It’s no secret that the economy is on virtually everyone’s mind right now. Every day, whether it be online, in print or on television, you’re likely to be faced with the dreaded “R” word: recession. For tobacco businesses, this can be an even more stressful time. During inflation, consumers typically cut back on their discretionary spending, including purchases of cigars and other tobacco products. Do they really need that new cigar? Can they get by with fewer packs of cigarettes a month? With money being tight, is this the time they try to cut back on smoking altogether?
These questions and the fears they spark can derail even the best of companies. When the economy is struggling and inflation is running rampant, your company needs a sales strategy. Whether you’re a manufacturer or a brick-and-mortar retailer, preparing for the worst-case sales scenarios can make or break your business. In the interview that follows, Terence Reilly, vice president of marketing and sales at Aganorsa Leaf, discusses how the current economic situation is impacting his company’s sales and provides some practical advice for how other tobacco businesses can implement their own recession-proof sales strategy.
Tobacco Business: How has inflation and the economic situation in the U.S. and the world impacted your company’s retail partners?
Terence Reilly: Consumers become more discerning on how they will spend their money, and so retailers are looking for the best values that will appeal to their customers and for reliable brands that they know will sell consistently.
Many tobacco companies experienced a sales bump during the COVID-19 pandemic. Are sales overall still trending as they were during the pandemic or are you seeing a return to pre-pandemic levels?
We were growing at a pretty healthy pace before COVID, an insane pace during COVID, and now we are back to a healthy pace again. We can’t look at a period of time where the government was giving out money with little opportunity to spend it on much other than cigars, alcohol and streaming networks as anything more than an outlier. It was naïve to believe that type of environment would become permanent. Overall, the pandemic brought in new consumers and made more dedicated fans out of existing ones. The industry will benefit from the increased exposure long term.
How has your company adjusted its sales and marketing efforts in response to inflation?
We haven’t changed anything because we never jumped on the $50 cigar bandwagon. Throughout the pandemic, we kept putting out excellent cigars at a great value. We had a lot of people telling us we needed $30-plus cigars. I’m not saying a cigar can’t be worth that much or more, as they certainly can, but to simply charge that kind of price for no other reason than the market would accept it seemed to be a short-term play. We may have lost some extra profit because we kept prices in the same range as we always have, but now that inflation keeps reducing the consumers’ buying power, a lot of cigar smokers are turning to us.
What advice are you giving your sales reps for how to handle selling in today’s economy?
We try to make sure our team’s primary objective is to bring as much value as possible for the retailer. When you work with us, we will educate your staff on our brands, help you display the product effectively, solve issues as they arise quickly, drive new customers to your store and so on. The sale itself, of course, is crucial to our remaining in business, but if your relationship with retailers is primarily transactional, you will have a hard time competing against players who can give bigger discounts and more swag.