Seriously. The insurance people would like to know.
Our coverage of the 2017 IPCPR Convention & Trade Show is almost done. There’s one more editorial and one editor’s note, but the meat and bones of recapping this year’s trade show will be done once you decide to stop reading this post. The editor’s note will describe more of the process of how halfwheel does the trade show, whereas this is really a summary and some parting observations.
In no particular order, here are 10 big picture thoughts about the trade show that I wrote down during the week.
1. IT WAS MUCH MORE CRAMPED
My favorite statistic of the trade show was: in 2010 there were 251 exhibitors, in 2014 there were 351.
Attendance at the IPCPR Convention & Trade Show has remained largely flat since I’ve been coming to the show (2010), however, the number of exhibitors and the size of the show has greatly expanded. That has given people the impression that the trade show is emptier than in year’s past, but much of that is people’s perception and a lot of that has to do with the fact that the same number of people were being asked to fill a space that grew 30 percent in five years.
In one of my first conversations three years ago with Mark Pursell, the ceo of the International Premium Cigar & Pipe Retailers Association (IPCPR), he told me that the size of the show floor would have to get smaller. I took that to mean he thought there were too many exhibitors, after all, the conversation was taking place at a time when the IPCPR was trying to discourage hookah and e-cigarette companies from exhibiting; turns out, it was a much more involved plan.
This year, parts of that plan were apparent and the aisles were substantially narrower than they had been in years past. During set-up and even during the show, it was challenging to tell where some booths ended and others began and if our photographs are any indication, trying to photograph any booth outside of the ones along the edges meant that at least two other booths were going to be in the shot.
2. SMALL COMPANIES DID NOT DO WELL
For a variety of reasons, it was pretty apparent that many smaller companies were having a poor trade show. Yes, companies like Dunbarton Tobacco & Trust, Foundation and Warped all probably had good shows,1 but after that, it had to be scary.
Five years ago retailers would constantly ask me, what company do I need to go visit, I don’t think one retailer asked me that question, phrased like that during this year’s trade show. Instead, retailers ask what product do I need to try/see and more often than not, it’s an accessory that I recommend.
I think there are a number of reasons as to why it’s changed, they include:
1. The Market Is Saturated — Five years ago many established companies weren’t coming out with many new cigars. It was not the case that every booth you visited had at least 20 new SKUs, but now, that’s the norm. If you take the 20 largest brands by either volume or revenue and look at their portfolios, it’s nearly impossible to carry every line from any one company, let alone every SKU.
The size of retail humidors has not increased and as such, retailers are having to be selective about which new Altadis line to bring in or which Padrón SKUs to carry, a stark contrast to 2012.
2. Retailers Have Been Burned Too Many Times — From 2011-2013, the desire to name the find Tatuaje or Illusione was a legitimate contest amongst retailers and cigar bloggers. In the end, no one has really come close to matching the rapid success either one of those brands have had, particularly in their ability to scale from small cigar manufacturer to medium-size cigar operation.2 Still, retailers, bloggers and consumers played the game, but the retailers were the only ones that had to pay the price when things didn’t work out.
There were a plethora of new brands and like most businesses, many of them aren’t around today. Retailers got stuck with product that wouldn’t move and without an effective way to get rid of it and much of that product is still found on shelves all across the country.
At some point, the retailers collectively decided to stop trying to find that diamond in the rough or unheard of brand. The over saturation, the power of the internet and the decision by many retailers to make their own cigars meant the illusion of potentially winning was no longer there and retailers stopped playing.
3. FDA Has Some Retailers Scared — There are some, a small percentage, of retailers who are concerned about bringing in new product without having guarantees that it will be FDA-compliant. While this certainly affects the overall buying volume in a significant way, because many of those retailers are the largest ones, it’s probably not that big of a factor for the IPCPR show floor.
So, many, if not most, small brands had a bad show. Many probably lost money in Vegas and I suspect some will decide to sit out next year given this year’s results. The simple fact of the matter is for all the reasons above, retailers really don’t roam the show floor aimlessly anymore and as such, I saw booths with literally no one in them despite being located right next to the cafeteria.
Note: This text was written prior to the announcement that FDA would be delaying substantial equivalence filings until 2021. While I think this was certainly a factory at this year’s trade show, I think FDA concern is no longer a valid excuse for not bringing in a brand. I think the news also means we will see a smaller amount of manufacturers sittings out next year’s show, though I suspect the numbers will still be a bit down next year.
3. CALIFORNIA RETAILERS SHOWED UP (TO SOME DEGREE)
The general belief heading into the show was that California retailers would not be attending due to the doubling of the state’s cigar tax on July 1. More specifically, because they would do their buying ahead of July 1 and the trade show in order to take advantage of the pre-increase rate.
It was a convenient excuse about why this year’s trade show would be the worst ever (see below), but I saw at least a half dozen retailers from California, about the same number I normally see. There’s no debate, there were certainly less California stores and I’m not sure many of the stores were buying cigars, particularly given many cigar companies had record Junes thanks to California retailers loading up to beat the tax hike, but they showed up in at least some capacity.
I think it highlights one very important point: for many of the country’s top retailers, the trade show is as much a social event as it is a buying event.
4. HISTORY REPEATS ITSELF — #NOTTHEWORSTSHOWEVER
Almost every company I spoke to in Vegas before the trade show started was highly concerned about attendance and orders. And yet, by day three most—outside of the smallest of the small—were breaking out the champagne bottles.
That wasn’t necessarily the case on day one, when many of the bigger companies were concerned, but just like last year, a light day one was followed by big numbers on days two and three.
As we’ve pointed out in the past, most “facts” on the trade show floor are generally “completely false,” particularly when it involves show attendance. So I’m not sure how much of people’s concerns are the industry’s irrational desire to complain about the trade show at every turn versus normal fear before a big event.
Whatever the case, the general theme when talking to medium and large companies was that while the number of orders was either equal or slightly down compared to years past, nearly every company told me their average order was for more money leading to greater revenue compared to last year’s trade show.
5. GENERAL’S WAR ON PRICE CONTINUES
There were 29 new cigars from General Cigar Co. this year—that’s total cigars, not just lines/blends—and only one of them will retail for more than $9. It’s the latest chapter in the company’s multi-year strategy of pricing most of its portfolio substantially cheaper than the market average.
It’s a noble strategy, but I’m just not sure it’s working as well it could be.
Neither General’s competitors, nor retailers that I speak with seem to be aware just how aggressive General is with pricing on a meta level and as such, I’m not sure it’s resonating as well as it could be. I wonder, if the updated Partagas 1845 was being priced at $12—nearly double what it’s being sold for—would General really see a 50 percent drop in sales?
I still don’t understand the strategy entirely, but I do know there’s plenty of room for General to better market its extremely aggressive pricing.
6. THE EUROPEANS ARE COMING
At some point later this year, three of the largest European machine made/little cigar companies—J. Cortès, Royal Agio and Villiger—will all have their own independent U.S. operations, something that was challenging to imagine two years ago when Villiger was in the process of firing most of its U.S. operation and most industry folks, let alone consumers, had no clue who J. Cortès was.
And yet, those three companies all had their own booths at the IPCPR Convention & Trade Show and will have independent U.S. operations by the end of the year.
I’m not sure what it exactly means beyond just an observation. The three companies all got here in very different manners. Villiger has had a U.S. operation, in varying sizes, for years; J. Cortès bought Oliva last year and Royal Agio is going out on its own after having distribution agreements with Cusano, Davidoff of Geneva USA and most recently Drew Estate.
It is interesting that in a world where most of the conversation is about U.S. cigar makers going over to Europe; the European influence in the American market seems to be growing. Three of the largest U.S. cigar companies are part of European corporations: Altadis U.S.A. (Imperial Brands, plc, based in the U.K.), Davidoff of Geneva USA (Oettinger Davidoff AG, based in Switzerland) and General Cigar Co. (Scandinavian Tobacco Group, based in Denmark.) In the last two years, a Brit was appointed as ceo/general manger of Altadis U.S.A. and a Dutchman was named the new president of General.
7. MEXICAN SAN ANDRÉS EVERYWHERE
If you were wagering blind bets on what the wrapper of a random new cigar is, it was Mexican San Andrés versus the field. It seemed like everywhere we turned, there was a company releasing a new cigar with Mexican San Andrés, a far cry from five years ago when Jonathan Drew asked me whether he thought consumers would actually buy a traditional cigar with a Mexican wrapper.
Like most things in life, I suspect the popularity of Mexican wrapper is a combination of push and pull. There’s no question there’s been a lot of investment over the last three years in the wrapper—not just when it comes to farming, but also processing and selling—but I suspect a lot of this also has to do with the state of Ecuadorian Connecticut tobacco.
In the last 12 months, the price of Ecuadorian Connecticut wrappers have skyrocketed due to declining availability of Indonesian Sumatra wrapper, which forced European little/machine made cigar companies to look elsewhere to meet their needs. They turned to shade grown wrappers, including Ecuadorian Connecticut, which has forced a price surge. The price hikes and availability issues are drastic enough that I imagine in a world without FDA, this is what everyone would be talking, not just about the show, but throughout the year as well.
8. FDA WAS KIND OF MEH
Speaking of the U.S. Food & Drug Administration, not a ton of people were talking about it.
There were certainly manufacturers who were asking questions about FDA or asking my opinion on things, but for all those that thought FDA’s deeming regulations, which went into effect shortly after the 2016 IPCPR Convention & Trade Show, would create a different looking show, it didn’t happen in year one.
New product, free samples and new companies were all present at FDA. While it certainly seemed to have an impact on just how many manufacturers were there, it only had a minor effect on how many companies didn’t have new product at the show. Per our calculations 26 of the 135 companies we visited didn’t have new product for the show, a bit more than what it probably was last year, but probably five or six more; certainly not double.
If anything, FDA had a much larger impact on last year’s show than it did on this one.
9. THUMBS UP: LVCC, THUMBS DOWN: WESTGATE
The amount of conversations about the Westgate, one of the official show hotels, was certainly a record high. While the convention center seemed to earn mostly positive feedback, I never heard a single person say anything positive about the Westgate.
I’m sure some people thought the hotel was fine; after all, you get what you pay for, but most people had a lot of issues. I heard complaints about the check-in process, the cleanliness of the rooms, the size of the rooms, the quality of the rooms, the inconsistency of the rooms between the older and remodeled towers and perhaps most notably, many seemed to feel like they weren’t informed as to exactly what they were buying.
I suspect we will see the International Premium Cigar & Pipe Retailers Association purchase some rooms at either the Renaissance or SLS/The W, hotels located directly south and north of the Las Vegas Convention Center, but neither will be as convenient, or as cheap, as the Westgate.
The grass is always greener and after a handful of years at The Venetian/Palazzo/Sands, most people seem to miss it. It can get a lot worse than Las Vegas, the LVCC and the Westgate—so respect the no smoking signs in the hallways of the convention center please.
10. WE ARE ON TRACK FOR 1,500 “NEW” SKUs in 2017
At the end of last year, I predicted there would be 1,5000 new SKUs for 2017. Currently, our 2017 release list sits at 1,113. My guess is we will get very close to that 1,500 number and the IPCPR Convention & Trade Show had a lot to do with it. Per our reporting, there were 681 SKUs that had a formal debut at the 2017 IPCPR Convention & Trade Show. There are an additional dozen SKUs that were on hand but aren’t expected to formally debut until 2018.
This number is certainly down from a couple years ago, but as I’ve noted before, the decline has been happening for a few years. I suspect that in the modern cigar area, the amount of new cigars peaked in 2014-2015 and we will continue to see a decline in the number of new cigars for the next couple years as a variety of factors take hold.
We covered 136 booths at the 2017 IPCPR Convention & Trade Show.
- 7-20-4 Cigars
- A.J. Fernández
- Alec Bradley
- Altadis U.S.A.
- Arturo Fuente
- Battleground Cigar
- Berger & Argenti
- Black Label Trading Co.
- Blanco Cigar Co.
- Blue Mountain Cigars
- Boutique Blends
- Casa Fernández
- Casa Turrent
- Cavalier of Geneva
- Cheap Bastard Cigar Co.
- Chinnock Cellars Cigars
- Cigar In The Bottle
- Cigar Oasis
- CLE Cigar Co.
- Cornelius & Anthony
- Crossfire Cigars
- Crowned Heads
- Daniel Marshall
- Davidoff of Geneva USA
- De Los Reyes
- Debonaire House
- Dunbarton Tobacco & Trust
- Dominican Big Leaguer
- Dominion Cigar, Inc.
- Don Kiki Cigars
- Drew Estate
- E.P. Carrillo
- Elie Bleu
- Epic Cigars
- Espinosa Premium Cigars
- Esteban Carreras
- Felipe Gregorio
- Foundation Cigar Co.
- Garo Cigars
- General Cigar Co.
- Global Premium Cigars
- Gran Habano
- FQ Cigars
- Hammer + Sickle
- HVC Cigars
- Island Lifestyle Importers
- J. Fuego
- J.C. Newman
- Jeremy Jack Cigars
- JRE Tobacco Co.
- Joya de Nicaragua
- La Aurora
- La Flor Dominicana
- La Galera
- La Palina
- La Sirena
- La Sonrisa Cigars
- La Tradición Cubana
- Leaf by Oscar
- LH Premium Cigars
- The Lotus Group
- LUJ Luxury Cigars
- Marrero Cigar Co.
- Miami Cigar & Co.
- Micallef Cigars
- MLB Cigar Ventures
- Mombacho Cigars S.A.
- MoyaRuiz Cigars
- My Father Cigars, Inc.
- Nat Sherman
- Nomad Cigar Co.
- Oscar Valladares & Co.
- Padilla Cigar Co.
- Paul Garmirian
- PDR Cigars
- Phillips & King
- Pier 28
- Plasencia 1865
- Potter Cigars
- Pure Aroma Cigars, Inc.
- Quality Importers
- Rabbit Air
- Rocky Patel Premium Cigars, Inc.
- RoMa Craft Tobac
- Royal Agio Cigars
- Sacra Folium Cigar Co.
- Sans Pareil & La Instructora
- Scrim by Hutch
- Selected Tobaccos S.A.
- Serino Cigar Co.
- Smoking Jacket
- Tabacalera El Artista
- Tabacalera Falto
- Tatuaje & L’Atelier Imports
- Ted’s Cigars
- Topper Cigar Co.
- Total Flame
- Vector KGM
- Villiger Cigars North America
- Vintage Rock-A-Feller
- Viva Republica
- Warfighter Tobacco Co.
- Whiff Industries
- White Hat Distribution