In cigars, “it’s not like it’s the ’90s again, but our sales continue to increase, and actually, with liquor [sales], too. Both have been pretty robust in the double digits.” That’s another reason they both go so well together lately, according to Guerra.
Cigars also offer much higher and more flexible margins—in the 30-40 percent range, sometimes even 50 percent range, Guerra reports. Distilled spirits, on the other hand, are “on consignment in the state of Oregon—they set the margin and every store is identical. With wine, we have some flexibility, with gross margins in the 20-40 percent range.”
The store does something similar with beer, whereby IPAs are labeled as a particular color, Stouts are labeled as another, etc. The wine is simply categorized according to varietals.
Party Store Highlights Humidor/Spirit Tastings
The Party Source is a standalone superstore in Bellevue, Kentucky that sells all the major components needed to throw a party, including, of course, the dynamic duo: alcohol and cigars.
Liquor sales, which constitute 50 percent of the store’s business, “give us the ability to do our cigar sales volume, thanks to liquor’s pricing and volume. They feed off of each other,” explains Josh Heaps, purchasing supervisor and humidor manager. “We have lower prices on cigars than the average cigar shop, thanks to the liquor. Economies of scale come into play here; we can run on lower price points and get higher volume on cigars.”
Liquor sales definitely run on lower price points and high volume, too, but it’s being squeezed by distributors doing fewer deals than they used to, according to Heaps. “Liquor gross margins are somewhere around 25 percent here,” he reports. And that’s partly because the store lies right up against the border of Ohio, which has gotten more competitive lately and gotten more aggressive on liquor pricing. Margins have also been squeezed by Kroger, another force in the Cincinnati backyard putting a lot of pricing pressure on local wine and liquor stores.
But The Party Source has a unique merchandising spin, with the operative word being “party,” which is further enhanced by combination liquor/cigar displays. “There’s uncaptured business out there, which we intend to attract somewhat with cross-merchandising,” says Heaps. As examples, the store humidor now features a facing of rotating liquors; there’s also a tasting bar right outside the humidor.
The Party Source also does weekly cigar tastings, teaming up with a local bar called The Beer Sellar. “Those tastings account for about 10 percent of our cigar sales for the year, and it’s only three hours of our day, once a week,” reports Heaps. The store puts together cigar-tasting bags ahead of time, consisting of three cigars for $15.
Cross-merchandising cigar events like this are a lot easier to manage off-site, Heaps explains. “We basically just show up with cigars. We get to focus on selling cigars and not the logistics of running the event. We don’t have to set up chairs and tables; we don’t have to clean up. So it’s a good deal for us and a great deal for our partners and customers.” TB
– Story by Renée M. Covino
This story first appeared in the May/June 2017 issue of Tobacco Business magazine. Members of the tobacco industry are eligible for a complimentary subscription to our magazine. Click here for details.
