The second-largest cigarette maker in the U.S., Reynolds American, is trying to acquire the third-largest cigarette company in the U.S., Lorillard. The deal speaks volumes about the current and future state of the tobacco industry.
While smoking has declined in the U.S. (18 percent of adults smoke here), the U.S. remains a major profit center for the tobacco industry – while it accounts for only 5 percent of volume, it produces 14 percent of all revenue globally. Tobacco firms have been raising prices to offset declining demand. Consolidation helps cut costs, and a duopoly could make raising prices in the future even easier.
Also factoring into the deal: Lorillard owns Blu e-cigarettes, a market leader in a small but persistent cigarette alternative. Finally, Lorillard also owns menthol-flavored Newports. Premium menthol-flavored cigarettes like Newports are the one area of the industry where sales are flat or barely declining, and Newports have very strong brand loyalty.
If the cigarette industry is slowly burning out, Reynolds is buying a few extra years on its life.
Graphic by Shea Huffman/Marketplace
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The federal Highway Trust Fund runs out of money at the end of the month. It's been paid for by gas taxes since 1993, but raising taxes is a tough political sell, and right now Congress can't agree on what to do about it.
Meanwhile, Jersey City, NJ is in the middle of a construction boom.
Those two things may seem unrelated, but Jersey City Mayor Steven Fulop says if the fund runs out of money, it could put the kibosh on the growth.
And to understand, it’s important to take a look back at the recent history of Jersey City.
“If you go back two decades, this was an example of urban decay,” Fulop says. “Most of downtown was rail yards. And if you go back twenty some odd years, they were giving these brownstones away. This was actually the most financially and economically challenged portion of the city that we're standing in right now.”
Now, construction cranes tower above the city in almost every direction.
“We're going to overtake Newark as the largest city in New Jersey, and I can comfortably say that the 20 largest buildings in the state will be in Jersey City in the next four years,” Fulop says. “We're building 54 stories, 60 stories, 70 stories, another 55 story, I mean I could go on and on. And if you walk down here you'll see the cranes, and activity, and people working … those are generally concentrated around mass transportation.”
Building around mass transit has been a cornerstone for Jersey City. And a good portion of the money that goes towards mass transit in the state comes from the Highway Trust Fund. In New Jersey, the average person pays about $600 per year in those taxes.
Fulop says if that money were to dry up, then contractors, developers and others in the building industry would lose faith in future funding and slow down – or stop – ongoing projects.
“And once they stop, they’re hard to get back started,” Fulop says.
The Highway Trust Fund was created in 1956. It's been funded by gas taxes, but the tax isn't tied to inflation, so it's gotten less bang for its buck since the 90s. And like many things in Congress, the trust fund is a fight. Conservatives say the program is bloated, and needs to be reformed. But Mayor Fulop, a Democrat, doesn't see it that way.
“At the end of the day, it's a partnership between federal, state and local,” Fulop says. “And anybody who says that government doesn't have a role in building infrastructure is an absolute moron. I don't know how else to say it.”
Right now, there are a couple plans to pay into the fund lasting until next Spring, but no long term solutions have been agreed upon.
This story comes from our Tumblr museum of regret: I Can't Believe I Bought That
I HAVE A BLACK BELT IN THE ART OF BUYER’S REMORSE
For me, the statute of limitations on not feeling stupid about a purchase is never. Many is the time I have ordered plumbing parts online or electronic do-dads on Ebay, only to find out they were close but not, in fact, compatible. One purchase, however, soars high above the rest in provoking a shattering sense of self-loathing, buyer’s remorse to the twelfth power, or as Edith Piaf never sang, “Oui, je regrette.”
Back when Otis was a little kitty, my spouse Mary and I were wandering a pet store when a curious contraption caught our eyes. It was a kit that promised to teach the cat to use the toilet, meaning the actual toilet bowl. If this thing worked there would be no more cat litter, no more scooping, just a dainty flush now and again. This, of course, would be the answer to a dream.
I remember Mary being appropriately skeptical but game to give it a shot. She figured at $19, or whatever it was, the purchase would be worth the risk. I, by contrast, was all in, fully convinced this was the $19 that would change everything.
Inside the plastic wrap of this kit we found two items: a step-by-step instruction sheet and a stiff piece of cardboard the size of a toilet seat, embossed with a series of concentric circles like the elevation lines of a low-resolution topographical map. The concept was this: we were to lay the cardboard flat on the toilet and in the initial phase of training, place a cluster of kitty litter in the middle of the platform so Otis would get the idea. Over time, once the cat got used to doing his business on this cardboard and porcelain perch, we would tear out the inner-most circle of cardboard to make a hole. Next, we waited a few more days and as kitty got more comfortable, we were to progressively enlarge the hole by stripping out ever-widening rings of the cardboard. Eventually, like the grin on the Cheshire cat, all the cardboard would be gone, leaving just the maw of the toilet upon which kitty could balance, let ‘er rip and be done.
Here was the problem: The cat was having none of this. When we tried to gently place him on the cardboard, he flailed in that "Are you out of your freaking mind?" way that cats get. When we finally lulled him into giving it the old college try and he accomplished the initial leg of his mission, we celebrated. This just might work.
Then I made an error that put the word “cat” into “catastrophic.” With Otis still nosing about the bathroom, I hit the handle on the commode. It was one of those high-pressure, low-flow toilets that goes beyond flushing and seems to detonate with pyrotechnic ferocity. The cat was alarmed. I was alarmed. The cat would forever associate the toilet with the explosion of flushing and that was that.
Perhaps with a different toilet, different humans or a different cat, the experience would have been different. I sincerely hope that others have found success with the kitty kit. But to this day and every single day, we are reminded of this one purchase. The memory is triggered every time we clean a cat box, enveloped in the acrid stink of buyer’s remorse.
He worked for The Tennessean and took leave to assist Robert F. Kennedy in the White House and during the senator's 1968 presidential campaign. He later helped shape USA Today.
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