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58TOBACCOOUTLETBUSINESSNOVEMBERDECEMBER2009WhattrendsareyoucurrentlyseeingamongcigarcustomersTeactualcustomerbaseissteady.IntermsotastepreerenceIthinktheyaremovingmoretowardull-bodied.TeU.S.marketisverypendulum-like.WhenIstartedinthebusinesseveryonewaslook-ingoramildcigar.Icameoutwithull-bodiedcigarsandcouldnx19tsellanything.Butnoweveryoneislookingorextremelyull-bodiedcigars.SointwotothreeyearsIthinkthependulumwillswingbackagain.Whatimpactwillavailabilityox18Cu-bancigarshaveontheU.S.marketIthinkitwillcreateamini-boombecausetheywereneveravailablebeore.TedaywecanbringinCubancigarstherewillbeaboomasalotopeoplewillbuythemtotrytheorbiddenruit.Teywillprobablyx3ndCubancigarstoostrongbutapercentageothepopulationthattriesthemwillgobacktostoresandthatx19swhenretailerscansayx1cWhydonx19tyoutrythisslightlymilderHonduran-madecigarx1dSoIthinkitwillhelpusall.Whatdoyouthinkox18thecurrentpopu-larityox18favoredcigarsIbelieveitwillbeashort-livedmove-mentbecauseotheFDA.IseetheFDAbanningx2avoredcigarsjustastheydidx2a-voredcigarettes.EventhoughIx19mamanu-acturerIcanunderstandthegovernmentx19spositioninsayingthatx2avorslikehoneyorcoconutcouldbeenticingunderagesmok-ersandencouragingthemtosmokemore.Howconcernedareyouaboutthepoten-tialimpactox18FDAregulationIamconcernedthattheFDAwilltrytoimplementstandardizationwhichhappenedinEurope.Teywantedactoriesoverseastohaveanapprovalratingwhichisanightmareasamanuacturerwhenyoux19redealingwithTirdWorldcountries.Tatwouldmeanevenmorebureaucracy.Asitisthegovern-mentputthisSCHIPtaxthroughbuttheydonx19thaveemployeestorunit.Sowhatisgoodintheoryisnotalwaysverypractical.IworrythatgivingthistotheFDAwillbeadisaster.Asasideex1ectIbelievethetrendomakingcigarsintheU.S.asIdowithPoorBoywillgrowbecauseothoseregulations.RightnowIhavetopaytaxesoncigarsIbringintothegovernmentwithin10days.Tatisahugecapitaloutlaywhereasiyoumanuacturecigarshereyoupaythetaxonlywhenyousellthem.Asmall-ormedium-sizebusinessdoesnx19thavethemoneytopaythegovernmentthatamountupront.Tatx19sworkingcapitaltiedupwhilethecigarssitininventoryandwhatitheydonx19tsellInthecurrenteconomythatx19saverydifcultsce-nario.Peopleanticipatedthatcigarsmokerswouldstepdownonpricepointinthewakeox18SCHIP.Whatx19syourviewWhatIx19mseeingisthatpeoplearechang-ingtheirbuyinghabitsintermsopackagingpeoplewhousedtobuy25cigarsarenowbuying18instead.Sothebundleisthesamepricebutthereareewercigarsinit.IhavenotdonethatwithmybrandsbutIhavedoneitorprivate-labelcustomers.Whatareyourplansx18orthecompanygo-ingx18orwardAsusualIwillcomeoutwithsomemoreprivatelimitedrunsandwillcon-tinueexploringalternativetobaccoromothercountries.IlikethatnichegettingawayromtraditionaltobaccoandseeinghowIcanblendtobaccosromdix1erentorigins.Wheredoyouthinkthecigarbusinessisheadedin2010Ithinkitwillbestable.Youcanseeromtheimportingocigarsthatthex3guresareprettystable.WhatelseshouldpeopleknowaboutFe-lipeGregorioIamoneotheewtrueboutiqueman-uacturerslet.Whenretailersdealwithmetheydealwithapersonnotacor-poratestructure.Weareamom-and-poporganiza-tionjustlikemanyoutletsare.Tatgivesustheavail-abilitytomakeourturnaroundtimesquickerandtoaddressconcernsmoredirectly.Byworkingtogetherwecanhelpeachothersucceed.TOB