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TAXATION AND THE LAW OF UNINTENDED CONSEQUENCES |
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 TAXATION AND THE LAW OF UNINTENDED CONSEQUENCES
Plus: UST dumps cigars and profits jump; new Avo sampler
Los Angeles, June 9 – “The road to hell is paved with good intentions” began the editorial from Britain Express and Star in mid-May. It’s one worth noting.
The commentary responded to editor-in-chief Richard Horton’s editorial in the British medical journal The Lancet, suggesting an annual 50 percent increase in the price of cigarettes to help reduce smoking rates.
Not so fast. “Sadly, like so many good intentions, it would not work,” noted the Express and Star.
“In theory, hiking the price of smoking ought to be a huge deterrent. The reality is that smokers always find money for smoking. . . .
“The lesson of history is that when tobacco prices soar, tobacco smuggling increases. If the profit margins are right, some drug dealers are happy to switch to tobacco trafficking because the rewards are higher and the legal penalties lower.
“This in turn can lead to a shortage of drugs. Good news? Not always. When drugs are in short supply, drug prices soar – and so does the number of crimes committed to feed drug habits.”
The paper notes there is a solution: better education. Let people know the risks and let them make the choice. Sounds like democracy to me.
The C.A.O. juggernaut:
Is there any event or marketing opportunity left in America that C.A.O. hasn’t snapped up?
OK, that’s an overstatement, but not by much. C.A.O.’s Chief Marketing Officer Jon Huber has spent the spring putting the brand in front of golfers at Pro-Ams across the country. The BMW Charity Pro-Am at The Cliffs in South Carolina? You bet. Ditto for the Skylar Neil Memorial in Malibu, California, benefitting the T.J. Martell Foundation, and the Matacama Annual Charity tournament in Santa Rosa, benefitting the Sonoma County Children’s Charities.
But the C.A.O. signature is not the limited edition, but the “private edition.” They debuted the concept for the 2005 Motley Crue tour, a “Tommyland” cigar offered to backstage visitors. More recently, they created the “HRH” cigar, a double-bander, for the Hard Rock Hotel during its 10th Anniversary celebration in May, a no-holds-barred bash that featured Fender Stratocaster guitars as invitations.
The “HRH” edition included just 300 cigars:
• 100 flavours by C.A.O. KarmaSutraSplash Robusto;
• 100 flavours by C.A.O. Moontrance Robusto;
• 60 C.A.O. Gold Corona Gorda, and
• 40 C.A.O. Brazilia Lambada.
More limited than any “limited edition.” Next up: their always-anticipated party for retailers attending the annual Retail Tobacco Dealers of America convention and international trade show on August 6. Naturally, we’ll have a full report!
UST doesn’t miss cigars:
As part of a settlement with Swedish Match in 2004, UST – originally, U.S. Tobacco – gave its cigar division, known as U.S. Cigar Sales, away to become part of General Cigar.
The portfolio included some well-known brands: Astral, Don Tomas and Helix, but the division had performed poorly, despite some excellent work in recent years by U.S. Cigar Sales president Larry Palumbo and his team.
Maybe UST knew what it was doing.
The company, now concentrating on its core business of smokeless tobacco, issued an earnings projection of $3.20 to $3.30 per share for 2005. It could break its record earnings year of 2004 of $1.8 billion in sales and $531 million in profits, reaffirming its position as the top U.S. manufacturer of snuff and chewing tobacco.
New Avo sampler:
We love samplers since they give smokers a chance to try one or more brands without having to buy full boxes.
One of the best was Avo’s “Take 5" sampler with an elegant porcelain ashtray included. Now it’s been tweaked to give both new and old buyers a reason to look at again.
The new “Take 5" includes robusto-sized cigars from all five of the Avo lines: Classic, Domaine, Maduro, Signature and XO, but this accompanied by an equally stylish, single-action torch-type lighter, complete with shimmering silver sides, Avo logo and rubber grip.
It’s the best way we’ve found to check out the entire Avo range of flavors and even with the torch, it’s got a reasonable suggested retail price of $50.
~ Rich Perelman
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