Absence of big names, true cigar puffers, among reasons for low sales

KLAIPEDA - Winston Churchill and John F. Kennedy would have stripped away much of their personal charm and identity if they had not enjoyed puffing on a cigar to such a history-making magnitude. History does not mention how much the cigar aficionados have influenced the spread of cigars and cigarillos in Britain and the United States, but no doubt, it has been a lot. Unfortunately, Lithuania does not have its big names enjoying a puff on a cigar - a mandatory prerequisite for boosting the cigar image and, certainly, sales.

According to Lithuania’s Department of Statistics, in 2009, cigar and cigarillo imports to Lithuania, contrary to the logic of the downturn, has been on an unprecedented surge, consisting of - get it right – 182.6 million cigarillos, preceded by a bare 4.6 million pieces in 2008.

The astounding cigar and cigarillos import data of 2009 have left even the statistics-providing specialist baffled, making them double check it. In Lithuania, where statistically cigar puffers make up a mere two percent of the population, the deal could be of interest to Al Capone, another notably avid cigar puffer. However, as some sources leaked information to The Baltic Times, the staggering data was determined by Phillip Morris Lietuva, the major Lithuanian tobacco player, which takes up 65 percent of the whole tobacco market in Lithuania. It imported a whopping bulk of light and semi - light cigarillos to Lithuania, taking advantage of considerably eased taxation for the goods. As the sources preferring to stay anonymous asserted, the bulk of Indonesian origin cigarillos has been re-exported, mostly to Germany. However, a rep for Phillip Morris Lietuva, Corporate Affairs Director for the Baltics, Gintautas Dirgela, asked whether the enterprise, in this way, was satisfying the much-increased demand for cigarillos in 2009, hushed up, finally uttering, “It is a really good question.”

“Certainly, we have not done anything bad. It is all about supply and demand – not necessarily in Lithuania, which is a small market, particularly for specific tobacco products, cigars and cigarillos. As we run a factory in Klaipeda, we do aim at satisfying all needs of local smoke lovers,” he added. However, he refused to elaborate on exact numbers, excusing himself on “unpreparedness.”

Lithuanian cigar imports are largely through a few other countries, which are, through 2007-2008, Germany and the Netherlands and, through 2008-2009, Germany and largely Indonesia. The latter importer is a new player on the Lithuanian tobacco market. It is, however, a major one, taking nearly a 90 percent lump of it in 2009, and significantly downsizing imports from other countries.

“In Lithuania, consumption of this kind of commodity is just starting to develop. While being a part of the Soviet Union, the cigar was seen as a relic of the capitalistic West, something, from an ideological point of view, highly despised. In that sense, we still do not have the cigar smoking traditions, which are very important in defining trends and, ultimately, customer behavior. Nevertheless, the market has been on a constant rise until the crisis commenced. With the smoking ban in public places in effect and the lingering downturn, the prospects for the cigar industry remain vague,” Rusne Naujokaityte, a senior Eastern European Market analyst at Euromonitor International asserted.

According to a Euromonitor International forecast, these market-defining factors, as well as increasing tobacco prices, will trigger a further decline in cigar and cigarillo sales.
Though different tobacco sellers import tobacco goods, three major players share the bulk of the market - Cigar House, Skonis ir Kvapas and Phillip Morris Lietuva. Cigar House Director Kestutis Skrebys runs an English-style Cigar House, which is kind of a club and haven for cigar puffers.

“According to the Lithuanian laws, cigar and pipe smoking is allowed only in cigar or pipe clubs, therefore, in order to stay afloat, I had to assume the undertaking,” the entrepreneur explains. He offers his clients an array of cigars, varying in price range, puff strength, tobacco origin and other qualities. His counterpart in Tallinn runs a similar establishment, Sigari Maja, and this kind of venture in Riga is an exclusive club charging an annual 30,000 litas (8,695 euros) membership fee.

The businessman refers to his dealership in a royal manner, freely calling it “a lifestyle and expensive hobby.”  In the three years since its opening, he has witnessed a constant customer rise. However, the trend has been considerably shaken up by the smoking ban and especially by the downturn, to which he attributes a 30 percent cigar sales fall. In Cigar House, arrays of cigars, including ten-litas-plus-something and those exclusive 120 litas Opus-six of Arturo Fuente, are available. His establishment also provides cigars to some restaurants.

“When it comes to a new brand introduction and supply, on the whole we are not lagging behind the Western countries on any point. We do have the same cigars and their accessories. However, we are behind similar foreign ventures in availability of specialized cigar houses and shops,” the Davidoff’s official representative claims, adding he personally attends all major cigar industry exhibitions, including the most prestigious ones in Las Vegas, the U.S., and Dortmund, Germany.

According to him, until recently, the Lithuanian tobacco market has been exceptionally supplied with Cuban made cigars. However, the trend is changing in favor of other cigar manufacturers, which Skrebys explains: “Cuban made cigars usually are of a very strong blend, too much biting a smoker’s tongue – something Lithuanian customers do not like. Therefore, we offer cigars of different strengths and blends, made not only in Cuba, but in Nicaragua, Honduras, Mexico or Dominican Republic. Usually, cigar lovers say that in the first half of the day, there is a need for a lighter cigar, while stronger cigars are preferred in the evening. Personally, I prefer Dominican cigars.”

Dovile Vinskiene, head of sales at Skonis ir Kvapas, another cigar importer, acknowledged an over 40 percent tumble in imported, handmade cigar sales in 2009. “Usually, handmade cigars are much more expensive than machine-produced cigars, reaching prices of 100 or more litas. Since the cigar does not belong to the list of commodities of primary consumption, therefore, many crisis-plagued customers have ceased buying cigars, hoping for better times. Besides, since smoking is prohibited in public places, who can venture on buying an expensive cigar just to smoke it outside for one hour at least, loitering around at 27 degrees below zero?” Vinskiene quipped, adding that machine-made cigar sales have been “quite positive,” seeing a seven percent rise in the first half of 2010.

According to her, “moderate pricing and an astronomical quantity” of cigars brought in by another competitor, Phillip Morris Lietuva, contributed to the rise. However, the Skonis ir Kvapas representative did not elaborate on the cigar sales trends in the company, claiming they “are not very much different from what is known about the market publicly.” Though she sees a growing interest in specific tobacco products, she remains cautious of their prospects in the short term. “Can you name five of your friends or acquaintances that puff a cigar? I bet you cannot. However, everyone will name five cigarette smokers easily. It says a lot about what is going on,” she pointed out to The Baltic Times.

Giedrius Naudziunas, who runs an individual tobacco product enterprise in Kaunas, claimed, “Cigar and cigarillos sales have dwindled to the point where it could be considered as frozen. Obviously, the commodity is not on the list of the most needed items, as the price factor is important. Cigar sales have never been good, as demand for them have never been high in Kaunas. To be specific, the cigar sales part in overall tobacco sales make up a bare 0.5 percent. In comparison, three years ago, I averaged 700 – 1,000 litas in cigar sales per month; however, this year, the sales have fallen to 100 litas per month. In addition, speaking of the price range, before, a 15- 50 litas’ cigar sale was not a rarity. Today, no one even looks at this kind of cigar, as only the cheapest ones, of 2.5 – 5 litas are sold. The smoking ban and the lingering downturn have had obviously the biggest impact on sales. However, from what I see, a decline in cigar sales has been reported not only in Lithuania, but in the countries with deep cigar- smoking traditions, in Britain or Spain, as well,” Naudziunas maintains.
Facing sale difficulties, he considered getting rid of cigar sales, but decided to leave cigars on sale so far, selling them for nearly his cost.

Meanwhile, the prospects of the cigar market remain murky in the crisis-plagued Lithuania; true puffers do not lose hope, expecting turnaround times for the royal cigar to be around the corner. “The cigar is more than what it is in its primal understanding. It is like a glass of a luxurious liqueur that you cannot mix up with anything. In many countries, it is a sign of luxury, a victory or a successful deal; so, sooner or later, this understanding will come to Lithuania. From my own experience, many business meetings end up futilely for one reason - there is nothing to hook up on at them. However, several times I have struck a good deal just because another businessperson and I were puffing on cigars. We started talking about them and, to my surprise, we found many binding similarities in our tastes. We struck a business deal at ease, still chatting about cigars,” Petras Naprusis, director of Visus Plenus, a leading exhibition and conference organizer, said as he shared his personal experience.

He became interested in cigars when all his friends, as if agreed with one another, started presenting him with cigars. His favorite cigars are the ones made in Cuba, as he prefers a strong blend. The cigar puffer is concerned over a large amount of smuggled, fake cigars into the Lithuanian market.

A true cigar lover has to be careful of price, as this can hide a fake cigar. “Once, while visiting Barcelona, I found quite cheap Cuban cigars; however, after having a first puff, I understood it [the price] was too good for the product,” the entrepreneur grins, asserting that good quality cigars burn evenly and smooth, while fake ones do this unevenly. Acknowledging that he loves a puff on a cigar, he asserts he does so only “on certain occasions,” understandably, the most jubilant ones.