Dosal Tobacco Feels Pack of Trouble
Adding to Florida's cigarette tax is one thing, say Dosal Tobacco executives. But they think it's unfair to slap a fee on their products by retroactively including the company in a legal settlement in which it had no part.
“Given that our product sells on price, when you make our product equivalent in price to Marlboro ... inevitably, the consumer will buy the brand name. It’s sort of like buying a Geo or a Mercedes-Benz. If they’re the same price, you’re going to buy the Mercedes-Benz.”
— Dosal CEO/CFO Yolanda Nader
[Photo: Eileen Escarda]
Dosal executives say that retroactively levying the fee against their company and a few others is unfair. The company wasn’t a part of the 1997 settlement because it didn’t engage in the practices for which the other cigarette makers were sued. The company’s products face the same state and federal excise taxes as other manufacturers, and they say it’s not right, after the fact, to make Dosal part of a legal settlement in which it had no part.
They claim the fee could even destroy the company. “Given that our product sells on price, when you make our product equivalent in price to Marlboro ... inevitably, the consumer will buy the brand name. It’s sort of like buying a Geo or a Mercedes-Benz. People are going to buy the Mercedes-Benz if they’re the same price,” says Nader.
Guillermo J. Fernandez-Quincoces, outside general counsel for Dosal, says that if the state needs more money it should simply raise the excise tax across the board. The excise tax, he notes, is unrelated to the 1997 tobacco suit settlement. “This whole thing was created by the lawsuits, the settlements, and it’s an awfully hard thing to correct at this stage in the game. The majors always say, ‘Level the playing field.’ Well, there’s no way to do that.”
Nader adds that lawmakers should “not try to affect a market by ... targeting a company such as ours with a special tax above and beyond what everyone else is going to be requested to pay.”
Dosal has been in this battle before. Since 2004, the company has fought numerous bills that would have added up to 50 cents per pack on cigarettes sold by the smaller tobacco companies. Since then, Dosal executives have become adept at the political game. Last year, the company gave more than $250,000 in campaign contributions to state lawmakers and political parties. This year, Dosal has hired more than 20 lobbyists to fight the fee. “We spend so much time in Tallahassee we have an apartment one block from the Capitol,” says Fernandez-Quincoces.
But Tallahassee insiders say there is considerably more impetus to pass the bill this year. While Gov. Charlie Crist has said he opposes any new taxes amid the ongoing economic crisis, many lawmakers may find it difficult to pass up what many see as one of the few politically palatable tax increases. “The greater challenge that we have today is the fact that the state is in such a desperate need of money — it has created the perfect storm,” says Nader.
Margarita Dosal, for one, says she won’t give up the fight. “I’ll die with my boots on.”
Dosal makes about 16 million cigarettes a day at its Opa-Locka facility. Its brands sell primarily at mom-and-pop convenience stores and other independents.
[Photos: Eileen Escarda]
As part of its fight against a proposed fee on cigarettes, Dosal has been offering reporters tours of the Opa-Locka plant, where it produces approximately 80,000 cartons every day. But it’s not so much the cigarettes the company wants people to see. It’s the 130 employees who earn an average of $12 to $15 an hour and receive benefits, including full healthcare coverage. “If Dosal was put out of business, none of these employees would ever be able to find themselves anywhere near the position they find themselves in today,” says CEO and CFO Yolanda Nader.
Before introducing its 305’s brand in 2001, Dosal did contract manufacturing for other cigarette companies. From 1989-97, Dosal manufactured the Santa Fe Tobacco Co.’s line of Natural American Spirit cigarettes, which comprised approximately 90% of Dosal’s production by the end of that period. The brand has been controversial because some believe its packaging implies its cigarettes are safer to smoke because they contain no additives. Also raising hackles is the company’s use of Native American imagery — Native Americans neither own the company nor make the cigarettes.
R.J. Reynolds acquired Santa Fe Tobacco in 2002.