Friday has once again so graciously come around, which means it is time for another installment of Ask halfwheel.
This week, reader Brad P. has a question about the cost of cigars:
Why do certain big name companies or families allow their cigars to be sold by other entities for substantial prices and they aren’t any better than their basic line of products? For example, Prometheus for Fuente.
Other than the simple answer of because they want to make more money, the answer usually traces to a relationship between brands that results in projects such as the God of Fire cigars that Arturo Fuente makes for Prometheus.
In my review of the God of Fire Aniversario 56, I gave a bit of the backstory on that relationship. Prometheus’ history goes back to 1992 when Keith K. Park launched a line of premium lighters as part of this father’s company, KGM Vector. In 1997, Park took the brand independent and added ashtrays and humidors, forming a relationship with the Fuentes in 1999 that resulted in a limited edition Fuente Fuente OpusX humidor.
In 2002, Park helped produce a documentary called The Fuente Family: An American Dream, and Carlos “Carlito” Fuente, Jr. heard that Park’s nickname was “God of Fire” as an extension of his Prometheus line. The idea for God of Fire cigars would come about in 2003 during a meeting between Park and Carlito Fuente, with the line’s debut in 2004 with two blends, God of Fire by Don Carlos and God of Fire by Carlito. In 2011 the God of Fire Serie B line was added with two versions, one using an Ecuadorian sun grown wrapper and the other using a Connecticut broadleaf maduro.
So in this case, it was a partnership that evolved over time, with Prometheus wanting cigars to add to its portfolio, and Fuente certainly benefitting from being associated with a line of high-end accessories. At a surface level it’s a win-win situation for both companies. Of course, to do this, Prometheus is almost certainly paying some sort of licensing fee for the use of the Fuente name on its accessories, and they are buying the cigars from Fuente and then adding their own markup to them, creating another layer of price structure.
It also gives Fuente another outlet to sell more cigars without having to bulk up their portfolio or overly dilute its existing options. Educated cigar smokers know that God of Fire is made by Fuente, but it isn’t spelled out explicitly on the packaging. When someone likes the cigar and digs into the story behind the God of Fire series, it’s a win for Fuente, and might make that person more likely to try other cigars made by them.
It also merits mentioning that Prometheus sets itself apart as a true premium goods company, and one way to do that is by inflating the price a bit. It’s a well-known fact of price theory that if two identical products are side by side, the higher-priced one is perceived as being of better quality. Whether or not you think this increase is justified is a personal decision, but some people will certainly think the price is merited by the quality of the cigar, or at least perceive an increase in quality because of the price.
While there aren’t many other relationships like that between Fuente and Prometheus, there have been some examples where pricing changes occur after the cigar was announced. One that comes to mind is Fable, which announced pricing and then raised it after signing a distribution agreement with Pospiech Inc. Nothing changed other than the distributor, yet the price went up.
It all comes back to the costs that go into getting a cigar from seed to shelf; every person whose hand is in that process chain wants to get paid, and ultimately the final product needs to stand out when it hits the shelf from all the other ones competing for your dollar. For some, that means being on the less expensive side of the spectrum, and for others that means being on the higher end.
And ultimately, it all comes back to getting that cigar sold, and the simple answer of making more money.
Ask halfwheel is a weekly feature where we answer questions from readers. If you have a question—burning or not—about cigars, the cigar industry or halfwheel, submit it here.