SMOKESHOP 02/07 - Retail News

February,
2007

TRENDS AND TRENDSETTERS IN TOBACCO RETAILING

Grand Havana Enterprises Going Private

Los Angeles — Grand Havana Enterprises, Inc. announced that the company is going private, and has entered into a merger agreement with Grand Havana Acquisition Corp. Stanley Shuster, the chairman, president and chief executive officer of Grand Havana Enterprises, Inc., owns 88% of the issued and outstanding common stock of Grand Havana Acquisition Corp.

The company’s board of directors, and stockholders owning a majority of the company’s common stock, have approved the merger. It is anticipated that the merger will close on or about February 21, 2007.

Grand Havana Enterprises, Inc. currently owns and operates two Grand Havana Room private member clubs in Beverly Hills, Calif. and New York, N.Y., and one Grand Havana House of Cigars retail store located in Beverly Hills, Calif. Grand Havana’s primary business is operating its existing cigar clubs and retail store.

In August 2006, the company announced that it entered into an agreement granting a license to a third-party entity to establish and operate a Grand Havana Room in Moscow, Russia. The agreement provided for an initial license fee to be paid to the company as well as ongoing royalty payments based on sales. The agreement also provides for certain reciprocal rights between the Moscow club and the New York and Beverly Hills clubs.

The company reported revenues of $2.16 million for the period ending June 25, 2006 — the last publically released earnings report. This compared to $2.07 million for the fiscal quarter ending June 26, 2005, an increase of approximately 4.6%. The company had a net loss of $2,017 during the period ending June 25, 2006, compared to a net loss of $7,403 in the period ending June 26, 2005, a decrease in net loss of $5,386 or approximately 72.8%.

NEW & NOTABLE

Glorioso Cigar Club opened in early November on U.S. Route 30 in a new shopping development in Merrillville, Ind. The owner is Tom Rich of Hammond, formerly a chemist in East Chicago for 10 years and later an entrepreneur who started a business that sold industrial fasteners to mills and machine shops.

Hammond, who says he’s enjoyed cigars since finishing college, decided to open the cigar shop since “there’s nowhere people can go and smoke cigars any more,” adding he knows of only two restaurants in the region that welcome cigar smokers.

The shop features a 300-square-foot humidor stocked solely with handmade, premium cigars ranging from $1 to $25 each, leather chairs, large-screen televisions playing sports and other amenities including free coffee and soft drinks. Hammond also brings in jazz and blues musicians from several Chicago clubs on weekends and hopes to have a baby grand piano, as well as WiFi access, later this month. He also plans to install a ventilation system to keep the 1,500-square-foot club smoke-free. His clientele includes doctors, lawyers, and businessmen from throughout the region, as well as several women.

Tobacconist Jim Holycross, who’s responsible for stocking the humidor, said he has both tobacco farmers and cigar smokers in his family. He’s been a regular cigar smoker since he was in his late teens.

Jeff Borysiewicz, founder of Corona Cigar Co. with two retail locations in Orlando and Heathrow, Fla., is moving ahead with a third retail location in the highly visible Premiere Trade Plaza in downtown Orlando.

Orlando architects Cuhaci & Peterson are designing the 5,500-square-foot store. Borysiewicz plans to spend $750,000 on the interior, says Jed Downs, president of Cuhaci & Peterson. The two existing Corona Cigar stores feature hand-carved wood furniture and fixtures from the Caribbean and South America and are entirely humidified.

BITS & PIECES

Maine’s Gov. John Baldacci unveiled a $6.4 billion budget package that would raise the state tax on a pack of cigarettes by $1, producing $66 million a year and bringing the tax to $3 — the nation’s highest.

The grand prize winner in Santa Fe Natural Tobacco Co.’s annual Natural American Spirit “Retailer of the Year” display/promotion contest was the Printer’s Row Wine Shop in Chicago, Ill., recipient of $5,000. Other winners included Instant Karma, Ashville, N.C. ($2,500); Trader’s Outlet, Flagstaff, Ariz. ($2,500); Smoker Friendly #401, West Valley City, Utah ($1,500); Trenton Smoke Shop, Las Vegas ($1,500); and Midtown Pipe & Tobacco, Eugene, Ore. ($1,000).

A La Plata County, Colo. judge has ruled that revenues, and not “fancy humidors installed in upscale cigar bars,” should determine which businesses are exempt from Colorado’s new statewide smoking ban. The Colorado Clean Indoor Air Act, approved by the legislature last year, provided an exception for cigar bars. To qualify, a business needs to prove that at least 5 percent, or $50,000, of its revenue came from the sale of tobacco products “and the rental of on-site humidors” during the year ending Dec. 31, 2005.

SMOKESHOP - February, 2007