When your business suddenly sees an unprecedented increase in annual sales during a time where the country is under lockdown, you might be a bit puzzled.
For the cigar industry as a whole it saw an increase of over 30% in sales, leaving cigar companies, lounges, manufactures, and distributors scrambling. It was impossible for them to keep up with the demand, as manufactures never expected to need to increase production to the level that would become demanded. For some boutique brands like Kritstoff, it was a greater struggle with less rollers at their factory.
“We burnt through our existing inventory pretty quick, and then we’ve just never been able to get caught up… Even if we had forecast on 30% growth, there’s no way we could have delivered on it, because we’re working at one-fourth capacity at our factory,” stated Kristoff Territory Sales Manager Bill Coyne.
Cigar manufacturers also had to deal with shutdowns due to Covid-19, halting all production of their product and putting them weeks or even months behind schedule, and had workers who chose not to return to the factories.
This has led South Jersey cigar lounges to be on the outs, being unable to provide their customers with some of their favorite cigars. Online distributors are the ones who are favored by boutique brands that are fighting for their share of the market, their large orders are what keep them in business, so their first priority is to keep them satisfied.
“It’s all about the money, so an online location will buy 200,000 boxes of something, and the people that are making it aren’t worried about the box or two I’m going to buy once a month, they’re worried about making the 200,000-box sale,” says Lit Cigar Lounge manager Artie Weiner.
This complicates the issue further with getting consumers to return to the lounge, once you do not have a customer’s favorite smoke in shop, they will begin to look elsewhere to fulfill their need. Soon enough they have changed their purchasing habits and now know they can buy less from their local lounge and more online.
For the cigar consumer new opportunities have been opened up to smoke the cigars they purchase, working from home, less opportunities to go out, and having virtual hangouts with their groups of friends. They are also able to purchase cigars easily online, and for a lower cost, all the while not having to drive another 20 minutes each way to their local lounge after a long day at work.
“The lounges are not as crowded, and events are not as busy. People are buying and smoking at home. During covid everyone has dad work done to the outdoor living space and this has affected lounge attendance,” stated General Cigar Company Premium Sales Manager Rami Dakko.
Events are beginning to die down for lounges, and with the heavy upfront cost of hosting one, there is less incentive when consumers are not turning out and purchasing less than before. Bill Coyne has seen a lot more grab and go as compared to buying a cigar and enjoying the lounge experience.
“Post-covid there has been a reluctance to return by enough of the regulars that it’s just noticeable. By and large I think the business has not been negatively impacted but the community of the shop has,” stated Coyne.
Although, for bigger companies like General Cigar Company, they were able to keep afloat and manage the increase in demand better than boutique brands. The shutdown did set them back on their orders, leading to them playing a bit of catch up, but they were more readily prepared to handle it.
“If you’re a smaller manufacturer you have maybe 50-100 rollers and 40 leave for whatever reason, that devastates you. But when you’re talking about the larger guys like General Cigars, we have the ability to weather that storm. We had nobody that left the company because of the situation. We didn’t feel that pinch,” stated CAO Master Blender Ricky Rodriguez.
Ricky believes that General Cigars is able to treat distributors and lounges fairly, giving each of them their share. He stated that when the distributor has a 5,000-box order, they deliver one-two thousand boxes to them, the same way when a cigar lounge orders 5 boxes, they get their one-two boxes. They choose to keep it proportionally equal. According to Ricky they have never viewed the number of cigars a company orders as what decides their value to their company, they have always treated everyone as equally important, which he feels they are.
Getting cigars in stock is not the only problem that South Jersey cigar lounges has to face, the high tax on cigars is a key factor in the consumers decision making. In New Jersey there is a 30% sin tax on cigars, and then a 7% sales tax as well, while cigars in Pennsylvania are untaxed, creating a great incentive to purchase in bulk when going across state lines. Online distributors are mostly housed in states without taxes on cigars as well, creating an incentive for online purchasing as opposed to supporting your local brick and mortar.
The boom that has occurred in the industry has helped to negate this issue though. No matter what, the large increase in demand has allowed everyone to benefit. The hope in the industry is that this boom will continue and not slow down.
“The boom is not going to go anywhere; we’re not seeing any change. This year was another record-breaking year for us, so why do we think it’s going to change next year. What’s happening this year that we’re not going to be able to do next year? I think the future for the next 3-5 years is bright,” stated Rodriguez.
Large cigar manufacturers are beginning to catch up and be able to fill the orders that are asked of them, but smaller ones are still struggling to meet the demand.
This gives light at the end of the tunnel for lounge managers like Artie, who may be deciding whether or not they have to switch up what they are doing in order to get consumers back in their store. The rest of the industry may be continuing their boom, but things have begun to slow down for South Jersey lounges. Although Artie does not believe this is any reason to switch things up.
“I’m not changing anything; I’m not changing what got us here. What got us here is what is going to continue us through,” stated Weiner.
Beforetheash 