Cigars: Premium Choice
Attracting buyers of higher-end cigars can lead to bigger baskets
“You’ll probably see a lot of companies release products this year just to get them out ahead of any FDA control over cigars, so that they don’t run into as many issues with substantial equivalence like the cigarette companies have had on their products,” he says.
While no one knows when or if the FDA will take action, some believe the agency might seek to ban some flavors or single cigars. Swedish Match’s Teller suggests retailers prepare by stocking unflavored cigars, the sales of which are growing.
As far as single cigars, consumers already have made it clear that they will embrace foil pouches containing two or three cigars. Retailers should merchandise these multi-stick foil pouch cigars together in one large section, Teller says.
“They should be placed in the highest position possible, as it is a huge segment with explosive growth and lots of variety. Blocking them all together at eye level allows the shopper to see the full variety of foil-pouch products the store offers,” he says. “Second, single-stick cigars should be placed right underneath foil pouches, again all brands and products blocked together.”
The cigar set is one place where retailers cannot afford to let their competition beat them to market with new items, he says. Cigar shoppers are interested in variety and trying the latest offering.
“The low-price competition and revolving door of new items means retailers have to do high-quality assortment analysis and reset their stores twice per year, or they risk losing out to retailers with a more updated mix of products,” Teller says.
Brian May, spokesman for Richmond, Va.-based Altria and its cigar subsidiary John Middleton, declined to speculate on potential FDA action and its effect on premium cigars. After the proposal is published, the company will share its perspectives during the public comment process, he says, and retailers can do the same.
“It really depends on what adult consumers are looking for when they’re coming into the store and how retailers differentiate their products within the cigar space,” May says. “That’s true whether you are selling machine-made cigars or hand-rolled cigars.”
Marquardt says retailers have to pay attention to what changes might be coming with any action by the FDA. But they shouldn’t make pre-emptive changes in their cigar set based on speculation about what regulators might do.
“I don’t believe it would be in the retailers’ best interest to start making guesses as to how the regulation is going to go,” he says. “It could make you very uncompetitive in your market for either a short time or a long time. On top of that, you could lose a good core of your tobacco consumers, and all for nothing.”
Havana Honeys, to be released later this year by Scandinavian Tobacco Group Lane, are machine-made cigars but have natural-leaf wrappers and binders.