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Cigar Prices in Tough Times
Written by Kevin Godbee

Wednesday, 25 March 2009

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So look at the deals you will find online carefully and maybe test the waters by purchasing a small quantity of cigars first. Once you know the quality that you will get from an online supplier then you can go on and buy with a bit more confidence. If you don’t make a test buy then you’re running the risk of wasting some of that money that you’re trying so hard to save.

But should we really expect any price reductions?

In a competitive market such as the cigar market there’s often very little room to move with prices. Online sellers have certainly added to the level of competition and that has brought the price of discount cigars down to rock bottom already.

As I alluded to before, tobacco production is quite labor intensive and just because we’re experiencing tough economic times doesn’t mean that the price of tobacco can be magically reduced below the cost of production. So don’t expect the prices to come down below the cost of production and that means the price we see now is probably as low as it’s ever going to get.

We might see some small reduction in prices for premium level cigars but, once again, when the cost of production is high then we really can’t expect the cost of these fine cigars to drop too much.

Of course we might see some close-out prices as cigar makers clear their inventory at below cost in an effort to stave off bankruptcy but that may not be something that we really want to see. Sure the price of some premium cigars might fall but that will only last as long as the maker has stock to sell and then there will be no more … and there will be no more next season either because the maker will go out of business.

And right there is something that we really should be considering. Cigar smokers who are constantly searching for the very best price are not really doing themselves, other cigar smokers, or the cigar industry any favors.



Sure everyone wants to save money but there comes a point where saving money now is actually going to hurt you in the future because when it comes to cigars we’re reliant on cigar makers to produce what we want just as much as they’re reliant on us to buy what they produce. We want them to be around in the future and there comes a point where, if our demand drives the price of cigars down to the point where it’s uneconomic for the manufacturer to produce his cigars, he won’t be around and then ultimately we lose out.






Comments 

 
0 # A bit of bias?pipesandgop 2009-03-25 16:12
I can't help noticing as reading this article that the side of the author is obviously not 100% on the consumer's side; even though the consumer is the one reading the article. Excuse me for looking for the best deal on a cigar. And yes, as people buy fewer and fewer cigars, basic economics of pricing based on supply and demand will kick in (if the manufactuers and retailers follow suit), and prices will drop. That is, as long as manufactuers don't mind making a bit less rather than just cutting corners. Personally, although I hate to hear about anyone losing their job, if it means I'm paying more for something and can still get it with a few less people involved in the process, I don't mind seeing them go.

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0 # Some good and bad pointsJunkiT 2009-03-27 04:24
A thought provoking article to be sure. What I'm more interested in when looking at the problem is the true nature of business in general, to profit. What we tend to see in the cigar business lately, is every Tom, Dick & Harry who has a few bucks to spare getting into the cigar manufacturing business. At one time, there were only a few manufacturers and they maintained dominance in the market. They gew quickly in a time where there was no real competition for the entire marketplace. Those first few manufacturers that got in quick and stabilized quick are now the largest and most stable manufacturers around. Their production schedules and output have remained largely in step with demand and margins are kept as stable as possible to limit exposure to the devastating effects of world economies. In short, what has happened over the last 10 to 15 years has produced a major uptick in the entrepreneur manufacturer, who has observed the market increase as cigars have become more popular with the trendsetters. These small time businessmen have chosen to invest their ( or other investors ) money into what was once a large ( and stable ) production business of tobacco , with the goal of carving out a niche in the market at a greater profit margin so that they can try to gain some level of control in the market. Now, while I enjoy several of these "boutique" brands that have come along, I don't feel that I need to keep these people happy in the lifestyle they've become comfortable with. When I see these local folks trying to attach themselves to the large internet retailers and using their advertising puch to create an inflated market for their product, I tend to not have any pity for them if they can't succeed on the same profit margins of the larger manufacturers. To demonstrate the point, when I see the large retailers trying to tell me that some new brand of cigar is "super premium" and that the retail on that cigar is, say 235.00 a box, yet I see them selling it off for $2.00 per stick, it's painfully obvious to me that there is plenty of profit being made even at 2.00 per. Large american retailers have created a false market of "super premium" cigars in an effort to do nothing more than increase their bottom line. You don't see the big boys pushing the market for established brands such as R&J, MC & etc. That's because those markets are established at a predicted margin and there is little room for negotiation with the manufacurer. People still want those cigars and the manufacturers won't allow the retail market to price gouge on their product because they don't want the retailers controlling their game, because it is their game.

So, if the little guy can't stand tall in today's market may very well be due to the fact that he can't sustain his business on less profit because he can't control the farmers and rollers that work for someone else. The same principle applies in America's economy: it's the big boys who control the markets not the little guy. It's the big boys who can take the crops away from the little guys if and when they choose to. If they want to make it difficult for the little guy they have no problem doing it.

Again, I do enjoy some of the boutique brands just like anyone else. If the economy stifles demand, it's the little guy with the big margin that's going to lose, not the big guy. And while cigar smokers demand more brands and flavors that the little guy provides, in the end they will smoke what they can afford. If the big guys don't want to add those tobaccos to their arsenal and keep prices in check, that's when we'll all lose a little variety.

Also, while these guys may be nice people, I don't feel too sorry for some 30 year old kid who had a great idea to blend a different taste, call the big retailers to promote it and then become instant cigar gods with a huge margin behind it. These folks can find other avenues to make a buck too, cigars aren't the only way to get rich.

So the next time you see some overweight young dude in a hawaiin shirt, or a motorcycle fanatic with tatoos all over their body or a couple guys who you wouldn't want to see walking through your neighborhood without a police escort shaking hands with a bunch of guys around a cigar shop, stop and think about who gets hurt when the time comes that we have a few less brands of cigars to choose from the next time we want to indulge in an uneccessary luxury habit we like to call cigars.

And since I can still see the last paragraph from the article while I type this, remember this as well: there will ALWAYS be someone around when the good times come back to dive into the cigar business again and start the whole process over again. We won't be without our boutique brands for long, and when they do come back, maybe it's US, the consumer, who sets the prices and NOT the dirty, grungy, overweight kid who was smart enough to call CI to set the price for their product line.

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0 # Good Cigars will surviveKenneth Singletary 2009-03-28 18:02
Dom Perignon will survive, Fuente Fuente Opus X will survive, most cigars and fine wines and liqours will survive because they will continue to be purchased by the people who tresure them. The shake out in an economic crisi will be the economically unstable manafacturers. In some cases that means the smaller manufacturers. It's the producers of the cheap cigars that are going to be hurt the most. As cigar smokers cut back, they are going to stick to the brands they enjoy the most. I don't buy chapies that I don't really like just because they are cheap. I couldn't imagine passing up on a box of Onyx and buying a bunch of swisher sweets. That may be an extreme example but my point is this.The high quality cigars will survive, the junk will go first. The consumer will chose who makes it. I will spen wisely and buy only that which I want to buy. I will chose to buy my cigars from the source that can give me the best deal on the cigars that I want. Why would I do anything else? As for the local tobacconist, I will continue to buy some of my cigars there because I absolutely love to walk into a giant humidor, salivate over a box of something I have never tried before and buy a few.

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