For the past several years, Charlie Minato has closed things out with 10 questions he thinks will face the cigar industry as a whole or will pertain to a specific company or individual and most likely have its resolution in the coming 12 months.
Three years ago, we decided it was appropriate to not only look back upon those questions to see what we might have learned in the past year, but to grade them. This is a bit of a subjective process; there aren’t letter grades or a cumulative score; instead, it is a way to show where trends might not have come to fruition, where the evidence of the moment didn’t lead to the expected conclusion, or where something foretold a change or event in the future.
As we close out 2015, here are the Ten Questions for 2015, graded.
1. HOW WILL THE FDA DECIDE TO REGULATE PREMIUM CIGARS?
We still don’t know. An attempt to exclude premium cigars from FDA regulation via the 2016 Appropriations Bill failed. While there's still hope that Congress could pass legislation to exempt premium cigars, the thought that it will get anywhere is slim.
FDA sent its recommendation to the White House Office of Management and Budget (OMB) in October, with OMB supposed to review FDA’s proposal and possibly make changes within 90 days, though there's no penalty for tardiness.
So after 12 months, the cigar industry isn’t much closer to definitively knowing how—or if—FDA will regulate it, leaving a good amount of uncertainty for 2016.
2. WILL THIS BE THE YEAR THE IPCPR TRADE SHOW GETS DRAMATIC CHANGES?
The IPCPR booked the band America for a concert in one attempt to make its trade show more appealing, though it’s hard to say how much it moved the attendance needle. A few more show-exclusive products were unveiled, but it remains to be seen whether or not that brings retailers to the show, and to what extent manufacturers will want to commit to make another cigar in hopes of getting people in the door. The IPCPR hopes consumers will encourage retailers to attend the show to get these limited products; time will tell if that works.
With many manufacturers offering their show deals outside of the show—and few wanting to curtail that—some retailers don’t have the economic reason to attend the show. That means they'll want to network with manufacturers, brand owners and other retailers, which can be a hard thing to place a value on, especially during the busy summer season, or for anyone on a budget of either money or time.
As noted in the IPCPR 2015 recap, the number of stores attending the show was down from last year in Las Vegas, though the number of badges was closer as retailers got a third badge for free this year. That helped the perception that it wasn’t an empty floor, though a huge 160,000-square-foot selling space didn’t. That will change in 2016 as the trade show floor shrinks.
Pretty much every thing that can be changed or improved is on the table for the IPCPR’s leadership, and there won’t be one answer that returns the trade show to the place that so many remember.
Grade: Under construction.
3. WHAT HAPPENS TO STG?
While a big change at STG didn't happen, a number of changes at General Cigar Co. did, and they weren’t the ones we expected.
Dan Carr was relieved of his duties as president of General in November. Less than 96 hours after Carr's dismissal, Craig Reynolds, president of Cigars International, was named evp of global handmade cigar businesses, a new role in the company, while staying in his position with CI. Filling the position of president of General Cigar Co. is Régis Broersma.
But the IPO never materialized, nor did the sale to a private equity firm. No brands were acquired and Cigars International didn’t open a retail location in Texas. The company laid fairly low at the 2015 IPCPR Convention & Trade Show despite Macanudo’s new branding, a revamp of Bolivar and Ramon Allones and several other new projects.
More changes are almost certainly in the works; General’s showing at IPCPR was too odd to think it wasn’t driven by crafting a balance sheet for a major transaction.
Grade: An accidental A.
4. WILL CRAFT BEER & COCKTAILS HELP INFUSED CIGARS?
The key word in the question is help, and by that metric I think the answer is no.
There’s no shortage in sales of infused cigars, while traditional premium cigars seems to be doing pretty well. As noted, however, the crossover appeal seems to be limited, and that’s fine.
While I don’t have the sales data, it seems the cigars made for pairing with beer or flavored with beers or other spirits didn’t fly off shelves. That’s not to say that some weren’t successful—Camacho's American Barrel Aged had a big debut—but in terms of being needle movers, I didn’t get the impression that happened in 2015 for the industry as a whole.
There will always be innovation: improving farming, curing and fermenting techniques, using different types of tobacco and experimenting with new approaches such as barrel aging and infusions. But finding the right synergy to truly shake up the industry doesn’t seem to be on the horizon.
Grade: It left a sour taste in my mouth.
5. WILL THE CHANGES IN CUBA SLOW DOWN?
While the embargo remains, there were a number of changes in 2015 that showed no signs of slowing down. Travel restrictions eased and the government out of the business of approving travel visas for the most part, leaving it up to individuals to make sure their visits complied with existing regulations.
Each week, more stories would pop up about visits to Cuba and attempts to bring the two countries together. Embassies opened and top ranking American officials visited the island. Major League Baseball is interested in playing a spring training game there as early as 2016 and recently completed a goodwill visit that included several Cuban players. Tourism is booming, hotel rooms are in high demand and casa particulares—rooms rented by individuals—are often the only way to get a place to stay.
Habanos S.A. continues to develop more releases for the Añejados project as well as larger ring gauge cigars. During the Habanos Festival in February, company leaders said they believe they will dominate the American market just as they do the rest of the global cigar market.
Are we any closer to the embargo dropping than we were a year ago? I want to say yes, but from a strict definition standpoint the answer is no. Until the embargo is lifted—a timeline that will depend on the leanings of the next president(s) and Congress(es)—we won’t see that flood of change that will have La Casa del Habanos opening in the U.S. and Cuban Montecristos and Cohibas on American shelves, but to say that changes slowed down in 2015 would be incorrect.
Grade: Aunque pequeña, los cambios siguen llegando. (While small, the changes keep coming.)
6. WILL RAÍCES CUBANAS (FINALLY) GET ITS ACT TOGETHER?
If 2015 was supposed to be the year that Raíces Cubanas reclaimed its spot as one of the best cigar factories, it didn’t happen.
I can’t think of a single cigar that came from the Honduran operation that had me thinking they’d figured out the issues that pushed some of Illusione’s and Viaje’s production to other factories.
If there’s another indicator, it’s that even with this decrease in new projects for certain clients, no one was jumping up to fill their spots, at least not in terms of making big announcements about doing so. I can’t think of a single company that made it known they were using Raíces Cubanas in 2015, other than those who had already been using them.
If that’s not an indication that something is still amiss, I’m not sure what is.
We reviewed just 11 cigars from Raíces Cubanas this year as opposed to 26 last year; while the average score went up a bit—87.36 in 2015 vs. 86.77 in 2014—none of them qualified for top 25 consideration.
Grade: Unfortunately, an A, as the factory still looks to get back to its hitmaker status.
7. WHERE DO NICHOLAS MELILLO & STEVE SAKA END UP?
Both went down fairly similar paths: starting their own companies and contracting with factories to produce their debut releases. While Saka has a bit more on the radar in terms of trademark filings, both stuck with one brand for 2015.
With no disrespect to Melillo, Saka won the popularity contest at the trade show, locking up a few hundred commitments, without samples and no confirmed shipping date. Reviews for both the El Güeguense and Sobremesa have generally been favorable, so that’s pretty much a draw.
Charlie wasn't as definitive with Saka or Melillo as he was with José Blanco in 2014, but the phrasing of the question made it seem like they’d end up with other companies as opposed to starting their own brands, so take a point off for that.
Grade: Foul tip on a slow-pitch softball.
8. WHAT HAPPENS TO NEBRASKA NOW?
A piece of emergency legislation was passed in February that exempted cigar bars from the smoking ban, so cigar lovers in the Cornhusker State can continue lighting up in their favorite cigar stores and bars.
The issue of being able to smoke in a store hasn’t arisen elsewhere, as legislators have been more intent on raising the minimum age to purchase tobacco and keeping it out of parks than to ban its consumption in cigar stores.
While Washington state legislators continue to let the bill licensing cigar lounges and bars languish at the bottom of their priority list, at least it’s on the radar and can hopefully gain some traction in the next legislative session.
Grade: A smoldering D.
9. WILL XIKAR GET SOME SERIOUS COMPETITION?
Without sales numbers, grading this relies on anecdotal evidence, which suggests that XIKAR is seeing much more competition.
Not that long ago, XIKAR was pretty much the only brand you’d see prominently displayed in a retail shop, yet a number of companies have done more than just nip at the heels of the Kansas City, Mo. company. While love for Colibri remains mixed, they have put out a number of impressive lighters, cutters and humidors in the past 18 months, while JetLine continues to get rave reviews from people who want a high performance, value priced lighter.
For higher end lighters, S.T. Dupont showed that it wasn’t content to rest on its laurels, releasing the Slim 7 while keeping its MiniJet and MaxiJet front and center in many display cases and garnering attention with its ultra high-end offerings. It signed a distribution agreement with Davidoff in December, which almost certainly was done with eyes on further growing the brand.
On the cutter side, the number of competitors isn’t quite as high, but early chatter about the Lotus Jaws and its double guillotine and serrated blade configuration had some people telling me it was the best cutter they had ever used. It would be silly not to think the Palió brand will want to regain its place as one of the industry’s favored cutters after being acquired by Quality Importers, so that will be another threat to fend off in 2016.
Beyond that, there’s humidification, something XIKAR seemed to want to address in years past but hasn’t been able to tackle. They still sell a good amount of product in that regard, but the whispers of a true challenge to Boveda never materialized, and they haven’t entered the active humidification market enough to shake that up. The PuroTemp monitoring system was a step in the right direction, but there’s still a lot of ground to cover.
Speaking solely from my own experience and what I see in the stores I visit, the idea of XIKAR being the one-and-only accessories option for consumers is almost completely in the rearview mirror.
10. WHERE IS CUBANACAN THIS TIME NEXT YEAR?
For many retailers, the answer seems to be on the clearance table.
While Cubanacan seemed to be doing business as normal at the IPCPR Convention & Trade Show this summer, including relaunching the Mederos brand, I’ve seen the Cubanacan brands and Hirochi Robaina’s HR Habano cigars on sale tables and marked down by online retailers more than I would have expected given the launch they got in 2014. While it may have sold well in the early weeks, that doesn’t seem to be the case much anymore.
Robaina departed Cubanacan just before this year’s trade show to enter into a vague relationship with La Palina, which Bill Paley said will consist of the two working on new brands in the future but has yet to result in any products, though that seems up in the air. What that means for the $20 (and up) HR Habano remains to be seen—though Robaina is still selling it directly out of the La Corona Factory—but launching a cigar at that price point, and requiring retailers to bring in a sizable amount of the company’s regular portfolio just to get it, takes a lot more of a supportive push than it seems Cubanacan is willing or able to give at the moment.
Another answer to the question is in the courtroom, as in early September the González family filed a lawsuit on behalf of their companies—Soneros Cigars Zone, Inc. and Industria Tabacalera Los Chariots, S.A.—against Cubanacan, seeking $800,000 in payments for trademark infringement and violations of a distribution agreement.
Add it all up: Robaina leaving, a lawsuit, the departure of Spence Drake in mid-May and several other personnel in the past month, along with the separation from the La Corona Factory in July and it's challenging to see a path to recovery, let alone what it looks like. There are probably some stores that are having success with Cubanacan, but it seems to be just another brand fighting for space on the shelf.
Grade: On the DL, injured from swinging too hard.