Tom's Rant

Tom's Rant Returns

Adrienne has been hounding me for months to put a good rant together. As the deadline approaches for the COTMC newsletter she regularly pesters me - at least as much as one can pester the boss - to write something. Despite Adrienne's persistent hounding it has been a couple of months since I had a good subject to write about.

All that changed last month when we started to call our bigger vendors in for our usual post RTDA show "what are you going to do for me this year" meeting. It seems that some of the big cigar companies have finally begun to realize that they are in the business of providing products to consumers, not some club which only gives product to members who have memorized the secret handshake. Because the big companies have finally gotten a clue, the cigar business is having more internal turmoil than anytime in the last five years.

To understand why you need to look back a bit. The boom years, and the rise of "no name brands", has been a sign of failure for the major cigar companies. Why, because these companies did not anticipate and prepare for the rapid expansion of the cigar business over the past several years. You see, in just about any other consumer product business, be it kitty litter, shampoo or tuna fish, if you cannot keep your sales channel filled you have failed. In the cigar business top management at the big companies could only fill the sales channel with sad excuses. And you have probably heard most of them: there is a shortage of wrapper, too few rollers, Blue Mold in Connecticut, or too much competition.

In any other business these excuses would not have sufficed. I used to think that only the retail tobacconists were fools for accepting these excuses. For years I have been ranting about how these retailers were still loyal to the big companies despite the fact that the big companies were not really loyal to them. But it was really much worse than I ever thought. Not only were the retailers dumb, the senior managers at the big cigar companies were even dumber. You see, even if the retail tobacconists demanded better customer service the big cigar companies were not capable of rising to the challenge

Probably the worst example of the incompetence is the mismanagement of the big cigar companies sales organizations. Many of these large companies have sales forces that cover huge territories. We deal with sales representatives who have territories that span a couple of states. These guys only come through our area once every couple of months. So you would think these guys would realize that communication is important. I mean, you do not have to be Zig Zigler to realize that if a customer cannot contact you then you cannot make a sale. And we have a pretty decent sales volume; a lot bigger than any 500 square foot cigar shop in the middle of a mall.

Well, most of the old guard sales people we routinely deal with refuse to carry cell phones or beepers. Many of them do not even check their voice mail on a regular basis. Even to this day we deal with certain sales representatives who think it is acceptable to give us a call a week after we leave a message demanding to be called back "right away". If you have read any of the stories we have written about problems with suppliers you understand how this communication is a problem for companies like ours which want to be aggressive.

Another example of this incompetence is cigar companies which only pick and ship orders once a week. Now, I know that sometimes we do not have everything you want in stock, but how long would you put up with us if we told you that we only ship orders on Thursday? I mean, a basic tenant of any business is that inventory is evil; you want to get product out as fast as it comes in. But there are companies in the cigar business which only ship product to us once a week. These outfits will actually sit on inventory that comes in on Friday for six days because it is their "policy" to only ship product on Thursday

But incompetent management cannot stand forever. No longer are the big cigar companies family run outfits that are run more like social organizations than profit oriented endeavors. Almost all the big players are now either publicly traded companies or are owned by publicly traded companies. Stockholders are not interested in excuses or tradition, they are interested in profit. Poor inventory management and missed sales opportunities are no longer acceptable

This is why things at the big companies are really starting to change. First of all, top managers, even CEOs, are getting axed because the excuses are just not holding up anymore. And if the top managers are not getting fired they are being "asked" to retire gracefully. There are plenty of managers who have 10, 20 even 30 years of experience who will not be working in this business by the end of the year.

Now I cannot speak to all the changes that are happening in these companies because I do not have enough information about what is happening in a lot of their internal departments. But the parts of their organizations that we deal with - sales, shipping, and accounts payable - are changing.

Even the bottom level sales people are noticing the problems and the changes. New sales people are being recruited from other organizations who understand how to keep retailers happy. We have met plenty of sales people who used to service supermarkets - where failure to deliver product means your shelf space is gone forever - who are coming into the cigar business. After we get over the usual vendor-purchaser mating ritual these people admit that they are finding the cigar business to be very frustrating. But the mere fact that they know the cigar business needs to be improved is a good sign.

Just the other day we met a sales representative from a major cigar company who told us the word is that everyone in their sales force is going to get a beeper, cell phone, and laptop; or they are going to be looking for a new job. Companies that used to tell us take it or leave it when they shipped an order a week late are now eating the cost to Fed Ex product to us when they make a mistake.

The new blood in these organizations means that the cigar business should get better for everyone in the next year. Companies are going to be concerned about getting product to market more then ever before. And not because they have all of a sudden decided they care about their retailers and consumers; it's because they are interested in making money.

The new sales professionals want to get us product because they know it means more money for them in way of commission. The CEOs, CFOs and COOs want to get product to us because they know shareholders will toss them aside like yesterdays newspaper if they do not improve earnings quarter after quarter. In the end, cigars are going to be in stock regularly, at fairer prices, and in greater quantities then anytime in the recent past.