At the start of every year since 2011, my colleague and halfwheel co-founder Charlie Minato has posted an editorial containing ten questions that he feels the industry will be facing in the coming twelve months. Last year, for the first time, those questions got graded as part of holding Charlie accountable for the things he thought the future would hold. This year, we continue that tradition as I grade Charlie’s Ten Questions for 2014.
The grading is fairly subjective; there are more than just As, Bs or Fs in this exercise, as well as other grades that I will choose if I think it applies best. If something was way off base or didn’t come to fruition, I shall deem that accordingly. There are also likely to be some things that may not have happened in 2014 due to certain circumstances but could happen in 2015 or possibly beyond, and those will get corresponding marks.
So without further ado, here are the Ten Questions for 2014 graded.
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.
The quick answer is yes, but sort of. FDA released the much-anticipated Deeming Document on April 24 and closed comments on it 75 days later on Aug. 8. The document and its two options were quickly scrutinized, with option two providing the most conversation since it was the option that contained conditions that cigars would have to meet in order to be exempt from regulations. Those options ranged from sensible to asinine, with the proposed $10 minimum price the most talked about and least logical.
Yet the 2015 federal budget contained reference to a committee report that encouraged the FDA not to regulate premium cigars. H.R. 792 and S. 772, bills that instruct FDA not to regulate premium cigars still garnered support in 2014 and will likely be reintroduced in 2015. There is much more pressure on the FDA to regulate e-cigarettes than cigars, and none of the public comments have been responded to, at least as far as I have heard.
FDA regulation took a big step forward, yet there is still a significant amount left to be announced.
Grade: Got it, though we still don’t know what the final outcome will be.
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.
Blanco was indeed visiting Tabacalera Palma quite a bit, but it wasn’t to work with Boutique Blends, it was to start his own line. Las Cumbras Tabaco’s first line, Señorial, is made at the factory owned by his cousin, Jochi Blanco. The one option that Charlie didn’t talk about was that after working for other companies for many years, Blanco might finally be ready to do his own thing.
Grade: So close but yet so far.
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.
While we don’t keep tabs on the number of cigars to come out in a given year that use a certain type of tobacco, I don’t think there’s been much slow down in the usage of San Andrés tobacco as of late. It seems like a good number of new cigars I smoked this year used Mexican tobacco, and while I understand that some were limited editions or might be discontinued, I simply don’t see San Andrés disappearing from humidors anytime soon.
Grade: No bueno.
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.
The issue certainly hasn’t gone away, as just recently we wrote of the highly-rated George Rico S.T.K. Miami Barracuda Maduro finally shipping after delays due to box issues. The launch of Michael Bellody’s new cigar was delayed as well, and I’m almost positive there are others that we didn’t hear about or didn’t get attributed to boxes.
It seems that with the sheer number of cigars coming out every year, there are bound to be some delays with getting the packaging ready. It may be getting better, but with more than 1,300 new SKUs released this year, there are bound to be a number of these delays.
Grade: Smells like lacquer.
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 and there definitely is a threat of snowballing.
At a state level, thankfully the answer is none, though it wasn’t for a lack of trying. Colorado rejected a proposal in March, as did Hawai’i, Maryland, Rhode Island, Utah and Vermont, while the New Jersey Senate approved an age increase that currently sits with the Assembly. Legislation also remains active in Massachusetts and New York.
At a city level, the answer is unfortunately more than we had anticipated. Massachusetts was the hotspot of tobacco purchase age increases, as Salem, Belmont, Framingham, Medway, Lawrence, Malden, Scituate, Foxborough, Yarmouth, Wellesley, Melrose, Saugus, and Hull all upped the age to purchase tobacco.
Columbia, Mo. also joined the age increase movement, as did Healdsburg, Calif.; Teaneck, N.J.; Sayreville, N.J.; Englewood, N.J., Evanston, Ill.; Hawaii;i County; and Suffolk, County, N.Y.; while neighboring Nassau County, N.Y. rejected the idea.
Regular readers know that there is a steady stream of legislation stories on halfwheel, and it appears that trend will continue if not increase in 2015. Massachusetts appeared headed straight for an increase to 21, if not by the state passing a bill then by so many cities increasing the minimum age that it becomes the de facto reality.
Grade: Spot on, with a continued 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.
I don’t know how many cigars Sindicato sold this year, nor how many non-owner accounts they have, nor how the company’s financials look after two years in operation. What I can tell you is that judging by what I have seen in stores and at the trade show, Sindicato isn’t selling like gangbusters. I’m sure it’s gained some followers, but could I honestly say it has jumped to the top of the most in-demand cigars? No. In the stores that I have been in that carry Sindicato, it’s pretty much another cigar on the shelf.
Grade: It’s still around and shipping cigars; beyond that, who knows?
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.
This got answered pretty clearly in the past month: AVO and Winston Churchill. Both brands are getting makeovers in 2015, the former in the way of refreshed packaging and some edits to the list of available cigars; the latter is getting a full-blown reboot with new blends and a new look, one that ties the cigars much more closely to the flagship White Label brand. Neither are in the same spot as Camacho was in 2013, though there are significant gains that can be made with both lines should these changes work.
But for the most part nothing was done until the final month of 2014, so points for that.
Grade: Given that there was no official news for about 11 months, I’m giving this an A.
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 where 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.
Quite simply, no. There is little debate that multi-vendor events can be a challenge and as it was described, not worth the time of some manufacturers attending. But there is still value to it if done correctly, which means companies being more choosy about when to send out their frontline people and the face of the brand.
That’s not to say that there some festivals will likely fold without a serious makeover, but by and large the established events that bring people from a wide region still seem popular and a staple of brand promotion.
Grade: Not yet. D.
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.
It was a mixed bag this year, as it seemed like we almost had an even split between companies that were increasing prices and those that weren’t. There was no widespread increase, and a few manufacturers even lowered some prices to stimulate sales.
If anything, it was the number of higher priced cigars that hit the market that was the real shocker.
Grade: Not as widespread as it could have been.
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.
As for House of Emilio proper, it seemed to be a fairly quiet year. Gary Griffith took absences from social media for stretches at a time, the number of press releases sent out from the company fell off dramatically from 2013, and Nate McIntyre departed for Cubanacan in July.
As for the individual companies, there have been a fairly significant number of new releases: Emilio finally released Mia Dora with the Draig Cayaquero Lancero showing up over the summer, but the long-awated Carpe Noctem still doesn’t appear to be on shelves. Ezra Zion started the year with FHK and then released Tantrum PA but said they were limiting the number of new accounts because of production capabilities. (Cigar Federation was sold to Logan Lawler in July, freeing up Chris Kelly and Kyle Hoover to focus on Ezra Zion as well as their Blessed Leaf project.)
Guayacan’s Maduro came out, as did new sizes of the Nomad S-307, the debut of the Nomad C-276, Bodega’s Aperitivo and Digestivo got a formal release and Sabor de Estelí by Noel Rojas. 1502 seemed to go into the year with the most new releases but some were delayed or have yet to come out; the 1502 Nicaragua was slated for a June release but didn’t make it out until September. Steven Ysidron of Epicurean Cigars had Carnavale, Gonzo Santeria and was showing off a related small cigar project called Chicken Bones.
Then there’s Rodrigo Cigars, who finally delivered on the Corona Project, though its completion will stretch in 2015. The company isn’t listed on the House of Emilio website at the moment and HoE is no longer responsible for opening new accounts, although it still will service existing accounts, sort of.
Which leaves Herederos de Robaina, a brand we haven’t heard from in quite some time. They’re not on the House of Emilio website and the company Facebook page hasn’t been updated since March 2013.
But how does all this come together? I certainly don’t think House of Emilio claimed the title of Most Intriguing Booth at IPCPR show this year, so I’d call that a miss. Personnel changes were made and there is some level of pruning the brands. So is House of Emilio in a stronger position that it was last year? In almost every case I would say the brands are, but the HoE name has fallen back a bit after thrusting itself into the spotlight in 2013. I can’t say that they have done anything this year has really wowed me, at least in terms of what an organization with as many brands and a strong affiliation to a growing multi-channel website could be doing. Maybe cohesiveness and a unified sense of direction is a bit too much to ask; or maybe there is something up someone’s sleeve that really will wow us in 2015.
Grade: Let’s be honest, does anyone really know?