German Tobacco welcomes Private Equity

Thomas Schumann, Co-Founder and Chairman of German Tobacco Group, Frankfurt/Germany is inviting private equity firms to support his start-up's turnaround and aggressive growth plans.

German Tobacco Group AG founded 2006 by two German entrepreneurs and one business angel overcame the high barriers of entry into the closely-knit tobacco industry in 2007 with only 1,5MioEUR in seed-financing.

Successfully completing its "Proof of Concept" by introducing the value cigarette brand "S.A.L.E." in Germany and Austria the company sold 7Mio cigarettes in its first operating quarter generating 5 times revenue projections and becoming 1 of only 5 privately-held cigarette companies in Germany alongside giants Philip Morris, British-American Tobacco, Imperial Tobacco and Japan Tobacco.

The company's value for money brand "S.A.L.E." is program and monopolizes in an increasingly restricted tobacco advertising environment the internationally recognized noun "Sale" for cigarettes.

At a time when all 4 multinational cigarette manufacturers and their premium brands are facing mounting challenges due to consumer down trading and large overhead, German Tobacco opted for a business model which according to Schumann is "lean and mean like a discount airline" and solely targets the industry's high growth segment of price sensitive smokers buying "Value for Money Brands".

"We developed a low-cost/high-margin business strategy which offers German smokers true value, our retail partners highest industry margins and us up to 35% profit potential" says Schumann and further explains "in the German cigarette industry you make money with cigarettes and treasury because 89,9% of sales revenues are excise duty taxes which generate income by benefiting from 42 days of float 8 times a year, a provision the German finance ministry grants cigarette manufacturers for paying excise taxes they collected within net 7 days from their customers".

Due to a lack of private equity and working capital German Tobacco was unable to acquire its own cigarette factory and to broadly market the "S.A.L.E." brand prompting 1 out of 75 creditors to put the company into Chapter 11 in 2009. With 1MioEUR in debt, strong retail interest for the "S.A.L.E." brand, a large order from a vending machine operator with 10.000 outlets and a positive feasibility study for up to 15MioEUR of government subsidies, management in cooperation with German administrator Fabio Algari of renowned restructuring firm Hermann Law, Frankfurt is seeking a new investor.

"We require 10MioEUR and are inviting private equity to participate in our recession-resilient investment case. Being in the world's largest consumer goods segment with $420bn in annual sales, 5,5 trillion cigarettes sold annually, 20% of the global population smoking and doing direct business with the German finance ministry provides every investor not opposed to vice with very compelling investment reasons" asserts the 45 year old Schumann who is a health enthusiast, runs marathons and does not smoke.

German Tobacco Group AG, Frankfurt/Main was founded in 2006 as a tobacco investment holding and to market the international value cigarette brand S.A.L.E.

German Tobacco Group AG
Bleichstrasse 2-4
D-60313 Frankfurt, Germany
Press Contact: Thomas Schumann

This release was published on openPR.