The Stogie Guys

Last week Patrick S and I were on location in Estelí, Nicaragua, to attend Drew Estate’s Cigar Safari. In the coming days we’ll have lots of content to share with you—including dozens of photos, a new premium tobacco being grown in Florida, and a behind-the-scenes look at “DE2.” But today I’ll start with the high-level highlights about our host.

It’s worth pointing out that Drew Estate is now producing around 100,000 cigars per day. To put this in perspective, even though there’s no such thing as the “typical” cigar factory, the median for cigar factories could be considered to be around 35,000 cigars per day.

Jonathan Drew admitted to the challenges associated with such high production. Drew Estate needs to hire more supervisors and more employees for the quality control room. Currently, the company is purposefully rejecting a higher percentage of cigars at each level of the process—a decision that’s less than optimal for profit maximization. But it’s clear Drew Estate will not compromise on quality control.

Eventually, as the organization acclimates to its accelerated levels of production, the percentage of rejects is expected to drop to an acceptable level. This acclimation includes promoting more standouts to supervisor rolls, hiring more staff, and even knocking down walls in the factory to improve flow and reduce accidental cigar damage.

Jonathan Drew seems to be grappling with the reality that his role is to make business decisions for the company. He is more of a corporate executive than a cigar blender or tobacco man. Nicholas Melillo, on the other hand, is redoubling his efforts in many areas he shared with Steve Saka (before Saka’s departure). These include tobacco purchases, overseeing the aging and fermentation processes, and working on blending.

Willy Herrera will be expanding his Herrera Estelí line with a Lancero. We saw the prototype on Drew Estate’s main rolling floor. He also has a whole new line in the works called Herrera Norteño, which will make use of Mexican tobacco. Willy continues to be an imposing, soft-spoken presence.

Part of Drew Estate’s expansion includes ensuring enough room to age cigars post-production before they are shipped. Interestingly, the room currently used for this purpose is colder than you might expect. That’s because Drew Estate has found that cold aging is similar to the “low and slow” rule of barbeque. Aging takes longer at a colder temperature, but the end result is superior. However, with Liga 9 in particular, they’ve found less aging produces a better result, so that blend is spending less time in this room.

Here are a few other nuggets of information about Drew Estate that are worth mentioning:

— Despite rumors that the company purposefully depresses production of Liga 9 to drive up price, Jonathan Drew once again assured us that he is making as much of the blend as possible. The key constraint is the availability of certain tobaccos. Again, the theme here is that quality will not be compromised.

— Drew Estate considers its main competitors to be Arturo Fuente, Davidoff, General Cigar, and Altadis—not small boutique brands.

— The cigar bubble burst of the late ’90s was, in a way, a blessing for Drew Estate. Falling demand meant the up-and-coming company had access to better tobacco than they might have otherwise been able to purchase.

Later on this week, I’ll report specifically on Drew Estate’s new pre-industry facility, which they’ve dubbed “DE2,” and what the enormous building means for the company. For now, I welcome your comments and questions.

–Patrick A

photo credit: Stogie Guys

A New Jersey bill currently under consideration represents a new type of anti-tobacco legislation.The proposed law, introduced March 24, would tax all advertising for tobacco products at a rate of 25%.

While a number of states are considering expanded smoking bans and increased tobacco taxes, the New Jersey law would be the first time a state would tax tobacco advertising. New Jersey already taxes cigars at a rate of 30% of the wholesale price and has a $2.70 per-pack tax on cigarettes, the sixth highest in the country.

Advertising directed at children is already regulated, so the ads this bill targets are for adults who can legally purchase cigars and other tobacco products. Revenue raised from the tax would go towards state funding of programs to prevent the use of tobacco products including electronic cigarettes.

Analysis

The bill only has four sponsors out of an 80-member General Assembly. And no companion bill has been introduced in the New Jersey Senate.

Given the current support, it is unlikely it will pass this term, but it should be a warning for advocates of cigar freedom. Anti-tobacco zealots are not happy just taxing tobacco; they also want to silence speech targeted at adults for tobacco products, or at least tax that speech and use the revenue to counter the message.

The proposed legislation also raises free speech issues since it targets one specific viewpoint for a tax and uses it for a message (anti-tobacco advocacy) that would presumably be opposed by those paying the tax. Generally, courts have found laws that target or limit a specific viewpoint to be a violation of First Amendment free speech protections.

It isn’t clear how the bill would apply to national publications where advertising happens to reach New Jersey audiences, but isn’t specifically targeted to them, which would include sites like StogieGuys.com. Further, the proposed tax would likely hit more dynamic and innovative types of tobacco particularly hard, which would include premium cigars where new products utilize advertising to fight for consumer attention.

Even though passage of this tobacco speech tax may not be likely immediately, this is a disturbing new type of anti-tobacco legislation that cigar smokers should be wary of. In the past, far too often seemingly unique and farfetched anti-tobacco proposals have become mainstream only a few years later.

–Patrick S

photo credit: wikipedia

When he was running for president in 2008, Senator Obama promised not to raise “any taxes” on families making less than $250,000. Fifteen days after being sworn into office, he broke that pledge by signing the SCHIP bill that included a major increase in federal tobacco taxes.

Now, five years into his presidency, Obama (himself a longtime cigarette smoker) has proposed raising taxes further. His proposed budget for fiscal year 2015 includes a 94% increase in tobacco taxes.

For cigarettes, the federal rate would jump from $1.01 to $1.95 per pack, up from 39 cents per pack in 2008. The new excise tax rates would then be increased annually to account for inflation. The rate on cigars, which is a percentage of sales as opposed to a per-unit tax, would increase proportionally, presumably with the tax cap jumping from 40 cents per cigar to upwards of 75 cents.

According to an IPCPR statement, in FY2015 the proposed tax hike is estimated to raise $78.217 million over 10 years, which the budget says would be used to fund pre-K education.

Analysis

Fortunately, this budget has pretty much zero chance of passing in its current form. As the IPCPR notes in its statement, “IPCPR does not expect this proposal to be approved by the Republican-controlled House of Representatives, but it does demonstrate that the entire suite of tobacco products is going to be on the table when legislators are searching for revenue to fund unrelated programs.”

And that is exactly the key takeaway. President Obama has repeatedly promised that tax hikes wouldn’t impact anyone not in the highest income percentiles. But, like so many areas, there’s an unwritten asterisk when it comes to tobacco.

Tobacco taxes disproportionately impact lower income income Americans, and that doesn’t include the lower income people in other countries who would lose their jobs as consumption is reduced by the high prices of increasingly climbing taxes. Yet, even a president who says he only wants to target the wealthiest Americans with higher taxes feels free to target those with lower incomes if they smoke.

Ultimately, the key point is that cigar smokers (and other tobacco users) need to make it clear to their elected officials that they are taxed enough already. If something (whether it be pre-K education or anything else) is worth paying more taxes for, then they should seek to pay for it out of taxes that impact everyone, not taxes targeted at a minority that already pays more their than their fare share.

–Patrick S

photo credit: Lisa Jack

Here’s a perfect example of the politicization of anti-tobacco “science.” A study comes out, a press release announces it, and news reports on it. And each step seems to mislead readers more than the next.

An article about a government-funded study by the National Institute of Health (which, as you might expect, doesn’t go out of its way to fund studies that show that the risks of smoking are overestimated) is titled “Cigarette Smoke Toxins Deposited on Surfaces: Implications for Human Health.”

The authors wanted to get publicity for their study so they put out a statement titled “Third-hand Smoke Shown to Cause Health Problems.” The press release included references to the sponsoring university’s policy of a tobacco-free, campus including e-cigarettes, even though it was not related to the study at all.

Next, a reporter summarized the study with an article that ran with this fear-inducing headline: “Study: Third-Hand Smoke Exposure as Deadly as Smoking.”

Note the escalating sensationalism?

Analysis

If you’re an unsuspecting person who clicks on the article from the Drudge Report (where the link appeared), then you’d assume you might as well smoke if you’re going to be in places where people have smoked before. The study says it’s just “as deadly as smoking.” That’s the claim the headline makes at least.

But you don’t have to be a scientist to understand the basic concepts of dosage and concentrations make it ridiculous to claim that smoking cigarettes (that’s what is studied, not cigars, even though the headline doesn’t make it clear) poses the same danger as spending that time in a  room where people have smoked in the past.

Not to mention the actual study involved shaving mouses’ backs so that exposure would be maximized to the strips of carpeting that had been placed in tiny, unventilated containers that were filled with smoke by a special smoking machine. Needless to say, it’s not particularly analogous to any normal human activity.

Plus, so far as I can tell, the human equivalent would be rolling up a 16 foot by 16 foot carpet, and placing it in a small closet for weeks on end while continually smoking but keeping the closet closed air-tight. Then never cleaning the carpet and laying naked on it for most of your life. Still, somehow that gets reported to the public as if it’s “as deadly as smoking,” and then politicians and activists repeat it to justify complete smoking bans. (Take a look at the bills on this page if you have your doubts.)

After all, if you can be seriously harmed not only by contemporaneous exposure to other people smoking but by exposure to a place where someone in the past may have smoked, then the only way to protect people fully is a complete ban on smoking. Which, unfortunately, is exactly what they want.

–Patrick S

photo credit: Flickr

Each Saturday and Sunday we’ll post a Quick Smoke: not quite a full review, just our brief verdict on a single cigar of “buy,” “hold,” or “sell.”

IPCPR and CRA sent a letter to the Obama Administration’s Office of Management and Budget (OMB) to argue against impending regulation of cigars by the Food & Drug Administration (FDA). The OMB is currently evaluating rules proposed by the FDA.

In 2009, President Obama signed into law the so-called “Family Smoking Prevention and Tobacco Control Act,” which required the FDA to regulate cigarettes. The bill also authorized the FDA to regulate other types of tobacco, but doesn’t require such regulation.

The nine-page letter makes the case that there is “no public health basis to conclude that premium cigars should be regulated by FDA under the Tobacco Control Act.” It states there is no legal basis for such regulation because there is no evidence that premium cigars are addictive or used by young people.

The letter notes the Tobacco Control Act gives the Food & Drug Administration “the authority to address issues of particular concern to public health officials, especially the use of tobacco by young people and dependence on tobacco,” and also should “continue to permit the sale of tobacco products to adults in conjunction with measures to ensure they are not sold or accessible to underage purchasers.”

It then goes through the scientific research, especially the National Cancer Institute’s Monograph 9, which is the most comprehensive overview of the health effects of cigar smoking. As explained in the IPCPR and CRA letter, the 248-page monograph demonstrates that handmade cigars are not addictive when used properly.

The letter, which can be read below, makes the case that if the FDA and OMB apply the law in a scientific manner, the FDA should not create any new regulations for handmade cigars. Further, should the FDA attempt to regulate handmade cigars, the arguments in the letter are likely to be the same arguments in any legal challenges to FDA regulation.

–Patrick S

photo credit: N/A

Why does the Obama White House refuse to answer a petition regarding the forthcoming Food & Drug Administration (FDA) regulation of cigars, when it has answered numerous other petitions that were filed more recently and had fewer signers?

In 2011, the Obama White House announced We The People. The concept was simple. “Individuals will be able to create and sign petitions seeking action from the federal government on a range of issues. If a petition gathers enough signatures, White House staff will review it, ensure it is sent to the appropriate policy experts, and issue an official response.”

Originally the threshold for an official response was 5,000 signatures within 30 days, but later it was raised to 25,000 signers, and more recently to 100,000. For the most part it worked as intended. According to WHPetitions.info, which tracks the 235 petitions that have reached the required threshold, 209 (88%) have received the promised response, with an average wait time of just 69 days.

But not all petitions have been answered in a timely fashion, including one about cigars. On April 11, 2012, Jeff Borysiewicz, owner of Corona Cigar Co. in Orlando, filed the petition asking the President to order the FDA to not use its discretion to regulate handmade cigars:

Dear Mr. President:

The FDA is considering the creation of regulations for the premium cigar industry. These regulations will jeopardize over 85,000 American jobs, destroy America’s “mom and pop” premium cigar retailers and manufacturers, and risk over 250,000 jobs in Latin America that produce cigars, impacting the economic/political stability in the region.

We hope you will stand up for small businesses that dot Main Street America and recognize that premium cigars are enjoyed by adults, are not addictive, and therefore do not conform to the Congressional intent of the Family Smoking Prevention & Tobacco Control Act.

Tell the FDA to leave our premium cigars alone. With this nation’s more pressing issues, harming my simple ability to enjoy a cigar should not be a priority of the government.

Cigar consumers, grassroots activists, websites, cigar sellers, and manufacturers soon banded together to promote the petition. By April 25, it reached the 25,000 signatures needed to qualify for an official response from the administration. Before the 30-day deadline ended, the petition collected nearly 39,000 signatures.

While the average response has taken just over two months, 19 months have passed and the Administration has not yet issued any answer to the 39,000 people who signed in favor of protecting cigars. Only one other petition has been pending longer.

–Patrick S

photo credit: White House