ption 2 would present a major relief to cigar smokers—the FDA would allow for some cigars—those deemed "premium cigars"—to be exempt from its regulation.
The new age restriction and vending machine laws would still apply to the exempted products, but the new rules regarding warning labels, sampling and most importantly FDA approval would not.
It's unlikely that the cigar industry will not feel some effects of regulation under Option 2, but there's a chance that for many, their smoking experiences will not be affected.
Under the current definition, which in our opinion is likely to change, the FDA would exempt some products in a retail humidor, while others would be subject to regulation. This would create a very divided world. Some products would be subject to warning labels and a restriction on sampling, while others would not. While the definition the FDA chooses is likely to change, we think the risk for a division within the market between the regulated and non-regulated will not.
While we agree with those who argue that pricing should not be a factor for determining a "premium cigar," unfortunately it probably needs to be.
Without some sort of pricing restriction, the fear of the FDA is that manufacturers of small cigars and cigarillos will be able to make a few changes to their products and receive exemption. The FDA wants to regulate these products and believes that small cigars are crucial to its mission to combat youth tobacco use.
We believe that in order for FDA to accept and enforce an exemption, there will have to be clear divisions between these small cigars and "premium cigars." Price is without question the easiest deterrent.
Cigar factories operate with little waste and many of the same components that produce $15 produce $3 cigars. It's an incredibly beautiful and efficient system when it comes to how tobacco moves through a factory. However, that also means the products are very connected.
Any change, whether it be to the bundle products, the top shelf or the more typical products that lie in between will affect all segments of the market. Whether or not customers notice is a different story.