Cigar Weekly

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Los Angeles – "Overall, I think the economy is still in a rut, but things could have gone a lot worse."

That’s Sathya Levin of Holt’s of Philadelphia, recalling the end of 2009 and how his company – Holt’s on the retail side and Ashton Distributors for wholesale – actually did in difficult economic times. Levin noted that both their storefront and mail-order/e-commerce sales were up over 2008, a good sign. And they weren’t the only ones:

=> Keith Meier of Cigars International (Bath, Pennsylvania) wrote that "thankfully we experienced strong growth, added many new jobs, and were fortunate to have again finished the year significantly up over last. I am also bullish about growth going into 2010, as we've got a big pipeline of deals ready to unleash."

=> Oded ben Arie of Mike’s Cigars (Bay Harbor, Florida) noted that "we finished the last Holiday season with a slight edge in sales over the reciprocate period last year which kept our retail revenues for 2009 in par with 2008." He added that Mike’s sales to other retailers on the wholesale side was down, however.

=> Kendall Culbertson of the Outlaw Cigar Co. in the Kansas City area just opened an enormous second store in Overland Park, Kansas and enthused "Our new store opened a little over a week ago and this place has been packed every day! Around 100 people every night – 7,500 square feet full – what a great thing!"

On his take for all of 2009, Culbertson explained that at his Kansas City retail location "We were up mid/low double digits for the year. Our holiday sales were only up in the high single digits. Our growth for 2009 slowed down from the previous year by about 30%, but we are still growing by a substantial amount. We would like to get back to the mid-double digits, though."

These may be the high flyers in the cigar business today, as pricing, tax and smoking ban pressures continue to plague the cigar trade. With mail-order and on-line cigar buying making up perhaps 50% of the business, there’s still $400-500 million in cigar sales at brick-and-mortar retailers nationwide.

What do these retail shops look like today? The International Premium Cigar & Pipe Retailers Association (IPCPR) just delivered its bi-annual survey of U.S. cigar shops, which paints a fascinating picture of its national membership. Highlights:

Store information:
=> The average IPCPR-member store in the survey was fairly compact at 1,510 sq.ft., with 56% of stores between 1,000-2,000 sq.ft. But there were 20% of stores with more than 2,000 sq.ft.

=> Average net sales were $724,269, hardly enough to get rich, but enough to make a respectable living. About 17% of stores reported annual net single-store sales of more than $1 million, but there were 30% at less than $300,000.

=> Stores averaged 1,954 customers per month, but 32% had less than 1,000.

=> Some 79% of all stores in the survey were family-owned. Cigars really are a family business, have no doubt about it. The average store had about three full-time employees.

=> While 67% reported having a store Web site, only 22% of stores were selling via the Web. However, 68% of all stores reported doing some mail-order business, most at very low volumes.

=> Lounges are gaining in popularity: 66% of stores reported having lounges, but only 12% charges a membership fee. Further, only 39% maintained private lockers in-store.

=> A surprising 46% of stores surveyed reported wholesale sales, with most selling to country clubs, bars, restaurants and liquor stores, but generally for small dollar totals.

Cigar sales information:
=> Almost every store reported stocking handmade cigars (97%), but only 47% carried a private-labeled brand for their store.

=> Not surprisingly, 84% of stores had walk-in humidors, which averaged 407 sq.ft. Almost half of these were between 100-400 sq.ft. while 5% had walk-ins of more than 1,000 sq.ft.

=> The most popular taste profile? Medium-bodied cigars were the favorite of 57% of stores reporting, with 24% preferring full-bodied cigars and just 16% identifying mild-bodied cigars as most popular.

=> The best-selling size was a surprise: Toros (typically six inches by 50 ring) at 38%, followed closely by Robustos (5 x 50 or thereabouts) at 32% . . . that’s 70% between the two. The next highest preference was for Churchills at 14% with no other size in double digits.

=> What do customers look for most? Flavor was the overwhelming choice at 43%, with price second at 26% . . . that’s 69% in total. Brand image was third at 13% with no other choice higher than 9% (size).

=> Who is buying cigars? The largest group of buyers are aged 35-54, covering 84% of the total. That’s important, as 18-24-year-olds comprised just 2% of the total according to stores surveyed. Next time someone talks about kids and cigars . . . the truth is they’re barely involved in buying premium cigars.

=> The best-selling price ranges for cigars were $6-8 (46%), with $4-6 comprising 23% and $8-10 at $18%. Total sales percentage for cigars of $8 and up was about 25%.
 

Most tobacconists reported that in addition to cigars, they also carried pipes (36%), pipe tobacco (56%), cigar accessories, lighters, humidors and the like. Outside of tobacco-related products, soft drinks were the item most often carried (25%).

Tobacconists see continuing potential in the cigar business, even with all of its challenges, by a 57%-40% margin. That’s a good thing. Smoking restrictions, taxes and competition from mail-order and online sellers are seen as major challenges. Look for even more new brands in stores, whether new boutique cigars, line extensions of existing brands or blends which are exclusive to individual stores.

That’s where local retailers across the nation see the future. Some of the nation’s biggest retailers survived 2009 and even profited. Hopefully, 2010 will see more of the same.

>> One of the legendary stories in the history of cigars is U.S. President John Kennedy’s request to his Press Secretary, Pierre Salinger, to collect as many H. Upmann Petit Upmanns as humanly possible on the evening of February 6, 1961.

Salinger did as he was told and as a fellow enthusiast, came up with 1,200 Petit Upmanns overnight. On the following morning, February 7, he delivered them to Kennedy, who then signed into law the Cuban trade embargo in essentially the form we know today.

It turns out that this wasn’t the first last-minute shopping spree for Havanas.

In Stephen McGinty’s charming 2007 book, Churchill’s Cigar, he relates that Germany’s Nazi Reichsmarshall Hermann Goering was also a Havana cigar fan and arranged to solve his own supply problems before World War II potentially eliminated his ability to acquire them:

"On the eve of the outbreak of the Second World War the German Air Attache visited the cigar store at Dunhill and bought 1,000 ‘Partagas’ cigars for Hermann Goering. The head of the Luftwaffe was an Epicurean who possessed as hearty an appetite for champagne, fine wine, good food and hand-rolled cigars as Churchill. It is interesting to speculate of Goering was doing more than satisfying his own desire and was, if fact, already attempting to blockade his future foe. Goering obviously became a fan of Dunhill cigars; after the fall of France, he purchased fresh supplies at the company’s shop on the rue de la Paix, although this did not stop his air force from bombing the London store in the early hours of 17 April 1941 with two parachuted land mines."

Goering was more than used to the good life, with an enormous wine cellar and a long affair with drugs. He committed suicide in 1946, shortly after being sentenced to death by the War Crimes Tribunal at Nuremberg, Germany.

>> Short fillers: Find our latest tasting reviews, of seven new blends that you may not know of . . . yet, in our News & Views archives for January 8.
 

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