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SMOKE Magazine
Dec.99/
Jan.00

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RETAILER & TOBACCO INDUSTRY NEWS

California Voters to Again Decide Fate of Tobacco Tax

SACRAMENTO, CA - Retail tobacco shops fighting the legality of California’s Proposition 10, a massive tax hike narrowly passed last November by state voters, have succeeded in returning the issue to voters next March.

California’s Secretary of State Bill Jones disclosed on October 27 that sufficient signatures had been received for a measure to repeal Proposition 10 to qualify for the March 7, 2000 ballot. A nailbiting-ending, the announcement came one day after elections officials initially said the measure had failed to meet the ballot deadline. An estimation error was cited, avoiding the need to complete a more detailed signature count.

The repeal had been actively sought by the California Association of Retail Tobacconists, as well as similar but separate efforts of libertarian party member and Cigarettes Cheaper! chain store owner Ned Roscoe.

Proposition 10, which was spearheaded by actor-director Rob Reiner and raised taxes on cigarettes by 50 cents a pack to pay for early childhood development programs, passed last November by a margin of just under 80,000 votes. Taxes on other tobacco products jumped from 26.17 percent before passage to 66.5 percent currently.

The ballot initiative is officially called Proposition 28; a "yes" vote is a vote to repeal.


Specialty Tobacco Council Leads Wholesale Assualt on Sales to Minors

WINSTON-SALEM, NC - The five importer members of The Specialty Tobacco Council (STC) have independently vowed to cut off future business relationships with all retailers who sell foreign or domestic tobacco products to customers under the age of 18.

"This unusual demonstration of trade association unity serves warning that our importer members will not tolerate sales of tobacco products to minors," said STC executive director Garry Avram.

The resolution calls for STC importers to sever business relations with retailers known to violate underage tobacco laws and identify the offending retailers to the council. By alerting all remaining STC members of age-violating retailers, the council intends to shut out offending retail outlets from access to wholesale purchases from any of its prominent members.

Avram says that procedures have been established for offending retailers to regain satisfactory standing with the STC. "If the retailer submits written assurances that it has implemented a training program, or revised personnel policies for its employees to the STC member originally reporting the infraction to the Council," explains Avram, "I will notify our other importer members so they can make their own decision if they wish to resume retail sales to that outlet."

The resolution was adopted following several recent reports from around the U.S. of continued underage retail sales infractions involving imported as well as domestic products.

The Council consists of two foreign cigarette manufacturers and five importers of cigarettes and other tobacco products from many countries throughout the world.


Fader’s and Aristoff Cigars Team up as NFL Team Sponsor
Combination Retail, Manufacturer Promo a Hit


BALTIMORE, MD - This Fall saw Fader’s, a nationally-known tobacconist, join Aristoff Cigars to sponsor the NFL’s Baltimore Ravens. Formerly A. Fader & Sons, the full-service retailer is distinguished by its continuous operation in the Baltimore area since 1891. The campaign is an intensive multi-media promotional effort.

The retailer keeps football fever and store traffic high with in-store appearances by players, giveaways of home-game tickets, and hospitality tent passes. In turn, Fader’s and Aristoff have exclusive use of the Ravens’ name, and signage is displayed prominently in Fader’s stores.

Two other high-profile participants are influential in the program’s success. Local radio station WJFK broadcasts all games over the Baltimore Ravens Radio Network. Commercials and promotional announcements during these programs tout the store and Aristoff’s exclusive status as "Official Cigar" of the Baltimore Ravens Radio Network.

Ruth’s Chris Steakhouse, the popular national chain restaurant, is the second participant. Fader’s and Aristoff sponsor "Monday Night Madness," a series of 21 live broadcasts from the steakhouse.

Prior to home games, the two cigar companies host a tent in the prestigious hospitality area. The steakhouse caters the food, and the first hundred guests receive a free Aristoff Black cigar. On the Ravens Speaking Tour, Fader’s personnel demonstrate cigarmanship and hand out samples of their partner’s superpremium cigars. "The day after these events," reports Mike Goeller, president of Fader’s, "these fans swamp our seven area stores to buy Aristoff cigars." "The cigar boom is over," Goeller says. "The only way manufacturers and retailers can maintain business levels in today’s shrinking market is to gain market share. This requires exceeding customers’ expectations of customer service and superior products." Goeller says this is why he chose Aristoff as a strategic partner in the program. "They understand their success depends on my success. Aristoff has the entrepreneurial insight to appreciate this Ravens campaign." Goeller calls them, one of the easiest companies in the industry to work with. "Their products are excellent, especially Aristoff Black." He cites Aristoff’s superpremium quality at competitive prices, attentive service, selective distribution, and keen advertising as contributing to his success, and he ratifies their claim of being "The Tobacconists’ Brand."

"What’s the campaign’s bottom line?" Goeller asks. "Fader’s and Aristoff both sell more cigars. More importantly, we increase market share by adding new customers. Together, we exceed our customers’ expectations."


States Fuel war on Gray-Market Cigarettes

WASHINGTON, DC - States continue to initiate laws outlawing gray-market cigarettes, citing concern over the wording of a federal ban slated to take effect January 1st. Although it prevents distributors from diverting exported cigarettes back into the U.S., manufacturers are exempted.

The law doesn’t specify which manufacturers can import the gray-market cargoes, according to Jackie Cohen, vice president of government and industry affairs for the American Wholesale Marketers Association. She fears that the vagaries in the law could be interpreted as exempting all manufacturers from importing the cargoes, not just the original cigarette maker.

The association is also concerned that distributors can sell any gray-market cigarettes still in their warehouses on January 1st. Cohen claims the federal government has not allocated sufficient funds to enforce the new law.

Gray-market brands provide a way for smaller cigarette retailers to compete on a level playing field, says Bob Porter, a Superior, Minnesota-based jobber who distributes the controversial cigarettes. "They can’t get the same price breaks as big operators. It’s a good deal for them," Porter said.

The dispute also could involve money the public stands to gain or lose through the $206 billion tobacco settlement, said Phillip Morris spokesman Brendan McCormick, because payments are based on domestic cigarette sales and exclude products destined for export.


California Delays Expanded Cigar Box Health Warnings

SACRAMENTO, CA - Next year, boxes of cigars sold in California will be required to carry warning labels similar to those found on cigarettes thanks to legislation signed by Governor Gray Davis.

San Francisco Assemblywoman Carole Migden, who wrote the bill, said she was prompted by the fact that cigar smoking has recently increased - especially among young men - and by her belief that consumers do not realize the risks associated with cigar use.

"We vilify cigarettes but exalt cigars," she said. "Cigar smoking has been on the rise because of our paltry health warnings for cigars. This new lay will send the message to teenagers and other consumers that cigars are not a safe alternative to cigarettes."

The Cigar Association of America in Washington, D.C., had argued that a new label was unnecessary because the state already requires a warning label on cigar boxes in accordance with Proposition 65, the Safe Drinking Water and Toxic Enforcement Act voters passed in 1986. Those labels state that cigars contain products known to cause cancer or reproductive harm.

Migden, however, countered that her bill would require an expanded label that would be more specific about the risks posed by cigars. She has amended her original stance, which was to have labels put on each cigar. She also agreed to postpone the start date of the legislation until September 1, 2000, after cigar makers said they needed time to use up current unlabeled supplies.


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