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Wellstone Filters to offer the best
cigarette money can buy at a discounted price
Consumer Products
Tobacco
(WLSF – OTC: BB)
Wellstone Filters, Inc.
121 Farrington Avenue
Sleepy Hollow, NY 10591
Phone: 914-333-0090
Learned J. Hand
Chief Executive Officer
Interview conducted by:
Lynn Fosse
Senior Editor
CEOCFOinterviews.com
October 2004
BIO:
Learned Jeremiah Hand, 45 received his B.A. from Amherst College cum laude. In
2001, Mr. Hand founded Warren Pharmaceuticals, Inc. where he served as Vice President and
COO until 2003. He also continues to serve as Executive Director of The Kenneth S.
Warren Institute, a 501c3 medical research facility. Prior to joining the Warren
Institute, Mr. Hand served as Vice President and Financial advisor for Morgan Stanley.
Company Profile:
Wellstone Filters, Inc. has developed and patented filter material that removes certain
carcinogens and other toxins produced when tobacco is smoked -- without removing the
compounds responsible for the pleasurable effects of smoking. Wellstone seeks to market
its own brand and continue to promote material for cigarette filters that will enable
major cigarette manufacturers to provide consumers with an equally enjoyable cigarette
with substantially fewer carcinogens.
CEOCFOinterviews: Mr.
Hand, tell us the vision when you started Wellstone Filters and how has that changed?
Mr. Hand: “We have
been working with the tobacco industry since 2000. At first we had thought that we might
infuse the existing cellulous acetate filter with our compound, however further
investigation reveled that the ratios would be too high and this method of delivery would
not be practical in a production run. We were then asked if we could granulate our
patented compound and insert it into an often-used cavity filter, much like charcoal
cigarettes, which are very popular in Japan.
We developed a granular formation; it took a long
time, but we’ve come up with the formula, consistent with our patent and we are
continuing our discussions with large tobacco companies in addition to launching our own
brand."
CEOCFOinterviews: So you made some changes to your basic
plan?
Mr. Hand: “When we thought about launching our own
brand, at first glance, we didn’t want to be in the tobacco industry.
However, we did our research and developed a lot of contacts in the tobacco industry. A
ranking individual in the tobacco industry recommended Mr. Samuel Veasey, who had just
retired from Liggett and Vector Tobacco. I contacted Sam and discussed our technology; he
is now our new COO and CFO. He believes that we will do extremely well if we do a proper
job of marketing and distribution.
We have engaged many consultants, the most important
being professional tasters. It’s very interesting that we were able to take quite a
number of different brands and perform double blind taste tests--and the tasting panel
always, without exception preferred the Wellstone Filter. With one particular cigarette, a
senior taster grimaced, but after smoking the same cigarette with the Wellstone Filter, He
said, “Now that’s a delicious cigarette’. In short, we have done our due
diligence: we were able to test quite a number of different brands and, in double blind
taste tests-- the tasting panel always, without exception preferred the Wellstone Filtered
cigarette. ”
What’s interesting to note is that after smoking
a Wellstone filtered cigarette, if one field strips the cigarette, that is, tears it apart
and dumps out of the cavity chamber, the granules, (which are originally white) the
granules become quite dark and odorous. Moreover, the used granules from just one
cigarette can be detected from across the room! As one taster put it, it smells like 60
ashtrays,” so that’s why we say that it is taking out certain carcinogens,
although we haven’t done a complete testing of everything that it takes out. However,
it does take out a significant amount of certain carcinogens and tar. The bottom line is
that it is a milder, smoother, better tasting cigarette.”
CEOCFOinterviews: Is the cost of launching a new brand as
staggering as one would imagine? How will Wellstone fund this project?
Mr. Hand: “Actually, the cost is not as high as one
would assume. There are several manufacturers in the United States and we’ve
contacted many of them. There’s a lot of capacity in the marketplace so we can toll
manufacture our cigarettes at a very inexpensive price; our company does not have to go
out and buy cigarette-making machines. Furthermore, our filters will probably be made in
Europe, because they need the specialized cavity filter, which are primarily made in
Europe by one of the larger filter manufacturers.
What’s interesting to note is that there was a
study done, which revealed that approximately 8% of the U.S. cigarette sales on the market
is that of renegade brands, this is called the small market. If one would ever dare to
smoke one of these, and I’ve smoked just about every renegade cigarette out there
(we’ve often used those in our taste tests,) you will find that they are pretty bad.
Our goal is to manufacture and market a premium cigarette; one that will stand up against
any cigarette in the market at a discount price. We firmly believe that the cigarette
market is going to be a commodity market; unlike it has been in the last forty years,
where people were very brand loyal. We feel that we can make a return on investment even
though we are offering a premium cigarette at a discount price. People will buy our
cigarette for the price and they will come back because of the taste.”
CEOCFOinterviews: Please walk us through your marketing and
distribution and also the timetable for accomplishing these goals.
Mr. Hand: “Distribution has always been somewhat of a
handicap to the small manufacturer however things have changed over the years. Certainly
the internet has had an impact. We intend on hiring a sales force to promote our product
and we will have point of purchase displays and the like. Getting through to distributors
is not difficult with a discounted premium brand that sells. We are not going to do a
nationwide launch; we are going to start small and grow. We do not want to bite off more
than we can chew. There has not been a successful launch of a premium cigarette
since 1973, and that cigarette was Merit. To launch nationally would cost approximately
$75 million just in advertising and that is not what we are after; it’s not our
mission. Our goal is to start small, concentrate and grow.
We are currently working on a web-based outlet for
our brand. This would allow anyone, anywhere with an internet connection that can
offer proof of age, the ability to order our product directly."
CEOCFOinterviews: I would suspect that there is a lot of word
of mouth.
Mr. Hand: “Tremendous word of mouth, especially because
people are very price conscious. As we like to say, ‘they’ll buy it for the
price then come back for the taste’. I believe there was a study done that shows that
if one person who had been a loyal brand smoker of one brand for many years, switched to
another brand for a mere two weeks; the chances of him going back to his previous brand
were nil. We are not going to be making that many claims about a less hazardous cigarette,
but we are venturing towards that. Our company’s goal is to reinvest our profits into
research and development and make further enhancements towards a less hazardous cigarette.
The stupidest thing in the world that one can do is to smoke cigarettes; but if you are
going to smoke cigarettes, I think that one should smoke cigarettes that are less
hazardous.”
CEOCFOinterviews: You’ve announced a three for one
forward stock split. Why?
Mr. Hand: “Because
so much of the stock is closely held, we had to enhance the liquidity of the float. There
just wasn’t enough stock out there to have an efficient market, so we had to increase
the float to make stock available.”
CEOCFOinterviews: How are you currently funding the company?
Mr. Hand: “We’ve had interim funding for about a
year. We have several groups that are interested in funding us for our launch and
we’ve narrowed it down to two or three.”
CEOCFOinterviews: You have a well thought out plan and it
seems the timing is right given the changes in the industry. In closing, why should
investors be willing to put their money into Wellstone and what should they realize that
they may not notice at first glance?
Mr. Hand: “We have a tremendous potential for growth
given the size of the market in the United States not to mention foreign markets and that
growth opportunity would be reflected in our share price. We have a great management team;
and we are much more nimble than the large tobacco companies.
With regard to timing, right now there is a lawsuit
pending against large cigarette manufacturers for $280 billion, by the Department of
Justice for everything they’ve said and done since the 50’s. Although they may
not win, I believe over 120 million pages of documents have been exchanged. So I think
that while the large tobacco companies are in turmoil, now is a great time for Wellstone
to strike out on our own. We have a better cigarette and, as the saying goes, “If you
build a better mousetrap, people will beat a path to your door.” We have the best
cigarette money can buy; and even at our discounted price it’s a very profitable
endeavor.”
CEOCFOinterviews: When do you expect to launch?
Mr. Hand: “We expect to launch within a year. There are
certain FTC hurdles we must cross, one being as simple as the packaging. However, I
wouldn’t be uncomfortable estimating the time to launch for about six to eight
months.”
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