Bases Loaded Beyond E-Cigs and Vapor Devices, New Tobacco Technologies Are Stepping up to by Renée Covino the Plate with Power
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JTI Debuts a New Design for Wave MAY/JUNE 2015 VOLUME 18 n NUMBER 3 The Tobacco Innovation Game: BASES LOADED BEYOND e-cigs and vapor devices, NEW tobacco technologies are STEPPING UP to By Renée Covino the plate with POWER. Will reduced-harm products and OTHER innovations change up the COMPETITIVE FIELD? 2015 Vapor Expo Preview The Dark Side of Taxation Uhle Tobacco Company’s Journey PUBLISHER’S LETTER BY ED O’CONNOR Father’s Day 2015… Now 115 Years Old Father’s Day turned 100 years old on June 20, 2010. Sono- So we’ve done the next best thing. Enjoy “Unforbidden ra Smart Dodd, often referred to as the “Mother of Father’s Fruit,” Renee Covino’s article on Cuban cigars appearing in Day,” was 16 years old when her mother died in 1898, the March/April issue of TBI (p. 30) with comments by Dick leaving her father, William Jackson Smart, to raise Sonora Dimeola, a premium cigar expert and long-time friend of and her five younger brothers on a remote farm in eastern the cigar industry, Victor Vitale, Marshall Gray and other ci- Washington. In 1909, Sonora heard a Mother’s Day church gar aficionados. Don’t have a hard copy? Your cigar article sermon inspiring her to propose that fathers receive equal is available to you on tobonline.com. recognition, lending credence to the old saying, “Behind For those of us excited about the dynamic growth of the every good man there’s a good woman.” electronic nicotine (c-cig and VTM) markets, be sure to With the assistance of her pastor, the Spokane, Wash- check out this issue’s Electric Alley column (p. 42) along ington YMCA and the Ministerial Alliance, Sonora’s idea with our profile of the innovative vapor company PAX Labs became reality. The first Father’s Day was celebrated in (p. 66). Finally, don’t miss Michael Gelfand’s Trench Market- 1910. Dodd suggested her father’s birthday, June 5, be es- ing column on Milwaukee’s renowned Uhle Tobacco Com- tablished as the day to honor all fathers, but to allow more pany (p. 76). time to prepare the Alliance decided on the third Sunday Enjoy—and men, hug the ladies in thanks for originating in June. your special day! We dedicate this issue to fathers and to the women who Best to you and good selling, made the day possible. No special occasion would be complete without a cel- ebratory cigar. And while passing out cigars to all of you is what we’d really like to do, logistically it’s just not possible. 4 TOBACCO BUSINESS INTERNATIONAL MAY/JUNE 2015 INSIDE THIS ISSUE CIGAR SENSE Cigar Sense: Banking on Cigars 30 The decorated bank building from the 1800s might be the pull that gets so many passersby to walk into James and Sons Tobacconists, but it’s the invest- ment in excellent stogie sales practice that yields the high customer return. FEATURES Cover Story: The Tobacco Innovation Game: Bases Loaded 46 Beyond e-cigs and vapor devices, new tobacco technologies are stepping up to the plate with power. Will reduced-harm products and other innovations change up the competitive field? Electric Alley: The Hasty Taxman Cometh 42 Minnesota and North Carolina already tax e-cigs, and 14 other states have introduced bills to follow suit, but lawmakers are being accused of not fully grasping the industry or the true effects of their proposals. The Dark Side of Tax Hikes 56 Smuggling, theft and thriving illicit trade are the side effects of state tax hikes. Are You Ready for Vapor Expo International? 62 Opening on June 17, this second annual two-day event will feature more than 200 vapor product suppliers and exciting educational seminars. Are You Ready for Vapor Expo International? page 62 PAX Labs: Dedicated to Innovation 66 How a California company plans to revolutionize the vaping category. Get Your Vape Game On 72 Are you ready to get your share of the VTM market? Trench Marketing: Best of Both Worlds 76 Milwaukee’s venerated Uhle Tobacco Company shows that old-school values and modern technology can thrive together. Publisher’s Letter 4 Father’s Day 2015…Now 115 Years Old News & Trends 12 PAX Labs: Dedicated to Innovation, page 66 Federal Tax Hike Possible, Vaping Bans Proposed and More TMA Report 20 A Roundup of Industry News Category Manager: Vaping Devices 26 E-Cig Report Sheds Light on Sales Trends Pipe in Hand 40 The Power of Pipe Club Camaraderie Op-Ed: Why an Excise Tax on Cigarettes Won’t Work 74 Fewer legal sales won’t necessarily mean lower smoking rates. Product Profile 86 A Guide to New and Popular Products Trench Marketing: Best of Both Worlds, page 76 NEWS & TRENDS MAY/JUNE 2015 Davidoff to Debut Tampa Flagship Shop The 5,000-square-foot store will be the company’s largest in the world. Davidoff of Geneva USA plans to store filled with premium cigar retail Tampa, with its rich cigar history, is cement its commitment to the Tampa space, multiple lounges both indoor a fitting home for the venture, adds Bay area with a new “Davidoff of Ge- and out, private lockers, and an ele- Jeff Borysiewicz, president of Coro- neva—since 1911” store in late 2015. gant full-service bar serving premium na Cigar Company. “We’re thrilled to Situated in the MetWest International alcoholic beverages. expand our retail operations and to Retail Village, the 5,000-square-foot “We are delighted to open a new serve cigar enthusiasts in the Cigar store will be the largest Davidoff flag- ‘Davidoff of Geneva—since 1911’ store City of Tampa,” he asserts. “We look ship store in the world—and the com- in our home market,” says Jim Young, forward to creating the ultimate cigar pany’s first licensed flagship store out- president of Davidoff of Geneva North experience in a community with such side of Las Vegas, Nevada. Davidoff of America. “We are particularly excited a long history of cigar manufacturing Geneva USA will open the new loca- to do this in partnership with Jeff and and rich cigar culture. It’s an honor to tion in partnership with Jeff and Tanya Tanya, who have been outstanding be partnering with Oettinger Davidoff, Borysiewicz, successful owners of Or- Davidoff partners for quite some time. the global leader in premium cigars lando-based Corona Cigar Company. They know how to provide consumers and luxury cigar stores, and it is ex- To create a destination in the Cigar with a premium retail experience, they citing to be building upon the legacy City, “Davidoff of Geneva—since 1911” know our entire product portfolio, and that Zino Davidoff started over 100 will feature a completely humidified they know our company.” years ago.” 12 TOBACCO BUSINESS INTERNATIONAL MAY/JUNE 2015 NEWS & TRENDS MAY/JUNE 2015 HIGHLIGHTS Mistic Returns to the Raceway Washington Company plans to continue racing sponsorships Legislators Tar- it began in 2014. get E-Cigarettes Value-priced electronic cigarette maker Mistic has decided to continue to serve A new bill would give Washing- as co-primary sponsor for the No. 11 car piloted by KVSH Racing’s Sebastien ton the nation’s toughest laws Bourdais for the 2015 Verizon IndyCar Series. The company will also retain its as- regulating e-cigarettes. sociate sponsorship of the SH Racing Rallycross No. 7 Ford Fiesta ST car for the 2015 Red Bull Global Rallycross (GRC) season. Both sponsorships began in 2014. Proposed regulation in Washington state “While traditional tobacco historically has dominated auto racing in the past, we would require retailers to have a special have since become a prominent sponsor within the IndyCar and GRC circuits as license to sell e-cigarettes, manufacturers e-cigs and vapor products continue to replace smoking,” says John Wiesehan to list all ingredients in e-juices, would ban Jr., CEO of Mistic. “These platforms have enabled us to build awareness for non-tobacco-flavored vaping products our Mistic and HAUS brands among adult smokers as significant alternatives to and would tax e-cigarettes at the same traditional tobacco.” rate as other tobacco products (OTPs). At IndyCar and GRC racetracks during 2015, adult smokers will be able to As a result, consumers would pay a 95 visit the Mistic/HAUS kiosk and engage with members of the Mistic Pit Crew to percent tax on the items compared to the learn more about the company’s products. Fans will also have the opportunity standard sales tax they now pay for e-cig- to ride in virtual race simulators and compete against driver Sebastien Bourdais arettes and e-juices. in mock competitions. “Every time we raised the price of ciga- Last year Bourdais finished 10th in the championship with three poles, a win rettes we reduced youth smoking,” said at the Honda Indy Grand Prix of Toronto, and a seventh place finish at the India- the bill’s sponsor, U.S. Representative napolis 500. He is a four-time series champion with 32 career wins, 49 podiums Gerry Pollet (D-Seattle), who views vaping and 33 poles. as an effort by the tobacco industry to cre- “We are thrilled to continue our relationship with Mistic for the 2015 IndyCar ate a new generation of nicotine addicts. and GRC series season,” says James “Sulli” Sullivan, KVSH Racing partner and “It’s not safe, it’s highly addictive and you principle at SH Racing Rallycross. “Our teams are coming off solid seasons and don’t know what else is in it,” he charges. are poised to continue their success this year, which promises to be very exciting His proposal spurred hundreds of va- with IndyCar’s newly designed aero kits and a host of new venues at GRC races.” pers and e-cigarette storeowners to testify Featuring racing at a combination of superspeedways, short ovals, road cours- against the bill during a public hearing on es and temporary street circuits, the Verizon IndyCar Series offers its international March 16 in Olympia, Washington.