The State of Cigarette Taxes

Beretta tuBe Gets even Better MAY/JUNE 2011 VOLUME 14 n NUMBER 3 Good news surrounds some state tobacco taxes this year. Will retailers run with the The State of momentum and fight for their states? Cigarette TaxeS ALSO IN THIS ISSUE D&R Does Right by Perique Marketing Tips from Have a Cigar! How to Fill, Light and Smoke a Pipe PUBLISHER’S LETTER BY ed o’connor TPE 2011— What’s the Buzz? Over the past almost 20 years of walking the aisles of to- cent). Open-ended questions were asked in the survey in bacco trade shows, I’ve observed attendees, exhibitors, order to drive at underlying feelings and specific selling members of the press, individuals using an alias, and results. The information obtained was studied and then the borrowed-name-badge folks all asking one another converted to an overall HQ assessment. the same questions: “How’s the show? How’s the attendance? Is anybody selling anything?” Let’s consider this TPE 2011 Success Survey last item and its importance to you. 5.7% You know as well as I do that if you ask 10 people about “Less-than-satisfactory” a show, you’ll hear many opinions, ranging from “It was great” and “I’m coming back next year” to “It’s the wrong time of year,” “It was just OK,” “It sucked,” and “I’m not 17.1% 26.4% coming back next year.” “Fair” “Very good” Because it’s you assessing the quality of the specific shows you patronize and support, isn’t it important to know from your suppliers and exhibitors how it went? Was the show good for them? If so, they’ll be back next 51% year, along with other new-to-the-show exhibitors who “Good” heard the buzz. That’s important, because it assures you of maximum exposure to both the new and the tried-and- true items to stock your shelves. Shelf space is your No. 1 product. How you use it determines your success. Happy exhibitors invest in the show to improve their show selling and prospecting experience. Their investment helps you Exhibitors with very good results: Exhibitors with fair results: to stock your shelves. 37 of 140, or 26.4 percent 24 of 140, or 17.1 percent Here’s how a good show computes for you; it should Exhibitors with good results: Exhibitors with less-than- offer: 71 of 140, or 51 percent satisfactory results: 8 of 140, • a wide array of great products, the lifeblood of your or 5.7 percent business • great show discounts Of the 140 survey respondents,108 (77 percent) indi- • attractive, inviting and welcoming booths cated good or very good results. Only 8 (5.7 percent) indi- • new-product samples and special intro prices in cated less-than-satisfactory results. addition to show specials The bottom line? A show with a high Happiness Quo- • seminars offering real world information to help solve tient provides a solid return on your support and patron- your real world problems age. It fosters a year-to-year increase in quality exhibitors, quality buyers, and quality press coverage, which drive To summarize: A trade show with good exhibitors offers upgrades to the show, thereby accelerating the cycle of good products at great prices to help you efficiently use success. your shelf space. Thank you for your support and attendance, and thank We wanted to know the Happiness Quotient (HQ) of you for your friendship. See you at TPE 2012. Meanwhile, the TPE 2011 exhibitors. To determine this, we distanced I wish you good selling. the HQ from the he-said-she-said opinions and created a As a former mentor used to say: “Keep it in the road.” more accurate overview assessment by commissioning a survey. Best to you, Of the 195 exhibitors participating in TPE 2011, we received survey responses from 140 companies (72 per- 4 TOBACCO OUTLET BUSINESS MAY/JUNE 2011 NEWS & TRENDS MAY/JUNE 2011 FDA Intends to Regulate E-Cigs In a victory for manufacturers, the FDA will comply with court’s decision and regulate electronic cigarettes as a tobacco product. In April, the FDA issued a letter sion: bination with other FDA-regulated “to provide stakeholders and the • The FDA intends to propose products. As mentioned, the FDA public with information, in light of a regulation that would extend has already issued a draft Guidance a recent court decision, regarding the agency’s “tobacco product” on this provision, which it intends to the regulation of products made or authorities in Chapter IX of the finalize. derived from tobacco.” The letter FDCA—which currently apply only • “Tobacco products” marketed states that between 2008 and 2010, to certain specifically enumer- as of Feb. 15, 2007 and which have the FDA determined that electronic ated “tobacco products”—to other not been modified since then are cigarettes “were unapproved drug/ categories of tobacco products considered “grandfathered” and device combination products and that meet the statutory definition are not subject to pre-market re- detained and/or refused admission of “tobacco product” in Section view as “new tobacco products.” to those offered for import by Sot- 201(rr) of the act. The additional A “tobacco product” that is not tera Inc. and other manufacturers.” tobacco product categories would “grandfathered” is considered a After Sottera Inc. challenged that be subject to general controls, “new” tobacco product and adul- determination in court, the U.S. such as registration, product list- terated and misbranded under the Court of Appeals for the D.C. Cir- ing, ingredient listing, good manu- FDCA, and therefore subject to cuit, in Sottera, Inc. v. Food & Drug facturing practice requirements, enforcement action, unless it has Administration, 627 F.3d 891 (D.C. user fees for certain products, and received pre-market authorization Cir. 2010), issued a decision that the provisions regarding adultera- or been found to be substantially e-cigarettes and other products tion and misbranding, as well as equivalent. The FDA has already made or derived from tobacco can to the pre-market review require- developed a draft Guidance ex- be regulated as “tobacco products” ments for “new tobacco products” plaining how manufacturers can under the Federal, Food, Drug and and “modified risk tobacco prod- request a determination from the Cosmetic Act (FDCA) and are not ucts.” FDA that a “tobacco product” is drugs/devices unless they are mar- • The Sottera decision states that “grandfathered.” keted for therapeutic purposes. products made or derived from to- The FDA letter states that the The FDA letter states that the “gov- bacco can be regulated under the agency looks forward to working ernment has decided not to seek fur- Tobacco Control Act unless they are with all stakeholders to ensure that ther review of this decision, and FDA “marketed for therapeutic purposes,” the existing authorities granted the will comply with the jurisdictional in which case they are regulated as agency are harnessed to best pro- lines established by Sottera.” drugs and/or devices. The agency is tect and promote the public health. In so doing the FDA plans to take considering whether to issue a Guid- The letter was signed by: the following steps to ensure that ance and/or a regulation on “thera- Lawrence R. Deyton, M.S.P.H., M.D. appropriate regulatory mechanisms peutic” claims. Director, Center for Tobacco Prod- govern all “tobacco products” and • Section 201(rr)(4) of the Tobac- ucts and Janet Woodcock, M.D. all other products made or derived co Control Act prohibits the market- Director, Center for Drug Evaluation from tobacco after the Sottera deci- ing of “tobacco products” in com- and Research. 12 TOBACCO OUTLET BUSINESS MAY/JUNE 2011 NEWS & TRENDS MAY/JUNE 2011 HigHligHts Retail Going Strong FDA Guidance In a survey of 160 convenience stores Issued on Penalties and tobacco outlets representing nearly 11,000 stores, 43 percent of respondents In April, the FDA issued a final Guidance Document on civil fines said they increased their store count over and no-tobacco-sale orders for tobacco retailers that are now in the past three years despite the economic effect. The 12-page Guidance Document explains how the FDA downturn and legislative challenges. Eighty- will assess fines on retailers who violate the federal tobacco three percent of c-store respondents to the compliance checks and regulations. In it, the FDA explains that NATO/CSP-conducted survey reported that any specific retail location with five repeated violations within they plan to increase the square footage a 36-month time period after a first violation will be subject to dedicated to tobacco products this year, an FDA-issued no-tobacco-sale order prohibiting the sale of to- while 68 percent of tobacco outlets said bacco products from that location for a specified period of time they would expand their tobacco product or indefinitely. and accessory inventory. Retailers should examine the entire document for guidance, but the following question-and-answer section from the docu- Newport Beach, California ment about the potential repercussions of acceptance of fake Approves Ban on Smoking identification is particularly relevant: in Open Spaces “Does good-faith reliance on the presentation of a false government-issued ID constitute a violation of minimum-age re- In an effort to further reduce what it quirements for the sale of tobacco products? perceives to be the public’s recreational With respect to minimum-age requirements for the sale of exposure to secondhand smoke, Newport tobacco products, including regulations issued under section Beach, California’s City Council recently 906(d) of the Federal Food, Drug, and Cosmetic Act (FDCA), voted to give preliminary approval to a good-faith reliance on the presentation of a false government- proposed ban that would outlaw smoking issued photographic identification that contains a date of birth in public parks and open spaces except does not constitute a violation if the retailer has taken effective in specifically designated spaces.

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