54
TOBACCO BUSINESS
JANUARY/FEBRUARY 2014
smokeless over the last two years. We
have concentrated on upgrading our
premium cigar category by expanding
cabinet and/or walk-in humidor space
and better merchandising upgrades.”The
chain has also hired a premium cigar
category manager.
“I do expect 2014 to be better than
2013,” Grantz concludes. “Our current
customers and potential customers have
reinforced our reason for optimism— the
results we have seen from the changes we
made in 2013 have been very positive.”
offsEtting cigarEttE
dEclinEs
The best 2013 news that came across
the desk of Randy Silverman, president
of 15-store chain Klafters in New Castle,
Pennsylvania, was the fact that it was a
year of minimal tax increases on tobacco
products and a year of minimal changes
to retailers on the regulatory front.
“This allowed for growth and
innovation in alternative nicotine
delivery products,” Silverman tells
TB
.
“We could be seeing the dawn of a new
era where tobacco-related products with
significantly less harmful effects could
help offset the continued decline in the
number of cigarette smokers. Depending
upon the FDA, this young segment could
continue to develop and thrive in 2014.”
Specifically, the electronic cigarette
category has helped to offset the
cigarette sales losses for Klafters, but
not entirely: “Electronic cigarettes’
share of total store sales have doubled
this year,” Silverman reveals. “Other
categories such as machine-made and
premium cigars, smokeless, and roll-
your-own have also been critical in
helping to offset the decline in cigarette
sales.” Klafters also opened a new store
in 2013 with a “much larger premium
cigar focus.”
One of the biggest challenges that
Klafters faced in 2013 was related to PCI
(Payment Card Industry) compliance,
according to Silverman.“PCI compliance
is an initiative led by the major credit
card companies and affects anyone who
processes credit card payments,” he
explains. “We had one of our merchant
accounts deactivated, and it took us a few
weeks to get a new merchant account.
This was a difficult experience, but we
learned a great deal about payment card
compliance from the experience and
have improved our processes as a result.”
Silverman is hoping 2014 will be as
good as 2013, “if not better,” he says.
He expects the e-cig category, including
e-cigs, vaporizers, juices and other new
items to take about a 5 percent share
of sales in the chain. “With the major
cigarette manufacturers entering the
electronic cigarette category, I would
anticipate an eventual decline in
margins in the category, along with more
stipulations tied to programs from the
major cigarette manufacturers. That may
not happen right away, but it probably
ultimately will.”
And so, Klafters will continue to look
for new locations and opportunities. “I
expect to see more electronic cigarette
boutique/lounges opening up in our
region, and we may look into doing
something like that ourselves,” Silverman
says.
TB
