HEARD IN THE HUMIDOR

Highlights of the week in cigars and smoking from

For July 26-30, 2010

Los Angeles - The Rocky Patel 15th Anniversary cigar is supposed to be launched on July 30, but it's already on sale in multiple locations, especially those that Patel has visited at events over the last month or so. He was on-site at two Corona Cigar Company stores in Orlando, Florida on July 16-17 and the full details of the brand are now available:

=> Made in his new Tabacalera Villa Cuba factory in Esteli, Nicaragua, Patel used an Ecuadorian-grown, Habano-seed wrapper with Nicaraguan-grown binder and filler leaves for this line. It is variously described as medium or medium-to-full in body.

=> There are four sizes, all offered in boxes of 20, from $9.00 to $10.75 retail.

The cigar is marked with two silver-colored bands. Patel has said that he plans to introduce two more blends at August's International Premium Cigar & Pipe Retailers Association convention and trade show in New Orleans.

>> It's been a half-century since 43-year-old Edgar Cullman expanded his family's tobacco-farming business by rounding up a series of partners to pay around $25 million for a well-established and profitable cigar company. General Cigar was a well-known maker of major brands including Robert Burns, Van Dyck, White Owl, William Penn and others, but Cullman made it the biggest seller of premium cigars in the United States, led by the introduction of a new version of Macanudo in 1971. A ten-city "50 Year Celebration Tour" will mark the occasion, already scheduled for some of the swankier cigar-friendly locations in the country, in Chicago, Denver, Dallas, Washington, D.C., Sonoma Valley, Atlanta, Tampa, Los Angeles and Las Vegas between July 27 and November 11. More details on these events is available at the Celebration Tour Web site: www.cigarcelebration.com. The events themselves are being designed as both a showcase for General's well-known brands - Excalibur, Hoyo de Monterrey, La Gloria Cubana, Macanudo, Partagas, Punch and others - and as a bridge between venerable cigar stars like 73-year-old Benji Menendez and the company's next generation, especially Rick Rodriguez and Michael Giannini. "Invited guests will not only have a chance to experience the premium cigar lifestyle in a connoisseur's setting, but will also have a rare opportunity to learn about tobacco cultivation and blending from Benji Menendez, our cigar sage, and from the emerging cigar masters who will take our company into the next half century," noted General's vice president of marketing, Debo Mukherjee.

>> If reports from two of the major players in the U.S. market are to be believed, then machine-made cigar sales are going through the roof while the premium market is standing still. Both Swedish Match and Altria delivered their quarterly reports on July 21 and showed considerable strength in the cigar sector, but only on the machine-made side:

=> Swedish Match:

"During the second quarter, U.S. mass market cigar sales increased by 36 percent in local currency compared to the same period in the previous year, while volumes also grew significantly. Also excluding prior year destocking effects, sales and volumes demonstrated strong growth for the U.S. mass market cigars, from continued success for Foilfresh cigars. "U.S. premium cigar sales revenues and volumes were flat in the second quarter, year on year, in local currency. Sales grew in the Cigars International (mail order and Internet) business, offsetting declines in sales from General Cigar. When backing out the tax related destocking effects from the prior year, declines from the General Cigar business would have been more pronounced." That sums up the second quarter pretty succinctly. It's worthwhile to note that Swedish Match is getting ready to move all of its cigar, lighters and pipe tobacco businesses into a joint venture with Scandinavian Tobacco, which according to the report, is scheduled to close before the end of the year, but will retain the roaring U.S. machine-made business to complement its distribution of smokeless tobacco products, sold at essentially the same retail outlets. Furthermore, the presentation slides accompanying the report note that Swedish Match's estimate of the size of the U.S. premium market has shrunk by nearly 15% over the past 18 months of recession. The end-of-year report for 2008 considered the U.S. market - the world's largest - at 270 million cigars a year, but the new report claims just 230 million premium cigars are expected to be sold annually. The company continues to estimate its market share at 30%, largest in the nation. It's worth noting that the second quarter of 2009, against which the current figures are being compared, was a slow-sales period, coming right after the imposition of the new SCHIP taxes on April 1. So the second-quarter 2010 results were even poorer than they appear. For the first six months of 2010, the report noted that "[i]n local currencies sales and operating profit improved for European cigars and declined for U.S. premium cigars. U.S. mass market cigars recorded solid growth in sales revenues, volumes and operating profit compared to the first six months of 2009." The American machine-made market was reported by Swedish Match, based on retail reporting by A.C. Nielsen & Co. and others, at seven billion units at the end of 2008, at nine billion (including little cigars) at the end of last year and now at eight billion at the end of June 2010. That's a lot of cigars. Swedish Match's market share of units sold has gone up from 4.9% to 5.3% between last December and June, especially because of its Foilfresh pouch presentation for its Garcia y Vega Game line. The market leaders continue to be Swisher International, Altadis U.S.A. and Altria. The numbers showed Swedish Match's worldwide cigar sales for the second quarter at $155.5 million U.S. (converted from Swedish Kronor), up 2% over 2009, with operating profits of $38.6 million, also up 2%. For the six months ended June, worldwide cigar sales totaled $282.0 million (down 9%) with profits of $64.3 million (down 16%).

=> Altria:

The nation's leading cigarette seller had a big second quarter, thanks in part to strong sales of its John Middleton subsidiary, which makes Black & Mild cigars.

Comparing sales against the weak 2009 second quarter, Middleton's brands - mostly Black & Mild - were up 19.7% in unit volume and 35.1% in revenue (after deleting excise taxes). Middleton shipped 323 million cigars in the second quarter, 40% more than all the premium cigars expected to be sold in the U.S. this year!

Looking at the first six months of 2010 in comparison to the roller-coaster first-half of 2009, Middleton's sales were down 1.6%, but revenue was up 8.1% thanks to price increases. Using a different measure of market share than Swedish, Altria reported Middleton's market share at 28.3% of the U.S. market, down slightly vs. 2009 thanks to some strong promotional efforts by its competitors.

In response, the report noted that "Middleton recently introduced Black & Mild Royale in both plastic and wood tip variants, and intends to strengthen Black & Mild's position in the marketplace with additional brand-building activities."

>> Short fillers: Find our latest tasting review, of seven under-appreciated brands - ORTSAC 1962, Padilla Cazadores, Padilla Dominus, Savinelli R&R Series Y and three styles of the Scarface/Tony Montana Series - in our News & Views archives for July 23.

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