60 SMOKESHOP June 2014

W
hen you have been involved
in as many aspects of the
cigar industry as I have, you
start to see patterns. When upstart cigar
brand owners/makers call me to pick
my brain, I try to give them the benefit of
my experience as a counselor in this
industry, as a brand owner, and as an ex-
retailer. Some of them heed the advice.
Some don’t. I have personally made
many, if not all of these mistakes.
Making mistakes is part of being an
entrepreneur. Repeating the same mis-
takes is just plain dumb.
First, I want to be clear: this industry
needs a constant influx of new blood.
Whether we call them boutiques, or
whatever, these new brands are impor-
tant to keep this industry from collaps-
ing upon itself. Competition is good.
Smaller brands have forced this industry
to broaden its palette and offer cus-
tomers new blends, packaging, and cool
brand names. With that in mind, retail-
ers should respect new brands and give
them a chance when the product is good
and the price is right.
As many seasoned cigar retailers will
tell you, each year IPCPR is met with an
influx of new brands. Cigar brands come
and go. Some make sense, others not so
much and are doomed to fail. Many of
those no longer in the business will tell
you various stories as to why they closed
their doors. The real reasons are usually
much less glamorous. What I can tell you
is that there are at least ten common and
fatal mistakes made by most newcomers
to the cigar world. Anyone of these top
ten mistakes is enough to crush a busi-
ness. There are exceptions to every rule,
and there are several new brands that are
doing everything right in my opinion.
The key to insuring that the mistakes are
not fatal is to learn from those mistakes.
It’s a cliché for sure, but the truth.
1. Newcomers to this industry do not
effectively research their brand/vitola
names before launching, which leads
to a weak brand and future trade-
mark disputes.
If you are launching a brand, think!
Remove your emotional connection to
the name you’ve chosen and do your
homework. You don’t have to hire a
trademark attorney to determine whether
you have a strong or weak mark or if you
might be infringing on another’s rights.
At the bare minimum, conduct your own
search on the United States Patent and
Trademark Office’s website. Google it.
Search cigar blogs. Do something.
2. They believe that their social
media audience accounts for a large
percentage of their customer base
(or possible customer base).
New brand owners rely heavily on social
media for the obvious reason that it is free.
Social media is an excellent ingredient to
your marketing plan, but it is not, as many
believe, your sole avenue for advertising.
In fact, I would argue that a new brand’s
social media presence accounts for little, if
any, direct sales from brick and mortar
consumers. Worse still is the fact that soc-
ial media and online marketing may actu-
ally devalue a brand. One bad review will
spread like wildfire, even if the review is
the ill-informed subjective opinion of an
unemployed goofball writing from his
mom’s basement. Cigars are luxury prod-
ucts, and luxury comes at a cost. The mes-
sage of luxury must be controlled which is
possible, but difficult, in social media. Be
creative. This is a highly competitive and
small market, and real relationships are
crucial. Social media, which aggregates
“friends,” does not develop deep relation-
ships that are necessary to be successful in
this industry.
3. They open accounts with too
many stores too quickly and are soon
unable to provide the first stores with
stock when they ask for it.
This, in turn, causes them to lose the
support of the first few stores that
picked up the brand and sets them up to
be an unreliable/sketchy company.
If you don’t have enough capital to
start a national cigar brand, then don’t do
it. You may, however, start slowly and
sell your product either to stores in your
region, or to fewer stores throughout the
country. At first, you must usually limit
the number of stores and be 100 percent
PREMIUMCIGARS
>
Launching a Startup Cigar
Brand? Do Your Homework!
> One that came and went: Panama Jones,
launched by Gilfranco Cigar Co. in 1998.
Avoid new brand trouble: Here are 10 common and fatal mistakes
made by new cigar brand owners. > BY FRANK HERRERA
62 SMOKESHOP June 2014
loyal to those stores by supporting them
with product, marketing materials, and
the like. Think of each store that you
open as a real friend. You can’t spread
your time too thin with friends. You
wouldn’t promise a friend something
then not deliver. If you did, soon enough
you would have no real friends. Worse
still, they would all turn on you and
devalue your friendship, in this case,
your brand. The retailers have taken a
chance on you. They have spent precious
time hand selling your product. Have it
available when they ask for it.
4. They are desperate to open new
stores and then soon discover that
they are chasing delinquent accounts.
Only open stores that pay you at the time
of ordering. Do not—I repeat, do not—
extend credit to a new account. Should
that account continue to order from you
then you can re-evaluate whether to
extend credit. If you choose to do this,
then take a card on file. Be very clear that
you will run the card on file at the expi-
ration of the credit term. If at the end of
the credit term the card gets rejected,
demand a new card. Once you have full
payment for the credited product, do not
ship new orders without prepayment.
This will suck at first because you want
your product on their shelves. However,
in the end you will be respected and your
brand will gain respect.
5. They think that attending IPCPR
for the first time (or second, third, or
fourth) will result in a tsunami wave
of product orders and instant fame.
The odds are stacked against new brands
at the IPCPR show. Period. If you are a
gambler, you should consider the odds
that retailers will flock to your booth as a
long shot. And I mean a very long shot.
Retailers go to vendors that sell products
that make retailers money. They spend a
lot of money with these vendors because
they know that there will be return on
investment (ROI). These products will
turn over quickly in their stores. New
brands do not guarantee a retailer ROI.
Worse still, new brands may hurt a retail-
er’s reputation with its core customer
base if the cigars suck or are inconsistent.
New brands are, in fact, a high risk for
retailers that are normally risk-averse.
Help the retailer take that risk by offering
a great product at a reasonable price.
6. They believe that Cigar Aficionado
gives a crap about them (or soon will).
They don’t. CA may pay attention to
new brands in certain circumstances.
First, they will mention a new brand if it
is created by someone well known in the
industry. Typically, if the brand is not
started by someone in the industry, CA
will lie-in-wait until the brand develops
and shows promise that it could be a
viable advertiser for CA. Until then, new
brands and their owners are persona non
grata. Remember, while CA is a great
asset to the cigar industry, it is a busi-
ness. Businesses are there to support
their bottom line.
7. They have no idea what the MSRP
or flavor profile sweet spot should be
to be competitive in the marketplace.
The U.S. cigar market is small. Very
small. It’s the smallest that it has ever
been. Ever. In contrast, there are more
brands now then there have ever been.
Better cigars, yes, but far more competi-
tion. This cannot be said enough. You
must have an exceptional cigar at a very
reasonable price. There is no way
around this as a small brand. Make sure
you know the real value of your product
in relation to your competition.
8. They bad-mouth others in the
industry not realizing that this is a
small industry with a wicked karma
backlash.
Never. Ever. Talk poorly about a com-
petitor’s brand. Here goes the broken
record…this is a very small industry. So
small, it’s like a family. Yes, there are
those red headed step-children, but
they are still part of this family. Ever
heard the saying, “You mess with my
family, you mess with me”?
9. They hire knuckleheads as sales
representatives that do more harm
to their brand than good.
I am not a sales guy. I know this. Most
people aren’t. There are born sales peo-
ple out there. They can sell anything.
But there are only a few talented and
very productive cigar sales representa-
tives in the industry. Most of them do
not, nor will they ever, pick up a new
cigar brand to sell. Why? They already
have enough products to sell. Remem-
ber, you get what you pay for. Don’t
insult them with low commission rates
or by asking them to sell a sub-par
product. Either pay them what they
deserve or think outside the box. Early
on, much of the selling will be you
pounding the pavement. It’s always
much more work then you expect.
Prepare yourself or get out of this busi-
ness. You must commit fully.
10. Those without their own produc-
tion facility pay too much for their
product from the factory.
New brands don’t understand simple
math. You can’t pay a factory $2.00 a
stick for a cigar. At a bare minimum
you will have to sell that stick at
wholesale for $4.00. The retailer will
then have to sell that stick for $8.00,
but in most cases it will be sold above
$9.00. The competition at those prices
is maddening.
Above all, do your homework and
don’t be a knucklehead. This is a busi-
ness and not an extension of your ego.
Ego is an essential element of this busi-
ness. However, it is also the number
one reason why new brands fail. Check
yourself, before you wreck yourself.
Frank Herrera is a Delray Beach, Fla.
attorney specializing in intellectual pro-
property, corporate and internet law,
and is the founder of Herrera Cigars.
PREMIUMCIGARS
>
>
New brands are, in fact, a high risk for
retailers that are normally risk-averse. Help
the retailer take that risk by offering a great
product at a reasonable price.