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Cigars Heaven: Business Project Proposal Coursework

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Updated: Mar 20th, 2021

Executive Summary

The idea of starting a cigar business is driven through our minds because it is a highly profitable business based on the fact that many people are extreme lovers of fun throughout the country most so the region where we have identified as our market stronghold. The target market that we have identified is also majorly composed of the youth who are still very active and whose population is ever increasing day by day.

Our target market is also composed of the older people who are philanthropically rich and only are looking for target places to spend the excess cash they have. The cigar business therefore based on the above pillars has a very high prospect of rapidly growing and widening the market coverage. This, in turn, has the effect of increasing sales and in the future, we project that we would control the cigar industry.

Most of the advantages that we have are the proximity of our services to the customers first of all. Then our restaurant is also located closer to the industries from where we obtain our goods hence we are saved from the cost of transportation, this ensures that the costs we incur are narrowly reduced hence high chances that profits would be high signifying prospects of future success in our business. The other competitive advantage that our business is likely to have is that it offers a range of innovatively developed products, this ensures that all our customers’ needs are met and hence good customer rapport which is extremely good for business.

Therefore, our team of business with all the proofs through facts have a belief that the business of cigar identified by us if properly and effectively exploited will be a success in the market place.

Business Opportunity

Description of Product/Services

Cigars Heaven’s goal is selling the best and most popular cigars in the cigar industry by offering the top cigars available in the market, along with cigar accessories, and top domestic and international beers and wines.

Cigars Heaven top Cigars available are:

MacanudoMacanudo always delivers a distinctively smooth and mellow taste that is consistent from cigar to cigar.
Arturo FuenteFuente’s traditional blend “Gran Reserva” carries a mild-to-medium body coupled with a delicate spice and nutty core. Arturo Fuente cigars are deemed one of the most consistent handmade cigars in the world.
H. UpmannH. Upmann consistency and flawless construction combined with its distinct nutty flavor have been a trademark recognized by many for years.
AshtonThree styles are offered which include (Aged Maduro, Aged Cabinet, and Traditional). This popular brand offers a wide variety of mild-to-medium rich flavors that satisfy the most discriminating smoker.
PartagasPartagas line of cigars has a distinct spicy note that is smooth and full of flavor.
CAOCAO is comprised of a diversified selection of blends for the cigar aficionado.
CohibaCohiba line of hand-made cigars are flavorful and smooth from the first draw to the last.
MontecristoCrafted a fine slow-burning cigar loaded with rich, complex flavors. This flawless cigar is savored by the most discriminating cigar enthusiast.
Romeo y JulietaAn excellent smooth aromatic cigar with a medium-bodied blend and slightly sweet with flavors of oak and coffee.
El Rey de MundoA delectable symphony of Honduran flavors, impeccable construction, slow burn and draw. The enchantingly complex blend of the world’s finest tobaccos makes this cigar line arguably one of the best made in the world today. A “must try” cigar for all cigar lovers!

Cigars Heaven offering premium Davidoff Humidors & Accessories as below:

Cigar’s Humidor Size Accessories Type
  1. Small Humidor
  2. Medium-sized Humidor
  3. Large Humidor
  4. Travel Humidor
  1. Cigar Cutter
  2. Cigar Lighters
  3. Cigar Cases
  4. Ashtrays Crystal

Also, Cigars Heaven is offering the top ten wines as below:

Wine Brand Name Ave Rating
Shiraz 2006[Greg Norman Estates, Australia] 95.7
Cabernet Franc 2002[ Peju Province Winery, USA] 95.0
Red 2006[ Arancio, Italy] 94.3
Cabernet Sauvignon 2003[ Kuleto Estate, USA ] 94.0
Merlot Cabernet Sauvignon Pinotage 2003[ Kanonkop Wine Estate, South Africa] 93.7
Grenache 2004[ Bodegas Alto Moncayo, Spain ] 93.0
Barbera 2005[ Ponte Family Winery, USA] 93.0
Shiraz 2004[ Wattle Creek Winery, USA ] 93.0
Pinot Noir 2003[ Wild Horse, USA] 93.0
Syrah 2001[ Agua Dulce Vineyards, USA] 93.0

And for the Cigars, Heaven Beer list will be as below:

  1. USA: Bud Light
  1. Canada: Labatt Blue
  1. Brazil: Skol
  1. Mexico: Corona
  1. Chile: Cerveza Cristal
  1. England: Carling
  1. Germany: Oettinger
  1. Ireland: Heineken
  1. Czech Republic: Gambrinus
  1. Denmark: Carlsberg
  1. Italy: Nastro Nazzurro

Value Proposition

Cigars Heaven will offer the top ten /most popular cigars targeting VIP costumers offering an exclusive environment where they can relax and enjoy their time.

Keys to Success

Goals & Objectives for Stakeholders

Keep up to date on the most sought Cigar and accessories.

Cigars Heaven will have their website and will allow subscriptions to the top cigar club worldwide and the cigar’s magazines to keep up to date on the latest cigar accessory and cigars’ selections.

Goals & Objectives for Customers

    1. Provide the highest Cigar selections and most popular, exclusive brands in the cigar world.

Cigars Heaven will be working with Mike’s Cigars, one of the largest cigar distributors in the world. Due to their proximity to Miami, where many top cigar makers are headquartered, Mike’s often gets many of the new cigars before other cigar retailers.

    1. Focuses on the culture, lifestyle, and tradition of Cigar.
  1. Create a comfortable environment offering luxury and comfortable leather chairs and couches, light music mixes of Cuban/Italian music reflecting relaxation and enjoyment of the fine art of conversation.
  2. Having knowledgeable staff in the cigar industry.

Cigars Heaven will employ staff with previous experience and knowledge in the cigar industry such as cigar collections and accessories. Also to be willing to answer the customers’ questions and concerns on any particular cigar.

Quality Control Initiatives

Cigars Heaven’s management team will assure the staff is well trained to offer customers the best experience possible. They will be trained on cigars history, attributes of each cigar sold in the store to be able to answer customer’s questions. Also, they will receive customer services training.

Products & Services

  • Cigars Heaven will maintain and keep the cigar in high quality by storing the cigars in the highest quality of the humidor’s cabinet with keeping eye on the humidity percentage which should not go over 70%. Humidor cabinet will be maintained and check daily by the cigar professional employee and the store manager/owner.
  • Cigars Heaven will maintain the wine inventory and keep it in high quality for a long period by following and taking into consideration the below particular way:
  1. Temperature: Temperature should not go over 75 F which is the normal room temperature.
  2. Light: wine should be Store away from light, especially direct sunlight and fluorescent fixtures. Cigars Heaven will keep the wine area with the little light possible.
  3. Humidity: Humidity should not go over 70% to keep the cork from drying and minimizes evaporation. Cigars Heaven will purchase a hygrometer to track the moisture conditions and use humidifying or dehumidifying techniques as needed.
  4. Horizontally: Wine bottles should be store horizontally way to keep the cork in a good condition and keep it away from drying.
  • Cigars Heaven will store and maintain their beer products by keeping them at a temperature between (45 and 55 F) in a refrigerator, and that will keep the beer between 4 to 6 months.

On the other hand, Cigars Heaven will hire the most knowledgeable staff and keep them updating in the cigar industry through having available subscribed trade magazines and websites so they can be able to offer the best service and answer the customer’s questions.

Operations

Five employees including the owner who will take care of the Cigars Heaven business and short/long term of operations. The employee’s positions will be assigned as below:

  • One Store Manager/Owner, who will be the direct contact with the cigar’s supplier and the beverage (wine & beer) supplier.
  • One Cigar professional, who will have knowledge in the cigar industry and keep the cigar of high quality and control the inventory of cigar between the store manager/owner and the supplier. Also, he/she will be willing to answer the customers’ questions about the cigar.
  • One Bartender,/will be responsible for taking the waitress’s orders and getting them ready. Also serving his/her direct customers who will be sitting at the bar. Also, he/she will control the inventory of the wine and beer by a daily report to the store manager/owner.
  • Two waitresses, will be responsible for customer services and attending to customers’ needs. By offering customers the best service, relationship building, and proving cigars and wine/beer answers.

Supply Chain

Cigars Heaven will be focusing on working with the best suppliers of Cigar, Wine & Beer to ensure the highest material quality and the move-in process from supplier to retailer (Cigars Heaven) to consumer.

Cigars Heaven will be coordinating with their supplies through an application based on a software system with Cigars Heaven Website on open data models that support the sharing of data of the products sold and inventory inside Cigars Heaven and outside the enterprise.

SWOT Analysis

Strengths

  1. Offering a large selection of the most popular and most exclusive cigar available.
  2. The top selection of International and Domestic beers and wines
  3. A luxury environment designed for VIP customers.
  4. Offering premium Davidoff Accessories.
  5. Prime retail location in vibrate area.

Weaknesses

  1. Not serving food.
  2. Not serving a hard liquor or mix drinks alcohol

Opportunities

  1. Obtaining an extra license to sell (Whisky, Cognac).
  2. Open other branches of Cigars Heaven around Florida.
  3. Sell Cigars Heaven custom made merchandise.

Threats

  1. Competitor improving Cigars Heaven concept adding food items.
  2. Not offering Cuban cigars per US regulations. However, cigar aficionados could get a hold of them in the black market.
  3. The decline in the cigar industry

Business Environment

Economic Issues

According to IBIS Worlds, the tobacco industry is in decline. Industry value-added and revenue are forecast to decline marginally during the 10 years to 2015. However, growth has fluctuated during this time.

Total consumption and per capita consumption of tobacco products have declined over 2005 and 2006, and this decline is expected to resume over the five years to 2015.

During recession times, consumers have less disposable money to invest in goods, experience relaxation time such as going out for a cigar, dinner, or/and even buying a new car. As a result, the business environment suffers and especially new coming businesses in the market.

On the other hand, if the economic environment is one of prosperity, consumers are more likely to spend money.As for Cigars Heaven, the concept of the business is to focus on the middle-high and high-class professional/business sector and the retirement sector.

Social-Cultural Issues

Cigars Heaven focuses on the culture, lifestyle, and tradition of Cigars. Cigar smoking is an affordable hobby that can be enjoyed just as much by you as it can with a group of closes friends or colleagues. Smoking cigars is considered very different from smoking a cigarette.

Legal – Ethical Issues

There have been decades of negative publicity, community opposition, and information dissemination regarding the negative health effects of tobacco products. However, the markets for tobacco products have changed a bit in recent times, with some sales being captured by online ordering retailers at the expense of more traditional sales channels like wholesale and retail stores.

Many organizations and governmental entities continue to ban smoking and imposing higher taxes. Also, many non-for-profit organizations invest heavily in campaigns to help citizens quit smoking. Cigars Heaven will ensure to have the warning label on their products since the cigar industry doesn’t provide it, also to create awareness to cigar smokers about the negative effect of smoking. Including these labels may prevent possible lawsuits.

Technological Issues

The rate of technological changes and industry capital intensity is very high and has increased, leading to some product innovations. US tobacco product manufacturers are intensifying their efforts to come up with new products to sell, which they claim to be less toxic than traditional tobacco products. According to IBIS World, the industry spent over $3 billion on new product development during the last five years but has not captured much additional market share. This is a sign of hope for the industry, and the major blue-chip manufacturers certainly will not go down easily.

As for Cigars Heaven and especially the cigar industry, the technological change will be more into the accessories selections than the cigar. Cigars Heaven will continue to stay up-to-date on the newest/improved cigar accessories like humidors and cutters, through their website membership and with the top cigar magazines worldwide.

Markets

Overall Market

The percentage of US smokers is expected to fall slightly in 2010, but recent momentum will increase revenue by 1.8% to total more than $46.9 billion since 2009.

The Market for Cigar bars in the United States has grown significantly in the past decade. They are expected to account for approximately 3% of industry revenue in 2010. Their share of revenue has increased in recent years, as they accounted for around 2.5% of industry revenue in 2006. Production and consumption of cigars and cigarillos in the US have increased. Production rose from 3.8 billion in 2002 to 4.4 billion in 2007, and consumption of cigars and cigarillos has exceeded US production, causing a spike in segment imports. Likewise, cigar prices have increased at a stronger rate than cigarettes over the five years to 2009, at around 7% per annum on average.

On the other hand, Florida is considered the home to the greatest number of tobacco manufacturers in the region.

Market Segmentation

Cigars Heaven is focusing on the high–end market of premium cigars which is comprised of males between the ages of 26-65 mainly professionals with a medium to high income. This segment of the population is the most profitable one due to a large disposable income. Our market segment comprises value-conscious smokers.

Target Market

Cigars Heaven bar will target males between 26-35 active young adults, 36-65 professionals/executives, and 65-on retired residents that live in the Winter Park Area and up to 30 miles from this zip code 3278.

Competitive Analysis

Current Competition

Cigars Heaven’s current direct competition

Name Address Area Zip Code
Cigars On the Avenue 333 S Park Avenue Winter Park, FL 32789
High Society Pipes & Cigars 543 S Semoran Blv Winter Park, FL 32792
City Tobacco 543 S Semoran Blv Winter Park, FL 32792
Xmms L1c 7559 University Blv Winter Park, FL
Corona Cigar Co Downtown Orlando & Lake Mary 32819/32746

Competition’s Advantages

  • Serving food.
  • Having a variety of alcohol.
  • Having a variety of cigars.
  • Having live music such as the piano player, bands. etc.

Competition’s Disadvantages

  • Not specialized in a niche market
  • Focusing more on the masses than servicing a specific targeted segment
  • Just another cigar shop in the market

Pricing Strategy

Introduction

Pricing is just one of the four components of the marketing mix elements. The others are product, place, and people. Pricing dictates the direction that is likely to be taken by the mix of the four i.e. the prices of products will dictate the kind s and quality of products to be produced by the manufacturers to fit in the needs and affordability of the consumers. It’s the prices that are dictated by the costs that will determine the extent to which distribution will take place and then again it’s because of the price that we will identify and categorize our customers.

Pricing is a complex and sensitive decision-making procedure that should be handled with great care and skill since it is the component that if handled with care results in success and if mishandled can cause the business to fail. A good and workable plan, therefore, has to be put in place using the required and well placed down strategies.

In strategy development, several steps are always taken care of and that is the marketing mix elements apart from pricing itself, the behavior of demand and supply of the product to be priced, also the costs associated with the business to be undertaken must be keenly looked into and most importantly the pricing objectives must also be mentioned in scrutiny.

The pricing strategies

The strategies now include;- cost-plus pricing where the costs are categorized in total and then a percentage margin is added on top of it to determine the profits. Profitability in this case can be predetermined or focused and achieved under normal market conditions. The second type of pricing is psychological pricing and this depends so much on the intelligence and the knowledge that the person pricing can employ in determining the prices. It’s the best for this kind of business since it augers well with fluctuations. Absorption pricing strategy may also be applied and here fixed costs are normally used to absorb the other costs so that a fair price can be arrived at for the consumer.

Other strategies that could be employed include; penetration pricing, product line pricing, and most of all economy pricing which is used mostly to fix prices at the times when the economy is not stable, that is at hard economic times when costs need to be extremely minimized so that prices are just low enough to accommodate the buyers.

Pricing Plan

Given that all the strategies cannot all be employed at a go, there comes the need for a plan on when and where, and to which groups of people to employ which form of pricing. A plan again is just to ensure that there is no conflict in price determination and that prices arrived at are the right ones most so to the targeted stakeholders. For example, it’s so that a plan is made so that a strategy like the economy pricing is made and used at times when the economy is turbulent and not any other strategy.

Pricing Objective

The reasons as to why pricing is done are many and diverse if not just accommodative. Pricing may first of all be done so that the goods and services offered are just acceptable to the customers and also affordable to them depending on the class to which every customer belongs, the acceptability will only ensure that enough sales are always made.

Cigar heaven’s major objectives in pricing are to ensure maximization in return on investments. It also has the objective of maximizing the shareholder’s wealth through the issuance of bigger amounts of the dividend. The biggest objective is to ensure profitability through maximized sales. The noble objective is to also facilitate the achievement of both social and ethical objectives. Since cigar heavens, aspiration is to be a price leader the other objective, therefore, is to apply the best strategy to obtain the best and competitive prices.

Promotional Program

Advertising

Print media

  • Include advertisement ads in trade publications targeting cigar fanatics, nightlife entertainment, lounges, etc like;
    • AXI’S Orlando’s Monthly entertainment magazine
    • Orlando Sentinel newspaper -community/WinterPark section

Social media

  • Create a website featuring venue, location, directions, etc
  • Create Facebook and Twitter pages
  • Create a promotion video of the venue and upload it to Youtube and Facebook.

Online advertisement

Purchase banner ads in local electronic newsletter linked to Cigars heaven website

Sales Promotions

  • Participate in community events
  • Offer loyalty programs to frequent consumers
  • Create a referral program for members

Public Relations

  • Distribute Press Release to Orlando media featuring the new cigar bar in the area
  • Distribute monthly press releases to maintain Cigars Heaven top of mind

Direct Marketing

Purchase databases Direct mailing postcards to targeted possible customers in the area.

E-Commerce

Offer on Cigars Heaven website a purchasing engine to give frequent visitors, and other customers, the opportunity to order our products from home.

Market Opportunity

  • Potentially, Cigar Heaven will be able to sell to customers anywhere in the USA or the world.
  • With the option of purchase in the site, Cigar Heaven will be able to do sell B2B and B2C

Risk Assessment

Risk assessment is a stage under risk management and it helps in the identification of the risks that are likely to face the business. Risk assessment is a process that involves the identification of risks and categorization of them, then the risks are analyzed through the analysis procedures, and then finally recommendations are on ways of avoiding the risks should also be made.

At the initial stages of starting the cigar heavens business, it is only likely to face just a few risks of which the most fundamental one is the risk of collapse as a result of ineffective decisions being made. Therefore those intending to start a business should always engage the services of specialists in the respective fields of decision making.

A professional plan will use a brief paragraph to introduce each main section’s topic to the reader. Set the stage for what this section is about and why it is important

Financial Risk

Cigar Heaven’s business doesn’t have much financial risk at the start but it is likely to face serious financial risks immediately it decides to expand its operations. When it, for example, decides to engage in export and import business it would face the exchange rates risks which are only solved through measures like hedging of the risks. The exchange rate risks may also affect the business in case of fluctuations in the financial sector like during an economic crisis.

Business Risk

Cigars Heaven will be required to display these warnings health risks of cigar smoking clearly and prominently on packages, in print ads, on the Internet, and in point-of-purchase displays. The point, says federal consumer protection and health officials, is to make sure that Cigars Heaven discloses the health risks of cigar smoking and that consumers understand that there’s no such thing as a safe smoke to avoid any possible lawsuits.

Also, the biggest risk involved is the counting pressure of the United State government over any tobacco product. At this time, however, Federal regulations are very lenient with cigars.

Financial Review

Cigars Heaven bar will sell its products (Cigars, Wine, and beer)

Sales Forecast

Cigars Heaven’s sales will be predominantly through tobacco and cigar accessories revenues, and the secondary revenue streams are drinks. Cigars Heaven forecasts modest but steady growth in sales during the first two years of operations. As new releases are added to the product offerings, marketing increases our exposure in our target segments, and smoking the top cigars gains greater acceptance as a cultural trend we anticipate skyrocketing sales in year two and three. Accessories

Expense Forecast

While the group wants to start the business as outlined, they intend to source the bulk of their capital from personal savings, collections, and donations from friends and also partly from domestic borrowing. This would act as start-up capital for the cigar heaven business.

Proforma P&L

The major costs are mainly composed of costs of sales that include those for salaries, purchases for the stock, promotion costs, rent, and depreciation. The profitability of the bar will continue to grow continuously till year three. The growth is majorly due to tremendous sales hence widened gross margin.

Proforma Balance Sheet

Just as the profitability indicates a constant growth, the same is shown is also shown in the net worth which also shows the same positive constant yearly growth. this indicates a general growth in the Cigar Heaven Business.

Financial Ratios

The major financial ratios are liquidity, profitability, leverage and efficiency ratios. The major of these are:-

Total debt to asset ratio=total liabilities/total assets = Year 1 230000/85000 =2.705

= Year 2 470000/70000 =6.714

= Year 3 834000/65000 =12.831

Net profit margin=Net income/Net sales =Year 1 77968.8/348000*100 =22.4%

=Year 2 308168.8/738000*100 =41.75%

= Year 3 509868.8/1100000*100 = 46.35%

Current ratio= current assets/current liabilities = Year 1 140000/45000 = 3.11

= Year 2 375000/50000 =7.5

=Year 3 725000/55000 =13.18

Cash turnover= Net sales/cash Year 1 348000/105000 =3.31

Year 2 738000/335000 =2.20

Year 3 1100000/680000 =1.62

Break-Even Analysis

Break-even analysis is the analysis of points that where the fixed costs just absorb the variable ones and the net effect is just zero. This means that at the breakeven point, there is neither a profit nor a loss.

Breakeven point= fixed costs/ (selling price-variable cost)

= 45931.2/(2889300-2880000)

=4.93 units

Sensitivity Analysis

This is the study of how variation in analysis can be studied and analyzed to aid so that the recommendations are acted upon to bring about an improvement in business operations. Sensitivity analysis is vital and very important for businesses most so the young and growing ones like the Cigar Heaven hence has to be performed. Either screening methods or local methods can be employed in this case to perform sensitivity analysis appropriately.

Controls

Given the number of employees that are there in the business like Cigar Heaven and the nature of the business that they do there need to be several control measures like complete uniforms for the bar attendants, receipt books should always be used for accountability and effective book keeping, the attendants should also be tagged for ease in identifying them to prevent silly frauds and confusion that may have occurred. And many other applicable controls.

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