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14TOBACCOOUTLETBUSINESSMAYJUNE2009NEWSTRENDSMAYJUNE2009AltriaGroupInc.raisedpricesonMarlboroandseveralotherPhilipMorriscigarettebrandsearlyinMarch.Thehikepromptedothermanu2acturersincludingLorillardReynoldsAmericanandCommonwealthtoimmediately2ollowsuit.Comingjustweeksbe2orethe61-cent-per-pack2ederalexcisetaxFETmandatedbySCHIPgoesintoe22ectthepricechangessentretailersscramblingtorepricecigarettesininventoryandrethinktheirstrategies2orpreparing2orthex1oorstockstaxthathitretailersonApril1.Editorx19snoteAx1oorstockstaxisdueandpayabletotheU.S.Treasuryonorbe2oreAug.12009appliedtoalltobaccoproductsheldininventorybyretailerswholesalersandmanu2acturersat1201a.m.onApril12009.Itisequaltothedi22erencebetweenthenewtaxratesandtheoldtaxrates.Eachretailerwillreceivea500credittowardthex1oorstockstaxhoweverthisisacreditpercompanyandnotperstore.x1cItputsretailersinabito2adilemmax1dAndyKersteinownero2SeaBrightNewJersey-basedSmokerx19sHaventoldTOBinmid-March.x1cOnMarch8Ihadtoraisethepriceoneverypacko2PhilipMorriscigarettesIhadininventoryx14apotentialwind2all2orme.Butthen2oreverypackIbuybetweennowandMarch31Ix19llpaythathigherpriceplusowethex1oorstockstaxo261centsapack.Thatmeansthatideallyyouneedyourinventoryo2PhilipMorriscigarettesonMarch31tobeequaltoorlowerthanwhatitwasatmidnightonMarch8.x1dEachmanu2acturerprovidedadi22erentdate2orthepricehikestotakee22ectchallengingretailerstofgureouthowtomanageinventoryinsuchawaythatthex1oorstockstaxwonx19tbeoverwhelming.Andinsomecasesstoreswonx19thavemuchsayinthematter.x1cItallcomesdowntowhenyouhaveyourpeakinventoryx1dsaysKerstein.x1cForexampleIx19lltrytodelayasmuchaspossiblegettingordersinonMarch30andMarch31butinsomeareaswholesalersonlydeliveronedayaweekandyouhavetogetadeliverythatdayorgowithout.x1dRetailerswhotriedtominimizetheirinventoriesbyMarch31riskedbeingouto2stockaltogetheri2salesexceededexpectations.Butthosewhooverestimatedsalesriskedalarger-than-expectedhit2romthex1oorstockstax.x1cYoujusthavetodoaverycare2uljobmanaginginventoryx1dshrugsKerstein.x1cManagingyourbusinesshasalwaysbeensomethingyouhavetostayontopo2inthisindustrybutnowitx19sevenmoreimportant.x1dFromthemanu2acturerperspectivehoweverthepricehikeisastraight2orwardboon.Cigarettemakersrealizeaboostinprofts2oreachpacksoldduringtheperiodbetweenwhenthepricesincreaseandwhentheFETtaxtakese22ect.x1cIwonderhowmuchproftthatis2orthemx1dpondersKerstein.Pre-SCHIPPriceBoostByManufacturersPhilipMorristooktheleadinimplementingpricehikesinadvanceofSCHIP.KaineSignsVirginiaBanVirginiax19ssmokingbanwilltakeeffectJuly1.Gov.TimKainesignedVirginiax19srestaurantsmokingbanintolawinMarchmakingitthefrstSouthernstatetoadoptamajorban.Thebanwhichgoesintoe22ectJuly1andappliestobothrestaurantsandbarsprovidesafve-monthdelayinen2orcementwhichgivesrestaurantownersalittlewiggleroominadapting.Tocomplywiththenewregulationsrestaurantsthatwishtocontinuetoallowsmokingwillneedaseparatesmokingroomandaventilationsystem.Smokingwillstillbepermittedonoutdoorpatiosanddecksaswellasinprivateclubs.Thebandoesnotincludeanexemption2orrestaurantsthato22erhookahsx14waterpipesusedtosmokex1avoredtobaccox14asdoesasimilarbaninWashingtonD.C.Tobaccoadvertisinginmagazinesandnewspapersaswellastheuseo2termssuchasx1clightx1dx1cultra-lightx1dx1cmediumx1dandx1clowx1dastobaccoproductdescriptorswouldberestrictedunderanewbillproposedbyNorthCarolinaSens.RichardBurraRepublicanandKayHaganaDemocrat.Thebillx19sproposedrestrictionsareanattempttodissuadeCongress2rompassingabilltogivetheU.S.FoodandDrugAdministrationtheauthoritytoregulatetobaccoproducts.AdvertisingRestrictionsProposedAnewbillsuggestsbanningadsandregulatingdescriptors.