In late 2012, Cigars International completed the largest free-standing cigar store in the world: a multi-story, 12,000-square-foot retail space disguised like a hunting lodge in central Pennsylvania. It then started looking at building another store somewhere in Texas.
For the last five years, Cigars International—known mostly for its catalog and website business that has made it the largest cigar retailer in the world by sales—has been planning an expansion. While it hasn’t exactly been a secret, the details have been so opaque that conjecture was largely dismissed as rumor.
Sometime next summer, the plans and conjecture will present themselves in physical form: the first of two planned stores in the Dallas-Fort Worth Area.
Craig Reynolds, president of Cigars International, confirmed to halfwheel that the first store would open mid-2018 in The Colony, a far north Dallas suburb located 25 miles north of downtown.
It will be the latest piece in the Cigars International empire which includes three stores in Pennsylvania; the most popular cigar catalog; the largest online cigar store; Cigar.com, a website and catalog; Cigars & Pipes, a website and catalog; Cigar Bid, a website and forum; and thousands of private label cigars.
In many ways, the new store in The Colony started in the tiny town of Hamburg, Pa.
Cigars International had other stores. But it wanted to see if it could create a different experience for its customer, a destination cigar store.
So the world’s largest cigar retailer created the largest freestanding cigar shop in the country: a two-story, 12,000-square-foot megastore complete with two bars, an outdoor deck, and a massive humidor that contained over 500,000 cigars when it opened.
Hamburg was a model. Could Cigars International build it? Would people come? Would it fit in with the company’s much larger online and catalog businesses?
The answer to all of the above was yes. Reynolds said the company then began looking at taking the Hamburg store into other areas of the country where it thought it could make it work.
Those plans were put on hold in 2014 when it was announced that Scandinavian Tobacco Group (STG), the parent of both Cigars International and General Cigar Co., was going public. In the mean time, Cigars International had to wait while Davidoff and then its direct competitor, JR Cigar, began brick and mortar retail expansion of their own.
Now the entire cigar industry will wait and see what the largest retailer places in what not too long ago used to be a 433-acre field.
Cigars International has chosen to put its store in Grandscape, a massive mixed-use space anchored by Nebraska Furniture Mart, a 1.86 million-square-foot home furnishing store owned by Warren Buffet’s Berkshire Hathaway. Grandscape itself is a project of Berkshire Hathaway, the Nebraska-based investment company that is one of the world’s wealthiest companies. In 2012, the company invested $1.5 billion for the 3.9 million-square-foot development that includes shopping, restaurants, offices, hotels, and apartments.
For its part, Cigars International has committed to spending $7 million on two retail stores in North Texas. Reynolds wouldn’t say where the second store is going specifically, but said it would be in the Dallas-Fort Worth area, with the acknowledgement that it is still early in planning.
While Hamburg might be the model, it won’t be a carbon copy. Everything might be bigger in Texas, but Cigars International’s stores will be smaller
“We don’t think we need to build 12,000-square-foot stores to create and provide that customer experience (that we want),” said Reynolds. “The size of the store will be what makes sense to the market.”
Cigars International plans to have a bar in The Colony store.
There were questions about whether Cigars International would use the Cigars International name for its stores, something that will happen. The concern—and one of the reasons why JR Cigar generally uses the Casa de Montecristo name—is because of nexus.
In short, Cigars International and other online stores generally don’t pay taxes in any state they sell to except the ones they have physical stores in. By opening retail stores in different states, it means the entity is now operating within that state and means that it sales, both in-store and online, would be subject to tax.
Reynolds wouldn’t get into the specifics, but said “we feel we are in compliance with nexus.”
Imperial Brands, plc, which owns JR Cigar, Casa de Montecristo, and Altadis U.S.A amongst others, has taken a hybrid approach to its aggressive retail expansion.
The company has built stores from the ground up in Austin, Dallas, Nashville, and North Carolina; acquired existing stores in New York City, Houston, and Boca Raton; and partnered for franchise stores in three states. Currently, there are 26 stores with a JR Cigar or Casa de Montecristo name in the U.S., nine are franchise stores not owned by Imperial.
Compare that to STG which has three Cigars International locations in Pennsylvania, two planned stores in Texas and Club Macanudo in New York City.
Reynolds said the company opted to build stores from the ground up because it believes that’s the key to creating the customer experience it wants to deliver.
“We want to do what we know best. We feel like we have a good model in the Hamburg store, now we want to see if it can travel well.”
As for where on the road it might go next, that’s not clear. Reynolds said the company only has plans for these two stores, though isn’t ruling out more in the future.
A handful of personnel from Pennsylvania will move to Texas to work at the store. Reynolds said the company values customers having a consistent experience.
One experience that doesn’t appear to be in the works for the time being is Cigarfest Texas. When asked, Reynolds seemed a bit surprised by the question and said “it hasn’t even come up.”
Every spring for the last decade, Cigars International has hosted Cigarfest, the world’s largest cigar event, which takes place over the better part of a week. It includes everything from multiple in-store events per day per store, private dinners, golf, and is highlighted by a two-day festival. The company sells 6,000 tickets to the event and they sell out in a matter of minutes.
Reynolds pointed to the resources and complexity involved with hosting Cigarfest as a reason as to why there may only be one version of it despite now having stores in Texas.