So here we are, beginning 2024 with the Food and Drug Administration’s flavor and menthol bans on their relentless way, but maybe not quite yet. The White House recently announced a new delay of three months for the menthol ban, to make sure everybody’s happy. An impossible task. Enforcement plans for new deeming rules are generally delayed 12 months after the rule change, which may take us to early 2025. We’ll see.
The FDA keeps moving the goal posts, but even with overtime, the final score will still be pretty much the same. Meanwhile, enforcement delays for flavored cigars weren’t mentioned. What will the cigar section look like after the ban?
Up to half of cigars and cigarillos will be removed from shelf sets, depending on how the FDA decides to enforce its own rules; 3 million to 4 million facings on the c-store tobacco back bar across 148,000 doors. Cigars will always be a pathway to friendship, even without the flavors, and there’s plenty of alternative nicotine and tobacco-free smokes to fill the slots.
I’ve thought for some time that a lot of flavored cigar smokers can be moved to something better. According to the CDC in 2021, 3.5% of adults smoked cigars or 9.7 million adults, as well as just under 2% of high school students from the same data, or about 260,000 young people. A small percentage of new premium cigar smokers from this base makes a sustainable segment.
Moving cigar smokers to try a premium product presents a strong opportunity for handmade imported cigar volume as well as for c-stores to recoup some sales lost to the flavor ban. The products are better. The margins are better. Properly presented, they’ll help upgrade the overall look of the store.
How Do We Get There?
The c-store purchase cycle for a couple of imported premium cigars is about the same as for as a couple of packs of cheaper flavored cigars or cigarillos. Cuban Rounds premium imports make a good example. In 2023, Cuban Rounds c-store sales grew 17%. During the same period, the brand’s chain drug growth was 33%, and food store sales expanded by 67%, albeit from a smaller base. Something’s happening.
“Cuban Rounds Fresh-Pack three-pack and five-pack SKUs align well with the weekly c-store visit cycle and premium cigar smoking frequency,” said Wes Schmidt, Cuban Rounds brand director. “We’re looking at the flavor ban as a strong motivator for c-store cigar customers to move up without emptying their wallets.”
Value-priced premiums are generally milder than higher-priced tobacconist brands with different size and wrapper choices for premium cigar smokers headed for a tailgate party or a golf tee time.
Higher-end brands like Rocky Patel and Arturo Fuente are more recent migrants from premium smoke shops. Higher-end brands are pouched as singles with up to triple the price points per cigar. Cuban Rounds sealed three-packs price out at around $11 before promotion. Blenders Gold in 10-packs at the cash register are $7 per cigar, for example.
Tubeaux by Rocky Patel may have found a solution to value at a higher price by taking a different tack. Tubeaux offers a turnkey program utilizing a refillable counter fixture and its range of tubed imported premium cigars. It relies on display elegance, high visibility and tobacconist style to reinforce the quality and reduce price resistance. It fits at 7-inch wide and holds 20 or 40 cigars; excellent geometry for profit.
“Premium smokers know the value and character of the brands they choose before they walk in the door. They don’t have to be sold,” said Darren Thibodeau, vice president of operations for Tubeaux. “Premium cigar smokers shop c-stores for gas, coffee, snacks and more. A single cigar from the Tubeaux can more than double the cash register ring of a coffee and snack customer.”
Opportunities & Issues
Selling imported handmade cigars to current premium smokers won’t be hard. Persuading flavored machine-made cigar smokers to upgrade will take some customer education and retail focus by marketers. It should include a reset that highlights a premium segment but it will be worth it.
There will also be issues of supply chain and package durability for a more fragile natural leaf product. The current sealed-fresh pouches retain the right humidity, but if they don’t have a secondary shelf unit or rigid backing, pusher racks make them vulnerable to wear and tear, eroding profits.
Next year there will be enough new empty cigar facings to provide Cuban Rounds and at least several more premium brands with more visibility, new SKUs and trial promo pricing. Also, look for smaller Petite Corona, and perhaps Corto Panatella, sizes to grow trial and frequency; 20-minute smokes in a 4.5-inch length.
Conditions will be right for more facings in more retail doors, but any level of sudden growth will create its own issues. In 2023, 430 million handmade premiums came to the U.S. A fractional c-store supply chain will put a strain on the time-consuming process of selection, aging and hand rolling to produce the right cigars for new premium aficionados. Distribution in just 20% of c-stores could easily double production from offshore premium cigar companies. Plan in advance.
So what’s the right cigar? It’s the premium handmade cigar your customer likes best and still has money left to buy the next one or three.
John Geoghegan has spent the last 30 years in the tobacco business including vice president at General Cigar Co., U.S. manager for DjEEP Lighters and marketing head at Kretek International Inc. Prior to that, he served as senior vice president group creative director at a global advertising agency. He began his career at Procter & Gamble. He lives in Laguna Niguel, California. Reach him at johngeo3646@gmail.com.
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