohol and Tobacco Tax and Trade Bureau on the defense. Departments Publisher’s Letter ............................................. 4 Trade Talk...................................................... 18 State Tobacco Legislative Update Pipe in Hand ................................................. 30 Event Spotlight .............................................. 48 J.C. Newman’s “Castor for Congress” Event Spotlight .............................................. 60 Miami Cigar’s Nestor Miranda Celebration Product Profile ............................................... 86 A guide to new and popular outlet products Trench Marketing: Welcome to the Machine, page 74 NEWS & TRENDS JULY/AUGUST 2011 HigHligHts CAO International and FDA Warns Retailers General Cigar Merge Because of a merger between parent compa- of “Light” Violations nies Scandinavian Tobacco Group and Swed- ish Match AB, CAO International Inc. is now a The agency is getting more vigilant about part of General Cigar Co. As a result, produc- enforcement. tion of some CAO brands has been moved In an announcement that suggests the U.S. Food and Drug Ad- from factories in Danlí, Honduras and Estelí, ministration may be getting more aggressive about citing retail- Nicaragua, known as STG Danlí and STG Es- ers for violations, the FDA announced that it issued 11 warning telí. These two factories previously combined letters in one week in May to online retailers for illegally market- to produce every nonflavored CAO cigar, ex- ing tobacco products with misleading or unsubstantiated claims cept for the CAO Vision, which was rolled in or descriptors indicating that the products can be used to reduce the Dominican Republic at Aurora S.A., the harm or the risk of tobacco-related disease. factory best known for Aurora and Guillermo “There is no known safe tobacco product. It is illegal for to- León cigars. Production at the Danlí operation bacco companies or retailers, including Internet sellers, to make has ceased, and the cigars made there are now unsubstantiated claims or statements that imply tobacco prod- made at General Cigar’s Honduras American ucts reduce health risks,” said Lawrence Deyton, M.D., director of Tabaco S.A. factory in Danlí, which is best the FDA’s Center for Tobacco Products. “FDA will pursue enforce- known for making the Punch, Hoyo de Monter- ment actions to protect the public health.” rey, Don Tomás and Helix brands. Both CAO The FDA cited the online retailers for a variety of illegal market- International and General Cigar are now head- ing claims that violate the Federal Food, Drug and Cosmetic Act, quartered in Richmond, Virginia. including use of terms such as “Light,” “Low,” “Mild,” “Less tox- ic,” or “Safer.” Such claims are not permitted unless a company Fight Against Underage has received an FDA order allowing it to market products with Tobacco Sales Gains Stores such claims based on scientific evidence. To date, the agency has not issued any such orders. According to Reuters, the companies that own In addition to these marketing violations, other violations cited Circle K, Dairy Mart and On the Run stores by the FDA included the illegal sale of flavored cigarettes. reached an agreement with 39 state attor- neys general to help clamp down on tobacco sales to minors. The multistate effort will pro- vide training for store employees and drive independent compliance checks in up to 250 Patrick Hurd stores. The three stores join a list of popular To Head Ventura Cigar gas station convenience stores and retail and pharmacy chains, such as Conoco, Exxon, Mo- Kretek International, Inc. has chosen Patrick Hurd, 36, bil, BP Amoco, Shell, Chevron, Kroger, 7-Elev- to head newly launched Ventura Cigar Co. The new en, Walgreens, Rite Aid, CVS and Walmart, that company was formed two years ago as a premium im- have already signed similar agreements. ported cigar group within the Kretek organization (see story, p. 16). Prior to his new role, Hurd served as general manager of Survey Shows Michigan’s Kretek Canada, the company’s importing and sales group headquar- Smoke-Free Laws Didn’t tered in Toronto, Ontario. In that capacity, he was instrumental in devel- Prevent Workplace Smoking oping the company’s Canadian tobacco business, including premium cigars. Hurd created the handmade Bravo brand exclusively for the According to a survey released last month Canadian market, and is now coordinating the introduction of the new by the Michigan Department of Community Ventura Brands through the Toronto office with Nicholas Brum, who Health (MDCH), Michigan’s smoking ban did replaces Hurd as managing director there. Hurd will relocate to the company’s U. S. headquarters in Ventura County, California. continued on page 14 12 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 NEWS & TRENDS JULY/AUGUST 2011 AWMA Show a Hit HigHligHts continued from page 12 Attendance was up at the American Wholesale not keep people from smoking in bars despite Marketers Association’s February 2011 Show. the agency’s claims that businesses are recep- tive to the rules established by smoke-free The AWMA’s 2011 Show attracted more attendees than any show laws enacted in May 2010. In its first year, the the group has held since the recession began. More than 1,500 statewide smoking ban at restaurants and bars people participated in the Las Vegas event, with attendance up more was violated 1,491 times, the MDCH survey than 29 percent over the previous year. The number of exhibitors and said. Two establishments were ordered closed amount of square feet of exhibit space also outpaced the past five until they met regulations, but the MDCH said years, due to the addition of the new Foodservice Pavilion and more there has been a high compliance rate despite exhibitors participating for the first time.