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August,
2005

It's a Family Affair at
Phillips & King International

Bringing the exotic to the mainstream.

By Joseph Finora

Finding an undiscovered niche and then cultivating it has been the key to many successful businesses. But after the initial excitement wears away, how can one continue to make the business thrive? For Phillips & King International, remaining constantly innovative, being dedicated to first-rate customer service, and maintaining an in-depth, regularly growing inventory has become the recipe for success. And while this sounds like a simple recipe, it's not nearly as easy as it sounds.

Phillips & King International has evolved to become more than just a cigarette distributor. The company itself is preparing to celebrate 100 years in the tobacco business - a significant milestone by any standard - and its synergy within the industry has become well known. Phillips & King is the only tobacco distributor in the country that's licensed and bonded to sell and stamp products in all 50 states. Personnel will actually hand stamp items destined for hard-to-reach locations, but the retailer still pays only one price for the total shipment and service.

Today Phillips & King's 6,000+ products can be found in all 50 states as their lineup has expanded to include related accessories, such as humidors and cigars which are housed in the West Coast's largest humidor - 4,800 square feet in size. And the merchandise list keeps growing as every day marks a new opportunity for Phillips & King, whose key personnel refuse to lose sight of the qualities that have helped them flourish in an area many considered too exotic to be taken seriously. Yet it is this category of product that today's retailer takes most seriously, deriving the bulk of their revenue in the super premium tobacco product category. This has been a mainstay in Phillips & King's long-term marketing strategy and has allowed it to form strong ties with thousands of retailers.

Phillips & King is home to the West Coast's largest humidor at 4,800 sq. feet in size. It's named after P&K's c.e.o., Hugo Cassar, and is part of Phillips & King's 100,000 sq.-foot headquarters, warehouse, and shipping facility in California.
"We try to serve as the retailers 'back room,' " notes Mark Cassar, chief operating officer, who - along with brother Sean, Phillips & King's marketing vice president, and Eliot Suied, vice president of sales - guides Phillips & King from its 100,000 sq-ft facility in Moorpark, Calif. Combined with founder, c.e.o., and owner Hugh Cassar's expertise, together they represent about 120 years of tobacco-industry experience.

"Retailers become greater specialty sellers when they see how they can grow their profit margins with our products," says Mark. Helping customers improve their business has been a key to Phillips & King's growth strategy but is supported by the company's proven ability to spot cigarette brands and other products that are full of sales potential.

In addition to Indonesian-made Djarum clove cigarettes (kreteks), Phillips & King also carries Dunhill, Natural American Spirit, and Nat Sherman - all unique entrants in a world full of retail conformity. Subsequently, these non-run-of-the-mill brands attract a customer that generally has higher purchasing power and is desirable to retailers. Customer service representatives remain highly trained to provide the retailer top-flight customer service and merchandising advice, including product knowledge, mark-up specifications, display ideas, and quick shipping.

"We can put product into a retailer's hand in 24 hours," says Sean. "This helps them save on inventory and better manage expenses." Phillips & King allows retailers to pay for orders via credit card and also offers a two percent early-payment discount. "A retailer does not need to keep a deep inventory when dealing with us because we keep everything in stock," says Sean. "This is another one of our hallmarks that plays a big part in keeping the customer first. We can help them better manage their inventory and cash flow."

How does one identify the smoker who enjoys an exotic product?

"Anyone who smokes a mainstream cigarette can be turned into a specialty smoker," says Mark. "Visibility and communication are key points because smokers are creatures of habit. They're usually very brand-loyal, so a retailer must give them a reason to switch. They usually do that by suggesting it to their better customers."

Phillips & King handles over 6,000 separate merchandise items and is bonded to sell cigarettes in all 50 U.S. states.
Phillips & King identifies a prospect as anyone who can afford a cigarette that's better than mainstream offerings. They also add that it can be a matter of image or status that may make a smoker convert to the exotic side. At other times it's a desire to smoke a better quality tobacco or try a new flavor, but promotions are generally limited to in-store displays and advertising in select outlets. Product placement offers in media are generally refused.

The Dreams brand was launched in 2001 and it enjoyed such steady success that a line extension - Pink Dreams, aimed at the female smoker - is forthcoming. Lush is a line of four specialty menthols including Sweet, a slightly sweet minty menthol; Max, a strong ultra cool menthol in red; Pure, a clean and refreshing menthol in green; and Menthol Blues, a satisfying and very smooth menthol packed in blue. Available in hard packs, the line takes aim at the mainstream menthol smoker, which the company estimates to be about 22% of the overall retail cigarette market.

Phillips & King has no set formula for deciding whether or not to bring a brand into its stable but instead relies on several factors. "Sometimes it's curiosity from a customer who's just returned from a foreign country and inquires at a retailer for a product he tried there," says Mark. "Other times we might be meeting with an overseas manufacturer who may introduce us to something new that they've been successful with in other markets. In either of these cases we'll try to bring new items on board, expand the brand, and build an exclusive relationship." Imagination and innovation are standard characteristics at Phillips & King. Consider that in 1998, Phillips & King added the herbal cigarette Ecstacy to its extensive collection of products. Manufactured by California-based Global World Media Corporation, Ecstacy cigarettes are tobacco- and nicotine-free and made strictly from herbal ingredients including damiana, wild lettuce, catnip, passion flower, and mint. The company also lists "love and light" among the cigarette's ingredients. Ecstacy cigarettes are available in Regular and Light, in 20-count hard packs and 10-pack cartons.

Phillips & King's philosophy is to allow retailers to buy frequently from the widest assortment of merchandise available. They maintain over 6,000 items in stock at all times and distribute twice-monthly order guides to offer retailers additional purchasing opportunities. Other goals inherent in this philosophy are to encourage retailers to buy additional items while saving money and enhancing their inventory. Its catalog has become the industry reference that also contains complete information on nearly every cigar brand in the industry including country of origin, wrapper type, ring gauge, and even the history of the maker.

Speaking of Cigars
According to a Swedish Match North America spokesperson, "Phillips & King has one of the best reputations in the marketplace in terms of developing extensive retail distribution." The overall mentality at Phillips & King is that "an educated customer is a successful customer and a loyal customer." It is this philosophy that has earned it the position as one of the industry's one-stop-shops for all tobacco products.

And as cigar sales grow, so do those of humidors, which now represent another expanding category for Phillips & King. To better exploit humidor sales, Phillips & King has capitalized on the product line with in-depth inventory and aggressive pricing.

"We've become one of the largest suppliers of humidors in the United States," notes Mark. "We have them shipped in by the container-load. This aggressive buying power enables us to pass on competitive prices to the retailers who can, in turn, price them well for their customers." This is the kind of foresight and customer consideration retailers have come to expect.

Phillips & King has not been immune from the seemingly countless restrictions placed on the tobacco industry in recent years and the virtual tsunami of negative publicity that's hit the industry. Nevertheless, the company remains true to its game plan.

"This industry operates from under a microscope," says Hugh, the tone of experience ringing heavily in his voice. "State-by-state, nearly every community has tried to make this business illegal, yet people still go out of their way to smoke. In that light, when one considers the restrictions, we've shown a great deal of imagination and resourcefulness."

Phillips & King International, 5069 Maureen Lane, Moorpark, CA 93021, Toll-free: (800) 358-8100, Tel: (805) 531-8888, Fax: (805) 531-8899.


SMOKESHOP - August, 2005