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November, 2009

PM USA will no longer offer tobacco contracts for two states
Alma - Philip Morris USA stunned the American tobacco community when, on October 14, it informed growers at a meeting in Alma, Georgia that it would no longer offer contracts for tobacco in Georgia and Florida after the current season.

It still plans to honor all multi-year contracts with growers if they have not expired, but growers who had one-year contracts will not receive new ones.

“Traditionally, Phillip Morris USA has purchased approximately half the production of Georgia and Florida growers,” said J. Michael Moore, Georgia Extension tobacco specialist. “Growers left the meeting confused as to their future in tobacco production.”

Three other companies still purchase tobacco in Georgia and Florida and have made no announcement that they plan to withdraw, he said.

House of Prince closes factory
Copenhagen - House of Prince - Denmark’s only cigarette manufacturer - shuts down its plant in Copenhagen due to overcapacity and high production costs. House of Prince was formed in 1990 as an independent subsidiary of the Scandinavian Tobacco Company and was bought out by British American Tobacco (BAT) in February last year. The factory produced 12 bn cigarettes annually, or the equivalent of 3 mn packets a day.

BAT to sue online sellers
Paris - British American Tobacco’s subsidiary in France recently stated it would sue websites selling contraband cigarettes that use its brands.

“Trade in contraband tobacco products and the counterfeiting of cigarette brands are reprehensible offences,” BAT France said in a statement. It did not give further details of the legal action it planned.

It estimated that the French state was deprived of ?3.7bn in lost tax revenue on tobacco sales in 2008.

United States
Lorillard 3Q profit dips
Greensboro - Lorillard Inc., the United States’ third-largest cigarette maker (Newport, Kent, True, and Maverick) faced declining volumes of about 6.1% during the period, compared with its estimate of a total industry decline of 12.6%. The company saw a 9.8% decline in volumes for its best-selling Newport brand, but a 51.9% increase in its value-priced Maverick brand due to downtrending.

Results from the three tobacco makers, who account for about 90% of the US cigarette market, show steep volume declines as a new 62-cents-a-pack federal tax, smoking bans, health concerns and social stigma make the cigarette business tougher.

Lorillard, the oldest continuously operating US tobacco company, stated that its third-quarter profit dipped 1%, pinched by higher expenses and consumers tightening their spending. It earned $235 mn for the three months ended Sept. 30, down from $237 mn a year ago and missed analyst estimates.

The company, which was spun off from Loews Corp. in June 2008, said revenue climbed 26% to $1.42 bn on higher prices, offset by selling fewer cigarettes and spending more on promotions. Excluding excise taxes, revenue grew 2% to $953 mn from $936 mn.

PMUSA works to block internet cigarette sales
New York - The International Trade Commission (ITC) last week issued a General Exclusion Order that requires US Customs and Border Protection (CBP) to deny entry of illegally imported Marlboro, Virginia Slims, and Parliament cigarettes, which infringe on Philip Morris USA’s (PM USA) trademarks.

In March 2008, PM USA filed a complaint with the ITC to stop foreign-based Internet sellers from selling cigarettes bearing PM USA’s trademarks. PM USA named 13 respondents who operate web sites and identified an additional 177 sites that sell Marlboro and other PM USA brand cigarettes intended for sales overseas, to US customers.

The ITC launched an investigation, and an administrative law judge subsequently determined the foreign Internet sellers are unlawfully importing cigarettes into the US, according to the statement.

PM USA previously worked with law enforcement, legislators and others in government to address the problems stemming from illegal Internet cigarette sales, such as lack of reliable age verification, violation of trademark laws and evasion of applicable taxes.

In addition, PM USA is currently supporting the Prevent All Cigarette Trafficking Act of 2009 (the “PACT” Act), which passed the House in May 2009 and is intended to prevent tax-evading sales of cigarettes and smokeless tobacco by remote sellers who operate via the Internet, mail or phone, the company stated.

Tobacco International - November, 2009

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