Smoker Friendly Deal Opens Doors for 22nd Century Group

CLARENCE, N.Y. — 22nd Century Group Inc.'s new agreement to manufacture the private-label cigarettes of the largest chain of tobacco stores in the United States will help the locally based company bring its own Red Sun cigarette brand to stores across the country.

One month ago, 22nd Century Group revealed that its NACSO Products LLC wholly owned subsidiary entered into a multi-year manufacturing agreement with Smoker Friendly International to produce the Smoker Friendly private-label cigarette brand. In turn, Smoker Friendly has agreed to carry the Red Sun brand in all its corporate-owned stores, according to Henry Sicignano, president of 22nd Century Group.

Sicignano's comments came Tuesday during the latest installment of Wells Fargo Securities LLC's "Tobacco Talk Conference Series" with Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities.

22nd Century Group will produce Smoker Friendly private-label cigarettes and "the revenue generated by those activities should substantially cover all of the overheard associated with our manufacturing facility in North Carolina," Sicignano explained.

In addition to Boulder, Colo.-based Smoker Friendly agreeing to carry Red Sun in its corporate-owned stores, he reported that he met with several of Smoker Friendly's independent dealers at the annual Smoker Friendly Conference & Tobacco Festival in August and they will be carrying the brand as well.

"We are very excited about the opportunity that Smoker Friendly represents for Red Sun. Smoker Friendly is the largest cigarette chain in the United States, so I can't say there are lots of other similar opportunities out there, but certainly there are other independently owned chains and specialty store groups that we plan to sell to," Sicignano noted.

22nd Century Group has also lined up about a half-dozen distributors that will offer the product to their accounts that meet the company's criteria: stores that carry super premium products, and stores located in markets that will be attractive to Red Sun.

The rollout of Red Sun nationwide comes on the heels of 22nd Century Group's acquisition of NASCO, which made the parent company a signatory of the Master Settlement Agreement (MSA). "We have greatly curtailed sales of [our] commercial brands in the U.S., Red Sun and Magic, over the last two years until we became a signatory of the MSA," explained Joe Pandolfino, CEO of 22nd Century Group. "The more sales we had as a non-MSA company, the longer and more expensive it would have been to become an MSA signatory."

Also, Pandolfino explained, many wholesalers and certain retailers won't carry non-MSA brands. Becoming a signatory to the MSA "greatly expands the potential distribution of the brands," he remarked.

22nd Century Group will start distributing its commercial brands across the country in October.