Trends Lighting Up Profits
After a frantic few years, the cigar business is maturing — and so must beverage alcohol retailers’ programs for selling them.
Cigars, which have boomed in popularity since 1994, have reached the point in their business cycle where fly-by-nights are thinning out, and those brands that have established long-term reputations for quality come increasingly to the forefront. Manufacturers who’d been racing for the last several years to keep up with the newfound demand have finally all but done so.
And so, with humidors fully stocked, and the wheat separated from the chaff, retailers must firm up their commitment to becoming true professionals when it comes to marketing and merchandising fine cigars.
A Hot Match
All agree that selling premium cigars in beverage alcohol stores is a match made in heaven.
“It fits perfectly,” said Louis Glazer, president of Dallas-based Sigel’s. “It ties into the upscale consumer’s feeling that when he drinks good wine he wants to smoke a good cigar with it. One of the things that really helps is the fact that port and sherry producers have been pushing cigars for years.”
Andy Abernathy, senior vice president of the 170-store ABC Fine Wine & Spirits chain based in Orlando, FL, calls it a “very good marriage, not just with wine but also with spirits. Cigars marry well with full-flavored spirits like single malt Scotches, single barrel bourbons, some of the more upscale, estate-bottled rums and cognacs. There’s just a lot of synergy between them.”
Five-store Haskell’s in Minnetonka, MN, has sold cigars for three years. Manager Dave Johantgen calls them “a nice addition to the liquor industry. It provides us with another avenue, another product that mixes well with liquor and beers.” Two Haskell’s stores feature walk-in humidors.
“A lot of cigars are becoming more available,” said Johantgen, “but, of course, the Fuentes and other highly allocated cigars are still pretty hard to get.” Haskell’s gets calls from distributors all around the country almost on a daily basis. And the chain buys from all over the country. Retail prices range from $1 per stick (cigar) to $15 and $20 each.
Sutton Place Gourmet, the upscale supermarket located in Bethesda, MD, has carried cigars only since last October, yet business is “outstanding,” according to Bruno Bonnet, beer and wine buyer. The chain operates two stores in Maryland, three in Virginia and one in the District of Columbia. “Wine, specifically ports, are a natural match with cigars,” said Bonnet. In fact, they are merchandised together at the Bethesda store.
Sigel’s started selling cigars four years ago, and now generates sales of close to $1 million throughout its 15 stores. Only one store has a walk-in humidor, with the rest equipped with units that can hold from 35 to 70 boxes. Glazer said that five stores will eventually have the 6-foot by 12-foot walk-ins, which cost $15,000 each.
Sigel’s recipe for strong sales? “People see good cigars. We give customer service; they get hand-selling. We treat cigars like we do everything else. Any time we run a liquor or wine ad, we put in there that we sell cigars. We do the same thing in our mailers — high visibility.” Stores drive the point home with an occasional demonstration by professional cigar rollers.
Glazer said there are two kinds of cigar smokers: “One kind buys cigars because it’s the in thing — there’s a party, and he wants to take a good cigar with him, or his wife wants to give him three or four nice cigars because he’s been reading about it. The other one is the guy who smokes every day. But there are very few truly loyal cigar brand smokers. Most cigar smokers jump around. They’ll go back to the original cigar, but I guarantee you every third time they buy they try something else.”
ABC has sold cigars “pretty much since we came into existence 60 years ago,” said Abernathy. The company didn’t start selling premium hand-rolled cigars, though, until a little more than four years ago. “We got in just a little bit earlier than the mob, which is the reason we’re doing well with it right now. We got established with all the major players before they stopped opening new accounts.” The company stocks cigars in every store, with as many as 35 stores featuring walk-in, cedar-lined, state-of-the-art humidors.
ABC has not found success by cross-merchandising, according to Abernathy. “We did it originally, but we didn’t see that it worked out very well. We didn’t get extra sales of spirits out of the cigar room, so we’ve stopped doing that mainly because of space. We like to have it nice and neat and all cigars in there. When you try to cross merchandise bottles on those wooden shelves it just doesn’t work. We tried, and we really didn’t get a lot of play with them right next to each other. But we do see people pick up cigars and then walk over to whatever their favorite spirit is and make that selection also.”
Making certain that store employees can talk knowledgeably to customers about cigars can be key — which means training becomes more important.
ABC has done some formal classroom training, where trainers “dissect” cigars to show employees their components — binder, wrapper and filler. “We talk to them about the difference between hand rolled and machine made.” Cigars are also organized by country, “because different countries give you different flavors.” Reviews and ratings are placed in front of about half of the cigars, “and the employees learn a lot by reading those.”
ABC hasn’t put as much emphasis into education about cigars as it has into wine and spirits, but Abernathy calls the company “pretty lucky in that we’ve got some knowledgeable cigar people spread around the stores. So if you go into a store, there are usually one or two people who have a passion for cigars, and they’re the ones who usually deal with the customers.”
Glazer said he used to smoke cigars, “so when you say a Macanudo, Upmann, Partagas or Cohiba, I know what you’re talking about. You’ve got to be able to talk the talk.”
Quality Across the Board
With newer, lesser-known brands going slowly by the wayside, retailers should stick with proven winners.
Abernathy advises retailers across the country to “stick with the major players.” Indeed, his chain is currently in the process of discounting and discontinuing a lot of brands. “We were like everybody else. We bought whatever we needed to have a supply for our customers. Now we’re discontinuing hundreds of SKUs and getting back just to the top 50 brands. There’s been a huge shake-out.”
Bonnet, of Sutton Place Gourmet, noted that retailers must be “very serious” about selling cigars. “We had to have the necessary equipment, proper background information on the brands and types of cigars, and we have to be very committed. There’s nothing worse than picking up a cigar at the register on the way out because you just thought it would be a great idea for after dinner — and taking with you nothing but a hard, dried out piece of tobacco because nobody took care of the humidor or replenished it.”
Sigel’s Glazer said he doesn’t think it’s ever too late to get into cigar retailing, but recommends starting out “slow and easy. You start with 12 boxes of different types, and if that works, go to 24. My first cigar entry was a plastic box that held six boxes of cigars. That’s how I got started. Today I’ve got a cigar room in my warehouse and carry a $200,000 inventory of cigars.”
— Howard Riell
ABC operates a cigar club on its web page. Senior vice president Andy Abernathy calls it “a little bit different” from others in that it concentrates on the top-selling, most recognizable brands such as Macanudo, Partagas, Don Tomas, Punch and Hoya de Monterrey. Here’s some of what visitors will find at www.abcfinewineandspirits.com:
“Are you interested in trying new premium cigars each month with the convenience of them being delivered directly to you? Join other Vintage Club members and enjoy the fun and adventure of trying at least three premium cigars each month at special club prices. Become part of a select group of individuals who enjoy learning and want to challenge their tastebuds by sampling cigars from the Dominican Republic, Honduras, Nicaragua, Mexico, the Canary Islands and other countries throughout the world.
“How does it work? Your selections will automatically be sent to your business address or residence each month (gift memberships also available) and billed to your credit card. Stop whenever you wish… but we think you will enjoy the convenience and selections offered to our members (30-day notice requested to terminate membership). Our Vintage Newsletter, included in your shipment each month, gives you information about your selections, including the shape, length and ring guage, the origin of the wrapper, binder, filler, where the cigars were made, who made them and tasting notes.”
The web site also details a variety of discounts, incentives and other benefits for Vintage Cigar-Of-The-Month Club members.