10 Thoughts: CigarCon 2020, A Bad Idea, is Canceled

And after all that, there will be no consumer day—at least for 2020 and hopefully not for 2021 either.

Earlier today, the Premium Cigar Association (PCA) announced that CigarCon 2020 was canceled, and that it would evaluate whether to introduce the concept for 2021, including creating a new sub-committee to further study the concept. Given the relatively quick reversal—the event was announced in late June—and the initial reactions, it’s challenging to see how CigarCon 2021 happens. But CigarCon shouldn’t be talked about as a past tense event—it could still happen—but it’s also unclear how an extra year of time and thought will fix many of the underlying issues with the event.

Over the last week I’ve been trying to finish an article that was titled X Reasons Why CigarCon is a Bad Idea. Publishing it—at least in that form—seems less of a good idea now, but most of the points remain valid. And so, here’s why CigarCon isn’t happening in 2020 and shouldn’t happen in 2021.

Note: The PCA was formerly known as the IPCPR. Both acronyms are used to describe the organization with IPCPR referring to actions before July 2019.

WHAT IS CIGARCON?

First, a basic explanation of what CigarCon is, or what it was planned to be, and also the first reason why this is a bad idea, particularly for 2020. Much of CigarCon wasn’t figured out before the organization announced it. That included basic things like the price of tickets and how many cigars consumers would get; and also more advanced things, like how much extra staff would be hired to run this event.

Normally, I would write the following in italics—a note, breaking down the fourth wall—but here it’s part of the actual story. Much of the explanation about what CigarCon might be is based on what the organization publicly announced, but so many of the details were never announced, largely because I don’t think they were finalized.

So, if you are a PCA employee you could easily say “most of what’s written in this section is wrong,” and the details about what was planned might now be incorrect because what was being discussed in June was not the same as July and probably not the same as August, and some of it is probably still not figured out.

The basic idea was to have a consumer event at the annual IPCPR Convention & Trade Show, now known as the PCA Convention & Trade Show. It would take place in lieu of the first day of the trade show, a Saturday. Consumers would be allowed in, they would get cigars—though not as many as at an event like Cigarfest, so probably a few dozen at most. They would be able to see the new products and trade show booths, talk to manufacturers, etc.

Retailers would sell the tickets to consumers. The retailers wouldn’t get any kickback on ticket sales but would have the ability to chaperone their customers around the trade show floor. The PCA would give consumers some sort of ability to scan—not actually sure if it’s physical scanning, but a similar concept—which new products they wanted to try. That data would then be turned over to the retailers who sold them the tickets and presumably the retailer would use that data to influence their purchasing at the trade show.

In addition, there would be other vendors—liquor companies, perhaps Harley-Davidson, etc. There was talk at various points of a big party, likely an expansion of the one the IPCPR has hosted on Friday night, though some of the grander plans for the party and entertainment were shelved. It’s also unclear whether all CigarCon attendees would get to attend all of the evening activities, though it seemed likely the answer to that was no.

The normal trade show—largely centered around retailers placing orders with the exhibitors—would not take place during CigarCon. Instead, the next three days would be three full days of the trade show with no consumers. This would be a change from the existing IPCPR Convention & Trade Show calendar which has three full days of show, followed by a half-day.

Of note, sources told halfwheel that the PCA was considering moving CigarCon from Day 1 to Day 4, or Saturday to Tuesday. That would solve the complaint many in the industry had about losing the biggest selling day of the trade show, though it would create an issue with selling the event to consumers, who would now be showing up for a one-day event on a Tuesday.

Scott Pearce, the executive director of the PCA, told a group of media that the organization expected to sell 4,500 tickets for CigarCon 2020, which would be a sellout. He also indicated that at 4,500 tickets the event would still lose money the first year, and potentially for the first three years.

While there was never a number publicly given, the price of tickets would be higher than most other cigar events. I think it’s probably safe to say that $400 would be the bare minimum per ticket, perhaps even $500, and there were definitely conversations about some ticket tiers over $1,000.

WHY DOES PCA WANT CIGARCON?

Primarily, money.

The legal bills for funding lawsuits against FDA are increasing and without much end in sight. The PCA’s financial situation is far better than that of Cigar Rights of America (CRA), but the cost of fighting anti-cigar legislation isn’t going to get cheaper. Once the current lawsuits are settled and perhaps even before, there will be another, and another, and really, no end in sight. It’s a far cry from what the IPCPR was having to deal with five years ago when the organization was funding zero lawsuits against the federal government.

And it’s not just the lawsuits.

The PCA is trying to develop a more organized approach to lobbying on Capitol Hill and it probably should spend more money on the state and local levels, something that requires a bigger budget. For some context, Rocky Patel told the audience at the CigarCon announcement in June that the legal bills for fighting FDA legislation “this year” had totaled $3.6 million.

There’s also the issue that the trade show itself is probably less profitable than it was in 2018. The Sands Expo Center, the current host of the trade show, no longer gave IPCPR access to meeting rooms off of the trade show floor. That meant the organization had to build out the areas to host its party, the seminars, breakfast, etc. It’s inevitably costing the organization a couple hundred thousand dollars more than if it was able to use the rooms like in years prior. But because of smoking, the Sands won’t let the organization use the rooms and as such, they must be built on the trade show floor.

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I don’t think there are many at the PCA that think they can do a better job at running a consumer event than the companies that are already doing it, but I understand that they think the trade show has more to offer than something like Big Smoke or Cigarfest. There are nearly three times the number of cigar vendors at the trade show than there are at Cigarfest, and it’s almost four times greater than Big Smoke. The booths are more elaborate and there’s a certain experience of having the entire industry—all the names and personalities from big to small—in one place at one time. And that certainly is a massive competitive advantage that an organization could generate revenue from.

And I think there’s also a belief at the PCA that even if the organization can’t do it better, it can probably do a good enough job and make money doing it. The PCA is making a bigger push to be a media player through a new magazine and website, it’s increased the number of partnership opportunities, and by hosting the largest consumer event—a sold-out CigarCon would be the biggest single-day event, though smaller than Cigarfest’s combined two days—it would be another consolidation of power—or at least a show of force.

1. A FEW DOZEN PEOPLE SHOULDN’T GET TO GAMBLE THIS MUCH OF AN INDUSTRY

If I had to pick one central complaint about the IPCPR as an organization in my time dealing with it over the last decade, it’s that the organization continues to operate like this: major decisions made by a small group of people that affect the entire industry in a massive way with nearly zero consultation of the industry as a whole.

Much of that particular problem isn’t related to the decisions themselves, but the way the organization goes about soliciting feedback for the proposed decisions and then the organization’s repeated struggles to explain why it must make decisions.

For example:

• Why was the trade show in New Orleans? Because it was so much cheaper.
• Why did we have to move the trade show from The Venetian to the Las Vegas Convention Center? Because The Venetian was fed up with people smoking where they were told not to.
• Why was the 2019 trade show the weekend before July 4? Because that’s the only date we could get.
• Why are we doing CigarCon? For the money.

None of that was ever said quite clearly by the IPCPR, but it should have been. And furthermore, most members were given zero ability to consult on alternative plans for any of them.

The PCA would counter and say that many companies, i.e. manufacturers, knew about CigarCon beforehand. There were the companies that are on the board of Cigar Rights of America, who were negotiating a failed merger with IPCPR. The seven-member Associate Members Advisory Board (AMAB)—the manufacturer’s advisory board of IPCPR—was also aware of the CigarCon plans. IPCPR reached out to larger companies who were not part of one of those two groups to explain the upcoming CigarCon.

But that’s sort of it.

The organization claims that it has thousands of retailers, which would mean that probably less than 2 percent of its retail members were made aware of the plans. Outside of the boards—particularly the executive board, the larger retail board and the AMAB board—it’s unclear whether anyone was actually able to suggest changes, or look at proposed numbers, or really anything. And outside of executive board, it’s unclear if anyone got to vote on whether to do this.

It’s a massive change to the industry’s most important event, which for most American manufacturers is the best week of sales during the year. For both the manufacturers and retailers that attend as well as the industry as a whole, it has the potential to be both financially incredible but also disastrous. It could add millions of dollars to the PCA’s budget over the next decade or it could cost an equal amount of money, money that retailers and manufacturers would ultimately have to reimburse the organization over time or risk losing the legislative support the PCA provides.

2. THE IPCPR WASN’T READY TO ANNOUNCE CIGARCON

A few weeks ago I was trying to figure out the right analogy. CigarCon wasn’t even a half-baked idea. It was a convoluted mixture of half-baked ideas, old fully baked ideas that no longer made sense and in some cases, aborted ideas.

Unfortunately, none of them seemed to involved asking and answering some of the most basic of questions. Who wants to attend this event? What effect will it have on our other business, such as the trade show? Has anyone else tried similar events of size/price? Most concerning, for an event that was supposed to generate revenue, there wasn’t even a financial plan that was finalized enough to where ticket prices could be announced.

And yet, there was still an announcement.

The PCA held a press conference before the 2019 IPCPR Convention & Trade Show open to anyone who had a trade show badge, but it didn’t take questions. Instead, Pearce, Rocky Patel and Scott Regina—the PCA’s trade show committee head—held a question and answer session with invited media after the announcement. It then publicly took questions a few days later at another session open to everyone, though that wasn’t really planned and was only the result of another seminar getting canceled at the last minute.

I was only at the media one, but it didn’t sound like the retailer went any better. The more questions were asked, the more questions that emerged, and the more visibly frustrated the PCA leadership was getting with the questions and lack of support.

Because there weren’t any numbers, no one really knows how much the PCA hoped to make off the event. Because there wasn’t really any investigation into similar events of similar sizes, no one knew about how realistic selling out 4,500 tickets in the first year was. Because no one surveyed retail members, no one realized that retailers wouldn’t be okay with not making money on the tickets they sold.

Pearce said that all tickets would be sold through PCA retailers. The organization said that 771 stores attended this year’s trade show. That means the organization needs each of those stores to sell about six tickets, which would seem reasonable in a world where the retailers actually supported CigarCon, but many aren’t.

3. AND THE PCA WASN’T LOOKING FOR FEEDBACK

“Our goal in announcing CigarCon at our 2019 trade show was to elicit feedback and have the conversations surrounding a consumer event,” said PCA President John Anderson.

That is the copied and pasted from the second paragraph of the press release announcing the cancellation of CigarCon 2020.

It’s also not true.

At least not based off of the hundreds of conversations I’ve had about CigarCon over the last year. The PCA wasn’t looking for feedback, and it certainly wasn’t looking for criticism. CigarCon 2020 was happening. Tickets were going on sale in the first quarter of 2020. They would sell out. “The consumers are coming!” was what the new PCA magazine wrote in a feature story about the event.

Sure, the PCA would have been willing to listen to people with suggestions for how to improve the CigarCon idea, but it wasn’t looking for feedback about how people felt about CigarCon.

The IPCPR did do a survey after the trade show, as you can see it had nothing to do with CigarCon. At some point, the IPCPR leadership went into listening mode but it was only after the waves of negative responses wouldn’t stop, something that wasn’t part of the plan.

4. THE PCA ALSO ISN’T READY FOR CIGARCON

You might be wondering why people are so opposed to CigarCon. It’s a fair question, particularly if you’ve never been to the trade show. So here are some of the basic reasons:

1. The Trade Show Has Problems — Declining attendance, increased costs. The IPCPR Convention & Trade Show—like many other trade shows in other industries—is having problems justifying itself. It’s still the biggest event of the year, but the return on investment is dwindling every year and the organization hasn’t done much to make the bleeding stop.
2. Day 1 Is the Best Day of Sales — Many manufacturers are not okay with sacrificing Day 1, the most attended day of the trade show, for a consumer event. For most, Day 1 is the best sales day because there are simply more people. Day 4—a Tuesday—is the worst. Unfortunately for everyone involved, attendance on Day 3 has taken a noticeable nose dive in recent years and it’s unclear whether retailers would care enough to stick around for Sunday-Tuesday in a world of CigarCon because an increasing number have turned the show into an in Friday, out Monday morning weekend.
3. There’s No Tangible Benefit from a Consumer Event for Manufacturers — Manufacturers giving away cigars for free isn’t profitable. Additionally, because of the proliferation of events where consumers are given one cigar from each manufacturer at an event, the value of brand exposure through events like this has been diminished almost to the point of exhaustion. Since there wouldn’t be a component where manufacturers could sell to a consumer, trying to convert a sale is much more challenging. The manufacturers can easily calculate how much money Day 1 is worth to them, but there’s zero ability to calculate the ROI on giving out cigars for free.
4. Retailers Find This Annoying at Best — For retailers, CigarCon doesn’t seem to have any value. The PCA claims that the feedback of customers telling retailers what new cigars they want is valuable. While I don’t think it’s of no value, for many it’s probably not worth much more than zero. All of it comes at a cost, most notably, the retailers would sell a ticket—as a reminder, at least $400 per person—to one of their customers and get zero profit. Furthermore, some were concerned about the PCA getting the contact info of their customers, particularly for free, or worse yet, in a world in which those same retailers have to pay to attend the event.
5. What’s In It for the ~100 Other Exhibitors — We cover just about everyone that sells cigars or cigar accessories, around 150 companies, but there’s another 100 or so that we don’t cover. These range from people selling Bic lighters to point-of-sale software to commercial water purification systems, i.e., the B2B parts of the trade show. For them, this is a massive annoyance—a loss of a selling day, a need to have someone at the booth during CigarCon to make sure nothing gets stolen or damaged—for zero possible gain. While most of those booths are fairly small, the combined footprint of these 100 or so booths is a decent chunk of the trade show floor.

As I’ve written before, my largest issue with CigarCon is that the PCA is trying to introduce a massive new event instead of fixing the problems with its current event.

5. THIS IS A VERY INEFFICIENT WAY TO GET MORE MONEY

The trends related to the expenses and revenue of the trade show is sort of like two ships passing in the night, albeit not in the traditional way that description gets used. Manufacturers complain that the cost of the exhibiting at the trade show continues to increase, dramatically. The PCA will then counter by saying the amount of money the IPCPR has generated from the trade show isn’t increasing much at all.

Both are true.

The problem is that the PCA sees very little, probably less than 20 percent, of what a company spends to exhibit at the trade show. The PCA gets the money the companies spend on booth space and for their membership dues. From some of the companies—particularly the larger ones—it gets additional money in sponsorship and advertising. There are some other instances of where the PCA might get money, like if a vendor gives the PCA a small commission on sales generated from its members, but that’s largely where the PCA’s revenue generation ends.

That means the PCA receives none of the money for when a company buys a physical booth, that goes to the booth company. It also won’t make money on the shipping of the booth, a cost that seems to increase annually. It’s also not going to make money—or at least a noticeable amount of it—for the setup and tear down of the booth. The costs associated with new signage, a coffee bar or the bottled water—those go to some entity that is not the PCA. All of the other basic travel costs—airfare, rental cars, taxis/Ubers, meals, etc.—those also go to someone else.

CigarCon creates a scenario where the PCA would likely spend over a million dollars more with other companies like The Sands/Venetian or Shepard—the event services company—all so it can entice a company like Rocky Patel or RoMa Craft Tobac to spend more money with the PCA in the form of higher dues or booth space costs.

That’s what CigarCon is: the PCA spends a lot of money with The Sands/Shepard/etc, have consumers cover the increasing costs for the PCA, profit off charging cigar companies more money because now there are consumers at the trade show.

6. EXHIBITOR COSTS MUST GO UP

Which leads to the explanation of the dirty little secret: CigarCon is probably not worth it to the PCA without a rather noticeable increase in the cost to exhibitors.

That’s the plan and that’s been the plan every time this idea has been seriously considered: get a whole bunch of consumers to show up, create more value for the manufacturers, increase the price they pay. The back of the napkin math says the organization could probably make money on a $500 ticket so long as it wasn’t having to include a formal dinner with that ticket, but the real money would come from a dramatic increase on the money that is charged to exhibitors.

Months ago, Pearce told me, on the record, that the cost of exhibiting would not increase beyond a nominal 3 percent—basically inflation—for 2020 with CigarCon planned.

But that—along with the comments about not making money in year one with 4,500 tickets sold—means the organization was going to risk money, and probably lots of it. Lose money on the first CigarCon—which a majority of manufacturers don’t want—but hope you can convince them that it’s not only good enough to continue, but it’s good enough to justify them spending more money for the event the next year.

It’s a massive gamble that the PCA was going to make and it raises the question: How much money was it willing to lose in 2020, all so that it can increase its revenue for 2021 and beyond?

7. THE PCA SET THE BAR: SELL OUT OR BUST

If a sellout is unprofitable, then the question becomes how many people need to show up for this to be a success? I think Scott Pearce made a massive mistake that was entirely unnecessary.

The bar became 4,500 because Scott Pearce told us so.

He said at the media Q&A session that he expected the event to sell out in its first year. He also said it wouldn’t be profitable for the first year and potentially for each of the first three years. It was such a baffling answer I asked the question again. And he responded with the same answer.

I would imagine the vast majority of events don’t sell out in their first year, certainly most large ticketed cigar events I’m familiar with don’t. But because Pearce said it would sell 4,500 tickets in year one, it created a weird scenario where the PCA could sell 3,900 tickets and have the largest single-day consumer cigar event, and yet, the event would still fail because it lost money and missed the 4,500 number.

It seems trivial. If 4,000 people show up, most exhibitors and retailers would probably be okay with it. But, it highlights just how little of a strategy existed to rolling out this event. Someone should have realized: a. don’t admit that this won’t be profitable if it sells out, b. don’t say it will sell out. It was unnecessary disclosure, particularly in a world in which the PCA was comfortable not answering other questions about very basic details.

Just so we are clear, there’s no scenario where I could see the PCA selling 4,500 tickets at $400 per piece for an event that was six hours long and where people got less than 40 cigars. For the first year, 2,000 attendees at that price—even with massive marketing, kickbacks for retailers and a lot of free tickets—seems like a stretch.

8. TIME DOESN’T HEAL MONEY

I don’t know how many of these issues, if any, are helped by more time.

The IPCPR knew that change always inspires criticism, but it didn’t expect the vitriol to be as swift or consistent. Some will inevitably blame this article for only encouraging it, which is true, though neither publishing this article nor blaming this article will have any effect on the actual issues at stake.

What definitely came as a surprise to the organization was the response in terms of money.

I suspect the reason why the PCA announced it was canceling CigarCon 2020 in August—as opposed to making it in January—was because of booth sales for the 2020 trade show. From what I’m told, they aren’t going well and they haven’t been going well since before the trade show started.

In June, halfwheel reported that five of the largest companies in the industry had chosen to not select booths until after they got more clarity on CigarCon and the future of the trade show, as well as other issues. Because of the physical floor space these companies occupy, that created issues for the PCA selling any additional space, as it likes to place the largest vendors first.

Many exhibitors have threatened to reduce their floor space because of both CigarCon as well as the ongoing issues with the trade show. A number of retailers threatened to not attend if CigarCon happened, and the response from consumers online on social media and websites like this and others showed only mild interest.

If 2020 booth sales were tracking similar to 2019, there’s little chance this announcement happens now, but given the threats—no matter how real they might be—it seems likely the PCA’s hand had been played for it.

9. HEADS WON’T ROLL, BUT SHOULD THEY?

I don’t think that college athletics, even football and basketball, is a business. There are parts that are businesses, but an athletic department as a whole is not a business. It’s a charitable organization, a foundation, just like the PCA. Unlike a professional sports team, no one owns it.

I’m adamant about this position because when push comes to shove in moments of crisis no one’s money is at stake, and as such, the consequences are much different than a business.

If the PCA was a company, with an owner or shareholders whose money was being risked in all this, there would be consequences to having to cancel—err postpone—a massive project less than 60 days after it was announced. People would likely be fired, certainly board members would either be forced out or resign due to their own disapproval.

Canceling CigarCon, or postponing, is the right decision, but it’s a massive change in direction from what has been talked about internally for the last year. It’s a failure, a very public one, and if it was a business there would be similarly massive consequences.

But it’s not. The PCA’s money doesn’t belong to anyone, its board doesn’t report to shareholders and as such, no one is likely to be forced out like they would be if this was a business.

I want to be clear, I’m not rooting for anyone in particular to be forced out, particularly any of the staff, who I don’t really blame for much of this. But it’s worth pointing out the difference between the worlds of organizations and businesses.

10. THE FUTURE IS SMALLER

I’ve spent an inordinate amount of time over the last six months thinking about CigarCon. I’ve had probably over 100 hours of conversation with people trying to learn about the plans, learn about the new plans, learn about today’s plans and talk through what initially seemed like an awful idea.

I still think CigarCon is a bad idea, a worse one than I did late last year. I’ll admit that even I was surprised how unorganized the roll out was and how negative the response was, particularly from the retailers.

But I don’t think it’s particularly helpful to just criticize, so I have a proposal for the future of the PCA Convention & Trade Show, one that’s more radical than CigarCon and one that I ultimately think fixes many of the underlying problems: make it smaller.

As far as I can tell, the central issue with the trade show is not the time of the year, the location, manufacturers giving discounts to people that aren’t there, declining interest in new products or even a stagnant industry: it’s the size of the booths and the size of the show.

Many years ago—I’m honestly not sure when—the IPCPR made a decision to keep the cost of its trade show square footage low, a decision that it repeated many times over. Manufacturers would be more likely to exhibit in a world where it didn’t cost as much. It made sense, but it also created a situation where companies in the cigar industry have trade show booths that are comically larger than they should be if you compare them to other companies in other industries.

Even when the IPCPR increased the cost of the trade show space $3 per square foot—a 22 percent increase for large booths at the time—it still meant that its show floor was anywhere between 11.5-33 percent less than the Tobacco Plus Expo, and less than half of what NACS—a massive trade show aimed at the convenience store segment—was charging at the time.

The lower costs meant that companies could build larger and larger booths because they were paying less for the space. But while the IPCPR kept its costs down, the companies that provide all of the other services related to the trade show weren’t as kind.

As has been pointed out above, the inefficiency between how manufacturers spend money surrounding the trade show and how much of the money the PCA receives means that each year the IPCPR has received less and less of that percentage. It also means we’ve created a trade show floor that is far bigger than this industry needs and dwarfs the dwindling retail attendance.

A smaller trade show—albeit one where the PCA charged more per square foot—would mean:

• A more profitable trade show for the PCA
• Lower costs for exhibitors
• Fewer complaints about attendance
• More options for where the trade show could be held

Most importantly, it might actually address the long-term, largest problem this trade show has and will have in the future, something that CigarCon just avoids. The value no longer exists between the amount of money retailers spend versus the discounts they can only get on the trade show floor. And the number of new products, while still high, matters less and less these days. Plus, if there are less retailers showing up, then exhibitors should spend less money.

But that is not what has happened.

As the majority of cigar sales has shifted from brick-and-mortar stores to those with catalogs and online storefronts, the number of exhibitors has increased, the size of the show has increased and the costs have increased. But the number of the stores and their buying power—individually and collectively—has decreased. The number of major stores sitting out has increased. Even the upper echelon of the core audience—the 80 or so stores that make up the Tobacconists’ Association of America (TAA)—is being represented less and less each year.

Cigar Bash, CigarCon, whatever the next grand idea is, it won’t matter in the long run. The brick-and-mortar cigar industry is declining, the cigar industry itself is showing signs of a slight decline, and it should come as no surprise that the trade show—largely marketed towards those brick-and-mortar retailers—has less attendance. So rather than ramrodding a consumer day down the industry’s throat, or even forming a committee to figure out how to make it more palatable to its members, the PCA would be much better off spending the time finding out why 59 percent of exhibitors have lost faith in its ability to run the trade show and then trying to fix it.