After extensively researching the domestic and international cigar industry, the owners of Emperors Cut Cigars discovered an interesting finding: With the explosive growth of African American smokers there was a niche for them to enter the space with a quality cigar and attract customers.
They were convinced with the right product they could compete in the general marketplace domestically. Understanding that the sales cycle would be longer, they, nonetheless, were confident that they would capture both mind and market share. Three years after its launch, Emperors Cut Cigars (EC) is steadily making headway into America’s fruitful cigar business that generates over $9 billion in annual revenue.
Like other U.S. businesses feeling the sting of COVID-19, Emperors Cut turned to online and social media channels to help boost sales.
In January 2020, the business planned for 30% of its revenue to come from online, says Darnell Streat, managing partner and founder of The Emperors Group L.L.C., owner of EC. But two months later, normal revenue from cigar lounges and events went to zero in seven days due to COVID-19. That forced the business to rely on its online platform for 100% of revenue for March and April.
“Looking back this was a blessing for our online business model,” Streat says. “COVID-19 forced us to revamp our website and find new ways to market to our customers. We had to embrace social media and execute more in the digital marketing space as a replacement to our normal face-to-face marketing approach.”
To do that, the firm aggressively started marketing its products on social media. That included creating digital content for Zoom happy hours and partnering with spirit companies like Uncle Nearest and Remi Martin. The business also benefited from the nation’s rising racial tensions that gave Blacks a greater desire to support local businesses. Streat says customers started promoting his company to other African Americans cigar enthusiasts. He pointed out that people also put lists together of African American cigar companies and denounced a few majority companies that didn’t support people of color.
“Little by little, more orders started coming in online along with a new awareness for our cigar products. Our customer service and open approach with our customers were starting to pay dividends in customer loyalty and increased sales.”
Now, EC has new growth plans and aims to puff up sales by expanding online and globally.
“As we move into the fourth quarter, we are exploring ways to develop markets in Europe, Africa, and Canada, Co-owner Greg Willis says. “We have a small number of international customers that we would like to continue to grow in a structured manner.”
He claims American products still have a level of mystique and interest in other parts of the world as luxury items. As well, Willis says in those targeted countries English is a dominant spoken language. “We think this positions us well to introduce, market, and sell our cigars to smokers in those areas.”
Streat says EC hopes to achieve annual sales exceeding $3 million by 2025, with most of the growth coming from international expansion.
The company’s business model thus far is apparently working. EC reports 2020 monthly revenue is growing 43% over the 2019 year to date. For all this year, the business is projecting revenue of $250,000, up from around $175,000 in 2019 and $75,000 in 2018. It plans to focus on driving growth in Q4 2020 from these buckets: direct to consumer (online), retail shops and lounges, and big-box retailers.
The company reports it is on pace to sell over 50,000 cigars this year.
Overall, observers say the cigar business is profitable. Though smoking is tied to health risks and subject to laws that ban smoking in public places, cigars are chic with people from multiple backgrounds. The business is alluring to entrepreneurs because it includes an established market with people who already smoke cigars as well as many prospective buyers. While it can be challenging to penetrate the market, insiders report operators in the business can achieve success if they target a strong core of customers.
Still, trying to upscale EC has not been a cakewalk for Streat, Willis, and their five partners since they started the Houston-based company. Streat says capital acquisition to grow in key areas such as procure inventory, product development, backend technology innovation, and marketing remains the biggest hurdles to overcome. Other hindrances include conquering federal and local government regulations that suppress smoking indoors, most outdoor venues, and any place not deemed a smoking establishment or zone. Brand recognition is another obstacle but Streat says the firm has been effective at leveraging social media, podcasts, and word of mouth to extend the brand where the cigars are sold.
Plus, EC is competing in an industry reportedly long prevailed over by whites and Latinos who have shut out or restricted Black cigar brands or enterprises from their establishments. But Willis counters that has not been the case from his firm’s perspective. He agrees the industry is competitive but added EC has not experienced any hostility. In fact, he says his firm has been welcomed by industry colleagues.
“The sales cycle is a bit slower with predominantly owned and patronized white cigar shops but we understand cigar placement in a humidor is akin to prime real estate, and competitive. So, owners need to know they can turn quickly the inventory they invest in. This is not an unreasonable approach, so we operate accordingly within the sales process.”
Some empowering news for EC is there is a growing number of Black Americans finding pleasure from enjoying a stogie or stick in their leisure time. Black adults accounted for nearly 36% of cigarillo smokers, 24% of non-premium cigar smokers, and 5.3% to-15.7%, respectively, of smokers of premium and filtered cigars, a 2017 report by the Society for Research on Nicotine and Tobacco shows.
To help capture a larger share of those smokers, EC has a physical sales presence in Atlanta, Miami, Florida, Houston, Washington, D.C., and Norfolk, Virginia. The business reports it is now in 19 states and 95 lounges and retail outlets, up briskly from 10 states and 40 retail outlets at this time last year.
Interestingly, like some other Black-owned businesses in various sectors, the cigar company has benefitted from COVID-19. Willis says cigar smokers love the pleasure derived from smoking a good cigar. “COVID-19 may have had an impact on their lives but it did not diminish their desire to enjoy a good smoke.”
Further, he pointed out there was a deep feeling within the Black cigar smoker community because of the murder of George Floyd and the prominence of the Black Lives Matter movement. He said many began to seek out Emperor Cut Cigars and other Black-owned cigar brands, adding that it has been good for business.
“Upon reflection, it is true our fight for mind share and brand awareness among Black cigar smokers became easier as a result of these unfortunate events,” Willis says. “Still, there is a lot of runway ahead of us to curate business within the Black cigar smoking community. It remains one of our biggest opportunities.”
Black Enterprise connected with Streat via email to get a glimpse of EC and its next steps.
BE: What niche sets your cigar business apart from rivals?
We have seven partners with a variety of industry knowledge, so we can manage 85% of the cigar business in-house. We develop our own marketing concept, we procure most of our materials associated with our cigars, we assist with managing the manufacturing process of the cigars, we develop and manage our online platform, we design packing. We have partners focused on business development and all partners engage in the sales process daily. We have three veterans (Air Force and Marine) on the team that allows us to tap into military people around the world. We have soldiers in Afghanistan smoking Emperors Cut or EC as the customers like to refer to the cigars. Our military members continue to support us around the world as they serve and protect this nation.
Our female partner—Temi Bush—makes sure we are in tune with the topics that are important to women. She provides engagement in a variety of social groups for women leaders and influencers. We work hard to support and understand the things that are important to women socially and personally through our engagement.
We have three Air Force and Marine veterans—Maurice Holland, Greg Hurt, and Streat—on the team that allows us to tap into military people around the world. We belong to fraternities and sororities, including Alpha Phi Alpha and Alpha Kappa Alpha. Four of the seven partners are HBCU graduates from Norfolk State University, Hampton University, and Tuskegee University. So we get broad support from these organizations and their events. We’re reaching out to all of those entities to extend our brand.
The firm’s other partners include Robert Howard and Darryl Redmon. All of the partners have a broad range of expertise in such areas as sales, supply chain, legal, logistics, and information technology.
What are some of your strategic growth objectives for the rest of this year?
In Q4 we will launch our new cigar line called the Jazz series. It is a medium to full-body cigar blend originating out of the Dominican Republic. Each cigar will be inspired by legendary jazz artists. This cigar will provide a secondary revenue stream alongside our flagship cigar line called Natural Pleasure.
We hope to spend up $10,000 to invest more in digital content to improve our marketplace exposure. This will provide exposure to our products in markets where we do not have a physical presence. Our U.S. marketing is geared toward growing market share in the Midwest and West Coast. We are spending more time cultivating these markets throughout 2020. We are working with focus groups to develop products that appeal to women. This is a growing market that we intend to penetrate based on what type of cigars women are telling us they want.
What about next year and beyond in terms of growth prospects?
We are looking to execute on our sales strategy for triple-digit growth. Create import and export opportunities in global markets. Continue to develop cigar products for our customers based on lifestyle trends. Strengthen our business partnerships in the Caribbean as well as internationally.