Little cigars are gaining a loyal following with older demographics based on affordability.
By Howard Riell, Associate Editor.
Consumption of little cigars, which have lower taxes and fewer marketing restrictions than cigarettes, has increased dramatically over the past three years. And while convenience store retailers can apply the usual merchandising techniques to them, an in-depth analysis of their potential, said one retailer, must begin with a basic question.
“What’s your definition of little cigar?” said Andrew Kerstein, president and owner of five Smoker’s Haven stores in Matawan, N.J. and the chairman of the National Association of Tobacco Outlets (NATO).
“There are two separate kinds of little cigars out there,” Kerstein explained. “There are the little cigars that you are seeing purchased by a number of primarily older, senior citizens who can no longer afford the cost of manufactured cigarettes due to the significant increased in SCHIP (State Children’s Health Insurance Program) or even to roll their own cigarettes. They are switching now to what a lot of people are calling little cigars. Our top-selling brands for example are Gambler, Cheyenne and Dean’s Little Cigars, but there is a plethora of brands out there.”
That market is indeed growing and has been for the last two years. “It continues, at least in my stores, to see strong sales gains,” Kerstein said. “And again, this growth is coming mostly from senior citizens on a fixed income who just can’t afford the price of cigarettes anymore.”
The other class of products that people, Kerstein included, refer to as little cigars, includes lines like Macanudo Ascots, Cohiba Pequenos, Monte Cristos, H. Upmanns, Griffin Puritos and a host of others. “Some are handmade, some are machine made, but to me those are little cigars.”
One of the characteristics of this subset of cigars is that they are a seasonal product. As the weather gets colder, product sales tend to increase dramatically, and for a very logical reason. “In most markets there are significant enough restrictions on indoor smoking so most people have to smoke outside,” Kerstein said. “When the weather gets colder, most people are looking for a quick 5-10 minute smoke.”
As far as convenience stores are concerned, it is the first class of product that consumers expect to find. But, in Kerstein’s estimation, they appeal to mostly a thin slice of the buying public. Is it possible to expand the audience to include, say, younger legal-age convenience store shoppers who smoke?
“Is there a chance? Yes,” Kerstein said. “But, in my experience, I don’t know if it’s going to happen because the younger people aren’t going for it.” The reason, he speculated, has to do with the amount of money in their pockets.
“Younger consumers aren’t interested in these products. The younger person—people who are in their 20s and 30s—have enough disposable income to buy cigarettes and that’s what they are buying. Down the road, they could convert to little cigars, but it’s not the core,” Kerstein said.
Andrea Myers, executive vice president of Kocolene Marketing LLC in Seymour, Ind., as well as a board member of NATO, said she hasn’t seen the same sort of demographic segmentation among smokers of little cigars as Kerstein.
“Little cigars, because of tax breaks between cigars and cigarettes, have become a lot more attractive to cigarette smokers in general,” said Meyers, who operates 12 Fast Max convenience stores as well as 19 Smokers Host Discount Tobacco stores throughout Indiana. “We’ve seen a lot of people convert from cigarette smoking to little cigar smoking. Little cigars look like a cigarette, act like a cigarette, and they sell for about a quarter of the price of cigarettes, depending on which brands you smoke of both.”
While the methods of merchandising little cigars probably aren’t all that different from most other products, they have proven, at least in Kocolene’s stores, to lend themselves more easily to suggestive selling, which has implications on employee education and training.
“Little cigars are an easy product to suggest to price-sensitive customers,” Myers said. “If anybody complains about the cigarette prices all we have to say is, ‘Hey, have you tried these?’ You hold them up; they look like a cigarette pack. You tell them, ‘Yeah, the wrapper is brown, but don’t knock them until you try them.’ We do have quite a lot of people convert to them.” Plus, Myers said, in stores already crowded with products, anything that relies less on placement and more on suggestive selling creates an opportunity to grow sales.
While little cigars and electronic cigarettes have enjoyed a surge in popularity, the jury is still largely out on e-cigars.
“I know of only one product out there that is calling itself an electronic cigar,” said Kerstein, “and I don’t carry them in my store. I don’t see any reason why anyone would. I have yet to be convinced that there is any market for them whatsoever. Now, electronic cigarettes have huge traction; huge traction.”
Kerstein explained what he sees as a lack of grabbing power by electronic cigars by going back to the original premise behind e-cigarettes.
“What helped prompt electronic cigarettes was a need driven by smoking restrictions and price concerns. So if there are significant restrictions, again on where adults can smoke legally, electronic cigarettes—at least in a lot of states right now—are not subject to the same restrictions. Customers can smoke them indoors and that creates a big opportunity.”
Myers said that while electronic cigars probably won’t prove as popular as electronic cigarettes, they nonetheless have a market.
E-cigarettes, she suggested, are fundamentally the next step in the evolution of tobacco.
“The evolution of smoking is more toward convenience and a cleaner smoking experience, and electronic cigarettes are more convenient,” Meyers said. “I have a girl in my office who smokes electronic cigarettes because she doesn’t want to walk down the steps to go take a smoke break, so she’s an office smoker.”
Another selling point for the electronic cigarettes over e-cigars is that brands are coming out with soft-tip versions. “The more the product looks like a traditional cigarette, the more it’s going to sell,” Meyers said. “When they first came out they were huge, like the length of a pencil. Now they’re more of the size of an actual cigarette, which helps attract attention from smokers.”
Kocolene Marketing currently carries five e-cigarette brands in its tobacco stores.
Perhaps the primary argument against the growth of electronic cigars is the mystique that cigars enjoy, an aspect that many might consider lost in an electronic version.
“I don’t think you’re going to go to a cigar bar for a martini and an electronic cigar,” Meyers said. “There are a lot of people who smoke premium cigars for the experience, and some of that is lost with e-cigars.”
That’s a fundamental difference between e-cigarettes and e-cigars. E-cigarette smokers have a need whereas cigar smokers want the full smoking experience.
Kocolene stores currently carry two brands of electronic cigars, each of which Myers said is doing well. “The electronic cigars didn’t take off like the electronic cigarettes did, but there aren’t as many cigar smokers as cigarette smokers. The target customer for e-cigars tends to skew toward younger customers who also have disposable income. E-cigars generally sell for between $10-$20 e