It took me a while to find the correct word to describe it. Astonishing—not incredible—is the correct word.
Yesterday’s confirmation that Craig Reynolds would be leaving his role as the head of Cigars International created an interesting bit of trivia: in 2019, the heads of Altadis U.S.A., Cigars International, General Cigar Co. and JR Cigar are all leaving their roles. The two largest cigar companies in the U.S., the two largest retailers in the world—both owned by same two companies—will all get major leadership changes in 2019, or at least by May of next year when Reynolds departs.
For context, Altadis U.S.A. and JR Cigar are owned by Imperial Brands, plc; Scandinavian Tobacco Group (STG) owns Cigars International and General Cigar Co.
And in fairness, the more senior bosses at both companies are still there: Javier Estades, head of Imperial’s Tabacalera USA, and Niels Frederiksen, the ceo of STG, both remain in their respective positions, for now. Everything at Tabacalera USA, including Estades’ future, is relatively up-in-the-air at the moment given that Imperial publicly announced it was trying to sell its premium cigar division.
While some competitors are inevitably cheering at the turnover at the top of the two biggest companies, it’s certainly not good.
Given the threats and costs of FDA, the now declining number of cigars being sold, and the overall legislative climate when it comes to tobacco, the industry could use some stability.
But more importantly, it can’t afford to lose the talent it has.
The four individuals that used to helm those posts—Rob Norris (Altadis U.S.A.), Craig Reynolds (Cigars International), Régis Broersma (General Cigar Co.) and Rob Maneson (JR Cigar)—are respected. Now their talents are going elsewhere. Maneson and Norris are working for Imperial’s e-cigarette brand blu, Broersma will go to Europe where he will inevitably still be involved with cigars at his new role at STG, but not like at General; and Reynolds might stick around the industry for a bit but is retiring.
With the exception of Reynolds, the other three are also relatively young and by all accounts were identified as talented within their companies. And also with the exception of Reynolds, none of them are leaving their parent companies, they are just going to other divisions, ones that are more important than premium cigars.
And even if you’ve never shopped at one of the aforementioned stores or smoked a Montecristo White or Macanudo, all four of them made the industry around them better. While each of them wanted to grow their respective companies, I never had conversations with any of them where they were rooting for the demise of any competitor, except—oddly—one another.
All of the talent and experience leaving is a big enough problem in and of itself, but it’s hardly the end. Both Imperial’s cigar division and STG as a whole seem in worse places than they were a year or so ago.
For Imperial, it all depends on the sale. If it goes through, whoever the new owners might be will likely inject their own philosophy and leadership into what the company(s) should be. And if the sale doesn’t go through, many expect the changes to be equally dramatically, namely in the form of aggressive cost-cutting for a division that is already of little importance for Imperial as a whole.
At STG, the last year has seen noticeable changes. Consultants have begun to further shape the company’s approach to the U.S. market, which has led to cost-cutting as well as more aggressive strategies. The company’s stock is continuing to struggle, which will likely only further the cost-cutting. It’s unclear when the declining stock performance would end as some at STG think the stock price is more related to whether STG can deliver cigarette-like dividends more than it has to do with the health of STG’s business.
And while some companies could prosper due to a weakened General/CI and Altadis/JR, most will not—and more importantly, the industry will not. There are very few times when the largest companies in any industry can suffer while the segment itself grows and there is zero reason to believe the cigar industry could be one to buck the trend.