Sunday, January 12, 2003

Tobacco warehouse sole cigarette maker in Ky.


'Best' line fighting for share of market

By Wayne Tompkins
The (Louisville, Ky.) Courier-Journal

CYNTHIANA, Ky. - Philip Morris was shutting its Louisville operations. Tobacco company executives sat lined up before Congress like ducks in a shooting gallery. Federal tobacco growing quotas were slashed, as cigarette consumption dropped and manufacturers sailed overseas for union-resistant pastures.

Against this grim backdrop in 1999, Mike Ammerman; his father, Bob; and mother, Betty, put up their farm and tobacco warehousing business as collateral, bought used machinery from the 1950s - and started a cigarette company.

Farmer's Tobacco Co. is now working its 55 employees in two shifts, 24 hours a day on weekdays and half a day Saturday. Production has been averaging about 17,000 cartons a day.

The modest success came through grueling months of retail hardball and the patience of winning smokers and retailers one at a time.

"The biggest challenge is getting them in stores and keeping them in stores," Mike Ammerman said of his cigarettes.

The Kentucky's Best line of smokes is fighting an uphill, but so-far-promising, battle for a foothold in the cutthroat world of tobacco retailing. It is Kentucky's lone remaining manufacturer of cigarettes.

(Brown & Williamson Corp. is headquartered in Louisville but makes no cigarettes in Kentucky.)

Mike Ammerman, the fourth-generation progeny of Bavarian immigrants who have grown Kentucky burley since their arrival in the state, said the family had little choice but to try the business.

Major tobacco companies are shifting to contract purchases and away from tobacco auctions, cutting the warehousers out, Mr. Ammerman said.

The Ammerman warehousing operation sold more than 14 million pounds of tobacco for farmers in 1997, but projected sales below 1 million pounds in 2002, he said. "That's not going to pay property taxes or insurance."

The family tried other crops, but found little money in them. Then came the idea of buying the tobacco in their warehouses, much of it from the Kentucky Burley Tobacco Growers Cooperative Association, and making cigarettes.

The first cigarettes from the Ammermans' vintage assembly line were sold in March 2001. Though a local wholesaler signed on early, finding a market was a challenge.

"We'd ride the roads in rural Kentucky, go in a store in a small town or a country store and say, `Hey, this is what we're doing, would you like to put these in?' " Mr. Ammerman said.

Just over 2,000 retailers carry the brand through wholesalers in Kentucky and 10 surrounding states.

"It's taken a little while to take off, but now we have trouble keeping them on the shelf," said Doug Edwards, manager of Brownsboro Spirit Shoppe in Louisville, which has carried Kentucky's Best for more than a year. "We move a lot of other cigarettes that are actually cheaper, but the name doesn't hurt either. People ask for them and buy them by the carton."




LOCAL BUSINESS NEWS
Clairol's potential about to be tapped
As costs rise, wedding insurance gains in popularity
What's the Buzz?

ENTERPRISE
Owner anticipated future of nursing home business
Estimate time, costs in plan
Business Notebook

LISTS
This Week's Business Meetings
Commercial Real Estate Projects & Transfers
Bankruptcies

U.S. & WORLD BUSINESS NEWS
Wartime gas prices: $1 a gallon or $5?
Outcome satisfies karaoke inventor
Tobacco warehouse sole cigarette maker in Ky.
Miller Brewing closing Tumwater plant