READING BETWEEN THE LINES...
Final import statistics show that premium cigar imports are estimated to have dropped by 22% to 262 million.
Taken alone, these numbers would probably paint a fairly bleak portrait of an industry in a tailspin. Yet, most leaders remain cautiously optimistic.
Why? A matter of context. When premium cigar imports reached their recent peak, the market was, truth be told, gyrating wildly out of control. Like some Willy Wonka contraption running amok, churning out piles of needed confections, things had gone insane. A 100,000 ton cruise ship could change direction faster than the effort needed to ramp up cigar production. And once it finally hit high gear, it continued to soar far past actual demand.
Three years later, we continue to ponder precisely how much "glut stock" remains in manufacturer's warehouses and distribution channels. If imports continue to drop 20-30% per year indefinitely, we're all in trouble. But industry leaders are confident that the market correction will soon level off, leaving us with an overall business respectfully larger than pre-boom days: about 150 percent larger than a decade ago.
The other key factor is a shift within the market itself. Total cigar imports - premium and non-premium combined - fell by a mere 1% last year to 512 million. That tells a slightly different story, with imports of little cigars increasing by 45% to 33.5 million, and non-premium large cigars showing an an estimated jump of 42%. Are these simply year-to-year fluctuations, or an indication that consumer interest in cigars remains is stronger than the premium segment alone indicates?
Attracting Greater Participation at RTDA Show
A few years back, the Retail Tobacco Dealers of America faced an explosion of interest in the annual summer trade show from retailers and manufacturers. While the scramble for exhibitor booth space remains very active (there were 619 booths in 1997; 900 in 2000; and 850 expected this year), retailer attendance has slid considerably during the same time frame. In 1997, Bill Fader, executive director of the RTDA, estimated that 2,000 retailers attended. Last year, the association said just over 900 retailers attended a show that was 45% larger than the 1997 show.
As such, the RTDA has stepped up its efforts this year to promote the show among retail members. Identified as a contributing cause of slumping attendance last year was manufacturers' practice of offering "show specials" before and after the trade show, eliminating a prime incentive for retailers to attend. The practice "can only result in declining retailer attendance which certainly is not in the best interest of our exhibitors," notes Fader. With competition among manufacturers as high as ever, it remains to be seen whether exhibitors can have the self-restraint necessary to boost attendance, or whether manufacturer's individual sales needs will simply take precedence over the show's goal of turnout. Business is business, and the RTDA's one-stop-shopping formula may not be enough to draw the crowds anymore.
E. Edward Hoyt III