The year 2020 has been one for the record books in the cigar business, and not in a good way. The pandemic has hurt many American cigar retailers, closing some cigar shops, forcing many to change the way they do business and impacting the supply and shipment chains in various ways.
Cigar Insider’s annual survey of U.S. cigar shops paints a picture of the state of the industry from the retail level. Our data is gleaned from surveys of 141 cigar shops spread across the United States, from the beaches of Hawaii and Florida to the crowded cities of New York, Atlanta, Dallas and elsewhere.
It’s hardly a surprise that the Covid-19 pandemic is the biggest issue on retailers’ minds, a problem that has had an immediate and negative impact on sales: 43.7 percent of the shops who answered our survey said their 2020 sales were down compared to 2019, and another 14.9 percent said sales were flat.
Steve Castro of Davidus Cigars Ltd., which has 12 stores in Maryland, said the impact has been severe. “Customer count is way down, people are not coming back,” he said.
“It has made for a much more challenging business climate as far as employees, product supply, and accessibility and hours are concerned,” said Paul Banducci, manager of Bulldog Pipe and Cigar in Coeur d’Alene, Idaho. “Luckily, it has also caused our client base to coalesce around us and support us through it all.”
Said Kurt Pennington, owner of Elite Cigar Café outside of Dallas: “We have a tough road ahead.”
Sixty-four percent of the shops in our survey had to close during the pandemic. Some of the closures were relatively short, with 8.8 percent reporting a shutdown of two weeks or less, but most of them were long. One quarter (24.6 percent) of those who closed had to shut down for a month, and 64.5 percent had to close their doors for more than a month.
“It has been catastrophic,” said Matthew Arcella, owner of six Davidoff of Geneva outlets in Las Vegas. “We were closed for three months. After reopening, traffic, revenue, spending habits etc. are all a fraction of pre-pandemic levels.”
“There’s been nothing like this. Not just our business, our lives,” said Abe Dababneh, owner of 10 Smoke Inn locations in South Florida. But Dababneh is among the minority of shops in this survey, one of the 41.4 percent who said sales were up. “We’ve selling more cigars,” he said. “People have more time. So, people are smoking more, myself included.”
The pandemic has caused customers to change their work and recreational habits, and some shops have been able to turn that into increased sales. “My sales are up 20 percent as a result of my customers working from home where they can smoke during their workday,” said Russell Wilder, owner of Top Shelf Cigar and Tobacco Shoppe, in Augusta, Georgia. He’s up even after a crushing April. “If The Masters had not been postponed, my percent increase for the year would be much higher. My April was down 31 percent without the Masters tournament.”
Unlike many shops, his has been able to remain open throughout 2020.
Disruptions In The Supply Chain
Cigar supply has also been a problem in 2020, as the pandemic has caused cigar factories to close in some parts of the cigarmaking world, particularly in Honduras (the No. 3 exporter to the U.S.) and in the Dominican Republic, the No. 2 exporter. That shutdown has led to supply issues at the retail level. More than half of our retailers (51.2%) said they were unable to get cigars at some point during the pandemic. Out of that affected group, 51.7 percent said supply still remains an issue to this day.
The shipping problems go beyond the issue of getting cigars into the shop—some retailers have also had difficulty getting cigars to consumers. Just as online retail giant Amazon faced issues of shipment delays, the same happened to cigar retailers.
“March and April it was utter chaos. Packages that would normally take two to three days would take seven to 10 days. Sometimes 12. It’s kind of back to normal now,” said Dababneh. “Those problems have leveled out.”
Craig Cass, owner of five Tinder Box cigar shops in the Carolinas (most near Charlotte, North Carolina), said shipments to his store had been relatively good, but he’s seeing changes now. “Recently there are serious backorders in July. We are loading in for fear of broader shortages in August and September. Business is solid, which confuses the problem of conserving cash for a broader downturn potentially [in the] third and fourth quarter versus keeping strong inventory levels to weather short shipping.”
The Shops, They Are A-Changin’
Nearly all of the store owners or managers who answered our survey (98.9 percent) were open, but most have undergone one form of change or another. If there’s one thing that’s a certainty during this uncertain time, it’s that business as usual is a thing of the past. Shops have added curbside delivery to their repertoire, added virtual events to replace in-store gatherings and have shifted their model to more mail-order and Internet sales to alleviate a shrinking walk-in business and less traffic in the shop.
Lounges, in particular, once a hotspot for business, are closed or reduced in many shops. “One customer at a time, mandatory masks and the lounge is closed,” said Christopher Maxwell, president of Tobaccos of Hawaii, in Honolulu. “I’m attempting to find another purpose for the lounge.”
The “seating area is closed for now,” said Dion Giolito, owner of Fumare (and the Illusione brand) in Reno, Nevada. “Only buy and fly.”
Cass had to shut down for more than a month, but he used that time to improve the stores. “We used the closed time for store remodels and renovating,” he said. Like many, his first method of reopening was via a curbside delivery model. “While doing curbside promos, it gave us a chance to put different cigars in people’s hands that they might not otherwise purchase. It helped in two ways; ability to move other brands we felt deserved a chance and helped us cleanse humidors of slow-moving product,” he said. He has reopened his lounges, but at 50 percent capacity.
New York has had more Covid-19 deaths than any other state, and the Nat Sherman Townhouse in Manhattan closed in mid-March, and was closed for more than three months. “I went in maybe two weeks after the initial shutdown, maybe three weeks after, and that was right at the height,” said Michael Herklots, vice president of Nat Sherman International. “You had the hospital ship on the Hudson, Central Park had its hospital station and you had freezer trucks outside of hospitals. What you never see in photos is the normalcy, it did me a lot of good to see people walking their dogs, getting newspapers—all you saw on the news were the worst moments, not the normal moments. As much as things grinded to a halt, there was still a certain level of normalcy. What you certainly saw was people taking it seriously.”
Nat Sherman reopened in late June, but with no lounge seating, and customers prohibited from entering the humidor. The shop is extremely dependent upon commuter business, and with many people still working from home and not going into the city, there are just fewer customers than before. “We are pretty dependent on people working in the area and visiting the area,” he said. “A lot of our customers aren’t coming in [to the city]. Most of our regular customers work in midtown, so that travel being disrupted has obviously changed their behavior. But they haven’t stopped enjoying cigars.”
Dababneh has been in the cigar business for more than 20 years. “This is insane,” he said. “But this comes down to a matter of Darwinism. The retailers that will pivot, do curbside, innovate, do virtual events online—they’ll find a way to survive.”
A Positive Outlook
Despite the unsettled market and the general uncertainty about when things will return to normal, many of our retailers expressed a level of positivity about the future.
“These are tough times but we will survive,” said Paul Falcon, CEO of Habana Cigar Club Corp. in Edgewater, New Jersey, one of the states hardest hit by the virus. The shop was closed for three months.
Havana Connections Inc. has five stores in Virginia, and they were able to stay open throughout 2020. “The industry is not bulletproof. However, the pandemic has shown there is still demand for cigars,” said operations manager Jason Cannata. “When times are good, we smoke. When things aren’t so hot, we smoke.”
“Our lounges seem to be a respite from all the fractured and polarizing opinions in the world,” said Cass. “Cigars continue to bring people together and that alone gives me hope for my business and our country.”
Herklots said that a cigar is the ideal companion for the buzz phrase of 2020. “What better socially distant activity to enjoy with people than a premium cigar? It was the first human moments all of us had, getting a drink, having a cigar, waving from a distance. Cigars certainly have come to mean more to people now even than they did before. The value of the time you get to spend with it and the value of the time you get to spend with others.”