Philip Morris
Smoking and Tobacco Control Monograph No. 9 Marketing and Promotion of Cigars
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- 2081367243-7248 Profile of Dr. John Slade
- 2081367250-7251 Dr. John Slade's Shareholder Proposals 910000 - 990000
- 2081367254-7256 Ftc Judge Considers Effects of Joe Camel Advertising
- 2081367257-7260 Philip Morris to Begin Testing New Cigarette on Consumers
- 2081367261-7264 Tobacco Industry Regulation May Lead to Safer Cigarettes
- 2081367265-7270 Money Is Tipping Big Tobacco's Scales, Weighing Cash Now for Profit Later
- 2081367271-7273 How to Reduce Deaths From Tobacco? Duh. Take the Toxic Stuff Out of Cigarettes
- 2081367274-7278 Free Camels Mailed to Youth, Parents Find It Tough to Get Son Off List
- 2081367279-7283 Never Too Young, Stop-Smoking Campaigns Have Largely Ignored Kids Who Are Addicted
- 2081367285-7290 Custody - Cigarettes - Matrimonial Law - Smoking
- 2081367291-7295 Defining Addiction When Nicotine's the Drug in Question
- 2081367296-7298 Tobacco Industry A 'Disease', Says Conference Speaker, Fourth National Conference on Nicotine Dependence, Raleigh, NC, 910913 - 910915
- 2081367299-7301 Nonprofit Health Agencies, Public Figures Speak Out Against Philip Morris Tour
- 2081367302-7304 Cigarettes Are Seen As A Gateway for Kids to More Potent Drugs
- 2081367305-7336 Tobacco Product Regulation: Context and Issues
- 2081367364-7376 Reducing the Addictiveness of Cigarettes
- 2081367378-7381 Addicted to Nicotine A National Research Forum Nicotine Delivery Systems
- 2081367382-7384 Addicted to Nicotine A National Research Forum Nicotine Systems
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Document Images
Chapter 7
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350
300
50
100
50
Figure 1
Mean retail Price of Various Size Cigars, U.S. 1976-1996, Corrected for CPI (1982-1984 = 100)
0
Large
Cigerillo
. . . . . .-
...............~.-.-.-.~
--
---- --------------------------- -------
Litlle
'76 '80 '85 '90 '95
Source; Maxwell, 1997
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Chapter 7
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Table 4
Little cigars, United States, 1996. Market share and Leading Brands, company by
company, Millions and percent
Company Units Percent
Swisher Int'l Inc.
Swisher Sweets Little 632 42.4
Consolidated
Dutch Treats 340 22.8
Tobacco Exporters Int'l
Winchester 316 21.2
Havatampa, Inc.
Omega
Between the Acts
Madison
Hav-a-tampa 139 9.3
Lane Limited
Captain Black 76 5.1
House of Windsor
Little Nippers 1 0.1
Change in Inventory (14) (0.9)
Total 1,490 100.0
Source: Maxwell, 1997.
Table 5
Cigar companies that also manufacture tobacco products that are regulated by the
Food and Drug Administration
Company Regulated Products
Commonwealth Brands
Consolidated Cigar
Finck Cigar
Lane Limited
Red Lion International
Nat Sherman
Pinkerton Group
Swisher International, Inc.
UST Cigarettes
Cigarette tobacco
Cigarette tobacco
Smokeless tobacco
Cigarette tobacco
Cigarette tobacco
Smokeless tobacco
Cigarettes
Smokeless tobacco
Smokeless tobacco
Smokeless tobacco
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Sources: Smoke 2(1):40-41, Winter 96/97, Tobacco Reporter, 1996, UST Annua! Report. 4
Smokeless tobacco includes oral snuff. W
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200
Smoking and Tobacco Control Monograph No. 9
Similarly, the CEO and the President of Culbro have stated,
The emergence and rise in popularity of cigar dinners, cigar
clubs, cigar bars and successful magazines such as Cigar Aficionado
lend additional credence to the link that now exists between
premium cigars and affluent consumers. (Culbro Corporation,
1996, p. 2)
The marketing of cigars has emphasized premium cigars; however,
when market shares of different brands are examined, inexpensive brands
of machine-made cigars actually dominate the cigar market (Table 1). The
leading brand is a machine-made variety of little cigars, Swisher Sweets,
which had a 19 percent market share in 1996. In contrast, the heavily
advertised premium brand Macanudo has only a 0.8 percent share. (General
Cigar is building Macanudo into a major name brand with a coordinated
campaign of advertising, sportswear, and ventures such as Club Macanudo
(Smoke Signals, 1997; Culbro Corporation, 1996).) Table 2 lists premium
brands of the largest U.S. cigar companies.
While there is a plethora of brands, styles, and sizes of cigars, only a
few companies sell most of them (Table 3). Just five companies, Swisher
International, Havatampa, Consolidated Cigar, Middleton, and Culbro
(General Cigar), control 95 percent of the market in the United States. Except
for Havatampa, which only sells machine-made cigars, each of the major
companies sells both premium and non-premium brands. In addition to the
major companies, a welter of small companies manufacture and import
premium cigars.
The market for little cigars is even more concentrated, with just three
companies, Swisher Internatiorial, Consolidated Cigar, and Tobacco Exporters
International, controlling 86 percent of the market (Table 4). Swisher alone,
with its Swisher Sweets little cigars, has a 42 percent share. Table 4 also lists
the major brands of little cigar now on the market.
Many companies which manufacture or import cigars are involved in
other aspects of the tobacco business. Table 5 lists cigar companies which
also sell other tobacco products.
The recent rise in cigar sales has led to increased value of cigar companies
as investments. Several have made public share offerings and both popular
and trade magazines have offered information about these potential
investments (Wall Street Report, 1997; Luz, 1997; Finora, 1997).
There has been a marked increase in the number of smoke shops since
1992 (Flying High, 1997). The number of retail specialty tobacco outlets has
increased from 2,358 in 1992 to 4,948 in 1996. A sign that this increase has
drawn in many small businessmen who have not previously been involved
in the trade is the publication of an extensive article in a trade magazine
about the function of sales representatives (Scott, 1997).
197
Chapter 7
Just by asking the question, U.S. Tobacco International legitimizes an
expansion of when cigars are smoked, especially by people who think of
themselves as not being bound by tradition. Smoking cigars with morning
coffee is not in exchange for consumption later in the day. Like promoting
soft drinks as a breakfast beverage, it is a marketing tactic which is aimed at
expanding the market.
Sexuality permeates many of the ads (Figure 2), and it can be especially
blatant in ads from some of the smaller companies. An ad for a 3.5 inch-long
cigarillo shows an attractive couple having a good time, each holding the
product. The copy reads, "For the women who say size doesn't matter,
and the men who actually believe them" (Caribbean Cigar, 1997, p. 33).
Some ads work at a more sophisticated level. An ad for Macanudo,
which is part of a "campaign aimed at younger adult smokers" (Culbro
Corporation, 1996, p. 5), shows an attractive woman and a handsome older
man, both holding cigars and looking directly at the camera. The headline
reads, "And they thought you'd have nothing in common." The copy creates
suggestions of professional tension and competition between the two, but
their cigars create an affirming bond that is "to be shared like wit. To be
savored like wisdom" (CigarA17cionado, May/June 1997a, p. 9).
*
Figure 2
Sexuality in cigar advertisements
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202 V+
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Smoking and Tobacco Control Monograph No. 9
Marketing and Promotion of Cigars
John Slade
INTRODUCTION This chapter examines the recent commercial history of cigars in
the United States. Sales patterns, advertising, and apparent promotional
activities are explored. Most of the discussion of marketing activities is
descriptive, since few quantitative data are available. There is almost no
publicly available information on how the increased visibility that cigars
have achieved since about 1992 has been financed. Accordingly, what are
described in this chapter as promotional activities are not necessarily the
result of activities by commercial interests. They are, though, activities
that have probably contributed to the promotion of cigar consumption.
SALES PATTERNS Figure 1 charts the mean retail price of cigars from 1976 through
1996, adjusted for inflation. The inflation adjusted price of small cigars fell
steadily over the period, losing 52 percent of their initial average price by
1996. Inflation adjusted prices for cigarillos ended the period about where
they had begun despite a prolonged dip during the 1980's. Large cigars
showed generally steady overall prices with some year to year fluctuations in
the 70's and 80's, but 1994 and 1995 were two consecutive years of
substantial increases in mean price, probably reflecting the relative growth of
the premium segment.
In a prospectus for the initial public offering of 5.4 million shares of
company stock, Consolidated Cigar Holdings Inc. pointed to several factors
which it believes have contributed to the increase in cigar sales in recent
years.
The Company believes that the growing cigar market and
increased demand for cigars continue to offer the Company
substantial growth opportunities. Recently, cigar smoking has
gained popularity in the United States, resulting in a significant
increase in consumption and retail sales of cigars, particularly for
premium cigars. Management believes that this increase in cigar
consumption and retail sales is the result of a number of factors,
including: (i) the increase in the number of adults over the age
of 50 (a demographic group believed to smoke more cigars than
any other demographic segment) and (ii) the emergence of an
expanding base of younger affluent adults who have recently
started smoking cigars and who tend to smoke premium cigars.
The Company believes the increase in cigar smoking is in large part
attributable to a positive and improving image of cigar smoking
resulting from increased publicity, including the success of Cigar
A ficionado magazine, the increased visibility of use by celebrities
and the proliferation of "Cigar Smokers" dinners and other special
events for cigar smokers. (Consolidated Cigar Holdings Inc., 1996,
p3)
195__-_
Chapter 7
Table 7
Persons Featured on Covers of CigarAficionado and Smoke, 1993 - Winter 1998
Year Persons
i
CigarAficionado 1993 Groucho Marx
Winston Churchill
1994 Rush Limbaugh
Fidel Castro
Bill Cosby
George Burns
1995 Ron Perelman
Jack Nicholson
Linda Evangelista
Tom Selleck
1996 Matt Dillon
Arnold Schwartzenegger
Demi Moore
Danny Devito
1997 Wayne Gretzky
JanetJones
James Woods
Claudia Schiffer
Michael Richards
1998 Denzel Washington
Smoke 1996 Pierce Brosnan
Tom Arnold
Red Hot Chili Peppers
Mel Gibson
1997 Elle Macpherson
Jeff Goldblum
Carmen Electra
Claudia Schiffer is talking tough. There's a problem in the
world of fashion these days, she says - the fact that too often
models have to look like junkies just to be cool. "I think fashion
should be promoting beauty and health," she says. "That doesn't
happen if the model looks anorexic, unhealthy, tired, if the
photography makes her look as if she's on drugs or been out
partying all night. That kind of thing can end up hurting young
women or girls who feel they have to imitate the models they see
in the magazines. That's not what fashion is about. For me,
fashion is about beauty." (Rothstein, 1997, p. 170)
The article and magazine cover include seven large photos of the N
0
supermodel cum cigar in alluring poses (Rothstein
1997)
The contrast being 00
,
.
drawn between drug use and dissipation on the one hand and cigar use on the i
ca
o)
other could not be more clear. V
204
Smoking and Tobacco Control Monograph No. 9
Table 2
Premium brands of the major cigar companies
Company
Consolidated Cigar
General Cigar
Swisher Int'l
Premium brands
H. Upmann
Montecdsto
Don Diego
Te-Amo
Santa Damiana
Royal Jamacia
Primo Del Rey
Montecruz
Macanudo
Partagas
Punch
Hoyo de Monterrey
Cohiba
Excalibur
Ramon Allones
Temple Hall
El Rey Del Mundo
Canaria D'Oro
Cifuentes
Bolivar
Belinda
Bances
Bering
Pleiades
Table 3
Large cigars and cigarillos, United States, 1996. Market share, company by
company, millions and percent
Company Units Percent
Swisher Int'l, Inc. 758 24.5
Havatampa 720 23.3
Consolidated Cigar 634 20.5
Culbro (General Cigar) 527 17.1
Middleton 310 10.0
M & N Standard Cigar 47 1.5
House of Windsor 30 1.0
Others 64 2.1
Total 3,090 100.0
Sources: Data on market share, Maxwell, 1997. Data on total U.S. consumption, USDA, 1997.
199
Smoking and Tobacco Control Monograph No. 9
!
Table 6
Measured media spending for cigars, United States 1994, 1995, 1996
(first 9 months for '96), $000's
Company 1994 1995 1996
(9 months)
CULBRO CORP. (General Cigar)
General Cigar 60 42 n/a
Garcia Y Vega n/a n/a 24
Macanudo 234 1,503 1,597
Partagas
DAVIDOFF OF GENEVA, INC. 375 689 134
Davidoff Cigars 128 249 230
MACANDREWS & FORBES HOLDINGS (Consolidated Cigar)
Don Diego n/s 83 406
H Upmann 96 187 366
Te-Amo
RICHEMONT AG 193 104 303
Dunhill n/a 30 173
Winchester Little Cigars
SWISHER INTERNATIONAL INC. 107 54 150
Swisher Sweets Little Cigars n/a 121 296
. THOMPSON CIGAR CO.
Thompson Cigars
TRIPLE C ACQUISITION CORP. n/a 277 n/a
Consolidated Cigars n/a 111 287
Total 1,193 3,450 3,966
Source: Leading National Brands, 1997.
other ways; for instance, by evoking a romantic vision of pre-revolutionary
Cuba. Many ads create a personal link with the company owners, founders,
or the artisans and the farmers who create the product and its raw material.
Some advertising seeks to expand the market for cigars by legitimizing
new users and new settings for use. The former is illustrated by the ads
which invite women to smoke cigars. An example of the latter is an ad
for a brand sold by U.S. Tobacco International, Don Tomas (U.S. Tobacco
International, 1997). The ad shows a man dressed in a terry cloth robe,
holding a coffee cup, smoking a cigar. The ad copy reads,
What time of day should you light up a cigar? We know
people who wouldn't think of having their first cup of caffe latte
without firing up a good cigar. Then there are the traditionalists
who wait until the after dinner single malt is served to light up
their handmade Don Tomas Presidentes. When you really get
down to it, as long as the label says Don Tomas you're in for
a treat, day or night.(p.253)
201
Chapter 7
Table 1
Market share large cigars and cigarillos, United States, 1996, millions and percent
Brand Company Units Percent
Swisher Sweets Swisher Int'l 601 9.4
Phillies Havatampa Inc 462 15.0
Havatampa Havatampa Inc 258 8.3
White Owl General Cigar 184 6.0
Dutch Masters Consolidated 138 4.5
Garcia y Vega General Cigar 138 4.5
Antonio y Cleopatra Consolidated 124 4.0
King Edward Swisher Int'I 105 3.4
Muriel Consolidated 100 3.2
Backwoods Consolidated 98 3.2
Robert Burns General Cigar 87 2.8
El Producto Consolidated 53 1.7
William Penn General Cigar 44 1.4
Tijuana Smalls General Cigar 34 1.1
Macanudo General Cigar 26 0.8
Universal Swisher Int'l 24 0.8
La Corona Consolidated 13 0.4
. Bering Swisher Int'l 10 0.3
Partagas General Cigar 9 0.3
Roi-Tan Consolidated 7 0.2
Canaria d'Oro General Cigar 2 0.1
Other, non-premium 340 11.0
Other, premium 233 7.5
Total 3,090 99.9
Premium brands in bold face.
Note: A premium cigar is hand-made, is comprised entirely of natural, long filler tobacco, and has a
retail price of more than $1.00.
Sources: Data on premium cigars and market share, Maxwell, 1997. Data on total U.S. consumption,
USDA,199Z
ADVERTISING Only a small amount of conventional advertising appears for cigars.
Measured media spending increased from $1.1 million in 1994 to $4.0 million
in the first nine months of 1996 (Table 6). Most advertising for cigars appears
in magazines; 39 magazines carried cigar advertising in this 3-year period. As
of December 1996, the price for a one time insertion of a full-page, four-color
advertisement in Cigar A ficionado was $18,360 while a similar ad in Smoke cost
$7,950.
Cigar advertising employs a variety of themes. Cigars are presented as
lavish, even outrageous, yet affordable luxuries and indulgences. Other ads
depict a rich history and tradition of cigar making or appeal to nostalgia in
198
Smoking and Tobacco Control Monograph No. 9
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Adding a charitable dimension to these events may add a sense of
mainstream mission, purpose, and respectability to what may simultaneously
be regarded as daring, flaunting of convention, and even somewhat
underground. Not only is a cigar dinner fun for itself and more so for
being a bit of a slap at puritanical attitudes, it can also be for a good cause.
Scott, writing in a trade magazine for retail tobacco shops, has described
how to organize a cigar dinner.
Cigar dinners, if planned and executed well, are an excellent
way to build your business. They work best as a promotional tool,
just like advertising. The nice thing about them, as a business
builder, is they can be operated at a break-even level. What other
advertising medium do you use that costs you nothing? The dealer
who thinks he can make a profit on cigar dinners, however, will
probably find his dinners, non-competitively priced, won't yield
the results he wants. (Scott, 1996a, p.44)
Ed Kotoch, owner of the Tobacco Road stores in Las Vegas, says,
"Instead, think of a cigar event as a way to get to know your
customers better, especially the ones who just breeze in and out of
your store; or to meet your customers' cigar-smoking friends whom
they bring to the dinner; or to say 'thank you' to a few selected and
valued customers." (Scott, 1996a, p. 44)
The article offers detailed advice on planning, organizing, and conducting
these events. A balanced blend of entertainment, food, wine and cigars is to
be sought. Cautioning against seeking venues in restaurants owned by non-
smokers, Scott advises making sure that ventilation is adequate and even
providing additional air filters because, he notes, "cigars put out a lot of
smoke" (Scott, 1996a, p. 46). In selecting cigars for the evening, he suggests
a mix of full-bodied and mild cigars. He especially suggests
Figure 11 providing a selection of smaller, mild cigars for women so that
Augusta
Source: Augusta,
September 1997
they can more easily participate in the revelry. For a ticket
price of $75-$90, Scott suggests a budget of $20-$25 for food,
$5 for tips, $15 for cigars, $10 for a gift, $15-$20 for drinks,
$5 for invitations, and complimentary tickets for the dinner
speaker and the people who represent the cigar and beverage
distributors.
Entertainments such as these serve to further embed cigar
use in the culture, socialize people to the use of cigars, and
teach novices how to use them. The luxurious settings foster
the high-class image with which the cigar industry seeks to
associate itself. In Augusta, Georgia, Mike Smith, proprietor
of Cigar Affairs, hosts cigar dinners, such as the Spring Big
Smoke (Barshafsky, 1997) (Figure 11).
Sanctioned social clubs organized around cigars have
appeared on a number of major college campuses (Barry,
1997).
209
