With a pandemic causing supply disruption across the manufacturing spectrum and the ever-present hurdle of increased regulation, the cigar category continues to march forward thanks to stable pricing, form and flavor innovation, and nimble market adjustments by manufacturers.
Dollar sales of cigars in the total U.S. convenience channel rose 10.1% for the 2020 calendar year ending Dec. 27, according to IRI liquid data. Unit sales rose 5.4%, with unit price rising just seven cents to $1.58 for the same period.
Premium cigars in 2020 were again a reliable performer.
“In the few stores we have humidors, the premium cigar sales have been steady,” said Jesse Dix, category manager for Sayre, Pa.-based Dandy Mini Marts, with 65 stores in Pennsylvania and New York.
And while homogenized tobacco leaf (HTL) are the “bread and butter” of the cigar category, natural leaf is the product to watch, according to Michelle Signorelli, category manager at Atlanta-based RaceTrac, with 560 convenience store locations in Alabama, Georgia, Florida, Louisiana, Mississippi, Texas and Tennessee.
“With natural leaf, just the growth in that segment is huge,” said Signorelli. “You can see it with the Dutch (Masters) and Game Leaf and Backwoods (brands), and Optimo.”
The only thing that seems to be holding cigarillos back is the shifting regulatory landscape.
“I foresee our cigarillo business, in New York, in particular, dropping a bit due to the tax increase, which forced us to remove the two-for-99-cent pouches,” Dix said.
Despite local and state flavor bans — and the threat of a federal flavor ban circulating on Capitol Hill — innovation in cigarillos is alive and well. More flavors, new mashups.
“ITG keeps releasing new flavors and offerings on Dutch and Backwoods, it seems like every few weeks,” Dix said.
And that’s despite supply disruption due to COVID-19, which has been a factor, especially with labor-intensive natural leaf or hand-rolled cigars, noted Signorelli.
“Units inclined at the same time that manufacturing declined,” she said. “So, it really hit them pretty hard, a lot faster than I think anybody was anticipating.” Manufacturers responded, though, by focusing on top SKUs, which retailers found helpful.
“Supply will continue to be issue, but I’m hoping we will see some improvement in the spring,” Dix said.
Driven by stable prices, flavor innovation and diligent navigation of local and state regulation, the cigar category looks to keep rolling along in 2021.