TOB Magazine

Remember the in-store RYO machine? All the rage about six years

ago, the concept—retail shops where customers could roll their own

cigarettes using high-speed rolling machines—was going to revolution-

ize tobacco retail. Customers would save significantly on the cost of

their cigarettes, while the store owners would benefit from the higher

margins that RYO machine stores could command.

At 2011’s Tobacco Plus Expo, in-store RYO machine manufactur-

ers were out in force, extolling the virtues of the idea itself, as well as

the features (speed, quality, small footprint, financing plans) of specific

models. Entrepreneurs raced to get into the game, with many investing

tens of thousands of dollars to set up RYO stores.

John Temple was one of them. As an experienced retailer who al-

ready operated three liquor stores, he invested in two machines and

charged one of his experienced employees, Arlene Harkraeer, to man-

age his new RYO venture.

Then came regulation. As

reported in 2012, a provision tacked

onto the federal highway bill that year designated retailers operating

RYO machines as manufacturers, subjecting them to regulation and

taxation that effectively wiped out both the customer savings and the

retailer profit potential of the new channel. Some shops fought the

law (and the law won), and some tried to work around it by redefining

themselves as private clubs (with mixed success), but most folded their

tents, taking a loss on the cost of those pricey machines.

Not Tobacco Road, says Harkraeer, general manager of the Mary-

land-based store. “The store had been built around having the in-

store RYO machines and teaching people how to roll their own, and

then within a month of us opening, the law changed,” she says mat-

ter-of-factly. “Now those machines are beautiful shelves in our stores.”

That kind of hit could easily derail a fledgling business, but

Harkraeer and Temple were not to be deterred. “We really looked

at how to define our customers’ needs when it came to a variety of

things—RYO, cigars and pipe tobacco,” she explains, noting that

RYO-related sales still account for 70 percent of the store’s sales,

largely because of the establishment’s educational philosophy. “The

way we advertise the store, customers come in looking to save money

on cartons of cigarettes. We draw them in that way and then we talk

to them about how to save money.”

Tobacco Road’s employees are experts at spelling out the math

of off-the-shelf versus RYO cigarettes. “Let’s say a machine is $100

and your initial purchase of a bag of tobacco and tubes is $15,” says

Harkraeer. “Depending on the brand, a carton of cigarettes can cost

upward of $70, so you’re going to recoup the cost of that machine in

a few weeks. From then on, a carton will only cost you $15 to make.”

ROLLING

WITH THE

TIMES

Hagerstown, Maryland-based Tobacco Road

is all about adapting to the tobacco

retail environment.

BY JENNIFER GELFAND