Slow Down Cornell & Diehl
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Thanks for sharing. I totally enjoyed reading it, especially learning how Sykes manages the business.
Business model for what? The pipe tobacco (and cigar, and car, and gun, and potato chip, and...) business thrives on new product. It compels people to buy more than they need, more often, than they would if only one flavor was available. Imagine that!
I was confused by that as well, but what do I know? The first thing they teach you in grad school for economics is not to assume a PhD in econ means you know anything about how the real world works.
Well yeah, that could theoretically make you more efficient, but let's try this one out:
Imagine I'm a pipe tobacco company. Let's call my firm Smornell & Giehl. Now imagine I make exactly one blend, Old Moe Pantz. People like to smoke Old Moe Pantz, and business is good. However, my customers like variety. They'd rather have four ounces each of four different blends than a pound of Old Moe Pantz. Currently, even though I do a great job at blending OMP, and I'm very efficient at it, I'm only a fourth of any given customer's stash of tobacco.
So I get a great idea: Smornell & Giehl is going to release a new blend, and we're going to name it Black Sailboat. Black Sailboat has a lot of Latakia in it, unlike OMP, and some people like it enough that they stop buying as much of my competitor's blend, Afternooncap, and instead substitute toward Black Sailboat. So now I have two blends, and both are selling pretty well, and I'm now taking up about a third of each customer's cellar, instead of the one fourth I previously had. Customers are happy because they have more variety, and I'm happy because I'm making more money.
Old Moe Pantz has been such a success, I decide to introduce a similar blend: Old Moe Pantz Purple Label. Some people think Old Moe Pantz is too heavy on the Antarctic Burleys, but they love OMP Purple Label's more refined flavor. Now I'm selling more tobacco than I was before, not only because I'm giving the customers more choices, but also because I'm expanding into new clients who previously didn't have any interest in the one blend I was making. Life is good for Smornell & Giehl.
Now imagine something terrible happens: the star ingredient of Old Moe Pantz, Antarctic Burley, suffers a terrible crop shortage. I can't produce any OMP until next year's crop comes in. Now I'm super grateful I expanded my line of offerings so I didn't have to shut down my whole production facility and pay unemployment insurance to my workers for an entire year until next year's crop of Antarctic Burley comes in. Diversifying my production really helped me mitigate risk, either from unpredictable crops, or from changes in consumer preferences.
Disclaimer: there is obviously a point at which it doesn't make sense to have any more blends on the market, either from a production capacity standpoint or from a consumer choice standpoint. But I have every confidence that C&D thinks about this, and makes an informed decision on whether to introduce a new blend or not. We would see a diminishing marginal return on introducing a new blend, but I don't see any evidence that C&D is so far along that curve as to be hurting themselves by producing new blends.
Imagine I'm a pipe tobacco company. Let's call my firm Smornell & Giehl. Now imagine I make exactly one blend, Old Moe Pantz. People like to smoke Old Moe Pantz, and business is good. However, my customers like variety. They'd rather have four ounces each of four different blends than a pound of Old Moe Pantz. Currently, even though I do a great job at blending OMP, and I'm very efficient at it, I'm only a fourth of any given customer's stash of tobacco.
So I get a great idea: Smornell & Giehl is going to release a new blend, and we're going to name it Black Sailboat. Black Sailboat has a lot of Latakia in it, unlike OMP, and some people like it enough that they stop buying as much of my competitor's blend, Afternooncap, and instead substitute toward Black Sailboat. So now I have two blends, and both are selling pretty well, and I'm now taking up about a third of each customer's cellar, instead of the one fourth I previously had. Customers are happy because they have more variety, and I'm happy because I'm making more money.
Old Moe Pantz has been such a success, I decide to introduce a similar blend: Old Moe Pantz Purple Label. Some people think Old Moe Pantz is too heavy on the Antarctic Burleys, but they love OMP Purple Label's more refined flavor. Now I'm selling more tobacco than I was before, not only because I'm giving the customers more choices, but also because I'm expanding into new clients who previously didn't have any interest in the one blend I was making. Life is good for Smornell & Giehl.
Now imagine something terrible happens: the star ingredient of Old Moe Pantz, Antarctic Burley, suffers a terrible crop shortage. I can't produce any OMP until next year's crop comes in. Now I'm super grateful I expanded my line of offerings so I didn't have to shut down my whole production facility and pay unemployment insurance to my workers for an entire year until next year's crop of Antarctic Burley comes in. Diversifying my production really helped me mitigate risk, either from unpredictable crops, or from changes in consumer preferences.
Disclaimer: there is obviously a point at which it doesn't make sense to have any more blends on the market, either from a production capacity standpoint or from a consumer choice standpoint. But I have every confidence that C&D thinks about this, and makes an informed decision on whether to introduce a new blend or not. We would see a diminishing marginal return on introducing a new blend, but I don't see any evidence that C&D is so far along that curve as to be hurting themselves by producing new blends.
BINGO.
This is true. But a business's main job is to stay in business. And blending tobacco isn't the same as manufacturing cardiac catheters. It's really a simple process that doesn't vary that much from blend to blend (and down the mountain side), unless you are also doing flakes and plugs. The difficult job is marketing and distribution, both of which are strengthened by a broader product line.
But I get your point about having too many things on your plate, and having product QC get lost in the shuffle. I personally think that C&D works hard to ensure that all of their blends remain up to their standards.
It's also worth noting that tobacco keeps well. I doubt C&D is spending much time making Canal Boat; they probably do a run once a year or something and let it sit in the warehouse as long as they need to. Having less popular blends could actually be a really smart way to keep your workers from sitting on their hands when you've met production goals for the popular stuff by the middle of the week.
I have a sure-fire scheme to make a million dollars in the pipe tobacco business... start with two million
I dig it. Even if many of the blends are 99% similar, I still enjoy new tin art along with it. I just wish the stupid warning labels would go away, or tobacco makers would include a separate sticker sans the warning. I'd love that to complement my pipe and tobacco collection.
I agree with you on everything, but this. We may read that all of these are either burley, Virginia, perique, Latakia, or orientals, but there are half a dozen to a dozen different varietals for burleys, Virginias , and especially orientals. Then cigar leafs, there are a ton of them. So, when we read Virginias and orientals or Burley, they can be an expenetial amount of variety between them.
Now, some may appreciate the differences, and thrive on picking out nuances, and some just can’t tell the difference between a stoved Virginia and a Red Virginia, so they might not appreciate the differences.
Maybe it all just boils down to the style of smoker one is. Someone who needs to paints some lawn furniture, might not appreciate having 10 different colors of blues to choose from in there paint, but an artist might think 10 isn’t quite enough.
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