Cigar Company

Smokescreen Cigars

1230 Armadillo Place
Dallas, TX 76155

Tony Tecce

This plan raised $25,000 for two owners of a cigar company specializing in non–branded cigars which can be sold with an infinite number of customized labels. Today the business now operates as both a popular Web site as well as a storefront operation.

EXECUTIVE SUMMARY

Smokescreen Cigars is seeking extra capital to take advantage of the soaring popularity of the cigar. We expect soon to become not only a very profitable business, but one which increase sales and profits by leaps and bounds. The challenge for Smokescreen Cigars is funding. At the current size, the company cannot keep pace with the increasing demand. In short, Smokescreen Cigars plans raise $30,000 to achieve the goals explained further in the plan.

Background

Smokescreen Cigars was conceived by Barry Blackstone in the summer of 1996. The main idea for the business was to market a cigar with a graphically appealing Smokescreen label—plus an excellent smoking experience—to a world–wide audience. Also, the company would provide the option of a personalized private label to either commemorate a special event or to display a corporate logo. Sales would be generated through local bars and shops as well as over the Internet, which offers an astonishing large market.

In January 1997 the first Smokescreen cigars hit the shelves of Antonio's Pizza, a great testing ground due to the fact that Blackstone is part owner. The cigars were a hit, and within two months there were 12 locations throughout the north shore of Lake Austin retailing our cigars. In the first five weeks, the company had sold over 600 cigars, but because Blackstone was not yet connected well in the cigar industry he was forced to pay retail prices. Still, he was able to earn a profit on each order. By the sixth week, new sales slowed as Blackstone focused on development of the company's Web site rather than in–store sales.

By February 1997 James Hull was brought into the business as a partner. Hull would focus on the Dallas market, as well as the construction of our unique "FreshSmoke" cigar boxes specially designed to keep cigars fresh. Both Blackstone and Hull have committed money and time to the company to ensure success. Components of the FreshSmoke containers, computer equipment, woodworking equipment, Internet ad space, and cigars were purchased to create and support a solid sales and marketing base. With the local market tested successfully, the Web page was launched at the end of March. In just three weeks it had already paid for itself with a remarkable level of sales. Then in the first week of April, the partners attended a national cigar convention. This convention put Smokescreen Cigars on the cigar map, and obtained lucrative distribution contracts on several lines of cigars and accessories direct from the manufacturers.

One problem remains: lack of a proper amount of capital. This new infusion we need is slated to pay for cigars/accessories, advertising space, and working owner's salaries. With sufficient capital, Smokescreen Cigars will be able to gross over $200K by the end of the fourth quarter of 1997 or the first quarter of 1998.

History of Cigar Industry

These days, it's not unusual to see someone puffing away on a stogie most places you go. The industry has been taken by storm; everyone is smoking cigars! Well not everyone, but since 1994, demand has more than doubled to 400 billion units in 1996. This has created a shortage in the industry for quality, name–brand cigars whose manufacturers must predict sales two years out. Well, no one could predict the explosion in demand so the industry is two years from meeting today's demand, and very easily it could be three to four years before things level off.

The shortage is primarily existing in the high–end name brand cigars like Fuentes, Partagas, Macanudo, etc. The niche now available is for quality, "no–name" cigars of which there is presently an ample supply, available at more reasonable prices than the vast majority of big–brand cigars.

MARKETING & SALES

Smokescreen Cigars' goal is to supply the world cigars emblazoned with the Smokescreen label in both wholesale and retail markets. We import non–branded, premium cigars from Honduras and the Dominican Republic, add our labels, then resell them at more than double our costs. The retailer will, in turn, double their costs. The benefits of buying non–branded cigars are numerous: Our costs are less, our supply is more reliable, and because the customer can not quantify the cigar based on manufacturer name, our cigars are felt to be comparable to higher–end name brands.

As a wholesaler, we provide a FreshSmoke container and a clipper for display at no additional charge. The FreshSmoke container is unique to our company and not only retains cigar freshness, but is quite an eye–catching display. The clipper allows for that personal touch so that the cigar can be enjoyed on the spot. Our wholesaling methods will work all over the world, not just in our local area. We plan on creating a label pertinent to select destination areas of the world. The initial order will be taken in person, with subsequent orders to be completed via a toll–free phone number (delivered by two–day air service). Imagine a Rocky Mountain label for Colorado, a Golden Gate label for San Francisco area, an Alamo label for San Antonio, etc. Once the initial sales trips are concluded, the re–orders will add up.

As a mail–order retail outlet through the Internet, we can offer a wide line of cigars and accessories. By selling direct to the end user, it allows for greater profits and less tax headaches. Proper placement of the Web site is the key. We have it linked to two cigar compilation sites, each boasting hundreds of thousands of hits. Even if we attract less than 2 percent of traffic to our page, sales are expected to be enormous. We also are registered with over 20 Internet search engines so that when people are searching for cigars, we match the query. The big draw will be the Stogy Lens: a live camera hooked up to the Internet displaying a new picture every 60 seconds. It will focus on a local spot frequented by cigar smokers. This will put us at the top of every cigar page list, which will further increase the Web page hits.

Locally, we are in the process of closing a deal that would allow us to have a storefront for our cigars. The deal entails no rent or utilities, but cigars would be displayed on a consignment basis.

OBJECTIVES

To calculate projected sales, we broke them down into four categories: cigars in bars, cigars over the Internet, private labeled cigars, and accessories (including hats, shirts, cutters, clippers, etc.).

Cigars in bars are based on past sales and future sales created in destination towns throughout the world. The average bar sale is from 30 to 50 cigars. Conceivably, if we do 1,000 cigar sales to new accounts, and we do that each month, each month will have all the re–orders from existing accounts plus new accounts sold. This progression can get out of hand. For instance: At 1,000 new account cigars per month, in month one 1,000 cigars would be sold; in month two, 1,000 (new) plus 1,000 (re–order from prior month) equals 2,000 cigars for the month; in month three, 1,000 (new) plus 2,000 (re–order from prior months) equals 3,000 cigars for the month; and so on. Our estimates are based on 400 to 1,000 new account cigars per month.

Cigars over the Internet are based on hits the Web page will attain. Our page will be listed on larger pages with documented hits of over one million per month. Now if only half of one percent visit our site, that gives us 10,000 hits per month. A conservative estimation of sales versus hits is 1 to 100, which equates to 100 sales over the Internet on a monthly basis. Each sale will be a minimum of 25 cigars, with the average around 50, or $100 to $200.

Private labeled cigars can include those sold over the Internet and locally. We estimate 3 to 4 sales per month with each sale averaging 150 cigars, or $600 to $800.

Accessories also can include those sold over the Internet and locally. A conservative estimate is around $1000 per month in sales. We also are the sole Internet distributors for a manufacturer of luxury cigar accessories. Their line includes a $2,000 humidor, of which we receive $1,000 for each unit sold.

For these kinds of sales, no other added personnel would be needed. The two partners can handle the business along with a commissioned sales staff and piece workers for labeling the cigars. All these costs have been worked into the price of the cigars.

FINANCIAL ANALYSIS

Smokescreen Cigars is a Texas corporation. To ensure profitability, Smokescreen Cigars must raise capital in the amount of $30,000. Terms of ownership will be discussed in person with those interested.