Don’t overlook cigar sales.
In this global marketplace, every industry has to adapt, change, and evolve to meet the frequently changing likes and dislikes of the consumer. And for many beverage retailers, the cigar market segment is making inroads into their retail sales and impacting their bottom line.
The majority of the customers at Cedar Mill Liquor & Cigar in Portland, OR, purchase only liquor, beer and wine. Then there’s another segment that buys those products as well as cigars, followed by an even smaller segment. “A small percentage of our customers come in exclusively for cigars,” says Randy Guerra at Cedar Mill.
But it all adds up. “On average our cigar sales account for about three percent of our total sales annually,” Guerra says.
To help cross-merchandise cigars with other high-selling items, Cedar Mill displays items near their humidors that traditionally pair well with premium cigars. “You will often find displays of cognac, single malt scotch, or other whiskey that compliment a fine cigar,” Guerra says.
The humidors themselves are a reflection of quality.
“We are very proud of [them]. We had them designed and constructed by American Cigar Cabinets in Plymouth, Indiana,” explains Guerra. “They use Amish craftsmen to create beautiful and functional humidors, and they get a lot of attention just because of their quality and craftsmanship.”
“We placed them near the entrance of the storefront so people literally can’t miss them,” he adds. “That also puts them near the checkout area, which helps with loss prevention and last-minute impulse purchases.”
At Sherlock’s in Atlanta, Georgia, about 85 percent of customers buy cigars as well as liquor or beer. “There is a very small amount of cigar purchases with wine buyers,” says Evan Johnson, store manager at Sherlock’s East Cobb. “We also do have customers that buy cigars only.” Sherlock’s does sell cigars at four of their locations—two of which are wine only. Two of the stores have walk-in humidors and two have freestanding humidor units.
With about 10 percent of their sales resulting from cigar purchases, Timer’s Beverage Center in Racine, WI, keeps sample packs of premium cigars near the register for impulse buys. They also have two large custom-made humidors behind registers in the front of the store.
“We offer a 10-percent discount on bundles and/or whole boxes of cigars to encourage our customers to buy by the box,” says Jason Jonas at Timer’s Beverage Center.
The Fridge Liquor store in Manhattan, KS, has a lot of customers that come in only for cigars. Part of this owes to state law.
“In Kansas we are not legally allowed to pair cigars with spirits or wine to increase basket size,” says Keith Spreckels, wine buyer at The Fridge Liquor. “We speak with our customers about pairings with cigars when they are interested, and also have hosted cigar pairing dinners at local restaurants, but, in-store, being sold together is not an option.”
At The Fridge Liquor, cigars are located in their “Party Shop,” which is an area that has to be legally separated from where they sell alcohol. This area houses all of the store’s non-alcoholic items, ranging from wine keys, vapor pens, mixers, and cigars, which are in a large humidor at the end of the shop.
Of course, selling cigars often means dealing with thorny and sometimes-frustrating state and federal laws.
In Oregon, Guerra says people often look online and see the MSRP for cigars but don’t take into account the additional state taxes on the items. That creates unrealistic expectations for prices in brick-and-mortar cigar retailers.
“Filling out the quarterly state paperwork can be quite difficult and time-consuming for cigar retailers who elect to ‘go direct’ with the manufacturers like we do,” Guerra explains. “We wholesale cigars to several other liquor stores in the state so they don’t have to deal with all of the state tax reporting. We do all the paperwork and provide verification that all state and federal taxes have been paid. Our wholesale accounts appreciate how we streamline the process for them.”
Johnson would like to see tax rates decrease. “As it stands right now, 35 percent of every dollar spent on inventory go towards taxes,” Johnson says.
Likewise, Jonas at Timer’s Beverage Center hopes the FDA reverses the new regulations on premium cigar makers, specifically being able to donate free samples and forcing premium cigar makers to submit cigars samples for market analysis.
“I also hope fundraisers in the form of cigar dinners are recognized as exempt from state bans of smoking indoors, provided all participants are volunteering of their own freewill,” Jonas says.
While state and federal laws may complicate the retail of cigars, many retailers have found ways to boost sales.
One strategy Cedar Mill’s uses is to offer a multi-stick discount starting at only three sticks. They offer the following discounts: 3-5 sticks are 5% off, 6-11 sticks 10% off, 12+ sticks 15% off, with 20% off for a full-box purchase.
“We also offer humidified packs at the cash register for impulse purchases,” Guerra says. “In addition, we make grab bags with a variety of brands at a discounted price, which allows people to try many styles of cigars and save a little money at the same time. Customers love them.”
Sherlock’s has an old bourbon barrel in the humidor for merchandising, allowing them to pair a cigar with a few different spirit options. They also have POS material with certain brands that give a taste profile for the customer’s own pairing assistance.
“We market our cigars through in-store signage, onsite promos, outside marquee advertising, plus our store blog and social media to draw people into our walk-in humidor,” Johnson says.
The Fridge Liquor sends out monthly emails to their customers with a cigar of the month included. They also market the cigars via logos and signs on the outside of the building, and they utilize the postings on Twitter and other social media sites.
“We also include a ‘Cigar Glossary’, defining a lot of the terms customers will need to know,” Spreckels says. “This is in the humidor to help customers understand what they are buying.”
The Fridge Liquor’s 10-percent military discount and 10-percent senior discount helps increase cigar sales.
“We are near a large military base and are one of the only places in town that offers this sort of discount of any kind,” Spreckels says. “We also offer free matches to everyone, as well as cutting cigars for people as well on the spot, if needed. We are in the process of working with some of our on premise accounts as well, including golf courses, trying to figure out if getting our cigars at those places would be of benefit to us both as well.”
Some of the most challenging aspects about cigar retailing with the volume Cedar Mills does is that it can be a very labor intensive. Staying informed on all the latest releases, dealing with vendors, and fielding customer questions can be time-consuming.
The biggest challenge Sherlock’s faces is inventory control. “This includes making sure that we have a sufficient supply without overbuying,” Johnson says. “When customers switch brands, you run the risk of being stuck with unnecessary inventory.”
“It’s especially rewarding when people are new to cigars or perhaps looking for the perfect gift,” Guerra says. “There can be quite a bit of education that goes along with a cigar purchase. Cutting, storing, lighting and even smoking a cigar are topics we are happy to discuss with our customers. I often recommend YouTube videos and other online resources to customers who are new to cigars. This presents an opportunity to increases sales for cigar accessories as well.”
“We hope the cigar business will continue to grow in all of our stores and remain a solid complimentary purchase for our customers,” Johnson says.
Spreckels hopes that the cigar business at The Fridge Liquor increases as people continue to learn more about pairings.
“The cigars that are out now that have been dipped or infused with certain bourbons or rums have become more popular and are helping people be more conscious of those sorts of pairings,” Spreckels says. “Now, with the introduction of Cuban cigars coming down the pipe, this could really help sales and spark curiosity in a lot of us who might have only heard the myth of how amazing those cigars are.”
Maura Keller is a Minneapolis-based writer and editor. She writes for dozens of publications on a variety of business-related topics. When not writing, Maura serves as executive director of the literacy nonprofit, Read Indeed.