April 1998
Volume 25
Number 2

Reaching Customers Beyond the Store:
Operating a Satellite Retail Cigar Program

by Bob Ashley

Despite news of shakeouts and slumping import growth, cigars continue to find their way into new "non-traditional" retail outlets every day. Can smoke shops claim a part of the action? Many already have, occupying profitable new layers in the wholesale-retail chain. If you want to thrive, consider grabbing a part of the action.

The liquor store down the street is selling cigars. So is the grocery store around the corner. Ditto for the service station across the street. As resurgent cigar sales during the last four years begin to level off, smoke shop owners are finding more and more competition for customers, often from the local alcohol or beer distributor or recently established independent entrepreneurs.

Unless shop owners are willing to accept a reduced market share, the challenge is to find new ways to get cigars into the hands of their customer. More often retailers are turning to sales at satellite locations - restaurants, hotels, bars, golf courses, tuxedo shops, clothing stores, and local barbershops and hair salons - to increase business.

Sometimes called alternative points of sale, the trend is being helped by some cigar companies and distributors that have established specific programs to help the traditional retailer capture a greater share of the cigar market outside the walls of his or her smoke shop.

"With the influx of cigar brands and 7-Eleven and grocery stores putting in humidors, we wanted to get our share of the market before the smoke shop becomes obsolete," said Chris Cacace, owner of Robustos of New Hope, a retail shop in New Hope, Penn. "I can't control other venues selling cigars. I can control where I sell cigars. To me, it makes more sense to try to profit from the situation than complain that a bunch of new people are taking business away from me."

Cacace has targeted upscale restaurants and lounges and local golf shops. Since he started the program in the fall, he's signed up 12 clients. "If you are a small smoke shop like we are it's going to be important to have alternative income as the cigar market starts leveling out," Cacace said.

"We target restaurants that are just opening," he continued. "Before they open, we are there trying to get our foot in the door. We've had to cover a larger geographical area than we anticipated because a lot of places are already selling cigars. But if we go as far as 45 minutes away from the store, we try to cluster three or four locations so that we can service them at the same time."

Wholesale distributors of cigars, humidors, and accessories are realizing that the more they help smoke shop owners sell cigars, regardless of the location, the better. "If retailers don't get into alternative markets, particularly the new retailers, they'll be out of business," said John Calabrese, president of Juan y Ramon Cigars Inc., a distributor of cigars and accessories with headquarters in Fort Lauderdale, Fla.

Calabrese urges his customers, including Robustos of New Hope, to sell into a category that he calls sub-alternative points of purchase - smaller, non-tobacco related retail outlets that are suited to cigars such as lounges, restaurants, and country clubs.

The local shop owner isn't going to have much luck latching on to the regional supermarket chain, convenience outlet, or even the liquor store on the corner because they probably are already receiving product from established distributors, according to Calabrese. "Those retailers who will have the best success are those who take distribution a step further, into sub-alternate accounts. Those are the retailers that I want to do business with.

"I'd rather work with the traditional retailer because they will be in the business for the long run. They have more knowledge about cigars and they have more at stake. The cigar business is evolving dramatically and quickly. The traditional retail stores have to evolve with the business. Otherwise, they will be out of business."

Ona Stewart, senior account executive with Stewart-Beckwith, a California humidor manufacturer, says it is important that smoke shop owners don't confine their thinking to what are considered traditional cigar outlets. "We have customers who are putting cigars into men's and women's clothing stores," Stewart says.

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