Draft discussion paper

[Ginseng]

Rob,

Without a doubt, you are the most visible and thoughtful strategist Habanos operating today. I'm thankful that you have established this community to sound out your musings.

I've read your draft through and several thoughts and questions come to mind.

0. What exactly is the product model that Habanos have chosen? Is it a consumables luxury goods model (wine, artisan cheese, olive oils)? Is it a commodities model? Perhaps it is a well-considered blend of several? This is the critical point to understand when making a proposal such as yours. The reason being that your proposal will either serve to extend their existing model or to redirect it. The success of your proposal will, of course, depend on a strategic and strong alignment between the premises, actions, and outcomes vis-a-vis their overall model or segment thereof. In other words, how does the Heritage Release program create enduring value or revenue channels for Habanos. I suspect you understand more about this than many inside Habanos itself.

1. You've proffered a characterization of the "Habanos Connoisseur/Zealot" and positioned them as the demand-side "custodians of Habanos history and culture." This is effective and accurate. However, would Habanos agree that this is their "core market?" How important is this group in a commercial sense? Judging from the last five years, clearly a different market is demanding and absorbing the fatties. On a related note, in what sense are this group "opinion makers?" Aside from the channel we have through you, thus far, there is little evidence that these "opinion holders" have affected the movements of Habanos in any discernible manner.

2. The linkage to Habanos history and heritage is brilliant not because it is not an ideal that is ignored by Habanos today. Rather, its brilliance lies in moving the concept down market out of the rarified province of multi-thousand dollar humidors and exclusive formats like the books. In activating this ideal in a broader section of the market, Habanos would place themselves in the position to capitalize on volume and goodwill. It will also have the potential of transforming acquisition aspirational frustration into realized purchasing power. In other words, I get pissed because there is no way in hell I could afford a $4,000 510 Ani Humidor but I sure as heck would buy one or two $300-400 Seleccion Connoisseur humis.

3. What would be really illuminating for us, and perhaps Habanos as well if they have not seen the data presented in such a fashion, might be to provide a graphic or chart which clearly illustrates the ring gauge imbalance created by the pattern of discontinuations and introductions. Such a chart would would provide a graphic illustration of the shift of vitolas in 2-D space. WIth length on the X-axis and ring on the Y-axis, one would readily be able to see the migration toward a particular region of the space (i.e. 6" x 50 rg). I suspect such a graphic would reveal other hidden patterns in their portfolios.

4. Cultivation of the emerging connoisseur. The Connoisseur approach targets the zealot. However, the zealots are already won. I wonder if the strategy would benefit from proposing a way to indoctrinate those who might be disposed to this Habanos culture. In a sense, to cultivate that segment of the market that will grow to provide further support to the "thin is in" offerings. There is plenty of momentum from the "image" and "style" segment which I suspect is largely responsible for supporting the consumption of fatties. For example, many newbie posts (of first purchases) on other forums are of larger ring cigars. Seldom do you see an novice crow about his Partagas SDC3 or Punch RS12 or ERdM Lunch Clubs.

5. Finally, in response to your response to Mark, I just don't see how anyone would come to use the Connoisseur Series humidor for traveling. I wouldn't. It would most likely stay in my cooler or, once empty, go up on my bookshelf display. Also, I don't see how this particular humidor format would directly drive the purchase of like sized cigars. Certainly not to refill it. Indirectly, of course, by introduction to cigars of the format, but directly, I don't see it.

Overall, your proposal is persuasive, rational, and well conceived. Thank you for having the confidence in us to share it. Now I just wish I could be a fly on the wall when you start batting them on the snouts with this. :-D

Wilkey

[croatan]

Great paper, Rob. I really hope people take notice.

I can't find any flaws in your ideas or very persuasive arguments and this is a draft, so I assume you don't want us to nitpick typos.

[El Presidente]

» 0. What exactly is the product model that Habanos have chosen? Is it a

» consumables luxury goods model (wine, artisan cheese, olive oils)? Is it a

» commodities model? Perhaps it is a well-considered blend of several? This

» is the critical point to understand when making a proposal such as yours.

» The reason being that your proposal will either serve to extend their

» existing model or to redirect it. The success of your proposal will, of

» course, depend on a strategic and strong alignment between the premises,

» actions, and outcomes vis-a-vis their overall model or segment thereof. In

» other words, how does the Heritage Release program create enduring value or

» revenue channels for Habanos. I suspect you understand more about this than

» many inside Habanos itself.

Consumable luxury goods model solely. This has been brought up with me in discussions time and time again.

»

» 1. You've proffered a characterization of the "Habanos Connoisseur/Zealot"

» and positioned them as the demand-side "custodians of Habanos history and

» culture." This is effective and accurate. However, would Habanos agree

» that this is their "core market?" How important is this group in a

» commercial sense? Judging from the last five years, clearly a different

» market is demanding and absorbing the fatties. On a related note, in what

» sense are this group "opinion makers?" Aside from the channel we have

» through you, thus far, there is little evidence that these "opinion

» holders" have affected the movements of Habanos in any discernible manner.

»

Absolutely correct. It is important to understand however that in a world of Advertising bans which will only become stonger, long time Habanos lovers become an important commodity. This is accentuated when you consider online forum mediums and their ability to convey positive and negative messages. The increasing reality to Habanos s.a is that this is a group which can easily be retained onside. Not to do so risks antagonising a small group of consumers who in the majority of cases hold to keys and are influential in the likely dominant cigar communication medium of the mid to late 21st century.

»

» 2. The linkage to Habanos history and heritage is brilliant not because it

» is not an ideal that is ignored by Habanos today. Rather, its brilliance

» lies in moving the concept down market out of the rarified province of

» multi-thousand dollar humidors and exclusive formats like the books. In

» activating this ideal in a broader section of the market, Habanos would

» place themselves in the position to capitalize on volume and goodwill. It

» will also have the potential of transforming acquisition aspirational

» frustration into realized purchasing power. In other words, I get pissed

» because there is no way in hell I could afford a $4,000 510 Ani Humidor

» but I sure as heck would buy one or two $300-400 Seleccion Connoisseur

» humis.

»

» 3. What would be really illuminating for us, and perhaps Habanos as well

» if they have not seen the data presented in such a fashion, might be to

» provide a graphic or chart which clearly illustrates the ring gauge

» imbalance created by the pattern of discontinuations and introductions.

» Such a chart would would provide a graphic illustration of the shift of

» vitolas in 2-D space. WIth length on the X-axis and ring on the Y-axis,

» one would readily be able to see the migration toward a particular region

» of the space (i.e. 6" x 50 rg). I suspect such a graphic would reveal

» other hidden patterns in their portfolios.

»

I will broach this with The Habanos Marketing Analyst next week.

» 4. Cultivation of the emerging connoisseur. The Connoisseur approach

» targets the zealot. However, the zealots are already won. I wonder if the

» strategy would benefit from proposing a way to indoctrinate those who

» might be disposed to this Habanos culture. In a sense, to cultivate that

» segment of the market that will grow to provide further support to the

» "thin is in" offerings. There is plenty of momentum from the "image" and

» "style" segment which I suspect is largely responsible for supporting the

» consumption of fatties. For example, many newbie posts (of first

» purchases) on other forums are of larger ring cigars. Seldom do you see an

» novice crow about his Partagas SDC3 or Punch RS12 or ERdM Lunch Clubs.

»

Agreed. I try to break it down to the lowest common denominator.

"Greed and Sex" are the two largest mass market triggers. Launching the PL Laguito No 1 as part of a 30 pack offering takes care of the greed aspect. People will be climbing over each other to purchase one.

By re-positioning the thin gauge cigar as the "Connoisseurs Cigar" I think you will see an across the board increase in sales. People like to think they can look smarter !LOL! Positioning can be done through magazine articles, product placement, Celebrity interviews etc.

We have all seen celebrities photoed on covers with big ring gauge cigars. How I would love to see a Nobel Laureat or IT mover and shaker on the cover of Epicure/CA/ECCJ with a Partagas Serie Du Connie No 1.

» 5. Finally, in response to your response to Mark, I just don't see how

» anyone would come to use the Connoisseur Series humidor for traveling. I

» wouldn't. It would most likely stay in my cooler or, once empty, go up on

» my bookshelf display. Also, I don't see how this particular humidor format

» would directly drive the purchase of like sized cigars. Certainly not to

» refill it. Indirectly, of course, by introduction to cigars of the format,

» but directly, I don't see it.

We need to move the lagging sales of other thin gauge cigars. Let us say that 100,000 PL Laguito No 1 were produced for this exercise. This means that approximately 50,000 of each of the other cigars will be required. Nice start....300,000 thin gauge cigars taken up.

I was not so much hung up on the Travel Humidor nature of the pack although such ideas sell better outside of the US than within the US. One of the reasons is that the US is the land of the Cigar Accesory....you have every gadget known to man including an array of travel humi's. Outside of the US such things are not so available and a travel humi box is a real oddity.

You are right in that 90% would not be used as a travel Humidor. But really...all we are talking about is a clasp, a humidifier and a nice design...maybe $30.

The key is to sell put something together that will be in demand and sell out say 10,000 boxes.

» Overall, your proposal is persuasive, rational, and well conceived. Thank

» you for having the confidence in us to share it. Now I just wish I could

» be a fly on the wall when you start batting them on the snouts with this.

» :-D

»

» Wilkey

Thanks Wilkey I look forward to it. FOH was always intentioned to be a forum that as it grows has the ability to influence decision making. This is one of our first opportunities so give yourselves all a pat on the back

[El Presidente]

» Great paper, Rob. I really hope people take notice.

»

» I can't find any flaws in your ideas or very persuasive arguments and this

» is a draft, so I assume you don't want us to nitpick typos.

Typo's will be taken care of by Friday ;-)

[jgros001]

Fantastic work. I really believe a Habanos Heritage series would sell like hotcakes. Something one-off like that always sell well especially if they do a nice job on recapturing the blends and not just the sizes. Also, I would love to get my hands on some of those 30 ct connisseur series humidors - an excellent way to be introduced to a variety of thin guaged cigars. Best wishes with the proposal. Thanks for the effort.

[Ginseng]

Thanks Rob,

I'm sure it's going to bring these issues to the forefront of their consciousness. Best of luck and good hunting.

Wilkey

[1f1fan]

Great paper and great discussion here. I like the ideas...it will give the lovers of small ring cigars an opportunity to purchase new sizes and it falls in-line with the Habanos SA marketing strategy of increasing limited and special release humidors, regional releases, etc. While some of us may not like that strategy, it does seem to give both sides - the consumer and Habanos SA something to smile about!

[Van55]

I don't know if it is credible or persuasive to begin with the notion that those of us who enjoy smaller gauge cigars are somehow necessarily "connoisseurs" or the "cornerstone" of the on-line Cuban cigar community. That sort of apparent elitism may turn out to be counter-productive.

You need to appeal to the marketing people. To do that you need to convince them that the thinner gauge vitolas will sell and be profitable. The approach that I would take would be to say that there is a small but significant and articulate portion of Habanos smokers who decry the apparent trend toward producing and marketing thicker Habanos to the neglect of the thinner vitolas. If we had more new releases in these vitolas with proper construction, our word-of-mouth on them would result in suprisingly strong sales.

[Colt45]

» I don't know if it is credible or persuasive to begin with the notion that

» those of us who enjoy smaller gauge cigars are somehow necessarily

» "connoisseurs" or the "cornerstone" of the on-line Cuban cigar community.

» That sort of apparent elitism may turn out to be counter-productive.

The terminology did leave me feeling a bit awkward - in that if you aren't a big

fan of these cigars, for whatever reason, you are somehow a second class habanophile.

[El Presidente]

Thanks Van.

It is not my intent to denigrate lovers of large guage cigars. Only to jolt HSA consciousness and thinking.

You will not win the argument based on the sales numbers of thin gauge cigars. On that basis we can be thankful for the number that they have retained. They will point to the fact that better construction has been evident since 2004....but sales continue to decrease.

The argument (in my opinion) needs to focus on "bigger picture" values and ideals in order to gain traction. By detailing the connoisseur angle, then you are talking about an important Habanos asset that needs to be handled correctly.

In reality what is proposed is quite minimal and achievable. Will give you guys the follow up next week ;-)

[HeavySmoke]

Wow. Interesting reading Rob/Wilkey.

One thing still sticks out in my mind concering this topic. Isn't the proof in the pudding? A well constructed, blended, fair priced, and excellent tasting cigar should sell regardless of RG. I have smoked my share of large RG cigars and have been equally disappointed. Im still on the fence regarding the Cohiba Sublimes are they a bust or a crown jewel?

As a aspiring connoisseur my buying habits are predicated on everything but the ring gauge. I am not knowledgeable about legacy or vintage thin gauge cigars except what I have read on cigar forum and limited reviews. I have only smoked one 80's Monte Especial No 1. (Good cigar). I never hear much conversation about the older lines of thin gauge cigars.

To me it is simple. Habanos will offer a product that will sell volumes and meet the demand of the buyers. Its a business undertaking that demands profitablilty. I just hope the end product is well constructed, blended, is fairly priced, and tastes good. Thin gauge, thick gauge, I dont care. Just offer me something I want to buy more of!

Just my 2 cents.

[Tom Bolivar]

» Step 2: Maintaining a historical links with the past.

»

» Separate to the highly successful “Edicion Limitada” and “Regional

» Release”. Habanos s.a. launches it’s “Habanos Heritage Release”program.

@Pres: What ever happened with the proposal made. I am especially interessted in the Heritage Release.

Regards,

Tom

[El Presidente]

» @Pres: What ever happened with the proposal made. I am especially

» interessted in the Heritage Release.

»

» Regards,

»

» Tom

Proposal was discussed in person with Habanos s.a Marketing rep in the week of the 9th of October.

The issues were tabled for discussion internally with Habanos Marketing end October. Decision was made early November to reassess issues further in February. Any further development of the issues will take place during 2007. I will be at a meeting to discuss the issues while in Havana the week before the festival.

The purpose of the report was to bring the issue of disenchantment in some quarters of Habanos community to the attention of senior Habanos s.a men. This has been achieved. Now the next step is to get some action which will take some aggitating but we do have some internal sympathisers who primarily see a commercial opportunity.

[Tom Bolivar]

Again, great job, Rob. Thank you for the info and please keep us posted.

And if you'll need somebody to help "beeing pushy" in Havanna I'm more than glad to offer my help for almost no charge. For an extra box of cigars per day I'll even carry the lugage. :-D

[56Tweed]

I think its a great discussion. I have been waiting to hear about somebody bringing this to their attention!!!!!

I like the idea of offering those Selection packs, but I'm not sure how well they would sell. I know I would buy some though if only to try the PL. :-P

Fight the good fight!

Mike

[habanablue]

Rob, I have found the ultimate poster boy for your 'thin ring gauge' cigars idea.

The late Uday Hussein, the real 'king, Ruler, Dictator, Tyrant, and all around nice guy'. :-D

in all seriousness, I great paper Rob and looking forward to official responses at habanos sa. Perhaps an 'Ayala series' humidor in praise of innovative thinking is on the cards?

[khomeinist]

Interesting reading.

I really wish I could say that I had a few of these 30 packs in my humidor.

[ndak]

Great job Rob!!! I agree with honoring the past by bringing some of these back but as a new CC smoker like myself and lover of small ring gauge cigars I would just love the opportunity to try some of these.

Good luck,

Vince

[aes8]

Rob,

What was the end result of this letter? Did you ever send it? If so nobody read it as we see more 52+ RG cigars still being developed.

I would think that this message would carry much more importance and be heard at higher levels if PCC, Intertabak, and H&F would co-sign with you.

Just my 2 cents.

[El Presidente]

You have seen a couple of new Half Corona's come into the general market.

A slowing of deletions.

What we have now is a new generaton of Head Office management in HSA a little more attuned to grass root so lets see how they go.

Behike has been the most successful release alongside the Siglo VI in a decade. You need to acknowledge success and I tip my hat to them in achieving it. They acknowledge the LE program is sinking.

Believe it or not, Distributors don't give a rats.

[investandprosper]

I am thoroughly enjoying the discussion. Fantastic paper Rob, let's hope Habanos SA takes at least portion of your ideas and puts them to work, if not all. I would love to see more smaller ring cigars.

[Ginseng]

A classic thread and one that provides interesting historical perspective vis-a-vis recent developments.

Wilkey

[mazolaman]

Thanks for digging this one up,Khomeinist,it was an interesting read.

While I haven't been smoking cigars for that long,I do find myself gravitating toward the thinner gauge,after getting the boss hog stereotype out of my system.

I find there are more clearly defined flavours.

So,I applaud the ideas put forward Rob.

I guess it's a negative of the system.

If we sell more wider gauge,we make more wider gauge,and if that means loosing a few thinner gauge,so be it.

The margins get steadily eroded,till we've got fewer choices.

Shame that distributors don't give a toss.

I suppose all they see are dollar signs.

Any chance of a skinny review on the deck?It might drum up some interest.

[aes8]

Believe it or not, Distributors don't give a rats.

I have seen first-hand when retailers of B&Ms stop giving a rat’s ass and lose touch with their customer base. It always ends with declining sales and a lower quality shop.

If this is extrapolated to the regional distributer level then it’s time that you bought out PCC. You can hire me and wifey to run the HK end of things (she is fluent in Mandarin, Cantonese, and English) and you can put Ken in charge of something. This is a can't miss team!!! Lisa becomes the Queen and you get to be the Pope

What do you think??? I'll start packing now

[El Presidente]

and you can put Ken in charge of something.

..your plan just fell apart