Cigars: Premium Choice
Attracting buyers of higher-end cigars can lead to bigger baskets
About halfway through an online forum last December, Mitch Zeller did something he said he wouldn’t do: He got specific in talking about tobacco products potentially targeted for federal regulation.
“There’s one thing that I do want to add about cigars, especially the so-called ‘premium cigar’ category,” said Zeller, director of the U.S. Food and Drug Administration’s Center for Tobacco Products.
“We have gotten the message that there may be differences when it comes to premium cigars vs. other cigars,” he said. “And the message is that the FDA needs to take that into account in figuring out how they should be regulated.”
The suggestion that the FDA might consider some leeway for premium in any potential regulation of cigars raises a question: If the government cracks down on cheaper cigars considered more appealing to underage smokers, is there fresh opportunity for the sluggish premium-cigar segment in convenience stores?
Yes, says Dionne Lucas, brand manager of cigars for Scandinavian Tobacco Group Lane Ltd., based in Tucker, Ga. But there are obstacles.
“I think the romance of that big cigar is going into that cigar shop and having a conversation with someone who actually knows and not be rushed,” she says. “It’s part of the luxury of it.”
For the same reason, Swedish Match’s Joe Teller is skeptical about whether premium cigars can occupy more than a very small niche in c-stores.
“Consumers who enjoy high-quality premium cigars already buy them from dedicated cigar stores that have the freshest products, a huge variety of products to choose from and highly educated store personnel to help with product choices,” says Teller, director of category management for the Richmond, Va.-based manufacturer. “I’m not sure many will choose to buy from c-stores.”
Andrew Kerstein owns six such specialty tobacco shops in New Jersey and couldn’t disagree more. A former c-store operator himself, Kerstein contends that convenience stores don’t need to wait for government action to take a hard look at the profit potential in premium.
“That is an area where convenience stores really have opportunities to significantly increase their sales,” he says.
CSP magazine’s 2013 Outlook Survey found that retailers are ambivalent concerning cigars. While most spoke effusively about electronic cigarettes and moist smokeless, they were mixed when addressing cigars.
Specifically, nearly 19% of respondents said they plan to expand both single cigars and flavored cigars. But when asked what areas of the tobacco segment they planned to shrink, nearly one-quarter said flavored cigars and roughly 18% said single cigars. Few talked about premium cigars as a growth opportunity.
Where There’s Smoke
With many new mass-market cigar brands, line extensions and new flavors being introduced, Teller says retailers are under pressure to create the best possible mix, “which means the highest-turning products— which are not premium cigars.”