TOBACCO BUSINESS CHANGING THE GAME How Blend Bar with Davidoff Cigars transformed retail A LOOK BACK AT TPE22 How this year’s trade show took the industry by surprise NEXT-LEVEL RETAIL TIPS Tobacconists offer expert tips for making big gains in tobacco retail THE OFFICI AL MAGAZ INE OF TOBACCO PLUS EXPO VOL25 NO2 ✶ MARCH/APRIL 2022
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12 TOBACCO BUSINESS | MARCH / APRIL | 22 F EATURE S MARCH / APR I L 2 0 2 2 ON THE COVER: BLEND BAR WITH DAVIDOFF CIGARS’ COREY JOHNSTON, MARK HOLDEN AND KIM ARBUCKLE PHOTO BY NEW GROUND PHOTOGRAPHY 40 ON ANOTHER LEVEL Your retail store is a business, but is it a corporation? Learn how the owners of the popular Blend Bar with Davidoff Cigars raised the bar and created a franchise that’s expanding across the U.S. and attracting customers new and old to the premium cigar lifestyle. 54 PROCIGAR FESITVAL: A FIRST-TIMER’S REVIEW What’s it like attending the annual Procigar Festival for the first time? Tobacco Business’ art director makes his first trip to the Dominican Republic cigar festival and shares his experience with our readers. 58 DETAILS OF STRENGTH With its rebrand well underway, Aganorsa Leaf is working hard to get retailers to understand that the company’s true value and strength lie in the Nicaraguan tobacco it grows each year. 40
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14 TOBACCO BUSINESS | MARCH / APRIL | 22 COLUMNS 18 | THE UNEXPECTED TRADE SHOW Attendees and exhibitors at last month’s Tobacco Plus Expo (TPE) trade show thought they knew what to expect when they arrived in Las Vegas. Find out how this year’s annual trade show turned out to be an unexpected surprise to many. 24 | BEST PRACTICES IN TOBACCO RETAIL What does it take to be successful in tobacco retail today? A panel of successful brick-and-mortar tobacconists share their firsthand experiences with many of the challenges tobacco retailers are dealing with today, from employee retention to finding the right products for their store’s customers. 32 | THE WORLD’S MOST VALUABLE TOBACCO BRANDS The tobacco industry can attribute its longevity to some strong, iconic brands. See which tobacco brands rank among the world’s most recognized—and valuable—business assets. 34 | THE TROUBLE WITH MISLEADING STUDIES Government agencies and health advocacy groups regularly use studies to make a case for policy and regulations, but what happens when those studies are flawed? The National Association of Tobacco Outlets examines how a recent American Medical Association study missed the mark and led to a bad policy. 36 | A RESPONSIBLE INDUSTRY SELLING TO RESPONSIBLE ADULTS Your right and ability to smoke and enjoy cigars is under attack. Should cigar advocates take a cue from the spirits industry in its call for fair treatment and less government interference? 38 | THE SKINNY ON DELTA-8 THC There’s a lot of hype surrounding delta-8, but despite its growing popularity, tobacco retailers are still mostly in the dark about this alternative product. Get the rundown on this cannabis product and why it’s gaining steam among tobacco consumers. 68 | A WINNING RETAIL STRATEGY Retailers are only as strong as their partnerships with manufacturers. Learn about the advantages an exclusive group of retailers say they have as Davidoff Appointed Merchants. 76 | DO THE RIGHT THING Sanj Patel has been a tobacconist for over 30 years. Now he’s taking on some of the cigar industry’s biggest problems with his own premium cigar blended to make a statement. 84 | OPERATION: NEW CUSTOMERS Want to contribute to a good cause while also increasing your store’s foot traffic? Learn how becoming an official Cigars for Warriors donation center can benefit your store. 90 | ON YOUR SHELF Cigar companies celebrate the Year of the Tiger with a series of special product releases. 96 | IN MEMORIAM – CARLOS ALBERTO TORAÑO SR. The cigar industry mourns the passing of Carlos Alberto Toraño Sr. TPE STARTUP ASSOCIATIONS TOBACCONIST 18 76 68 MARCH / APR I L 2 0 2 2
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16 TOBACCO BUSINESS | MARCH / APRIL | 22 Maybe it’s a Southern thing, but most in- person visits typically end with, “Call me when you’ve made it home” or some deviation of that phrase. Sometimes, of course, that call turns into a text, but the sentiment is all the same. In the South, we’re very concerned about whether the person we care about makes it from one destination to the next. Just going next door? Doesn’t matter— call because who knows what dangers lurk between one doorstep and another. Going to travel across the country and won’t make it to where you’re going until the early morning hours? Doesn’t matter—there better be a voicemail or a text saying you made it to your destination. Southerners are very concerned about where you came from and where you’re going, and as old-fashioned and dated as that may seem, it’s probably the missing ingredient in business today. We’re all busy, and each of us has a list of things we have to get done each day, week, month and year. Because of the busy nature of our lives, we have to pick and choose what we accomplish and do. Some of the most routine things—like being concerned with whether or not that account, that employee or that business partner made it to their “destination” or not—simply land on the cutting room floor. We’re becoming so busy and preoccupied with making bank or hitting that sales target that we’re forgetting something very important: the relationships that make or can end up breaking a business. I’m fascinated by the relationship between manufacturers and retailers in the tobacco industry. While we’re bombarded by news about companies hitting their sales target and making record sales—as well as articles about products being recognized by different media outlets and receiving awards—there’s something we’re not hearing a lot about, which is how retailers are becoming an afterthought in the tobacco business. In my conversations with retailers over the past year, I’ve heard far too many retailers complain that they can’t get in touch with a sales rep. They comment on a lack of communication from companies outside of a request to pay an invoice, and they’re feeling left to fend for themselves without the proper support from the industry they’ve chosen to work in and support with their business. I’ve said this before, but retailers are the unrecognized superheroes in this business. Without them, I’m not sure any brand could achieve or maintain any long-term success. After leaving the 2022 Tobacco Plus Expo trade show in January, it was clear that Tobacco Business needed to put a bit more emphasis on retailers. We wanted success stories that would inspire retailers of all sizes, so we reached out to the team behind the popular Blend Bar with Davidoff Cigars to ask them how they’ve managed to build their retail empire. We also have a panel of retailers that were recently recognized by the company as being among their best Davidoff Appointed Merchants to have them talk about what they’ve done to achieve such high praise and recognition from one of the industry’s leading manufacturers. To offer some new perspectives, we also assembled a panel of tobacconists from different parts of the U.S. to share their best practices and tips to help other brick-and-mortar retailers. Again, retailers are the frontline workers, serving as ambassadors between manufacturers and consumers. If they fail, the entire industry fails. After reading this issue, pick up the phone and check in on your local retailer. Ask if they’re OK and what you and your company can do to help them reach their desired destination. The aim of this issue is to give a glimpse of what it’s like to be a tobacconist today. There are plenty of good things happening, but there are some areas of concern that, as an industry, we can all work on improving. Let’s make sure we don’t forget that relationships, not products, are at the heart of what makes the tobacco industry thrive. TB M ED I TOR ’ S LETTER VOL25 NO2 MARCH / APRIL 2022 PRESIDENT Jason Carignan MANAGING DIRECTOR Ben Stimpson SENIOR EDITOR AND DIGITAL DIRECTOR Antoine D. Reid ART DIRECTOR Harrison Brackett COPY EDITOR Stephanie Banfield CONTRIBUTORS Storm Boen, Harrison Brackett, Thomas Briant, David Ozgo, Matt Zehner TOBACCO PLUS EXPO TRADE SHOW DIRECTOR Ellie Hansen TMG SALES MANAGER Dawn Conger DIGITAL MARKETING MANAGER Brian Rodak TRADE SHOW OPERATIONS & LOGISTICS MANAGER Scott Gibson SENIOR GRAPHIC DESIGNER Rachel Esteffe TMG SALES ASSOCIATE Carly Gegorek TOBACCO BUSINESS MAGAZINE 5449 Endeavour Ct #1712, Moorpark, CA 93021 A DIVISION OF KRETEK INTERNATIONAL, INC. CHAIRMAN Hugh Cassar PRESIDENT AND CEO Sean Cassar CHIEF FINANCIAL OFFICER Don Gormly Tobacco Business is published bimonthly at 5449 Endeavour Ct #1712, Moorpark, CA 93021. Printed in USA. Copyright 2022 by TBI, LLC. Subscription rate is $45.00/year. Send paid subscriptions to Tobacco Business at same address as mentioned above. For reprint information, contact Ben Stimpson at 919.412.7380. Copying: Permission is granted with users of the Copyright Clearance Center Inc. To photocopy any ar ticle, with the exception of those for which separate copyright ownership is indicated on the first page of the article, provide a base fee of $1.25/copy. Tobacco Business International is a registered trademark of TBI, LLC. POSTMASTER: Send address changes to Tobacco Business, 5449 Endeavour Ct #1712, Moorpark, CA 93021. LETME KNOWYOUMADE IT THE TEAM Antoine D. Reid, Senior Editor, antoinereid@tobaccobusiness.com TOBACCOBUSINESS.COM TOBACCO BUSINESS
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18 TOBACCO BUSINESS | MARCH / APRIL | 22 What is TPE? That is a question that, even after almost two decades, retailers and others in the tobacco industry continue to ask—with good reason. TPE, which stands for Tobacco Plus Expo, is an annual trade show put on by Tobacco Media Group (TMG), a subsidiary of Kretek International and Phillips & King. Over the years, TPE has changed and evolved along with the industries it represents. In the past, TPE was viewed by many to be a show for discount tobacco outlets. As emerging product categories such as e-cigarettes and vapor took center stage in the tobacco industry, TPE embraced the “new” while other similar trade shows opted to exclude or treat it as a fad. It’s no surprise that after so many years some people still ask what TPE is because, year after year, TPE evolves to reflect the full scope of the tobacco industry and then some. Today, TPE is a trade show with something for everyone. It has traditional combustible tobacco products like cigarettes, it has pipes and pipe tobacco, it has mass-market cigars, and it also now has plenty of premium cigar offerings. That’s just one side of the trade floor. A few steps away from these tobacco businesses are where the “plus” in Tobacco Plus Expo comes into play. There’s CBD companies, glassware, synthetic nicotine products, oral nicotine and plenty of “other” stuff. At TPE, retailers are treated to what can be considered the best of both worlds. TPE22 was a trade show that took many by surprise. In the age of COVID-19, many came into the show not sure what to expect. What they found was a trade show that had evolved and grown in just half a year. 2021 was challenging, and TMG was forced to move the show from its typical January timeframe to May. TPE21 was the first trade show back at the Las Vegas Convention Center to be held post COVID-19, and the general feeling coming out of that trade show was that it was good to be back together and doing business in person rather than virtually. There were high expectations set for TPE22, and TMG’s teamworked hard to not only deliver but to exceed those expectations set by TPE21. What’s New Walking the trade show floor at TPE22 showed just how much things have changed since the previous show. The trade show floor was expanded in comparison to the 2021 show. Booths were bigger and more elaborate. Returning again this year was Drew Estate, a long-term partner of TMG and Kretek International that brought its two-level trade show booth to TPE22. The pavilions, which are an affordable option for many smaller companies, were also back, and from the first day of the show until the closing on Friday, Jan. 28, they were packed with retailers who were busy writing orders and manufacturers fulfilling the TPE motto of “a fun place to do serious business.” Of note was the heavy presence of the cigar industry at TPE22. In addition toDrewEstate, therewere a number of iconic andwell-knownpremium cigar brands exhibiting this year, including Davidoff, Altadis U.S.A., Perdomo Cigars, Plasencia, Aganorsa Leaf and Sutliff Tobacco Company, among many others. For many cigar manufacturers, TPE22 offered a chance to W : THE UNEXPECTED TRADE SHOW STAFF REPORT
WHERE CUSTOMERS REIGN Phillips & King has a new brand identity to mark the beginning of the next chapter. A contemporary refinement of the company’s “shield and knight” badge, the new logo signifies its mission to modernize the business while paying homage to the equity earned over their 116-year heritage. Phillips & King has embarked on a complete digital transformationof itsbusinesstobetterservetheevolving needs of its retail customers and brand partners. Visit us at phillipsandking.com
20 TOBACCO BUSINESS | MARCH / APRIL | 22 reach new retailers that they normally would not encounter and open new accounts. It also offered an early opportunity to show “what’s new” as opposed to having to wait until the summer to debut new products. Retailers also had the opportunity to obtain early access to many new releases. Drew Estate chose TPE22 to debut the new Acid 20 Connecticut Toro. This cigar is presented as a 6 x 54 Toro and features an Ecuadorian Connecticut wrapper, an Indonesian binder and filler tobacco grown in Nicaragua. Ferio Tego, a brand that made its debut last year, chose TPE22 to showcase the Metropolitan Host collection, which consists of cigars made in Honduras at the Camacho factory. Aganorsa Leaf’s newest Guardian of the Farm cigar, named Cerberus, made its debut at TPE22, where retailers were able to place orders for an anticipated February ship date. Altadis U.S.A. also had several new products on display at its booth, including the luxurious Romeo y Julieta Bed of Roses humidor, VegaFina Year of the Tiger and the H. Upmann Nicaragua AJ Fernandez Heritage. Retailers also had the opportunity to use Altadis U.S.A.’s new Vibe360, an interactive tool developed as a resource for retailers that not only provides them with information on Altadis U.S.A.’s vast portfolio of products but also helps facilitate the ordering of products. These were just a few of the many new releases that made their debut at TPE22, with others having been covered in depth at tobaccobusiness.com. Networking and Education Those attending a trade show often come in with two expectations: They expect new releases and want to network with other professionals. Knowing this, TMG set out to make sure there were plenty of opportunities for attendees and exhibitors to come together. The Industry Night party, which was held at the Sahara Las Vegas’ Azilo Ultra Pool, showed the industry what a good time really looks like. Headlined by Drew Estate and Phillips & King, this party took the party to the pool with three hours of an open bar, hors d’oeuvres and high-energy music. TPE didn’t forget about its annual education initiative, TPE Ignite. For a second year, TPE Ignite took place virtually ahead of the show and touched on a number of timely topics, including legislation, regulations and best business practices for retailers and manufacturers. Thomas Briant, executive director of the National Association of Tobacco Outlets (NATO), presented an update on the current tobacco regulations and legislation that are impacting U.S. retailers. This session was followed by “Best Practices in Tobacco Retail,” a virtual panel consisting of several brick-and-mortar tobacconists, including Kathleen Kelly of Queensbury Cigar & Pipe, Brandon Frakes of Industrial Cigar Co., and Cory Talanca of Boss Cigars. Jason Carignan, president of Phillips & King and Tobacco Media Group, gets attendees hyped on the first night of the TPE22 trade show.
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22 TOBACCO BUSINESS | MARCH / APRIL | 22 The Cigar Association of America (CAA) provided an update on the legislative fight being waged to preserve the premium cigar industry. “Sisters of the Leaf,” a popular panel from TPE20, returned this year virtually with an engaging and frank conversation about the important role women play in the cigar industry today. On the alternative side, Brightfield Group shared the latest information on trends in the CBDmarket and the growing cannabis industry. The Vapor Technology Association’s executive director, Tony Abboud, tackled the provocative question, “Is the FDA trying to shut down tobacco alternatives?” in his panel, discussing the FDA’s handling of premarket tobacco product applications (PMTAs) and the vapor industry’s fight for survival. All of these panels can be viewed online at https://tobaccobusiness.com/category/tpe-show. Success andOpportunity So, what is TPE? TPE is a trade show that reflects the many opportunities available to those that work in the tobacco, vapor and alternative industries. TPE is where professionals come to network, find new releases and make deals for the coming year and beyond. At TPE, it doesn’t matter if your company has thousands of employees or if you’re a boutique companywith just two partners. At TPE, everyone is relevant and has the opportunity to set their business up for success. Next year’s TPE returns to Las Vegas Feb. 22-24, 2023. For all the latest news and information from TPE, visit tobaccoplusexpo.com. TB
Check our the 2022 Rewind page at TOBACCOPLUSEXPO.COM for photos and video from the show. We look forward to seeing you next year (February 22–24, 2023) at TPE23! THANKS FOR MAKING TPE22 UNFORGETTABLE! LAS VEGAS CONVENTION CENTER FEBRUARY 22–24, 2023
24 TOBACCO BUSINESS | MARCH / APRIL | 22 What does it take to be a great tobacconist? That’s a question that is often asked in each issue of Tobacco Business and one that was explored at great length in an hour-long virtual panel discussion held in January. As part of the TPE Ignite Online Educational Series, Tobacco Business assembled a panel of brickand-mortar tobacconists to tackle a number of topics of interest to tobacco retailers today, including employee retention, training, merchandising and the obstacles standing in the way of growth and opportunity. Panelists included Kathleen Kelly of Queensbury Cigar & Pipe (Queensbury, New York), Brandon Frakes of Industrial Cigar Company (Frisco, Texas), and Cory Talanca of Boss Cigars (Carrollton, Georgia). The Consumer Investment One of the fallouts from the COVID-19 pandemic for many retailers has been the ongoing labor shortage. Turn on the news today and you’ll be bombarded with stories of retailers struggling to find help or of what’s being called “the great resignation.” Workers are changing careers, looking for new opportunities and pursuing their own entrepreneurial dreams—and this is leaving tobacconists struggling to properly staff their stores. Each of the retailers on the panel mentioned that they had lost an employee over the past two years, but each offered a solution to this common problem: treat your employees right and they’ll stick with you for the long haul. Employees are part of a much larger picture in retail—they are the foundation of a store’s community. Successful retailers must create a sense of togetherness or a tribe within their store, one where employees understand the vision of the store’s owners and practice it when engaging with customers. “If you ask anyone in the team what our shared purpose is, it’s very simple: We create community by providing the finest cigar lounge experience to people of all levels. We do that through training,” says Frakes. “From a retention standpoint, we have to treat our employees like they are our customers. We want our customers to keep coming back and we want them to stay excited. Same thing with our employees.” Retailers can look at other businesses for inspiration when it comes to training. A trip to Disney and interaction with a park employee inspired Frakes and his family to put their store’s employees through the Disney Institute, a professional development and leadership training program designed to improve a business’s customer experience. Providing employees with the proper training and making sure each one is aware of and aligns with the vision of the business is key to retention. Acknowledging employees and their hard work is another easy way to keep good employees from leaving, Kelly explains. “You want to treat them well. People like to get praised. It’s not always all about the money,” she says. “We all have credit cards where we get reward points that you can trade in for gift cards and stuff. I do that, and when my guys do a good job, I throw thema $50 gift card for somewhere. They appreciate that. So it’s little perks like that where it doesn’t cost you a lot to take care of your employees and show them that you appreciate them.” W STAFF REPORT BEST PRACTICES IN TOBACCO RETAIL A panel of tobacconists tackle the difficult questions and issues facing many tobacco retailers today, from staffing issues to increasing store traffic and sales.
T “After decades as an InterTabac media partner, we are now proud to join forces with InterTabac in presenting one of the foremost awards in the cigar industry.” Cigar world gala – in person and online via Business Insights Even in pre-Covid years, presentation of the Cigar Trophy Awards was one of the highlights of the industry get-together – and 2022 will be no exception. Besides the gala event in the presence of the biggest names in the cigar world in Messe Dortmund the Cigar Trophy Awards also take place on Business Insights, the interactive platform of InterTabac and InterSupply which was added last September to complement the twin shows. There representatives of the tobacco industry have been able to inform themselves on current topics and trends across all time zones and get in touch with players in the tobacco world. And naturally will be all news about the Cigar Trophy Awards. You can f ind the business portal and more information at https://business-insights.intertabac.de. The readership awards, which are wellknown and popular features of the cigar world, will continue to be presented at InterTabac in Dortmund, the difference being that the award ceremony will now be supported even more strongly by the trade show: “The expansion of our partnership with Cigar Journal and joint presentation of one of the most important awards in the world of cigars speak volumes about Dortmund as a premier trade show location and as the foremost convention venue for the international cigar industry,” said Sabine Loos, Managing Director of the Westfalenhallen Group of Companies. “At the CigarTrophy Awards, the entire tobacco family comes together and eagerly awaits the awards which go to the ‚best of the best’. As a partner of Cigar Journal, we’re delighted to be able to assist the reach and perceptionof the awards even more than hitherto,” she continued. Benchmark for the industry The Cigar Trophy Awards have been presented by Cigar Journal since 1998. What makes them so special is that they are decided solely on the opinions of cigar lovers across the world. They nominate their favouritesin categories like Best Brand, Best Cigar, Best Value and Best Accessory at www.cigartrophy.com and vote for them afterwards. Having attracted over 140,000 votes in previous years, the readership awards are already very popular. In conjunction with InterTabac, they become a real benchmark for the industry. “As the world‘s most widely read cigar magazine, cultivating a close partnership with the world’s leading trade show for tobacco products and smoking accessories is the natural thing to do,” said Reinhold Widmayer, Senior Editor of Cigar Journal, adding, Cigar Trophy Awards: Foremost readership award now to be awarded by InterTabac and Cigar Journal. InterTabac, the world’s largest trade show for tobacco products and smoking accessories, now becomes a strategic partner of Cigar Journal, the most renowned trade magazine in the world of cigars. As a result, the most recognised awards in the cigar industry will in future be presented jointly, with the winners to be announced at InterTabac, which is making a big comeback after two cancellations due to COVID together with InterSupply this autumn/fall (15 to 17 September 2022). ADVERTISING A real benchmark for the tobacco industry. The Messe Dortmund: Here – and online – InterTabac and Cigar Journal will present the Cigar Trophy Awards.
26 TOBACCO BUSINESS | MARCH / APRIL | 22 Remember, a happy employee is a retailer’s most valuable asset. “Having a good employee is [having] somebody that’s going to project themselves on the consumers,” Talanca explains. “You’re not just selling a product; you’re selling yourself.” Finding capable, passionate, dedicated employees is just half the battle. Once your store has a staff, how do you go about building a strong customer base? It again goes back to training and making sure you build an experience for customers the moment they enter into your store. “I’ve always taught my guys to always say hello to everyone that comes in,” says Kelly. “It sounds like a no-brainer, like everyone would do that. But how many times have you walked into a store and there’s zero greeting? When you walk in, you want to feel welcome, especially at a cigar shop. That’s the most important thing: to greet your customers, say hello, smile. Again, it sounds like a no-brainer, but for a lot of places you go to that doesn’t happen.” The power of the first impression is another valuable lesson Frakes feels more tobacconists need to understand and practice in their stores. From Jeff Haugen, a fellow tobacconist at Tobacco Grove and owner of Crux Cigars, Frakes learned that first impressions are eternal. Greeting customers with a handshake or a smile is the first opportunity to build a relationship with new and returning customers. Once that customer goes into the humidor of your store, a retailer needs to continue that interaction. “We have to identify what their expectations are so that we can exceed them,” Frakes explains. “What do they want? Are they open to suggestions? What is the correct cigar for them? What is the experience they’re trying to find?” Anticipating the needs of the customer takes work and time but gives retailers the ultimate advantage. Talanca describes this entire process as investing in your consumers. Training your employees to greet every customer in the same way when they enter the store, teaching them how to engage with customers in different parts of the store and encouraging them to learn how to pick up on body language cues to anticipate the spoken and unspoken needs and desires of each customer is how retailers can build their own tribes and communities. Put some time into creating a customer experience and whatever money or time goes into it will pay dividends in the long run. Keep it Lit When it comes to products, retailers need to be selective in terms of what they stock. You only have so much space, so how do you choose what products make it onto your store’s shelves? The tobacconists on the panel had different approaches to this problem. For Frakes, his store has a process it puts every product through before deciding whether or not to carry it. This process builds on the community his family has built within Industrial Cigar Company and involves both employees and customers. When a manufacturer sends products for his store to sample, Frakes disperses those samples to several different groups within the store. One group is his family, who owns and runs Industrial Cigar Company. Each family member smokes the cigar and tries to decide how that product can fit into the humidor and what it has to add. Beyond product characteristics, they want to know more about the manufacturer. What’s their story? What’s their personality? What’s their reputation within the industry? How do they treat other retail partners? Once a product makes it past this stage, it then enters into a launch program. This involves an event where the brand owner engages with the customer base, either through an in-store event or virtually. These events are developed around the idea of educating the store’s customer base about the manufacturer, their company and their product. This rigorous, multi-pronged plan has helped successfully launch several brands within Industrial Cigar Company, including those that may be newer to themarket. Smoking the product is a very important factor in choosing what to carry or what to pass on, says Talanca. “You have to smoke the product,” he says. “There’s associations you can make with different tobaccos if you sell a lot of this brand, and this guy’s got this over here and it’s something new—there might be some similar or common ground as far as flavor profile that could be something you might want to try.” KATHLEEN KELLY Queensbury Cigar & Pipe Queensbury, New York BRANDON FRAKES Industrial Cigar Company Frisco, Texas CORY TALANCA Boss Cigars Carrollton, Georgia Meet Our Panel I’ve always taught my guys to always say hello to everyone that comes in. It sounds like a no-brainer, like everyone would do that. But how many times have you walked into a store and there’s zero greeting? — Kathleen Kelly, Queensbury Cigar & Pipe
28 TOBACCO BUSINESS | MARCH / APRIL | 22 Smoking the product is an important part of the sales process, as is forming a close relationship with manufacturers and their sales representatives. What happens, though, when a particular product doesn’t sell like you thought it would? Talanca urges retailers to manage their expectations and state up front that while your store may be willing to give a new brand and its products a shot, it may not work out. Revisiting the products in six months can give both the retailer and manufacturer time to reevaluate how to better position a product in a store. Retailers should also take some initiative and use different merchandising techniques to bring attention to slow-moving products. “When we bring in good cigars and maybe they don’t sell, we just make some assorted packs with them. People like to try those. It at least gets that cigar in their hands,” says Kelly. In addition, don’t forget the importance of first impressions, an idea that even applies to the initial impression your store’s humidor gives your customers. Humidors should be tidy and well lit. All three tobacconists on the panel urged retailers to line their humidors with LED lighting and to develop a lighting structure that helps customers move through the humidor and explore its contents. “There’s a reason why all airplanes have escape lighting down the center,” says Frakes. “We can guide [our store’s customers] with some lighting. It’s amazing the number of humidors that are just dank, dark areas. Bring some freshness and vibrance to it.” “Being an electrician for 20 years, I can say that lighting is so key,” adds Talanca. “I mean, when you go purchase a car or something, you’re not shopping at night, right? You want to see it out there; you want to be able to see what color it is. And LED strips are so cheap these days. There’s no reason not to have your shelves lit.” Also, don’t be afraid to change things around to help bring attention to all of the products you carry. Kelly and her staff at Queensbury Cigar & Pipe move things around several times a year and says that customers will take notice of items they had previously overlooked. After these mini makeovers, they’ll notice an uptick in sales associated with products that hadn’t sold before. Changing things up and presenting your store and its products differently to customers is an easy way to get your customers interested in what your store has to offer them. This Year’s Biggest Challenges Taxes and local regulations are two pressing issues that concern these tobacconists today. In New York, Kelly’s retail business has to grapple with a 75 percent tax rate that makes it hard for her brick-and-mortar to compete with online businesses. She often sees customers who will come in and buy several individual cigars and will hear that the same customer will go online to buy a box because the price is often better due to lower taxes. This is a problem that Kelly tries to solve and work on alongside other tobacco retailers in the state. “It’s good to work with other shops as a united front,” she says. “We’re working on a 50 cent tax cap—that’s a bill that’s in the Senate and Assembly in NewYork. Fingers crossed, it’ll pass in April. That would be a game changer.” In Texas, Frakes’ biggest challenge involves successfully carrying out new initiatives while continuing to meet and exceed customer expectations. “Our challenge is spinn[ing] new plates while retaining the level of experience that we expect here. Are there reasons for people to come back? Are the ashtrays constantly clean? Are we able to onboard a sufficient number of teams? By the time we get to this point—to open the next location—are we successful in growing and retaining what our brand is? That is our biggest challenge: creating an experience that is replicable but doesn’t feel corporate, doesn’t feel like a franchise; it feels like who we are.” Talanca’s biggest concern in 2022 is one shared by many retailers: the ongoing disruptions impacting the supply chain. “There are a lot of companies right now that are trying to catch up,” he states. “This whole corona[virus] thing has affected the industry in another way. When we order, say, 30 boxes, and I get five, what am I going to do with that? Now somebody has to be really proactive in that humidor and go, ‘Alright, do I take this off the shelf? What do I replace it with? How do I maintain this brand that people love and enjoy?’ It’s hard to get product, and I’m curious to see what’s going to happen this year.” You can watch this panel and others that were part of this year’s TPE Ignite Online Educational Series at tobaccobusiness.com/category/tpe-show. TB CANDID CAMERA Do you want to grow your store’s customer base? The best tool you can use to gain new customers and sell more products may be in the palm of your hand. Tobacconists are using video to show their store, showcase products and engage with both current and brand-new customers. At Queensbury Cigar & Pipe in New York, tobacconist Kathleen Kelly gets her entire staff involved in making videos and urges them to become creative and not to try to be perfect. The goal is to show the human side of the business and to build relationships and build awareness for the store and what it has to offer. At Industrial Cigar Company, Brandon Frakes and his family also use live video and social media to build a community within their Texas-based store and lounge. “You cannot be confined to your four walls,” he says. “You have to create these opportunities for people to be a part of it.” Set out to create video content that educates your customer. Teach them about the products that you carry, show off your personality, and encourage them to engage with you. Social media platforms such as Facebook and Instagram both offer easy live video capabilities that can work from your mobile device with an account. TikTok is another untapped social media platform built around short-form video that can help you showcase your knowledge and show off your own personality as well as that of your retail store. The key to success when it comes to video is not perfection; it’s consistently publishing new content on a regular basis to build a community and following around your business and brand. There’s a reason why all airplanes have escape lighting down the center. We can guide [our store’s customers] with some lighting. It’s amazing the number of humidors that are just dank, dark areas. Bring some freshness and vibrance to it. — Brandon Frakes, Industrial Cigar Company
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30 TOBACCO BUSINESS | MARCH / APRIL | 22 The World Health Organization estimates that 1.3 billion of the world’s population are tobacco users. According to the U.S. Centers for Disease Control and Prevention, in 2019 it was estimated that 34.1 million of those 1.3 billion users were smokers living in the U.S. Many of us have a family member or friend that at one point has tried to quit smoking or at least smoke less. However, there are several reasons quitting smoking or cutting back is hard. One of the biggest reasons is nicotine’s effect on the brain. When someone smokes a cigarette, it takes just seven seconds for nicotine to reach the brain. Once there, nicotine then activates different neurotransmitters, many of which are responsible for the reduction of tension, anxiety and pleasure. Without cessation support, only 4 percent of attempts to quit tobacco will succeed. There have been few Reduced Risk Products (RRPs) and Tobacco Harm Reduction products available on the market containing low levels of nicotine—until now. 22nd Century Group (XXII), a global pioneer in tobacco harm reduction products, is a plant biotechnology company focused on technologies that alter the level of nicotine in tobacco plants and the level of cannabinoids in hemp/cannabis plants. This is done through genetic engineering, gene-editing, and modern plant breeding. 22nd Century’s primary mission in tobacco is to reduce the harm caused by cigarette smoking. 22nd Century’s VLN reduced nicotine tobacco cigarettes contain 95 percent less nicotine than conventional cigarettes and can help break your dependence on nicotine. Here’s what 22nd Century’s Vice President of Trade Marketing, John Ellegate, had to say about the benefits of VLN and why retailers need to carry this exciting new product today. Q: Tell us about VLN?What makes Modified Risk Tobacco Products (MRTPs) different? A: VLN is the first cigarette in the world that is not designed to create or sustain nicotine addiction. Utilizing proprietary tobacco developed, bred and grown in the United States, and manufactured in the heart of American Tobacco Country, VLN Tobacco smokes, smells and tastes just like a conventional cigarette, but the tobacco blend contains 95 percent less nicotine. In 2021 the FDA authorized 22nd Century Group, Inc. an MRTP for VLN as the first combustible tobacco cigarette that helps adult smokers smoke less. To date, the FDA has only authorized three products with an MRTP designation, including Philip Morris and Swedish Match. What makes VLN so special is the fact that it’s a tobacco cigarette that contains 95 percent less nicotine. We are not a herbal cigarette that does not satisfy the adult tobacco cigarette smoker. The following claims have been authorized by the FDA to market VLN cigarettes to adult smokers: • Helps you smoke less • Greatly reduces your nicotine consumption • Helps reduce your nicotine consumption • 95 percent less nicotine Q: Why should retailers carry these products? What kind of customer base can they attract with VLN products? A: Licensed tobacco retailers across the United States should carry MRTP products, but specifically VLN because VLN customers are high margin customers who are seeking alternative tobacco products to traditional highly addictive cigarettes. It’s also simply the right thing to do. As the VP of Trade Marketing at 22nd Century Group, I am excited to announce that we will soon be launching our Pilot Market. VLN is a premium priced product, with premiummargins, in the largest tobacco category: combustible cigarettes. Many of the retailers who reached out to us were moved by the mission of the VLN brand, which is to help adult smokers who want to smoke less and gain control over their nicotine consumption. Q: How can retailers follow up for more information? A: We are ecstatic to launch our Pilot in the United States this year. After the Pilot we will be working with select retailers who are interested in pioneering the MRTP Product Set. I’ve enjoyed over a 40-year career at Reynolds and Kretek International having witnessed the evolution from the cigarette rack, to the addition of the “OTP” or Other Tobacco Products section, to the “ITP” or Innovative Tobacco Products section, and now I believe we are witnessing the evolution of the beginning of the Modified Risk Tobacco Products section at Tobacco Retail. It’s been an unbelievable ride from investor who believed in the mission, to Vice President of Trade Marketing at 22nd Century Group. Thank you to all the retailers who have reached out to me to innovate and pioneer theMRTPSection at Retail. If you are interested in becoming a fellow pioneer, sign up at TryVLN.com or at XXIICentury.com. —22nd Century Group is a publicly traded company listed on the NASDAQ as XXII. T A PREMIUMPRODUCT OFFERING PREMIUMMARGINS John Ellegate, Vice President of Trade Marketing, 22nd Century Group With the FDA’s Modified Risk Tobacco Products (MRTP) approval, 22nd Century Group’s Very Low Nicotine (VLN) combustible cigarettes offer tobacco retailers big margins while breaking consumer addiction to nicotine at the same time. By: Ben Stimpson
32 TOBACCO BUSINESS | MARCH / APRIL | 22 The tobacco industry is defined by strong, quality brands that help retailers build loyal customers in stores. Every year, Brand Finance—the world’s leading brand valuation consultancy—releases its Tobacco 10 ranking, which ranks the most valuable and strongest tobacco brands in the world. Brand Finance defines brand value as being the net economic benefit that the owner of the brand would achieve if they licensed the brand in the open market. In addition to showing what a valuable asset these brands are for the manufacturers, it also indicates that these are the brands consumers are purchasing the most—and therefore they are valuable brands that retailers should be carrying in their stores. The U.S. is home to most of the world’s strongest tobacco brands, claiming eight out of 10 spaces on the ranking. This year’s ranking reveals that for 80 years in a row, Marlboro continues to dominate with an estimated brand value of $36.3 billion. British-based Glo has fallen out of the ranking this year, while Newport reenters the top 10 list for the first time since 2019 to claim 10th place. TB T STARTUP : MARKETWATCH THEWORLD’SMOST VALUABLE TOBACCO BRANDS 2021 2020 Logo Name Country 2021 2020 2021 2020 1 1 Marlboro USA $35,572M $32,671M AA+ AA+ 2 3 Pall Mall USA $7,092M $6,070M AA- AA3 2 L&M USA $6,869M $6,312M AA+ AA+ 4 5 Camel USA $3,837M $3,368M AA- AA 5 7 Copenhagen USA $3,576M $3,123M A+ AA+ 6 4 Winston Japan $3,545M $4,083M A+ AA7 10 Chesterfield USA $3,262M $2,719M AA+ AA 8 8 Rothmans UK $3,115M $3,095M AA- AA9 N/A Kent USA $2,816M N/A AA- N/A 10 N/A Glo UK $2,779M N/A AA- N/A Data provided by Brand Finance. For more information, visit https://brandirectory.com/rankings/tobacco/table. UK 2 NUMBER OF BRANDS BY COUNTRY USA 7 JAPAN 1
34 TOBACCO BUSINESS | MARCH / APRIL | 22 On Jan. 4, 2022, the Journal of the American Medical Association (JAMA) published a study compiled by the American Cancer Society (ACS) that claims to analyze the impact of a Massachusetts law banning the sale of menthol cigarettes and other flavored tobacco products. The study focused on comparing cigarette sales in Massachusetts from January 2017 to July 2021 to cigarette sales in 33 other states that did not enact a similar statewide menthol cigarette ban. In the discussion section of the published study, the ACS researchers claim that “the comprehensive flavor ban in Massachusetts was associated with a statistically significant decrease in state-level menthol and all cigarette sales.” This claim is misleading, and for this reason the study and its conclusions could misinform the public as well as lawmakers about the actual impact of a statewide flavored tobacco ban on cigarette sales. Study Claims The ACS study, which was based on an analysis of Nielsen Company Retail Scanner data from retail stores in Massachusetts and 33 other states, asserts the following impacts from the Massachusetts menthol cigarette ban. • Sales of menthol-flavored and nonflavored cigarettes in Massachusetts declined by up to 33 percent from June 2020 to July 2021, which constitutes the first year after the law went into effect on June 1, 2020. • Sales of menthol-flavored and nonflavored cigarettes in the 33 other states decreased by 8 percent from June 2020 to July 2021, with menthol cigarettes in particular declining by 3 percent. Study Findings Misleading The methodology of the study and the noninclusion of publicly available state cigarette tax stamp sales data raises a serious concern that the study findings are misleading. In fact, these questionable aspects of the study lead to a conclusion that the findings are not an accurate representation of how a statewide menthol cigarette ban impacts cigarette sales. These questionable aspects of the study include the following: • The main conclusion that the Massachusetts flavored tobacco sales ban led to a decline in cigarette sales to Massachusetts residents is a misrepresentation. If a state bans the legal sale of a product, the sales of that product by retailers in that particular state will, of course, decline to zero. However, given that cigarettes are a nationally sold product and that consumers are mobile and will seek out other sources of a banned product, a study of one state’s cigarette sales should focus on a more regional analysis, especially considering the short distance to adjacent states where the product is legally sold. That is, the impact of the Massachusetts menthol cigarette sales ban should be analyzed in conjunction with cigarette sales data from immediately adjacent states because consumers will travel to the nearest state to purchase what has been banned in their home state. • Significant increases in cigarette tax stamp sales in some of these neighboring states demonstrate the improper focus of the ACS study. In fact, the study researchers confirmed that “[l]imitations of the study include that cross-border or online cigarette sales in Massachusetts were not accounted for ….” This admission by the study authors raises the question of whether excluding changes in cigarette sales in adjacent states—specifically New Hampshire, Rhode Island and Vermont—was a choice to support their eventual claim that a statewide menthol cigarette sales ban is associated with a significant decline in all cigarette sales to residents of the subject state. • The Nielsen Company Retail Scanner data that was relied upon for the study is only a sampling of some retail store sales and does not capture total cigarette sales in any given state, including Massachusetts. Even the study authors admit that their “findings should be interpreted cautiously as sales data may not fully capture cigarette consumption.” That is, the Nielsen Company sampling of cigarette sales data in Massachusetts would not capture cigarette purchases made by Massachusetts residents who travel to adjacent states to buy their preferred cigarettes. • A more accurate source for cigarette sales is cigarette tax stamp sales data from state revenue departments. All states, except North Carolina and North Dakota, require a special cigarette tax stamp to be affixed to each package of cigarettes by a wholesaler to show that the state cigarette tax has been paid. A state revenue department maintains data on every tax-paid stamp sold to wholesalers, and this data is publicly available. The decision to not use accurate and publicly available state cigarette tax-paid stamp sales data calls into question the credibility of the study and the very conclusions made by the ACS researchers. • According to Massachusetts cigarette tax stamp data, state tax-paid stamp sales to wholesalers declined by 24 percent (33,076,000 fewer stamps/ packs), not the 33 percent projected from Nielsen Company sales sampling data. This 24 percent decline occurred from June 2020 to May 2021. During this same 12-month period, three adjacent states experienced significant cigarette tax stamp sales increases led by New Hampshire with a 22.1 percent increase (+23,380,000 stamps/packs), Rhode Island with an 18 percent increase (+5,355,000 stamps/packs) and Vermont with a 6 percent increase (+1,143,000 stamps/packs). This means that while Massachusetts recorded 33,076,000 fewer cigarette stamps sold during the first year after the flavor ban law was in effect, the three bordering states reported an increase of 29,878,000 cigarette tax stamps sold, which equates to 90 percent of the lower Massachusetts cigarette tax stamp volume. Evidence-based data in the form of state cigarette tax stamp sales demonstrates that the study’s conclusion is not fact-based as Massachusetts residents changed their purchasing behavior by crossing state borders and patronizing retailers in New Hampshire, Rhode Island and Vermont to purchase cigarettes. The questionable aspects of the ACS study and the noninclusion of cross-border cigarette sales data substantiate not only the need for a more regional impact analysis of a statewide flavored tobacco ban but also confirm the importance of accurate evidence-based data when considering the impact of tobacco-related policies. With lawmakers relying on studies to make policy decisions, a study such as the one paid for by the ACS needs to be approached with a serious amount of caution and skepticism. TB O LEG I SLAT I ON : NAT I ONAL ASSOC I AT I ON OF TOBACCO OUTLETS THE TROUBLEWITHMISLEADING STUDIES Thomas A. Briant, Executive Director, National Association of Tobacco Outlets How an American Medical Association study on Massachusetts’ cigarette sales decline is misleading to legislators and the public.
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