Tobacco:
A Boom in Homemade Smokes
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Rising Prices
Light Up Sales
Of Rolling Kits
By Greg Jaffe and Christopher J. Chipello
05/11/1999
The Wall Street Journal
Page B1
(Copyright (c) 1999, Dow Jones & Company, Inc.)
Montreal -- THE DAY after the historic U.S. tobacco settlement was signed in November, Arnold Kastner got a call
from his factory in Plattsburgh, N.Y., telling him it had received orders for 100 cigarette-rolling machines.
Two weeks later, the same factory called again. This time it had 10,000 new orders. "When everyone wants
something at the same time, what can you do? We couldn't meet demand," says Mr. Kastner, president of family-
owned CTC-Canada Inc.
The cigarette-rolling machines CTC and a few other players make are tabletop contraptions that smokers use to
make their own filtered cigarettes. The machines, which pack loose tobacco into an empty paper cigarette tube
attached to a filter, save smokers lots of money, if not lots of time.
For the first time since the Great Depression, sales of the once-quaint cigarette-rolling machine are soaring in the
U.S., the result of steadily climbing cigarette prices and an obscure tax loophole. CTC is on track to sell more than a
million cigarette-rolling machines in the U.S. this year, up from roughly 250,000 last year, says Mr. Kastner's son
Lorne, who oversees U.S. sales.
Brown & Williamson Tobacco Corp., a unit of British American Tobacco PLC and the other major player in rolling
machines, also reports a sales boom. A spokesman for the Louisville, Ky., company says smokers are snapping up
about 125,000 of its cigarette-rolling machines each month, a sevenfold increase since last year. Tobacco shops,
meanwhile, have waiting lists of customers for the next shipment of filtered cigarette tubes and machines. Smokers
are hoarding supplies.
"When the last batch of cigarette tubes came in, I bought 2,000," says Jerry Craig, who lays cable for a telephone
company and lives outside Chattanooga, Tenn. He began rolling his own six months ago. "I don't plan on sharing
them," he warns.
The boom in roll-your-own cigarettes began in the winter, after the landmark settlement of litigation between states
and tobacco companies prompted manufacturers to raise prices. At about the same time, a number of states raised
cigarette taxes. The resulting steep rise in prices has been a bonanza for what the tobacco industry calls the make-
your-own segment.
Sales of loose tobacco are booming, too. Because federal authorities and many states don't collect taxes on loose
tobacco, prices have remained relatively stable. The federal government doesn't track sales of loose tobacco, but
Brown & Williamson, the major U.S. marketer of the product, says since the settlement, sales of loose tobacco have
risen about 30%. The company expects 1999 sales of loose tobacco plus make-your-own accessories to total about
$110 million.
As federal taxes on cigarettes climb from the current $2.40 a carton to $3.90 a carton in 2002, companies are betting
the make-your-own boom will continue. Brown & Williamson, CTC and other companies are ramping up
production. "Our [make-your-own] sales are through the roof," says Mark Smith, a Brown & Williamson
spokesman.
To gauge the market's potential growth, some roll-your-own boosters look to the Netherlands and Germany, where
cigarette taxes are among the highest in the world. In both of those countries, roll-your-own cigarettes account for
about 40% of the cigarette market, according to World Tobacco, an industry trade publication.
The cost difference between smoking traditional cigarettes and smoking the home-rolled variety can be staggering.
For example, in California, which has some of the highest cigarette taxes in the nation, a 10-pack carton of Marlboro
cigarettes currently retails for about $30. By using a rolling machine and empty cigarette tubes, smokers can roll
their own carton for about $12. For a smoker with a two-pack-a-day habit, that amounts to a savings of more than
$1,300 a year.
Antismoking advocates aren't pleased. "It certainly looks like an end run around paying cigarette taxes," says Steve
Rosa, a spokesman with the tobacco-tax-policy branch of the American Cancer Society in Washington, D.C.
Until recently, cost-conscious Canadians and hobbyists who wanted to mix distinctive blends were the primary
customers for CTC's rolling machines and cigarette tubes. Some artists, prisoners and other diehard types use flat
papers to finger-roll unfiltered cigarettes. Rolling machines offer a distinct advantage: They make filtered cigarettes.
There is no actual rolling involved. A smoker inserts an empty paper cigarette tube with a filter attached over a small
opening at the front of the machine, then packs loose cigarette tobacco into a long, thin chamber inside. The
machine inserts the tobacco into the prerolled tube.
"I can sit down in front of the television and make a carton in about an hour," says Katherine Dias, a business-
administration student in Hamford, Calif., who began rolling her own in January. "It's easy. Without one of these
little machines, there is no way I could afford to smoke."
The rolling machine Brown & Williamson distributes, often as part of a starter kit of empty tubes and loose tobacco,
is made by Gizeh-Werk Gmbh of Germany. CTC makes devices ranging from a $5 plastic model to the $54
Supermatic machine. At the high end, some of Mr. Kastner's machines look very similar to the ones his father
brought to Canada from Germany, when the family immigrated in the 1930s.
Beginning in 2002, the federal government is set to impose a new tax on loose cigarette tobacco that amounts to 55
cents for a carton's worth. That is still far less than the projected rate for cigarettes.
"It's a real pain, even with the machines," says William Fader, executive director of the Retail Tobacco Dealers of
America, based in Baltimore. "The cigarette comes out fine. But there is no way I would ever make my own. I don't
have that kind of time."
The sales surge, however, has the 73-year-old Mr. Kastner dreaming of riches. Only a few months ago, he was
contemplating semiretirement from the family business, based in a cluttered industrial section of Montreal. A former
smoker who suffers from a circulatory condition and moves around the office in a slow shuffle, Mr. Kastner says
these days he smokes only when testing new products.
"I predicted this would happen one day," he says of the boom. "Everyone thought I was crazy. It just took longer
than I thought it would."