Cigars: Premium Choice

Attracting buyers of higher-end cigars can lead to bigger baskets

Kelly Kurt, Freelance writer

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“Most premium cigars require humidification, which is why the Gold Strike pouches offer a unique opportunity to stock premiums without the costly humidor,” Green says.

Without speculating on the impact of any pending regulations on the category, Altadis USA vice president of marketing Janelle Rosenfeld says there is opportunity for retailers “as premium cigars have a strong adult-smoker following, especially for those adult consumers looking for quality and name brands.” Altadis’ portfolio, she says, “offers both at fair consumer prices and great margins to the retailers.”

If the FDA shows premium cigars leeway, Lucas of Scandinavian Tobacco Group Lane sees greater opportunity for Macanudo and Punch freshness packs in convenience stores. She also believes c-stores would have success with smaller cigars, such as the Havana Honeys that the company plans to launch later in the year.

“I refer to it as almost hand-rolled because it has all of the other elements possible, from the good blend to the natural binder and the natural leaf,” she says. “But it is a machine-made cigar, so we can sell it at a reasonable price.”

Absent any effects of new federal regulations, Kerstein believes c-stores already have an opportunity to get existing lower-end- cigar customers to trade up to premium. Depending on the tax impact of various states, the difference between some popular-priced cigars and premium may not be significant. A smoker of Antonio y Cleopatra Grenadiers, for example, could be urged to try a Pasade Garcia from Altadis, he says, “then move them up to the next step.”

“There are a number of what we would call premium cigars that are very competitively priced with what the industry would call popular cigars,” Kerstein says. “Properly merchandised, you will get customers to trade up. You have to have a section for cigars and you have to integrate the premium cigars within that section.”

Cuban Rounds from Kretek International is a premium product that targets the c-store shopper, says John Geoghegan, director of strategic planning for the Moorpark, Calif.-based company.

“We’ve focused our new Cuban Rounds on the everyday cigar smoker. It’s a true imported hand-rolled premium in a value-priced resealable pouch of three cigars. For the c-store shopper, it’s affordable,” he says. “For the c-store operator, it displays well on the shelf. No humidor or display space.”

But he believes it would take “a tectonic shift” in both merchandising and cigar smoker shopping habits for premium handmade cigars to have a significant effect on the c-store cigar set dominated by lower-end options.

“The premium-cigar smoker and the mass-market smoker are two completely different animals,” he says. “And it has to do with the strength of the cigar, the style of the cigar, the size of the cigar, how long it takes to smoke.” A hand-rolled Robusto or Churchill-size cigar can take an hour to smoke, an unlikely amount of time for a c-store shopper on a smoke break, he says.

“Over the years, we’ve done countertop humidors for convenience stores. We’ve put our products in aluminum tubes for convenience stores. These things in terms of the volume metrics don’t do nearly as well as mass-market machine-made cigars,” Geoghegan says. “We’ll see how it goes after we all get a chance to read the proposed new FDA rules.”

Certain Uncertainty

So what will 2014 bring for the cigar category? Much is unknown, pending the FDA’s publishing of its proposal. Marquardt, however, expects the coming months to bring a flood of new products.

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