General Tobacco, Mayodan, N.C., stopped producing cigarettes and other tobacco products at its North Carolina plant several months ago and is winding down operations, J. Ronald Denman, executive vice president and general counsel, told the newspaper. He said the closely held company, which is [image-nocss] formally called Vibo Corp., recently has been selling off inventory in foreign markets.
The maker of brands such as Bronco, Silver and GT One took market share from larger rivals after it began selling cigarettes in 200, the report said, and it posted annual sales of $335 million by 2004. But its U.S. market share fell to less than 1% from almost 2% in recent years, amid intense competition from other discounters.
Denman said General Tobacco struggled to keep its prices competitive with those of rivals such as Vector Group Ltd.'s Liggett Vector Brands Inc. while meeting the demands of the Master Settlement Agreement (MSA), the landmark pact between 46 state attorneys general and cigarette makers. Under the $206 billion agreement, companies agree to marketing restrictions and make payments to reimburse states for the costs of caring for sick smokers.
General Tobacco joined the accord in 2004, six years after it was signed by major tobacco companies, and agreed to make payments to the states for both ongoing sales and those it recorded prior to joining the agreement.
The company has made about $600 million in payments to states, the report said, but early this year, Washington, North Carolina and other states barred the company from selling cigarettes because it had not made certain payments for cigarette sales prior to 2004. The bans did not affect filtered cigars and roll-your-own tobacco sold by the company.
Denman said General Tobacco has informed states that it will not be able to make the back payments.
In 2008, General Tobacco sued many AGs and tobacco companies, alleging that the MSA violated federal antitrust and constitutional law. The company argued that rivals such as Liggett enjoyed terms under the agreement that gave them unfair competitive advantages. A U.S. judge in Kentucky dismissed the case last year. General Tobacco filed an appeal this year, and continues to pursue it, Denman said.
He added that the company does not "want to throw in the towel" on the legal challenge, and said there is a chance it would get back into the cigarette business, depending on the outcome. "But as we sit here today having lost just about everything," he told the Journal, it plans to shut down.
Global Tobacco was founded in 1997 by its president, Vidal Suriel, a former Florida grocery-store operator.
According to its website, General Tobacco launched its first brand of cigarettes, GT One, in 2000. Due to the success and demand of GT One, it said, the company unveiled Bronco cigarettes the following year and Silver brand cigarettes in 2002. In 2006, it introduced Vaquero Little Cigars and 32 Degrees menthol cigarettes. In recent years, it began scientifically researching and investigating new tobacco industry techniques; it implemented Low Ignition Propensity (LIP) paper for its cigarettes, which use thin bands of less porous paper to slow down the burn.
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