How much do you think it costs to make a cigar and have it brought into the US? Say the Tatuaje Red and Blacks that are getting released. I read where Pete said there were 5340 boxes of 10 being sent out, so assuming 50% of red and black at MSRP, that is $293,700 for red and $373,800 for black, for a total of $667,500. Since they are all made overseas, I assume labor is extremely cheap as is materials for the boxes, etc. So I am guessing around 20-25% for cost, materials, importing, etc., another 40% for Tatuaje net profit and the rest is the retailers profit. Not bad, around $250k profit for bringing in just 1 style cigar and they have many other lines also. I could be way off on my numbers as I know nothing about the business side of cigars, just wondering. I wonder if there is more profit in the limited edition cigars like the red and black or in the regular line like the P series?
Cost to make a cigar?
- Thread starter Vegan702
- Start date
AlohaStyle
BoM Sept '12 & Aug '13
I'm sure cigar makers have good contracts with wood providers, but wood is not that cheap. Yes I believe there are good margins making cigars overseas, but the wood costs is what I would be curious about.
Regarding Tatuaje, you have to consider that there are technically 2 companies taking their profits. Pete Johnson's Tatuaje, then Pepin & Jaime Garcia's company. I have no clue what business arrangement Pete has with the Garcia's, but the Garcia's make all of Pete's cigars so even though Pete owns Tatuaje, a good chunk of his profit is going to the Garcia's who own the factory and employs all the rollers...
Regarding Tatuaje, you have to consider that there are technically 2 companies taking their profits. Pete Johnson's Tatuaje, then Pepin & Jaime Garcia's company. I have no clue what business arrangement Pete has with the Garcia's, but the Garcia's make all of Pete's cigars so even though Pete owns Tatuaje, a good chunk of his profit is going to the Garcia's who own the factory and employs all the rollers...
In Colorado we have high taxes (only a few higher in the nation), so essentially, with a $12 cigar on the shelf, the owner has already paid out $7 in product cost and taxes. If he isn't doing a discount (locker holder, box purchase, etc) he now has $5 to pay the expenses of running a business. If you have ever done that, you know business costs are about out of control (employees, taxes, product loss, rent, etc, etc, etc, etc).
As to product costs, consider that 20-30 people have directly handled your tobacco before it gets shipped to someone to sell it. If you look into it, tobacco is about the most labor intensive commodity to put on the market. Anyone that I know of who has been to the DR, Honduras, etc. no longer questions the cost of their cigars. They are thankful that they don't cost more.
I don't mean this to scold the person asking the question. Just information. Look into it - it is a fun study anyway - videos, internet, possible vacation time, reading, etc. It will make you appreciate your smokes more anyway. There is a lot of love in them thar sticks.
Peace, Love and happy smoking!!
As to product costs, consider that 20-30 people have directly handled your tobacco before it gets shipped to someone to sell it. If you look into it, tobacco is about the most labor intensive commodity to put on the market. Anyone that I know of who has been to the DR, Honduras, etc. no longer questions the cost of their cigars. They are thankful that they don't cost more.
I don't mean this to scold the person asking the question. Just information. Look into it - it is a fun study anyway - videos, internet, possible vacation time, reading, etc. It will make you appreciate your smokes more anyway. There is a lot of love in them thar sticks.
Peace, Love and happy smoking!!
There was a great article on CA a while back about a guy who made his own cigars. He grew, harvasted, dried, cured, payed for a roller, boxed.. By the end of it he said there is no such thing as an expensive cigar. I'll look for link, it was a pretty cool story.
Here's the link...
http://www.cigaraficionado.com/Cigar/CA_Archives/CA_Show_Article/0,2322,40,00.html
Here's the link...
http://www.cigaraficionado.com/Cigar/CA_Archives/CA_Show_Article/0,2322,40,00.html
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Don't get me wrong, the question wasn't to be taken as criticism, as I think the prices I pay for my cigars are fair. Just trying to understand the business side of cigars is all the question was posed for. I run my own business and just like to compare costs of different types of businesses, in case I need to change or the opportunity comes up to purchase a business, etc.
AlohaStyle
BoM Sept '12 & Aug '13
Hot damn, is Gurkha for sale?!? :grin:
Not poking fun at you Vegan, that was just the first thought in my sarcastic mind...
That was a good read, thanks for the link.
I think CAFTA would make it easier (read: relatively cheap) for sticks from Nicaragua and Honduras and the Dominican Republic, to name a few, to be shipped to the U.S., though what I'm assuming as the multinational composition of a lot of these cigar companies might be a stipulation on the kind of "easy access" to U.S. markets promised by the agreement to companies and services from Central America. Maybe. Or perhaps CAFTA wouldn't apply to tobacco products? Dunno.
But just remember this too, Even after all is said and done if there wasn't a good profit margin in making cigars these companies wouldn't be doing it. There must be some decent profit in cigars look at the Fuente's spread in the Dom. Rep.
smokemifugotem
BoM July '10
not to mention prmotion, advertising, giveaways, in store appearances, etc...that has to be a HUGE chunk o money! Just think about 1 store appreance...transportation, hotel, rental car, food, and giveaways to sell 20-30 boxes...they have to loose money on this. it is all tax deductible....but still costs money. Don't get me wrong....I love em....don't take them away
but it is a cost that is taken out of profit.
but it is a cost that is taken out of profit.
I am completely ignorant in regards to this industry and would love to be able to visit a factory to experience it first-hand. I even had an oportunity to learn a little about it via a trip to one of the manufacturers facilities, but I am unable to do so due to a tight budget. Reason being, I married a business owner! (don't get me wrong, I'm not complaining about money because all of my needs are met and I'm blessed)
When I met my wife I found out that she (along with her immediate family) owned several small, take-out restaurants. I immediately thought she was loaded because she owned a business! (this is not why I started a relationship with her) Fast-Forward a few years, I'm the one paying all of the bills because she's still stuck in the business and has not made a paycheck in two years. She is bound by debt and cannot leave the business because close to everything of her family rests upon the success of the business. I have even had to bail em out twice and give them a few thousand each time.
Long story short: I imagine manufacturers make a decent living off of their business, as they should, but I imagine it is not nearly as glorious as we may think.
Just my .02
When I met my wife I found out that she (along with her immediate family) owned several small, take-out restaurants. I immediately thought she was loaded because she owned a business! (this is not why I started a relationship with her) Fast-Forward a few years, I'm the one paying all of the bills because she's still stuck in the business and has not made a paycheck in two years. She is bound by debt and cannot leave the business because close to everything of her family rests upon the success of the business. I have even had to bail em out twice and give them a few thousand each time.
Long story short: I imagine manufacturers make a decent living off of their business, as they should, but I imagine it is not nearly as glorious as we may think.
Just my .02