Why was Mac Baren sold?

I've read many comments about the sale, and there's so much misinformation that I should have written this a long time ago. Here's the answer:

Before Henrik Halberg's sudden death in January 2021, he and his two siblings owned the Halberg Group, which in turn wholly owned Mac Baren Tobacco. At that time, the Halberg Group also owned other companies, mainly hotels and real estate. Henrik held the majority stake in the Halberg Group and thus controlled the company. Henrik and his wife Britta had no children. Henrik was a generous man and wanted to give something back to his hometown of Svendborg. He placed his assets in a trust fund, which was to use the profits for the benefit of the community: for art, people in need, buildings, and to preserve Mac Baren and its jobs. After his death, Sutliff became part of Mac Baren USA, which belonged to Mac Baren DK, which in turn belonged to the Halberg Group. The group had three owners: 1. Henrik's sister (small share), 2. Henrik's brother (small share), neither of whom had anything to do with the tobacco business, and 3. a trust fund with a board of directors that held the majority. I don't know the board members exactly, but I'm fairly certain that none of them had anything to do with tobacco; they were more likely bankers. This board and the board of the Halberg Group invested more after Henrik's death and bought a Danish food company, Logismose. Then the board decided that tobacco was "bad" and wanted to sell it to invest in other industries. None of them knew anything about tobacco and only saw the risk and an unpopular industry. They only saw a pile of money that they could invest in "better" industries. The companies made a lot of profit, but the board didn't like where the money was coming from. Then STG came along!

A little side story, the truth of which I can't 100% confirm: The former CEO, who retired before Henrik's death, told me that STG had asked him during a visit to the Sutliff factory if he wanted to sell Sutliff. Henrik's answer was a clear NO!

When Henrik was no longer there and the company was up for sale, STG saw a good opportunity and seized it. If not STG, then it would have been someone else, and we don't know if it would have turned out the same way.

I don't know the exact reasons behind the decisions about what's being shut down, when, and which products will remain. I also don't know who made the decisions, but I assume it was the STG executives. In the next paragraph, I won't say whether I agree with the decisions or not, because I can understand both sides, especially when it comes to Sutliff. Here are some things most people don't know or don't talk about, aside from the tobacco blends: 25% of the products Sutliff sells in the US (mainly Mac Baren) are not FDA approved. They've been submitted as "Substantial Equivalent" (SE) products, but the FDA hasn't approved any yet; some have even been rejected. They keep demanding more and more lab tests, which is very expensive. I'm 90% certain it would cost $1.5 million to get our SE products (25% of our offerings) approved, with no guarantees. Given the FDA's recent demands on others in the industry, I'm only 5% confident that any of them will even be approved. They'd probably all disappear eventually. For example, the entire Mac Baren HH line wasn't approved and could be rejected at any time. The FDA has published "Good Manufacturing Practices" (GMP) that every tobacco manufacturer must adhere to by a certain date. Some of these standards are unclear and still need to be defined more precisely. Before the acquisition, we had budgeted at least $1 million to meet the requirements. That depended on whether traceability was also part of the requirements. The production facilities in Denmark probably already meet the requirements. I've visited them all. All of Sutliff's "fun" projects, like special editions, may not have complied with FDA regulations, but as a family business, you can take that risk. As a publicly traded company, you can't take regulatory risks. You either play by the rules or you don't. This isn't a criticism of STG, but simply the legally safe way to do business. Sutliff has a good computer system for production, but STG is implementing a different system worldwide. Anyone familiar with new systems knows how expensive and time-consuming the global implementation of SAP is. It's necessary to manage all companies correctly, but it's very costly.

Sutliff produced over 900 item numbers with over 400 different blends. That's not efficient. You, the consumers, made the choice. It's what you smoked. If you had only smoked Sutliff Z92 and 515 RC-1, we would have been the market leader and produced far fewer blends. That wasn't, and isn't, the reality. Probably half of the item numbers were produced at only £200 or less per year. No other company would keep them, and we struggled with the decision every year when we reviewed the offering. We were honestly afraid to discontinue them, even though it was probably the right decision. Mac Baren pushed us in that direction, and we got closer to it. With much love to all, light your pipe, enjoy life, remove hate from your heart, and be grateful for what you have. Sutliff was able to do this with our niche industry, loyal customers and employees, old equipment, and no FDA GMP regulations. Times slowly changed, and we discontinued blends every year. We had a niche with all these blends, and that was our only way to compete. We could never compete with Captain Black, 1Q, BCA, Escudo, Dunhill/Peterson, and Stokkebye blends, so we had to be different.

All of this doesn't account for the other side, which is about the community, the hobby, the history, and so on. But these are important points to consider for any decision made in any company, with any ownership structure, in any industry.

You can call me a corporate lackey for writing this (I can take it), but those who know me, know me. Don't forget, my last day at STG is April 30th, so technically, I'm only a corporate lackey until then.

With much love for everyone, light your pipe, enjoy life, remove hate from your heart and be grateful for what you have.

Jeremy McKenna