Stogie Commentary: Questions for the Future
2 Apr 2009
With the economy still struggling and the SCHIP taxes taking effect this week, I’ve been thinking what the future might hold for the cigar industry. Here are a few of the questions I have:
1. Will General and Altadis move to increase their market shares? The two giants already control a large share of the market and have expanded their reach in recent years to include huge retailers, a magazine, distributors, and who knows what else. I would be flabbergasted if we don’t see more buyouts, especially of boutique manufacturers.
2. Will more states seek revenue by collecting sales taxes from online transactions? This, too, seems likely. Cigars are a miniscule component, but such a move would probably serve the interests of B&Ms, who’ve always had to collect the money.
3. Will Florida and Pennsylvania impose taxes on cigars and will low-tax states ratify increases? Taxes in Pennsylvania and Florida—both of which are considering taxes—would have an extraordinary impact on major online operations, as would boosts by low-tax states, such as North Carolina. Just think of how many operations are in those states (Cigars International, Famous Smoke Shop, JR Cigars, Holts, Thompson). Again, this would at least somewhat level the playing field for local shops and Internet sellers, but the end result would be higher prices for consumers.
4. Will cigar makers begin to pare back? Fancy boxes and intricate bands would be my candidates for extinction as costs go up. More limited editions could supplant introductions of new lines because of the need for less inventory.
5. Will the industry and its related organizations work to change the image of cigar smokers? The perception that cigar smokers are $10,000-watch-wearing, first-class-flying, Wall-Street-worshiping, wine-sipping snobs makes it easy to single them out for taxes. Getting out the truth about the vast majority of people who actually enjoy cigars would certainly help.
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