This feature ran in our Complimentary Products Guide, which you can still download if you missed it.
Most alcohol retailers carry a variety of supplementary products, including food, glassware and gift items (where legal). Tobacco is another popular product category among beverage retailers, and it seems like a natural fit. After all, many cigar connoisseurs like to enjoy a nice Scotch or other beverage with their smoke.
So how can retailers capitalize on this interest and grow the tobacco product line into a larger segment of their business?
Choosing the Right Products
First, product selection is key. If tobacco products account for only a small portion of your inventory, realize that your store most likely won’t be a top destination for tobacco enthusiasts. Instead, you’re likely marketing to the more casual tobacco consumer, and your inventory should reflect that.
“Consumers that shop in beverage retail stores aren’t those that look for the next new thing to hit the market,” says Gene Richter, Vice President of Sales with General Cigar Company, Inc. “They tend to seek the tried and true, turning to legacy brands.” He says that alcohol retail shoppers are likely to lean towards cigars with strong brand recognition such as Macanudo, Punch, Partagas and La Gloria Cubana.
Variety is something else to keep in mind. Just as customers have many distinctive preferences when it comes to beverages, they also have different tastes in tobacco products. Renee Duszynski, Vice President of Sales with J.T. International U.S.A., Inc., cites the importance of offering a variety of tobacco products.
“The adult drinker looking for the next small-batch, locally crafted IPA has different consumer preferences than the person who stops by every Friday for their regular six-pack,” Duszynski says. “It’s the same for tobacco products.”
Duszynski says the vast array of tobacco products in JTI USA’s portfolio offers a wide variety for beverage retailers to choose from. The company has four distinctive cigarette brands: Export ‘A’, Wave, Wings, and the global value brand LD, along with a collection of filtered cigars and the Logic line of vapor products.
Along with cigars and cigarettes, retailers should also consider adding some tobacco accessories to their product inventory. Humidors, cutters, lighters, cigar flasks and ashtrays are just several examples of supplemental items that can enhance sales across the tobacco category.
Tim Koletsos is Director of Lighter Marketing with BIC Consumer Products. He says that lighters are a growing category that provide retailers with steady, high-margin sales. BIC lighters go the extra mile by offering customers a wide variety of design options to choose from.
“When a consumer chooses a lighter, they want safety, quality and reliability, and those qualities are what set BIC lighters apart from the competition,” Koletsos says. “Consumers appreciate BIC’s extensive and expanding variety of new and exciting lighter sleeve designs. Consumers identify with the new designs because they’re a favorite team, a favorite rock band or TV show, or just act as an accessory to their outfit for the day. As a result, every year we explore popular trends and make sure we offer lighter designs for every interest, personality and lifestyle.”
Integrating Tobacco Products
Deciding which tobacco products and accessories to carry in your store is key, but it’s also important for retailers to strategize about how this category will work in their unique store environment.
Speakeasy Liquors is a three-store chain in southern Illinois featuring walk-in humidors at each location. Dalton Page, who manages two of the stores, says that customer requests make up a large portion of his cigar product selection – as well as the tobacco accessory line.
“First and foremost, we are a liquor store, and that’s always the main focus of our business,” Page says. “We do have a lot of customers who really enjoy smoking cigars, and we listen to them and order the brands they want us to carry. I also try to be hip and keep up with what cigars are new and popular. A lot of young people come into the store and are interested in smoking cigars, and they tend to gravitate toward the newer products, many of which are being marketed to younger consumers.”
Another important thing for retailers to keep in mind is that tobacco products need to be showcased properly in order to appeal to target customers. Eye-catching displays and sophisticated humidors will naturally spark consumer interest the same way other featured products do on the floor. Making an effort to display tobacco products in the best possible way will naturally yield positive results.
At Fort Collins Warehouse Liquors in Fort Collins, Colorado, tobacco doesn’t account for a large amount of the store’s total sales. Manager Tanner Huber estimates that while the business generated $4 million in sales during the last fiscal year, tobacco-related products only accounted for about $50,000. But in recent weeks Huber noticed that cigar sales are up 20 – 30% from where they were this time last year, which can be attributed to remodeling the store’s walk-in humidor. Although the humidor is less than 100 square feet, its large windows and prime location right at the front of the store makes it easily accessible to customers.
“Last year I tore the humidor apart and had a friend install some cedar boards and shelves,” Huber recalls. “We put in new lighting and decor, painted, and installed a new humidifying system to maintain better air quality control. Now it’s a lot more visible and inviting. Customers have said to us that they didn’t buy cigars here before because the old humidor wasn’t up to their standards, but they’re really impressed with the improvements we’ve made.”
For retailers who aren’t prepared to design a humidor themselves, some manufacturers offer assistance with humidification requirements, supplying humidified environments for retailers to use in selling the company’s’ cigars. General Cigars is one manufacturer that helps with this. The company also teaches beverage retailers how to properly care for their cigars in order to preserve the quality of the product. Additionally, both General Cigars and JTI U.S.A. offer signage, display and POS materials to support retail cigar sales.
Placement of tobacco accessories requires additional consideration. Koletsos stresses that visibility is key, suggesting that retailers display lighters on the front counter beside the register to maximize sales.
“The lighters should be featured in a display that allows the consumer to easily look at the designs and make their selection,” Koletsos says. “BIC’s Powerhouse Display can accommodate six or nine trays of various design series, improving product visibility and delivering big profits from a small footprint.”
Developing Cross-Category Pairing Options
Retailers may also want to consider offering pairing suggestions of tobacco and alcohol products. Although cigars traditionally have been paired with brown spirits, the rules have changed dramatically. As the beverage industry continues to evolve, so do consumer tastes and preferences. Now the cigar and beverage pairing options are virtually endless, and consumers are eager to experiment with new options.
At Speakeasy Liquors, Page reports that a growing trend is for customers to pair cigars with port wine (and even with white wine), which illustrates the wide variety of pairing choices available. It’s crucial for retailers to be aware of different pairing options in order to pass that information along to customers.
“Consumers who purchase cigars at beverage retail stores are typically in a celebratory mood and are often open to suggested pairings to maximize their enjoyment of both the cigar and the beverage,” Richter says.
In addition to placing POS materials on beverage product shelves to drive pairing options, Richter suggests that retailers drive consumers to the General Cigars pairing website, which offers practical tips and advice on pairing cigars and spirits. Learn more at www.cigarworld.com/education.
Speakeasy Liquors provides basic pairing training for all store employees to make sure they are equipped with the knowledge needed to make pairing suggestions to customers. “With so many different cigars on the market now, it’s important to have an understanding of what goes well with what, especially when you’re dealing with the non-flavored cigars,” Page says.
Keeping Local Laws in Mind
Another thing to remember is that tobacco products are subject to their own local laws and regulations, so make sure you are up to date on current policies and procedures in your state, as it may impact your bottom line.
For example, Fort Collins Warehouse Liquors has a modest selection of cigars that are generally chosen based on customer requests and distributor recommendations. The store is known for being a low-price destination, and Huber says prices of cigars are also extremely competitive. The lack of other cigar retailers in the immediate area also accounts for additional foot traffic from customers. Despite all these improvements, however, Huber doesn’t anticipate tobacco sales skyrocketing anytime soon.
“In Colorado it’s tough, because we have to absorb a 40- to-50% tobacco tax that online retailers don’t have to pay,” he explains. “Customers can easily buy cigars online for far less than we can ever sell them for.”
Some legal statutes may actually have a positive effect on retailers. In Illinois, a regulation that works to Speakeasy Liquors’ benefit is that, unlike with alcohol products, Page can move boxes of cigars and other tobacco products from store to store in order to better circulate his products if a certain brand isn’t working well in a particular location.
Retailers also need to follow laws pertaining to age verification of tobacco purchasers. These rules do not necessarily mirror regulations pertaining to alcohol purchases, so make sure that you and your staff members are aware of the rules and committed to enforcing them.
Duszynski also stresses the importance of retailer community engagement.
“As regulations drill down to the local level, make sure you are engaged in your town,” she says. “Follow any ordinances that may negatively impact your business and voice your concern at town council meetings. Always emphasize that these are legal adult products sold by your tax-paying business, whether it’s tobacco or alcohol restrictions. Local lawmakers need to hear from you.”
Melissa Sherwin is a freelance writer and marketing communications strategist from Chicago, IL. Her work has appeared in Chicago’s Daily Herald newspaper, Time Out Chicago, Suburban Life newspapers, and various magazines. She is also the author of several children’s books. Follow her @MelissaNSherwin.