Our first IPCPR Interview question for our interview panel began as no fun.
What do you see as the biggest hurdle or challenge that the cigar industry needs to overcome in the next 12 to 18 months?
For our first IPCPR Interview question, our participants included:
- Robert Caldwell, Owner, Caldwell Cigar Co
- Michael Herklots, VP Retail & Brand Development, Nat Sherman
- Christian Eiroa, Founder, CLE Cigars
- José Blanco, Founder and Owner, Las Cumbres Tabaco – Señorial cigars
- George Sosa, VP of Sales, Alec Bradley
- Rocky Patel, Rocky Patel Premium Cigars
- Steve Saka, Founder/Owner, Dunbarton Tobacco and Trust
Not surprisingly, each IPCPR Interview echoed Robert Caldwell’s succinct, three letter “F D A” response as the single largest challenge that the industry as a whole is facing in the coming months. While most of the panel agreed that the FDA was the biggest challenge the industry will face over the coming months, each participants differed in exactly how the FDA will impact their companies and the industry as a whole. Some highlights from the interviews include:
- Rocky Patel predicted the regulations will “change the scope of the industry forever.” He expressed specific concerns that “the predicate blends and people who started after 2007 are going to have some major issues.”
- Rather than releasing new blends during this year’s trade show, George Sosa indicated that Alec Bradley was primarily concerned with securing and protecting brands that existed prior to the current predicate date. He also communicated a guarded optimism, saying “We feel fairly confident. We’ve hired two FDA attorneys who are working for us diligently. And we feel that we’re going to be in good shape.”
- José Blanco was quick to credit that “a lot of retailers and a lot of consumers have done a lot of hard work,” but is increasingly concerned that there remains a silent majority of retailers and consumers who have remained on the sidelines dubious that the FDA regulations will ever really materialize. He proposed, with some 20% of the retail and consumer market doing 80% of the work, that the industry, as a whole stands to lose everything we’ve gained during recent years.
- Michael Herklots took a measured approach and is looking to answer questions that allow his team at Nat Sherman to develop and fine tune strategies and tactics to deal with the FDA regulations. He doesn’t “think, necessarily, the threat to the industry is the regulation, but more the uncertainty of the regulation.” To arrive at those strategies, he suggested we need to be asking and answering questions like, “What will the methodology be? How will we go about testing? How will we do all those things? There’s so many unanswered questions. Everything is so vague and up in the air that it’s almost impossible to form any kind of strategy.”
- Steve Saka doesn’t envision a doomsday scenario before him and believes that the regulations will ultimately result in a “navigable path,” both for the industry as a whole and for Dunbarton specifically. “As it is on paper, it’s devastating. But what’s on paper does not really translate to what will actually be executed. There’s going to be a lot of things. There’s going to be legal challenges. There’s going to be legislative challenges. And there’s also going to be a lot of clarification, because the way the deeming regulations were published, there’s more ambiguity than clarity in them. So it really comes down to what are the details? And what is actually executable? And what really comes to fruition. So without really knowing that, I’m very uncertain as to exactly what will happen.”
- Christian Eiroa maintained some perspective, acknowledging relatively good news for the impact at the retail level, but also let us know he believes that “innovation is going to be lost for the products that we create and how we make them and how we package them. Even something as simple as 5 packs, things like this are going to be lost.” He also noted that the industry, as a whole, is between 95% united and completely unanimous under the three trade associations.
So the industry seems to be 100% in agreement that the FDA is on the verge of creating some unique challenges for the industry in the near term. While each person on our panel had his own opinions about how exactly he believes the industry will be impacted, the impact to innovation due to the number of unknowns seems to be the biggest dent we’re likely to see in the immediate future. As some of these regulations begin to go into effect next week, we’ll look forward to beginning to determine what the navigable paths are for the industry and for innovation.
Next in our series of IPCPR Interview questions: With the three big trade organizations working primarily on the FDA’s deeming regulations, is there a secondary threat or hurdle that’s also on the horizon?