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    Categories: EditorialSelected

Graded: The Ten Questions for 2015

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?

Up until late last year, it wasn’t clear when the U.S. Food & Drug Administration would announce its plans to regulate the premium cigar industry; turns out the answer was April 24. While it’s important to point out that nearly everyone who claimed to be “in the know” seemed pretty far off about what the FDA initially announced as part of the Deeming Regulations, our best sources continue to tell us they expect the first announcement regarding finalized plans to be announced during the summer of 2015 at the earliest. There’s a lot at stake in the deeming regulations, arguably this site. The outlook from the premium cigar industry has been a mixed bag of full-on freaking out to something that resembles the definition of ignorance—but the reality is simple, every one of the next nine questions, as well as anything related to premium cigars, rests on the outcome of what FDA decides.


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.

Grade: Incomplete.

2. WILL THIS BE THE YEAR THE IPCPR TRADE SHOW GETS DRAMATIC CHANGES?

It's everyone’s favorite thing to complain about, and it’s probably not getting better for 2015. Complaints regarding the annual IPCPR Convention & Trade Show have been rampant for years, but of late the choir moaning about sluggish attendance has added a new verse: the growing cost. Absent some miracle, I have a hard time seeing how hosting the trade show in New Orleans will help the attendance issue and the cost of the show is unlikely to be substantially different. While the IPCPR took its time to find a new ceo, the move to hire Mark Pursell—someone who oversaw a trade show with over 75,000 attendees—was a very good one. It will be interesting to see what changes, if any, Pursell plans for the New Orleans trade show or if he will wait until the 2016 show in Las Vegas to try to calm the complaints of manufacturers. Given the problems that were apparent the last time the trade show was in New Orleans and the complaints from this past year in Las Vegas, it hopefully will be time to rethink the show.

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?

In August, it became known that Scandinavian Tobacco Group (STG), the company that owns and operates General Cigar Co., was preparing for major corporate changes. Swedish Match, which owns 49 percent of STG, was planning on divesting its stake and STG would be holding a public offering, likely in early 2015. Shortly after those plans for the offering were made public, General acquired the Toraño brands and added Sam Leccia to its staff. Within a month, Anders Colding Friis, STG’s ceo, announced he would be leaving in March 2015, which at the time seemed likely to delay the public offering. Then came a report that numerous private equity firms were looking at acquiring STG with first round bids due on Dec. 18 and a valuation believed to be around $2 billion. There were big plans for General in the U.S. in 2015. Sources told halfwheel that Cigars International was eying opening a retail store in Texas and there has been rampant speculation that General was close to purchasing E.P. Carrillo. Multiple sources have told halfwheel everything is now on hold, likely due to the interest from private equity firms. Texas retailers are taking a bit of a breath and E.P. Carrillo is moving on, expected to announce a new national sales manager in the coming weeks.


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?

Flavored cigars have always stumped me. Cigar smokers seem to like cocktails, many love beer brewed with all sorts of added ingredients and I don’t see many pictures of unseasoned chicken on Instagram, but when it comes to cigars, most of our readership seems adamantly opposed to any additional flavoring. There are people that smoke “regular” cigars and people that smoke flavored cigars and not a whole lot that do both. Part of that might be the marketing of flavored premium cigars, but it seems like that’s changing. Asylum introduced a cigar that was infused by aging in barrels used to make a stout beer and a new sweet-tipped cigar. Drew Estate recently announced a private label that is made for pairing with certain styles of beer, as well as a cigar in partnership with the famed bourbon brand Pappy Van Winkle. While none of these moves were radical, there does seem to be some momentum—even extending back to 2013 with fire-cured tobacco—in terms of trying to get consumers of traditional cigars to try something different.


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 there was one big announcement regarding Cuba, in reality, little has immediately changed for cigar smokers. Getting into the country legally requires some hoops to jump through, but is still doable for most. Bringing back cigars is now legal but only up to $100 worth and only from Cuba and bringing Cuban cigars back from any other country remains just as easy and just as illegal, as does buying them online. Politically, it’s hard to believe that the embargo will be lifted within the next two years and until that happens, buying and selling Cuban cigars at U.S. retailers will remain illegal. Even suspending the enforcement of embargo would likely have little effect given that importers would need to pay federal SCHIP taxes on a product that is illegal. While the groundwork for serious change is being laid, Habanos S.A. itself is going through some pretty big changes that will likely have much more of an immediate effect. This year marked the release of a 58 ring gauge Cohiba, the thickest production release for Cuba cigars, and the launch of the Añejados series seems to show that Cuba understands at least some of the problems with its cigars. Whether you like big ring gauges or not, Habanos S.A. modernizing with the American market is a welcome change, but what’s next?

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 this sounds familiar, it’s because it is. Less than three years ago, the Honduran factory seemed to be the factory. Yet months later,  I included “Paging Raíces Cubanas” in my Ten Questions editorial and two years later, I think things have gotten worse. There’s no question that around 18 months ago the cigars coming out of Raíces Cubanas stopped having as many issues as they were in 2012, but with Illusione moving its Corojo and Maduro production to TABSA and Viaje flirting with other factories, you have to wonder how much longer brand owners will put up with whatever is going on at Raíces. In my mind, some of the greatest cigars of the last five years have come from the factory, unfortunately, none in the last couple years.

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?

Before anyone has any ideas, it almost certainly won’t be together. The two former Drew Estate executive team members have their own followings and their owns plans to remain the cigar business, something that will almost certainly become known next year. Saka’s non-compete will expire over the summer and it's pretty clear that he will probably be more than a consumer sooner rather than later. What remains to be seen is whether he will go out on his own or decide to do another stay in a company’s c-suite. Melillo is another interesting story given his background is almost exclusively in production. He’s been working as a consultant for the last few months, but it’s likely that he will move onto something a bit more permanent in 2015. Like Saka, the largest question is whether he will go out on his own or join another company.

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?

Soon, there will be two states where smoking in cigar retailers will be illegal. While Washington’s laws have been on the books for some time, the decision made by the Nebraska Supreme Court isn’t yet in effect. Furthermore, Nebraska has outlawed smoking in any place of business, while in Washington you have to be on a tribal reservation to light up. No court in another state will likely be able look at what Nebraska did and try to implement it. Furthermore, it was not that the court ruled that smoking was unconstitutional per se, rather, that the Nebraska constitution forbids exemptions that favor one business over another, so exempting tobacco retailers from the state’s smoking ban was not okay. But don’t think a few anti-smoking politicians won’t take note and use this as another example of where outlawing smoking in all businesses “worked." Neither Nebraska, nor Washington are particularly large markets for cigars and while Washington’s cigar retailers have survived, adapted and are working at changing the law, it’s hard to imagine just how a store—particularly in the winter—could survive in Nebraska without offering their patrons a place to smoke.

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?

JetLine is doing an admirable job making value-priced lighters and S.T. Dupont still makes some incredible products at the opposite end of the price spectrum, but when it comes to mid-level lighters and cutters, XIKAR seems to have less and less competition. While Colibri made some decent products this year, its most notable was a $1,250 humidor produced in collaboration with Daniel Marshall, and its signature new lighter and cutter release for the year looked all too familiar to certain XIKAR products. Palió, who once had a loyal following, has pretty much fallen off the face of the earth as far as most of 2014 is concerned. It go so bad, Toraño stopped distributing Palió because it simply couldn't get product. XIKAR makes some great products, and no, they aren’t all perfect, but the company does a phenomenal job with its service and warranty. It also appears to have less competition than anyone in the cigar industry outside of Boveda. There are plenty of other companies: Lotus, Vector, even Prometheus—but none seem remotely interested in trying to compete in brick and mortars and none had years that would lead you to believe they could be threatening XIKAR. It would be great for everyone, including XIKAR, to see some legitimate competition, but another year like 2014 could put that even further out of reach.

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.

Grade: A.

10. WHERE IS CUBANACAN THIS TIME NEXT YEAR?

If there’s one company that invokes uneasiness from retailers I talk to, it’s Cubanacan. Hiring Spence Drake was a smart move and he quickly made some hires that many applauded. But “quickly” is probably an understatement with Cubanacan; it’s clearly swinging for the fences. The company formerly known as Mederos possesses a portfolio with existing lines many had not heard of prior to this year’s trade show and one big piece of eye candy in the form of the HR Habano. It’s still early into the Hirochi Robaina tour and even retailers that have not bought in at a level that will bring the grandson of the legendary Cuban grower to the store have told me the product moved pretty well in the opening weeks for a relatively unheard of $20 cigar, but it’s still early, very early. Cubanacan is the most interesting company to me at the moment, not necessarily because of what they have done or are doing, but that they could go in any direction from here and it wouldn’t be all that surprising. Cubanacan wants to be big, or at least BIGGER, and the swinging for the fences strategy seems to have worked okay as of now, but it’s hard to imagine that it will be as effective for another 12 months.

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.

Patrick Lagreid: I strive to capture the essence of a cigar and the people behind them in my work – every cigar you light up is the culmination of the work of countless people and often represents generations of struggle and stories. For me, it’s about so much more than the cigar – it’s about the story behind it, the experience of enjoying the work of artisans and the way that a good cigar can bring people together. In addition to my work with halfwheel, I’m the Spring Training public address announcer for the Colorado Rockies, PA announcer for the Salt River Rafters of the Arizona Fall League, and PA announcer for the Phoenix Mercury of the WNBA. I'm also work in a number of roles for MLB.com, plus I'm a voice talent and writer, among other things. I previously covered the Phoenix and national cigar scene for Examiner.com, and was an editor for Cigar Snob magazine.