Sunday, 8 July 2012

Up in Smoke

Years ago, in Germany, I kind of noticed this nifty trend.  Guys who smoked.....had gotten upset about prices and taxes.  They discovered that regular tobacco in a can was taxed at a much lesser rate, but you had to roll your own smokes.  So along comes this little plastic gadget that you'd pay $10 for, and with a can of tobacco.....you could roll two-to-three packs of smokes in about an hour.  Typically in Germany, you'd save around fifty percent of your cost (tax related), but this hour or two each week was a drain on folks who did this.

Well....an interesting trend started in the US over the past decade or two....with shops opening up, which would sell you the bag or can of tobacco at a very reduced rate (again, savings on taxes), then charge you a minor fee to roll for you right in the shop.  A guy could sit there and buy three blends of tobacco and make some very unique blends, and save money while doing it.

This past week, the President signed a transportation bill into law....that both the Republican House and the Democratic Senate had signed off on.  Somewhere in the transportation bill....was this nifty change.  There was a short piece which said that a shop that sells tobacco and rolls it for you....is a industry, thus requiring some very particular regulations to occur.  The examples?  Well....there's the warning on the side of the container.  Then, there's the flavoring which had a lot of federal control over.  Then you had package and sizing regulations which were dictated by the federal government.

What happens now?  For most small smoke shops who had the machine to roll your smokes.....they have to hire a lawyer or specialist to tell them how bad things are....so figure at least $3k wasted on this two hour conversation.

A small shop with two or three employees will gauge the situation and maybe move forward.  They will have to buy tiny boxes with the warnings on the side to put your smokes into after being rolled.  Added cost?  Yeah.  They will limit you on what flavoring you can add to the smokes....so you aren't as happy as you were before.  The odd size cigarettes that customers used to ask for....like extra long or extra short?  Gone.

For a small shop.....they have a fifty-fifty chance of survival now.  Who did this?  Well....I'm guessing the big guys figured out the growth pattern and got worried.  If you were Marlboro or Camel....even a $10 million dollar industry in Louisiana would be a threat....so you have to do something....to ensure fewer of them operate.

How do you as a customer react?  I'm guessing you will find a smart engineer kid to design a $200 rolling machine that you toss your blend into and still make your fancy flavored smokes, in an extra short cigarette or extra long size.    The kid will make a thousand of these in his garage until he realizes that he can go national, and then gets some company to manufacture these at $125.  They will appear on the Shopping Network and eventually sell for $49.  This will destroy the tobacco shops and their machine business.

So in three years.....you will notice several guys visiting Gus (your neighbor) and hauling bags in, and out, of his house.  You will Gus about this.....and he will unveil his fancy rolling machine.  He'll be all proud of his cheap smokes and the new way to beat the government's taxes.

Don't worry....someone is probably drafting up a new tax on these garage-made rolling machines.  You have to stop smart folks from getting ahead....after all, this is America.