Republic Powers Up With Its New PoweRoll

MARCH/APRIL 2014 VOLUME 17 n NUMBER 2

Will the FDA make fine-cut, or blasting legislation on electronic ? The category is heating up with these and other debates as experts weigh in from all angles.

Highlights From the TPC Show in Vegas

Cigar Sense: Tips From the Top

J.C. Mart’s RYO Story PUBLISHER’S LETTER BY ed o’connor

Are You Ready for Vapor World Expo?

apor World Expo is a business-to-business show The goal of Vapor World Expo is threefold: that will be held May 7-8, 2014 at the Rosemont 1. Gather electronic medium exhibitors and suppliers at VConvention Center in Rosemont, Illinois, an incor- the Vapor World Expo. porated city proximate to Chicago, with its own mayor and 2. Bring buyers, wholesalers, manufacturers and retail- political system. ers from convenience stores, drug and supermarket chains, Electronic cigarettes and related vapor devices have and the outlet store communities to consider, evaluate and reached the tipping point. Having passed through the fad make purchasing decisions to support their electronic mar- stage, the market is trending substantially higher and rap- keting strategies for the upcoming months. idly becoming a tobacco behemoth­­—innovative, unique 3. Identify and attract the most knowledgeable market— and capturing enormous consumer appeal. All the evi- product and regulatory specialists—bringing perspective dence from recent studies suggests low to no continuum and direction to burning marketplace issues through semi- of health risks from vapor products compared to traditional nars, roundtables and attendee collaboration. cigarettes. What’s , the American Etiquette E- The Vapor World Expo vision for long-term electronic Survey of more than 1,000 individuals, commissioned by product development and market success needs to evolve Mistic Electronic Cigarettes, found that 63 percent of re- as a “grand bargain” among all stakeholders. Vapor World spondents did not object to the use of electronic cigarettes Expo seeks to set the stage for innovation, product safety, in their vicinity. harm reduction, education and market profitability. In the Lightning market growth poses complex questions. An- same spirit as the TPC Expo, Vapor World Expo offers a big swers to today’s product, regulatory and distribution is- tent approach to the market, believing an open source fo- sues lag consumer demand for all vapor products, likely to rum presenting alternative, and at times, conflicting points of be the case for the next three to five years as the industry view allows the market to competitively sort and develop in sorts through the Gordian market knot. Product safety, sci- such a way as to foster safe products, consumer satisfaction ence-based regulation, store layout, dedicated shelf space, and profitable supply. The fact that not everyone agrees with wholesale distribution, advertising, capital planning, human this philosophy gives evidence to the potential for conflict. resource allocation, world supply and competitive position- The Rosemont Convention Center is located proximate ing number are among the major concerns facing this na- to Chicago’s O’Hare International Airport. Superior accom- scent category. All this coupled with now-evident product modations and restaurants support an excellent centrally fragmentation—specifically, differentiation between the located venue for the Vapor World event. traditional e-cigarette and, as TMA’s Farrell Delman char- Vapor World is a must attend for marketers, distributors acterizes, the “$/puff” advantage of personal or “tank style” and retailers who have a committed stake in the electronic vaporizers. cigarette phenomena. See you at Vapor World Expo!

4 TOBACCO BUSINESS MARCH/APRIL 2014 INSIDE THIS ISSUE

CIGAR SENSE Mastering the Cigar Sale: 15 Top Tips 28 Two tobacco outlet retailers and two cigar retailers share their latest and greatest to help you move more stogies.

FEATURES

COVER STORY Scalpel vs. Sledgehammer: Regulation…and Other E-Cig Debates 46 Will the FDA make fine-cut, or blasting regulations on electronic Cigar Sense: Mastering the Cigar Sale: cigarettes? Will “tanks” take over the market? The category is heating up 15 Top Tips, page 28 with these and other debates as experts weigh in from varying angles.

Electric Alley: Rest Insured 42 Product liability insurance is a must for wholesalers and retailers who want to get in front of potentially devastating e-cig quality issues—real and fabricated.

Tobacco Plus Convenience Expo Highlights 54 Formerly known as TPE, the TPC Expo wowed attendees with exciting educational seminars and a bustling trade show floor.

Scalpel vs. Sledgehammer: Regulation... Electrifying S&M Brands 62 and Other E-Cig Debates, page 46 Building on its success with LEX12, this Virginia company is venturing into electronic tobacco products and the market.

C-Store Corner: Tobacco Categories Vying for C-Store Share 70 With cigarette sales continuing to slip, where will retailers turn?

Trench Marketing: Reading the Signs 76 Jessica Curnett came to the business by chance, but she deftly turned J.C. Tobacco Mart into a raging success by keeping RYO on the top of her customers’ minds. TPC Expo Highlights, page 54

Publisher’s Letter...... 4 Are You Ready for Vapor World Expo?

News & Trends...... 12 Big Tobacco advances on e-cigs, CVS drops tobacco, and more

TMA Report...... 20 Breaking news from the TMA Pipe In Hand...... 36 A Past of Pipes

Category Manager...... 38 Tobacco by the Numbers

Product Profile...... 84 A guide to new and popular outlet products Trench Marketing: Reading the Signs, page 76 NEWS & TRENDS MARCH/APRIL 2014 E-Cig Industry Continues Evolution Major players rolling out e-cig lines; independents doing deals As the e-cigarette category continues to vides the group greater strength to com- companies are pushing forward in the cat- pick up speed, the Big Three and indepen- pete in the rapidly evolving and competi- egory. Greensboro-based Lorillard’s blu is dent manufacturers are all jockeying for tive e-cigarette category. The new entity now in 136,000 retail outlets, and the com- position. has established a convergence committee pany has also entered the European mar- FIN, one of the leading independent to identify and capture major cost and rev- ket by acquiring SKYCIG, an e-cigarette e-cigarette brands, recently agreed to a enue synergies in the areas of people and business based in the United Kingdom. merger with Victory Electronic Cigarettes culture, cost efficiency, and sales, distribu- Lorillard CEO Murray Kessler has reported that will make the combined entity one of tion and marketing. that blu eCigs captured approximately 48 the largest pure-play Each of the convergence areas has ded- percent of the total market for the fourth companies, with 2014 sales expected to icated work teams to identify and capture quarter and approximately 47 percent for surpass $100 million. The new company significant synergies. To date, teams have the year. plans to combine the sales and marketing identified more than $5 million of revenue “Lorillard has established itself as the depth of the FIN organization with the sup- synergies resulting from expanding dis- clear leader in the e-cigarette category in ply chain capabilities, international reach, tribution of both brands and employing 2013,” he claimed in a recent call with in- and financial strength of Victory. The deal a dual brand strategy. In cost synergies, vestors. Looking outside the U.S. market, is expected to close in the next few weeks. more than $10 million of savings have Kessler explained the company is rebrand- Victory, which acquired the European been identified in the areas of production, ing SKYCIG e-cigarettes to blu and will roll e-cig company VAPESTICK for $70 million supply chain and marketing spending ef- out the product across Europe by mid- through a combination of cash and stock, fectiveness, all of which are expected to year. “I believe [we] have only scratched also recently formed a partnership with be achieved within 12 months of closing, the surface of the category,” he added. Fields Texas Ltd. to drive global distribu- according to Victory. --based RAI’s subsidiary tion and strategic retail expansion. “The “The combination of the FIN and Vic- R.J. Reynolds Vapor is also focusing on addition of FIN brings instant accelera- tory brands provides an incredible one- the category, most recently by expand- tion of scale and distribution in the United two punch for distributors, retailers and ing its digital vapor cigarette, which States, significantly upgrades the global consumers, and an opportunity to further debuted in Colorado in July, followed leadership team, and furthers the com- increase shareholder value by capturing by its introduction in Utah. “VUSE con- pany’s efforts to consolidate the electronic significant cost and revenue synergies,” tinues to deliver outstanding results in cigarette industry globally,” says a com- said Elliott Maisel, CEO of FIN. “The com- Colorado and remains the market leader pany spokesperson. bination of the FIN and Victory organiza- in the state,” Daniel Delen, RAI president Atlanta-based FIN has distribution in tions, coupled with the leadership of Fields and CEO recently told investors during more than 50,000 outlets across all major Texas and VAPESTICK in Europe, creates an earnings call, adding that VUSE has channels in the United States, including a company with greater potential and helped drive growth in the e-cigarette cat- 7-11, Circle K, Murphy USA, Stripes and growth opportunity than any other com- egory as a whole in Utah. “Since VUSE MAPCO Express. petitor in the industry.” was introduced in July, the e-cig category The combination of Victory and FIN pro- Meanwhile, the large U.S. cigarette has tripled in size.” JM Tobacco Expands Website New design incorporates a direct sales company store

JM Tobacco has completely redesigned “[This] did not serve smokers without its website (www.jmtobacco.com), add- nearby access to our products,” he ex- ing several new pages and features for plains, adding that the company continues greater reader-friendliness and interactiv- to protect its retail partners by limiting sales ity. “Probably the most important new to service only brick-and-mortar retailers. page resulted from smokers’ requests for a “Consumers can now buy direct[ly] from Blog” and “JM News.” The former encour- company store page, from which they can [our company store] page, but only if no ages communications between readers, buy direct[ly] from JM Tobacco,” says JM’s JM retailers exist in their zip codes. We will the company, and each other, while the lat- president, Anto Mahroukian, who notes not undercut brick-and-mortar shops by ter apprises them of the company’s latest that JM Tobacco fans have previously re- discounting our direct sales. We feel this is products and activities. “We have found lied on the old site’s store locator page to equitable to all concerned.” that the free interchange of news and views 12find the closest of JM’s 900 retailers nation- JM’s site also introduces two pages that is a bonus for both our customers and our- TOBACCOwide. BUSINESS keep visitors informed and involved: “JM selves,” says Mahroukian. MARCH/APRIL 2014 NEWS & TRENDS MARCH/APRIL 2014

Altria Buys Green Smoke’s Vapor Biz Highlights PM USA’s parent company pays $110 million in cash to expand its Nu Mark e-cigarette business. Rhode Island Altria Group’s subsidiary Nu Mark has en- The agreement includes provisions for Seeks E-Cig tered into an agreement to acquire the e- Altria to retain key Green Smoke manage- vapor business of Green Smoke and its affili- ment infrastructure and talent. “We are very Tax ates for approximately $110 million in cash. pleased to be joining the Altria family of com- Rhode Island Governor Lincoln Founded in 2008, Green Smoke sells both re- panies,” says Robert Levitz, Green Smoke’s Chaffee wants to impose an 80 chargeable and disposable e-cigarettes and CEO. “We are dedicated to innovation and percent tax on e-cigarettes, cit- had around $40 million in revenues last year. believe joining Nu Mark will help us deepen ing a belief that “electronic ciga- The company has operations in the United that expertise and create new opportunities rette laws should mirror tobacco States and Israel, although most of its sales for our customers, our employees and our product laws.” Opponents are are in the U.S. products.” protesting the proposed tax, The move will significantly expand Altria’s Analysts see the move as a strong strategic saying it will incent smokers to vapor division, which currently consists of its play by Altria. “Altria took a deep scan of the continue and fail to pro- Nu Mark e-cigarette company and its recent- entire e-vapor space and felt Green Smoke duce the additional revenue the ly introduced disposable brand MarkTen. was the right fit at the right time,” says Bon- state is after as e-cigarette us- “Nu Mark’s entry into the e-vapor category nie Herzog, tobacco analyst for Wells Fargo, ers will simply buy out of state. with its MarkTen product was an important who pointed out that the deal will help Philip development in Altria’s innovation strategy,” Morris develop a portfolio of e-vapor brands says Marty Barrington, Altria’s chairman and to complement its MarkTen product line. “We CEO. “Adding Green Smoke’s significant e- believe that Altria can leverage its sales force, Illinois E-Cig vapor expertise and experience, along with retailer relationships, and marketing exper- its supply chain, product lines and customer tise to quickly bring broader distribution to Proposal service, will complement Nu Mark’s capa- Green Smoke,” says Herzog, who also hopes Commissioner Jeffrey Tobolski bilities and enhance its competitive position. the category as a whole will benefit from the (D-McCook) of Cook County, Illi- Further[more], Green Smoke’s culture of acquisition. “From a regulatory perspective, nois plans to introduce a propos- innovation and history of producing high- this acquisition may put further pressure on al that will require e-cigarettes to quality products are consistent with Altria’s the FDA to regulate e-vapor products as they be sold from behind retail store culture.” become increasingly more mainstream.” counters, and ban their sales to minors. Chicago, which is the county seat, approved a similar measure last month.

Hawaii In Hawaii, the Senate Health Committee and Commerce and Consumer Protection Commit- tee passed a Senate bill that will raise the legal age to purchase tobacco products and e-ciga- rettes from 18 to 21. However, the committee deferred another measure that would have im- posed an excise tax on e-cigs.

14 TOBACCO BUSINESS MARCH/APRIL 2014 NEWS & TRENDS MARCH/APRIL 2014

Toraño’s Opens Its Vault Tour CVS Dumps Cigs Toraño Family Cigar’s “Blends from the Vault” tour kicked off the first The nation’s second-largest drug- of 40 events on February 5, 2014 at Three J’s Cigar Store in Davie, Flor- store chain says it will no longer sell ida. The tour will feature the Toraño Family’s highly acclaimed Vault A-008, which received a 92 rating from Cigar Aficionado, the recent- tobacco products. ly released Vault D-042, and the Limited Edition Vault Gold VLE100, which will only be available at these exclusive events. Charlie Toraño, CVS Caremark plans to phase cigarettes, ci- president of Toraño Family Cigar Company, wished to introduce an ex- gars and chewing tobacco out of its 7,600 tremely limited edition third from the storied Toraño Vault series drugstores by October 1, a move that will for this special tour. The 100 hand-numbered, nine-count, gold brick reportedly cost the chain $2 billion in annual boxes for the tour will hold the only Gold Vault VLE100 cigars ever revenue. A company spokesperson says that produced. exiting tobacco will help it grow the health care Blends from the vault tour originate from the cigar “blend book” side of its business, which includes operation started by Carlos Toraño, Sr. in 1982. Now over 30 years old, the book of health clinics that administer flu shots and has a record of every blend concept the Toraño family has ever worked help people manage chronic illnesses like high on, many of which the family has released over the years. blood pressure and diabetes. In 2011, Charlie Toraño revisited the blend book and discovered an “We’ve come to the conclusion that ciga- intriguing, yet unreleased blend: Liga A-008. After a slight modifica- rettes have no place in a setting where health tion, the Liga A-008 was released to the public and so well received by care is being delivered,” says CEO Larry Merlo. critics that another forgotten blend from the book was modified, the Some other drugstore chains including the Liga D-042. The Vault Gold VLE100 cigars are from yet another unre- nation’s largest, Walgreen Co., still sell tobacco, leased blend from the blend book, also modified to complement the but many independent pharmacies and chains vault series perfectly. do not. In fact, a 2011 study in Los Angeles The Blends from the Vault tour will feature at least two lucky winners reported that just 32 percent of pharmacies at each event. Each winner will walk away with a box of Vault Gold, a sold cigarettes, and traditional chain pharma- blend conceptualized by the Toraño family but never produced. cies were far more likely to sell cigarettes than “The Blends from the Vault cigars are a celebration of the Torano independently-owned pharmacies. Several cit- family’s legacy and I am extremely excited about being able to share ies, including San Francisco, Boston and New this part of our history with the public,” says Charlie Toraño. “Event- York City, have also considered or passed bans goers can count on either myself, Carlos Llaca Toraño or Jack Toraño on tobacco sales in stores with pharmacies for to be present at each of the Blends from the Vault events and announc- similar reasons to those cited by CVS. ing the winners of the Vault Gold Brick Box Giveaway.” However, some discount chains such as Family Dollar have begun selling tobacco in recent years, recognizing the potential that the category offers both in profit and attracting TMA to Hold 99th Annual store traffic. Meeting and Conference

The theme of the event will be “Evidence-Based Science, Global Industry Regulation, and FDA Regulation of the U.S. Tobacco and E-Cigarette Industries.” Topics to be covered at the TMA’s annual conference at the Kingsmill Resort in Williamsburg, Virginia will include: · in the U.S. and Around the World · Risk-Benefit Analyses of E-Ciga- rettes · Population Risk Modeling for Modified-Risk Tobacco Products

16 TOBACCO BUSINESS MARCH/APRIL 2014 NEWS & TRENDS MARCH/APRIL 2014

Drew’s Lounge Debut Drew Estate and Corona Cigar Company announce the first Drew Estate Lounge.

Drew Estate plans to open the first of- will be working with Drew Estate to ficial Drew Estate Lounge at the Corona create a series of unique, limited edi- Cigar Company’s Sand Lake, Florida lo- tion, lounge exclusive offerings of Liga cation. The location is currently under Privada, Undercrown, Natural, Tabak development with a significant but un- Especial, Nica Rustica and Herrera Es- disclosed investment, featuring an en- teli cigars, available in summer 2014. tirely new full liquor bar area complete “Since the infancy of both Corona with an incredible selection of bourbon, Cigar Company and Drew Estate, Jon, single malt scotch, dark rums and co- Marvin and I have not only had a close gnac. business relationship, but a long per- Two community tables will add ad- sonal relationship built on trust, re- by our little factory in Estelí, Nicara- ditional seating and a place for cigar spect and an incredible passion for all gua and saw us working, prepping the enthusiasts to gather with fellow aficio- things cigars,” says Jeff Borysiewicz, boxes for the release of the Natural by nados. Drew Estate and their stable of owner of Corona Cigar Company, ex- DE line,” adds Drew Estate co-founder cigar brands will be tastefully displayed plaining the endeavor. “Drew Estate and namesake Jonathan Drew, re- throughout the lounge via custom art, and its entire team, both in the U.S. counting the origins of the partnership. custom furniture, unique ashtrays and and Nicaragua, are incredibly talented “Half the factory had no roof; we were other eclectic items that Drew Estate’s and we are proud of our long-standing drinking borrowed iced tea while we Nicaraguan artists will create. relationship with them.” placed bands on each cigar ourselves. In addition to the branded Drew Es- “It was 3 a.m. on some random day Jeff told me that he respected our hard tate Lounge, Corona Cigar Company in 1999 when Jeff Borysiewicz walked work and humility…[and] the rest is

In Memoriam Myrna Sherman Nancy Elizabeth

Wife of Joel Sherman of the cigar and cigarette company Gallagher , Myrna Sherman was fatally struck by a car during the 2013 holiday season. Mourned by her children Nancy Elizabeth Gallagher, matriarch of the Gallagher fam- Bill, Larry and Michelle, Myrna was actively involved in a ily, which operates The Cigarette Store Corp in Boulder, number of charitable and community organizations, espe- Colorado, passed away on January 25. In lieu of flowers, cially The Davis Phinney Foundation for Parkinson’s dis- contributions can be made to Juvenile Diabetes Research ease. In lieu of flowers, the family requests that donations Foundation (Denver Chapter) at rockymountain.jdrf.org, the be sent to the Michael J. Fox Foundation for Parkinson’s Cystic Fibrosis Foundation (Colorado Chapter) at cff.org/ Research or to Dr. Susan B. Bressman, M.D., Chairman, chapters/Colorado, the Alzheimer’s Association (Colorado Parkinson’s Research Department at Beth Israel Medical Chapter) at alz.org/co, or the Sacred Heart of Jesus, Boul- Center, 10 Union Sq. East, Suite 2Q, New York, NY 10003. der, Colorado at shjboulder.org.

18 TOBACCO BUSINESS MARCH/APRIL 2014 TMA REPORT By FARRELL DELMAN

Breaking News From the TMA The following are excerpts from harm reduction, Farrell Delman, tobacco regulation and other tobacco-related news. President, TMA

On harm reduction… from the Medicines and Healthcare January 18. A 54.8 percent equivalent Products Regulatory Agency (MHRA). unit growth was partially offset by net …Misguided regulation of e-cigs pricing of -6.3 percent, suggesting an …San Francisco, California-based based on concerns that are not backed increased penetration of e-cig kits that Ploom, inventor and manufacturer by sound evidence may have unintended offer a lower price per cartomizer, with of the premium vaporizer Pax, which consequences for public health, Lorillard’s blu retaining the No. 1 heats tobacco without producing stated a Journal of Therapeutic Advances position in the c-store channel with a smoke, said that following the discovery article titled “Achieving Appropriate 45.5 percent dollar share, up 23.4 points of counterfeit products containing Regulations for Electronic Cigarettes” year over year, followed by NJOY at plastic materials that are not stable at by Daniela Saitta, Giancarlo Antonio No. 2 with 19.6 percent, and Logic in operating temperature, it conducted Ferro and Riccardo Polosa from the the third spot with 19 percent, while investigations to locate manufacturers University of Catania in Italy. The RAI’s Vuse held at 1.4 percent and of the fake products. The company authors recommend that regulators Altria’s MarkTen held at 0.7 percent. initiated legal actions in China to stop consider science-based regulations like … is addictive, but it is the the production and sales of fakes, noting good manufacturing practices (GMP), toxins in cigarette smoke that kill, said that Ploom’s foremost goal is to protect childproof containers for nicotine liquids, Joel Nitzkin, senior fellow for tobacco consumers from poorly performing and reporting on the contents of e-liquids policy at the R Street Institute and past potentially unsafe counterfeit devices. to regulators, and “clear, accurate and co-chair of the American Association …The Guardian reports that e-cigs detailed labeling about the contents and of Public Health Physicians’ tobacco could be available as “medicines” on the hazards associated with [e-cig] use.” control task force, in a recent presentation the UK’s National Health Service by the …Analysts at Wells Fargo said at the Oklahoma House/Senate hearing end of 2014. At least two companies— Nielsen’s U.S. c-store data on e-cigs on e-cigs and tobacco harm reduction Nicolites and Nicoventures (BAT)— indicates that their dollar sales grew 45 (THR). An addition of a modestly have started the process to obtain licenses percent in the four weeks ending with successful THR initiative to current

20 TOBACCO BUSINESS MARCH/APRIL 2014 TMA REPORT

An addition of a modestly successful THR initiative to current programs would save an estimated 1.5 to 4.8 million American lives, said Nitzkin, who noted that the tobacco control movement is opposed to THR because it has a goal of a tobacco-free society and because it receives support from major drug companies.

tobacco control programs would save an with host John Hockenberry on the arguing that taxing e-cigs at the same estimated 1.5 to 4.8 million American morning news program “The Takeaway,” rate as cigarettes would reduce an lives, said Nitzkin, who noted that the Dr. Michael Eriksen, founding dean of incentive for smokers to switch to the tobacco control movement is opposed to the School of Public Health at Georgia devices, which they say are much less THR because it has a goal of a tobacco- State University and former director harmful, while critics like State Health free society and because it receives of the CDC’s Office on Smoking and and Human Services Secretary Terry support from major drug companies. Health, said among other things that: Cline and the American Cancer Society’s Nitzkin asserted that e-cig companies do smoking kills because of smoke; nicotine, deputy medical officer Dr. Leonard not recruit teens, and e-cigs do not lead to though not benign, is better than smoke; Lichtenfeld said existing evidence on cigarette use or produce vapor containing almost without exception, e-cigs are e-cigs is not enough to recommend high levels of organic chemical toxins generally safer to use than smoking; the devices as a safer alternative measurably above background levels. and that e-cig concerns include dual to cigarettes or as a cessation aid. …Commenting on New York Times’ use, re-normalization/glamorization …Philip Morris International said health reporter Jane Brody’s article of smoking, and the possibility of that it will invest up to $683.8 million on health officials’ efforts to reduce non-smokers and teens using e-cigs “into its first manufacturing facility in smoking and the existing cessation and developing a nicotine addiction. the European Union and an associated methods available, the American …The Electronic Cigarette Industry pilot plant” near Bologna, Italy, Council on Science and Health said Group (ECIG) in Tallahassee, which would produce its “potentially that although Brody “acknowledges that Florida announced the opening of reduced-risk tobacco products,” and current aids for quitting, such as nicotine its Washington, D.C. office and the when fully operational would have substitutes, low-dose antidepressants, addition of J.P. Moery and his firm, combined annual production capacity hypnosis, and acupuncture, are not very The Moery Company, to the ECIG of up to 30 billion units by 2016. effective,” she “stops short of endorsing team, with Moery to serve as the …In a commentary in the January 8 the newest and likely most effective aid: managing director of the D.C. office. issue of the Journal of the American Medical e-cigarettes,” a position that ACSH’s …During a joint legislative panel Association, Dr. David B. Abrams, Gilbert Ross said “parrot[s] the party hearing in Oklahoma on January 22 on executive director of the Schroeder line of the CDC, the FDA, the ACS the pros and cons of promoting e-cigs Institute for Tobacco Research and etc. etc. and Stan Glantz, thereby doing as a means to reduce smoking, e-cig Policy Studies at Legacy Foundation, a terrible disservice to her smoking supporters including Oklahoma Vapor examines the “promise, from a harm readers who are desperate to quit.” Advocacy League Chairman Sean Gore reduction perspective, and the peril, from …During a recent discussion on e-cigs focused on taxation and regulation by an abstinence perspective,” of e-cigs. He

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says that the device has the “potential manner” as cigarettes, smokeless tobacco, 12-17 “who are open to trying smoking to make the combusting of tobacco RYO tobacco and other products that or who have already smoked between one obsolete,” and that “tobacco control contain tobacco. Tobacco-containing puff and 99 cigarettes in their lifetime,” experts must be open to new strategies” if products, especially those that are with plans to evaluate the effectiveness e-cigs represent the new frontier, though combusted, are the most harmful, while of the $115 million campaign with “statements based on ideology and e-cigs and the e-liquid used in them a longitudinal study that will follow insufficient evidence could prevent the are “demonstrably less harmful,” they 8,000 youths over a two-year period. use of this opportunity” before it becomes explained. AEMSA also opined that: …The FDA’s Center for Tobacco part of a harm-reduction strategy. there is little to no evidence that e-cigs Products (CTP) participated in the …The American E-Liquid are used as a “gateway” to conventional annual meeting of the Society for Manufacturing Standards Association cigarettes; the premarket authorization Research on Nicotine and Tobacco (AEMSA) had its third “listening requirements in the FSPTCA should (SRNT) February 5-8 in Seattle, session” with the FDA on December 19, not apply to e-cigs and e-liquids; the Washington. In a roundtable discussion, at which Dr. Konstantinos Farsalinos, grandfather date of February 15, 2007 in CTP Director Mitch Zeller joined a cardiologist recognized as a leading the FSPTCA should not apply to e-cigs NJOY CEO Craig Weiss, OSH’s Tim e-cig medical researcher, made a primary and other tobacco-derived products that McAfee, Mayo Clinic’s Scott Leischow, presentation on his study on plasma were not contemplated when Congress and the University of Minnesota’s nicotine absorption levels (PNLs), which was drafting the legislation; all e-cigs and Dorothy Hatsukami in a discussion tested nicotine delivered from both e-liquids currently on the market should be led by the ACS’s Tom Glynn on the “cig-alikes” and representative PNLs allowed to remain on the market without potential health benefits of e-cigs. from a “new generation” device used obtaining premarket approval from …Until March 3, the FDA is accepting by experienced e-cig consumers and the FDA; and the deeming regulation applications for the FDA Tobacco novice e-cig users (tobacco smokers), should allow for products already on Regulatory Science Fellowship, which and found that “PNLs from cig-alikes the market to smoothly transition offers mid-career professionals an were dramatically lower as compared to fully regulated status and create a opportunity to spend a year at the Center to tobacco cigarettes” and that the new reasonable premarket authorization for Tobacco Products and “participate in generation device “showed evidence of process for new products that focuses on the development of science-based public being more efficient at nicotine delivery ingredient and manufacturing process health strategies and serve as the lead than the cig-alikes and came closer to disclosures to ensure purity and safety. for defined projects, meet with policy tobacco cigarette PNLs over time, yet …Wisconsin State Sen. Glenn leaders, and develop new competencies.” indicated tobacco cigarettes still deliver Grothman (R- Bend), who has …Appearing on the January 21 substantively more nicotine puff-for- introduced a bill that would exempt e-cigs episode of “The Diane Rehm Show” on puff,” while novice e-cig users’ PNLs from the state’s 2010 public smoking National Public Radio that discussed indicated less nicotine absorption ban, commented that the bill is intended the latest Surgeon General’s report compared to experienced e-cig users. to help smokers quit regular cigarettes. that expands the list of adverse health …AEMSA’s president Lou Ritter …Sheriff Millard Gustafson of Gage effects caused by smoking, FDA Center and counsel Azim Chowdhury of Keller County, Nebraska said that he is seeking for Tobacco Products Director Mitch and Heckman met with representatives an exemption for e-cigs at the Gage Zeller said that the report “is a clarion at the U.S. Office of Management and County Detention Center from the ban call that the real harms are associated Budget’s (OMB) Office of Information on tobacco products on county property. with the use of the combusted products and Regulatory Affairs (OIRA) on and principally cigarettes.” He then December 16, during which AEMSA ON THE FDA… noted that the FDA has an opportunity said that: the Family Smoking Prevention under the Family Smoking Prevention and Tobacco Control Act broadly defines …The FDA has launched its first and Tobacco Control Act to reduce “tobacco product” to include substances public health education campaign smoking-related morbidity and that are derived from tobacco such as called “The Real Cost,” aimed at mortality by both informing the public nicotine, but that “products that only reducing and preventing youth tobacco and using regulatory tools to try to shift contain such tobacco-derived substances use through ads specifically targeting the people away from the most harmful should not be regulated in the same estimated 10 million young people aged forms of nicotine delivery, and further

24 TOBACCO BUSINESS MARCH/APRIL 2014 TMA REPORT

acknowledged that “[i]f a current bitters and cynar, an Italian liqueur. smoker, otherwise unable or unwilling ON OTHER tobacco news… …On January 10 in the U.S. District to quit, completely substituted all of Court in Washington, D.C., the U.S. the combusting cigarettes that they …As the European Parliament Department of Justice and major cigarette smoked with an electronic cigarette at considers proposed revisions to the EU makers filed an agreement onpublishing the individual level, that person would Tobacco Product Directive (TPD), corrective statements per U.S. District probably be significantly reducing some member states, including France, Judge Gladys Kessler’s November 2012 their risk,” but the challenge for the Belgium, Finland, Ireland and the UK, ruling ordering the companies to pay for FDA as it shapes e-cig regulation is are expressing strong support for the corrective ads that say they misled the to figure out what the net population European Commission’s proposal, while public about the dangers of smoking. level health impacts would be. other nations, mostly from eastern and Each company must publish full-page ads …The Department of Health and southern Europe, are opposing the in the Sunday editions of 35 newspapers Human Services’ Safety Reporting measure, claiming that it would harm their and on the newspapers’ websites, in Portal now has a new category economies and hurt thousands of families primetime TV spots on CBS, ABC or for tobacco products, providing a that depend on tobacco cultivation NBC five times per week for a year, on standardized way for consumers and for their living. Commenting on this the companies’ websites, and on a certain health care professionals to let the FDA opposition, EU Health Commissioner number of cigarette packs three times know when they suspect an unexpected Tonio Borg said he is worried that per year for two years. Each corrective health or safety issue with a specific economic concerns are starting to ad is to be prefaced by a statement tobacco product, such as a product dominate what is predominantly a that a federal court concluded that the believed to be damaged, defective or health issue, and British MEP Linda defendants “deliberately deceived the contaminated, to have a strange taste McAvan, who is guiding the legislation American public.” The ads are to include or smell, or to cause allergic reactions, through Parliament, verbalized her belief five categories of corrective statements: poisonings, or an unusual reaction in a that the economic objections being 1) the adverse health effects of smoking; longtime user, among other problems. used by MEPs and member states are 2) the addictiveness of smoking and …The Smoke-Free Alternatives actually coming from the tobacco lobby. nicotine; 3) the lack of significant health Trade Association’s Annual Summit …A Nielsen survey of empty cigarette benefits from smoking cigarettes with was rescheduled from January 2014 to packs collected from 20 cities and descriptors like “low tar” and ‘‘light;” 4) sometime in the spring, given that no towns in Lithuania between September the manipulation of cigarette design and FDA deeming regulations have been and October 2013 found that 28.2 composition to ensure optimum nicotine issued and an abundance of e-cig/vapor percent of the packs were illegal. delivery; and 5) the adverse health conferences closed out 2013. However, …National Public Radio’s food news effects of exposure to environmental SFATA will offer a webinar free to program “The Salt” reports that even tobacco smoke. Some of the statements its members to review the deeming as smoking bans spread across the U.S., read, “Smoking kills, on average, regulations once they are released. mixologists are bringing tobacco back 1,200 Americans. Every day;” “Philip …The National Academies posted to bars by using it as an ingredient in Morris USA, R.J. Reynolds Tobacco, on its website a public announcement their mixed drinks like the mezcal- Lorillard, and Altria intentionally regarding the Committee on the Health based “Oaxacan Fizz” at the Father’s designed cigarettes to make them more Implications of Raising the Minimum Office restaurant in Los Angeles, addictive;” and “There is no safe level Age for Purchasing Tobacco Products which is sweetened with pipe tobacco- of exposure to secondhand smoke.” (IOM-BPH-13-02), whereby the infused sugar syrup, the bourbon-based …TheStreet.com reports that Institute of Medicine will establish an ad “Smoker’s Delight” at the restaurant “discerning” marijuana smokers are hoc committee of public health, medical, named PX in Alexandria, Virginia, switching from pipes and other smoking and other experts to conduct a study which contains a sweet tea made with devices to vaporizers marketed for use and prepare a report to be issued to the pipe tobacco or clove cigarettes, and the with nicotine liquids because they can FDA CTP on the likely public health cognac-based “Step-dad” at Bar Charley get more THC from vapor rather than impact of raising the minimum age to in Washington, D.C., incorporating smoke without damaging their throats buy tobacco products to 21 and to 25. a dash of homemade tobacco and lungs. TB

26 TOBACCO BUSINESS MARCH/APRIL 2014 Mastering the Cigar Sale: 15 Top Tips

Two tobacco outlet retailers and two cigar retailers share their latest and greatest to help you move more stogies.

By Renée M. Covino

ave you mastered the art of knows Johnson best—Victor Vitale of threat currently as big-brand vendors selling fine cigars? Even if Legacy Brands Ultra Premium Cigar who he knows he has to do business Hyou nailed it yesterday, there Company—said, “Mike’s been trained with, but who also try to sell cheaper is room to sharpen it today. The best to survive and strategize and patiently to his customers online. Years ago, his premium cigar sales tips are constantly seize opportunities, and that now goes biggest threats came from a crashing developing and changing, ideally with hand in hand with his [retail cigar] stock market, a partner being diagnosed the evolving creativity and strategy of business.” Vitale added that Johnson’s with a mental illness and his credit card a particular retailer. Some of the most survival tactics, combined with his ability company’s skyrocketing interest rate. successful cigar retailers stay ready to to “change like a chameleon with the “These are curve balls that you have reevaluate and readjust, utilizing their times,” all works together. to deal with head-on; you can’t win in backgrounds and expertise to develop a With that in mind, here are Johnson’s defense, you have to play offense,” he specialized plan and unique allure. and three other retailers’ best “of-the- says. “You can sit around feeling sorry Take Mike Johnson for example, founder moment” cigar sales tips, all gathered at for yourself or you can actually develop and owner of Holy Smokes Cigars, TPC 2014 in January: a solution.” operating for 10 years in Manchester, New 1 2 Hampshire. Johnson is a retired Army Identify your threats and develop Pick and choose vendors correctly. sniper—specifically, he was among the elite a solid plan to counter them. Yes, Cigar retailers need to know which as a senior Scout Sniper and was in the there are threats to your cigar business vendors will be their allies in the “war Army for a total of six years. that go beyond pending legislation. against the Big Web Retailers,” according One boutique cigar vendor who Johnson identifies his most pressing to Johnson. “Choose more small-batch

28 TOBACCO BUSINESS MARCH/APRIL 2014 cigar companies and, ideally, price- like that, try this.’ So you get them there events—employees should feel it too, with protected vendors,” he advises. Johnson and then it’s like bait and switch,” but programs that offer them commissions on teases his salespeople that every time really, he is just opening their cigar palates the monthly or bi-weekly featured brands. they sell a Macanudo, they owe him five to smaller brands that have merit and are “On these and the brands [that] we get dollars. “I’ve burned a lot of bridges, but better for his store’s business. good margins on or whatever we want these brands aren’t doing us any favors; in to push, we will give our employees five 5 fact, they’re ultimately trying to put us out Forget a one-day-only cigar event. percent kickbacks,” he relays. “It prevents of business.” “One day is stupid,” says Johnson. He them from becoming lazy.” believes in holding cigar events for two 3 Develop private label trademarks/ weeks or all month long. It’s great to 7 Rearrange the lounge area. One bundles. In addition to small-batch, hold a special evening cigar night, but grouping in the lounge area is not ideal limited-release cigars, the other way brick- in Johnson’s mind it makes much more anymore, according to Johnson. “People and-mortar cigar retailers can protect sense to market that night as the kick- argue and they form groups—you can themselves is to develop bundles with off to the event—to offer that brand’s ultimately lose customers in the long vendors who can “put your own trademark cigar special for a much longer period run, especially after your lounge has been on them,” according to Johnson. so that customers who couldn’t make around awhile, if you don’t account for it that evening can still get excited and separate sitting areas,” he says. Of course 4 Bait and switch customers. Yes, purchase the promotional offer(s). “My this is dependent on space, but Johnson Johnson believes it’s fair game and smart sales manager and I came up with this believes it’s not the size of the groupings cigar sense to bait and switch customers last year after he made a comment to that count, but the arrangement. Holy from popular brands to trademarks or me that in his previous business— Smokes improved its customer satisfaction your allies’ brands. He says, “You have furniture—events were held all month and cigar sales when it regrouped the to face out your humidor with trending long,” explains Johnson. Holy Smokes’ lounge to have three different sitting areas cigars. Cigar Aficionado holds a lot of business increased by 20 to 25 percent instead of one. weight with customers—it’s annoying. So just by making that one change. 8 we’ll get the top 10 and put them on the Don’t forget the females. Part of the 6 shelf. Then we’ll put a brand like Victor’s Give employees commissions on Holy Smokes lounge “clean-up” was to [Vitale] next to it, or another small-batch featured brands. Johnson says it’s not make it more female-friendly, as Johnson brand, and we’ll tell our customers, ‘If you enough to get customers excited about the tells it. “It’s got to be very clean and it’s

30 TOBACCO BUSINESS MARCH/APRIL 2014 Collett Enterprises’ Klafter’s World Famous Cigar Bar’s Darren Collett Randy Silverman Rich Castiano got to appeal to them,” he says. “Women videos and social media outlets tied to the to him. “How much support we get from spend 90 percent of the discretionary business are updated regularly. a vendor is an important factor as to household income and we want it to whether we will do business with them,” include cigars.” 10 Seek extra vendor support. Sure, Silverman says. you have cigar vendors offering event 9 11 Cultivate a network of websites and merchandising support, but ask Bundle cigars and take a cut in and social media. “You need to have them to go the extra mile, advises Randy margins. Like Johnson, Rich Castiano, an e-commerce site—period,” advises Silverman, president of Klafter’s, who was owner of multiple cigar bars in Florida, Johnson. “It’s a long process, but worth a panelist on TPC’s trench marketing believes in bundling cigars, but not just for the investment.” Johnson actually keeps panel in January. “We ask them to attend the benefit of trademarks. “We have great a network of websites; he has three our quarterly store managers’ meetings relationships with cigar manufacturers currently tied in to his cigar business. so they can educate and inform our store who will give us a great price on bundles,” “If you have one website, it’s not good employees,” relays Silverman. he says. “So instead of selling one cigar for enough. You have to please Google now, Regarding potential new products, $7, we make it keystone and offer four for because of searches.” Holysmokes.com Silverman asks vendors the tough $20. As long as it’s a good premium cigar, is the company’s informational website, questions, such as: what makes it more we’re making money because they move. while NHcigars.com is its e-commerce appealing than existing products, and will We just did this and sold 20,000 sticks at site. “We also have blogs out there— it be readily available? keystone.” mostly propaganda blogs. We’ll write Klafter’s also invites cigar vendors, 12 reviews about lines we want to push along with other vendors, to its company Use a quality air system. “It’s all and then we’ll have back links going to trade show, which Silverman says is the about how much you reverse the air—the our e-commerce site. In the premium “best format for training managers and air transfer system,” advises Castiano, who cigar world, if you don’t have a website assistant managers. Basically, vendors are also served on TPC’s trench marketing to sell online, you’ll eventually go out of given a table to set up their products; a panel. In his cigar lounges, he also uses business. Vendors hate it, but we’re not in small group of store managers visit[s] electronic air purifiers (“the best money business to please vendors.” In addition to each table for 15-20 minutes and then can buy”) and he has the filters cleaned the blogs, Johnson makes sure YouTube rotate[s] like musical chairs,” according constantly. HVAC specialists and air-

32 TOBACCO BUSINESS MARCH/APRIL 2014 conditioning companies can put cigar retailers on the right track with this very important component, Castiano says.

13 You don’t need alcohol to hold a great event. Even though Castiano is fortunate to be able to have both alcohol and cigars at his cigar bars, he recognizes that it’s not the alcohol that makes the event, it’s the camaraderie—getting your customers in one area at the same time to smoke and sample and talk about cigars as well as other passions. Retailers who use alcohol as the excuse to not hold events are not strategizing correctly and could be excusing themselves out of cigar sales, Castiano believes.

14 Consider hiring a certified retail tobacconist. That’s what another TPC panelist did—Darren Collett, president of Collett Enterprises—after he revisited his premium cigar business, realizing that after “discontinuing it and saying ‘never again,’ times changed with better products and better support, and we are now back in pretty heavily.” The retail tobacconist was hired to manage Collett’s premium cigar category and help train associates in important product knowledge.

15 Don’t fall in love with your inventory. Sometimes the best tactic is to keep cool on your cigar inventory—don’t get too attached to the existing sticks, according to Collett. “How do we really make money in retail? We make it by turning inventory,” he offers. “My word is to take a look at your inventory—be honest and turn dead or slow-moving inventory back to cash. It does you no good to have excess inventory. This dynamic industry warrants that we have to be able to change our business a little bit every day.” TB

34 TOBACCO BUSINESS MARCH/APRIL 2014 A Past of Pipes A place for pipes is also a full of memories.

By Erik Stokkebye

just found the old pipe cabinet The pipes are all different and all he has passed on to that belonged to my father, Peter a reflection of who he was—elegant, me, and the great IStokkebye—what a trip down classic and with a bit of whimsy. These experiences we memory lane it is! are not the antiques he treasured from shared over the years I see a jewel...Turkey, and a beautiful the fabulous tobacco museum his father in this wonderful Joergen Larsen straight-grain, like started, but everyday objects, well world of pipes and the ones he had to hide in his hotel cared for and meant to be enjoyed and . For Peter, rooms because otherwise they would be appreciated. his pipes were almost snapped up too quickly at the RTDA. Of course, one of the strongest as much a part of There is also the block of unfinished triggers of old memories is smell, and his appearance briarwood—with the stem already the scent of his tobaccos still lingers as his glasses. My mounted—that he never had the chance on these pipes. I can close my eyes and personal favorite is the classic that he to fashion into a truly homemade pipe. picture him clear as day relaxing with a is brandishing in one of the last official He loved the funky details, like a bit of bowlful of his own Navy Flake with just portraits of him. Maybe one day I’ll bamboo or a copper ring, to play up his a hint of Kentucky tobacco, even though fire up one of his pipes instead of just pipes a bit. I even remember a bright he has been gone for more than 10 years reminiscing about Peter smoking them blue pipe, which somehow never made now. himself. it into his cabinet of favorites. I also appreciate the love of tobacco Cheers!

36 TOBACCO BUSINESS MARCH/APRIL 2014 CATEGORY MANAGER retail trends Tobacco by the Numbers Highlights from Bonnie Herzog’s U.S. Tobacco Trends report

he times, they are a’changing. Many of the shifts now in the category and some consolidation is likely, research taking place in the tobacco retail landscape are, by suggests that brands like NJOY, Mistic, Fin, Logic and Krave Tnow, expected by the industry. Few, for example, will continue to enjoy a healthy position in the market. will be shocked to hear that tobacco volume decreased by 2 “We think that e-cigs are to tobacco what energy drinks percent in 2012, according to U.S. Tobacco Trends, a February are to beverages—highly profitable and quickly growing in 2014 report by Bonnie Herzog, managing director of tobacco, volume and shelf space at retail, and increasingly gaining beverage and convenience store research for Wells Fargo customer acceptance,” writes Herzog. Securities. But not all categories of tobacco suffered a decline. As the various tobacco companies continue to grapple for While cigarette volume was down 5 percent, smokeless market share, retailers are also jockeying for position in the tobacco volume increased by 5 percent. category. Family Dollar and Dollar General have begun selling As many in the industry have anticipated, cigarette sales cigarettes, suggesting that dollar store chains may be a growth continued to drop in 2013, while e-cigarette sales continued channel for the category. Vape stores are another emerging to grow—reaching approximately $2 billion for the year. retail trend, although many question their long-term viability, “The majority of respondents from our Tobacco Talk survey contending that the FDA may regulate them out of existence. continue to be very excited about the e-cig category,” writes Meanwhile, CVS opted to abdicate, exiting the tobacco sales— Herzog. “We think consumption of e-cigarettes could outpace which accounted for an impressive $2 billion in sales for the combustible cigarettes over the next decade.” Blu, NJOY and company—altogether. Logic have emerged as early market leaders, adds Herzog, To follow are some charts excerpted from the report that who also notes that while the Big Three tobacco players are offer a snapshot of current retail trends. TB

Total Tobacco Estimate Total tobacco volume decreased by 2% in 2012. Cigarette volume was down 5% and smokeless tobacco volume increased by 5%. 1200 Total Volume (in millions of pounds)

1,000 5-Yr CAGR=1.0% 4-Yr CAGR=1.5%

800

600

400 Volume (in millions of pounds) of millions (in Volume 200

0 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013E* *Estimated Retail Channel Market Share Mass & Others C-stores still top the tobacco distribution chain. Tobacco Stores

Grocery & Drug C-Stores

C-stores continue to account for the bulk of tobacco sales, and are also the dominant player in the e-cigarette category. 38 TOBACCO BUSINESS MARCH/APRIL 2014 CATEGORY MANAGER retail trends

Retailers Report Impact Change in Shelf

From Vape Shops Space Allocation Y/Y

(Responses to question, “Are vape shops

impacting e-cigarette sales?”) Q1 2013 Q2 2013 Q3 2013 Q4 2013

50% 80% 72% 45% 47% 40% 60% 56% 35%

30% 33% 40% 31% 25% 26% 20% 20% 19% 7% 7% 6% 15% 4% 4% 1% 3% 1% 10% 0% -1% -1% -1% -5% 5% -5% -5% -7%-6%

0 -20% YES NO NO Cigarettes Smokeless Snus Cigars E-Cigs (Negatively impacting) (No impact) (But expect negative impact in future) Chart Source: Wells Fargo Securities

E-Cig Growth Hiccup Category Growth in Measured

(Percent of customers converting to e-cigarettes Channels Appears to be Decelerating from conventional cigarettes) (Responses to question, “Do you carry any ‘tank-style’ vaporizers?”) 12% 40%

35% 36% 36% 10% 10.6% 10.7% 30% 9.2% 8% 28% 8% 25%

6% 20%

15% 4% 10%

2% 5%

0 0 Q1 2013 Q2 2013 Q3 2013 Q4 2013 YES NO NO Currently carry But plan to carry soon No plans to carry While annual growth for e-cigarettes is still estimated to be above 20 percent, Tank-style or “open system” vaporizers are gaining traction and taking some customers’ “switching” rate declined in the fourth quarter of 2013. share away from the “cigarette-like” style of e-cigarettes.

40 TOBACCO BUSINESS MARCH/APRIL 2014 electricALLEY

Rest Insured Product liability insurance is a must for wholesalers and retailers who want to get in front of potentially devastating e-cig quality issues— real and fabricated.

By Renée M. Covino

he alleged story, now resulting to grow and profits continue to by product liability insurance, has heard in a lawsuit that was heard climb, electronic cigarette lawsuits, a number of retailers complain first- T’round the TPC 2014 show including class-action lawsuits, are hand of product safety and lawsuit issues floor in January, goes like this: A wildly spreading across the United resulting from e-cigarettes purchased Californian couple was traveling by States. Currently, there are lawsuits directly from China. car to the Los Angeles International for defective batteries, intellectual “This is the only industry I’ve seen Airport for a volunteer trip to South properties claims, and for injuries where retailers are purchasing directly America when the woman’s charging resulting from electronic cigarettes from China, bypassing a wholesaler e-cigarette emitted a strange odor. The blowing up (like the one above), to save a nickel,” Lewis tells Tobacco woman claims she saw the battery to according to electroniccigarettelawsuits. Business. “My biggest frustration with the e-cig dripping. com, which also reports that “some electronic cigarettes is that everyone is “I went to unscrew it, and the battery claims have their merits, and some going after price, but no one is educating started shooting fire toward me and do not.” It is becoming apparent that the store owners; they are oblivious to then exploded and shot the metal pieces consumers and legal firms are starting the overseas product risks and to what onto my lap,” she told CBS News last to cash in on the industry for both the their regular insurance will cover. I have summer. She also reported that her right and wrong reasons. retailers calling me back after they got cotton dress caught fire, resulting in And that leaves retailers who are burned buying from China.” second-degree burns on her body—and uninsured, underinsured, or who All of the e-cigarettes that Vapor now continuing trips to a medical burn purchase e-cigs from an uninsured/ Central supplies are covered by the center. underinsured supplier in a very company’s product liability insurance; A lawsuit is not only pending against vulnerable position. retailers that purchase through them (or the California-based manufacturer of any reputable supplier or manufacturer the electronic device, but also against The China Factor with the proper product liability the retailer who sold it. It has been Mike Lewis, chief operating officer insurance) are reportedly covered reported that neither of them had the of Vapor Central, a wholesaler in Kent, and don’t necessarily need separate proper insurance. Washington that supplies e-cigs and insurance. As the e-cig industry continues other vaping products that are covered But retailers who are buying direct

42 TOBACCO BUSINESS MARCH/APRIL 2014 electricALLEY

“Potentially, a retailer could lose everything because of these lawsuits. A retailer’s standard liability insurance will not cover it—they need separate product liability insurance.”

Safe Battery 101 Because it is the rechargeable lithium battery (Li-ion and LiMN) that is at the forefront of these e-cig mechanical safety issues, retailers should also promote safe battery practices to their customers to avoid potential lawsuits. or who are not buying product that is Some of these tips, as highlighted on several industry websites such as covered by product liability insurance guidetovaping.com, include: are essentially playing Russian roulette • Charge batteries on a fireproof or flame-retardant surface such as concrete, without it. natural stone, or tile and use only the corresponding charger that is set to the “Potentially, a retailer could lose correct settings. everything because of these lawsuits,” says • Store e-cigarette batteries in a protective, non-conductive case. Bill Seide, owner of the insurance agency • Do not disassemble or tamper with e-cig batteries in any way. William R. Seide Agency in Pompton • Discontinue using if there is any sign of damage to the battery casing or Plains, New Jersey. “A retailer’s standard wrapper, including dents, bulges, rips, tears and scarring. liability insurance will not cover it—they • Take care not to unintentionally short the batteries by exposing them to metal need separate product liability insurance.” objects, liquids, or by submerging them fully into any conductive substance. The product liability policy that • Keep batteries away from fire or extreme temperatures as they could explode Seide’s agency provides to cover such and/or vent. products specifically states that it is “a • Avoid leaving charging batteries unattended. policy designed for those that sell e-cigs, vaporizers, e-juice and accessories—it’s an exclusive program just for that,” according are established and have been in business and for wholesalers and manufacturers to him. for a number of years are less of a risk product liability policies “start in the Interestingly, tobacco shops and than the vape shops that are cropping up range of $5,000,” according to Seide. outlets that sell regular cigarettes, everywhere now,” he offers. Seide says he Lewis concurs with that wholesale cigars, and a variety of tobacco products has seen “regular tobacco shops” purchase figure, relaying that Vapor Central’s $2 along with e-cigs can get the added product liability for “as low as $1,800” per million product liability policy (from protection cheaper than a pure vape year. Scottsdale Insurance Company) costs the shop, Seide relays. “Tobacco shops that For vape shops it would be “a bit more,” company about $5,600 a year. TB

44 TOBACCO BUSINESS MARCH/APRIL 2014 46 TOBACCO BUSINESS MARCH/APRIL 2014 Regulation… and Other E-Cig Debates

Will the FDA make fine-cut, or blasting regulations on elec- tronic cigarettes? Will “tanks” take over the market? The cat- egory is heating up with these and other debates as experts weigh in from varying angles.

Troutman Sanders’

he New York Post recently Bryan Haynes reported on the growing trend of many venture capitalists Reportedly, the FDA will issue and all the major tobacco proposed regulations for electronic companies firmly investing in cigarettes this year, possibly as soon as this electronic cigarettes. “What spring. There are several issues tied to how was years ago a cult fad is now more than this will play out, but the overarching one doubling in sales annually [as seen over] is whether the government agency will the last three years,” said Sam Hamadeh, regulate the category with a scalpel or CEO of research company PrivCo. with a sledgehammer. Bonnie Herzog, a tobacco analyst with Bryan Haynes, a partner in tobacco Wells Fargo Securities, maintains her practice at Troutman Sanders law firm, to effectively evaluate them. bold stance from over a year ago: “We is optimistic that it might go more the His biggest question then is: “How believe consumption of e-cigs will eclipse way of the scalpel. He says that he was much of this product is the FDA going consumption of traditional cigs over the encouraged by the FDA’s recent stance to regulate?” The answer hinges on next decade as e-cig technology improves that the Tobacco Control Act “is not how the product is positioned—that is, and conversion continues to accelerate,” an all-or-nothing proposition.” Like whether its legal definition is expanded she reiterates. other industry experts, he has observed or retracted (see “Tobacco Product vs. With all the hype and , debate over “the huge learning curve” that the FDA Medical Device vs. Something Else?” the category’s ultimate potential is heating undertook with traditional tobacco debate on page 46). up. To follow are the top issues that those products, and recognizes that “when As of late January, Cynthia Cabrera, involved in the tobacco industry feel will you add e-cigs into the mix, I’m not sure executive director of Smoke-Free determine the category’s future. [that] they have the capability right now” Alternatives Trade Association (SFATA)

47 TOBACCO BUSINESS MARCH/APRIL 2014 More than 70 percent of retailers carry or plan to carry “open system” or tank-style vaping products. 40%

35% 36% 36%

30%

28% 25%

20%

15%

10%

5%

0 YES NO NO Currently carry But plan to carry soon No plans to carry

was also feeling encouraged by the on e-cigs, subject them to taxes, impose FDA’s seemingly open dialogue with stringent marketing and sales restrictions, the industry. “We think the FDA is and ban the use of flavors in them. coming around,” she says. “Mitch It also indicated that Big Tobacco’s Zeller (FDA’s director, Center for competitive advantage will probably Tobacco Products) pointed out strengthen once the FDA releases its that [e-cigs] are a good option proposed regulations for e-cigs, which for people who don’t want analysts expect could include restrictions to use tobacco products. I on the Internet sales on which many of think they understand the the smaller players depend. Conversely, the potential for this product “more lightly the area is regulated, the better and that it is one they can chance the upstarts will have of taking on leverage to get people off Big Tobacco and winning,” according to tobacco products.” the Bloomberg story. In February, the question Andries Verleur, who formed V2Cigs in of whether the federal 2009, said that it is his “sincere hope” that government will regulate “regulators and legislators take a responsible e-cigs like traditional approach towards our category.” cigarettes (sledgehammer) or

adopt a less-restrictive approach (scalpel) was touched on in a Bloomberg Businessweek Magazine The FDA has already classified electronic cover story. The article reported that cigarettes as tobacco products (vs. medical some health advocates support tough devices), which was generally viewed as a regulations that would require health labels good thing by the industry since medical

48 TOBACCO BUSINESS MARCH/APRIL 2014 devices are more strictly regulated. However, (AEMSA). “But just because something liquid [used in a tank-style system], based on that topic is still open for debate, and very is [the] law and there are only two options TMA analysis, is one-twenty-fifth the cost much tied to how heavily, or if at all, the doesn’t mean we have to settle; we have to of a cartridge, committed users are moving FDA will regulate certain products in the fight the fight—there are nicotine loopholes. from initiation (disposables) to vaporizers, category. We don’t have to stand for just those two some of which are now appearing at retail, Regarding the no-regulation option, options. Things can change and the fight is versus over the Internet where [the] majority Haynes says, “I’ve heard of e-cigs with worth fighting—we can change it for the have been sold.” nicotine that doesn’t come from tobacco. future.” One e-cigarette vendor of the cig-alike/ In my view, the FDA doesn’t have the Bill Bartkowski, president of VapAria stick variety recently reported to Tobacco authority to regulate these products. Their Corporation, an e-cigarette research and Business that it just introduced a tank- jurisdiction is not tied to nicotine, but to product development company, agrees. style product because its biggest client— tobacco.” “The judge said that if the FDA is going to Walmart—prodded them to do so. The Then there’s the issue of whether the FDA regulate [e-cigs], it needs to regulate them company initially wanted to wait for the will evaluate e-liquids and batteries, or the as tobacco products because they’re derived FDA’s regulatory proposal, but the retail electronic parts of the e-cig. “I might suggest from nicotine, but I think there is some room giant pressed them to move swiftly, saying that they won’t,” Haynes continues. “They to negotiate. Right now nicotine is regulated that more and more of its customers were don’t have the authority or the technical in two areas of the FDA: the CTP’s tobacco requesting the tank form. competence to look at the electronics in an products and in pharmaceutical applications. This suggests a market-changer that leaves e-cig.” There is an attempt to combine nicotine vendors from the other side scrambling for As for the traditional definition debate, under one regulatory authority—one or the more information and confirmation. “The Tom Kiklas of the Tobacco Vapor Electronic other—or under some combination of the majors of the world want you to believe Cigarette Association (TVECA) says, “We two. Given that, the discussion is ongoing, that [the cig-alike] is the market,” confirms are the ones that put this debate out there. but there is an opportunity for e-cigs to Bill Seide, owner of the insurance agency There are only two options: [an e-cig is work to get their own classification. Today’s William R. Seide Agency, who insures either] a medicinal device or a tobacco path is clear, but that could change.” and closely follows the market of e-cigs, product. Our position since day one has Public health groups generally support vaporizers, e-juice and accessories. “That’s been that we are nothing but a tobacco e-cigs being classified as tobacco products what Lorillard, Philip Morris and Reynolds cigarette with slight improvement…[the so as to subject the device to additional are pushing, but the ‘in’ thing right now is e-cigarette category has] been around and restrictions and taxation. tanks, liquids and mods that center around on the market for 400-plus years.” vaping and flavors. The problem is [that] SFATA, however, does not see it that there is no record of those sales right now; way. “We don’t agree that this is a tobacco This is one of the latest topics to hit [cig-alikes] are tracked by Nielsen, but product; we believe it is an alternative to a the scene. It now appears that the market nobody has any idea what this other side is tobacco product that is very viable for the for electronic cigarettes is becoming yet. I can guess from the guys I insure—it’s FDA to leverage…to get people off tobacco,” divided between cig-alikes (disposable and in the double-digit millions.” explains Cabrera. “And it’s a lot newer, it is rechargeable e-cigarettes that come in stick Even without sales data, Bonnie Herzog not 400 years old, it is a viable alternative that form) at one end, and personal vaporizers/ and Wells Fargo Securities are tracking could exist in its own ecosystem and should tanks/open systems/modifications or mods, the trend, and in their recent Tobacco Talk not be treated like a tobacco product.” at the other. survey, they found that more than 70 percent This sentiment to strive for another Farrell Delman, president of the Tobacco of retailers currently carry or are planning to classification beyond what is out there Merchants Association (TMA), has been carry tanks (see chart). right now—a tobacco product or a medical following this issue closely. “Most U.S. “A key trend that we see emerging is the device—is echoed by other industry players invested heavily in the cartridge increasing prevalence of vapors/tanks/open associations. “Legally, right now there are business thinking there was lots of money to system vapor products, which we think only two pathways, and [with] the way be made in the razor blade model,” he says, could be somewhat marginalizing the ‘cig- we’re going now, we will be lumped into the referring to a practice of selling a device at alike’ e-cigs, but incrementally growing the tobacco product area,” warns Linc Williams, or near cost and deriving profits from the overall e-vapor category,” says Herzog. “A co-founder of the American E-Liquid subsequent sale of supplies for that device. number of vape shops have been opening up Manufacturing Standards Association “But since the cost to the consumer for the across the country and although they are not

50 TOBACCO BUSINESS MARCH/APRIL 2014 yet a threat for [c-store and tobacco] retailers, these new shops are definitely on retailers’ radar screens. Bottom line, retailers continue to embrace the e-cig/e-vapor categories.” With cities like New York City and Chicago proposing to ban One retailer quoted in the Tobacco Talk survey e-cigarette use in public places, it opens up the question: Will e-cig remarking on his tank business said, “It is outpacing bans become as commonplace as bans on traditional cigarettes? all traditional e-cigs in sales with higher margins, and Market research firm Harris Interactive’s 2014 American E-Cigarette consumer satisfaction is amazing.” Etiquette Survey, commissioned by North Carolina-based e-cig Another stated, “It looks like a growth segment we company Ballantyne Brands, indicates that they will not. After polling can’t ignore.” over 1,000 adults by phone in December 2013, the study found that 63 percent of the respondents, including 71 percent of men and 55 percent of women, said that someone using an e-cig in close proximity would Perhaps the issue that ties both regulation concerns not bother them. Only one-quarter of the respondents said that they and device concerns together is the debate over who is would object to someone using an e-cig nearby. Below are more stats running this industry: Big Tobacco, or the little guys. from the survey. It’s no secret that all the major cigarette makers are now in the e-cig category. In fact, Altria recently boosted Total respondent approval rate for e-cig use at: its presence by announcing that its NuMark subsidiary Sporting events 58% will acquire Green Smoke. Altria also launched its MarkTen e-cig in a test market in Indiana last August. Malls 47% Reynolds American is selling its Vuse brand e-cig Restaurants and bars 45% in test markets in Colorado and Utah; it is expected to Offices 35% become available nationally by mid-2014. Lorillard was the first major player in the market with its acquisition Public transportation 35% of blu eCigs in April 2012. Herzog estimates that these Movie theaters 29% three players will weather about a 50 percent reduction in conventional cigarette revenues by 2023—a fact Airplanes 26% that is probably driving their respective moves into e-cigarettes. Respondent approval rate by gender for e-cig use at: However, while these companies with deep Restaurants and bars pockets have brought much attention to the category, Men 52% they are also behind some of the confusion. Part of Women 38% the misinformation being fed to legislators, health advocates, and even to some consumers is that Big

Sporting Events Tobacco is running the show, and that the public needs Men 65% to be protected from Big Tobacco once again. This is simply not the case, says SFATA’s Cabrera. Women 51% “This industry was built well before [Big Tobacco] got in,” she points out. “Government should understand Respondent approval rate by age for someone using an e-cig nearby: that Big Tobacco is not driving this industry and they 18-34 70% didn’t build this industry. This vape industry was built by small- and medium-sized companies that are 65 and up 46% creating jobs and generating taxes for cities across the country.” TB

52 TOBACCO BUSINESS MARCH/APRIL 2014 Las Vegas Convention Center South Hall 1 January 29 – 30, 2014 Tobacco Plus Convenience Expo Highlights Formerly known as TPE, the TPC Expo wowed attendees with exciting educational seminars and a bustling trade show floor.

igger than ever, this year’s Panelist Linc Williams, cofounder of Panelist Cynthia Cabrera, executive Tobacco Plus Convenience the American E-Liquid Manufacturing director of Smoke-Free Alternatives BExpo welcomed attendees Standards Association (AEMSA), Trade Association (SFATA), expressed with a whopping 36,000 square expressed a pessimistic outlook, the view that for this very reason the feet of exhibits showcasing tobacco suggesting that the FDA might well e-cigarette category should seek to look and tobacco-related products and look to impose the same regulatory to designate itself as a separate class accessories, including a wide array of requirements on e-cigarettes that they of product. “We don’t actually agree e-cigarettes. In addition to browsing are demanding of traditional cigarettes, that electronic cigarettes are a tobacco innovative, profit-boosting products, which would potentially decimate the product,” she said. “This is a much newer, attendees enjoyed a gala opening industry. “I would like to see the FDA viable alternative that could exist in its reception at the Sky Villa on the come up with regulations that are own ecosystem and should not be treated 30th floor of the Las Vegas Hotel, as narrowly focused on manufacturing like [a] tobacco product by the FDA.” well as seminars on the future of the quality standards…as well as transparency Panelist Thomas Kiklas, representing emerging e-cigarette category and so that the public can have confidence the Tobacco Vapor Electronic Cigarette on tobacco retailing trends, as well as in [product quality],” said Williams. Association, countered that there are only peer-to-peer roundtable discussions “We also want to see a national age two options: being regulated as a medical on product categories. requirement so that [varying regulation] device or as a tobacco product. “Our A sold-out panel discussion on the jurisdiction-by-jurisdiction goes away. position is that we are a tobacco cigarette future of e-cigarettes kicked off the But what I expect the FDA to say is that with slight improvement,” said Kiklas, show on January 29, with panelists [the same good manufacturing practices who noted that taking the position that from four of the category’s leading required of traditional cigarettes] are e-cigarettes are a simple technology that’s associations offering their insights on necessary and then spend the next five been around for a long time will ease its regulatory issues facing the e-cigarette years trying to define what that means.” regulatory path. industry. Several of the panelists made predictions concerning the FDA’s much-anticipated proposed regulations for electronic cigarettes. “I expect to see flavor restriction, some age restrictions, maybe some attempts to limit nicotine density as well as restrict the fill-your-own products,” Bill Bartkowski, president of VapAria Corporation, told attendees. “Whether that survives [the] public comment period remains to be seen.”

54 TOBACCO BUSINESS MARCH/APRIL 2014 Trend Talk Las Vegas Convention Center South Hall 1 Following the e-cigarette panel, David that all approvals and denials issuedJanuary thus far 29 – 30, 2014 Bishop of Balvor offered an in-depth look have been the proverbial “low hanging fruit.” at economic and category trends influencing “The limited approvals appear to have been tobacco retailing. Bishop pointed out that while easy calls with ingredients in the new products President Obama’s pledge to raise the minimum having been reduced or eliminated as compared wage will represent a cost to retailers who rely on to the predicate product,” she reported. “Some minimum-wage workers, it will also give their applications were summarily denied because customers more discretionary spending income. basic info required was not included and at The president’s proposal to raise cigarette taxes least one or more products could not show by $1, however, has no such silver lining. “If that grandfather status.” were to pass, it would likely trigger a 6 percent Following Keane’s remarks, Bryan decline relative to cigarette volume,” he noted. Haynes urged manufacturers and retailers Bishop closed his presentation by encouraging to communicate with the FDA, particularly retailers to get involved in grass roots efforts to following the report on suggested deeming influence the wide range of regulatory actions regulations that the FDA is expected to facing the industry, from those mentioned above issue in the spring. “All of you need to be to pending regulatory action on categories like submitting comments to the FDA when e-cigarettes and premium cigars. “These are the rule becomes published; the FDA has exciting times; they are interesting times and to consider those comments,” he said. “It is you need to be involved,” he noted. important that they be substantive, [and] well Day two of the TPC Expo opened with a thought-out, because the FDA will summarily retail panel on marketing tactics (see Trench reject comments like, ‘You all are stupid, you Marketing, p. 76, for highlights) followed by a are trying to destroy the industry.’ You need presentation by Nancyellen Keane and Bryan to think about how the deeming regulations Haynes of Troutman Sanders. Keane discussed will affect how you do business and comment the long and winding road to obtaining FDA accordingly.” Ultimately, noted Haynes, no one approval to bring “new” tobacco products to can predict what the FDA will decide—but market, noting that only a handful of new industry needs to do what it can to influence products have been approved by the FDA and the regulatory landscape.

A Teeming Trade Show Floor

The TPC trade show floor opened at 10 a.m. and immediately bustled with activity as retailers began browsing the thousands of products on display. The exhibit hall also featured the popular Cigar Bar & Lounge, where attendees taking a break enjoyed complimentary beverages, as well as—for the first time—a vaping lounge, catering to attendees and exhibitors seeking a comfortable space to enjoy using their electronic devices.

56 TOBACCO BUSINESS MARCH/APRIL 2014 TPC’s Roundtable Forums

The peer-to-peer category roundtables were a big hit with attendees who enjoyed exchanging ideas on building a premium cigar clientele, marketing electronic cigarettes, protecting patents and more. Las Vegas Convention Center Highlights From the South Hall 1 Verona Sky VillaJanuary Recept 29ion – 30, 2014

TPC’s Opening Night Reception was once again held in the fabulously appointed Verona Sky Villa on the 30th floor of the Las Vegas Hotel. Once called home by Elvis, this luxurious 15,000-square-foot penthouse features its own pool and outdoor patio. Music, great food and an open bar made for a memorable evening.

Winning Big at

Kretek International held its annual prize drawing giveway on day two of the show. Several prizes were awarded before the grand prize—a Rolex watch.

The winners:

Ron Jung of West Bend, Wisconsin-based Smokes

Michael Klingerman of Easton, Pennsylvania-based Famous Smoke Shop

Rolex winner Promod Patel of Pennsylvania’s Mountaintop Tobacco with Kretek’s Hugh Cassar and friends Las Vegas Convention Center South Hall 1 January 29 – 30, 2014

Show Spotlight

60 TOBACCO BUSINESS MARCH/APRIL 2014 Electrifying S&M Brands

e’ve been busy,” Steven of (see sidebar, “Sensational Bailey, president of S&M Cigarillos”), and an extensive offering of “WBrands, told TBI at the vapor products, including a disposable recent Tobacco Plus Convenience e-cigarette line in an impressive array of Expo. Judging by the wide array 16 flavors. The same proprietary flavors of new products on display at the are available in 12 ml bottles for use in Building on its company’s booth, it was something of liquid vaporizers. The company is also an understatement. offering rechargeable liquid and dry success with LEX12, S&M Brands, which makes Bailey’s, herb vaporizers (see sidebar, “S&M’s Tahoe and Riverside brand cigarettes, Electrifying Lineup”). this Virginia company as well as LEX12 sweet-tipped little S&M Brands has had these is venturing into cigars, is not a newcomer in the tobacco products in limited markets since July business. Founded in 1993 by Mac and of 2013 in anticipation of imminent electronic tobacco Steven Bailey, the company debuted FDA regulation of the category. “We its LEX12 sweet-tipped little cigars approach all business from a long- products and the in 2012 at the TPC show to a warm term perspective, and we don’t think cigarillo market. reception. In 2013, it added Sweet there is any chance that conventional Chaos and Menthol Chrome in both e-cigarettes will be regulated out of tins and grab-and-go four packs, and business,” says Bailey. “Will it look this year the company has introduced the same as it does today? I highly By Jennifer Gelfand Napa Night in tins and grab-and- doubt that, but we have positioned go four packs. The company is also our products for the long term. I see a extending the brand to encompass good proportion of this portfolio being LEX12 Wides Cigars, four SKUs around 20 years from now.”

62 TOBACCO BUSINESS MARCH/APRIL 2014 Sensational Cigarillos

Sure, e-cigarettes are getting a lot of attention lately, but cigarillos are another category that’s going strong. With its LEX12 Blend #7, S&M has debuted four SKUs of this popular tobacco product: Classic (pipe), Sparkling Moon (white grape), Blue Magic (blueberry) and Napa Night (red wine). All are made in the Dominican Republic and packaged in a resealable “LEX Lock” foil pouch to ensure freshness. While the company is well aware that flavored products are on the FDA’s radar—hence the names that evoke but don’t specify flavors— Steven Bailey intends to make hay until a firm ruling appears. “Because of the politics around flavored products, I’m not confident that all of these products will be around in two years,” he says. “Do I believe children can’t wait to try Napa Night? I would say no. But there will always be the argument that flavors appeal to kids, so we have to be realistic.”

S&M’s Electrifying Lineup

The Bailey’s, Tahoe and Riverside cigarette brands are established throughout the southeastern United States. These three brands, along with Contact (a branded electronic cigarette), will also be available in electronic versions to include disposable sticks in 84mm, 100mm, and slim versions in both tobacco and menthol flavors as well as rechargeable and multi-unit rechargeable formats. A major point of difference between S&M’s products and those of its competitors is the standard tin packaging, which creates a natural link between the quality units offered and consumer perception of its brands. The MSRPs for the disposable lines will be $9.99 and the rechargeable units will range from $13.99 and $39.99. The LEX12 E-Sense line of disposable e-cigarettes is available in 16 flavors: Classic, Menthol Chrome, Sweet Chaos, Napa Night, Free Spirit, Temptation, Midnight Dream, Blue Magic, Ragin Cajun, Carnal Ecstasy, Broken Dawn, Blonde Essence, Red Krush, Exotic Fusion, Wild Passion and Sparkling Moon. All are available in standard tin packaging and a 700-puff format with an MSRP of $9.99. The company offers two “jump-pack” rechargeable units: • The regular jump-pack is a multi-stick rechargeable unit (Bailey’s, Tahoe, Riverside and Contact) with five cartomizers [and] two batteries. “The way it is designed lets you keep a battery charged at all times [and is the] same size and shape as a pack of cigs, so for a consumer who wants to keep something always charging, it’s a great entry level,” says Bailey, who reports that the MSRP for the unit is $39.99. • The mini jump-pack (in Bailey’s, Tahoe, Riverside and Contact) is a small rechargeable unit, cartomizer and USB charger for a $13.99 price point. Additional electronic products available from S&M Brands include the LEX12 Staple, which is a rechargeable liquid vaporizer that can be used in conjunction with the LEX12 16 e-liquid flavors, which is packaged in a tin, and the LEX12 10 Penny and 20 Penny dry herb-smoking devices.

64 TOBACCO BUSINESS MARCH/APRIL 2014 “LEX12 is not a product that people smoke like a cigarette. It’s more of an after- dinner or with-a- cocktail product.”

A Bailey Backgrounder

Steven Bailey hails from a Virginia sell the cigarettes, and S&M Brands “LEX12 is not a product that people family that has been in the tobacco was born. The Tahoe and Riverside smoke like a cigarette,” explains Bailey, business for more than a century. His cigarette brands soon followed. who sees it as a “bridge” product. “It’s father, Mac, was a tobacco grower All of S&M’s cigarette brands more of an after-dinner or with-a- who started Golden Leaf Tobacco are now firmly entrenched in the cocktail product.” Company in 1980, a company that southeastern states in which they’re With LEX12 now a well-established continues to supply tobacco to sold (Virginia, West Virginia, North brand, the company is leveraging its processors and manufacturers today. Carolina, South Carolina, , name recognition with a steady stream In the ’90s, Mac called on Steven to Delaware, Georgia, Tennessee and of new products. Visit LEX12.com for help him develop his own cigarette Kentucky). more information. brand, an endeavor that eventually In 2012, Bailey debuted LEX12 yielded Bailey’s: a blend of 40 different little cigars, a product that is smooth types of 90 percent American-grown and pleasurable to smoke and also has a flue and burley tobaccos and a touch pleasant aroma. Like the rest of S&M’s of Oriental tobacco. The family brands, the cigars are machine-made decided to form a sister company to and contain American-grown tobacco.

66 TOBACCO BUSINESS MARCH/APRIL 2014 “This whole category will evolve quickly over time. In terms of technology, what we look at today might be totally different by this time next year.”

In developing the vapor products, Bailey, who is a smoker, worked diligently to duplicate the smoking experience. “Most of the electronic products out there don’t do that,” he says. “For me it all boils down to the flavor profile. As a smoker, I recognize that if I’m not willing to smoke it day in and day out, no one else will be. That’s how I measure it. “Our products are as close to duplicating the smoking experience as any electronic product I have tried,” adds Bailey, noting that he expects innovation to continue to drive the electronic cigarette sector. “This whole category will evolve quickly over time. In terms of technology, what we look at today might be totally different by this time next year.” Quality is central to S&M, and its new products are manufactured in keeping with the company’s “made in the USA” philosophy. “There are a lot of price points out there in this category, but I know that consumers appreciate a high-quality product,” explains Bailey. “All of our juices are made in the U.S. and come with childproof caps, which we think is really important.” TB

68 TOBACCO BUSINESS MARCH/APRIL 2014 C-STORE CORNER

Tobacco Categories Vying for C-Store Share

With cigarette sales continuing to slip, where will retailers turn?

By Jennifer Gelfand

he c-store retail sales landscape where you could smoke, whether that restrictions.” is continuing to shift. Cigarette be a cigarette or cigar. As those changes What is a c-store retailer to do in Tsales in convenience stores occur, so does the behavior of smokers. the face of shifting consumer demand dropped another .9 percent in 2013 The headwind for combustibles becomes coupled with an uncertain regulatory according to research by Balvor/ a tailwind for smokeless.” future? With sales of electronic cigarettes Convenience Store News. However, smaller This trend might also seem to lay the up 67.9 percent in 2013 and industry tobacco categories including electronic groundwork for the already growing observers painting a rosy picture of cigarettes, pipe tobacco, smokeless and popularity of electronic nicotine devices their future potential, many retailers cigars saw a bump in sales, suggesting (e-cigarettes, e-cigars, etc.), which emit have opted to expand their offerings of that retailers may need to evolve with the vapor rather than smoke, to gain even e-cigarettes and take their chances with changing demands of tobacco consumers. more momentum. However, Bishop is what looms on the regulatory horizon. Both moist snuff and snus gained quick to note that the same legislation In fact, 80 percent of them increased the ground in c-stores last year, with sales banning cigarettes may soon pertain number of brands offered since last year. boosts of 7.9 and 2.9 percent, respectively. to electronic alternatives as well. “We However, research shows less than one- “Obviously the increase in smoking are facing the [way of ] thinking, ‘If it third of retailers intend to expand shelf restriction has been a challenge for [all walks like a duck, looks like a duck and space devoted to other tobacco products ’ combustibles],” says David Bishop, acts like a duck, it must be a duck. So this year, Bishop says. That reluctance managing partner of Balvor, a Barrington, places like New York City are enacting stems in part from concerns about taking Illinois-based sales and marketing firm. bans on e-cigarette use, and New space from cigarettes and the potential “You’ve seen an explosion in smoking Jersey is considering a statewide ban. effect on retail contracts. “The balancing bans since 2009—dramatic changes in Clearly, e-cigarettes are not immune to act,” he says, “is complicated by the fact

70 TOBACCO BUSINESS MARCH/APRIL 2014 C-STORE CORNER

[that] there’s a lot of money at risk when we talk about OTP Sales Still Rising as Cigs Drop shuffling between those two major categories.” Retailers also are cautious because no one knows when and 100% OTP OTP how the U.S. Food and Drug Administration (FDA) will act +6.7% on major regulatory proposals, including a ban on menthol 90% cigarettes, harsher warning labels on smokeless tobacco, and calls for more restrictions on e-cigarettes and flavored cigars. 80% Pending state legislation is also acting as a lock on the “latent potential” of other tobacco products (OTP), he says. 70% “What retailers want is some clarity and certainty,” 60% CIGARETTES Bishop says. While the right assortment of cigars and -0.9% smokeless offers growth potential for c-stores, “some of these regulatory uncertainties could be game changers” for 50% Cigarettes those segments. TB 40%

30% Electronic Devices Gaining OTP Share 20% Pipe/cigarette Electronic tobacco nicotine devices 10% 2.2% 5.1% PAPERS 0% 3.5% SALES While cigarettes still account for 90 percent of tobacco sales, sales of Cigars OTP products are rising as cigarette sales drop. 32.3%

SMOKELESS 56.8%

Tobacco Category Growth in C-Stores SALES DOLLAR GROWTH 70% 60% 65.9% 50% STRONGER GM% 40% 30% 20% 10% 7.9% 2.7% 4.8% .1% 0% Moist Smokeless Cigars Break-Even Point Snus Loose Electronic Nicotine Devices

72 Source: NACS SOI data, BALVOR/CSNEWS Research, TOBACCO BUSINESS December 2013; Nielsen data MARCH/APRIL 2014 C-STORE CORNER

Average C-Store Offers Three Brands of E-Cigs

Tobacco Outlet Stores

Convenience Stores

All Others

0 1 2 3 4 5 6 Number of E-Cig Brands Offered 80 percent of retailers are offering more brands today than a year ago.

Disposable Devices Still Dominate (Percent of respondents who report carrying the subcategory)

Single Units, Disposable

Refill Cartridges

Kits, Basic/Express

Single Units, Rechargable

Multi Units, Disposable

Kits, Deluxe

e-Cigars

e-Hookahs

e-Liquids

0% 20% 40% 60% 80% 100% Percent of Retailers Source: BALVOR/CSNEWS Research, December 2013 (Reflects retailers who carry in either all stores or some stores) 74 TOBACCO BUSINESS MARCH/APRIL 2014 trench marketing BY MICHAEL GELFAND

Reading the Signs

any people attend church in hopes of seeing a Jessica Curnett came sign that will reveal the path that their lives will Mtake. The sign that shaped Jessica Curnett’s to the business by chance, future, however, came to her in a slightly different way. “It but she deftly turned was back in 2011, and I was on my way to church when I saw a sign outside the local tobacco market that said, J.C. Tobacco Mart into ‘Roll Your Own Headquarters,’ so I pulled off the road to see for myself what was going on.” The store’s owner met a raging success Curnett, who had rolled her own cigarettes for 17 years by keeping RYO on the prior, out in front of the store at the time, and they spoke about his store and the business for 45 minutes. “We just top of her hit it off,” she says, “and he asked me to come back that customers’ minds. upcoming Wednesday. I came back dressed up to the nines because I sensed he had it in mind to hire me as his manager.” As she suspected, after a short conversation, Curnett was hired.

76 TOBACCO BUSINESS MARCH/APRIL 2014 trench marketing

“The store carries everything from cigarettes to dry snuff in cans, little plugs of tobacco, and cumberland twists. I’ve got dry snuff in cans to tuck in your cheek, I carry hookahs and shisha in pieces and parts, higher-end pipes like Dr. Grabow, and a variety of RYO brands.”

Curnett threw herself into her job, learning everything she could about the business and the store’s customers from her boss. However, the tobacco industry was already undergoing sea changes, and the job she fell in love with had lost its allure for her mentor. “He approached me a year later and asked me to buy the store myself or help him shut it down,” she recalls. “I couldn’t let it go, it was near and dear to my heart, so I took the step up, signed the paperwork in September of 2012, and things have been cruising right along ever since.” Today Curnett is the owner of J.C. Tobacco Mart, a thriving tobacco outlet located in Panama City, Florida with five employees (four of whom are full-time) including Curnett’s husband, who helps with tracking and fine-tuning inventory, and their 19-year-old son. Like most owners of J.C. Tobacco Mart’s staff (from left to right): small businesses, Curnett’s fingers are in everything. “I’m Donna Collins, Linda Avella, Jessica Curnett and Emily Woods responsible for scheduling and marketing, and I do all of the budgets, all of the reports, speak with the accountants, and generally make sure everyone’s happy,” she says. Her store manager, Linda Avella, handles the bulk of ordering, but Curnett oversees and approves the orders before they are finalized.

RYO Remains the Heart and Soul The store is 2,000 square feet and divided into two sections. “One side is purely retail-oriented, housing our lottery and fax machines, along with a wide variety of cartons and bags of tobacco,” says Curnett. The other side serves as the “rolling room,” and also hosts miscellaneous products like the high- end pipes and e-cigarettes, including disposable, cartridge and liquid kits, she says. “The store carries everything from cigarettes to dry snuff in cans, little plugs of tobacco, and cumberland twists. I’ve got dry snuff in cans to tuck in

78 TOBACCO BUSINESS MARCH/APRIL 2014 trench marketing

your cheek, I carry hookahs and shisha in pieces and parts, “I’m seeing a lot of my customers go through economic higher-end pipes like Dr. Grabow, and a variety of RYO struggles, and it shows up in many different ways,” says brands, including OHM, which is my main brand.” She also Curnett. The most prominent one is customers adopting carries rolling papers, cigarillos, wraps, ashtrays and other filtered cigars after having smoked cigarettes. “I’m not the miscellaneous , candles and incense. king of this industry, but I don’t think filtered cigars were Many of Curnett’s customers were loyal regulars on the meant to be a replacement. They were a supplement, and big RYO machines that once filled the store, but even now they can be harsh because people are smoking them like that regulation has put a stop to the use of those machines, cigarettes, not cigars. I’m also seeing elderly customers come Curnett’s customers know that RYO is here to stay. “I set up in asking, ‘What’s the cheapest cigarette [that you sell]?’ and tables with every type of machine a customer can use at that’s where RYO comes in.” home, and we’ve been successful with the category because we’ve put the product back in the customers’ hands and Practice What You Preach made it even more affordable for them. The heart and soul of “We [Curnett and her staff] all roll our own, and we know our business is RYO.” the product is better,” she says. “When you’re doing it, you’re seeing what you’re putting in there, so we work hard to put Going the Extra Mile Pays Off the product back into their hands and show them that they Having something for everyone who walks in the door is what can afford to do it. It’s a little bit of work, and I feel bad for has made J.C. Tobacco Mart successful. “I think it’s important folks who work 50 hours a week and don’t have time to roll. that I have everything available for whoever comes in, and it’s “I like to think customer service goes a long way, and I important for my customers to know that if I don’t have it, I’ll know it does because I feel it when I’m out shopping, but find it for you,” says Curnett. “I’d rather go the extra mile to realistically price is always No. 1,” says Curnett. “If they can order something special that a customer wants than have 60 get it cheaper down the road, they’re going down the road, of something that no one wants.” Her store has two displays but I’ve got such a turnover on my product that nothing’s for high-end cigars, but Curnett pines for a walk-in humidor. staying on the shelf. My competitors down the road only “My store’s demographic isn’t as keen on high-end cigars, and have two products and they’re both dried out, so if I take walk-ins can be very costly if you don’t have the right clientele customer service a step further, my customers will come to justify it, but it’s one of my dreams for the store.” back to me even though the same product costs a dollar Curnett caters primarily to the middle class, she says. more in my store.” “We’re all out here trying to make it work, so the more Curnett isn’t big on advertising and admittedly has barely solutions and alternatives I can give them, the better. This is scratched the surface of the Internet. Instead, she puts most the last legal vice we can hold on to, so I want to make sure of her marketing energy into events, like Mardi Gras and my clients are getting a healthier product if that’s possible,” Oktoberfest celebrations where she and her team can educate she says. “These are blue-collar folks, including the milkman, locals about the products. Similarly, she set up a dedicated the street sweeper, and lots of seniors, and I’m working hard lounge area where customers can enjoy products. “It’s a very to take care of my people. simple rolling room decorated with drawings of James Dean,

80 TOBACCO BUSINESS MARCH/APRIL 2014 trench marketing

Marilyn Monroe and Al Pacino smoking. A round kitchen Curnett’s son (and employee), Jesse, table surrounded by four nice chairs, a full couch, and a funky enjoying some alone time in the lounge. hand-shaped chair provides a comfortable area for customers to relax,” she says. “Coffee is always brewing, and we make sure to have music playing on the radio to keep it fun.” The most important aspect of her sales strategy, though, is keeping herself and her staff educated about their products. “If a new product comes out, or if there’s something that was before my time, I make sure everyone tries it,” she comments. “Know what you’re selling, and know your customers so that when you’re telling them about what’s new, you’re both speaking the same language.” TB

82 TOBACCO BUSINESS MARCH/APRIL 2014 PRODUCT PROFILE MARCH/APRIL 2014

Arango Adds Private Label

“We are pleased to include Romeo & Julieta as the most recent addition in our new ‘Clasico’ series of premium cigars,” says Michael Gold, Arango Cigar’s president, in announcing the company’s latest premium cigar offering. “Unlike the original two Clasicos, which are patterned after General Cigar Company’s top-selling Ma- canudo and Punch brands, Clasicos are a product of USA.” All three Clasico lines are made exclusively for Arango and have natural wrap- pers. Their make-ups and blends are comparable to the Altadis and General Cigar brands they are patterned after. Romeo y Julieta Clasicos are medium-bodied with an Indonesian wrapper, while medium-bodied Punch Clasicos have an Ecuadorean wrapper, and the mild-to-medium-bodied Macanudo Clasico features a Connecti- cut shade wrapper. The Romeo y Julieta Clasico frontmarks, like the original two lines, pay tribute to notable Chicagoland areas: Mag Mile (5.5x44), Windy City (5x50), Bucktown (6.125x52, Belicoso) and Gold Coast (6x60). Their suggested prices range from $6.75 to $8.40. Clasicos are presented in 15-count boxes, an affordable, space-saving and novel feature of the line. “Another significant advantage for brick-and-mortar tobacco shops is that Arango does not sell Clasicos to mail-order or Internet retailers,” notes Gold, who adds that the full Clasico lineup is currently available. Arango Cigar, 800-222-4427

Debuts From

Davidoff has released two new assortments. Its “Inspirational Robusto” assort- ment offers cigar aficionados an assortment of three exceptional cigar blends and complex aromas. The new assortment features three cigars: •The award-winning Davidoff Nicaragua Robusto, launched in late 2013; • The “Millennium Blend,” which showcases Davidoff’s sophistication in blend- ing and complexity of aromas; and, • The “Puro d’Oro,” the first Davidoff Dominican Puro with its intense and com- plex blend wrapped in a unique Yamasá wrapper. The Davidoff “Short Pleasures” assortment offers four ideal cigars for those short, relaxing moments in a hectic life. It includes a selection of Davidoff’s rich blends that can be enjoyed in 30 to 45 minutes. Thanks to the different cigar for- mats and blends, modern cigar lovers can discover and enjoy, depending on their mood and the time of day, the milder “Entreacto” and “Grand Cru” No. 5, or the richer and more intense Millennium Blend Short Robusto or Davidoff Puro d’Oro Gorditos. The cigar strength indicator inside the assortment pack helps you choose the right cigar for a specific occasion. Davidoff, www.davidoff.com

84 TOBACCO BUSINESS MARCH/APRIL 2014 PRODUCT PROFILE MARCH/APRIL 2014

Styling from Royal Gold and Drew Estate Team Up Sapphyre Hookah

Royal Gold Cigars has partnered with renowned cigar manufacturer Drew Estate Sapphyre Hookah is an exciting new for its latest premium, hand-rolled cigar release: Nirvana Cameroon Selection. line of flavored electronic hookah The new cigar features a luscious, light-brown, Rosado wrapper grown in the from ECO-CIGS. With a rich metallic Eastern province of Cameroon, Africa. finish, Sapphyre Crystal tip and 600 The origin of the Cameroon seed varietal is Sumatra Indonesia, which has puffs of zero-nicotine flavor, Sapphyre been grown in Africa for over 60 years. The balance of the blend consists of fill- Hookah e-cigs appeal to a wide range ers from Nicaragua, specifically Jalapa and Estelí, along with a portion from the of adult customers—and delivers the Jamastran region of Honduras. The binder is San Andreas tobacco from Mexico. quality, margin and value retailers ex- “The beauty behind the Nirvana blend is the combination of [a] Cameroon pect from the Sapphyre brand. wrapper and Nicaraguan filler leaves,” says Drew Estate co-founder Marvin Sapphyre Hookah comes in eight Samel. “Cameroon leaf is from Africa and is known for its sweetness and a natu- great flavors, including Blueberry ral sweet, spicy taste. Blending the strength, body, and richness of the Nicara- Mint, Mango Tango, Green Apple, guan tobacco with the Cameroon allows a nuanced and layered depth to really Strawberry Fields, Peach Passion, come through. This is not an old-fashioned mild Cammy. Quite the contrary.” Grape Explosion, Watermelon Heaven The new Nirvana line is offered in five sizes, including a 6x46 Corona Gorda, and Chocolate Mint. Each Sapphyre 5x52 Robusto, 6x52 Toro, 6x54 Torpedo and finally, a 4x44 size called the “Si- box includes five each of four flavors lencio.” The first shipment of Nirvana will be shipped in unique, limited edition, at an MSRP of $8.99. ECO-CIGS, 855- wooden display boxes featuring beautiful silkscreen graphics. Royal Gold Cigars, 326-2447 (x106) or tony@eco-cigs. 800-524-4406, [email protected], www.royalgoldcigars.com com

86 TOBACCO BUSINESS MARCH/APRIL 2014 PRODUCT PROFILE MARCH/APRIL 2014

Electronic Cigarettes U.S. Automated Filling, Assembly & Packaging

Freedom Smokeless, a Southern California-based producer of electronic Miami Cigar Debuts Anni- cigarettes, unveiled new, U.S.-built, high-speed electronic cigarette automa- versary Humidor tion machinery at the recent TPC 2014 show in Las Vegas. Freedom, in the e-cig industry since 2008, offers complete, turnkey automated solutions de- Twenty-five years ago, Nestor and Mariana Mi- signed specifically to bridge the gap between China and America, making e- randa began distributing cigars out of the trunk cig and cartridge liquid filling, assembly and packaging an affordable reality. of a car, visiting accounts that Nestor Miranda Freedom’s business is focused on OEM and ODM precision manufactur- had built relationships with through his many ing of electronic cigarettes. In 2011, Freedom began the design and con- years in the liquor business. That endeavor struction of its high-speed automated filling and assembly production lines eventually evolved into what is today one of with the assistance of U.S. automation engineers. The first of six custom- the nation’s largest premium cigar distributors. designed “made in America” machines has been installed in Freedom’s To commemorate this accomplishment, Mi- Southern California, FDA Registered, ISO- and GMP-compliant facilities. By ami Cigar & Company has decided to release May 2014, all six automated lines will be up and running with the capacity a limited edition 25th Anniversary Humidor of producing over four million units per week (disposable and cartomizer). containing cigars from the two factories that “The response at the recent TPC show was overwhelming,” says Glenn helped them reach this milestone. “We are Kassel, Freedom’s president and co-founder. “When watching the video of very excited to be working with La Aurora and our automated production, people were amazed that we had developed My Father Cigars on this project,” says Jason such sophisticated technology, especially our built-in quality assurance fea- Wood, Miami Cigar’s vice president. “Twenty- tures.” Freedom’s automation includes precision filling, gluing, capping, a five years would not have been possible with- patent-pending fusion feature (for soft-tip disposables and for a first-of-its- out the help of the Leon and Garcia families kind soft-tip cartomizer), QC inspection with pressure testing, LED valida- and we thank them for that.” tion, a visual puff test, labeling, and silicon over-capping. This piano-finished humidor has the capac- “Our quality assurance protocols include audits at every level of manufac- ity for 75 cigars. It will contain 20 Toro-sized turing from raw materials, sub-assemblies, WIP and finished goods in ad- cigars, each packaged in their own individual dition to regularly scheduled, consistent on-site factory inspections,” says coffin. The individual cigar will have a second- Michael Lewis, Freedom’s CEO and co-founder. “We use the very finest U.S.- ary band denoting its country of origin. Total made e-liquids, which are all batch tested by accredited third-party labs. Our production on this limited release will be 500 packaging and printing is handled locally at ISO-certified facilities. It’s taken humidors set to hit the U.S. market in mid- us several years to create this world-class production system; our custom- March. ers will attest that our consis- “I feel privileged to be a part of this historic tent high quality and extremely milestone,” says Wood. “What the Mirandas efficient manufacturing and fin- were able to accomplish is something that I ished goods production allows can only hope to duplicate in the 25 years to them to focus on sales instead come. They have provided us with the blue- of facing all the challenges that print; now with the help of everyone at Miami can arise when working with Cigar, we look forward to an amazing run con- foreign vendors.” Freedom, tinuing their legacy.” Miami Cigar & Company, www.freedomsmokeless.com www.miamicigarcompany.com

88 TOBACCO BUSINESS MARCH/APRIL 2014 PRODUCT PROFILE MARCH/APRIL 2014

Super Limited by Nat Sherman

Nat Sherman is offering a limited production format in three of their most popular blends from the Dominican Republic: The Timeless Collection, 1930 and . The Super Lancero measures 8x38, a half-inch longer than a traditional Laguito No. 1 Vitola. “The lancero format is an extremely elegant size, allowing the smoke’s flavor to remain fo- cused, without incorporating as much air into the smoke as larger ring gauges do,” says This New Haus Michael Herklots, executive director of re- tail and brand development for Nat Sherman Mistic introduced its new Haus Personal Vaporizer at the Tobacco Plus International. “The extra length of the cigar Convenience Expo in Las Vegas in January. The device will be sold na- gives greater opportunity for the experience tionwide in mass-merchandise, convenience, dollar store and grocery re- and flavors to change and develop from start tail channels, including Walmart, Circle K, The Pantry, H-E-B, Winn-Dixie to finish, while keeping the smoke cooler lon- and Bi-Lo, and other national and regional distributors. ger.” “Mistic is setting the standard for quality, value and taste within the “The Super Lanceros are manufactured in electronic cigarette and vaping industry,” said John Wiesehan, Jr., CEO of limited quantities at The Quesada Factory Mistic. “Our retail partners chose Mistic to develop Haus because of our [formerly known as MATASA] in Licey, Domin- reputation for quality and increasing demand among adult smokers who ican Republic, just outside of Santiago. Only want to create their own vaping experiences as they transition away from one team of rollers is tasked with making this traditional cigarettes.” coveted size,” adds William Sherman, execu- Offered in blue or black with stainless steel fittings and a light activat- tive vice president of Nat Sherman. “Small ed on/off control, Haus features a streamlined, lightweight design and a ring gauges are among the hardest vitolas to high-powered lithium ion battery at a suggested retail price of $24.99. make, as it’s very easy to under-fill or over- The Haus Personal Vaporizer is a complete starter system, equipped with fill. We have one expert team in the factory a specially designed unit and tank with a soft handle for added comfort, a that is carefully bunching and rolling these ci- lithium ion battery, a USB charger, and a lanyard for easy carrying access. gars to ensure they’ll draw “We listened to what our retailers wanted and developed an individu- and burn perfectly.” al personal vaping unit to be rolled out nationally across multiple store The Super Lancero channels,” says Wiesehan. “Haus also provides the added convenience Timeless Collection for consumers of being available nationally from a trusted brand of vapor comes packed in boxes products and accessories.” of 10 cigars with an MSRP Allowing vapers the flexibility to choose from a variety of taste profiles, of $110 per box, the 1930 five distinct blends will be available to use with the Haus Personal Vapor- Super Lancero is $150 izer: American Blend, Cool Ice, Washington Red, and Ocean Mist. per box, and the Sterling Retailing at $7.99, Mistic’s e-liquid, like all of its other electronic cigarette Super Lancero is $180 products, is made and bottled in the United States. Mistic, www.mistic- per box. Nat Sherman, ecigs.com natsherman.com

90 TOBACCO BUSINESS MARCH/APRIL 2014 PRODUCT PROFILE MARCH/APRIL 2014

A Powerful Roll

Republic Tobacco has launched the PoweRoll Electric King Size Cigarette Ma- chine by TOP-O-Matic, which combines one-touch automatic operation with the quality and durability of the popular TOP-O-Matic line. The PoweRoll ma- chine comes with tamper and cleaning tools, instructions, and a one-year, one-time limited warranty, all packaged in its own carrying case. With the PoweRoll, cigarettes are made in seconds with three steps: fill the tobacco chamber, place a tube on the nozzle, and push the start button. The PoweRoll King Size is individually boxed and sold in cases of four units that display in a small footprint on a counter or shelf. Republic Republic Clears Tobacco, 800-288-8888 Things Up Republic Tobacco’s new Kwik Kleer Lens Wipes are individually-packaged wipes WOW with a clean, fresh scent. The moistened, non-abrasive sheets clean eyeglasses, E-Cigarette sunglasses, cell phone screens, com- puter screens and more. Ten individual Vapor4Life recently in- foil-sealed packages are packed per box troduced its WOW Vapor for 99 cents each, or a three-tier counter King disposable e-ciga- merchandiser ships ready to sell with rettes at the Tobacco Plus 48 boxes per display. Republic Tobacco, Convenience Expo in Las 800-288-8888 Vegas. After four years in development and more than 200 hours of taste testing, the Vapor4Life company has released a disposable e-cig available in two flavors: Tobacco and Menthol. Both flavors are available in Regular (2.6 percent nicotine) and Strong (3.6 percent). “For years I’ve been trying to find the perfect solution for a disposable e-cig. I have tried over 500 brands of disposables,” says Steve Milin, Vapor- 4Life founder and CEO. “Nothing cut it. My disposables deliver a true smok- ing experience: perfect tobacco flavor, a realistic throat hit and huge vapor.” Vapor4Life, www.wowvapor.com

92 TOBACCO BUSINESS MARCH/APRIL 2014 PRODUCT PROFILE MARCH/APRIL 2014

Announcing Voodoo Hookah Accessories

Kretek International announced several new additions to its lineup of Voodoo Hookah products. Join- ing Voodoo traditional hookahs and new e-hookahs are a full line of 20 shisha flavors with matching flavors in Voodoo Steam Stones. The 20 exotic flavors are divided into four pre-packed collections of tropical and blended fruit, berries, citrus and coconut. Flavors include Guava Sunrise, Chill Berry and Wet Kiss Mango. Each flavor combo is created A Stand-Up Idea to deliver the perfect balance of top-quality hookah tobacco and natural ingredients for hookah lovers. The new XistiX’s Cigar Clip and Voodoo Steam Stones are 100 percent natural mineral complexes selected for flavor Stand accessory allows users and moisture absorption. Steam stones produce no smoke and contain no nicotine, but to clip the cigar near the band and continue normal smoking deliver all the exotic flavor of shisha. methods, as well as stand the “Our goal with Voodoo Shisha and Steam Stones is to take this traditional form of clip up on a flat surface. The tobacco enjoyment forward to current adult tobacco users who are looking for relax- clip and stand has the capability ation and an escape from the increasing regulation of the cigarette marketplace,” says of grasping anything from a Kretek Marketing Director Rick Chandler. “Our Voodoo now encompasses a wide range cigarette-sized object all the of electronic, hookah, and smoke-free tobacco products and accessories.” The Voodoo way up to an 80-ring gauge brand also includes hookah charcoal, hookah torch and the fast-growing Voodoo cigar. The stand also allows disposable e-hookah in eight flavors with 800 puffs. Voodoo offers products created to cigar smokers to “go beyond ensure the most enjoyable smoking experience possible. Voodoo’s goal is to provide the band” and smoke cigars all the way to the nub. XistiX, www. the best products and accessories at the very best prices. Kretek International, www. voodoohookah.com, 800-358-8100, [email protected] xistixcigaraccessories.comPRODUCT PROFILE JANUARY/FEBRUARY 2014

Zooming Along Zooming Along Vector Group announced the launch of indirect subsidiary Zoom E-Cigs’ ZOOM Vector Group recently announced that its indirect subsidiary, Zoom E-Cigs will electronic cigarette brand nationwide in January. ZOOM, a superior disposable, launch its ZOOM electronic cigarette brand nationwide in January of 2014. Zoom’s non-rechargeable line, is the company’s first e-cigarette product. Sales and distri- first product, a superior disposable, non-rechargeable line, will be the company’s bution of the brand is managed by Liggett Vector Brands. ZOOM premium e-cigs first e-cigarette. Sales and distribution of the brand will be managed by Liggett will feature tobacco and menthol flavors in bold and smooth styles. This product is Vector Brands. ZOOM premium e-cigs will feature tobacco and menthol flavors not available nationwide in single and convenient three-pack formats and consists in bold and smooth styles. Products will initially be available nationwide in single of low-weight 100mm devices, a length that is familiar to smokers of conventional and convenient three-pack formats and feature low weight 100mm products, a cigarettes. length that is familiar to smokers of conventional cigarettes. Developed in combination with XEO Int., a Hannover, Germany-based e-ciga- Developed in combination with XEO Int., a Hannover, Germany-based e-ciga- rette design and engineering company, ZOOM disposable e-cigs feature an ex- rette design and engineering company, ZOOM disposable e-cigs feature an ex- clusive, 130mAh battery that delivers at least 300 TRU-PUFFS, the equivalent of clusive, 130mAh battery that delivers at least 300 TRU-PUFFS, the equivalent of approximately two packs of conventional cigarettes. ZOOM products use a propri- approximately two packs of conventional cigarettes. ZOOM products use a pro- etary U.S.-made e-liquid which produces a premium quality vapor stream with the prietary U.S.-made e-liquid which produces a premium quality vapor stream with consistent delivery of traditional tobacco and menthol flavors preferred by smok- the consistent delivery of traditional tobacco and menthol flavors preferred by ers. ZOOM features a soft-tip filter and proprietary packaging to complete the best- smokers. ZOOM features a soft-tip filter and proprietary packaging to complete in-class e-cigarette experience. Vector Group, www.zoomecigs.com the best-in-class e-cigarette experience. Vector Group, www.zoomecigs.com

94 TOBACCOaDv BUSINESSERTIsER INdEx MARCH/APRIL 2014

Altria Group Distribution Company 13 Nat Sherman 31 BIC 73 National Tobacco 75 Cheyenne 49 Phillips & King International, Inc. 95 Cigar Rights of America 74 Privateer 87 D&R Tobacco 27, 57, 93 Puff E-Cig 43 Drew Estate 33 Rouseco, Inc. 9, 21, 59, 83 East West Trading 51 Royal Gold 67 FasTraxPOS 7 RSB Tobacco 5 Gold Strike 25 S&E Distributor Inc. 98-CV3 Global Trading Inc. 29, 85 S&M 15 Inter-Continental Trading USA, Inc CV4 STG/Lane Limited 17, 39, 63 J.C. Newman 23, 61 SX Brands 77 JM Tobacco 19 Tobacco Outlet Products 91 Kretek International, Inc. CV2-3, 35, 71 Tobacco Plus Convenience Expo 79 Liggett Vector 47, 55 Tryst 41 Lil’ Brown Smoke Shack 97 U.S. Flue 53, 81 M&R Holdings 10-11 VAM Tobacco 69 Missouri Meerschaum Co. 37 Vapor World Expo 89 Music City Marketing, Inc. 65

94 TOBACCO BUSINESS JANUARY/FEBRUARY 2014