Spring 99 Volume IV Issue 2

by Lew Rothman

But, is it a slide from grace, or a return to reality? The facts are the facts. Today, the cigar business is three times larger than it was in 1992. That's a compound annual growth rate of 20% over the last six years, a figure that would be envied in almost any other industry ... and certainly when one considers that the cigar industry produces a product that most consumers are forced to use outdoors or in the basements of their own homes. Given the difficulties of peacefully enjoying a cigar, and given the outrageous taxes that are placed on stogies in most states, the continued growth of the cigar business is truly a testimony to the love affair that people have with this marvelous product.

So what's gone wrong? Why do journalists, analysts, and even tobacco retailers think the boom is over? Is it because $10 cigars are now being sold for $2? Is it because $5 cigars are now being sold for $1? You bet it is.

The truth is, there is no real problem with the cigar industry of today The problem was with the cigar industry of yesterday The euphoria of yesterday is gone and now reality has commenced to sink in.

The shortages of the past years were caused by "pipelining." As cigars began to receive more and more notoriety in the period from 1992 through 1997, millions upon millions of handmade cigars were utilized to stock the retail shelves of liquor stores, duty-free shops, convenience stores, and even gas stations. Had these cigars gone directly into the hands of consumers instead, then the severe shortages we experienced would never have happened. Cigars are not like diamonds; they are a renewable resource. The amount of tobacco grown and the number of cigars produced are easy to increase; it just takes a little time. However, time doesn't count in America. We want what we want, and we want it when we want it. Simply put, Americans want everything now.

That American "spoiled little boy" attitude of stamping our feet and demanding what often can't be supplied or is difficult to attain is the very reason that America put a man on the moon, and that America leads the world in new technologies and inventions.

Sometimes that attitude result in remarkable achievements that would not have otherwise happened, and sometimes it creates problems that would otherwise never have happened. The American demand for luxury cigars at the onset of the "cigar boom," is three times larger and the three years of time it actually takes to produce a premium cigar, caused what I term:
Cigar Inflationado: the rapid escalation of wholesale cigar prices due to an acute differential between a limited supply and a seemingly limitless demand. This was followed by an acute attack of avarice on the part of the cigar retailer, who sensed that, for the first time in his life, he actually had more customers than cigars. There seemed to be no limit to the price a retailer could command for his meager supply of merchandise, and so prices went even higher - in many instances more than twice the manufacturer's suggested retail.

So this brings us back to the question, is the industry in a state of decline or just returning to a state of reality? The answer is right at the end of your lips. The cigars that never should have been $10 (you know, all the ones you never heard of, the "Don Nobody" cigars) are now back to $2, the price they should have been from the very beginning, and most of the people that made them are now out of business. The absurdly priced "Super Premium, Vintage-Shmintage" cigars (you know, the ones that you had to have an "in" with somebody to buy, the ones that were bedecked with rows of multiple cigar bands like hash marks on a Master Sergeant' s sleeve), those cigars are now gathering dust in retailer's humidors or being sold for 30 or 40% less than the manufacturers suggested retail price, and that's probably still more than they're worth. However, the bedrock basis of the cigar industry, the H.Upmann's and the Macanudos, and the Casa Blanca's, and yes, even the Garcia y Vega's and the Dutch Masters, are still selling for the same price they're supposed to be. They were the blockbuster brands that were there "before the boom" and they're gonna be the ones left now that the boom has gone Ka-Boom.

The bottom line?

The cigar business today is healthier than it has been in years, because you, the consumer, can now obtain the cigars you want at a reasonable price. Cigars are supposed to be a form of relaxation and enjoyment. I personally do not appreciate nor enjoy having to pay $20 for something that is in reality a $5 product. I do not appreciate paying $10 for a $2 product. I don't appreciate traveling out of my way to a tobacco retailer only to find that the cigar I want is hopelessly out of stock. I don't appreciate having unknown cigars foisted on me, at insane prices, simply because there is nothing else available. Horrendous shortages, inferior and overpriced cigars, avaricious manufacturers and retailers, and the American credo of having wishes fulfilled immediately, regardless of cost or consequence, was actually killing the cigar industry at the very time when everyone thought that things couldn't be better.

Today, as we are in the last year of the millennium, the cigar industry is almost 500 years old. The industry is far from sick. In fact, it is recovering from a very long sickness; one in which the gains of short-term profits were put ahead of the goal of long term customer satisfaction. Today, consumers have an incredible availability and variety of cigars to choose from, and prices on even the best-known cigar brands have either stabilized or fallen. As a cigar smoker, what could be better? Maybe an end to the Cuban embargo?