CWNews

HEARD IN THE HUMIDOR

Los Angeles - "We're going to meet this head on. What's happening here, this is socialism. This is communism."

That's John Barton, manager of the Up in Smoke tobacco shop in Dallas at a rally against a soon-to-be-proposed extension of the city's smoking ban to bars and potentially city parks, smokeshops, private clubs or other facilities.

Dallas-area retailers who might be affected are gathering strength and the Dallas Morning News reported on their meeting at the Havana Social Club on August 5. "It's a small group of people trying to have their utopia at our expense," said Barton.

Smokeshop owners were joined by the Amusement & Music Operators of Texas, the Americans for Prosperity Foundation and the Greater Dallas Bar & Tavern Coalition in opposing the prospective ordinance. Amusement & Music Operators spokeswoman Kathy Grant said the City Council should protect adult rights to smoke in "adult venues without children present.

"The free market will generate nonsmoking bars if there's a demand. It's unfortunate that the government is trying to take away individual freedom. What are they going to do next? Ban alcohol?"

There actually isn't a proposal for a new ordinance to expand the city's smoking ban past the current limit of restaurants and workplaces. But Mayor Tom Leppert, Mayor Pro Tem Elba Garcia and others are in favor of such an extension, based on the argument that people should not be exposed to secondhand smoke.

According to the Morning News story, City Council member Pauline Medrano - head of the applicable committee - "says she plans to conduct [a hearing] before her committee in late August or early September."

>> When British giant Imperial Tobacco purchased San Leandro, California-based Lignum-2 earlier this year, its primary interest was in the company's cigarette and roll-your-own businesses, especially its Rave brand.

As the Lignum-2 acquisition is absorbed into the Imperial Tobacco infrastructure, that also means that Lignum-2's primary cigar brand, Troya, will be distributed in the future by Altadis U.S.A.

Troya is another ancient Cuban-heritage brand, made in Cuba more or less continuously since its introduction in 1932, and more popular in the U.S. these days than among Havanophiles. It's a minor, machine-made brand for Habanos, S.A., produced primarily for developing markets as a lower-priced, introductory cigar.

The four current styles of the Lignum-2-version of the brand available to American smokers include Troya, made in the Dominican Republic and introduced with considerable fanfare as a top-quality brand in 1985; Troya X-Tra, a stronger blend introduced in 2004 and made in Nicaragua, Troya Clasico, which debuted in 2007 and has been well received since it is made by Pepin Garcia at the Tabacalera Cubana in Esteli, Nicaragua and Troya Reserva Maduro, just introduced at the 2008 IPCPR trade show.

Altadis U.S.A. vice president Janelle Rosenfeld confirmed that it will be taking over distribution of the brand, but that the manufacturing arrangements will remain as they are at present. It is the first brand in the Altadis U.S.A. portfolio that is made by Garcia.

>> Cigarette giant Altria Corporation, which is now the domestic-sales side of Philip Morris, purchased machine-made cigar giant John Middleton, Inc. last year for $2.9 billion on the assumption that it could sell a lot more of its iconic Black & Mild brand. So far, it looks like Altria was right.

In the first quarter of 2008, Middleton sales were up by 8.2 percent, compared to the first quarter of 2007, in the total number of cigars shipped, totaling 312 million. Excluding tobacco taxes, Middleton products - principally Black & Mild, Gold & Mild, Prince Albert and Cherry Blend - had $76 million in revenues and generated $41 million in operating income (!), a profit margin of 54 percent.

But the full impact of the integration of Middleton into the Altria distribution and sales network was not felt until the second quarter, when the same folks who place Marlboro cigarettes for sale began working on the cigar side as well.

Thus, it was no surprise that Altria's second-quarter results showed that Middleton's revenues jumped to $85 for the quarter, operating income for the three months leapt to $50 million and shipment volumes increased to 355 million in the quarter, up 11.0 percent over the same quarter in 2007.

Altria also noted that the Black & Mild market share at retail rose 2.6 percentage points - a big move in a single quarter - "to 27.8% of the machine-made large cigar segment." Other reports place Middleton second only to Swisher International in retail share in the machine-made category. Some financial analysts who study the tobacco field have suggested that Swisher is an attractive acquisition candidate for another big tobacco concern, perhaps Reynolds American.

>> Short fillers: The nation's no. 2 tobacco trade show has changed hands once again and will move from its Las Vegas home to New Orleans in 2009. Kretek International, based in Moorpark, California and a major player in the clove cigarette business and also the owner of the giant cigar, pipe and accessory distribution firm Phillips & King, announced on Wednesday that it purchased the assets of North Carolina-based Tobacco Outlet Business L.L.C. That company owns and operates Tobacco Outlet Business Magazine and the Tobacco Plus Conference & Exposition, which will now be part of the Kretek empire . . . find our latest tasting review, of new cigars that were the stars of the International Premium Cigar & Pipe Retailers Association convention & trade show, in our News & Views archives for August 8.
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Heard in the Humidor is a publication of Perelman, Pioneer & Company. Copyright 2008; All rights reserved.