With 2018 counting down its final days, it’s time to take a look back at an article that is an annual tradition on halfwheel, Ten Questions.
At the tail end of every year, my colleague, Charlie Minato, takes a look at the cigar industry both on micro and macro levels and asks 10 questions he thinks will shape the coming year, whether it be regulation, personnel changes, acquisitions or almost any other topic. Just about a year later, I look back on those questions and Charlie’s accompanying predictions to see not only what happened, but how well he did in predicting the outcome.
For a refresher on this year’s list, you can find the full Ten Questions for 2018 here.
1. Which company will have more changes in 2018: Altadis U.S.A. or Davidoff of Geneva USA?
Prediction: Altadis U.S.A. undergoes the larger changes. Nothing would surprise me in terms of where the company is this time next year, both good and bad.
The more I thought about this, the harder it was to make a clear decision. Both companies underwent notable changes in 2017, with Oettinger Davidoff AG replacing its longtime chairman and very public ceo, as well as promoting Dylan Austin to be the new vp of sales. Meanwhile, Altadis U.S.A. gutted nearly its entire marketing department while adding Rafael Nodal of Aging Room and promoting him less than six months later. As Charlie noted, it set the stage for a 2018 to watch.
Judging simply by recency, Davidoff certainly feels to have undergone more changes, at least at the levels I deal with. Richard Krutick left the company in late October and several other members of the Pinellas Park, Fla. operation departed as well, while Dylan Austin seemed to be in a new country on a regular basis in his new role. Not to mention that Jim Young relocated from Florida to Basel, Switzerland as part of his new role as chief commercial officer, and Klaas Pieter Kelner has become a much more visible part of the company’s U.S. marketing strategy, particularly in stores and via social media.
Altadis U.S.A., meanwhile, opened up the first quarter of 2018 with new marketing personnel, but otherwise seemed to have a solid if expected and turbulence-free year. Outside of the Boutique Blends/Aging Room rebrand and the updated Onyx line, nothing was blown up and the company stayed its usual course. Montecristo got a new core line, the Nicaragua Series, which was sizable news in its own right but hardly earth-shaking, while other lines tapped the resources of Abdel Fernández to bring fresh spins to established brands. Even Casa de Montecristo, a retail arm of Altadis U.S.A.’s parent, Tabacalera USA, felt like it had a fairly quiet year. Luis Miguel Torres, formerly of Davidoff, was named as the head of that operation, replacing Steve Lochan, while Tampa Humidor was acquired and a second store opened in that city, along with a partnership formed with Mancave Cigar, LLC for a store in Hallandale, Fla.
The case could be made for either of the two companies, though my gut wants to go with Davidoff of Geneva USA.
2. Will there be a resolution to the FDA lawsuit in 2018?
Prediction: The lawsuit, or some part of it, will still be outstanding by this time next year.
The short answer is that no, it has not yet been resolved, which Charlie correctly predicted. If there was a headline in 2018 about this, it came in early July when the requirement for warning labels was delayed until 60 days after an appeal has been decided by the U.S. Court of Appeals for the D.C. Circuit. That didn’t stop some companies from putting labels on boxes, but it didn’t require everyone to do so.
So yes, the lawsuit is still outstanding, and in several ways it doesn’t feel like we’re much closer to a resolution.
3. Will the spending bill (omnibus) include an exemption for cigars and/or a predicate date change?
Prediction: This is pure speculation: yes to the exemption, no to the date change.
This is one that I really hate to grade as a miss, but as we found out in March, Congress once again passed a spending bill that contained no relief for cigars, either exempting them from regulation by the U.S. Food & Drug Administration (FDA) or changing the grandfather date for deeming regulations.
Maybe in 2019.
4. Does Imperial or STG buy A.J. Fernández?
Prediction: AJF doesn’t get purchased in 2018.
There may very well have been offers to do so, but neither Imperial Brands, plc or Scandinavian Tobacco Group purchased A.J. Fernández this year, meaning that the relationships between Altadis U.S.A. and General Cigar Co. and Abdel Fernández will remain contractual for the time being. To borrow from Charlie’s original post, the nuclear warfare option was avoided, at least this year.
5. What will Cigars International’s Texas stores look like?
Prediction: Mini-versions of the Hamburg store and busy, very busy.
Charlie Minato: Patrick Lagreid hasn’t been to the new store, so here’s some ole’ fashioned self-grading.
The lone new Cigars International store in The Colony, Texas is similar in a lot of ways to the Hamburg store, but nicer. Some notable differences include that The Colony is one floor, whereas Hamburg is two; the humidor in the Texas store is enclosed, while Hamburg is an open concept; the bar feels like a bigger part of the concept because there’s less seating away from the bar.
I think The Colony store is nicer than Hamburg, but it’s easy to see it as a version of a singular concept. The real problem with my prediction is that the second Texas store hasn’t even broken ground, let alone opened, so it’s difficult to judge my prediction which implied multiple stores.
Grade: Incomplete, but heading in the right direction.
6. Will there be less than 20 lists on the 2018 version of The Consensus?
Prediction: There will be more than 20, I’ll say around 26 largely thanks to the four hours I spent scouring YouTube last week for potential new entries. In fairness, I haven’t started compiling The Consensus and haven’t been keeping track of who has published a list this year and who has not.
Charlie Minato: As of right now there appear to be 16 lists ready for The Consensus, but it seems likely that number will get above 20.
7. Will the Tatuaje/L’Atelier Imports salesforce be majority in-house by the end of the year?
Prediction: The trend keeps going. Tatuaje will be majority in-house by the end of next year.
Pete Johnson told us that he added one new broker in 2018, so as of right now there are more brokers representing the company than when Charlie made his prediction.
8. Will Davidoff ever do anything in Nicaragua?
Prediction: Yes, Davidoff will do something in Nicaragua, but 2018 won’t be the year it gets done.
There’s still no factory, and by all accounts that I’m aware of, no announced operations. Whatever is going on with the farm on the Panamerican highway and the building in Condega is likely still in the works, but nothing changed this year, at least that we could tell.
Grade: A, as long as the company eventually does something in Nicaragua.
9. How expensive will the Cohiba Robusto Reserva be?
Prediction: In Germany, expect $80 per cigar.
It seems that Charlie nails one that is a bit of a surprise every year, and that’s what this one is. The Cohiba Robusto Reserva began arrive in mid-to-late December, and in Germany, it’s priced at €70, or right around $80 depending on when you check the exchange rate. Not only spot on, but better than my prediction that the cigar wouldn’t even make it to market in 2018.
10. When the new IPCPR ceo shows up for the first day of work, how many employees have left the organization?
Prediction: I’ll set the over/under at two employees leaving, which would be 25 percent of the current staff.
As a reminder, Mark Pursell left the International Premium Cigar & Pipe Retailers Association in September 2017, replaced by Scott Pearce in April 2018. During that time, just one person left the organization by our count, Matt Dogali, who resigned his post as senior director of state affairs in Jan. 2018.
Grade: Close, but no cigar.