The second question for our IPCPR Panel piggybacked off of our first.
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?
For the second question, we ended up with the same participants who each brought their own insight:
- 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
We had a lot more diversity with the responses to this question in particular. While our panelists agreed that the FDA was the biggest threat, they each see unique challenges with continuing to produce quality cigars in today’s market.
- A couple of our panelists are looking forward to good things and are seeing new challenges emerge that are associated with their growth. George Sosa talked about Alec Bradley’s next challenge as being tied to their plans for market expansion into the Asian market. Prior to the fight with the FDA, his team was on track to open up Asia this year. Specifically, “doing business with Asia is a very tricky situation that requires quite a bit of money. We were prepared to go into China full bore this year.” Robert Caldwell, at the end of a very successful trade show, indicated, “for us personally, it’s going to be having enough hands shipping.” Industry-wide, he also expects to see some behavioral changes from the retail end of the market, with fear, uncertainty and doubt spreading from information and disinformation regarding current and pending regulation.
- Michael Herklots sees his biggest challenge for Nat Sherman is that they have the unique perspective of being an established company that has to market to both new and existing customers. Some of those new customers even believe that that they’re a newer company because they have been exposed first to the Timeless blends, rather than the more traditional lines that Nat Sherman’s older client base already know. Those marketing efforts require that his team “come up with two or three different strategies per line, per blend, per store,” but he admits that some of the extra legwork can also be a lot of fun.
- Steve Saka alluded to the need for cigar makers and retailers to partner together to drive sales, beyond what is really possible without the other. He thinks “people are finally realizing that Facebook Likes and Instagram photos and a high rating in this or that magazine” don’t directly translate into sales. He also cautioned retailers to look at what does and doesn’t move in their humidors and that the average retailer should be more selective about the products that they stock.
- Christian Eiroa circled back to new economic threats, most directly presented by the U.S. political engine. He spoke to the rising costs of doing business in the cigar production industry and how some of the obvious costs are contingent on the results of the 2016 Presidential election. “Hillary has been campaigning on the SCHIP.” He speculates that under a Democratic controlled White House, the SCHIP taxes would double. But in addition to regulations, he speaks to rising salaries in Honduras and Nicaragua, as well as rising costs for box production. Ultimately, those costs get passed on to both retailers and end consumers.
- A couple of our panelists still look to there being after shocks from the FDA’s new regulations. Rocky Patel, for one, focused on continuing to fight the FDA to “win on the lawsuit that we filed. We also have a bill pending in Congress looking for… a one year exemption and to change the predicate date.” Jose Blanco also cautioned cigar smokers to “join the CRA. Instead of being reactive, be proactive.”
I think, a lot of times, we, as cigar smokers, get caught up in the affordable luxury of cigar smoking, that we forget that for our favorite brands are running businesses and have the same day to day obligations to advocate for their people and product. So whether they are experiencing growing pains due to a successful trade show or market expansion, or whether they’re concerned about rising costs and government overreach into their operations, it’s easy to forget that they still face some of the same types of operational challenges that you or I may face in our own career verticals. Just like in a 9 to 5, identifying the challenges and threats is important to developing tactics and strategies to tackle problems one at a time.
Next in our series of IPCPR Interview questions: What blend trends do you see emerging currently? Do you have a favorite wrapper or filler leaf right now?