A Whole 'Nother Smoke

Even before the U.S. Government doused cigarette commercials on television last year, sales of little cigars were lighting up. Put off by evidence that cigarettes cause cancer, heart disease and other ailments, some smokers began to switch several years ago to small, mild stogies.

To boost demand, the makers of little cigars, which are still allowed to be advertised on the home screen, expanded their promotions in print and television. Cigars like Lorillard's Omega, U.S. Tobacco's Tall N' Slim and American Brands' Antonio y Cleopatra became increasingly popular. Sales of little cigars reached 878 million in the last fiscal year, and in recent months have been running about 46% ahead of that level. One reason is that last September R.J. Reynolds Tobacco Co., the nation's largest cigarette maker, brought out a new brand called Winchester. Ever since, sales have soared, and controversy has gathered around the product.

Cowboy Redux. Winchesters are shaped, packaged and sold 20 to a pack exactly like cigarettes. They contain shredded tobacco and have tan paper-like wrappers made from tobacco. Tipped with cellulose-acetate filters like cigarettes, their light smoke can be comfortably inhaled, and they are sold in some cigarette-vending machines and displayed among the cigarettes at some retail stores. The Internal Revenue Service, which classifies all tobacco products for tax purposes, initially declared that Winchesters were not little cigars. The IRS reversed itself later when Reynolds made some changes in the product's tobacco.

Winchesters gain big advantages by being classified as little cigars. Most important, for a pack of 20, federal tax on cigars is about 1.5 cents v. 8 cents on a pack of cigarettes. This helps Reynolds hold Winchesters' price below 30 cents in most places; in New York City Winchesters sell for 28 to 30 cents a pack compared with about 40 cents for other little cigars and 65 cents for cigarettes. At least one state, for its own tax purposes, has gone counter to the IRS; California officials have put Winchesters in the same category as cigarettes, raising the price to about 35 cents. Even so, little cigars do not have to carry a health-hazard warning on the pack.

Reynolds has been able to promote Winchesters in a brassy television ad campaign in test markets, including Boston, Dayton, New York City, Sacramento, Calif., and Sioux City, Iowa. The commercials feature a tall, lean cowboy who looks like a refugee from Marlboro country. He pops out of nowhere and steals another man's girl at the beach, on a lonely road or at a sidewalk cafe. Each time, the silent, saturnine cowboy offers the girl a Winchester; the two take a few puffs, exchange febrile glances and go off together as the announcer chants: "Ain't no cigarette. Ain't just another little cigar. It's a whole 'nother smoke."

Aroma. The American Cancer Society has condemned the ads as "a violation of the spirit, if not the letter of the law banning electronic cigarette advertising." Critics note that Winchesters are easily inhaled, and inhaling, experts say, is the major health hazard of tobacco. Reynolds Marketing Vice President James Hind disputes such criticism and insists that Winchesters are indeed different from cigarettes. He asserts that Winchesters are made entirely of cigar and air-cured tobaccos--as distinct from flue-cured tobacco in most cigarettes--and that they have the aroma of cigars.

In February, the Senate Consumer Subcommittee held hearings on little cigars that centered largely on Winchesters. After listening to testimony, Subcommittee Chairman Frank Moss said that he was considering asking for new legislation that would more clearly define the differences between little cigars and cigarettes, possibly including whether the products' smoke can be readily inhaled. Says Moss: "I am anxious to move swiftly and decisively to prevent the proliferation of more cigarette-like cigar products."

Executives of many little-cigar companies are worried that Winchesters' vigorous marketing campaign will result in a ban on TV ads for small stogies. For its part, Reynolds is wagering that it can create an unusually large demand for Winchesters.

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