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55TOBACCOOUTLETBUSINESSMARCHAPRIL2009hopedthattherewouldbeanamendmenttoreducethetaxrateonRYObysomedegreebutwhenitdidnx19thappennoonewasterriblysurprised.Mostexpresseddisappointmentx14thenmadesomequickre-calculationsregardingtheviabilityothecategoryintheirstores.x1cIbelievetherewasnotonesingleRepublicanamendmenttotheSCHIPlegislationx14somuchorbipartisanshipx1dsaysAndyKersteinNAx1aOpresidentandowneroSeaBrightN.J.-basedSmokerx19sHaven.Asorthebiggerpictureheaddsx1cWhileIthinkthisisgoingtohaveanoverallnegativeimpactontheRYObusinessIthinkitmattersmostbystate.IknoworNewJerseytherewillstillbeasubstantialsavingswithRYO.InsteadoRYOorMYObeingone-ourththecostoacartonomanuacturedcigarettesitx19snowgoingtobeaboutone-hal.SoIdonx19tbelievewhathappenedtotheindustrywiththeSCHIPisanirreversibledeathsentence.x1dVelmaHartleyormerpresidentoNAx1aOandowneroTex1aobaccoPlaceinColumbusGa.agreeswiththatassessmentalthoughwhatwassignedintolawstillmakesherbloodboil.x1cWeheldtheSCHIPlegislationofprobablyaslongaswecouldx1dshesays.x1cButwhatWashingtondoesnx19tunderstandisthereisnotachildinthiscountrylegalorillegalwhowonx19tbeseenbyahospital.PeopleintheSouthespeciallyx14wex19rejustsotiredosupportingthird-generationwelare.Iemploy13womenand11othemarethesolesupportersotheiramiliesx14theyx19renotonwelarex14theyx19reworkinghardinmystores.x1dRegardingtheutureoRYOshenotesx1cTeRYOpopulationisalreadythelowmiddleclassandtheypurchaseRYObecausetheyx19repoor.x1dAndevenwithittaxedtothemaxlikeitisshesaysx1cYoucanstillgettwo-and-a-halcartonsocigarettesoutoa1-poundbagoRYOwhichstillbeatsthepriceomanuacturedcigarettes.Ix19vebeencalculatingthex18whatix19sincelastyearandIalreadyknowIwillnotgetridoRYOnorwillIdeductanythingromthecategoryline-up.x1dSheknowsshewillhavetodox1csomeregroupingx1dothecategorymeaningsherecognizesthata1-poundbagmightnotbeaeasiblepurchaseanymoreseesidebarormostohermilitaryandstrict-budgetRYOcustomers.x1cWewillprobablyhavetostockalotmore6-ouncebagstomakeitafordablex1dshesays.Butmakingadjustmentslikethattoaccommodatecustomerbudgetswonx19tbetheonlysignothecategoryx19scontinuedimportanceatx1aobaccoPlacestores.PriortothepassingotheSCHIPtaxesallthesizesandvarietiesoRYOMYOtobaccogotspecialtreatmentx14andthatwillstayjustasitisaccordingtoHartley.x1cWehaveawholeseparatewalk-inhumidorjustorRYOtokeepallthetobaccoreshx14bagscansandpouchesx1dHartleyexplains.x1cWedonx19thaveitsittingonashel.RYOWhenSCHIPx1federaltaxesmovedintotobaccooutletsmost1-poundbagsox1fRYOtobaccomovedout.Itwasperhapsthefrstsignox1fachangingcategory.x1cForthemostpartthe1-poundbagishistoryx1dsaysarepresentativeox1fRepublicTobacco.x1cMostpeoplearenotsmokingRYObecausetheywantto.Theyhavetoandwiththepriceox1fa1-poundbagatalmost70nowtheycanx19tax1fx1fordthatkindox1fout-ox1fpocketexpenseatoneshotx14itx19saweekx19sworthox1fgroceries.x1dAsamajorplayerintheindustryRepublicTobaccosaysitispreparedx14andhasbeenanticipatingachangelikethisx1foryears.Itiswellequippednowtoserviceretailerswithsmallerbagsox1ftobaccox14andishelpingthemtomakeothercategoryadjustmentsx14inordertostayviableinRYOtobacco.Buttherex19sasurprisebonus.Manyretailersarediscoveringthatthedeathox1fthe1-poundbagisnx19tnecessarilyabadthingbecausenowRYOcustomersarecominginmorex1frequentlytopurchasesmaller-sizedbagsox1fRYOtobaccowhentheyusedtocomeinx1forproductonlyonceeverymonthorso.x1cIx19mnotnecessarilyupsetthat1-poundsalesaredramaticallyreducedx1dsaysAndyKersteinownerox1fSmokerx19sHaveninSeaBrightN.J.x1cIx19dratherseethesecustomersonceeveryweekorthreeorx1fourdaysthanonceeverythreeorx1fourweeks.Asx1farasIx19mconcernedeverydayanRYOcustomerwalksintomystoreisanotheropportunityx1formetomakeadditionalsales.x1dx1cIx19mthinkingtheRYOindustrywillbedeadforme.ChancesarewewillbecompletelyoutofitbyApril1.x1dx14JefSteinbockowneroxfUhlesTobaccoCo.MilwaukeeWis.