All about cigar prices

Четверг, 30 Сентября 2010

How are cigar prices fixed? Often considered controversial and even sometimes secret, one thing is certain, this subject is rarely discussed.
Let's try to understand how cigar prices are constructed in general and how particularly we approach the pricing of our Nicarao cigars.


What are the important factors that structure the final price of a cigar?

In production

+) Volume of the cigar -- This determines the quantity of tobacco leaves that fills the cigar. Except for figurados shapes, this can be mathematically calculated with the diameter and the length of the cigar.

+) Length of the cigar -- This will determine the size of the capa needed to wrap the cigar. The longer the cigar, the bigger the wrapper and therefore the more important the price.

+) Shape of the cigar -- The construction complexity will determine the labor to be invested for rolling a cigar. Therefore if a cigar has a funny or difficult shape, the production cost will be more important.

+) The cigar blend -- As seen before the quantity of leaves is important in the price of a cigar but so is their quality. The type of liga has a big influence on the final price. Two wrappers can have very different prices. The cost can easily double or even sometimes triple. The filler's strongest leave, the ligero, can also show a big price variability. The reasons can be as diverse as the species used, the special care given during the processes, the fermentation and aging time, etc. For instance, the Nicarao Exclusivo Maduro wrapper has 2 years of fermentation whereas a normal or cooked wrapper only has around 10 months. This means that our wrapper is significantly more expensive than classic ones. Also the Nicarao Exclusivo ligero leaves are from the crop 2001-2002... this is an aged tobacco. So are the other leaves of the blend Exclusivo, they all are older than 5 years... where classic cigar leaves range from 1 1/2 to 4 1/2 years. It is normal that the Nicarao Exclusivo blend reflects this by being more expensive.

The same principle applies the Nicarao Especial. Its leaves are selected from the best fields and plots and they have a finer selection process as well as a longer fermentation and aging time as compared to classic cigars. For a similar size, the Nicarao Especial is positioned at a slightly higher price point.

+) Quality controls -- The intensity and the frequency of quality controls are both influential in the cost of cigars.

On one hand, some producers might have the objective to produce the highest number of cigars. They have then simple quality standards and target a high rotation.
On the other hand, some producers - like us - give the maximum they can. They would never let a cigar leave the manufacture without having given all the necessary checks to insure the maximum absolute quality of the cigars. Passionate about cigars, their objective is to give everything possible to be proud of the cigars provided to the amateurs.
We produce with passion and dedication to give pleasures to the world.

Therefore there is always some kind of quality control in cigar manufactures, but the extend of it shows very different cost levels and thus influence on the final cigar price.

+) Packaging -- When you look for new products on the shelves of your favorite dealer you might be charmed by the beauty of a box. By their luxury and importance, some packaging are even surprising.

When compared to the products itself, you might sometimes ask yourself "But this box is probably more expensive than the cigars inside!" Yes... Sometimes it is!
Similarly, cigar bands can have very different quality and prices. Some bands can be 10 times more expensive than others...and even more! A quick look to some cigar bands easily demonstrates this.

In distribution

+) Transport costs -- Some destinations are more expensive than others, so are the origin countries of the cigar shipments. The carrier companies can have different tariffs for different transport services like the route used, the speed, the airport clearance, etc.
The content of the shipment - 5 cigars carton boxes, 10 cigars wooden boxes, or 50 cigars wooden cabinets - influences greatly the average weight per cigar and then the average cigar transport costs.

+) Taxation -- The countries where the cigars are sold have often very different taxation policies.

Taxation are normally divided in
- Excise duties: specific tax applied on tobacco products and therefore on cigars. Each country has its own way to calculate but the basis is generally one or a combination of the following: cigar CIF price (custom value at import), cigar retail price (price at final sales), or cigar weight. This tax can be as high as around 40% of the retail price in France or around 250 USD a kilo in Singapore!
- VAT is the classical value added tax on products. It can be as diverse as 7% in Singapore or 21% in some Western countries.


One final parameter that can be stated is the margin structure of the intervening companies. Some charge high price to play on value while other charge lower fees to try to generate some volume.

With the 3 Nicarao product lines - Clasico, Especial, and Exclusivo - we price our cigars to give amateurs a nice price to quality ratio. The 3 cigar lines are very different but we always want the Aficionado to say "This cigar is good, the tasting is nice... The price asked for the quality given is definitely a good deal." It is the cigar you want to try again and bring into your humidor.


We have reviewed some of the important factors influencing the cigar price. We can just timidly approach it because everything is very different between producers, brands, countries, etc.

This interesting topic is now yours! Go to the cigar shop and analyze prices, smoke your cigars and start thinking: "With the price factors I just discovered, is this cigar worth its price?"

Have fun and taste a lot of Nicarao.