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Louisiana's 40-acre tobacco trade seems a speck on the agricultural map.
Even at its height in 1922, farmers planted just 1,100 acres of Louisiana's only breed of tobacco, known as perique. Its home in Grand Point, a remote outpost in St. James Parish, is too small to merit its own ZIP code.
Yet perique has achieved fame as far afield as Europe and Asia among connoisseurs who prize the plant's pungent, fruity taste.
"I kind of equate that product with a cognac," said Mike Little, vice president of operations for Santa Fe Natural Tobacco Co., which has become perique's biggest customer. "It's a little sweeter and heavier in the way it smokes."
For all its charms, perique has struggled to survive as tobacco farmers nationwide have slowed production of the plant now synonymous with cancer and corporate corruption. But perique has staged a surprising comeback since 2005, with the state's seven tobacco farms nearly doubling the crop's footprint and tripling production to more than 58,000 pounds last year.
Santa Fe started using the leaf in a special blend of its Natural American Spirit cigarettes and roll-your-own tobacco pouches. . . .
Located in two barns along historic River Road in Convent, L.A. Poche has been the parish's main perique processor since the 1930s.
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Citi analyst says, "Reynolds owns four of the strongest brands in the industry, but this is outweighed by the rapid decline of the rest of the portfolio.
Faced with rising taxes for cigarettes -- in New York the price of a pack hit $9 -- and ever-tightening smoking bans in places such as Los Angeles, where a bill threatens to force smokers out of all outdoor eating areas, Big Tobacco is trying a new approach to keep America's dwindling 45 million smokers in the fold.
The solution: snus (they are always curiously plural), a pinch of steam-cured tobacco nestled in a tiny tea-bag-like pouch. Snus don't need to be spit out like traditional fermented dipping tobacco; they simply remain under your upper lip until you've gotten your nicotine fix.
U.S. Smokeless Tobacco is testing Skoal Dry, a snus version of its moist, fermented Skoal dipping tobacco. Spokesman Andrew Lee said the company was encouraged to find out that some 6 million of America's smokers have tried smokeless tobacco, and fully half of all smokers -- more than 22 million -- have expressed an interest in finding a smokeless-tobacco alternative.
But given that pending legislation takes aim at flavored cigarettes, tobacco companies might need to be worried about snus, too. Both the House and Senate versions of a bill to give the Food and Drug Administration jurisdiction over tobacco contain a rule to eliminate flavored cigarettes.
Despite the 6.5% yield, RAI is trading around its 52-week low of $51.08. RAI has been taking hits in the headwinds of analyst downgrades and lowered guidance, but trading flat since May 1st. This is not the Conwood division's fault; the producer of the discount dip posted double digit volume growth, according to the Winston-Salem Journal. In fact, Conwood has huge growth opportunities, making up only 4% of revenues in 2006. RAI should follow in UST's footsteps and start to market more varieties of its discount products.
Is it time to try to catch a bit of a, I don't know, let's call it a falling butter knife? Execs must think so after initiating a $350 million buyback program for the forward twelve months. RAI has a strong balance sheet; lots of cash, in other words, your 6.5% yield is safe. Now, time your entrance point right or cost-average down and you'll mint money.
One last thought to ponder: Altria (MO), better known as Philip Morris USA, is testing its own smokeless tobacco product. If market penetration proves difficult for big MO, will either subsidiary be ripe for acquisition by the tobacco giant? Would not be a big surprise to me.
Nicotine has long been known as a powerful, if toxic, stimulant. Targacept, a Reynolds spinoff, is tapping this effect to find treatments for Alzheimer's, depression, obesity and other diseases that will not have nicotine's side effects.
None of Targacept's experimental drugs has been tested enough in patients to prove the company is on the right track, but the drugs look promising. So much so that two deep-pocketed partners -- AstraZeneca and GlaxoSmithKline -- are putting up as much as $750 million and $1.5 billion, respectively. That's more money than any company in the Triangle -- the state's biotech hub -- has had on the line in a drug development deal.
Now, "they're about to find out whether it works," said Edward Levin, a Duke University professor who has researched the effects of nicotine and related chemicals on the brain. . . .
Five of Targacept's drugs are in clinical trials. AstraZeneca has dibs on one, which could be used to treat two disorders. It could help Alzheimer's patients and improve cognitive function among schizophrenia patients. GSK is interested in another, a painkiller.
So, there I was, waiting in line at the Sheetz store in Weston, West Virginia.
On the counter in front of me were about 50 of these little tins laid out on the counter.
They smell like mints.
They looked like mint containers.
And there was a sign next to them that said - free samples.
Young and old could take one.
And no one would object.
The cashier behind the counter looked like a teenager himself. . . .
The slip cover over the mint container says: Camel Snus Trial Offer.
In the container are little pouches of tobacco that you stick under you lip.
Camel Snus is a product of R.J. Reynolds.
And Reynolds is a party to the Master Settlement Agreement between the state Attorneys General and the tobacco companies.
That agreement includes a ban on free tobacco samples.
There is an exception to the ban on free samples, including "the conducting of consumer testing or evaluation of tobacco products with persons who certify that they are adults."
But that clearly wasn't going on at the Sheetz I was at.
The Camel Snus were on the counter. . . .
An attorney at the National Association of Attorneys General said that if Reynolds were giving Camel Snus to retailers as free samples to be handed out, "it would appear to violate the terms of the agreement."
And Eric Lindblom, director for policy research at Campaign for Tobacco Free Kids in Washington, D.C., said that it was clearly a violation of the agreement and did not fit within the consumer testing exception.
We keep our Hold recommendation on cigarette maker Reynolds American, Inc. (NYSE: RAI), as even though cost savings measures and the new brand portfolio strategy contribute to earnings, continued volume declines, additional debt from the Conwood acquisition, and the class-action status of the Light cigarette suit warrant caution. The company posted weaker-than-expected first-quarter profit and cut its 2008 outlook, citing the challenging economic environment.
The nation's No. 2 tobacco company lobbied against proposed legislation that would grant the Food and Drug Administration authority to regulate cigarettes and other tobacco products. . . .
Reynolds also lobbied on a bill to prevent tobacco smuggling and collection of tobacco taxes, among other things, according to the report filed April 17 with the House clerk's office.
Reynolds American Inc. is the parent company of R.J. Reynolds Tobacco Company, Santa Fe Natural Tobacco Company, Inc., Lane Limited and R.J. Reynolds Global Products, Inc. R.J. Reynolds Tobacco Company, the second- largest U.S. tobacco company, manufactures about one of every three cigarettes sold in the United States, including five of the nation's 10 best-selling brands: Camel, Winston, KOOL, Salem and Doral. Santa Fe Natural Tobacco Company, Inc. manufactures Natural American Spirit cigarettes.
It has been a difficult year so far for the domestic tobacco firms, which have struggled to balance the retail price of cigarettes with the economic trends affecting many of their core customers. We've been concerned for much of the last year that cigarettes were starting to reach price points at which demand could start to falter, so we weren't too surprised to see volumes decline for all of the domestic manufacturers during the first quarter of 2008. The magnitude of the decline, however, when combined with the economic forces we face today and the potential for increased regulation and excise taxes in the year ahead, has led us to lower our near- and long-term expectations for all three of the U.S. cigarette manufacturers-- Philip Morris USA/Altria (NYSE:MO - News), Reynolds American (NYSE:RAI - News), and Lorillard/Carolina Group (NYSE:CG - News).
Domestic tobacco stocks tend to respond to three main drivers: litigation, industry fundamentals, and changes in the political or regulatory environment. Although the litigation environment has improved substantially during the last five years, leading to a dramatic runup in the shares of Altria (up more than 50%), Reynolds American (200%), and Carolina Group (150%), the specter of multi-billion-dollar lawsuits or settlements has not completely gone away. . . .
we've revised our long-term volume growth expectations for the industry from negative 2%-3% per year to annual declines of 3%-4%. With the economy likely in recession and food and fuel expenditures taking up a larger and larger portion of consumer spending, we expect industry volumes to decline at a slightly greater rate in both 2008 and 2009. With only limited pricing power going forward, we now envision a much different sales and profitability environment for the industry than we did even just a few short months ago.
Of the three domestic cigarette producers we cover, we expect Reynolds to be affected the most, as the company has effectively bet the farm on the success of its three top brands
Lisa J. Caldwell has been promoted to executive vice president of human resources for both Reynolds American Inc. (NYSE: RAI) and its largest subsidiary, R.J. Reynolds Tobacco Company, effective June 1.
Caldwell is currently senior vice president of human resources of Reynolds American and R.J. Reynolds Tobacco. She joined R.J. Reynolds Tobacco in 1991 as manager of employment practices.
Tobacco companies claim they don't want youngsters to start smoking, but the reality is different, they need those kids. 1,200 smokers die every day in America, and many more quit, they need to be replaced.
A confidential document from RJ Reynolds was candid about it saying, "if our company is to survive and prosper, over the long term, we must get our share of the youth market."
Kids become hooked because of nicotine. The leaders of all tobacco companies denied that before congress.
Frontiers of Freedom is a think tank that advocates a free market, deregulatory approach to public policy.[37] It operates six policy groups, including a Center for Economic Liberty and Property Rights which handles telecommunications policy.
Frontiers of Freedom does not disclose its financial backers, but the Wall Street Journal reported in 2001 that the organization's main contributors were corporations such as Philip Morris, ExxonMobil and RJ Reynolds Tobacco.[38] At the time, Frontiers of Freedom lobbied heavily against environmental regulations designed to reduce global warming,[39] and also railed against plaintiffs who sued the tobacco companies after contracting lung cancer from smoking.[40]
Gov. Mike Easley is proposing tax increases on cigarettes and alcohol, but he has stiff opposition from state legislators as they return to Raleigh today. . . .
Reynolds American Inc. said yesterday that it would oppose any effort to increase the cigarette tax.
"The median income of North Carolina smokers is about $33,000 a year," said Steve Kottak, a spokesman for Reynolds. "That's the group that the governor is piling onto with this tax proposal."
Kottak said that some states are trying to close budget deficits with cigarette-tax increases, but have found that such increases cause smokers to avoid the tax by buying cigarettes over the Internet or from other states.