Now that the general media has had its field day declaring the cigar craze dead and the industry in shambles, we can all get back to business and take stock of the health of the industry. Don't believe everything you hear, because the outlook is a lot better than the pundits would have you believe.

Yes, imports soared far above actual demand in 1997, and the resulting correction in 1998 stood in stark contrast to the wild celebrations our industry had grown accustomed to.Most industry leaders estimate the premium cigar surplus in 1997 at about 150 million units. A market correction followed, and imports, not surprising, fell to compensate.

With nearly all of the import figures for 1998 available, premium cigar imports showed a decrease of 10.6% for the first 11 months of 1998, compared to same period in 1997. Even so, that amounted to 409 million premium cigars; 484 million large cigars; or 492 million total cigars imported into the U.S. last year, from January through November. But what about consumption?

Edgar Cullman, Jr., president and c.e.o. of General CigarHoldings, estimates that premium cigar sales in the U.S. grew slightly, reaching anywhere from 350 million to 375 million cigars, compared to an estimated 325 - 350 million units sold in 1997. Cullman anticipates 1999 will see a modest increase in sales, with premium cigars reaching 400 million sticks this year, but with dollar value running flat due to lower price.

Lew Rothman, president of 800-JR Cigar, Inc., doesn't foresee any price hikes from manufacturers this year, noting that higher taxes have already raised consumers' prices nationwide. Rothman's goal for 1999 and beyond is to introduce as many new brands as he can. Those that find a following in the marketplace will survive. "Our job is to put out new products all the time," he says. "It's up to the consumer to decide what they like."

Peter Strauss, director of U.S. operations at Tabacalera Cigars International, Inc., anticipates conservative growth, but cautions that attacks on Big Tobacco will continue to dictate premium cigar pricing policies. Federal taxes on cigars are of minimal concern, he notes. State taxes, however, will continue to have a major affect on final consumer prices. Strauss also sees continued foreign interest in the U.S. premium cigar market. European Union directives that initiated the disbanding of state-owned tobacco monopolies throughout Europe have encouraged these large companies to search foreign markets for growth. Tabacalera's acquisition of Hollco-Rohr and Havatampa, and Seita's recent acquisition of Consolidated Cigar, may just be the beginning, Strauss predicts.

The Retail Tobacco Dealers of America reports that holiday sales were predictably disappointing among retailers hoping for the giant increases seen in 1997. Above-average holiday season temperatures, high-end price resistance, and a volatile stock market may have all played a hand. On the brighter side, more moderately-priced premium cigars, those in the $3.50 to $7 range, appeared to sell well among RTDA members, notes executive director Ira "Bill" Fader. Sales of cigar accessories and mid-range humidors appeared soft, while lower-priced pipe lines sold well, and activity among the mid-range lines picked up "substantially."

Will 1999 see the dismantling of the Cuban trade embargo? While trends have fluttered back and forth over the past several years, few predict any overnight changes on this front. Nearly all major manufacturers agree they would take advantage of any access to Cuban tobacco should it become available, but complicated trademark issues would likely prevent any drastic changes to the domestic marketplace.

Each year, the staff at Smokeshop welcomes feedback from our readers in planning our issues, and determining what type of information is important to you in operating your retail tobacco store. We welcome your input at any time.

E. Edward Hoyt III