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Nov/Dec
2002


Tobacco's
Coffee Connection

Tobacco retailers brew up excitement and profit incorporating java into their merchandise mix.

By Bob Ashley

Smoke shop owners looking to increase revenue with products compatible with tobacco shouldn't ignore the potential of coffee " either as a beverage served in the store or in bulk for carry-out.

"They really go hand-in-hand," says Bob Maurer, owner of Greybeard's Tobacconist and Cafe in the Atlantic Ocean resort city of Rehoboth, Del. "Coffee and cigars have many of the same characteristics." More to the point, coffee brings in customers.

"It's another consumable item that brings people into the store more frequently," says cigar icon Lew Rothman, president of retailer 800-JR Cigars Inc. Whipanny, N.J., and wholesaler Cigars by Santa Clara, Inc. "Anything that is consumable can be sold in a smoke shop. You want to sell items that the consumer destroys so that he has to buy it again."

For many smoke shops that also sell coffee, the revenue increase is not insubstantial. Maurer, who added coffee to his smoke shop in 1997, says that the sale of coffee beverages and freshly ground beans makes up 25 percent of his business.

Maurer's cafe, which has separate space inside the 2,300-sq. foot store, seats about 40 people and serves bakery items as well as coffee. About a third of his coffee sales are in bulk beans, which he grinds in the cafe and sells for between $14 and $17 a pound.

Coffee is particularly popular in the morning with tourists staying in nearby motels and B&Bs.

"It's picked up this year as far as the carry-out trade, partly because we've picked up on our advertising," Maurer says. "We've put out flyers and advertised in the dining books that are out and around."

Maurer, who stocks 15 varieties of bulk coffee from Brazil, Kenya, Hawaii, and Colombia, says his customer's smoking preferences run parallel to their coffee tastes.

"The coffee my customers drink depends on the type of cigar they smoke," Maurer says. "If they smoke a full-bodied cigar, they tend to go with full-bodied coffee. If they smoke a mild cigar, typically they drink a mild coffee." In Clarksville, Tenn., coffee, tea, and related gift items have been an integral part of the Briar & Bean, owned by Don and Ann Clark, since the store opened in 1986. "We have coffee customers and we have tobacco customers, and there are some of both," Ann Clark says. The Clarks purchase most of Brian & Bean's coffee through White Coffee Corp., Long Island, N.Y., considered by many to be among the best bean roasters in the United States. "We also buy from two or three other sources locally, because of customer desire," Ann Clark says. "Sometimes there is a hot regional coffee flavor going."

The 60 varieties of coffee beans that Clark stocks typically sell for $9.99 to $12.99 per pound. The exceptions are Jamaica Blue and Kona estate coffees that retail for more than $40 a pound.

"It all tastes different, just like tobacco does," Ann Clark says. "Every bit of ground where coffee is grown makes it taste a little different."

That point isn't lost on Jeff Borysiewicz, president of Corona Cigar Co. Inc., Orlando, Fla., a cigar manufacturer and retailer who sells branded Corona estate coffee in his Central American-themed Orlando smoke shop, and in an affiliated catalog and on the Internet.

"Coffee is a lot like cigars," Borysiewicz says. "For a lot of cigar smokers, coffee is a balancing act, particularly if they are smoking a full-strength cigar."

Corona coffee is grown on a 200-acre farm in the Matagalpa region of Nicaragua where Borysiewicz also has cigars made.

Borysiewicz says he makes a bigger profit on cigars than he does on coffee, but offering quality coffee adds to the image he wants to create in his retail store. "Coffee is a very small part of our business," he says. "The consumption level is much lower than for cigars. A pound of coffee retails for between $10 and $11, and that's enough coffee to last a month. For the same money, I can sell you two cigars and they will last you a day or two."

Nonetheless, Borysiewicz roasts his own coffee, which he sells as a beverage in the store and as a whole bean or ground. "It's an added value for our customers," Borysiewicz says. "Cigars are king for us, but our customers can smoke a cigar and enjoy estate-grown coffee that they can't get anywhere else."

Coffee in the Cigar Supply Chain
Manufacturers and distributors also increasingly are recognizing the value of coffee to the cigar industry.

Fuego Cubano Corp., Van Nuys, Calif., which manufactures several premium cigar brands and small cigarette-size cigars called Cigets, recently shifted its marketing emphasis from liquor, grocery, and convenience stores to smoke shops.

"It's a natural transition for us," says Roger Padayao, Fuego Cubano's director of product development. "The characteristics of coffee's rich, opulent flavor are the same that our customers get from a cigar."

Fuego Cubano offers 10 self-named coffee blends that retail for $3 for six cups of instant to $10 a pound ground or whole bean. The company provides built-to-order marine-varnished oak cabinets to display its product. "We create our own floor space," Padayao says.

Rothman says the idea of coupling coffee with cigars has been around for decades. "We did this 30 years ago. I had coffees from all over the world," Rothman recalls. "We were pretty successful with it, but in those days we didn't have computers and we didn't know which people bought the coffee and which people bought the cigars."

Rothman abandoned coffee sales in 1977, but started back up again several years ago with whole-bean brands under license from Mayorga Imports, Bethesda, Md., and Altadis USA, Fort Lauderdale, Fla., for Montecristo. The estate-certified coffees " 10 Mayorga and five Montecristo varieties " are sold retail in Rothman's stores, in his catalog and on his 800-JR Cigar Internet website, and wholesale through Santa Clara and several major distributors.

One-pound bags of Mayorga sell for $9.95 retail, with Montecristo priced at $12.95 a pound.

Coffee sold under the famous A. Fuente name has transformed cigar accessory and apparel supplier Smoke Rings Merchandise into a purveyor of roasted coffee beans.

A.F. Coffee Products LLC, Pittsburgh, Pa., a sister company of Smoke Rings, has melded coffee and cigars since 1999 through a licensing agreement with Tabacalera A. Fuente y Cia, manufacturer of Arturo Fuente cigars.

"The coffee business has grown to the point that it is a far larger piece of our business than the apparel that we sell," says managing partner Tom Smith.

"Over time, we've sold coffee to several hundred smoke shops, but we also have expanded into restaurants, and we sell in-room coffee to about 100 Candlewood Suites." A. Fuente coffee is also distributed by American Hotel Register and Guest Supplies, two of the largest hotel suppliers in the United States.

A. Fuente single-bean estate coffee from Puerto Rico retails for $14.95 for eight ounces, and is marketed in a tin featuring the label of Arturo Fuente's Flor Fina cigar, and that when emptied doubles as a humidor.

The company also sells A. Fuente Family Blend for $6.95 for eight ounces. "The coffee business is expanding, slowly but surely," Smith says.

Retailer John Young, who, along with his wife Mellisa, operates two Hemingway stores in Midland and Odessa, Texas, and who holds the United States rights to distribute espresso roasted by Costadora LTD, Torino, Italy, has added another twist: small espresso machines suited for smoke shops and other retailers.

"What we have found in our experience with tobacco stores is there is always an opportunity to find alternate sources of revenue," John Young says. "While I was setting up the distribution network for Costadora, we came up with the idea of placing espresso machines in stores." With a $1,000 order for 1,000 individual pre-packaged pods of Costadora espresso to be sold as a beverage at the keystone price of $2, Young will place and service an espresso machine about the size of a small cash register in a smoke shop. In bean form, the coffee retails for about $12 a pound.

"What we found is that if people are buying espresso we get more hang time " they are sticking around the store and exploring areas that they might not have noticed before," Young says. "My goal right now is to put the machines into the stores. That will create a market for the coffee. That's what we are seeing happen in our stores."

Batdorf & Bronson Coffee Roasters, Olympia, Wash., prepares a special blend of its Dancing Goat coffee for the Spar Cafe, a period restaurant/cigar bar also in Olympia, and for Tower Tobacco and Espresso, Centralia, Wash., a full-service smoke shop that features a small coffee bar. Both shops are owned by Alan McWain and his wife Penny.

"We are one of the few places in town where you can buy a cigar and take a coffee break," says Alan McWain, Spar Cafe.

At Tower Tobacco, about 10% of business is coffee beverages or roasted coffee beans. "Cigars and coffee beyond a shadow of a doubt go together," Penny McWain says.

That thought came to Tobacconists' Association of America (TAA) executive director Ted Clark " Don Clark's brother " nearly 20 years ago. Ted Clark has sold coffee and cigars since he opened the first Briar & Bean in Evansville, Ind., in 1983. "I'd never been in business before, and it made sense to me to sell both coffee and cigars since I was in a mall and I needed more than one product," Clark says. "We opened as much as a coffee store as we did a cigar store. And the coffee carried us for several years."

In the mid-1980s Clark, who sells an average of 700 pounds of coffee a week, roasted his own blend for three years after buying a $15,000 coffee roaster. He since has switched to White Coffee Corp., which roasts coffee to Clark's recipe and ships it overnight to Evansville.

"I stopped roasting when I decided to have a life. It's very time consuming to roast as much coffee as I was selling," Clark says. "And the quality of the White's coffee is better. They have relationships with the coffee boards in the countries that produce coffee and they roast to my order."

Clark, who sells 60 varieties of coffee beans, moved to a strip mall two years ago where he opened stand-alone cigar and coffee shops. "I hope that when people think of the Briar and Bean, they think about both coffee and cigars," Clark says. Approximately 25% of his cigar customers also frequent the coffee shop next door, which features 30 seats and light bakery goods, and books live music on Friday nights in the traditional coffee house tradition.

The coffee shop also helped Clark learn about the cigar business. "Before the cigar boom, I'd experienced the same pattern with coffee," he says. "They both go through cycles. Coffee got very popular in the late 1980s just like cigars did in the 1990s. There were small coffee roasters all over the place until the big companies caught up."

Nonetheless, Rothman predicts a strong future for coffee and smoke shops " particularly given the rise of Starbucks stores and the scores of regional coffee shops that have popped throughout the country in recent years. "Today, people are much more attuned to gourmet products," Rothman says. "American consumers have become very sophisticated, and more well-traveled. They've been to Europe and they've had the more powerful coffee compared to what we drink.

"I think 95% of people who smoke cigars drink coffee, so it's easy to find coffee buyers among cigar smokers. It's certainly easier than finding a cigar smoker among coffee buyers."


SMOKESHOP - Oct/Nov 2002