Tag Archives: FDA

The FDA Drops Its Hammer

Posted on by Craig W.
17 May

It was just about a month ago that I sat down and wrote THIS Editorial on this exact site trying to provide an overview of where we stand in regards to the FDA’s looming regulation of our beloved industry.  Well those regulations are no longer looming.  The FDA released a 499 Page Document which included details on how they intend to regulate the premium cigar industry.

We have seen a lot of reaction to the regulations.  There is an ongoing petition to have the regulations prevented.  We have also seen a lot of questions.  Unfortunately, it seems there are just as many questions now as there was before the regulations were announced.  The biggest one yet to be answered is “What will it cost a cigar manufacturer to submit a line for FDA testing?”  I am not sure if this answer will ever be released to the public.  It may just be told to the cigar manufacturers upon submission.  I have not heard anything near official in regards to a number, but the rumors have been anywhere in the $10k to $250k range per SKU.

So what does this mean to the consumer?  At the end of the day, it is my belief that the only direct impact from these initial regulations to the consumer will be higher prices.  Increased manufacturing costs and increase packaging costs will just be added to the bottom line and MSRP on each product.  Essentially, manufacturers add the additional costs into the wholesale price that they sell to retailers.  The retailers will then price cigars as normal at the higher MSRP set by the manufacturer.

But what about all of the “Sky is Falling” scenarios that everybody is talking about?  Well, it’s very unfortunate.  No industry wants regulation.  It changes the business dramatically.  But these FDA regulations (at least as they stand right now) will not kill the cigar industry.  I will be sad to see any companies not survive.  It remains to be seen if any companies will fold due to the regulations and cost of testing.  If they do, that would be highly unfortunate.  Some of my favorite cigars are produced by smaller companies like Tierra Volcan and RoMa Craft and I would hate to see these regulations damage companies with good people and a strong passion for what they do.  But the strong will indeed survive.

As of right now, it is estimated that about 40% to 60% of the inventory in most cigar shops are stocked with cigars that have been out since the 2007 date, meaning those cigars will remain untouched and will still be able to appear on the shelves for you to buy.  That is a significant portion of premium cigars that will not be effected by the FDA regulations.  There will be change, however.  I don’t expect many limited edition cigars and small batch released like the AVO Classic Covers or Dunhill Seleccion Supremaa to hit the market after this year due to testing costs.  There have been a bunch of different new cigar companies bringing products to the market the last 5 years.  That trend will also die down.

I talked to a brand manager of a very large traditional cigar company (who asked to remain anonymous) about the FDA regulations and some interesting points were made.  I insisted that his company will be fine and its no big deal to them.  He agreed that they would be fine, but interjected with some concerns.  He stated that even though they sell their traditional products in very high volumes, almost 60% of their revenues last year came from products released in the last 4 years.  So even the veteran companies have skin in the game.

It will come down to evaluation of each line.  For the bigger companies, if a newer line is selling at a successful rate, (CAO Flathead, Montecristo Espada, and Davidoff Winston Churchill as examples) it may be worth submitting the product for testing.  If sales numbers are low on a line, in may not be worth investing the time, money, and efforts in keeping the line alive.

How bad will it be?  The guys at Halfwheel are doing a tremendous job breaking down the FDA Regulations and specifically their “costs” section breaking down what the costs of testing may be.  The numbers appear to be very feasible to a majority of cigar manufacturers.  Not ideal, but feasible.  And the price increases that consumers will see will not be as dramatic as was once thought.  There will be change.  We may not be able to get free cigars from manufacturers or retail stores during events.  We don’t even know the effect it will have on donating cigars to organizations like Cigars for Warriors.  Lines will disappear.  Cigar prices will increase a bit.  Cigar packaging will look a lot different.  But at the end of the day, we can all be sitting in our favorite cigar lounge, puffing on a premium cigar, and discussing how frustrating the changes are, which is not as bad as many of us had thought it could be.

The FDA And Cigars: An Editorial

Posted on by Craig W.
18 Apr

This is an editorial piece and the thoughts and views expressed in this piece are the author’s alone and are no way affiliated with the views of our company or any of the companies which products we sell.

 

For several years the FDA and its regulations have loomed over the cigar industry.  Every smoker and shop owner across the country have been holding their breath and just hoping that the FDA would choose option 2 which would change very little or anything at all.  Then the leaked documents shown on sites like www.halfwheel.com have indicated the FDA is leaning towards the dreadful option 1 which would provide sweeping changes across the industry.  Then the little glimmers of hope, such as the language included in the Omnibus Bill that would exempt cigars from FDA Regulation.  As we know, that language was cut from the bill.  Now there is the Appropriations Bill that includes similar language.  We can all be hopeful and sit and wait and see if that part of the bill remains, or if it will be stripped out and set a flame like a nice premium cigar.

When I sit back in my reclining patio chair, smoking a wonderful RoMa Craft Cromagnon, It’s really hard to complain about anything.  But then I think about how this simplest of freedoms is being constantly threatened.  Not just by the FDA, but other tax laws, smoking bans, age restrictions, etc.  Yes this industry has it’s activists.  Groups like the CRA and the IPCPR do their part and represent us as best as they can.  What is sad to me, is there are so many cigar smoker’s that don’t even know these groups exist.  Because of this, these groups face a huge uphill battle.  Taking on multi-billion dollar lobbyist groups with a mission to tax and regulate all things tobacco, with no idea the differences of each industry.

I hate politics.  Unfortunately, our hobby is deeply intertwined with the political machine.  Seeing people from all different walks of life enter our stores, and talking with many of our online customers from all over the country, the only common denominator that I seem to find is that cigar smokers are generally really laid back people.  There are exceptions of course, but it seems to be a common theme.  These are not the types of people who are going to stand up and bang their chest and scream and make sure their voice is heard.

The problem is, we are grouped in with cigarette smokers.  We are grouped in with chewing tobacco users.  The Anti-Tobacco groups see us the same.  Cigar smokers are not the same.  Cigars are not cigarettes.  Cigar smokers know this.  The rest of the world does not.  At least twice a week a “former” cigarette smoker comes into our shop who wants to quit cigarettes and is looking to cigars for replacements.  1 out of 100 of these people I will see again.  Why?  Because cigars don’t replace cigarettes.  It is full of natural nicotine and will never satisfy a cigarette smokers craving for the potent addictive chemical nicotine additive found in cigarettes.  You will never find that in a cigar.  That 1 out of 100 guys that I actually do see again has returned because he appreciates the flavors of the tobacco and has now gotten into the hobby.

It’s 2016.  We all are aware of the health risks of smoking.  Cigarettes are much more dangerous than cigars, however cigars still contain risks.  But many of the smoking bans, tax hikes, and other laws cite second hand smoke as a danger in its own right.  In 2013 Forbes published the findings of a long term study on second hand smoke and lung cancer, and the results showed that any health risk increases in regards to lung cancer and second hand smoke are non-existent.  You can read the full article HERE.  While those results are shocking to most, the part of the article that shocked me the most however was the comments made by Dr. Jyoti Patel of Northwestern University.  Here is the quote: “The strongest reason to avoid passive cigarette smoke is to change societal behavior: to not live in a society where smoking is a norm”.  This is the type of mindset our industry is fighting.  It’s not about the health risks (or lack there of), or the tax dollars, or protecting the children.  It’s just that tobacco is looked at as evil and there are groups backed by billions of dollars that want to get rid of it.

Again,  we are grouped with cigarette smokers.  I for one have never had a cigarette in my life.  I know how terrible they are for you.  I was born in an era where that information was made available to me.  We live in a world where false and truthful information can be found any where on the world wide web.  I think its time we let adults make their own decisions.  Education is key.

The fight is not just on smokers, though.  In fact the biggest tax hikes and regulations are meant to put a choke on the business that sell these products.  If you make it harder for these businesses to open up or stay open then there will be less ways to obtain the product.  As a Cigar store, it is very hard to turn a profit in many areas of this country.  More regulations will make it even tougher.

But is it really time for regulations?  In the crosshairs of another political spectrum is an island 90 miles south of Florida.  An Island that holds a lot of importance to our industry.  What part does this play in the politics of our industry?  If Cuba is on the verge of having the Embargo lifted with the United States, will the United States Government want to regulate one of the biggest revenue streams that will come with the removal of the Embargo?  It seems we would just be shooting ourselves in the foot if that were so.  Or is it the other side of things?  Does the government want to have all of the regulations in place for when the Embargo is lifted to have more control over what type of products are coming into the country?  Unfortunately it’s an answer I don’t have.

That said, whatever option the FDA chooses, or whatever legislation that is passed to prevent regulations, quite simply, just can’t come soon enough.  The waiting and the unknown is putting this industry in a very interesting position and it’s not a positive one.  It is definitely having a huge effect on the mom and pop type B&M’s.  Stores are putting expansion plans on hold.  Companies are holding back new releases.  Shop owners are selling their businesses to get out before the doom comes (if it ever comes).  If this continues to drag out, the waiting and the unknown can cause the industry more chaos than what the regulations could bring.  This industry will survive.  The smart businesses and the smart companies will prevail.  We are already seeing cigar companies expanding their presence in the retail market by opening or acquiring B&M shops throughout the country.  This is a very intriguing thing to me, as these bigger companies will have the money and resources to withstand and regulations.  At the end of the day, Smokers will still want their cigars and they will find the stores that are successful in adapting to the new rules.  It may be tougher, but it will not die.

It doesn’t mean we shouldn’t keep fighting though.  Just talking about the issues while smoking with your friends at the cigar shop or on your patio…it doesn’t matter.  Keeping the topics relevant and keeping the discussion going is what is important.  Do what you can to protect this industry.  Support the groups that are fighting to protect this industry.  Keep this industry alive and well.