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e Invitations For All Occasions •
fifty-year-old monoplies
are not easily broken.
Yet for a brief period
earlier this year the Israeli
consumer had a choice of
which locally-made cigarette
to buy.
The preference was as
short-lived as Forum lights,
the American-blend cigarette
Haifa-born entrepreneur Ami
Hister put on the market.
After much fanfare and a
small fortune in a public rela-
tions blitz, Forum was a
marketing failure, the com-
pany, Potomac TDbacco Israel
Ltd. was a financial disaster,
and the entire episode is now
being investigated by the
State Comptroller (Om-
budsman) for possible govern-
ment mismanagement.
When Hister applied to
Israel's Ministry of Industry
and Trade in the summer of
1987 to establish a factory in
northern Israel he claimed
that the raw tobacco was go-
ing to be imported from
Potomac Tobacco (U.S.) Ltd.,
which was 90 percent owned
by Reemstma, West Gar-
many's largest cigarette
maker. His overall strategy
was to take a high quality
raw material and use
relatively cheap Israeli labor
to manufacture the finished
product.
On that basis the Ministry
of Industry and Trade gave
Potomac Israel a $1.2 million
grant to establish production
facilities in Safed. The U.S.
company invested an addi-
tional $2 million and a fur-
ther $1.2 million came from a
consortium of Israeli banks.
Hister claimed that Forum
would capture between 5-7
percent of Israel's cigarette
market (valued at $340
million, $100 million of which
is imported) in its first year.
In business for only 60 days,
his new brand seized no more
than a paltry 1.8 percent
marketshare.
Like many manufacturers
which enter a market with a
new product, initial start-up
expenses were woefully
underestimated. Hister
thought he would simply
hook-up with Dubek's
wholesalers and distributors.
When he realized that
Dubek's business was more
important to these concerns
than an upstart, he had to
establish his own distribution
channel of 30 suppliers and
offered commissions of only
4.5 percent.
The firm's pockets weren't
deep enough to finance such
an aggressive undertaking as
instead the company's debts
climbed to $4.5 million. In
mid February when income,
customs and purchase tax
weren't paid, the authorities
impounded the firm's delivery
vehicles from its Petah
Tikva's warehouse.
Hister left Israel shortly
after. His secretary claimed
he had gone abroad to search
for new investment sources;
he hasn't been heard from
since. His debt to the pur-
chase tax department alone is
enough to prevent his immi-
nent return to Israel.
Representatives of his West
German partners told a press
conference in Tel Aviv that
Hister's lack of business
acumen caused the venture's
downfall. While a few foreign
companies and Dubek were
reportedly to be initially in-
terested in Reemstma's 68
percent share in the company,
no deals have yet been
reached.
A new Israeli
cigarette was a
marketing and
financial disaster.
In early March after the com-
pany had gone into tempo-
rary receivership and the de-
tails of its financial position
were released to potential
buyers, it was reported that
Hister might have misled the
Ministry of Industry and
Trade by stating he would be
importing equipment from
the U.S. when in fact much of
it came from the West
German-based Reemstma Ld.
A five-year agreement was
signed with Reemstma, West
Germany, to buy tobacco at a
price which was significantly
higher than what could be ob-
tained elsewhere. Originally,
Hister told Ministry of In-
dustry and Trade officials he
would acquire the raw
materials from Potomac
Ibbacco (U.S.) Ltd.
The State Comptroller is
trying to determine if in fact
any cigarettes at all were
manufactured in the plant
but merely brought in from
West Germany and packaged
in Safed.
It is also demanding to
know why the Ministry of In-
dustry and Trade recom-
mended to the Israel Invest-
ment Authority to offer a $1.2
million cash grant to Hister
if in fact the company had lit-