Louisville, Tobacco Farmers Feel Loss of Cigarette Company

TBO ^ | 10/28/03 | Bruce Schreiner

[Tumbleweed_Connection]

LOUISVILLE, Ky. (AP) - For this city, the loss of Brown & Williamson Tobacco Corp. uproots one of the last remnants of a once-vibrant tobacco industry. For beleaguered tobacco farmers, it injects more uncertainty into a vocation already at a crossroad.

Brown & Williamson, headquartered in Louisville since the 1920s, will leave its old Kentucky home, taking with it 450 jobs after it merges with rival R.J. Reynolds Tobacco Co., based in Winston-Salem, N.C.

The deal announced Monday combines two of the nation's largest tobacco companies. The merged operation will be called Reynolds American Inc.

"It's an emotional loss because of the history and because of how much they have contributed to this community," said Carmen Hickerson, spokeswoman for Greater Louisville Inc., the metro chamber of commerce.

Paul Coomes, a University of Louisville economics professor, said Tuesday that B&W's departure would drain more professional jobs from the city and increase unoccupied office space downtown. The city also will lose a generous contributor to charitable and civic groups, he said.

"As you go around and lift up rocks, you are going to see their money behind a lot of things in town that we all benefit from," Coomes said. "So you hate to see it go."

B&W spokesman Steve Kottak said the company's payroll, retiree pensions, corporation contributions and local and state taxes amounted to more than $200 million annually.

The company expects to complete its move from Louisville by mid-2004, Kottak said.

Will Snell, a University of Kentucky tobacco economist, said the deal reflected difficulties in the cigarette industry. In recent years, cigarette makers have been hampered by declining smoking rates, litigation, smoking restrictions and the rise of cheaper generic brands.

"Unfortunately, the tobacco industry today is certainly more about business than relationships with employees and even farmers," Snell said.

"It's gotten so extremely competitive that the cultural history that has developed over time within the so-called tobacco family has somewhat disappeared."

B&W's departure nearly tamps out the city's long association with the tobacco industry. For decades, Louisville was a cigarette hub because of its transportation links and proximity to burley tobacco. Three years ago, Philip Morris closed a manufacturing plant here, costing 1,400 jobs.

"Louisville has paid a pretty high price in this whole 'war on tobacco," said Gary Huddleston, a spokesman for the Kentucky Farm Bureau.

U.S. Sen. McConnell, R-Ky., called the loss of B&W "very disappointing," and further evidence that the "tobacco business is in dramatic decline."

For tobacco farmers, however, the merger could eventually reap benefits, said Patrick Jennings, also with Kentucky Farm Bureau.

The combined company could gain the clout to compete with industry giant Philip Morris USA in buying contract leaf from farmers, he said.

"Part of that competition will be going after the best growers and could get into price wars to get those best growers," Jennings said.

Historically, RJR and B&W have been important buyers of Kentucky tobacco, Snell said. However, their presence on leaf markets diminished in recent years in part because of cheaper foreign leaf prices, he said.

RJR has not had as much of an appetite for U.S. leaf as other cigarette companies, some industry observers said.

"Reynolds certainly has not bought the percentage of leaf from the domestic market relative to their domestic market share," Snell said.

Huddleston said farm officials hope the merged company's buying habits for U.S. tobacco "more closely resemble Brown & Williamson's pattern than it does Reynolds' pattern."

RJR said it doesn't disclose its tobacco purchasing practices. RJR spokeswoman Jan Smith said it was premature to discuss "specifics of what may or may not change" once the companies merge.

Meanwhile, Snell said he didn't know what impact, if any, the merger would have on negotiations in Congress to pay tobacco farmers to exit a federal price-support program in place since the 1930s.

RJR and B&W both opposed any proposed buyout linked to giving the Food and Drug Administration oversight of tobacco products. Philip Morris has been a supporter of FDA regulation.

"It's such an uncertain time right now in tobacco that it's really hard to talk with any certainty about what the future holds," Huddleston said.

[mallardx]

Can you say TRIAL LAWYERS?

[semiarticulate]

"Will Snell, a University of Kentucky tobacco economist, said the deal reflected difficulties in the cigarette industry. In recent years, cigarette makers have been hampered by declining smoking rates, litigation, smoking restrictions and the rise of cheaper generic brands."

Thank God we have experts to connect the dots!!