Document oe0o6mx4VRw5zkakz4kxrRbxR

MAFCO CONSOLIDATED GROUP INC (Form 10-K, Received: 03/28/1997 00.00 00) Page 9 of 116 has taken, and will continue to take, action to protect its interests in all such trademarks. 7 RAW MATERIALS The Company has developed and is developmg long-term relationships with tobacco suppliers and is expanding its commercial and technical ties with local growers to secure a variety of sources for raw materials, ensure the quality of its raw materials and maximize cost savings The Company buys tobacco directly from a large number of suppliers in Brazil, Cameroon, the Central African Republic, Costa Rica, Germany, Italy, the Dominican Republic, Paraguay, the Philippines, Indonesia, the United States, Ecuador, Honduras, Mexico and other countries and does not believe that it is dependent on any single source for tobacco. The Company has recently expenenced shortages in certain types of its natural wrapper and premium cigar tobaccos due to the increase m demand for high quality natural wrapped cigars These shortages have caused the price of natural wrapper and premium cigar tobaccos to increase. To date, these shortages of tobacco have not materially adversely affected cigar manufacturing or the Company's profitability, but could if the Company is unable to purchase additional quantities of certain tobaccos m the future or is unable to pass increases for such raw materials onto its customers. In addition, the Company purchases packagmg materials from multiple suppliers predominantly in the Umted States No single supplier accounts for 10% or more of the Company's raw materials COMPETITION The Company is the largest manufacturer and marketer of cigars m the United States in terms of dollar sales and believes that it is the only participant in the cigar industry that is a major competitor m all subcategones of cigars at all price levels. The other three significant competitors in the cigar market in terms of 1996 market share, in order of size, are Swisher International Group Inc., General Cigar Co Inc , a division of Culbro Corporation during 1996 and Havatampa/Phillies Cigar Corporation, a privately held corporation In addition, Tobacco Exporters International Limited (a subsidiary of Rothmans International) is a significant competitor in the little cigar market The Company believes that its leading market position in the cigar industry is due to its strong, well-known brand names, broad range of product offerings within both the mass market and premium segments of the Umted States cigar market, commitment to and reputation for manufacturing quality cigars, marketing expertise, close attention to customer service, efficient manufacturing operations and an experienced management team. If and when normalization of relations between the Umted States and Cuba occurs, the entry of Cuban premium cigars into the United States market could increase competition in the Company's core premium cigar market Through its Allied Tobacco Division in Richmond, Virginia, the Company competes in all areas of the U.S pipe tobacco business including branded, pnvate label and bulk tobacco. The Company believes it is the fourth largest manufacturer in the U S of pipe tobacco, in terms of dollar sales, and its largest competitors m order of size are Lane Limited, John Middleton Inc. and UST Inc THE TOBACCO INDUSTRY Regulation httrr//www edearoro com/EFX dll/EDGARnro dll?FetchFihngHTMLl9ID=969943&Ses . 10/19/2003