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November, 2006

U.S. Tobacco Cooperative

United States
Company Launching Cigarette Enhanced with Vitamin E
South Boston, Virginia — Vitamin-enhanced products have been around for a while now, but if the founders of E Tobacco LLC get their way, cigarettes enhanced with Vitamin E will be just as common someday.

The company stresses that the added Vitamin E does not mean a safer cigarette, but there are distinct benefits to “E” brand, the cigarette it is launching.

“The effect of the patented vitamin E additive in our premium blend is such that when the vitamin E vaporizes into the smoke, it mitigates against the chemical assault that takes place between tobacco smoke and the live cells of the palate, nose, throat and lungs,” said Joseph Russo, CEO of E Tobacco. Russo holds worldwide patents on the concept.

In addition, said Russo, “Compared to conventional premium cigarettes, E’s are less irritating; have a better, fresher, cleaner taste; fight stale tobacco odor; are less offensive to non-smokers; and may reduce smoke-related aging and wrinkling of skin.”

E Tobacco’s e.v.p. John Czerewko noted that a report from the Linus Pauling Institute of Oregon State University confirms that vitamin E tends to disappear more quickly in smokers than non-smokers. E cigarettes, he said, may be one way for smokers to overcome that loss.

According to Maret Traber, a professor in OSU's Linus Pauling Institute involved with the report and a national expert on vitamin E, "It’s increasingly clear that many people have health habits, such as smoking or poor diet, which can leave them with inadequate levels of vitamin E. And vitamin E has clear value in helping to prevent serious degenerative disease." Further, Traber concludes, “In lung tissue, vitamin E is one of the first lines of defense against the free radicals generated by cigarette smoke”.

E cigarettes, manufactured in Virginia, completed its beta testing stage in small, multi-state, geographic areas of the United States, said Czerewko. He added they are presently seeking funds in private placement equity for the U.S. launch.

Looking beyond the United States, test product has been produced in Asia under the brand name VEC, an acronym for “vitamin E cigarette.” In January, Czerewko said, the company is looking forward to international exposure by exhibiting at the Tobacco Asia Expo in Hong Kong (booth 805) under the VEC brand name. The VEC brand was developed by Russell Chan of Hong Kong under license. More information on the availability of E’s as well as scientific research can be found at the company’s Web site, www.etobacco.com.


Spain
Altadis Says Profits Down Nearly 14%
Madrid — Spanish-French tobacco company Altadis said its third-quarter net profit fell 13.7 percent under pressure from stricter smoking restrictions and higher taxes in core Spanish markets.

The manufacturer of Fortuna, Gitanes, and Ducados cigarette brands said net profit fell to 145 million euros (U.S. $184.95 million) in the third quarter from 168 million a year earlier.

Altadis said its nine-month net profit fell 19.9 percent to 339.1 million euros (U.S. $432.52 million) from 423.3 million.

The bottom line was hit by a 15% drop in cigarette sales to 1.25 bn euros ($1.59 billion) in the first nine months of the year, from 1.47 billion euros in the same period of 2005.

The company has suffered after the Spanish government launched tougher anti-smoking policies and increased taxes in an effort to prevent consumption of cheap brands, such as Altadis' Ducados Rubios.


Sweden
Cigar Sales Up for Swedish Match
Stockholm — Swedish Match AB reported that third-quarter profit climbed 10% as Americans and Europeans bought more cigars and taxes fell, according to a recent Bloomberg report.

Swedish Match, whose brands include Macanudo cigars and Red Man chewing tobacco, also said cigar sales are becoming more profitable. The company bought Hajenius and Oud Kampen cigars in the first quarter to expand in the Netherlands. Sales of cigars rose 3.3% in the period to 903 million kronor, while operating income for that business gained 19%.

“Results were ahead of our and consensus estimates,'' David Hayes, an analyst at Lehman Brothers Holdings Inc. in London, said in a note to clients. “U.S. cigars was the major driver for outperformance. The company has set up a joint venture with Lorillard to develop smokeless tobacco in the U.S.''

The operating margin for cigars widened by 3.4 percentage points to 24.9%, driven by “strong'' results for U.S. premium and mass-market products, Swedish Match said. The United States is the largest cigar market in the world. Madrid-based Altadis SA is the world's biggest cigar maker.

Third-quarter snuff sales fell 3% to 785 million kronor. Swedish Match, the world's second-largest maker of smokeless tobacco, has sought growth in snuff in the United States as its share of the Swedish market declines. The Swedish company gets about a third of its sales from North America.

The first smokeless tobacco product to be developed with New York-based Loews Corp.'s Lorillard Tobacco Co. unit may go on sale in the “not-too-distant future,'' Swedish Match said. Americans are using more such goods, prompting Reynolds American Inc. and Altria Group Inc. to enter the $3.8 billion market for snuff.


United Kingdom
Imperial Sells More Cigarettes Worldwide
London — Imperial Tobacco reported a 9% increase in earnings, despite seeing volumes fall in the UK and Germany, its two core markets.

Imperial, which makes Lambert & Butler, Richmond and Davidoff cigarettes, said its cigarette volumes around the world were up 7% to 186.9 bn.

While Imperial increased market share in the UK and Germany, which between them account for nearly 60% of the company's profits, this came against the background of a decline in the number of cigarettes sold.

In the UK, Imperial increased its market share to 45.5% but its cigarette volumes were down 2% to 23 bn. Revenue after duty was up 4% to £835m because of price increases.

"Volumes have been declining for a long time ... but that hasn't stopped them growing profits," said Jonathan Fell, an analyst at Deutsche Bank.

Overall, Imperial estimates that the UK cigarette market has been shrinking by 2% to 4% a year. It estimates it is down 3% in the year and consumers are also switching to cheaper cigarettes. Lambert & Butler and Richmond are the company's two top-selling cigarette brands in the UK.

Imperial said it expected regulatory changes to "cause moderate reductions in market sizes," for example in France, where restrictions on smoking in public places are scheduled to take effect next year.

However, the company still believes it can increase profits by increasing its market share. "We still have plenty of room for us to grow our share," c.e.o. Gareth Davis said.

In the rest of the world volumes were up from 112.7 bn to 122.7 bn and revenues were up from £1 bn to £1.1 bn. Imperial also plans to enter the U.S. market, which it said is also slightly declining but remains profitable.


Tobacco International - November, 2006
SMOKE Magazine - Cigars, Pipes, and life's other desires


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