Small tobacco's entrepreneurs refuse to be snuffed out

Who'd enter an industry dominated by big players, hit with bans, high taxes and a declining market? We report on the niche cigar, pipe and shisha businesses that are proving there's more to tobacco than fags.

by Jack Torrance
Last Updated: 03 Aug 2016

Talk about the tobacco industry and most people will think of the five cigarette giants who have come to be pejoratively referred to as 'Big Tobacco' - Philip Morris International, British American Tobacco, Japan Tobacco, Imperial Tobacco and Altria.

They have a vice-tight grip on the market - along with China Tobacco they account for around 80% of all tobacco sold globally. But despite their best efforts, smoking rates in most of the developed world have plummeted over the past 50 years, and not only because of Richard Doll and Austin Bradford Hill's landmark discovery of the causal link between smoking and lung cancer. Punitive duties, a ban on smoking indoors, and what is effectively the total prohibition of marketing have helped cut the proportion of British adults who smoke from 30% in 1990 to 18.9% today. According to the Tobacco Manufacturers' Association, total consumption of cigarettes halved from 102 billion in 1990 to 51.5 billion in 2012.

Fighting a fierce battle to maintain share of a declining market, the giants have circled their wagons, making tobacco an extremely difficult industry to break into. Just ask BJ Cunningham, whose ill-fated Death Cigarettes brand caused something of a stir when he launched them in 1990. While their sombre name and skull and crossbones packaging was clearly meant to shock, Cunningham says his intentions were good.

Roll with it: boxes of handmade Cuban cigars can sell for thousands of pounds. Credit: Shutterstock

'At the time I was thinking, "Why are there so many brands that just seem to lie?"' he says. 'You've got Marlboro, who's claiming to be a cowboy rounding up cattle and you've got Camel, who was playing on the "if you smoke them you'll be an adventurer in the jungle". (I thought they transformed you into a camel. Ed.) There seemed to be nobody out there actually saying what every smoker knows, which is if you smoke you're going to die - and that's OK.'

The brand was really popular with smokers, Cunningham says, but the difficulty was getting them into shops. 'Distribution is owned by - I mean literally owned by the tobacco companies,' he says. 'Every point of sale you see for cigarettes in the UK is owned by (Japan Tobacco subsidiary) Gallaher and Imperial.

'The problem with Death Cigarettes was, we achieved tremendous success in terms of demand - consumers loved it - but tobacco companies didn't want to see a cigarette called Death on the shelf next to their product. They thought it was antithetical to their interests and as a result we found it very difficult to get distribution.'

Death ultimately lived up to its name when it was wound down in 1999, but Cunningham would have found it more difficult to make it in today's market. Regulations forcing cigarette retailers to 'go dark' (hide tobacco behind screens) and banning tobacco marketing in almost its entirety, may have had the desired effect on smoking rates but they also prevent new brands from making contact with consumers.

Of course, there's more to tobacco than cigarettes. Cigars, long prized by those who enjoy the finer things in life, are still fairly popular. Pipe smoking, that most traditional of pastimes, has enjoyed something of a resurgence and shisha pipes have caught on, too.

Britain's cigar market is slowly declining in size, but its customers are extremely enthusiastic. In a small shop on Mayfair's Mount Street you can find Sautter Cigars, which first opened in 1961. It's currently owned and run by Laurence Davis, a property developer who took over after 10 years of nagging its founder, the late Desmond Sautter, to let him buy it when he decided to retire.

The pungent shop's shelves are lined with hundreds of cigar tubes (all Cuban - 'anything else tastes like a rolled up newspaper,' says Davis) and memorabilia. In the corner is a large walk-in humidor - a controlled humidity cabinet used to keep the store's stock in good condition.

'Every cigar is a living organism until it's smoked, therefore it needs to be looked after,' says Davis, who smokes six to eight per day. 'It needs to be kept at the right temperature, to be not exposed to sunlight.' That gives him an edge on new online competitors, he says, because their cigars tend to be kept in big warehouses.

It also helps that specialist tobacconists are exempt from the ban on smoking in enclosed workplaces - for sampling purposes at least. That's why under Sautter's front window (which is covered by Cuban flags because of the tobacco display ban), you will see a row of leather chairs occupied by customers puffing away at their latest purchase.

As for the clientele Davis gets in there, 'they vary from cab drivers to statesmen, ambassadors to football club owners from Europe, Arab sheikhs to Russian oligarchs and actors and musicians.' Even Alec Baldwin, Jack Nicholson, and Aerosmith frontman Steve Tyler have popped in, says Davis.

American visitors are a key market for most cigar retailers in Europe, because of the trading embargo that the US has enforced with Cuba since the missile crisis in 1962. But that revenue stream could be threatened by the recent thawing of relations between the two countries. Tourists have been able to bring back $100 worth of cigars home with them from Cuba since January, but it's still likely to be a while before businesses can import them wholesale.

Even in the UK, it's not a totally free market. Cuba's cigar exports are all managed through Habanos SA, a company owned 50/50 by the Cuban Government and Imperial Tobacco subsidiary Altadis. In the UK, they are distributed exclusively through Hunters & Frankau.

Once the taxman has taken his cut, 'it's a very low margin business,' says Davis. But it helps that duty on cigars is charged by weight rather than price, and that some cigars can go for hefty amounts of cash - especially as they age. 'Boxes from 2004, like the Cohiba Sublimes, that were £700 are now trading around £6,000,' says Davis. 'That box there,' he gestures, 'is worth half a million. It's 130 years old.'

For those with lighter wallets there are other alternatives to cigarettes. Pipe smoking - the common bond that linked Harold Wilson, Albert Einstein and Hugh Hefner - has come to be seen by many as a time-consuming and unhealthy thing of the past, and its popularity has been falling since the 1970s. In 2007, the last year the Office for National Statistics bothered asking, just 1% of British men, and a negligible number of women smoked a pipe. Almost all were aged 50 or over. But while they remain a niche interest today, tobacco pipes are not an uncommon sight between the lips of a mustachioed hipster on the streets of Shoreditch.

'There's definitely been a kind of east London resurgence,' says Marcus Jones, who runs EA Carey, an online and mail-order pipe retailer based in Guernsey. 'Pipe smoking never had the numbers that cigarettes did to start with, so we haven't seen the massive decline that the cigarette industry saw. If anything we're probably seeing a slight bump back as people are thinking, "Hang on a minute, I like my motorbike, I like my beard, I like my tattoos, I fancy smoking a pipe."'

Sonal Mehta, owner of The Smoking Jacket, a tobacconist in London

While there's a substantial online pipe retail industry (and they are also available in most cigar shops), Britain's pipe manufacturers are not as well-established as they once were. Jones says that the British-owned manufacturers are mainly boutique operations making small batches in workshops - little wonder given the low levels of demand.

Jones is keen to emphasise the distinctions between pipes and cigarettes. 'If I would compare it to anything, it's a bit like the alcohol world - cigarettes would be like your Jagerbomb or blue WKD, it's about trying to get that drug that you want in there as quickly as possible,' he says. 'Cigars and pipes are much more like wine tasting. It's about finding the right tobacco for the right occasion, particularly in pipe smoking.'

Whether that can draw in a new generation of smokers is another question. 'There are some days and weeks when I think, yeah there's definitely a new crowd coming on board, and then there's some days when I think pipe smoking is going to disappear with the older generation,' says Jones.

'I sell a lot of pipe tobacco to people in their early 30s, maybe late 20s, even some 18-year-olds really get into it,' says Sonal Mehta, who owns and runs The Smoking Jacket, a tobacconist on London's Earls Court Road. A young finance graduate, she set up the business four years ago in a bid to inject 'new blood into an industry that's dying'.

'I know tobacco kills, it's not a secret but it's a choice,' she says. 'We're adults and there's an art to smoking a pipe, it's not like having a cheeky cigarette, it's meant to be a relaxing process that has historical connotations.'

The same is true of shisha, which originated in the Middle East but is also especially popular among Britain's migrant communities from the Indian subcontinent. It's made by mixing tobacco with sugar and flavourings, and is usually smoked through a water pipe that cools the smoke down. That makes it feel less harsh on the lungs, but the British Heart Foundation (BHF) says that in an hour using a water pipe, you can inhale the same amount of smoke as from more than 100 cigarettes. It can also rot your teeth. That has not stopped a lot of people taking it up as an occasional treat though.

Shisha lounges are just as affected by the indoor smoking ban as bars and restaurants, although enforcement is sporadic at best. 'The regulations we face like the requirements of 50% opening on smoking shelters are not (applied) fairly across, say, the boroughs of London or in other councils in the UK,' says Naz Choudhury, founder and owner of Temple Lounge, which has shisha bars in Oxford and London.

Shisha lounge in Stables Market, Camden, London. Credit: Gregory Wrona/Alamy Stock Photo

While some flout the rules, others have adapted by sprucing up their outdoor areas and offering food to keep business ticking over when it rains. The ban certainly hasn't stopped an explosion in the popularity of shisha lounges over the last decade or so - from 179 in 2007 to 556 in 2012, according to the BHF.

Niche tobacco companies may have loyal followings, but as with Death Cigarettes, it's not easy for them to reach their target audience. The marketing ban means they can't pay for advertising on Google or social media.

'The biggest issue that we have in our business is we're kind of pariahs in the world of sales and marketing,' says Jones. 'I can totally understand legislation designed to stop a child smoking, I'm totally for it, I've got my own children. But a child is never going to take up pipe smoking, it just doesn't fit into their world.'

Taxes don't help either. At £10.40 per 100g, the duty on pipe tobacco is substantially less than for rolling tobacco but is still is a lot higher than many other countries - a hindrance that affects the market for cigars too. 'Duty is a problem when I can buy cigars in Europe for half the price I can here,' says Davis. 'It's not a level playing field.'

Despite the best efforts of health campaigners and successive governments, small tobacco is still trundling along. But its biggest existential threat could be less tangible: the changing habits of the consumer. 'Life has become so immediate, we're so used to our phones, so used to our iPads, do people really have 45 minutes these days just to sit down and take their time and smoke a pipe?' asks Jones. 'There is an argument that says we need it more than ever ... but equally if there isn't the time to do it, then people aren't going to.'


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