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. 620 violations and 117 citations being issued. “We are thrilled with the results and the level of participation and engagement of our members in the show,” said Keith Canning, man- Camel Snus Ad Leverages aging partner, Pine State Trading Co. and 2011 AWMA chairman. NYC’s New Smoking Ban “Two years ago, our board approved a strategic plan to reinvent our annual event so that it provides more value to both attendees and ex- R. J. Reynolds Tobacco Co. timed the launch hibitors. Since then, we have completely revamped the educational of its new smoke-free Camel Snus advertising program by adding more sessions on industry issues and best prac- campaign to occur right when New York City’s tices; invited leading retailers to speak about and share their insights; smoking ban hit the streets in May. New York’s and added new categories to the expo, including a Foodservice Pa- newest antismoking legislation, which took ef- vilion to showcase food-service equipment, products and services, a fect May 23, bans smoking in city parks, beach- growth category we are all extremely interested in.” es, public plazas and boardwalks. The smoke- The Foodservice Pavilion featured 35 companies, most exhibiting free Camel Snus ads, which were slated to at the AWMA Show for the first time. “The distributor is the key com- appear in USA Today, The Wall Street Journal, ponent between the food-service supplier and the consumer, and the and a wide variety of major daily newspapers, AWMA Show provides a direct connection with these decision-mak- said, “NYC smokers enjoy the freedom without ers,” said Jerry Ryker, executive vice president of business develop- the flame,” and “NYC smokers rise above the ment at Land Mark Products. “Distributors are our partners and we ban,” according to the National Association of are listening to their business issues so that we can respond.” Convenience Stores. AWMA’s 2012 Show, to be held Feb. 15-17 at the Paris Hotel in Las Vegas, continues to evolve to meet the needs of distributors and re- tailers. New for 2012 will be an Operations Pavilion on the show floor that features technology products and services, warehouse manage- ment systems, and transportation and other key services that support FDA Cracking distributor operations. Other pavilions will include Foodservice and Down on Adult-Only? Candy & Snacks, with the balance of the expo featuring the latest in tobacco, OTP, novelty and other core categories. NATO’s Tom Briant recently reported an incident “Our goal is to continuously improve the show each year and find where a tobacco outlet retailers received a warning more ways to add value for exhibitors and attendees,” said Scott letter from the FDA citing a “failure to ensure that Ramminger, AWMA president and CEO. “Our post-show survey re- “no person younger than 18 years of age is present sults indicate that we are going in the right direction, with a majority or permitted to enter his adult-only store.” Briant of both exhibitors and distributors rating the 2011 show as providing reports that the letter went on to state that signage more value than previous shows.” stating that only adults are allowed in is insufficient Overall attendance was up 20 percent over the previous year, and and that “it is your responsibility to take appropriate more than 80 percent of exhibitors indicated that the show met or measures, such as checking identification upon en- exceeded their business objectives, reports the AWMA. try, to ensure that no person younger than 18 years Information about the AWMA’s 2012 Show can be found at of age is present or permitted to enter the establish- www. AWMASHOW.com. ment at any time.”

14 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 NEWS & TRENDS JULY/AUGUST 2011

Proposed Smoking Ban in Texas Killed Opponents dubbed it an invasion of personal rights. continued from page 12 A smoking ban proposal that was hidden in considers it an invasion of personal rights, More than 30 Texas cities have smoke-free a spending and school finance bill was killed said the majority of the Senate negotiating ordinances banning smoking in public work- recently by state lawmakers. The proposal, team didn’t want the ban, and noted that places and facilities, but this proposal would which would have banned smoking in most attaching the proposal to a critical school have banned smoking in places licensed by Texas bars and restaurants, was backed by finance bill also doomed it because tying the Texas Alcoholic Beverage Commission House lawmakers, but Senate negotiators op- it to another piece of unrelated legislation and by state and local health departments posed it and stripped it from the bill. could have potentially violated legislative (except for charitable bingo halls in small Senator Bob Deuell, R-Greenville, a phy- rules against bills that deal with more than counties, veterans’ social halls, pool halls, and sician who opposed the ban because he one subject. tobacco bars).

UBS is Bullish on Tobacco Our Lifestyle Collection The investment bank publishes 10 reasons we should be, too. is red, hot, and new. According to multinational investment bank UBS, ongoing macro and industry-specific Men’s gifts factors have contributed to the continued strong performance of Altria Group, Reyn- Watches olds American, and Lorillard and have forced the bank to reassess its stance on the tobac- Pens co sector. What’s that mean? They’ve raised their price targets for all three companies. Leathers The bank is so bullish on the tobacco sec- tor in general that it published a list titled “10 ® Reasons to Stay Bullish on Tobacco.” Those BLU Butane Lighters reasons, in descending order, are: Windproof Lighters 1) low interest rates Lighter Fuels 2) market becoming risk-averse

3) tobacco stocks behave like staples

4) no exposure to currency or input cost volatility

5) minimal capital allocation risk

6) proven and sustainable pricing power

7) structurally lower litigation risk

8) government oversight provides barriers to entry

9) diminishing excise tax risk, and

10) unique leverage at retail. 15 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011

ZippoAd-TOB_JulyAug.indd 1 6/8/11 2:12 PM NEWS & TRENDS JULY/AUGUST 2011

Ventura Cigar Co. to Launch at the IPCPR Show

New Kretek International group to focus on premium imported segment with four new brands.

Kretek International Inc. has announced personal blend of Nestor Plasencia Sr., in Honduras in a Toro size in a choice of the formation of Ventura Cigar Co., with who emigrated from Cuba at 15 to build three wrappers: habano criollo, maduro, new imported cigar brands available for the family tobacco growing and premium and Honduran Connecticut-shade, with customer sampling and enjoyment at the cigar businesses in Nicaragua and Hon- blend variations to match. The brand will IPCPR show in Las Vegas beginning July duras. The Pura Sangre brand was devel- be at the heart of the popular-price seg- 18. “We are really excited about what we oped in 2010 and is now boxed for ship- ment and comes in a unique 60-stick hu- are bringing to the premium cigar mar- ment. midor display with three 20-count slide- ket,” says Kretek CEO Mark Cassar. “The While smoking a range of cigars to- top boxes in a row. Ventura Cigar group gives us a strong fo- gether, Mark Cassar and Nestor Andres New Hugo Cassar Nicaraguan hand- cus on quality at the upper end of the ci- Plasencia both concluded that this dark, made cigar bundles will also be launched gar category with unique new brands for full-flavored stick, handmade at the at the IPCPR show, and ready for imme- the U.S. and Canada.” Plasencia facility in Estelí, Nicaragua, had diate shipment. Hugh Cassar has mar- The Ventura Cigar initiative was begun to be the power hitter of the lineup. “My keted value-priced cigars for nearly two two years ago as a premium imported father can smoke any cigar in the world, decades. The new Nicaraguan cigars are group within Kretek International. The and he blended this one as his personal mid-mild in character and will compete in ongoing goal is to deliver a high-quality favorite,” Plasencia explains. The brand the bundle category in four sizes. On a trip portfolio of premium handmade cigars at was immediately named Pura Sangre to Central America in October 2010, Hugh all popular price points. by the two, reflecting the heritage of the Cassar and Nestor Plasencia Sr. selected A range of Ventura products was blend- families and the product. the blend and sizes. ed and tested over the past two years in Pura Sangre will available for shipment Ventura Cigar Co. (www.venturacigar. conjunction with the Plasencia family in immediately after the IPCPR show to se- com) will be located at Booth 800 at the Honduras and Nicaragua. “We wanted to lected IPCPR member tobacconists in IPCPR show alongside Phillips & King In- come out with a portfolio where we got it both the U.S. and Canada. Retail pricing ternational. right the first time, even if volume might is planned in the $9-to-$12 range. Four be limited for the first couple of months,” sizes have been made and are in stock in says Cassar. Cassar and Plasencia VP designer boxes of 20 cigars each. Three- Nestor Andres Plasencia collaborated on pack samplers in the Churchill size are the Ventura brands, each bringing their also available. personal expertise in tobacco growing, Other Ventura brands include the mid- blending, branding, marketing and distri- priced Estilo Cubano, made in Honduras bution to the table. using an aged viso habano maduro wrap- Ventura is fielding its own sales force as per and a blend of ligero habano and seco an integral part of the venture, initially con- habano Jamastran Valley fillers. Estilo Cu- centrating on selected major urban cen- bano is finished with a rabo de cochino ters. Initially, Phillips & King International (pigtail) head and comes in boxes of 20 will be Ventura’s exclusive distributor, so it and a four-pack variety sampler. Smokers will be easy for retailers who already buy who tried Estilo Cubano in pilot studies from P&K to buy Ventura brands. raved about its rich mid-bold taste and The flagship brand of the Ventura Ci- smooth finish. gar Co. will be Pura Sangre, with a viso In addition, Ventura will be introduc- habano Nicaraguan wrapper aged for ing Las Ramblas, a new brand named five years, and a Nicaraguan filler blend after the famous confluence of five of Condega-, Estelí- and Jalapa-grown boulevards at the social center of Barce- tobaccos. The Pura Sangre stick is the lona, Spain. Las Ramblas is handmade

16 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 NEWS & TRENDS JULY/AUGUST 2011 Harm E-Cigs As Social Device Reduction

Blu’s e-cigarette packages flash a blue light when other e-smokers are nearby. Update

Lots of electronic devices communicate about e-cigarettes, which satisfy a craving packs, which also serve as a charger for wirelessly, and now Blu e-cigarettes are one for nicotine with a reportedly harmless va- the cigarettes, can be set to allow owners of them. A pack of Blu cigarettes will vibrate por rather than smoke. to exchange personal information, such and flash a blue light to signal the presence Retailing for $80 for five e-cigarettes, as contact information on social network- of other e-cigarette smokers within 50 feet. the new Blu “smart packs” work by simul- ing sites. The packs also vibrate when a The idea is to harness the social network- taneously emitting and searching for the smoker nears a retail outlet that sells Blu ing power of consumers newly passionate radio signals of other packs. The reusable cigarettes.

Graycliff Chooses Official U.S. Distributor

Toraño Family Cigar Company appointed exclusive distributor.

Graycliff Cigar Company has officially appointed the Toraño Family Cigar Com- pany as its exclusive distributor in the Great Style. United States as of June 1, 2011. “After many years of doing our own distribu- Great Price. tion, we decided that it was best if we partnered with Toraño to handle that part of our business, so we could focus on the production side,” says Paolo Garzaroli, president of the Graycliff Cigar Company. “We chose Toraño for the similarity in our family values and because our respective cigar brands will complement each other very well.” “Graycliff is a super-premium brand • reliable quality • windproof and we are honored to be given the re- • metal construction • refi llable sponsibility to grow its distribution na- • adjustable fl ame • great value tionwide,” says Charlie Toraño, president of Miami, Florida-based Toraño Family Cigar Company (www.torano.com). “This union of two very passionate tobacco families will only enhance both of our po- sitions in the cigar industry.” After taking back their own distribu- tion in August 2010, the Toraño Family Cigar Company has undergone several changes, including a successful rebrand- ing effort, new ad campaign, several key hires and the introduction of three new See us at IPCPR at Booth 1195 or call brands. Graycliff Cigar Company will now ® Ronson sales at 814-368-2700 be part of the company’s evolution, as A Zippo Brand 17 both companies to grow their brands in TOBACCO OUTLET BUSINESS the premium cigar market. JULY/AUGUST 2011

RonsonAd-TOB_JulyAug.indd 1 6/8/11 1:57 PM TRADE TALK By Thomas briant

State Tobacco Legislative Update

By Thomas Briant, NATO Executive Director

With only a few weeks remaining in most state legislative sessions, Georgia: proposed $0.31/pack cigarette tax increase several tobacco-related bills have been passed and enacted into Indiana: proposed 65 percent tax on little cigars and law. dissolvables Kentucky: proposed $1.06/pack cigarette tax increase, Smoking Restrictions 27.5 percent OTP tax rate Of the seven state legislatures that have considered the Maryland: $1.00/pack cigarette tax increase; adoption of new smoking restrictions, bills in Indiana, Kentucky 95 percent OTP tax rate and Mississippi were not passed because the 2011 legislative Mississippi: $0.50/pack cigarette tax increase; sessions have been adjourned. Four other states still have bills 22.5 percent OTP tax rate pending, including Alabama (which would include bars in its Montana: $1.50/pack cigarette tax increase current smoking ban law); California (which would eliminate Nevada: $1.20/pack cigarette tax increase the smoking exemption for bars); South Carolina (which would New Mexico: 57 percent OTP tax rate include bars in its current smoking ban law); and Texas (which North Dakota: $0.41/pack cigarette tax increase would include bars in its current smoking ban law). Virginia: $1.15/pack cigarette tax increase; 50 percent OTP tax rate Tax Increases West Virginia: $1.25/pack cigarette tax increase; With 18 state legislatures already adjourned for 2011, and 14 percent OTP tax rate many more scheduled to finish legislative sessions by the end of June, only Connecticut and Vermont have passed a cigarette and Those states with legislative sessions still under way in tobacco tax increase. Those state legislatures that have adjourned which cigarette or other tobacco products tax increase bills are Alaska, Arizona, Arkansas, Georgia, Idaho, Indiana, Kentucky, are being considered include California, Hawaii, Illinois, Maine, Maryland, Mississippi, Montana, New Mexico, North Dakota, Massachusetts, Missouri, Nebraska, New Hampshire, New Jersey, South Dakota, Utah, Virginia, Washington, West Virginia, and New York, North Carolina, Oregon, Rhode Island and Texas. Wyoming. The Connecticut tax increases, which go into effect on July 1, 2010 versus 2011 2011, include a $0.40/pack cigarette tax increase to a new rate of In 2010, six states enacted a cigarette tax increase while $3.40 per pack; an increase of $0.45 per ounce on moist snuff seven states raised the OTP tax rate. With only Connecticut to a new rate of $1.00 per ounce; and a 22.5 percent rise in the and Vermont passing cigarette and OTP tax rate increases so tax rate on other tobacco products to a new rate of 50 percent far in 2011, there is the possibility that fewer states will enact of the wholesale price. There will be a floor stocks tax assessed higher cigarette and OTP taxes than in 2010. Moreover, this on cigarettes only (not moist snuff or other tobacco products) year four states have bills pending that would reduce cigarette on all wholesalers and dealers (including retailers) on cigarette or OTP tax rates, including New Hampshire (proposed $0.10/ inventory held on July 1, 2011. pack cigarette tax decrease); New Jersey (proposed $0.30/ In Vermont, the legislature passed a $0.38/pack cigarette tax pack cigarette tax decrease); Oregon (proposed OTP tax increase, resulting in a new rate of $2.62 per pack, and an increase rate reduction); and Rhode Island (proposed $1.00/pack tax in the tax on cigars as follows: Cigars priced from $1.08 to $2.17 decrease). will be taxed at a rate of $2.00 each; cigars priced from $2.18 to Two possible reasons for the low number of states enacting $10.00 will be taxed at a rate of $4.00 each. cigarette and OTP tax increases in 2011 include the lackluster This year, more than 20 states have considered or are still economic recovery and the outcome of state elections last considering proposed cigarette and/or tobacco tax increases. November, which saw a change in many state legislatures and Those states in which a cigarette and/or tobacco tax increase governors’ offices. Except for just a couple of states, legislatures was not enacted due to being defeated or adjournment of the should be concluding their 2011 legislative sessions by the end of legislature included the following: June. TOB

18 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 Lounging Large in Texas

When a large rustic building became available in downtown McGregor, Texas, Tobacco Junction owners turned it into the 5,400-square-foot cigar lounge of their dreams—quadrupling cigar business. Their “big lounge” ideas may inspire you.

By Renee M. Covino

exans are known for their Balancing Act that balance on several levels. passion for the “bigger” things Long before the building became “We married the old and the new pretty Tin life. That’s one reason the available, the Livingstons’ vision of a well—a building with rich, old history, 13- 5,400-square-foot TJ’s Cigar Lounge, cigar lounge was one of balance; now foot ceilings and scratched hardwood floors opened last June in McGregor, Texas that their vision has become reality, with technology, five flat-screen TVs and by Tobacco Junction husband-and- they seem to have a knack for achieving (free) Wi-Fi,” explains David Livingston, wife owners David and Joan Livingston, is not only a popular town hangout but also is gaining notoriety with cigar smokers throughout the big ol’ state of Texas. TJ’s Cigar Lounge is even touted as “the largest cigar lounge in Texas.” But the year-old lounge’s mammoth space is not all it has going for it. There is a rustic ambiance of relaxation here where cigar smokers from all walks— and even nonsmokers—come together to talk, listen to some jazz (offered live every second and fourth Thursdays of the month), watch a little sports, enjoy an alcoholic drink (it’s BYOB, but cups and ice are provided), purchase a cup of coffee, work on their laptops, and basically feel at home in a wide- open Texas space dreamed up by a tobacco- friendly couple in the business since ’97.

20 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 TJ’s Cigar Lounge Etiquette

Long before TJ’s Cigar Lounge was they? Realize that people gravitate to 7. Let the staff members do their created, co-owner David Livingston had what they like, with cigars or anything jobs. Cigar shops are social centers, and a vision in his head of what it could be else. Leave room for those around you this does include the staff. You can’t like, courtesy of Nat Sherman in New to enjoy what they choose. help but get to know your “cigar guy” York City. Livingston says he “can vividly 3. Know your audience. When I or “cigar gal,” and you’ll come to enjoy recall” walking into Nat Sherman’s for asked the guys around me about cigar talking to them. But when the smoke the first time—“the sights, the smells, etiquette, two gave variations of “keep shop’s employees are with customers, the people.” He says he was impressed it clean.” Sitting down and regaling the unloading boxes, or otherwise working, that “everyone was on the same playing crowd with the previous night’s sexual let them be. The first priority is the job, field,” and he wanted to create a place conquests in lurid detail, for example, and you need to respect that. like that for his Tobacco Junction stores may not be appropriate. If you float 8. Be aware of the line behind you. A one day. a controversial topic and it doesn’t good tobacconist won’t rush you or show Now with TJ’s Cigar Lounge in resonate, let it go. Trying to force it will impatience, so don’t challenge him to try. McGregor, Livingston and his wife have not work in your favor. Likewise, if you If you don’t know what you want, stand created a place of relaxation and respect. find a crowd comparing their evenings out of the way while you look around, “The tone of the lounge is almost like in a way that doesn’t sit well with you, especially if there’s a line forming behind your living room, and it dictates how realize that you’re the outsider - and that you. Nothing is worse than hearing, “I customers act. I rarely have to tell them this crowd may not be the right one for came in last year and bought a cigar, do how to behave; the lounge does that on you. you remember what it was?” If you see a its own, people can instantly feel the 4. Talk on the phone­—somewhere waiting crowd behind you, let them take culture of the lounge when they walk else. Cell phones are now a part of life. care of their purchases while you find in,” he tells Tobacco Outlet Business. Given enough people and enough time, your way through the maze. Nevertheless, he says, he recently you’re bound to hear a few of them ring. 9. Don’t take over the TV. The TVs came across a list of “universal points Answering the phone isn’t a big deal; are there for everyone’s enjoyment. It is of etiquette” for entering a cigar lounge just have the decency to take your call just bad manners to start changing the or shop, and was inspired to make his away from the lounge. Move to the back channels when the lounge has several own such list available on TJ’s website, of the store, or step outside for a minute. patrons in it. If you really want to watch www.tjcigar.com, for customers to 5. Don’t tell people how to smoke. something, ask the employees and they review on their own. This is an excerpt Cigar smokers have their habits, right will make sure that it is OK with the of those 11 points: or wrong. You’ll irritate the hell out of other customers to change the station. 1. Don’t be a conversation snatcher. somebody by telling him he cuts his 10. The lounge is for luxury-tobacco If you walk into a lounge where a cigar too low, shouldn’t bite the cap, or users. The primary function of the conversation is taking place, don’t try to isn’t lighting his cigar appropriately. lounge is as a place for cigar and pipe change it. You can wait for an appropriate Some are open to the advice, others not. smokers to relax. No, I really do not care time to weigh in and participate, but If you decide to become a cigar educator, if someone smokes cigarettes and sits in there’s nothing worse than a newcomer be ready for a chilly reception. the lounge area, but when the lounge is who disrupts a discussion about politics 6. Buy from the shop where you’re crowded, please move to the bar/table or the economy with some unrelated smoking. This shouldn’t even need to be area. remark about the Mets’ bull pen. said, but there’s always an element that 11. Have fun. The lounge is there for 2. Mine’s not better. Cigar smoking is shows no respect for the establishment. your enjoyment. In order for everyone a matter of taste, whether you prefer an Retailers don’t have great profit margins, to have a good time, manners is the AVO Compañero or a cognac-dipped and when you bring a cigar into a shop word of the day. I think we have proved novelty stick. “Real” cigar smokers may from the outside, you are taking money that having a good time comes in many not touch the latter, but not everyone from the store. If you like having a place forms; enjoying a good cigar or pipe is chooses to be “real.” And why should to smoke, support it. one of the better ones. Source: www.tjcigar.com

22 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 vice president of Temple, Texas-based houses a 400-square-foot cedar-lined information world. Blue Diamond Capital Inc., his and Joan’s humidor, carrying all of the latest premium Beyond the “old and new” balancing company (she is president), which oversees cigar lines. Cigars do make up about 50 act, there is a balance of masculinity and the operation of four Tobacco Junction stores percent of the location’s business, but as an femininity in the new TJ’s Cigar Lounge, as in East Texas, including the McGregor all-tobacco operation, there is also a complete described by Joan Livingston. location. selection of other tobacco categories, “Ladies will come in here by themselves The 5,400-square-foot space includes including a full line of pipes. because they feel safe; the lounge is not too the McGregor Tobacco Junction’s retail “We get a lot of pipe smokers in here,” says masculine,” she says. “A lot of cigar lounges space. There was previously a small Tobacco Livingston. He adds that the store/lounge are created by men and women feel that. It’s Junction store in McGregor, but when the atmosphere drums up a lot of nostalgia also not too feminine—we found a way to building was purchased with the TJ’s Cigar for some customers. “If you sat on your balance that.” Lounge in mind, the store and the lounge grandfather’s lap while he smoked a pipe, In the lounge space defined by plush were combined in the new location. this place will help you remember that.” But leather couches and deep burgundy walls, “We also married cigar culture and with that nostalgia feel in the background, “there are a few silk flower [arrangements] education with the new quality of cigars the lounge simultaneously offers customers along the wall with the TVs,” she explains. today,” he adds. And so the vast space also access to the comforts of their modern Not overly done, the floral touch is one that

24 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 Joan Livingston. In addition to the store’s at-least-monthly cigar events, “we have groups of ladies that come in and I’ll do Cigar 101 with them,” says David Livingston. “They bring wine in and I’ll do a quick education on cigars—how to cut and light them, and I’ll help them choose cigars based on their tastes.” It was specifically the lounge that got the ladies hooked. Prior to opening TJ’s Cigar Lounge, the McGregor Tobacco Junction store had some women customers, but not as many it has now. “When we remodeled this building for the lounge­—it’s a small town, everyone wanted to know what was going on,” explains Joan Livingston. “We told them about the lounge and that you don’t have to buy anything, and almost instantly, women started showing up at the door to come in and relax, just like the men.” “The word-of-mouth spread like wildfire about this place,” comments David Livingston. And because the wide-open TJ’s was is refreshed seasonally to “add some color,” Additionally, there are tables where “intentionally designed not to be smoky,” according to her. “We also had an artist customers regularly play poker, backgammon, according to David Livingston, nonsmokers paint huge portraits of actors and actresses dominoes and chess. Darts are available, too. are often attracted to it, too. “The lounge was smoking cigars—Raquel Welch, George designed from the ground up for smoking,” Burns, Catherine Zeta-Jones and Jack Cowboy Coffee he says. “We’ve got three five-ton ACs Nicholson—they add more color and they Beyond the “living room” atmosphere, moving air throughout plus scrubbing and lean up against the wall to hide the airflow TJ’s Cigar Lounge also has a “kitchen feel,” vent systems. So even if we get 30 people system. We also took cigar boxes to fill in and with a coffee area, complete with bar stools in here smoking, it’s not going to be very decorate, which brings the cigar merchandise and a cup of Arbuckles coffee for $1.85 (the smoky—it’s non-offensive because we into the lounge area.” second cup is free). “The type of coffee we designed it that way.” To balance a “living room feel” within serve goes with the building,” explains David The lounge was also designed to hold big a social/retail area, the television sets are Livingston. “Arbuckles is the same coffee cigar events, which it does at least monthly. purposely down at eye level and not high they had on the chuck wagons on the trail David Livingston says that their customers up on the wall, as is typical in a sports drives in the 1800s. We grind our own beans “are pretty hungry for knowledge,” so TJ's bar. Jazz music is featured at the lounge and offer two different varieties every day. does well with cigar manufacturer events, and often, “customers don’t really want We also sell the beans.” alcohol pairing events, and even charity- to listen to the sports—nine times out of This coffee bar coupled with the free Wi- sponsored events, like it recently did with 10 they don’t want the sound up on the Fi is further incentive for women, and even the Humane Society (an event calendar TVs,” she relays. Now that a live-jazz duo nonsmokers, to congregate at TJ’s. and videos of past events are featured on performs twice a month (which started “I wanted a place where the common man its website, www.tjcigar.com). “We are still this May), TJ’s will often leave its doors and every man can come together, and where feeling out the different things we can do open and townsfolk will just stroll in. ladies could feel comfortable,” states David here,” he states. “That’s really bringing in the crowds,” she Livingston. And indeed, TJ’s Cigar Lounge One thing they learned they cannot do is states. “It’s cool because McGregor sidewalks now has its fair share of women clientele. hold a cigar event on a Thursday or Friday tend to roll up at dusk, but you can hear the ”A lot of our cigar reps are surprised to see during football season. “Texas is very big on jazz and we’ve had walk-ins from the street.” how many women show up at events,” relays its football, especially here in a small town,”

26 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 he explains. “The entire town goes to the SpaceX Marks the Spot Meanwhile, TJ’s Cigar Lounge enjoys games on those days.” That goal could blast off thanks to the the political benefits of being in a small It’s only been a year, but TJ’s Cigar private-sector rocket company SpaceX, town, according to David Livingston. Lounge has made a mark on its town—and which just happened to move its rocket “My view is in a big town, you’re more quadrupled cigar sales for the McGregor test facility into the town of McGregor, subjected to the whims of city councils Tobacco Junction. “We see our numbers a place that was once where the Navy and their smoking bans,” he says. “We’ve increasing every month as more and more made its rockets. The Livingstons seen it happen in big cities—it has put people are finding out about us,” says Joan knew about this before they opened people like us out of business. Livingston. the lounge, but SpaceX has recently “But here in this small town, the While the cost of the entire lounge tripled its space in the town to more politicians are more accessible to hasn’t seen a return yet on investment, the than 5,000 acres and qualified for some one-on-one time; they’re more open Livingstons are optimistic. “We’ve only been serious contracts. to listening,” he continues. “The city open a year in June and we haven’t hit our “So now we will have people from council here in McGregor is very open stride yet,” offers David Livingston. “But 60 all over the world coming to see the to new ideas, and because we’ve done percent of all cigars sold in Texas are sold rockets, to test and work on them, a quality job and are not overbearing, online, and tapping into that is one of our and our lounge will be sitting on their they’re supportive of everything we’re goals.” doorstep,” explains David Livingston. doing.” TOB

28 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 Show Your Pipe Some

The gentle care and maintenance of a pipe is crucial to its longevityLove and your continued smoking enjoyment. little love goes a long way—even tobacco, smoked or unsmoked, in your keep the pipe in the best storage position, when it comes to pipes. pipe. It clogs the flow of air necessary to with the stem facing up and the bowl on A I have relayed in past columns help dry the pipe and adds moisture to an the bottom. about what constitutes a good smoke. already moist pipe. You will remember that good tobacco, a • If the pipe becomes a little smelly and good pipe and good smoking techniques • When emptying your pipe, never not as sweet as before, try dipping your comprise a good smoke. And as with so bang it on anything except the palm of pipe cleaners in drinking alcohol (vodka many things that matter in life, good care your hand. Use a pipe tool to loosen the or rum; I like vodka). Run the alcohol- and maintenance provides continued tobacco and empty it carefully. dipped pipe cleaner though the stem and enjoyment and pleasure. Thus, good care shank until it comes out clear; then let and maintenance of a pipe (beyond just • The last thing you should do to your your pipe “rest” for a couple of weeks. cleaning it properly) is essential for a pipe, after you have emptied the bowl continued sweet smoke. of tobacco, is run a pipe cleaner though • If the outside of your pipe bits become So below are my suggested pipe the stem and shank. This will clean and dirty or start to turn color, try using maintenance tidbits: dry out your pipe. You need not remove toothpaste on a rag. Use it only on the your bit from the shank—remove it only pipe bit and not on the shank. Toothpaste • Use pipe cleaners as you smoke. This in major cleaning (which I will explain in is a mild abrasive; it will clean the bit is first because it is perhaps the most a later column). without harming it. important tip. It will help keep the pipe dry and smelling sweet. • Rotate your pipes. Never smoke a hot With proper care and maintenance, pipe; try to wait at least one to two hours your pipe can last your lifetime—and • Never leave your pipe in the sun or before re-smoking the same pipe. with love, it can last lifetimes. I have pipes heat. Direct sunlight will change the that are more than 100 years old, and I color of the pipe, and the heat can change • Try to keep your pipes in the open; smoke pipes from the 50s and 60s weekly. the flavor of your pipe. never keep them in a closed box, drawer In fact, I’m doing so right now (lovingly, or bag. Pipes kept in closed containers of course) as I write this. • If you have to stop smoking and are not will become smelly. Pipe racks are the going to smoke again in the next 10 or 20 best; they are open, which allows the air With Pipe in Hand, minutes, empty your pipe. Never leave to flow though the pipes. Also, most racks Frank

30 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 hey are smokeless, and yet a haze hangs have a limited number of colleagues on my of major players and protect them from over them as they climb and descend side,” Joel Nitzkin, M.D., immediate past competition from other products and other cig along with the good news/bad news chair of the Tobacco Control Task Force for makers.” around the category. Will the smoke ever clear the American Association of Public Health Recognizing that “tobacco control is still on tobacco alternatives? Physicians, tells Tobacco Outlet Business. firmly committed to the old way of doing Despite endorsement from a few strong Nitzkin, by the way, was one rare public things,” Nitzkin has questioned the stubborn voices in the public health community who health physician who, after downloading and old-school thinking and come to some very are promoting tobacco harm reduction actually reading the proposed FDA bill in different science-based conclusions. He has (THR) products in place of cigarettes, the 2007, would not endorse it. “The contents of challenged, for example, the fact that the misinformation (especially on health and the bill were very different from how it was mandated warnings on traditional smokeless legislative levels) mounts on e-cigarettes, being presented,” he recently told attendees tobacco products imply that smokeless smokeless tobacco, dissolvable lozenges, sticks of the TMA Conference in a presentation tobacco comes with the same health hazards and strips. Nevertheless, those who know about his experience with the legislation. “It as cigarettes, when the evidence is clearly to the the “tobacco truth” push for THR to prevail. was hyped as saving countless lives and as a contrary. According to Bill Godshall, executive director victory over Big Tobacco, but there was really Public health proponent and University of of Smokefree Pennsylvania, noncombustible nothing new [regarding cigarette regulation] Louisville professor Brad Rodu agrees with tobacco products are 99 percent less dangerous in this bill that wasn’t already established in the Nitzkin that the three originally mandated than cigarettes. MSA. But [what it did do was] grandfather health warnings for traditional smokeless Yet there is a surprising lack of support for in current products but place huge barriers tobacco products—“This product can cause a category that should, by logic, be viewed as against the introduction of new products— mouth cancer”; “This product can cause gum an opportunity to boost overall public health. modified-risk products and so on. Rather than disease and tooth loss”; and “This product “Tobacco harm reduction is the most rapid [help smokers], those new product restrictions is not a safe alternative to cigarettes”—were way to reduce tobacco-related death, but I would essentially lock into place the ranking “fabricated by tobacco prohibitionists and 32 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 E-cigs, snus, lozenges, sticks, strips and the like bear a lot of promise for the tobacco industry, but they are still grossly misunderstood. These are the latest ups and downs surrounding modified-risk alternatives.

By Renee Covino

codified into federal legislation in 1986 by this is going to play out.” But it seems “things blowing “smoke”) aspects of smoking, was a misinformed U.S. Congress.” But rather are moving in that direction; the general public, featured on the NBC TV show “The Doctors” than revise the “exaggerated” and “distorted” a limited number of public health advocates as one of the top-10 key health trends for warnings in light of extensive recent risk data, and most in the tobacco industry are basically 2009. “The greatest issue with cigarettes is the federal lawmakers simply reconfirmed the on the side of smokefree moving ahead, with 500-plus other ingredients added, not just the labels in 2009 when they approved the FDA the FDA lagging behind.” nicotine,” stated Dr. Travis Stork on the show. tobacco regulation law, according to Rodu. “Do we recommend [electronic cigarettes] for Congress did add a fourth warning, E-cigarettes nonsmokers? Of course not, but for current “Smokeless tobacco is addictive,” which Rodu Perhaps no alternative has been hyped so smokers this is the most revolutionary device says is the only warning with a legitimate much nor carried so much hope to consumers to date.” scientific rationale. The FDA’s claim that and the industry alike as the e-cigarette. Agreeing that addiction to smoking involves its decisions are based on science “provides Industry estimates put U.S. sales of the devices both pharmacological and behavioral factors, some hope that smokeless tobacco warnings and accessories at $200 million to $250 million professor Michael Siegel of Boston University’s will someday be appropriately and accurately annually. A recent Associated Press (AP) School of Public Health says that one of the revised,” Rodu maintains. report said the industry has grown to several reasons electronic cigarettes are proving to And for now, Nitzkin says, “sales of million users worldwide from thousands in be more effective than nicotine replacement e-cigarettes, dissolvables and smokeless 2006, when e-cigs were first readily available therapy (NRT) is that they address both of tobacco products are increasing at a rapid clip,” in the United States. And the number of users these aspects. while cigarette sales show single-digit declines. increases by tens of thousands every week, the “It appears that especially with e-cigs, people AP reported. The E-Cigarette Trend are exploring on their own and coming to their The e-cig device, which addresses both E-cigarette recognition and endorsements own conclusions and initiating action,” he says, the nicotine (which can be weaned down to are everywhere now. Movie and television noting that it will be interesting to see “how zero) and behavioral (puffing, hand motions, actress Katherine Heigl discussed the benefits 33 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 of the electronic cigarette on the Late Show who on his website (www.rodutobaccotruth. “promised future course of action,” according with David Letterman while she, and even blogspot.com) called it a “victory on several to a company press release. Letterman, “took hits” from the device on- counts for smokers and for our nation’s public Meanwhile, innovation continues in the air. The December 2010 blockbuster movie health” essentially because it guarantees that e-cigarette category by companies such as The Tourist features Johnny Depp’s character a product that has helped many smokers Solar Cigarette, based in Boca Raton, Florida, puffing on an e-cigarette in various scenes. quit will remain on the market. (However, which reportedly developed a new patent- Electronic cigarette company Blu Cigs, there remains the FDA issue of Substantial pending vitamin-pack design that will help based in Charlotte, North Carolina, sponsored Equivalence, explained below in “The Downs” its consumers lose weight while e-smoking. NASCAR team Fas Lane Racing at the Sprint section.) Users of the brand will receive multivitamins Cup Series in May. Blu Cigs also reportedly Moreover, the decision allowed the release and CoQ10 with every puff, according to the circulated some photos of Lindsay Lohan of previously held e-cigarette shipments. Some company CEO, Markus Skupeika. using its e-cigarette instead of her regular sellers of e-cigarettes sued the FDA after the At press time, Blu Cigs was set to release cigarette, expressing that she “is determined to agency told customs officials to refuse entry of e-cigarette packs that are powered with sensors better her career and her health and has started shipments into the U.S. The ruling basically that can detect other e-smokers within 50 feet using Blu Cigs as a deterrent to lighting up.” upheld that the FDA was not permitted to to prompt potential social interaction, The This June, New York-based e-cigarette stop the shipments and that it had overstepped New York Times reported. Later versions of maker Cigirex LLC teamed up with Monster its authority. the technology will be bound to a smartphone Energy to sponsor the premier of Operation Brandenton, Florida-based Totally through an app, allowing more options for Belvis Bash, starring Corey Feldman and Wicked is one such e-cigarette marketer that real-time communication. The company also Daniel Baldwin. Feldman said he did not demanded the release of its products after they plans to develop a system through which the smoke traditional cigarettes after using Cigirex were impounded by U.S. Customs at Miami packs can monitor a user’s smoking behavior in January. International Airport in October 2010. In and report back to the user or to the user’s Actor Charlie Sheen and former Major May it received a letter from the FDA saying doctors. League Baseball center fielder Lenny Dykstra that its confiscated goods had been released for are reportedly partners of NicoSheen, an sale in the U.S. Totally Wicked then voluntarily The Downs online seller of e-cigarettes and other related sought dismissal of its lawsuit against the Despite the growing interest, innovation products. Meanwhile, hundreds of companies FDA, retaining the right to immediately refile and support from some health advocates are scrambling to get in on the market while the case if the agency fails to comply with its for electronic cigarettes, a firestorm of it’s hot. The Ups But beyond the celebrity endorsements, The THR Promise the consumer acceptance, the “household name recognition” status, the really good news The benefits of switching to tobacco harm reduction (THR) products for an individual: for e-cigarettes came on April 25 when the • Immediate improvement in sense of taste and in stamina U.S. Food and Drug Administration (FDA) • First year: 30 to 50 percent reduction in risk of heart attack announced that it would not appeal Judge • Over 15 years: near total elimination of all risks Richard Leon’s ruling in NJOY vs. FDA to the U.S. Supreme Court, meaning it would The benefits of switching to tobacco harm reduction products for the public: regulate smokeless electronic cigarettes as • Rapid and substantial reduction in illness and death (over 20 years) tobacco products and would not try to regulate • Elimination of environmental tobacco smoke them under stricter rules for drug-delivery • Enhanced switch rate of 3 percent would reduce prevalence of smoking almost 50 devices. percent in 20 years Because cigarettes, roll-your-own and • Enhanced switch rate of 10 percent would reduce prevalence of smoking almost 90 traditional smokeless tobacco products are percent in 20 years currently the only regulated tobacco products • Enhanced switch rate of 10 percent would save the lives of 4 million of the 8 million under the Family Smoking Prevention and current adult smokers who would otherwise die of a tobacco-related illness over the Tobacco Control Act, e-cigarettes join cigars next 20 years and pipe tobacco as unregulated tobacco • Enhanced switch rate of 10 percent in year 20 would reduce the annual tobacco products according to federal law, as long as no attributable death rate by 82 percent therapeutic claim is made by the manufacturer Source: “Tobacco Harm Reduction, Promises and Barriers,” presented in May at the Tobacco Merchant As- sociation’s annual conference by Joel Nitzkin, M.D., immediate past chair of the Tobacco Control Task Force or importer. for the American Association of Public Health Physicians. Many welcomed the FDA decision, including public health proponent Rodu, 34 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 misinformation continues to spread. It is approval. While it could be argued that all Star Scientific’s Ariva and Stonewall dissolvable professor Siegel’s opinion that antismoking e-cigarettes use the same basic technology and smokeless products were effective in helping groups “are ingrained with an underlying therefore are “substantially equivalent” to one smokers remain smoke-free.) ideology that simply does not allow for another, the FDA may make finer distinctions, Professor Rodu calls the snus study a the endorsement of a device that simulates industry observers fear. “landmark development for tobacco harm smoking, no matter how many lives that device Tobacco harm reduction expert Carl V. reduction” because NCI’s backing “sends an might save.” Phillips says he does not see any “pro-THR unequivocal message that informing smokers Because electronic cigarettes don’t burn thinking” on the part of the FDA and that about safer smokeless substitutes is ethical, and don’t give off smoke (rather, they give off this could “seriously mess” with the selling credible, and worthy of serious consideration.” vapor; users call the practice “vaping” rather of e-cigarettes moving forward. Requiring Few details are available about the trial, except than smoking), logic indicates they would be a product that is not almost exactly the same that it will be conducted among 1,250 smokers allowed in places where smoking is banned. as something that was on the market before who are not motivated to quit. But the confusion surrounding the device February 2007 to go through pre-market Of course, there continues to be a lot found some states and localities across the review would be largely prohibitive, he believes. of misinformation circulating around the country scrambling to ban them without the Furthermore, Phillips says it appears likely that snus category, just as with all tobacco harm proper backup for how good or bad they really the FDA will “cling to its nutty anti-scientific reduction. In a Huffington Post blog, Dr. Glenn are. Ignorant lawmakers decided to lump e-cig position” by prohibiting even the “obviously Braunstein of the Department of Medicine at users in with traditional smokers and penalize accurate claim that e-cigarettes are a way to not Cedars-Sinai Medical Center in Los Angeles them as such. smoke.” warned against smokeless tobacco use, asserting So far, New Jersey is the one state that Professor Siegel similarly believes that that it carries risks as serious as smoking. specifically bans the use of e-cigarettes where the implications will be in how severe or Blogging on his own website, professor Rodu regular smoking isn’t allowed. The city of San lenient the FDA will be in interpreting the highlighted Braunstein’s smokeless health Francisco plans to include e-cigarettes in its meaning of “substantially equivalent” as well risks as “demonstrably fictitious,” pointing out current smoking ordinance, basically ruling as the interpretation of “therapeutic claim” that Braunstein’s comments ignore numerous that anything that looks, feels or functions like with regard to e-cigarettes. Siegel notes that scientific studies that have found smokeless a cigarette is a cigarette and has to be banned some e-cigarettes introduced after Feb. 15, tobacco use is 98 percent safer than smoking. from public places. 2007 could potentially be removed from the Dr. Gilbert Ross of the American Council In Washington state, the Tacoma-Pierce market. He also says that it is “ridiculous” on Science and Health recently criticized an County Health Department similarly that e-cigarette companies must refrain from editorial posted on a local South Dakota news proposed to ban the use of e-cigarettes in making therapeutic claims because there is no website that warns against smokeless tobacco public places where cigar and cigarette smoking question that e-cigarettes are safer than regular use, saying it “contained more falsehoods and is already illegal under state law, but on June 1, it cigarettes. misleading statements in the fewest words more wisely voted 7-0 for an amended proposal that I’ve had the displeasure to read recently.” that prohibits the sale of electronic cigarettes to A Snus/Smokeless Sensation? The editorial’s description of Camel Snus as minors and regulates where people can use the According to Wells Fargo Securities analyst a chewing tobacco brand is wrong, he stated, devices. The amended legislation says e-cigs Bonnie Herzog, U.S. cigarette volumes have because it is actually a moist smokeless product will be allowed in adult establishments such as been declining at about 3 percent to 4 percent that involves neither chewing nor spitting. bars, private workplaces if the owner approves, annually, while smokeless/snus volumes have While he believes that “the best use of tobacco and businesses that sell or promote electronic been increasing by about 6 percent to 7 percent. products is no use,” one solution to reduce smoking devices. In New York City, coinciding with an smoking-related mortality is to get addicted But beyond the bans, the potentially big outdoor smoking ban that took effect on May smokers to switch to cleaner nicotine delivery “downer” for e-cigarettes could be the issue 23, Reynolds American Inc. ran full-page ads systems, such as snus. of Substantial Equivalence, which will arise for a week in publications such as The Wall And snus now has tax backing from once the FDA starts regulating e-cigarettes, Street Journal and the New York Daily News, two states—first, Kentucky, and most as it has said it will eventually do in a letter to urging NYC smokers to switch to its Camel recently, Indiana—that officially recognize “interested parties.” While no timeline has Snus, reportedly the top-selling snus brand in harm reduction by allowing the tax rate been set on the proposed rule changes, the the country. on smokeless tobacco/snus to reflect the Substantial Equivalence question will arise as it Good news for snus could come from relative risk between smokeless products has for other tobacco products under FDA rule. upcoming research. The National Cancer and cigarettes. Professor Rodu calls this Essentially it means that under the grandfather Institute is funding a new one-year study that a “compelling and innovative strategy” clause, tobacco products that were available will evaluate the impact of Camel Snus on because it provides “an economic incentive in the U.S. market as of Feb. 15, 2007, and smoking cessation, conducted by Matthew for smokers to transition from high-risk, “substantially equivalent” products introduced Carpenter at the Medical University of South high-tax cigarettes to very low-risk, low-tax after that date are not subject to pre-market Carolina (who found in a previous study that smokeless products.” The idea of a risk-based 36 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 tobacco tax system is gaining momentum and the health risks of using the products. A that it has entered into an agreement for the is endorsed by the National Center for Policy spokesperson for the Kansas Tobacco Use patent rights of a new technology employing Analysis in its report titled, “Taking Tobacco Prevention Program said the sticks taste sweet a unique method for delivering a nicotine- by Risk,” released earlier this year. and resemble chocolate-covered toothpicks. containing aerosol—one that reportedly lets But an Altria spokesperson said recently in users inhale nicotine without smoking— Discovering Dissolvables The Wichita Eagle that the sticks, which are developed by Jed Rose, director of the Tobacco-coated sticks, strips and lozenges coated with finely milled tobacco and come in Center for Nicotine and Smoking Cessation fall under the dissolvable tobacco category, one different flavors such as “cool mint,” are aimed Research at Duke University in Durham, that continues to evolve with ups and downs at adult smokers and snuff users who want a North Carolina, who led the initial studies in as all others in harm reduction. As mentioned smokeless, spit-free alternative, and noted that the early 1980s that helped pave the way for above, a study conducted by Matthew multiple warnings on the product packs are nicotine cessation patches. Carpenter at the Medical University of South meant to “make sure adults understand not to In an AP report, a spokesman for Philip Carolina found Star Scientific’s Ariva and buy these for children or leave them around Morris said it may take three to five years to Stonewall dissolvable smokeless products where children could get a hold of them.” develop a commercial product that would were effective in helping smokers remain Health officials in Colorado expressed be considered an alternative to conventional smoke-free. similar concerns; R.J. Reynolds Tobacco cigarettes. The study, published in 2010 in the journal Co. has been test-marketing its dissolvable Less than a week after the Philip Nicotine & Tobacco Research, highlighted that tobacco products, Camel Orbs, Camel Sticks, Morris announcement, British American the use of dissolvable products resulted in a and Camel Strips, in Denver. Tobacco’s recent subsidiary Nicoventures significant decline in cigarette consumption Claims that dissolvable smokeless products (focusing on nicotine alternatives) signed per day and an increase in self-efficacy among are marketed in “candy flavors” to attract its first commercial contract with Kind smokers to quit the habit. According to children are irrational, according to Thad Consumer, reported the U.K.’s Financial Siegel, the study called for “a large prospective Marney, a founding board member of The Times. The contract is a distribution randomized clinical trial to more accurately Consumer Advocates for Smoke-Free agreement for a device that uses assess the long-term viability of smokeless Alternatives Association (CASAA), who miniaturized breath-operated inhalation tobacco use as a method for cessation noted that even nicotine replacement therapy technology rather than tobacco to deposit induction among unmotivated smokers.” products are available in such flavors. nicotine in the lungs. More good news for Star Scientific came Nevertheless, state and local governments It all comes down to reducing the risk of this March when regulators ruled that its are proposing to ban them, just as with smoking-related diseases in the quickest way Ariva-BDL and Stonewall-BDL tobacco e-cigarettes. Oregon, for example, is looking possible. According to Nitzkin, who recently lozenges aren’t subject to regulation under the to ban certain flavored dissolvable smokeless spoke at the Tobacco Merchants Association’s 2009 tobacco law, clearing the way for Star tobacco products. Linn County, Iowa, is (TMA’s) annual conference, we need to Scientific to start selling them. The dissolvable proposing to ban the sale of all dissolvables. “reconsider the goal of a tobacco-free society; products contain reduced levels of carcinogens Ordinances such as these are “similar to the instead we should aim for a smoke-free known as tobacco-specific nitrosamines. reversed logic among national antismoking society.” TOB However, as with e-cigarettes, an FDA groups, which supported FDA tobacco advisory panel will eventually evaluate legislation that institutionalizes the FDA’s dissolvable tobacco. In fact, it was announced seal of approval for the most toxic tobacco The Electronic that on July 21 and July 22, the FDA’s Tobacco products on the market—cigarettes—and Products Scientific Advisory Committee puts [in place] insurmountable obstacles Cigarette Test (TPSAC) will initiate discussions on the that preclude the marketing of safer tobacco nature and impact of the use of dissolvable products that could potentially save lives,” Instead of cutting cigarette consumption tobacco products on public health. according to Siegel. by 25 percent, introduce a product that reduces lung cancer risk by 25 percent. One of the biggest “downers” for dissolvable On the Horizon The electronic cigarette delivers nicotine products is the exaggerated hype that they without the thousands of chemicals and resemble candy and attract kids and underage The quest for safer tobacco products more than 60 carcinogens in tobacco youth to try them. continues beyond the scope of current product cigarettes; it reduces TSNA levels by 1,400 In Kansas, where Altria Group Inc.’s categories. “New nicotine aerosol products times compared to levels in Marlboro Philip Morris USA and U.S. Smokeless may be even better cigarette substitutes than cigarettes.

Tobacco Co. subsidiaries are test-marketing electronic cigarettes, and have the potential to Source: Harm reduction session presented in May “tobacco sticks” under their Marlboro and save the lives of tens of millions of smokers,” at the Tobacco Merchant Association’s annual Skoal brands, the state’s Department of says Godshall. conference by professor Michael Siegel of Boston University’s School of Public Health. Health and Environment recently issued an He is referring, in part, to the recent advisory warning parents and others about announcement by Philip Morris International 38 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 Berger & Argenti: Michael Argenti

By Jennifer Gelfand

hen it comes to creating a great on for three-eighths of an inch beyond the Creating a great cigar cigar, Michael Argenti doesn’t cigar’s foot. “The methodology behind the Wtake the easy road. Maybe it’s design is that the ligero channel acts as the is a blend of art and his engineering training, or perhaps it’s the cigar’s fulcrum,” explains Argenti. “Because science. So who culmination of 20 years developing and it burns more slowly than the fillers around marketing cigar brands—whatever the it, the cigar produces a perfectly conical Engineeringbetter to pursue reason, Argenti sets his cigar-makingExcellence sights ember with a firm ash that will stay on high, refuses to compromise on quality and for half the cigar’s length. The result is a the perfect perseveres until he creates exactly what he flawless draw, a perfect burn and a focused envisioned. balance of rich and complex flavors.” stogie than an Witness Entubar, the company’s first Entubar demands excellence in engineer introduction and the most innovative cigar craftsmanship by being decidedly on the market today. The word “entubar” difficult and time-intensive to make, turned refers to a long-practiced Cuban cigar- but worth the effort, says Argenti, who making technique of creating scrolls of teamed up with his brother Albert, along cigar tobacco leaves by hand, which are meant to with Nicaraguan cigar maker Henry ensure that air flows evenly from the foot Berger, Jorge Salazar and Al Gutman, maker? to the head of the cigar. Argenti took that to produce the brand. “Henry and I practice a step further by designing a cigar have known each other for many years; with a ligero core—a channel of ligero that his Tabacalera Estelí farm produces extends the entire length of the cigar and incredibly robust and flavorful tobaccos

40 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 The word “entubar” refers to a long-practiced Cuban cigar-making technique of creating scrolls of tobacco leaves by hand, which are meant to ensure that air flows evenly from the foot to the head of the cigar.

Albert Argenti

and I’ve always wanted to work with his more than just a project. And that’s how businessman. He’d been in Nicaragua material,” Argenti begins. “Over the years Berger & Argenti was born.” for about 12 years and during that time we always spoke of one day working on When the inherent demands of Entubar was slowly investing and building a little a project together, but for one reason or production pressed a need to shift the empire of his own—some fields in Estelí, another, we could never find the necessary brand to its own production facility, it was Jalapa and Condega and a boutique cigar time to do it. Then, ironically, it was my Jorge Salazar who suggested that Berger & factory. When I approached him about old friend Jonathan Drew (co-founder of Argenti form a manufacturing partnership producing Entubar, he instantly recognized Drew Estate cigars) who pointed out the with his cousin, Cuban-born Gregorio that we were breaking new ground and long-term business synergies of Henry Vazquez. “I already knew of him through doing something very special and radically and myself and explained the many his reputation as a quality cigar craftsman,” significant. He wanted to contribute to the ways we could complement one another. says Argenti. “He’s an extremely modest cause, and I found my right-hand man.” Jonathan suggested we should make it guy but very strong-willed and an astute “I’ve produced millions of cigars over the

42 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 last 20 years,” Argenti concludes, “and right now I’m making the best cigars of my life.” In fact, Entubar is so unique that Berger & Argenti is pursuing a patent—a rare path in the cigar business—on the unique process used to create and position the core of ligero. The company has since unveiled the Entubar Quad Maduro, a full-bodied, super-premium extension of the Entubar cigar brand. While Entubar is clearly its flagship brand, Berger & Argenti has also won raves for its more modestly priced Clasico, a medium- to full-flavored cigar featuring aged Nicaraguan fillers from Estelí and a Nicaraguan corojo leaf binder finished with an Ecuador-grown desflorado Connecticut-seed wrapper. Recognized with a Robb Report “Best of the Best” designation for 2010, the Clasico actually hit the market at prices ranging from $4.50 to $7.50 before Berger & Argenti finished fine-tuning the complex production required by Entubar. Not one to rest on his laurels, Argenti debuted a completely different cigar at the 2010 IPCPR trade show in New Orleans— Mooch, offering a medium-bodied, rich and creamy smoke geared toward the “everyday” cigar enthusiast, with suggested retail price points ranging from $3.99 to $5.79 per cigar. “I was looking to complement our brand mix by producing a more affordable cigar,” says Argenti. “Given the quality of tobaccos I’ve used to blend this brand, and the enthusiastic response and demand we’ve received from cigar enthusiasts, I’m confident Mooch ranks among the very best values in the long filler market today.” we’ve been working on for over a year now, corollary tools and equipment to make the With the IPCPR show just around the Entubar V32, which will be available for production of Entubar commercially feasible. the corner, TOB caught up with Michael authorized retailers for delivery this autumn. I’ve shown it to certain people who’ve been Argenti to chat about his plans to continue The predominant feature of the new V32 making cigars for decades, and even when to build out Berger & Argenti’s offerings and will be a half-inch (32/64-inch) diameter I dissect the cigar for them, they still can’t the methods and philosophy that guide his channel of ligero. It will be the most quite figure out how we’re able to produce it cigar-making. Here are excerpts from that full-bodied cigar I’ve ever made without or consistently position the channel of ligero interview. compromising balance or complexity. We in the center of the cigar. There are a lot of You’ve been steadily rolling out new already have the Entubar Desflorado and machine-made-cigar patents, but you could cigars. What will you be introducing at the Quad Maduro commercially available, count on one hand the number of premium, IPCPR 2011 and beyond? so the development of the CRV and V32 are long-filler-cigar patents. We will be releasing the Entubar CRV, natural progressions of the line. What are your plans to expand which is an acronym for Connecticut You are pursuing a patent on Entubar, a production capability? River Valley, at this year’s IPCPR Show. It very unusual move in this industry. How We now produce the entire family of has a No. 1-grade U.S. Connecticut-shade does Entubar’s production differ from Berger & Argenti premium cigar brands in a wrapper—with a beautiful, mouthwatering traditional cigar-making significantly new, 7,500-square-foot factory in Estelí that golden hue that’s significantly lighter than enough to justify a patent? we’ve occupied for about six months now. the stalk-cured desflorado wrapper available Entubar is unlike any other cigar that’s But because of the increased demand for all in our standard Entubar line and a wonderful ever been made and its production involves of our brands across the board, I’m looking creamy complexity. We’re also planning to many more steps and quality checks. We’ve at a second location, a 20,000-square-foot debut another Entubar brand extension developed proprietary molds and other building that’ll be dedicated to producing

44 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 only our traditionally-made cigar brands, such as Clasico and Mooch. Berger & Argenti Blends Are you making Entubar available to all retailers or have you restricted sales? How do you protect the brand? Clasico: Completely crafted by hand, Clasico cigars feature meticulously blended, To ensure we maintain firm control of the bold and deeply aged Nicaraguan filler tobaccos from Estelí, widely considered by Entubar brand’s distribution, it’s only sold cigar makers as among the finest areas in the world for filler tobaccos. The Cuban- directly by Berger & Argenti to brick-and- seed Nicaraguan fillers are sheathed in a sumptuous Nicaraguan corojo binder and mortar tobacconists. And to further protect enveloped in a stalk-cut, molasses-colored Ecuadorean Connecticut-seed desflorado the integrity and price point of the Entubar wrapper for a well-balanced, full-bodied character bursting with a confluence of brand, we have a written agreement with sweet and spicy flavors. Available in four sizes: Corona Gorda (4-1/2x46); Rothschild each authorized brick-and-mortar retailer (5x50); Belicoso (5-3/4x50); and Churchill (7x50), with a suggested retail price of that sets specific ground rules for how it’s to $4.50 to $7.50 per cigar. be marketed and sold to consumers. This is Entubar: A full-bodied, super-premium cigar brand, Entubar is made through a a wonderful benefit for retailers who have time-honored Cuban cigar-making technique of the same name. Each deeply aged grown increasingly wary of being blindsided Nicaraguan filler leaf is carefully rolled into itself, creating delicate scrolls of rich, by unauthorized cigar discounters. As for flavorful tobacco that ensure open chambers of airflow from the foot to the head restricting sales to new brick-and-mortar of the cigar for a superior draw. Comprising all Cuban-seed Nicaraguan filler and retailers on Entubar, I think it’s something binder tobaccos with an Ecuadorean desflorado Connecticut-seed wrapper, Entubar we may have to address soon because of is five unique vitolas characterized by sumptuously large ring gauges: Corona Macho demand. But at the moment, we are still (4-5/8x48); Robusto (5-3/8x54); Double Corona (7-5/8x54); Torpedo (6-7/8x56) opening new accounts in certain strategic and Gran Toro (6-5/8x64). Available in rustic Spanish cedar boxes of 20 cigars, the areas of the country. Interested retailers suggested retail price of each cigar ranges from $7.99 to $11.99. should call and inquire about it. Entubar Quad Maduro: A full-bodied, super-premium extension of the Entubar How do you go about developing a new cigar brand, Entubar Quad Maduro is “cuadrado”-pressed habano comprising all cigar—what inspires you? Cuban-seed Nicaraguan (viso and ligero) and Dominican (seco) fillers and a savory (Laughs) Good question. I guess Nicaraguan binder, skillfully enveloped in a rich, dark Jalapa Valley-grown maduro the genesis behind the development of wrapper crop aged eight years in seasoned oak barrels. Entubar Quad Maduro is new cigars and brands varies based on delicately packaged in rustic Spanish cedar boxes of 20 cigars and available in ring circumstance. It could be getting access to gauges Corona Macho (4-5/8x48); Robusto (5-3/8x54); Double Corona (7-5/8x54); exceptional material that came out of pre- and Torpedo (6-7/8x56). industry (fermentation, selection, sorting). It Mooch and Mooch Maduro: A rich, medium-bodied smoking experience aimed to could be borne out of a conversation I have appeal to the “everyday” cigar enthusiast. These cigars feature a flavorful Nicaraguan with my brother or our factory managers Cuban-seed filler and binder crop enveloped in a choice of either a sun-grown and craftsmen. It could be based on an Ecuadorean Connecticut-seed wrapper or a dark, Nicaraguan hybrid-seed maduro. observation of market trends. Or it could With a suggested retail price range of $3.99 to $5.79 per cigar (Natural) or $4.99 simply be a concept that pops into my head. to $6.79 (Maduro), Mooch and Mooch Maduro are available in an eye-catching There’s no particular formula for developing display tray of 120 cigars or elegant short wheels of 24 cigars. Sizes include Minnie a new cigar, although for me, inspirations (4-3/4x42 Corona); Shnorr (5x50 Robusto); Loll (6x52 Belicoso) and Windbag abound! (7x49 Churchill). Is that why you chose to include smoking instructions on each Entubar? When one first looks at the foot of an People in the industry say that you’re Argenti going forward? Entubar cigar, it may be quite startling to a perfectionist. What do you think they We’re a very experienced and quality- some cigar enthusiasts. The reason we extend mean by that? focused company. I feel blessed because the ligero channel beyond the foot is simply I’m very hands-on with every part of the all of us at Berger & Argenti, my staff and because it’s the only way we can visually business and I won’t tolerate things not being colleagues, have decades of experience present how unique the manufacturing done the right way. I spend at least half my with all aspects of cigar manufacturing and process is. So we’ve incorporated a secondary time in Nicaragua checking on production. distribution, including product development, bright-yellow advisory band near the foot I go through the yields to make sure we are sales and customer support, and we’ll chart a of each Entubar cigar that instructs you to using materials correctly. I look at every aspect responsible course. By that I mean that we’ll thoroughly toast the entire cigar foot before of production, not just cigar-making, from continue to reinforce and broaden Berger & smoking. That way, the cigar opens up right the aging of cigars to packaging. And when Argenti’s reputation and grow the company away. Actually, you can light just the ligero I’m back in the States, I receive daily reports the right way, in a tightly controlled and well- channel extension and the cigar will combust directly from the Vazquezes on production thought-out manner. And we’ll continue to satisfactorily, but I wanted to encourage and other relevant issues affecting us at the develop the very best cigars we can, cigars of people to toast the entire foot. Entubar is just time. exceptional quality and tremendous value to TOB better enjoyed that way. What are your goals for Berger & cigar enthusiasts everywhere.

46 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 J.C. Newman Holds “Castor for Congress” Event The cigar industry recognizes supportive congresswoman.

he J.C. Newman Cigar Co. recently hosted a “Castor jurisdiction over tobacco products and to protect jobs and for Congress” reception and fundraising event for small businesses involved in the sale, manufacturing and TCongresswoman Kathy Castor (D-Florida). The distribution of traditional and premium cigars. The bill was event was attended and supported by a wide range of referred to the House Energy & Commerce Committee, premium cigar manufacturers, distributors and retailers. which referred the bill to its Subcommittee on Health, and Rep. Castor, along with 18 Republicans, is a sponsor is currently pending as TOB goes to press. of House Resolution 1639, the “Traditional Cigar Castor—who represents Florida’s District 11, which Manufacturing and Small Business Jobs Preservation comprises Hillsborough, Pinellas and Manatee Counties— Act of 2011.” Essentially, the bill inures premium large has a record of supporting small businesses and initiatives cigars (weighing at least 6 pounds per 1,000 count) from favoring job creation. She received her J.D. degree from control by the FDA. The bill’s purpose is to amend the Florida State University and is currently serving her third Federal Food, Drug and Cosmetic Act to clarify the FDA’s term, elected in 2006 and re-elected in 2008 and 2010. TOB

Cynthia Fuente-Suarez, Frank “Smitty” Smith and Geri Smith Peter Baenninger and Marvin Samel

Peter Baenninger, Chris Szelowski, Eric Newman, Lyris Newman Peter Baenninger, Kathy Castor and Chris Szelowski and Marvin Samel

48 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 Glenn Fulgueira, Eric Fulgueira, Cly Philips and Eric Newman Chris Szeglowski, Bobby Newman and Mike McKinney

Kathy Castor Eric Newman

Eric Newman and Kathy Castor Eric Newman, Shanda Lee, Shira Martin and Jeff Borysiewicz

49 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 CMI’s story is about perseverance, adaptability and, most of all, a love for cigar-making. It began in the 1970s when a Dutch company opened a plant in aE rural part of western Ireland where there had been very little industry. The Dutch were lured to this part of the world— beautiful but not exactly known for cigar industry—for purely economic reasons: In an effort to lure companies to the region, the Irish government had built “advance factories,”essentially empty units ready and waiting for enterprising companies. But in the end, the Dutch proved less enterprising than one of Ireland’s own— Gerry O’Dowd, who was hired as general manager for the company’s new cigar bobbin (casings) manufacturing plant. Just a few years after the profitable Irish operation was launched, its struggling parent company pulled out. “The Irish operation was shut down and all the workers were out of a job,” recounts Aoife O’Dowd, Gerry’s daughter, who now serves as sales director of the company. “But my father had great faith in the potential, so he bought the business and looked for an investor who could help him grow it.” O’Dowd teamed up with Villiger and began manufacturing private-label cigars— entire cigars, rather than simply casings. Before long, ECMI was back in business. By 1998, the factory employed more than 70 workers and was manufacturing between 35 million and 40 million cigars a year for ECMI Cigars: customers in Holland and the United States. Over time, less and less of its business Enterprising in was for Villiger, and in 2006, the O’Dowd family decided to buy the company, winning the distinction of becoming the only independent cigar manufacturer in Ireland. “We are doing exactly what we did for Villiger before but under our own name,” says Aoife O’Dowd, who notes that ECMI is exclusively a private-label producer. “Our competitors focus on their own brands and

52 TOBACCO OUTLET BUSINESS JULY/AUGUSTIreland 2011 “Private-label is all we do; it’s what we specialize in. We’re 100 percent dedicated to helping our customers develop the perfect product for their customers.”

order and Internet distributors, as well as retail chains. We are very competitive on price; generally, our wooden boxes of 50 cigarillos come in at $20. And there is no minimum order, but realistically you would want to order at least 25,000 because of the logistics of shipping product from Ireland. That’s why larger chains and distributors who can order a pallet (121,000 cigarillos) make more sense for us. But we can sell smaller quantities, and we often do, particularly at the start of a private-label launch. If a client wants to do test-marketing, there is no minimum order limit for boxes, and the initial setup costs are less than $1,000, so there is no big risk involved. and a commitment to providing hands- make private-label cigars on the side. on, responsive customer service, our You’ve said that you see a big We focus entirely on producing private- flexibility and ability to produce exactly opportunity in the U.S. private-label label brands; it is our company that is what the customer requires. We can work market. Why? our brand rather than the products.” with whatever sources and packaging With smoking bans coming into In the interview to follow, O’Dowd type—loose, wooden box, tins and tubes— force across the U.S., smokers who shares insights about private-label that they want. We can design logos for traditionally smoked quality big cigars production. them or work with logos they supply. face huge constraints on their smoking We have done it successfully both ways. time. Whether it’s due to weather or just What differentiates your company from Also, the Irish weather suits us perfectly. being pressed for time, maybe they can’t other private-label producers? There is always a bit of natural humidity; step outside to enjoy their daily cigars Private-label is all we do; it’s what we it’s a perfect condition for cigar production. anymore. So on a day-to-day basis, that specialize in. We’re 100 percent dedicated smoker can enjoy a quality cigarillo that to helping our customers develop the What kinds of U.S. companies do you gives a good 10-minute smoke. People perfect product for their customers. We work with? in the U.S. don’t typically associate small have the flexibility to adapt to their needs We sell to a lot of the traditional, mail- cigars with that level of quality. But

54 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 there is an area in between where from long Corona to cigarillo. We have I see huge potential growth. never sold long Corona in the U.S. because it is a short filler and not good for How do you work with your the market there. Our 37.75x6 ring gauge clients to develop a cigar? is the largest we do. The 22.75x3.75 is the Generally we meet face to smallest and also our most popular. I think face and talk about what they’re that reflects a trend. Over the past decade looking for—their preferences or so we’ve seen every country gradually with regard to the cigar type, shifting to smaller and smaller models. wrapper, binder, filler and I believe that’s due to smoking bans. packaging. Then we prepare Also, people don’t smoke in their houses samples and pricing and then anymore, so if they want a big cigar we work with them on fine- after dinner, they have to go outside. In tuning and creating a brand and packaging. the summer it’s fine to be out on the Typically, they can have products on shelves deck, but in winter, that’s less appealing. three months after they speak with us. What are your goals for the company? What types of cigars do you produce? I want to make sure we are the go-to We offer a broad range of premium and company for anyone who wants to develop value cigars and cigarillos—everything their own private-label cigar. TOB 56 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 Miami Cigar’s Nestor Miranda Celebration In May, retailers and cigar smokers gathered to honor “The Most Interesting Man in the Cigar Industry.”

n bringing back the heralded National Nestor Cigar & Company’s way of thanking the smokers for Miranda Cigar Day on May 6, Miami Cigar offered their enthusiastic support of the company’s brands for the Iparticipating retailers across the country the chance past 22 years, and to reassert Miami Cigar’s commitment to provide customers with free cigars with any cigar to bringing you great cigars in the years to come,” said a purchase. Nestor Miranda was on site at one of the spokesperson for the company, which distributes Tatiana participating retailers—Tampa Humidor—to join in flavored cigars and Nestor Miranda Collection cigars, as the festivities, which included the chance to sample the well as La Sirena, La Aurora, León Jimenes, and Ducados newest addition to the Nestor Miranda Collection, the cigars. The photos on the following pages, courtesy of Art Deco (5.5x54). TOB’s own Ed O’Connor, offer highlights from Miranda’s “The National Nestor Miranda Cigar Day is Miami special day. TOB

60 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 61 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 TMA Conference Highlights: Tobacco Turning a

By Jennifer Gelfand

Farrell Delman

Ever resourceful, the industry looks to adapt as FDA regulation progresses.

ometimes I feel like the anti- but as drab green.” relative risk continuum that much more tobacco movement has transported Like most in the industry, Delman is not difficult to fathom.” Sus all—industry, regulators and against tobacco regulation, as long as that What’s more, the advent of FDA consumers—into the twilight zone,” regulation is rational. “That we do need regulation has ushered in an era of confusion said Farrell Delman, president of the solid regulatory science is something we as manufacturers and retailers attempt to Tobacco Merchants Association, in his all agree on in principle,” he said. Instead, meet target dates for requirements set by opening remarks for the TMA’s 96th he noted, the industry is plagued with the FDA's Center for Tobacco Products, annual conference. “Take recent protests in pervasive misinformation. despite a dearth of guidelines from the Australia [which plans to mandate that all “The government and media today FDA about how to do so, noted Delman. cigarettes be sold in plain green packaging]. continue a largely unconscious habit Participants in a series of panel Olive growers, fearing that [negative of confounding references to smoking discussions held during the two-day sentiment] around tobacco will sweep them cigarettes with those of tobacco conference echoed his frustration. Much up, are complaining loudly to the Australian consumption,” Delman pointed out. of that frustration centered around the government that the proposed color for the “Throwing all tobacco products into the anticipation of upcoming FDA action. packaging be referred to not as olive green cigarette basket makes the concept of a “Two years into FDA regulation, there 64 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 Daniel M. Delen, TMA Conference Highlights CEO of Reynolds American Inc.

have been major announcements and a sea “Tobacco products are not intended to change in overall requirements,” noted John be safe and effective,” said Michael Ogden, Manthei, a partner in the Washington, D.C. senior director of regulatory oversight for office of Latham & Watkins and global co- R. J. Reynolds Tobacco Co. in Winston- chair and Washington, D.C. department Salem, North Carolina, in agreeing that chair of the health care and life sciences modeling the language used for tobacco practice. “But for the large part these are products to be substantially equivalent after things this industry has largely been familiar language used to set standards for medical with, [such as] restrictions on advertising, age devices is problematic. “There seems to be verification practices, packaging mandates. the perspective that tobacco products, which That will change with the regulatory action inherently involve some degree of risk, are that will have the most significant impact on to be held to a higher standard than devices Sheppard Mullin’s this industry slowly but surely coming into intended to have zero risk. That seems Seth Mailhot effect now.” problematic.” Chief among these is the Substantial Many also protested enforcement of the Equivalence (SE) provision of the Tobacco March 22 deadline when the FDA failed Control Act, which required manufacturers to provide guidance on the submission of a tobacco product introduced or modified application requirements—which were after Feb. 15, 2007 to submit an application extensive—until just two months prior to the to the FDA by March 22, 2011. The deadline. “From June 22, 2009, to Jan. 5, 2011, manufacturers were charged with “providing the industry had only statutory language as information on the product sufficient to guidance; requests to meet with the FDA allow the agency to determine that an order were rejected,” noted Ogden. “The FDA authorizing the product’s introduction is issued nonbinding guidance and proposed appropriate for the protection of the public exceptions barely 10 weeks before the filing “The FDA is not going to take your word health.” deadline.” for being an SE; you will have to prove it. It should be a fairly high bar.” The Substantial Equivalence provision Substantial Equivalence was roundly criticized by industry experts Ultimately, he noted, there will be five both inside and outside the manufacturing The SE submissions collected will be acceptable categories for a tobacco product community. Many protested that the concept evaluated to determine whether the product in those categories currently regulated by the borrows heavily from the FDA model in question is substantially equivalent to FDA to be lawfully marketed: established for pre-market review of medical a product already on the market prior to devices, a completely different industry. the Feb. 15, 2007 deadline and therefore 1. Grandfathered “Tobacco products are not like medical grandfathered in as lawful. “Substantially 2. Substantially equivalent to a devices,” noted Seth Mailhot, a special equivalent products are those that have the grandfathered product counsel in the Washington D.C. office of same characteristics as a predicate tobacco 3. Exempt from Substantial Equivalence Sheppard Mullin and a member of the product [one on the market on Feb. 15, 2007] requirements firm’s Food and Drug Law group. “For the or a product that has different characteristics 4. Approved new tobacco product most part they are agricultural in origin and than the predicate product but information 5. Approved modified-risk tobacco subject to the normal variations that you find submitted to the FDA demonstrates that it product in botanical products. Medical devices are is not appropriate to regulate the product as predominantly constructed out of synthetic a new tobacco product because it does not Most products—90-plus percent—will or semi-synthetic material and by design raise different questions of public health,” fall into the substantially equivalent category, are generally less tolerant to batch-related explained Manthei. added Manthei, who noted that those variation.” Criteria for SE will be strict, he added. categories not yet regulated by the FDA, such e-cigarettes and cigars, may well find themselves facing similar SE requirements down the road. “The FDA doesn’t have authority to regulate cigars and e-cigarettes,” said Manthei. “However, the agency has noted its intent to formally regulate these categories through the rule-making authority granted under the act. So those who do not find themselves actively regulated by the FDA should watch how it is applied because they may be living with it shortly.”

66 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 TMA Welcomes TMA Conference Highlights New Chairman FDA Directors Report

e are going to communicate with TMA’s Farrell Delman, outgoing TMA Chairman “ you as clearly and openly as we James H. Starkey, Commonwealth Brands’ Rob Wilkey Wcan within guidelines of what a federal regulatory agency can do,” Dr. ommonwealth Brands’ Rob Wilkey David Ashley, director of the FDA’s Center will assume the chairman role at for Tobacco Products Office of Science, Cthe Tobacco Merchants Association told TMA participants. “We want to be as (TMA), announced James Starkey III, transparent as we can.” outgoing chairman of the TMA, at the Ashley went on to recap some of the organization’s annual meeting and luncheon. agency’s activities so far in carrying out “A difficult time lies ahead, one that will be the mandates of the Tobacco Control Act, expensive, time-consuming and frustrating and noted that final rules on graphic health for everyone in the industry,” Starkey said in warnings and Substantial Equivalence welcoming Wilkey to the role. “Such a period exemptions will be issued this summer. requires someone who is young and vibrant— But the most relevant part of the panel Dr. David Ashley, director of the FDA’s Center for and who happens to be a lawyer with long presentations for retailers probably came Tobacco Products Office of Science experience in regulation.” from Ann Simoneau, director of the Office Following the announcement, Wilkey of Compliance and Enforcement, who offer an opportunity for retailers to ask real- presented Starkey with an award in reported on training sessions and oversight time questions and get answers from the recognition of his 25 years of work with the of retailers. “Last fiscal year we went to five Center on any requirements applicable to TMA on behalf of the industry. different states in large jurisdictions and that specific retailer.” Also at the lunch, the TMA announced provided live retailer trainings, which were The policy of the FDA with regard to the industry executives who will be serving also tape-recorded and available for phone- retail enforcement is to first send warning as directors of the organization over the next in listeners,” she said. “More than 1,000 letters about violations, she added. “After a year. They are: retailers participated in those events. second violation we will pursue civil money Stephen Altman, “This year we are doing monthly webinars penalties; the statute is very specific on Mountain Service Distributors and also accepting requests from retailers,” how much we may pursue depending on she added. “They can submit topics where number of violations.” Daniel Carr, they feel they need training or outreach To date, the FDA has conducted General Cigar Co. from FDA to assist them in complying 9,000 inspections of retail locations and Gary Ellis, with the law.” issued 337 warning letters with regard to Altadis U.S.A Retailers interested in more information enforcement, including 30 warning letters should visit the FDA’s Center for Tobacco of violations of the flavor ban. “We recently Terry Gallagher, Products website. “Everyone should issued 11 warning letters regarding the Smoker Friendly look at our website on a regular basis to modified-risk provision [light, low and Herbert Weatherford, get information,” she noted. “When we mild cigarette] violations, said Simoneau. Alliance One determine a need for a webinar, we post the “We will continue to do inspections and agenda, or my staff blasts out the information surveillance on any new provisions of the Thomas Hirshfield, on agenda topics for these webinars, which law as they become effective.” JTI USA Thomas Lavinka, Molins Richmond & Arista Laboratories

Michael Ligon, Universal Leaf Tobacco

Walter Niedermann, Astra Tobacco

Bhavani Parameswar, King Maker Marketing

J. Thomas Ryan, Swisher International Four directors of the FDA’s Center for Tobacco Products presented at the conference (from left): Beverly Chernaik, Ann Simoneau, Kathy Crosby, and Eric Lindblom Sherwin Seltzer, General Cigar

James Swauger, 68 Reynolds American TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 Rob Wilkey, Commonwealth Brands TMA Conference Highlights FDA Regulation Report he 21 months that have passed since FDA regulation began have Tbeen extraordinarily challenging, agreed the industry members on the Tobacco Merchants Association’s (TMA’s) Federal Regulation panel. “It has been an enormously burdensome exercise,” said Ron Tully of National Tobacco. “As small manufacturers, we have stepped up to the plate and met requirements the agency has set before us. There is a lot more to come though. It’s not so much what has TMA FDA Regulation panelists Ron Tully of National Tobacco, Janet Aho of Mane USA, happened but what is to come that presents and Dr. Michael Ogden of R.J. Reynolds Tobacco the challenge.” Tully went on to point out that regulatory added. “Among other things, it requires made it clear that it’s no longer enough to requirements should be scaled so that small companies to mine information that they report that you purchase ingredients from manufacturers are not unfairly burdened may not have had or no longer exists a distributor; they want to know who the by being subject to the same requirements in readable format because it is on an manufacturer is,” she explained. “They may imposed on large manufacturers. “Having obsolete system. It was also modeled after go that direction with tobacco as well. If you the same level of reporting requirements on the substantial equivalence regulations are a supplier who uses a distributor, they small businesses as on large manufacturers for medical devices, but unlike medical will want to go the next step back to the is an inherent unfairness,” he asserted. devices, which are intended to have zero manufacturer.” “If nothing else, the agency has to look at risk, tobacco products by their very nature Tully also questioned cigarette labeling the burden this places upon us, given the are not intended to be safe and effective. So requirements and noted that ideally, margins we have relative to big companies the parallels are not there.” templates should be produced for those to fund all these obligations.” National Tobacco’s Tully also pointed out and guidance provided to reduce the risk of Larger manufacturers, too, are struggling, that still to come are the final publication economic hardship as a result of the need noted Dr. Michael Ogden of R.J. Reynolds, of the list of harmful and potentially to make corrections down the road. He also who cited the Substantial Equivalence harmful constituents; the determination noted that while modified-risk regulations provision of the Tobacco Control Act. on dissolvable tobacco and modified risk are not due out until 2012, manufacturers The provision requires manufacturers of products; product labeling requirements; will clearly need a great data set on products a tobacco product introduced or modified and the prospect of having to comply by 2013 and will also soon be facing facility after Feb. 15, 2007, to submit an application with FDA requirements for Good inspections. to the FDA “providing information on the Manufacturing Practices. “None of these These burdens will fall on manufacturers product sufficient to allow the agency to are lightweight things,” he noted. at different times depending on the number determine that an order authorizing the Janet Aho, director of regulatory affairs of products and categories of products they product’s introduction is appropriate for the at Mane USA Inc., warned manufacturers participate in, Tully added. “You had better protection of the public health.” to prepare for more stringent supply chain be prepared for that long haul in terms “That look-back provision is problematic requirements once the agency releases its of getting the necessary data together to for the industry and the FDA,” Ogden list of harmful and potentially harmful meet your regulatory obligations,” he urged noted. “I would argue that it’s akin constituents. The recently enacted Food attendees. “The best advice is to start that to Congress changing the IRS Code Safety Modernization Act focuses on supply data collection now and start talking to retroactive to 2007 and [assessing a penalty] chain integrity by mandating a step back in companies that have gone through the to taxpayers who didn’t comply.” the food chain, and that policy may well process, because it ain’t going to be easy and It creates problems going forward, he be applied to the tobacco industry. “They its going to get harder from here on.”

Participants in the harm reduction panel discussion Speakers participating in a session on illicit trade Participants in the panel on Substantial Equivalence (from left): John Manthei of Latham & Watkins, included (from left) Loren Yager, director of internation- (from left): John Manthei of Latham & Watkins; Will American Association of Public Health Physicians’ Dr. al affairs and trade at the U.S. Government Account- Woodlee of Kleinfeld, Kaplan and Becker; William 70Joel Nitzkin, Boston University’s Dr. Michael Siegel, ability Office; Gary Grant, lead spokesperson for Can- McGrath of Wiley Rein TOBACCOand Star Scientific’sOUTLET BUSINESS Sara Machir. (For more on harm ada’s National Coalition Against Contraband Tobacco; JULY/AUGUSTreduction, see 2011TOB’s cover story, p. 32.) Jeffrey Cohen, associate chief counsel for the ATF TMA Conference Highlights

Menthol Ban Unlikely, Say Analyst Panelists

Panelists on the Tobacco Merchants Association’s (TMA’s) Securities Analysts Roundtable reported that concern about near-term regulatory activity around menthol products has abated. “What we can expect to see over the next six to 12 months is more procedural in nature, not a major announcement coming out of the June FDA update,” Moody’s Janice Hofferber told attendees of the TMA’s annual conference at a seminar on May 23. “We largely believe there will be lots of silence Outgoing TMA Chairman Starkey shakes hands with Grand River on the topic and behind the scenes some work on [investigating the Enterprises’ Julian Baskett, while Universal Leaf’s Lemuel Doss III potential for] unintended consequences that were not covered in the looks on. original report.” Panelists Matthew Grainger of Morgan Stanley, Ann Gurkin of Davenport, and Erik Bloomquist of Berenberg Bank agreed. Gurkin noted that in its June report, the FDA is likely to call for additional studies, particularly on the potential impact of menthol regulatory activity on the contraband market. Graphic Warnings Other areas being watched by the tobacco analyst community include the likely impact of the FDA’s final rule on graphic health warnings, due in June 2011. Panelists expressed doubt that the new requirements would significantly impact cigarette consumption. “The premise is flawed, “ noted Bloomquist. “The idea presumes that if you Cheyenne Tobacco’s Terry and Wendy Gallagher of make the product less attractive by removing the trade dress and make Bill Greiwe Smoker Friendly the graphic warning more obvious you will reduce initiation or aid cessation. But those presumptions don’t make sense.” Bloomquist noted that the latter presumption is based on the idea that people don’t understand that smoking isn’t good for you. “If you look at data, people understand that smoking is not a good thing to do for your health,” he noted. “But they are willing to trade the long-term risk for the short-term pleasure it offers.” What the changes intended to make packages less attractive do accomplish, he added, is reducing consumers’ incentive to buy branded cigarettes, and by extension pay the related tobacco tax. “It removes the difference from illicit products and legal ones,” he noted. “In Australia [where the government is poised to pass a requirement for all cigarettes to be packaged in identical “drab green” boxes], consumers can arbitrage the tax by buying [contraband] cigarettes sold in 200-stick baggies. By removing the packaging distinction you increase the incentive for From left: RJR’s Robert Dunham, TMA’s Farrell Delman, RJR CEO consumers to think, ‘Why should I give $8 to the government when I Daniel M. Delen, Smoker Friendly’s Terry Gallagher, TOB’s Ed O’Connor can get something that looks the same for a lot less money?’” Other issues explored by the panelists included current and pending litigation against the major manufacturers and potential regulation of reduced-harm products, such as electronic cigarettes, going forward. Look for more on the discussion of those issues in this issue’s cover story. TOB

Bill Godshall of Smokefree Tabacos USA’s William Cloherty Pennsylvania and Stephen Johnson

72 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 trench marketing By Michael Gelfand

Welcome to the Machine

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.

tarting your own business in a bad economy isn’t their own shop, they had clearly identified a strategy they were a pursuit for the faint of heart. And when Tightwad confident would separate them from the the competition and STobacco opened its first store back in November 2008, help fuel their success. things couldn’t have been worse—the economy was imploding, Their core idea was, and remains, simple: Create a full- and the husband-and-wife team of Don and Lisa Fleck had no service tobacco store centered around roll-your-own machines, previous experience in the tobacco business. That isn’t exactly a also known as filling stations, that customers would operate on- recipe for success pulled from the pages of a Harvard Business premises to make their own cigarettes. “Our typical consumer School textbook, but the Flecks remained undaunted. is struggling financially,” says Lisa Fleck, chief marketing Fact is, they had both run their own businesses before, and officer of the six-store, New Castle, Pennsylvania-based chain. they had also done their homework on the tobacco industry. “They’re looking for a cost-savings alternative, and they want Despite never having attended a tobacco retailer show or run more control over the products they’re smoking.”

74 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 Their core idea was, and remains, simple: Create a full-service tobacco store centered around roll-your- own machines, also known as filling stations.

Customers load the machines, which cost approximately A Match Made in Heaven $32,500 each, with loose tobacco and tubes sold in-store. As the Fleck’s business plan anticipated, the roll-your-own Tightwad offers customers tobacco-blending recipes designed machines provide a cost-effective, no-brainer solution for to closely match the flavor expectations commonly associated Tightwad’s target demographic—the company’s website with popular premanufactured brands, but store employees are (www.tightwadtobacco.com) says that a regular smoker of a prohibited by law from operating the machines, so customers premanufactured brand of cigarettes costing $6.20 per pack must also pay Tightwad an additional can save nearly $2,000 annually by fee to operate the machines. After rolling the same amount of comparable approximately 10 minutes at the cigarettes in-store. It’s also a high-margin controls, a customer walks away with business that’s helped the company grow 199 cigarettes. from a single, 900-square-foot store into An arcane Pennsylvania law a six-store chain that employs more than dictates that any consumer in 75 people in western Pennsylvania possession of 206 or more and Fort Lauderdale, Florida, cigarettes in a set can be held and drove the expansion of its liable for taxes by the state, so business model with the launch Tightwad sets each machine’s of the Smokin’ G family of loose guaranteed production run limit tobacco as well as client-store and to 190 cigarettes, never to exceed distributor-partner operating groups. 199. “This law is also in effect for Such success made the company someone in Pennsylvania rolling a natural voice for a smokers’ rights cigarettes at their kitchen table,” explains Fleck. “It’s not a law group (www.smokervoice.org), but it has also created a stir, as that the state had any chance of enforcing, but given that it’s Tightwad is a plaintiff in a suit against the U.S. Department of the part of our business, and given that we are a retail location, it Treasury’s Alcohol and Tobacco Tax and Trade Bureau (TTB). makes our clientele easy targets for that type of taxation, so “Our customers used to be victims to whatever was we protect our clients and our business model.” available, then we gave them a choice,” says Fleck, explaining

76 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 Tightwad vs. the TTB The nature of Tightwad Tobacco’s case against the U.S. public to brew and bottle their own beer as part of her Department of the Treasury’s Alcohol and Tobacco Tax company’s argument against the TTB’s stance. “If you read and Trade Bureau (TTB) is very complex, but in simple those requirements, you’ll find that every single thing, with terms, the TTB won a ruling that argued that Tightwad one exception, is precisely how we conduct business,” Tobacco must “immediately discontinue the use of. . . she says, citing that employees of brew-on-premises cigarette-making machine[s] until” it received a permit to businesses are allowed to sample the products, whereas manufacture tobacco products. That ruling was overturned her company doesn’t allow its employees to sample by a judge in a federal court in Akron, Ohio, who granted customers’ cigarettes. Tightwad a preliminary injunction preserving the status quo The TTB’s requirements for brew-on-premises include for current and future stores to use roll-your-own machines an age requirement and a limitation as to who you can until such a time that the matter is decided in his court. In make product for, but, according to Fleck, Tightwad’s policy the meantime, the TTB has filed a notice of appeal and goes further and is more narrowly construed. “Customers submitted a brief to the judge (Tightwad’s brief isn’t due there [brew-on-premises] can do it for themselves and until the first week of July). family, but we require that you can roll only for personal Fleck says she expects TTB’s appeal to be heard during use and consumption. If anything, we’re more restrictive the fall, with a ruling likely to come three to six months than the very broad set of rules that the brew-on-premises later. She says the appeal will be based strictly on legal [businesses] have to follow. And those are written by the arguments, meaning there will not be any witness testimony TTB, so it gets to the point where you look at something like during the hearing. The basis of the TTB’s appeal is that the that and wonder why there are different rules for alcohol, judge erred in granting Tightwad a preliminary injunction. beer and wine than for us? “They’re calling for ‘subject matter jurisdiction,’ calling “Why are they creating this new rule for us when the it, in their minds, an interpretive ruling,” explains Fleck. brew-on-premises is clearly an exact parallel to what we’re “Certainly in our mind it was a legislative ruling because it providing?” she asks. “We provide the equipment, we had the effect of a legislative action. We are very bullish on maintain the equipment, we do quality control, and we our arguments, and we are looking forward to sharing our provide the product they use to put into their product. They side of the story.” have to do it themselves—we can assist and teach them, Fleck cites the TTB’s own “brew-on-premises” guidelines but we can’t do it for them. There is absolutely no difference for businesses that provide space and equipment to the between the two.”

her company’s position as a smokers’ rights advocate. “There are no chemicals added to our [Smokin’ G] tobacco during the blending processes at the manufacturer. And the tubes aren’t required to be fire-safe at this time, so they’re not, and customers love that,” she says. “Our solution gives them the choice not to smoke a prepackaged, done-deal product with lord-only-knows- what in it, and it’s become a liberty issue. They hate when their liberty is attacked. “Previously, [they] really had no voice, so we don’t mind being their voice,” Fleck adds. “We promised them when we opened, back at the very beginning, ‘If there’s ever anything that happens, we’ll stand up for you, we’ll do our very best, we promise.’ And when it came time to file suit against a federal agency, we did. And so far, we’re really glad we did. We’re very bullish on ultimately prevailing, and we’re very, very confident in our position in this court case.”

Beyond RYO Machines Despite the focus on roll-your-own machines, each Tightwad

78 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 Making the most from hookahs Despite all the attention the roll-your-own machines receive, Tightwad does a healthy business in hookahs and shisha. “We cemented tremendous relationships with wholesale resources for our hookah products, and because we get them at low cost, “Our name speaks we offer them at low cost and still turn a very decent profit,” explains Fleck. “We can be very competitive, and the hookah business in general is increasing in most markets to what we do, that don’t have hookah bars.” According to Fleck, military personnel returning home after being stationed in the who we are, Mideast were exposed to hookahs, which has created greater demand for the related products. She has customers who buy large cans of shisha every week, but a lack of and what we offer” community exposure—which is slowly reversing—still makes some people mistake hookahs for bongs.

Tobacco store carries something for every tobacco consumer. By offering everything from traditional manufactured cigarettes, raw tobacco, smokeless tobacco, wraps, pipe tobacco and pipes, to premium cigars in walk-in humidors, hookahs, shisha, lighters, ashtrays and accessories, Tightwad is a veritable one- stop shop. “Pretty much anything tobacco, we have it,” explains Fleck. “When we launch a store, it grows organically through prelaunch, guerilla-based marketing,” she says. “We paper the windows to build an air of mystery about what’s going on inside, and we don’t talk about what we’ll do, we just talk about savings people will experience. And when we open our doors, we have 30 to 40 people waiting. It’s like a big sale at Macy’s.” Fleck says the company pays careful attention to each store’s layout, ensuring that the store is designed with customer comfort in mind. Lounges are loaded with chairs,

80 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 couches, love seats, and tables, and we work on maintaining, and it’s been database for coupon rewards via customers waiting to use the roll-your- so successful that we actually used regular mail and e-mail. “We are own machines can take advantage of it to collect a half-ton of food that we very careful about e-mail campaigns, games, puzzles and a complimentary donated to different locations in each though, because the recipient has to book exchange program. “It’s an adult- of the markets we serve. It helps build be 21. We have a database of birth only facility, not family-oriented by any excitement.” dates associated with clients in all of stretch,” she says. “Friends and family The company also occasionally our stores, and it’s an extra step to slice members who are of age come in to runs billboards as a reminder to the list in that manner, but sometimes hang out with relatives and friends who customers in the area that they’re it’s worth it.” are waiting on line, which makes for a still there. “They may have stopped To Fleck, the secret of success is very friendly store.” coming into our store, and we want continually appealing to the customer Part of Tightwad’s appeal comes from them to come back.” Another tried- base. “It’s a coupon-driven business, the attention it pays to its customers and-true strategy the company relies but you don’t necessarily always need a when they’re not in the stores. “We’ve on is coupon books. “We’ll offer $1 coupon in order to get their attention,” got a pretty aggressive social media off any purchase over $15 except on she says. “We always try to maintain a marketing approach,” says Fleck. “We premanufactured cigarettes, cigarette family feel between upper management do a weekly Facebook special that’s tobacco, smokeless tobacco or and our staff, and between our staff and available only to our ‘friends,’ and we’ve premanufactured cigars,” Fleck says, our customers. Ultimately, it’s about actually developed a nice following explaining that they will sometimes reaching out when it’s appropriate to there [Facebook]. It’s a community target high-value customers in their reach out.” TOB

82 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 PRODUCT PROFILE JULY/AUGUST 2011

Go with GIZEH Bringing on Beretta

Since 1920, GIZEH Raucherbedarf GmbH, The Beretta Elite series is the latest edition to Gummersbach, Germany has been supplying Beretta’s signature line of premium cigarette consumers with the finest in RYO and tubes. The Elite series was developed to offer MYO. GIZEH’s line of rolling papers includes a milder taste than the full-flavored Original GIZEH Hanf, a medium-weight hemp paper series. Like the Originals, the Elites feature with 100 leaves per booklet; GIZEH Silver unique black tipping papers and are available Tip Extra Fine, a thin, slow-burning paper in king-size 200-count cartons. Beretta Tube with 100 leaves per booklet; and GIZEH Co., Pink Hill, North Carolina; 800-979- Sphinx, a lightweight, slow-burning paper 0661; fax: 800-979-0673; e-mail: sales@ with 100 leaves per booklet. Emphasizing berettatube.com; www.berettatube.com. value, GIZEH papers offer the consumer up to four times more papers at the same price as many leading brands. United States importer and distributor: GIZEH of North America, Ltd., 888-989-4662, [email protected]; East Coast master distributor: Daughters and Ryan Tobacco, Inc., 866-942-7364, gloria@ daughtersandryan.com.

Bull Dog’s Next Bite

Building on a successful line of disposable electronic cigarettes, Retail Network Inc., in collaboration with Mecam Corp., is now rolling out Bull Dog rechargeable e-cigarette kits nationally. Created to meet the ever- growing demand of consumers who are looking to transition to a more affordable e-cigarette solution, Bull Dog rechargeable A New Leaf from Djarum kits deliver solid value and are available in both Tobacco and Menthol. Each kit contains Kretek International has announced the one e-cigarette, a 500-puff refill cartomizer launch of Djarum natural-leaf wood-tipped (equivalent to two and half packs of traditional cigars in five-packs and 25-count upright cigarettes), and a USB charger. The kits have a units. The new cigars are offered in four suggested retail price of $19.95, and the refill new clove blends, including Classic, Vanilla, cartomizers (two per tube) come in Tobacco Cherry and Rum. Each blend carries a and Menthol in Low, Medium and High and unique clove signature, smoothed by the retail for just $11.95. Bull Dog electronic imported natural-leaf wrapper and blend cigarettes have the best flavor and draw of of mild tobaccos. Each wood-tipped cigar any electronic cigarette in the market. Retail is double-sealed and protected in its own Network Inc., Troy, Michigan, 800-676-2808, individual holder. Phillips & King, 800-532- www.rnwholesale.com. 4427 (53-CIGAR) or 800-358-8100.

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Acing It

Republic Tobacco has introduced 4 Aces Turkish & Blended Pipe Tobacco in 0.75-ounce pouches. The new blend is a flavorful combination of rich and aromatic Turkish and other premium tobaccos for a smooth, mellow taste, packaged in a re-sealable, Seal-Tite wrap- style pouch that maintains product freshness and flavor. 4 Aces Turkish & Blended Pipe Tobacco 0.75-ounce pouches come packed 12 pouches per Toasting the Toro sleeve, 12 sleeves per case. Republic Tobacco, 800-288- 8888. Tabacalera Perdomo’s new and highly anticipated Perdomo Reserve Champagne Noir cigars feature dark, oily, triple- fermented Cuban-seed maduro wrappers meticulously aged in bourbon barrels. Filled with hints of chocolate and dark- Rising Sun roasted coffee, this medium- to full- bodied blend offers a sweet aroma with a Goodrich Tobacco Co., a subsidiary of 22nd smooth, satisfying finish. The initial size is Century Group, will introduce Red Sun cigarettes an impressive 6x60 Super Toro, packaged to the tobacco trade at the IPCPR show in Las in 25-count boxes that are individually Vegas. Red Sun is a super-premium specialty handcrafted in Tabacalera Perdomo’s state- cigarette that challenges the antismoking of-the-art box factory. Each Spanish cedar establishment. box is stained in black with the brand’s Responding to consumer sentiment about the logo, size and dimension prominently silk- endless assault on tobacco use, Good Tobacco screened in gold on the outside of the box. Co.’s motto is, “We put the fun back into “After carefully fermenting these thick smoking!” Red Sun contains a rich proprietary Cuban-seed maduro wrappers for more blend of tobacco with relatively high natural than 14 months in a natural pilón, we nicotine content and uses the finest cigarette age them an additional six months in paper and filter. Red Sun is available in two king- oak bourbon barrels. This process helps size styles: Immense Taste Satisfaction and Bold Cold Menthol, both packaged to ensure parallel colors, a clean even in a hinged-lid flip-top box. Red Sun is distributed exclusively to tobacconists, burn, and rich, complex flavors,” states smoke shops and independent retail outlets. Nick Perdomo, president of Tabacalera “Red Sun was created for smokers by smokers,” explains Henry Sicignano Perdomo, whose cigar brands include III, president of Goodrich Tobacco Co. “Our product was developed for adults Edición de Silvio, Perdomo Patriarch, who are expressly unapologetic about smoking. Perdomo Reserve 10th Anniversary, “We do not encourage nonsmokers to start smoking, nor do we recommend Perdomo Habano, Perdomo Grand that current smokers smoke more,” he adds. “However, we firmly believe that Cru, Perdomo2 (Squared), Perdomo every adult smoker should be free to enjoy a cigarette without harassment Lot 23, Nick’s Sticks, Cuban Bullet, and without feeling vilified and guilty, as long as nonsmokers are not forced to and Perdomo Fresco. Tabacalera inhale secondhand smoke.” Perdomo, Miami Gardens, Florida, Goodrich Tobacco Co., www.RedSunCigarettes.com; 22nd Century Group, www.perdomocigars.com. www.xxiicentury.com.

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Mooch Goes Maduro

Introduced at the 2011 Tobacco Plus Expo, Berger & Argenti’s Mooch Maduro is winning raves from retailers. The cigar offers a medium-bodied, rich and complex smoking experience that ranks among the finest values in the premium-long-filler cigar market for discriminating cigar enthusiasts. The Nicaraguan- grown puro is produced with a deeply aged, Cuban- seed filler and binder crop and enveloped in a newly developed strain of Cuban-seed wrapper that bursts with a mosaic of diversely sweet flavors. Mooch Maduro is completely crafted by hand and affordably priced to appeal to the experienced everyday cigar enthusiast, with suggested retail price points ranging between $4.99 and $6.79 per cigar. Mooch Maduro is available in four unique sizes: Minnie (4¾x42 Corona); Schnorr (5x50 Robusto); Loll (6x52 Belicoso); and Windbag (7x49 Churchill). The cigars are packaged in attractive “short wheels” of 24 premium cigars, and an eye- catching, space-saving display tray is also available to retailers. Berger & Argenti Premium Cigars, Miami, Florida, 800-815-1155, www.bergerargenti.com.

GIZEH Papers. Great Variety & Value. AVAILABLE NOW! CALL TODAY!

East Coast Orders Contact: GIZEH East Coast Master Distributor Daughters and Ryan Tobacco, Inc. 207 Johnston Parkway Kenly, NC 27542 Toll Free 866-942-7364

West Coast Orders Contact: Medium weight United States Importer Light weight Medium weight 110mm GIZEH of North America, Ltd. Slow burning 50 leaves/booklet Cut corners Light weight 340 North Palm Street • Suite A 50 leaves/booklet 50 leaves/booklet Slow burning Brea, California 92821 33 leaves/booklet Toll Free 888-989-4662 www.gizehna.com 90 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 PRODUCT PROFILE JULY/AUGUST 2011

New Size in the House

J.C. Newman’s Brick House cigars are now available in a sixth size: a 5-1/2 x52 pyramid, the Short Torp. “We are excited to introduce a new Brick House size to cigar lovers nationwide,” says Eric Newman, J.C. Newman’s president. “The new Short Torp is guaranteed to live up to the reputation of flavor and construction Brick House has earned.” Originally launched in four sizes, J.C. Newman’s Brick House line was expanded last year with the addition of Mighty Mighty, a 6x60 cigar that packs a mouthful of flavor. The new pyramid shape allows for a concentration of flavors in the head of the cigar, creating an exceptional and unique smoking experience. The Short Torp will be officially released at the International Premium Cigar & Pipe Retailers trade show in July, but attendees of the tasting events sponsored by J.C. Newman across the country, known as the Brick House Bash, can get a sneak peek of the cigar starting mid-May. Each Brick House cigar is handmade in Nicaragua using the finest Nicaraguan tobaccos and wrapped in a one-of- a-kind Havana subido leaf. Recently named one of Cigar Aficionado’s top 25 cigars of 2010, Brick House offers one of the best cigars in the world at a price any connoisseur can afford. J.C. Newman, www.jcnewman.com or www. Celebrating Churchill brickhousecigars.com. Davidoff has introduced the Lancaster cigar, the newest edition to its popular Winston Churchill cigar series. This somewhat grander version of the Winston Churchill Making Martins Spitfire cigar boasts a 4-1/2-inch-by-46-ring gauge, but its most striking feature is its Belicoso format. It packs The legendary name of Martin a smooth, powerful flavor and is perfect for aficionados will return to the world of who do not wish to relinquish their Winston Churchill premium cigars this year, cigar for those briefer interludes of smoking pleasure. bringing blends based on the Lancaster’s truly unique blend is a compilation of lifelong work of cigar master many different tobaccos. All tobaccos used in this blend Pedro Martin. The Martin are from seeds of Cuban origin. An Ecuadorean special Family of Cigars will feature several lines, including the sun-grown leaf is used for the wrapper. The binder leaf Pedro Martin Ruby, featuring a glossy, red corojo wrapper is Pelo de Oro from Peru. The Lancaster uses the same with an aromatic all-Nicaraguan blend; Pedro Martin Gold, filler tobaccos as the other Winston Churchill cigars. showcasing an exclusive combination of Connecticut Lancaster cigars are presented in a brilliantly attractive wrapper with select tobaccos; and Pedro Martin Corojo, red tin of four cigars for $23, or sold individually for one of the family’s classic all-corojo blends from pre-Castro $5.75 (not including state taxes). Davidoff USA, Cuba. Martin Family of Cigars, www.martinfamilyofcigars. www.davidoffusa.com. com.

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Luxuriate in Lagunas

Kretek International recently launched Djarum’s Lagunas brand of premium imported cigarettes in the United States market. Developed by an international team of experts from Djarum and Kretek over a two- year period of blending and testing, Lagunas’ taste is characterized by a unique combination of tobaccos from the U.S., Brazil, Indonesia, Turkey and Greece; the tobaccos are blended for smoothness, enriched taste, and unique accents and characteristics. Lagunas is available in two styles, Smooth Select and Menthol Select. Unlike previous Djarum brands, Lagunas is not a clove cigarette, and is therefore an important venture for Djarum into regular and menthol products. The new brand, supported by its premium imported blend, is priced at a slight premium to the prices of major-brand cigarettes such as Marlboro and Camel, but slightly below prices for specialty brands such as Dunhill, Natural American Spirit, and Nat Sherman. The brand comes in a wide European-style 20-stick flip-top box with double-bundled sections of 10 sticks each, with 10 boxes per carton. At 7.3mm in diameter, the product is slightly slimmer than major-brand cigarettes, in keeping with current global trends. Lagunas cigarettes are currently available in limited areas, with plans to roll out to all 50 states by the end of summer 2011. Phillips & King, 800-53-CIGAR.

Packing ’Em In

Swisher International has introduced new 84mm hard-pack packaging for the company’s Swisher Sweets Little Cigars. While the traditional soft pack will remain available, the popular 84mm-length hard pack is designed to resist bending and crushing to preserve the product in its original condition. Hard-pack Little Cigars are available in Swisher’s most popular styles, Sweet, Menthol and Silver. Swisher International, 800-874-9720.

94 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011 PRODUCT PROFILE JULY/AUGUST 2011

Spicing Up Maduros

Zoidian Cigars has introduced the Zoidian Cigars Maduro Line. Handmade in Dominican Republic and available in four new sizes, these cigars have a rich flavor with a hint of spice. Zoidian Cigars, 818-731-3009, www.Zoidiancigars.com.

95 TOBACCO OUTLET BUSINESS JULY/AUGUST 2011