Cigarette manufacturing profit margins are just about to get squeezed again in the developing Fire-safe cigarette debacle.
To start; fire-safe paper - aka LIP paper - costs 6-9 times as much as regular cigarette paper. This means in the range of $60 - $90 per bobbin. This assumes you can find a source.
Next comes the testing required to demonstrate compliance with regulations - Laboratory testing can run $8,000 and if your product doesn’t pass - the exercise needs to be repeated.
Last, and this one will become a major issue for the smaller independents, is annual registration and compliance fees levied by each State.
These fees vary considerably. Some are levied by brand others by SKU and are $250 - $3,000 per brand / SKU - depending on the State. For now this cost is around $500,000 if you have 4-5 brands and register them in those states requiring FSC cigarettes.
You can expect these fees to increase and become more consistent between States. This will increase to several million dollars a year in registration fees.
The fees will increase the fixed cost of compliance and registration. Operating margins will be hit and for smaller operations this may be beyond their means - ultimately contributing to their demise or consolidation.
Fair? What do you think? What about competition?
7 comments ↓
As long as it costs all competitors the same or as long as the largest of the large can continue to buy their bobbins at the least cost, given their volumes, they will achieve more and more competitive advantages by playing the health card to make it more and more expensive for others to play the competitive game. No surprise in any of this it has been going on for some time.
Vector Group Ltd. subsidiary, Liggett Group LLC, revealed plans to voluntarily convert the manufacturing of all its domestic cigarette brands to comply with state cigarette fire safety standards beginning January 2009, the company stated.
How do you like these new FSC cigarettes?
I hate them! Ruins the taste of a cigarette.
Ummm - You sing the blues about costs - Buahahaha - who pays that? The consumer!! Not to mention; as a result of the blues mentioned above you *will* profit from this.
And you didn’t even have the stones to tell us before you did it? Oh - it’s s’posed to help stop forest fires in California.
Oh yeah - did I forget that you now make a more efficient killing machine? Last I looked cigars self extingush because they contain tobacco and nothing else.
I don’t care which government said what - you have the choice of fighting this - you fight for *your* rights - how about your *customer’s* rights?
Dig in your warchest and send your little boyz in DC with lobbying dollars and help us out. It will help both of us ya know!!
Gosh guys - you already kill us for profit - hows about you cough up a few to make a *less dangerous product.
What a scam.
And FWIW since you (and the government) hid the facts -
The Testing (awwww you gotta make sure your product is consistent) - http://firesafecigarettes.org/assets/files/NISTstandard.pdf
The Solution = LIP paper = Sodium silicate =
Kill ‘em faster boyzzzzz = http://www.jtbaker.com/msds/englishhtml/s4982.htm
We consumers are sick of hearing your little whining - its all an excuse to rape our pocketbooks under the guise of the big bad governemnt.
Well, after that vile comment I have a few more sensible words.
First off, it would be my guess that the majority of folks, in the upper level business end, of the Tobacco industry are Republicans. I may be wrong but … well …. the Republicans are all for pushing everything down to the state level.
Being big business, and assuming said political affiliations, you got what you wanted. If it were a Democratic administration this would be administered amd managed by the federal governemtn. Fees, methods, materials, etc, would be standardized.
I need to partially retract my comments about chemicals (Sodium Silicate) as I discussed the matter with Philip Morris who achieves the self extinguishing with multiple layers of paper. They had no answer why nearly 100% of the customers report a terrible taste. My hypothesis os that there is glue involved = chemilcals = change in taste. I have family who spent their career with the largest supplier of glue to the Tobacco industry. Fact of the matter is = socium silicate or not, we customers are getting more chemicals.
I do feel badly that the industry had this crammed down their throat by an administration who just loved to take liberties at hiding as much as possible from the public. However we could have been informed. As silly as it seems you (the Tobacco industry) have forced us (the retailers) to be the ones to tell your customers what is happening and why. It chaffs me below the belt that the industry couldn’t take the bull and publicize this activity.
All in all I appreciate your feelings and frustrations. Personally, I managed to snag the last carton of Marb Reds that are *not* FSC and am preparing myself to quit smoking.
After all is said and done, the may just be the tool we have been given to stop poisoning ourselves.
If you need a good info security expert you know how to get hold of me.
Oh yeah and I stand by my comments about the industry faltering in providing us long term customers with readily available retail promotions (2 for 1, 3 for 2, special prices on cartons etc. Only the new smokers interested in the flavor du jour are rewarded with special pricing. We cough up the highest price in reqesrd for all our product loyalty. Plus, if we out ourselves on corp mailing lists to get coupons, we are subject to terrible privacy agreements where our personal information can be sold and/or traded and where we will be subject to all marketing and other mail just for that occasional nugget of a worthwhile coupon.
Best to you and have a great holiday season,
CeeMGee
I thinks its all BS, just another law…They love making laws. I found more info on FSC cigarettes here: http://www.fsccigarettes.com
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