Entries Tagged 'Current Issues' ↓

Retailer Tobacco Training Sessions in September Hosted by FDA Followed by Workshop at NACS Show
The Food and Drug Administration (FDA) will host four more live retailer training sessions in September. The remaining sessions will be in Atlanta, Chicago, Dallas and Los Angeles. Topics up for discussion are:

Who is subject to the regulation
What products are regulated
Age verification
Displays and vending machines
Samples, Coupons, Sponsorships and Gifts
Light, low, and mild cigarettes
NACS will host a workshop with officials from the FDA to answer retailer questions regarding compliance with the new law at the NACS Show on Thursday October 7th at 9 a.m. Must be registered for the Show to attend.

Martin Orlowsky Retiring; Former UST CEO Murray Kessler Takes Over
Lorillard announced today that 11-year CEO Martin Orlowsky will be retiring, effective September 13, 2010. Mr. Orlowsky will be succeeded by former UST CEO Murray Kessler – who spent six months at Altria in 2009 assisting the company with the UST integration. Mr. Orlowsky will stay on for two years as a consultant to Lorillard’s Board of Directors.
Mr. Kessler Brings Record of Cost-Cutting and Smokeless Expertise
We spent a lot of time with Mr. Kessler during his tenure at UST. We believe that Mr. Kessler brings a strong track record of cost discipline. One of his last initiatives within UST, before purchase by Altria, was Project Momentum – which significantly boosted margins (which were already high). Additionally, Mr. Kessler clearly brings expertise on how to run a smokeless tobacco business –where Lorillard lacks exposure (and is likely to focus on expanding into this area).
The above info was provided by UBS analyst Nik Modi.

What are your thoughts?
Is this a good move?
Is it good for Lorillard?
Do you agree with Nik Modi’s thoughts?

C-stores bear the brunt of tax hike, see 25%-35% drop in volume.
Interesting article related to recent tax increase in the State of NY.
What are your thoughts?
How can the situation at hand be corrected?

ALBANY, N.Y. — The first six weeks following a cigarette tax-rate increase in New York showed a plunge in sales at convenience stores statewide, mainly because most smokers are finding ways to dodge the tax altogether, according to a report from the New York Association of Convenience Stores.

On July 1, Gov. Paterson and the Legislature increased the cigarette excise tax in New York State from $2.75 a pack to $4.35, the highest state tax rate in the country. As NYACS predicted, the 58% jump unleashed a new wave of cigarette tax evasion, as tens of thousands of additional smokers—shocked at $9 to $12 pack prices—shifted their purchases to tax-free tribal smoke shops, the black market, and border states with lower tax rates, according to NYACS.

Field reports indicate convenience stores have suffered an average drop of 25% to 35% in cigarette packs during July, but that those in closest proximity to tribal outlets and state borders experienced losses of up to 45%. Meanwhile, Indian reservation and border-state “tax havens” are flourishing, with sales up as much as 300% at some outlets, NYACS reported.

“New York State has now increased its cigarette excise 691% in the past 10 years without closing off readily available channels for dodging that tax,” said NYACS president James Calvin. “As a consequence, we’re approaching the point where two-thirds of the cigarettes consumed in New York are purchased without collection of any New York State tax whatsoever.

“Law-abiding stores like ours lose enormous amounts of business, state and local governments lose hundreds of millions in tax revenue, and public health loses because the financial incentive to quit is easily and routinely circumvented. So what did the Governor and Legislature accomplish with this tax hike exactly?”

The upswing in tax evasion heightens the urgency for Gov. Paterson to follow through on the scheduled Sept. 1 start of tax collection on Native American sales of cigarettes to non-Indian customers, currently the busiest avenue of cigarette tax avoidance in New York, costing the state $1.5 billion in lost revenue, according to NYACS.

The state law enacting the tobacco tax increases also set forth a plan to exercise New York’s right to collect these taxes by requiring wholesale distributors, beginning Sept. 1, to certify that they are prepaying the tax before delivering cigarettes, so that the tax is built into the price paid by customers at both Indian and non-Indian stores.

Calvin said anyone who tries to attribute the 25% to 35% drop in sales to smokers quitting “is in La-La Land. Two or three percent, maybe as many as 5% have quit smoking. The rest just quit coming to our stores but continue to smoke cigarettes they found cheaper elsewhere.”

On Aug. 1, the situation got even worse for New York convenience stores, which have traditionally relied on tobacco as a major product category. Dramatic increases in state excises taxes on other tobacco products, such as cigars and smokeless tobacco, took effect, chasing even more of their customers to no-tax or lower-tax venues.

The one-two tax punch threatens to cripple many c-stores—especially mom-and-pop independents and those closest to Indian reservations and the Pennsylvania border, NYACS said.

“It’s not just the loss of sales revenue from cigarettes themselves,” Calvin said. “It’s fewer customers coming through the door to buy cigarettes and other merchandise. For example, many stores have seen a corresponding drop in lottery sales.”

The Post-Standard newspaper reports a pack of Marlboros hovered around $6 or $7 a pack at convenience stores before the tax hike. Now, a pack costs $9.60. A pack of Senecas are $3.50 at the Onondaga Nation Smoke Shop. That’s $2.52 less than the tax alone on the average pack of non-Nation cigarettes. A pack of Marlboro’s costs $6.50 there.

Article from CSP Information Group, Inc. 2010

When PMI made a firm bid to buy Protabaco in Colombia most, including myself, thought the deal would not be turned down by the Colombian Government. We were wrong.

Now PMI (PHILIP MORRIS INTERNATIONAL) is asking Colombian regulators to reconsider their plan to buy Protabaco but it is not at all clear if the government will overturn its decision as PMI already owns what used to be rival Coltabaco – based in Medellin Colombia. Together they control 90%+ of the local Colombian market, which is around 20 billion sticks.

Colombia’s Superintendent of Industry and Commerce rejected PMI’s bid to buy Protabaco for $452 million.

Interestingly, does this open the door for rival BAT to gain entry into the Colombian market? We think it does. Watch this space or provide a comment.

Protabaco manufactures Mustang, Premier and President.

Japan Tobacco Group (JT Group) approves Belgian Electronic Sorting Technologies’
(BEST) Foreign Matter Detection-system.
As the tobacco market is increasingly under pressure, facing rigorous regulations worldwide, leading
manufacturers are searching for the most efficient, premium quality control equipment. While the removal
of FM (Foreign Matter) or NTRM (Non Tobacco Related Materials) is a specific field of expertise, many
techniques and technologies apply. One of them is the ‘optical’ technology.
Market analyse on the sorting technologies
In 2008, the JT Group decided to execute a detailed market analysis on the
latest technologies used in optical FMD-systems. During this process, the JT
Group learned that the technology had greatly evolved since their existing
laser-based FMD equipments were implemented, making it impossible to
further upgrade them with the latest technologies available.
In order to compare the current units with the latest sorting technology,
a long-term evaluation test was required. The main focus was to increase
NTRM removal/sorting efficiency by decreasing error rejection levels, while
looking into the new/enhanced sorting criteria available (such as biological
characteristics of tobacco).
Following this, a series of short-term tests was executed. Further required long-term tests in a real production
environment were organised at the JTI Trier GmbH facility. These evaluations were performed during almost the whole
of 2009.
BEST provided its laser sorters
BEST Sorting provided its latest laser technology for sorting tobacco. Both its HELIUS™ free fall
laser sorter and its TB5™ high capacity belt laser sorter (with a HELIUS hardware processing
platform) were put to the stand for long-term evaluation. Each unit was integrated into the
Primary Tobacco expansion-processing line and evaluated in real production conditions by the
facility team.
The Japan Tobacco International (JTI) Global Engineering team also led several off-line tests
on PMD-conditioned Tobacco-lamina (tobacco blends incl. Virginia, Burley, Oriental and/
or reconditioned tobaccos) in different percentages. The tobacco industry evaluation testprotocol
was used (seeded tests) as JT Group’s specific targets were set forward. Criteria such
as ease of maintenance, operatability (blend management, blend changes), line integration
complexity, user-friendliness, and stability of sorting were considered during the evaluation.
Tests with HELIUS™ free fall laser sorter and the TB5™ belt laser sorter were successful. Both the sorters complied with
the high standards set forward for this evaluation and requested by the JT Group.
Press release April 19th 2010
JT Group chooses BEST for a long-term partnership
The foundation for a long-term partnership was set as the JT Group decided, after careful analyses of the parameters set
forward during the evaluation, to approve BEST’s (laser-based) FMD-systems. As a result, the JT Group has already committed
to purchase multiple BEST sorting machines for various processing plants.
Mr. Tatsuya Shimada, JTI Global Engineering FMD-evaluation project leader, said that he became convinced of the quality
of BEST’s laser sorters after rigorous testing. “Both laser sorters satisfied the criteria we set forward, and the product range
they cover will ensure that the implementation meets the specifics of our production lines.” Furthermore, Mr. Shimada
commented upon BEST’s professionalism: if any observation was made, BEST’s responsiveness and the actions they
undertook to overcome them gave JT Group a good feeling about the kind of commitment BEST is ready to make and of the
resourceful solutions BEST is able to offer. For example, when asked if a local service team could be available for Japan Tobacco
Inc. facilities in Japan, BEST committed to setting up a specific operation and hiring competent service engineers to comply
with the very specifics towards minimal intervention time. BEST also agreed to make local spare parts available. Today, as
we speak, this action has nearly been completed and BEST Japan is scheduled to be operational before the first BEST unit is
supplied to JT’s Manufacturing Technology Center in Japan.
Mr. Steven Van Geel, BEST’s Area Sales Manager for the Tobacco branch, commented: “BEST is looking forward to this
new challenging partnership. We would like to thank the JT Group for this opportunity and the time they have dedicated
to the evaluation”. He further added that BEST is committed to making each of the different sorter integration projects a
success. Furthermore, Mr. Van Geel stated that BEST will be pleased to work with the different JT Group affiliates, while a
close relationship will also need to be maintained (or built-up if not already present) with the different primary processing
equipment integrators with which JT Group has established a relation in terms of equipment-supply. “Together with the
expertise of the JT Group, its integration partner(s) and BEST, we will make sure that any of the (to be) installed sorters will be
performing in the most optimal conditions, striving for a consistent NTRM free product.”
As a leading and pioneering designer and manufacturer, BEST will pursue comprehensive market research and continuous
development to further strengthen its position on the sorting market. Currently, several new developments are being tested.
Once they are ready for commercialization, any of these solutions will have the potential to be implemented within the
existing units, without any major additional cost.
Contact information :
Steven Van Geel
Area Sales Manager
T: +32 (0)16 740 309
steven.vangeel@bestsorting.com

Tens of thousands of people could return to using tobacco cigarettes if the results of a new survey are correct.

The survey asked 150 electronic cigarette smokers what they would do if the electronic cigarette was banned.

Nearly two thirds said they would return to cigarettes.

And over 80% said they would buy the device, if given the chance, on the black market.

The results, if extrapolated to all smokers who have switched to e-cigarette, could see thousands either returning back to the cigarettes or buying unregulated devices on the black market.

For the full results see Electronic Cigarette Ban survey.

Sources close to Filtrona PLC confirmed the closure of Filtrona Venezolana SA – the plant located in Valencia Venezuela specifically to produce carbon dual filters for Cigerrera Bigott SUCS (a wholly owned BAT subsidiary) based in the capital Caracas.

A Filtrona executive visited Brazil to break the news to the regional HQ – Souza Cruz – based in Rio de Janeiro.Their reaction is unknown but it cannot be taken lightly as this leaves Bigott to pick up the pieces left by Filtrona’s withdrawal.

The final straw was most likely Rhodia’s recent sudden closure of their Cellulose Acetate plant also located in Valencia. This meant importing tow from elsewhere and having to deal with foreign exchange requirements within Venezuela, not to mention associated increases in raw material and transportation costs. The plant was probably already operating under marginal profitabilty given the difficult economic situation which has developed in Venezuela.

In these difficult economic times our thoughts and best wishes go out to those affected.

RUYAN AMERICA AND PRIME TIME INTERNATIONAL SIGN AGREEMENT
Ruyan America, Inc., Minneapolis, MN, and Prime Time International Company, Phoenix, AZ, announced that they have executed an “Exclusive Product Development, Brand Marketing and Supply Agreement.” Under the terms of the agreement, Prime Time will become the exclusive North American distributor and marketer of Ruyan America’s digital smoking alternatives and will provide input and direction with respect to Ruyan’s future product development initiatives, to include design, formulation, distribution, branding, labeling and marketing.
Initially, Prime Time will distribute Ruyan’s RAPP® digital, E-mystick®, a battery powered, personal, portable, and disposable vaporizer containing a long-established lobelia based supplement. The product is classified as a non-tobacco smoking alternative. It is not intended to be used for smoking cessation or deterrent. The product is formulated and assembled in the United States, using the finest and purest ingredients available domestically. Prime Time and Ruyan will cooperatively develop other formulations and designs for similar purposes. Ruyan America currently has patents pending for a variety of formulations using its patented designs and delivery systems.
William Bartkowski, President of Ruyan America, Inc., commented, “We are delighted to join forces with Prime Time International to bring our unique products to a broader market through its extensive wholesale and retail network. They have a demonstrated ability to reach segments of the market where consumers of traditional tobacco products are now looking for alternatives that can be used where smoking is now prohibited or limited.”
Jim Emery, President of Prime Time International, stated, “We are partnering with the original pioneer of this technology and with the real innovators of its design and formulation with both its current and future products under development. We anticipate being able to offer our customers the very best in innovation, design and effectiveness in a whole range of easy-to-use, disposable smoking alternatives. We look forward to expanding and extending the designs, formulations and uses for Ruyan’s dynamic and patent-protected products. Prime Time International is committed to bringing open and honest leadership to this exciting new alternative tobacco category. We are committed to being the captain in the category of alternative tobacco products with a broad range of product offerings.”

ABOUT RUYAN AMERICA
Ruyan America, Inc. is a technology based company that currently develops and markets OTC consumer products using patented and patent-applied-for convenient delivery methods. Ruyan America, Inc. is a U.S.-based joint venture partner of Ruyan Holdings Ltd. of Hong Kong.

ABOUT PRIME TIME INTERNATIONAL COMPANY
Prime Time International Company, established in 1993, is an established manufacturer of tobacco and non-tobacco products with an established presence in the US wholesale and retail supply chain serving over 70,000 established retail outlets. Prime Time International is committed to providing its wholesale and retail trade partners with highly profitable products that they will feel confident representing in their establishments. Prime Time International prides itself on its ability to identify market niches and initiate rapid product development to address changing consumer needs and strives to offer only products of consistent quality and excellence.

For inquires or questions regarding this partnership, Ruyan products, or distribution and sales opportunities call Prime Time International at (800) 959-9880.