Ten Questions for 2014

It’s hard to believe this is the fourth iteration of this column. About two weeks ago I started working on this article and to be quite honest, this might have been the most difficult year to write for. For those unfamiliar, before the start of each year, I write a list of ten questions I have for the upcoming year. This year was a bit different, as we added a Graded editorial earlier this week when Patrick Lagreid graded my predictions from last year. The end result was a lot less repetition and I think the most unique list of any in this editorial’s history.

1. WILL THE FDA ANNOUNCE PLANS FOR REGULATION THIS YEAR?
It will not be a good day when the U.S. Food and Drug Administration announces its plans for the premium cigar industry. Its new chief Mitch Zeller made it clear that the process on any product the agency does not currently regulate will be to announce its plans, allow for some debate, reconsider plans and then enact said plans. Whether the agency will be at all welcoming to suggestions remains to be seen.

This column—all four iterations of it—has always included something about the FDA, and for good reason: it’s kind of a big deal. Yet, the only real change since 2010 has been formal indications that regulation is closer to happening. I can’t say with any confidence that I am 100 percent convinced the FDA will announce something in 2014, and I will not be mourning if they remain quiet, but the questions about the FDA are simple: if, when and then what.

2. WHEN WILL JOSÉ BLANCO ANNOUNCE HE IS DOING SOMETHING WITH BOUTIQUE BLENDS?
It’s not even a secret at this point. From what I can tell from his very public Twitter and Instagram feeds, he is working on some sort of blend, visiting Tabacalera Palma, Boutique Blends’s factory, and smoking a lot of Aging Room.

3. HOW LONG WILL THE RECENT SAN ANDRÉS OBSESSION LAST?
My guess is somewhere around 18 months, but who knows. It’s clear that San Andrés will very much be the wrapper of 2014, although in what varietal remains to be seen. I think it’s safe to say that the amount of new cigars with Ecuadorian wrappers on it will decline in 2014 compared to 2013, but until Brazil’s pricing becomes more competitive it’s likely to remain amongst the top two for new brands.

4. HOW MUCH LONGER WILL BOX ISSUES PERSIST?
Making boxes in Nicaragua came to a literal standstill earlier this year and now the issues have spread to other countries. Combine the box issues with a year that has been ripe with cigar band issues and packaging delays have been abnormally high. The real risk going into next year is that the backlog continues to grow, resulting in a lack of releases in March, May and June; something we saw this year.

5. HOW MANY PLACES WILL 21 BE THE MINIMUM AGE TO PURCHASE TOBACCO BY THIS TIME NEXT YEAR?
New York City, various places in Massachusetts and the Big Island in Hawaii are already slated to raise the minimum age to tobacco from 18 years of age and there are more coming. Outside of smoking bans on municipal property, this will be the most widespread issue fought on the local level an there definitely is a threat of snowballing.

6. WHAT KIND OF COMPANY WILL SINDICATO BE?
The start of Sindicato, the cigar brand owned by more than 40 of the country’s largest retailers, could have gone smoother. And while that’s true about most new companies, none will be judged quite like Sindicato.

While I will be the first to remind you that three—Cigars International, J.R. Cigars and Holt’s—out of the five largest retailers in the country are owned by manufacturers, it’s clear that the way the company went about promoting itself struck a nerve with some manufacturers, including some who own retail stores—the meta issue at stake. The company did not get a break with the aforementioned box issues delaying shipping of some of its debut lines. But those are hardly the real questions as far as I am concerned.

Whether or not Sindicato can get into stores that are not owners in the company is the real test. If so, it will be a national force that could become something much bigger and different than what debuted in Las Vegas this July. Getting there will not be so easy. For starters, some stores likely will refuse to carry it because they do not want to be supporting a rival store who might have ownership in the company. Secondly, the lack of advertising and other promotion for a new company has been a concern of others. (While the company’s Twitter account is virtually non-existent, its Facebook page is active.) Then there are the cigars themselves. While Affinity received a recommendation from halfwheel, Hex did not; and it’s hard to argue that the lines have been received as a home run elsewhere.

All three present large issues to opening up new accounts, something that is arguably more crucial to Sindicato than any other new brand. While the financials of the company are in much better shape if non-owners do not carry the cigar, it will be hard to view Sindicato as anything more than a nationally-owned house brand. The good news is, the company opened up dozens of non-owner accounts, but the second order is always more difficult than the first.

7. WHERE DOES DAVIDOFF GO NEXT?
It’s hard to argue there was a bigger winner brand-wise in 2013 than Camacho. Oettinger Davidoff AG took a brand that virtually no one was asking for in January and made it one of the most vibrant by the end of July. The packaging is bright and bold, the prices are lower and the sales sheet is smaller and simpler. While the Swiss giant is doing well with Davidoff proper, the other parts of its portfolio seem at varying levels of overlooked, and in worse cases, ignored. AVO and Zino are still receiving support, but almost all of the energy seems focused on limited and seasonal releases. Then there is Cusano, The Griffin’s and Winston Churchill, brands easy to forget are even part of the Davidoff portfolio. There’s a very good chance Davidoff could do nothing as far as a 2014 brand makeover, but if they do decide one is in order, there are a host of options to start.

8. HAS THE CIGAR FESTIVAL BUBBLE BURST?
A few years ago a representative from a mid-size cigar company told me that his boss had run the numbers and figured out that cigar festivals, or multi-vendor events, were hardly worth their time. Since then, the number of festivals has gotten ever more out of hand, but it seems as if manufacturers are finally starting to understand that many of the events are hardly worth the time, let alone the money.

The popularity of multi-vendor events where consumers are charged a flat fee for a bag of cigars, ones usually donated by manufacturers or sold below normal wholesale cost, are in vogue, at least at this very moment. The events, big and small, could and did work, but that was before we saw an explosion in the number of them.

Now it’s hard to look at the overall event circuit with anything but skepticism. It really should not be a surprise, the idea that giving away product at heavily discounted prices on Saturday and then selling it at normal price on Sunday is obviously flawed.

Cigarfest, Big Smoke, The Great Smoke, Chattanooga Tweet-Up and other established events will likely remain for various reasons, but many are about to go. It just does not make sense to spend time giving away free cigars, while not being able to sell cigars, on a regular basis. Some events are better than others, but too many return zero upside for manufacturers, something that was always known, but never was an issue because it had almost no effect on the bottom line. Those days have come and gone and 2014 will be a year when many of the events begin their decline.

The system worked for a while, but that was before multi-vendor events became a weekly occurrence, something the cigar industry cannot sustain.

9. HOW WIDESPREAD WILL PRICE INCREASES BE?
In the coming weeks, we will likely see a host of manufacturers announce price increases, or at least that’s what history will tells us. It’s unclear if, and how many, will be coming. I gather that we will see far less than what we have seen in the past, particularly as consecutive increases, mostly between two and five percent, have now amounted into a substantial increase in retail price for cigars.

10. WHERE WILL THE HOUSE OF EMILIO ET AL. FAMILY GO NEXT?
First, a distribution company adds a host of smaller and new companies. (That would be House of Emilio, which currently has nine brands in its portfolio.)

Next was Cigar Federation—owned by the same people behind Ezra Zion—which has gone from a mix between a forum and Facebook, to a cigar brand, to now an online retailer and media conglomerate. Cigar Federation now hosts three online shows (CigarChat, HalfAshed and Stogie Geeks), which have connections to three outside blogs: RobbyRasReviews, The Cigarmy and Cigar Coop. There’s also a dedicated review portion of the site with other individuals and connections to other bloggers, such as CigarCraig. In staff alone, Cigar Federation might honestly be the largest media organization as far as online cigar media is concerned.

But Ezra Zion/Cigar Federation is not the only House of Emilio family member with hosted media. The newly-added Bodega Premium Cigars has added Logan Lawler of the aforementioned CigarChat, DK of 2gentlemenreview.com, Evan of The Smoking Greek and Scott Lancaster of Sticks2Ash. All this for a cigar brand that is not available on retail shelves at the moment.

I should be clear, Ezra Zion/Cigar Federation, Bodega Premium Cigars and Emilio are all separate companies, only connected by the House of Emilio distribution company, but there’s no question what booth at IPCPR 2014 will be the most intriguing. While House of Emilio is far from the largest cigar company in the world, there’s nobody trying as many ideas, I just wonder what’s next.

Charlie Minato

I am an editor and co-founder of halfwheel.com/Rueda Media, LLC. I previously co-founded and published TheCigarFeed, one of the two predecessors of halfwheel. I have written about the cigar industry for more than a decade, covering everything from product launches to regulation to M&A. In addition, I handle a lot of the behind-the-scenes stuff here at halfwheel. I enjoy playing tennis, watching boxing, falling asleep to the Le Mans 24, wearing sweatshirts year-round and eating gyros. echte liebe.