A Business that Caught Fire in Late 1992 Continues To Burn Ever Hotter
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Only four years ago, making or selling cigars may have been one of the least attractive businesses in the United States. Not only were cigar sales flat, but the future promised more of the same. The core customer base consisted primarily of older men. With few new customers venturing into cigar shops, the industry was literally fading away. Throughout the 1980s and the early 1990s, premium cigar imports--the best indicator of cigar sales, as most handmade cigars are made outside of the United States--were stagnant, hovering around the 100 million mark. Then, in autumn of 1992, the industry began to change.
According to Cigar Aficionado statistics, the number of imported cigars started to rise during the year's last quarter, and 1992 ended with imports of 107.4 million cigars, a 4 percent increase over 1991. That modest start was followed in 1993 by the first significant growth the industry had seen in well over a decade. Imports rose 10 percent, to 117.8 million cigars.
But that was only the beginning of what would become a cigar renaissance. The number of imports continued to accelerate. As tracked by Cigar Aficionado, imports grew 12 percent in 1994, to 132.4 million, then soared 33.1 percent, to 176.3 million cigars, in 1995, stunning most experts in the cigar business. The growth continues, and today cigars are one of the hottest consumer products in the United States.
Cigar sales continued their remarkable performance into 1996. Imports in the first quarter grew 36.2 percent, and industry insiders reported that the second quarter appeared to be even better. If the first-quarter pace is merely maintained for the remainder of the year, imports will top 240 million cigars for 1996. The premium cigar market will have more than doubled in the span of three years. Not bad for a business that was ready to be written off only four years ago.
What happened? While it sounds self-serving, it's hard to ignore the fact that this change probably can be tied directly to the launch of Cigar Aficionado magazine in the autumn of 1992. As retailers, cigar makers and distributors all claim, the magazine has forever changed the landscape of the cigar business.
Before the latest cigar trend began, cigar shops had trouble moving their products. Today, there aren't nearly enough cigars to meet demand. Cigar Aficionado estimates that total industry back orders of premium cigars reached 55 million units by June 1996, approximately double their estimated level at the end of 1995. In part, the back-order problem exists because the tobacco in cigars takes at least 18 to 24 months to go from seed to a finished cigar. Even manufacturers with the foresight to increase production two years ago are just beginning to bring in significantly larger supplies of tobacco; no one predicted the level of demand in 1996, so it will take at least several more years to reach an equilibrium, industry experts say.
The boom has made finding cigars a challenge to retailers, and has forced some to take unorthodox steps just to get cigars on the shelves. "Retailers call in and they have cigars sent to their own house and they pay retail price," says Oscar Boruchin of Mike's Cigars Distributors Inc., in Miami. Lew Rothman, owner of J.R. Cigars Inc., the largest cigar distributor and retailer in the country, says he frequently sees cigar retailers come into his shops and fill shopping carts with cigars.
While the back orders frustrate some retailers, most are enthusiastic about the change in their fortunes. In the last four years, new customers have begun to frequent their stores; at first it was younger men, but in the past two years, increasing numbers of women have become cigar smokers and new customers.
"Ten years ago selling cigars was so hard. Now it's so easy," says Diana Silvius Gits, the owner of Chicago's Up Down Tobacco Shop, who has expanded her staff to 28 full-time employees to meet the soaring demand. "We can sell anything we can get, but we just can't get much."
The back-order situation is even more impressive when you consider the rising prices that have emerged in the cigar market since the dawn of the boom. In early issues of Cigar Aficionado it was common to see cigars retailing for under $2. Today such an inexpensive cigar is a rare find. "The meat of the market today is up to $5 per cigar," says Boruchin. "Five years ago it was $2." Today it's not uncommon for a new brand to sell for $10 per cigar or more. The new H. Upmann Chairman's Reserve, 7 inches long with a 38 ring gauge, sells for $20 per cigar.
The tremendous demand and the inability to meet it are forcing some cigar makers and distributors to limit their customers. "We haven't opened a new account in over a year and a half," said Carlos Fuente Jr., referring to cigar shops that carry his Arturo Fuente brand cigars.
When a shipment of hard-to-find Arturo Fuente or El Credito's La Gloria Cubana cigars hits the shelves, it quickly attracts excited customers. Many cigar shops impose limits of one or two cigars per customer on scarce brands, and some even keep prized smokes such as a Partagas Limited Reserve under the counter and offer them only to special customers.
The cigar boom, rather than leveling off as was widely expected, shows no signs of slowing. "We keep expecting to level off," says Austin T. McNamara, president of General Cigar Co., maker of Macanudo and Partagas. "We're not looking for non-growth, but non-accelerating growth." McNamara's complaint is common among cigar manufacturers because of their inability over the last few years to predict the pace of the growth.
Today, cigars are everywhere. They can be seen in the hands of celebrities. They're for sale in supermarkets, liquor stores and even gas stations. Cigar dinners occur virtually every night, and young men and women have become educated and passionate smokers. The number of cigar friendly restaurants (a term unknown before the launch of this magazine), cigar bars and cigar shops are increasing rapidly. Whereas cigar smokers were once challenged to find a place where they could smoke in peace, today in most big cities it's a matter of which place to choose.
In the next few years, industry insiders believe supply and demand will balance out, and everyone's favorite cigars will be back on the shelves--and back in your humidors.
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