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The 200-Year-Old Business That Could Go Up In Smoke

It’s survived world wars, upheavals, recessions, and is still standing. Sturk’s Tobacconists must be one of the oldest operating stores in Africa. But now it’s battling against the world crackdown on smoking.

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It is the faint whiff of tobacco that turns your head as you walk through Cape Town’s cobbled Greenmarket Square. All around are tourists with coffee in hand and people talking business in sidewalk bars. Everything you can see is like modern cosmopolitan to the cries of hawkers selling African art under canvas.

Here among the new, you will find – amid clouds of smoke – the ancient, in terms of African shops.

Sturk’s Tobacconists opened its doors in Greenmarket Square on August 1, 1793, and hasn’t closed them. The business seems durable to say the least. In recent times #FeesMustFall students fought pitched battles near the doorstep of Sturk’s – even then it did not close its doors.

This 223-year-old store, which is older than the Louvre in Paris by nine days, is now owned by Alan Phillips, a former customer and bartender from Benoni in Johannesburg.

“Smoking a pipe isn’t something you just pick up and smoke and enjoy. There is a process. It’s not for everybody. The pipe bug hit and then I became a client of Sturk’s,” says Phillips, leaning on the store’s hardwood counter.

Phillips is not just the owner, he is also a student of the history of the store. The likes of Cape governors and even at one time Winston Churchill visited it.

“Originally the entire building was [Hendrick] Sturk’s. He was a general dealer. At that stage the Cape governor’s house is where the South African Museum in Company’s Garden is. This was the CBD, it’s where everything happened. This square is where you bought your vegetables.”

Inside are relics that tell the passage of time. Phillips weighs his blended pipe tobacco on the company’s 200-year-old scale. Around him are ceramic pots that have also survived a couple of wars. Sitting next to them are vials of tobacco flavorant gathering dust in the rafters. Even World War II posters, found in a bunker in France, were brought here to add to the flavor of another time.

“Look, we’re a specialty shop. You can buy cigarettes pretty much anywhere, the street vendor the grocer, wherever.  Tobacco is our bread and butter. We blend it ourselves. When I talk about a niche business, you cannot buy a blend we produce anywhere other than where we are sitting now. We do cigarette shag and pipe tobacco blended to our own specifications, through age-old recipes.”

The sweet scent of tobacco may have layered onto these walls over two centuries, but in the uncertain 21st century the store is suffering hard times.

“It’s hard to pinpoint the exact cause. 2015 and 2016 have not been good years. The three main factors are new smoking laws, global economics and South Africa visa laws which affected us severely.”

Ten years ago, Sturk’s would sell an average of at least 80 kilograms of tobacco blend a month. By 2011, it was 70 kilograms. These days, Phillips sells 50 kilograms.

The tobacco industry has taken a huge knock globally as tighter health restrictions have been imposed. In 2013, Phillips says the South African Department of Health cracked down on smoking laws. These included store owners using designated smoking shelf zones, restrictions on advertising, and higher taxes.

Phillips’ main worry is a pending amendment which, if enforced, could reduce his shelf space to a mere four square meters.

“This business sells tobacco related items only. Four square meters is going to be a problem. I cannot fit a thousand stock units in four square meters, it’s absolutely impossible.”

“I can understand the Department of Health’s point of view, it’s for health reasons. But the revenue generated through tobacco tax is huge,” he says.

Coupled with tighter laws is a decrease in tourists and a grinding South African economy.

“Although, the business can’t count on the tourism factor, as we recently found out with the visa debacle that was happening with the unabridged birth certificates, it knocked down tourism figures significantly, and our business.”

On this morning, a number of curious customers trickle in. Phillips gets up to weigh out a 50-gram pack of his tobacco blend which sells for R55 ($4) to a pipe smoker. Another customer gets his lighter filled at no charge.

“I generally buy loose tobacco in five-kilogram bundles which we then blend and repack. I try to keep cigarette turnover under 20% of total. The margins on cigarettes are very low,” he says.

Opposite the counter is Phillips’ pride and joy, an assortment of smoking pipes, hanging in fluorescent light for all to see.

“What you see here, hasn’t been purchased quickly to give a look to the shop. This is the way the shop has always looked. I’m sitting on around 150, I haven’t bothered to count in the last year or two,” he says.

Some of the pieces in Phillips’ collection can cost as much as R3,000 ($225). The collection may not be up for sale, but Phillips does sell high-end pipes on the rare occasion. His biggest sale was an order for a Dunhill Christmas pipe for R9,000 ($670).

“[Pipe smoking is] exclusive, you don’t see many men with pipes, you hardly see any women with pipes. The options of the tobacco are almost endless. There is a difference in aromas, in flavors and one can blend to ones heart’s content to make something bespoke for you.”

Phillips holds a favorite from his collection. The South African-made pipe has a long stem – called a lovat – that has been rusticated in a well-known Italian Castello style.

“New, this guy would retail at R3,000. Which one would think is rather a lot of money, but considering the cost of the material and the time required to produce a pipe like this, it means the pipe maker is only earning about R100 an hour. Which is not fair on the pipe maker, but it is what it is.”

As it becomes more difficult to sell his wares, Phillips is doing the best he can to swim with his head above water.

“Talking about adaptation though, we’ve supplemented the decline in volume with newer smokeless products like snus and vaping.”

As the discussion finishes he gets up from the counter and adds: “Survival is about adaption, you see.”

Survival is going to be as tough as being a smoker in urban Africa.

Entrepreneurs

Leaving Airplane Middle Seats Empty Could Cut Coronavirus Risk Almost In Half, A Study Says

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A new research paper from the Massachusetts Institute of Technology estimates that blocking out the middle seat on airplanes could cause the likelihood of passengers being infected with coronavirus to drop by nearly half, just as some airlines are starting to book flights to capacity again.

KEY FACTS

  • According to the MIT paper (which has not been peer reviewed) the chances of catching coronavirus from a nearby passenger on a full airplane when all coach seats are filled is about 1 in 4,300.
  • However, those odds drop to 1 in 7,700 when all the middle seats on board are left empty, the paper states.
  • Taking into account a 1% mortality rate according to the statistical model, the likelihood of dying from a coronavirus case contracted on a plane is far more likely than dying in a plane crash, which has odds of about 1 in 34 million, the paper stated. 
  • In “Covid-19 Risk Among Airline Passengers: Should the Middle Seat Stay Empty?” the author of the study, Arnold Barnett, wrote that his analysis aims to be “a rough approximation” of the risks involved in flying during the coronavirus pandemic.
  • “The airlines are setting their own policies but the airlines and the public should know about the risk implications of their choices,” Barnett told ZDNet this week.
  • The paper comes just as more flight carriers, like American Airlines, begin booking flights to full capacity despite surges of the virus across the country. 

KEY BACKGROUND

The coronavirus pandemic has been disastrous for the travel industry, and has especially hurt airlines. Major American carriers including American, Delta and United have asked employees to take buyouts and early retirement, Forbes reported, in a bid to cut costs as the pandemic causes them to bleed cash. United Airlines warned this week that it could be forced to furlough 36,000 jobs, or nearly half of its American workers, starting in October if travel doesn’t pick up. In April, the airline estimated that in the first quarter it lost $2.1 billion pre-tax, Forbes reported, and was losing $100 million a day in the last half of March. Boeing CEO Dave Calhoun said in May he expects a major airline to go out of business in 2020 as a result of pandemic pressure.

NEWS PEG

American Airlines announced two weeks ago it would begin booking middle seats again starting in July, although the carrier will allow passengers to switch from a full flight without any extra cost, Forbes reported. United is also selling tickets for middle seats. American Airlines took flak earlier this month when Sen. Jeff Merkley (D-Ore.) tweeted a picture of his crowded flight

WHAT TO WATCH

If airlines continue to extend their policy of keeping middle seats blocked off or if they’ll be forced to book to capacity to turn a profit. Southwest and Delta have both committed to keeping their middle seats blocked off until at least the end of September, while JetBlue will do the same through July, according to the Washington Post.

Carlie Porterfield, Forbes Staff, Business

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Entrepreneurs

From The Arab World To Africa

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Sheikha Hend Faisal Al Qassimi; image supplied

In this exclusive interview with FORBES AFRICA, successful Dubai-based Emirati businesswoman, author and artist, Sheikha Hend Faisal Al Qassimi, shares some interesting insights on fashion, the future, and feminism in a shared world.

Sheikha Hend Faisal Al Qassimi wears many hats, as an artist, architect, author, entrepreneur and philanthropist based in the United Arab Emirates (UAE). She currently serves as the CEO of Paris London New York Events & Publishing (PLNY), that includes a magazine and a fashion house.

She runs Velvet Magazine, a luxury lifestyle publication in the Gulf founded in 2010 that showcases the diversity of the region home to several nationalities from around the world.

In this recent FORBES AFRICA interview, Hend, as she would want us to call her, speaks about the future of publishing, investing in intelligent content, and learning to be a part of the disruption around you.

As an entrepreneur too and the designer behind House of Hend, a luxury ready-to-wear line that showcases exquisite abayas, evening gowns and contemporary wear, her designs have been showcased in fashion shows across the world.

The Middle East is known for retail, but not typically, as a fashion hub in the same league as Paris, New York or Milan. Yet, she has changed the narrative of fashion in the region. “I have approached the world of fashion with what the customer wants,” says Hend. In this interview, she also extols African fashion talent and dwells on her own sartorial plans for the African continent.

In September, in Downtown Dubai, she is scheduled to open The Flower Café. Also an artist using creative expression meaningfully, she says it’s important to be “a role model of realism”.

She is also the author of The Black Book of Arabia, described as a collection of true stories from the Arab community offering a real glimpse into the lives of men and women across the Gulf Cooperation Council region.

In this interview, she also expounds on her home, Sharjah, one of the seven emirates in the UAE and the region’s educational hub. “A number of successful entrepreneurs have started in this culturally-rich emirate that’s home to 30 museums,” she concludes. 

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Entertainment

Kim Kardashian West Is Worth $900 Million After Agreeing To Sell A Stake In Her Cosmetics Firm To Coty

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In what will be the second major Kardashian cashout in a year, Kim Kardashian West is selling a 20% stake in her cosmetics company KKW Beauty to beauty giant Coty COTY for $200 million. The deal—announced today—values KKW Beauty at $1 billion, making Kardashian West worth about $900 million, according to Forbes’estimates.

The acquisition, which is set to close in early 2021, will leave Kardashian West the majority owner of KKW Beauty, with an estimated 72% stake in the company, which is known for its color cosmetics like contouring creams and highlighters. Forbes estimates that her mother, Kris Jenner, owns 8% of the business. (Neither Kardashian West nor Kris Jenner have responded to a request for comment about their stakes.) According to Coty, she’ll remain responsible for creative efforts while Coty will focus on expanding product development outside the realm of color cosmetics.

Earlier this year, Kardashian West’s half-sister, Kylie Jenner, also inked a big deal with Coty, when she sold it 51% of her Kylie Cosmetics at a valuation of $1.2 billion. The deal left Jenner with a net worth of just under $900 million. Both Kylie Cosmetics and KKW Beauty are among a number of brands, including Anastasia Beverly Hills, Huda Beauty and Glossier, that have received sky-high valuations thanks to their social-media-friendly marketing. 

“Kim is a true modern-day global icon,” said Coty chairman and CEO Peter Harf in a statement. “This influence, combined with Coty’s leadership and deep expertise in prestige beauty will allow us to achieve the full potential of her brands.”

The deal comes just days after Seed Beauty, which develops, manufactures and ships both KKW Beauty and Kylie Cosmetics, won a temporary injunction against KKW Beauty, hoping to prevent it from sharing trade secrets with Coty, which also owns brands like CoverGirl, Sally Hansen and Rimmel. On June 19, Seed filed a lawsuit against KKW Beauty seeking protection of its trade secrets ahead of an expected deal between Coty and KKW Beauty. The temporary order, granted on June 26, lasts until August 21 and forbids KKW Beauty from disclosing details related to the Seed-KKW relationship, including “the terms of those agreements, information about license use, marketing obligations, product launch and distribution, revenue sharing, intellectual property ownership, specifications, ingredients, formulas, plans and other information about Seed products.”

Coty has struggled in recent years, with Wall Street insisting it routinely overpays for acquisitions and has failed to keep up with contemporary beauty trends. The coronavirus pandemic has also hit the 116-year-old company hard. Since the beginning of the year, Coty’s stock price has fallen nearly 60%. The company, which had $8.6 billion in revenues in the year through June 2019, now sports a $3.3 billion market capitalization. By striking deals with companies like KKW Beauty and Kylie Cosmetics, Coty is hoping to refresh its image and appeal to younger consumers.

Kardashian West founded KKW Beauty in 2017, after successfully collaborating with Kylie Cosmetics on a set of lip kits. Like her half-sister, Kardashian West first launched online only, but later moved into Ulta stores in October 2019, helping her generate estimated revenues of $100 million last year. KKW Beauty is one of several business ventures for Kardashian West: She continues to appear on her family’s reality show, Keeping Up with the Kardashians, sells her own line of shapewear called Skims and promotes her mobile game, Kim Kardashian Hollywood. Her husband, Kanye West, recently announced a deal to sell a line of his Yeezy apparel in Gap stores.

“This is fun for me. Now I’m coming up with Kimojis and the app and all these other ideas,” Kardashian West told Forbesof her various business ventures in 2016. “I don’t see myself stopping.”

Madeline Berg, Forbes Staff, Hollywood & Entertainment

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