Commentary: Why ‘What’s New?’ Is Here to Stay
5 Nov 2015
One of the common themes on forums, blogs, and podcasts these days is dissatisfaction with the seemingly endless number of limited and special edition cigars. “I’m through chasing them,†is a typical complaint.
Tiring it may be, but don’t expect the trend to go away anytime soon (barring, of course, some U.S. Food and Drug Administration intervention). Ongoing changes in the cigar industry—from sales to buying habits—are likely to lead to more small releases.
I’m no industry insider, and I have no special knowledge. My conclusions are drawn from conversations with a few manufacturers and retailers, as well as keeping up with and observing the industry for quite a few years.
Consider:
— The premium cigar industry is not growing much, if at all, in terms of sales. Imports for 2014 were essentially the same as for the previous year. At least some manufacturers don’t anticipate 2015 to be much different.
— Much of the growth comes from new smokers, who are apt to be younger and not nearly as tied to a brand as are many older smokers. Retailers of yesteryear can tell you of the many, many customers who’d stop by once a week or month and pick up a box or two of the same cigar like clockwork. These days, customers are much more likely to be looking for what’s new and their repeat box purchases occur far less frequently, if at all.
— Events are driving a higher and higher chunk of sales. Whether a single store/brand affair or massive productions like Big Smoke or Smoke Inn’s Great Smoke, customers expect to be entertained and enticed, as well as given a bargain. Without something new to offer, vendors can find themselves at a disadvantage.
— The growing cigar production industry, especially in Nicaragua, has created bigger factories and more trained workers, both resulting in increased capacity. Those who want to create their own brand can find tobacco and facilities to do it.
Of course, none of this means every company’s success is dependent on novelty or constantly introducing new cigars. Dominant brands such as Padrón and Arturo Fuente continue to be industry leaders and seem virtually unaffected by trends or fads.
But for smaller, newer brands it becomes tougher to break out of the pack and that leads to efforts to distinguish yourself, whether that’s a massive ring gauge, a shop exclusive, a limited run, outrageous packaging, or something else.
I can’t say what lies ahead. But I wouldn’t look for the rate of releases to slow down anytime soon.
–George E
photo credit: Flickr
Patrick Ashby
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George Edmonson
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I will admit that I enjoy trying new cigars and blends, and I look forward to additional choice in terms of cigars to choose from. However, I think the marketers need to be careful about diluting the image of their brands with too many blends and extensions. For example, I instantly know what to expect when someone says “Padron”, but the wild variety of sticks, price points, flavor profiles, and seconds makes me very confused as to what Rocky Patel and Gurkha stand for. What kinds of cigars won’t they put their brands on?
That said, from a value standpoint I look forward to continued opportunities to pick up limited edition and new cigars on clearance when some of them (inevitably) flop.
I think the trend away from just buying boxes of the same brand has been going on since the cigar fad of the 1990s. I like a lot of different cigars, but there is only a handful I like enough to buy a box of.
Mike – I think you’re correct, but at the time of the boom there were still many “old-time” smokers, a number that has decreased over the past couple of decades both in absolute and relative terms.
Kilroy – You raise an interesting point, especially whether manufacturers will face a backlash from B&Ms over underperforming releases, resulting in fewer and smaller orders.
George-
I didn’t even touch on SKU proliferation too much, but I do agree that that is a danger to watch out for. I work in supply chain for a national manufacturer whose products are sold at every grocery store in the US, and SKU proliferation has been a huge issue for us.
Study after study has shown that having too many choices or options without an easy way to decide between them stresses consumers out and actually makes them less satisfied than they would be if they had fewer choices.
If manufacturers do want to continue to push the limited editions & new products on B&Ms, they will need to invest some effort into educating the store clerks as to why XX new blend from their company is different/better. When a consumer asks about a new cigar on the shelf and hears, “It’s a new limited edition stick from XX, similar to their regular line but with a little more strength, and with a really unique wrapper that has some citrus notes,” they are far more likely to try a cigar than if they only get a shrug followed by, “It’s the new stick from XX brand. It’s a limited edition.”
Adding SKUs and limited editions may help sales a little, but B&Ms in particular only have so much humidor and shelf space, and many new products cannibalize sales from the same brand (a consumer was planning to buy Stick A from Brand Z, but then decides to buy their new limited edition stick instead, so Brand Z is helped only to the extent that the consumer trades up to a more premium product). When SKU count increases faster than unit sales, supply chain costs typically increase dramatically, as inventories, transportation costs, and discounting/spoilage (clearing out underperforming inventory at a discount) all increase.
Limited editions and additional SKUs are great, but if overdone they can really stretch out the long tail of products with relatively little demand, and many of them may be best sold by online shops that have more space and a bigger pool of customers to draw from, not B&Ms that need to make the most of their limited humidor space.
Again, though, I definitely look forward to some potential upside as a bit of a price vulture of a consumer. The clerk at my local B&M knows I’m a guy who will try anything for the right price. He also knows the importance of devoting humidor space to items that sell, clearing out stagnant inventory. As a result, we play “Let’s Make a Deal” any time he has a box of sticks that aren’t very popular, and I get to buy some higher end sticks that I had previously dismissed as poor values or too expensive to try.
I think the cigar industry and beer industry are becoming very much alike and this aspect is one that pairs well. If anyone thinks that the limited releases of cigars is maddening, need just try to compare it to beers. There are so many releases and some in very small batches with severely limited distribution, if any, that someone could seriously go crazy trying to track things down.
In my view, people just need to accept the fact that there’s going to be stuff they can’t get unless they want to dedicate some time and money to make it happen.
If they weren’t selling, they wouldn’t keep getting made.
If you miss out on this weeks small release, fret not, someone else is going to make something good next week.