Premium Appeal
Connoisseur-orientated cigars constitute a niche but profitable market. Chloe Gold assesses the demand for premium cigars and finds out which companies are satisfying it
CIGAR connoisseurs have traditionally been considered men of affluence, stature and maturity, synonymous with iconic figures that have made their name in history such as Che Guevara, Winston Churchill and Sigmund Freud, to name but a few. However, times are changing and a new breed of cigar connoisseurs is evolving. As Karin Linders, head of brands at Henri Wintermans, points out, it is a trend that is reflected in the stable development of premium cigars in travel-retail.
“Cigar connoisseurs are definitely a growing species, especially in emerging markets such as Eastern Europe, Russia, the Middle East and Southeast Asia where the economic development has had an impact on spending power and where cigars are perceived as status symbols,” says Linders.
As tastes and lifestyles are ever-changing, so is the consumer mix when it comes to smoking cigars.
“Consumers aged 35-45 are now entering the market,” she adds. “These consumers have more spending power and regard cigar smoking as a symbol of their new financial status. People are getting wealthier, have more knowledge and more interest in different types of products, blends and packaging.”
Since Henri Wintermans acquired US-based premium cigar manufacturer CAO in 2007 and launched a new range of products, which includes long filler and two flavoured cigars, at last year’s TFWA World Exhibition, it has seen a growing interest in flavoured cigars. Although their market share remains relatively limited in the overall category, the long-filler cigars, in particular, are doing extremely well.
“While the unflavoured cigars and long filler cigars still make up the majority of the business, CAO’s flavoured cigars are proving very successful in the US and are certainly fulfilling a need,” explains Linders. “The cigar smoking culture is still alive and popular in many markets. Consumers want to learn more about cigars and are interested in trying and tasting different products, brands and varieties, in the same way as single malt whisky connoisseurs are happy to try different ones.”
Unveiling the company’s plans to capitalise on the profitable premium cigar market for 2008, Linders
reveals: “We have high expectations of the travelretail and duty-free sectors for the CAO range of premium cigars in 2008. We believe that the products respond to the consumers’ ever-changing tastes and the expectations of the travellers. Our objective for 2008 is to identify and secure new listings that will
best fit our extended product portfolio.”
CAO is the only non-Cuban manufacturer to have received over 90 ratings from Cigar Aficionado, the widely respected US publication, for 10 of its products. “These are handmade cigars,” notes Linders. “Much more time is spent making the cigars and making sure that all aspects from packaging to products are meeting the same high quality standards. The average mainstream cigar is a machinemade cigar and a mass product.”
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While it is a commonly held view that premium cigars, noted for being hand-rolled, are ‘top of the bill’, Josef Wiese – sales director of German cigar manufacturer Arnold André – challenges this opinion.
“We believe that machine-made cigars or cigarillos probably are better quality than hand-made. Only the way of manufacturing hand-made cigars is more expensive and so gives them a better quality image.”
For Wiese, this emphasis misses the point. “In the end it is all a matter of taste and status,” he says.
Commenting that it is mostly Cuban cigars that are available in the humidors in duty-free markets, he notes: “What we are missing are the extremely highend cigars from the Dominican Republic, Honduras or Nicaragua, all hand-made but simply from different tobaccos as the Cuban cigars and therefore with a different, surprisingly good taste.” He adds: “We feel that people hardly take any notice of premium machine-made cigars. There are Dutch brands available of extreme high quality, with a taste that is unique in the world.”
Arnold André offers varieties of premium cigars that are machine-made, such as its Vasco da Gama (made from 100% tobacco and cedar sleeved) and Vasco da Gama Port Wine cigars (aged in a room together with Port Wine before packing), and Wiese informs Frontier that they have “intrinsic quality better than most of the hand-made cigars”.
“The trend is that people smoke less but better. In the past, cigar smokers were elite; nowadays cigars are being enjoyed by many more consumers that don’t smoke that much, with those who are really knowledgeable waiting for the best occasion to fully enjoy a good cigar. When such an occasion arises, they do not want to save money, but go for the best.” However, Wiese warns those consumers are not as brand loyal as they used to be.
“With premium cigars, consumers like to experience new brands, sizes or taste versions,” he explains.
“Often it is because of a good rating in a cigar magazine, such as Cigar Aficionado or Smoke, or because a cigar has been recommended by a friend, that they have become curious to try.”
However, Wiese insists that the most important reason to try something new is and will always be the recommendation of the shop-keeper. “If an outlet is prepared to carry a wide assortment and if the shop keepers are knowledgeable about the products and brands they carry, they are able to reach a much broader consumer base as they do right now.”
The trend regarding cigar enthusiasts suggests that they do not buy spontaneously but for a reason, and so while the option to educate and guide the consumer reigns as the supreme marketing tool, the problem remains that it is rare to find duty-free shop employees who are as knowledgeable about cigars as one would like.
“We wish that airport duty-free shops would allow us to provide product brochures or a hostess service for cigars and [supply more details of] taste characteristics and tobaccos used,” Wiese comments.
Instead, cigar companies are forced to try and provide as much ‘on pack’ information as possible. Since
the first health warnings began to appear on tobacco products, the onus on manufacturers – faced with a reduced surface area on which to communicate the brand identity – to put more effort into packaging design has become ever-greater.
“Brand and packaging design have become more important as packaging is often the only means of communication that is left for tobacco products in general,” says Wiese. “Cigars are most of the time still packed in the conservative way – wooden boxes, tins or hinge lid cardboard boxes. It is all done in the same way we have known for decades. In the dutyfree sector it is important to work with more brand exclusives, such as luxury gift boxes only available in duty-free. This is the easiest way for duty- free outlets to boost sales.”
Summing up the changing patterns of global demand for cigar products, Wiese concludes: “With the world getting smaller all the time, we should not underestimate the enormously increasing amount of travellers from other countries where there has not been a cigar tradition so far. We know that there is a growing demand for premium cigars, particularly in the Middle East, Asia, and Eastern and Central European countries, simply because of the higher demand for luxury products in combination with the fact that more people are travelling from and to these countries. The largest domestic market for premium cigars is the US, although no Cuban cigars are allowed to be sold there. Therefore we believe that the luxury cigar market is most popular in the duty-free sectors where Americans are travelling to such as the Caribbean, but most likely also Canada.”
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