New horizons
Which travel-retail territories are currently generating the most new opportunities for cigar makers? David Davies spoke to a selection of leading suppliers in an attempt to find out
If you accepted all of the headlines in the daily newspapers at face value, you might easily conclude that there was very little to smile about in the tobacco industry. Greater awareness of health issues and increased regulation of public smoking are just two of the factors that regularly receive mainstream media coverage.
Of course, no one would dispute the fact that, in many parts of the world, trading conditions and regulations are becoming increasingly restrictive. For example, at the time of writing, the UK government Department of Health (DOH) has prompted a diversity of responses with the announcement of its proposal to implement a ban on retail displays of tobacco products.
However, as regular Frontier readers will know, many areas of the travel-retail tobacco category remain in vibrant form, and arguably none more so than cigars. Highly successful small cigar and cigarillo products are just two of the developments to have ensured that suppliers across the board have continued to register good business. Moreover, as this month’s conversations with three leading suppliers demonstrate, cigar’s success story is one that encompasses an ever-increasing number of countries and territories…
Habanos
Argentina, Mexico, Brazil, Russia, Czech Republic, Bulgaria, China and India are just some of the new or ‘emerging’ travel retail markets to have been generating new opportunities for Cuban cigar supplier Habanos.
In outlining the reasons for this growth, Addis de la Fuente – at the time of our interview, Habanos’ international travel retail supervisor, but subsequently appointed to the role of director of brand diversification – pinpoints “a combination of factors. There is a trend of smoking less but better, and Habanos’ portfolio leads the way at the global premium cigar market. Besides, cooperation between our distributors and operators is key.”
De La Fuente – whose successor as international travel retail supervisor is Eneris Neira – goes on to document a variety of developments that have helped the brand to progress, including increased consumer knowledge of Habanos products, the development of the La Casa del Habano franchise in both TR and domestic retail, an enhanced presence in many airport stores, and a focus on staff training at point-of-sale.
“We will continue working in a closer relationship with operators, trying to give the consumer the Habanos [product] he is looking for and the service he deserves and expects when buying Habanos cigars,” adds de la Fuente.
Villiger
India and China are among the fast-rising travel-retail markets to be exciting Switzerland-based cigar company Villiger. The company already has a presence in both markets, and is now working on developing this further.
“India is offering new TR opportunities in all major airports,” confirms Villiger’s director export sales, Chris Pfister. “Villiger is already present in most of them and we are keen to expand our presence in this important market, both in arrivals and departures shops.” By way of example, he points to the siting of Villiger Premium gondolas in Hyderabad and Bangalore airports.
China is also proving to be an appreciative market for Villiger product ranges such as the Premium Line. “China duty-free is another focus which we need to expand in the near-future,” observes Pfister. “Cigar smoking has gained a substantial market share [there] and is becoming more and more popular among smokers of middle and upper class income groups.”
Pfister also believes that continued airport development in these two countries is set to play a major role in ensuring further growth. “The new airport expansion [projects] and new terminals under construction will enhance the duty-free market and create new demand for the cigar market in both India and China,” he says.
Dannemann
For the Netherlands-based manufacturer Dannemann/Ritmeester, it is the Middle East – and specifically Dubai – that is presently affording the most dramatic sales uplift.
“Dubai Duty Free has shown tremendous growth for us over the last years,” confirms Maurice Houben, market manager, Dannemann. “We are also finding that in upcoming markets – including Russia, Poland and Ukraine – people have more buying power than they did a few years ago. Consumers are more able to buy cigarillos, and we are lucky to have a product that has approximately a 4-5 euros out-of-pocket price.”
Demand from Chinese travellers is also on the rise. “Chinese people flying to Europe go through two main hubs: Frankfurt and Heathrow,” observes Houben. “We estimate that 50% of purchasers of our MOODS cigarillo products at Frankfurt are Chinese. They seek them out and come back again and again. In fact, it seems that some people travel to T1 just for our MOODS presentation!”
Scandinavia, where Dannemann is working with retailer Gebr Heinemann, is also a source of
excitement. “I think this region will become more important because of the attractiveness of the products’ presentations at the various airports,” says Houben. “Heinemann has done a really good job at the refurbished Copenhagen and Oslo stores [Heinemann is part of a joint-venture, Travel Retail Norway, operating stores at Oslo Airport], and we are growing pretty well in those markets. The presentation is wider and the price levels are attractive to consumers.”
Houben does, however, have a few reservations about another much-touted market: Russia. “I don’t think we will see a big growth in Russian travel-retail,” he predicts. “The domestic market is far more interesting than duty-free at this stage. Russian people flying to other countries are likely to be wealthy and tend to buy [full-size] cigars such as Montecristo and Cohiba.”
Product-wise, Dannemann is currently rolling out Mini MOODS, described as the first cigarillo that comes with a long filter, ready to smoke. The new product – billed as “the espresso among cigarillos” – is available in ten-stick packs and is expected to reach the majority of duty-free markets this spring.
With the kind of enthusiasm that distinguishes the cigar category, Houben reveals that Mini MOODS is “more or less a competitor product to cigarettes in the sense that it takes as much time to smoke a Mini MOODS as a cigarette. It’s not so easy to smoke in public places these days, and a normal cigarillo will take longer to smoke than a cigarette. The shorter smoking time is a major part of the appeal of this product.”
And there you have it. Ongoing product innovation and a determinaton to evolve new markets:
cigar suppliers are, to their credit, continuing to work hard on behalf of their category, with often
remarkable results.
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