Opus X MSRP ruminations

[moki]

I realize this is going to seem incredibly contrarian, and against conventional wisdom, but while many people think Fuente makes a killing on Opus X cigars, I think the opposite may be true.

First, let's look at the Opus X MSRP -- this is right in line with the Padron 1964 Anniversary line, and less than the Padron 1926 line, less than Cuban Cohibas, Davidoff Millennium Blends, etc. As such, for a flagship cigar line, I think the price is certainly in line with the market.

Whether or not you are able to purchase the cigars at MSRP isn't germane to this discussion, because Fuente only ever sees the wholesale purchase price from retailers. That's all the money they make. If anything, one might argue that because of the reseller "grey" market price gouging, Fuente may very well have these cigars priced too low.

Now getting back to what I mentioned earlier regarding a contrarian stance, I've been told by authoritative sources that the Opus X line of cigars is actually a loss leader when all is said and done. That is, instead of the larger mark-up some people envision, Fuente actually doesn't make money from retail sales of Opus X cigars alone. Add in the merchandising and other residual sales, sure, they make money, but not on the cigars themselves.

Fuente gets an awful lot of mileage out of the Opus X line of cigars, driving people to retailers to look for them, bolstering their brand, and the associated merchandising, etc. In this light, the limited, 4x a year release makes a whole lot of sense. It also makes sense that the amount of "special stuff" Fuente sends to retailers is tied to how much other product they sell, when seen in this light.

Why does Fuente discourage retailers from selling Opus X cigars online? Because then the lure to get people into the local store to purchase the cigars (and hopefully others, once they are there) is gone. The drive that keeps people coming back to their local stores looking to see if these cigars have arrived disappears as well.

Now clearly no one outside of people at Fuente who have done an audit of the total growing, treating, rolling, production, and packaging of these cigars knows this for sure, but it certainly does make sense.

Discuss.

 

[Allofus123]

Interesting line of thought.

I'm pretty sure the limited release is because they can not produce anymore than they currently do...... if I recall correctly because of the lack of quality wrapper. Limited releases 4 times a year, to me, is not out of line with a limited crop item. I'd lean mostly towards that for the reason rather than promotional reasoning though the promotional benifit of the limited numbers do create good marketing for them. THe thing about the limited supply...... you can get away with selling any limited supply item once. If it sucks the item dies. In order to continuelly release a limited supply item and successfully sell it, it has to be good. I think they've accomplished that.

While the MSRP for Opus is well within premium standards I'd hardly buy that its a loss leader. In fact, I'd have to see books before I'd believe it. Are they making less than what the maket would bare.... without a doubt.

 

[Infinity]

Interesting perspective Andrew.

As for the MSRP, these can be had at the suggested retail but there are only a handful of B&M,s that offer the consumer this value.
Tampasweetheart is one vendor that comes to mind. In fact, they are the only vendor I know of (there must be others) that sell
at MSRP. You are required to spend at least $25 with them on other products/merchandise in order to acquire a quota of 2 vitola's
per customer. This falls in line with your statement

Why does Fuente discourage retailers from selling Opus X cigars online? Because
then the lure to get people into the local store to purchase the cigars (and hopefully others, once they are there) is gone.

Conversely, online merchants as well as others who do not sell online but do so by either email or telephone, add an exorbitant profit onto
the MSRP. Sure, it can be debated that "choice" dictates the purchase. In other words, if you want them, pay and shut up. The problem as I see it...
some merchants do not restrict quantity, they get them in and sell them out before they have time to sit on a shelf. This creates the HTF (hard to find)
environment. Instead of many getting a few, few get many and the others pay whatever is asked if they want them, at times
double MSRP - not what Fuente envisioned!

Personally I am not partial to Opus X and have about 25 of certain vitola's that I will probably put up for a trade one of these days. However, I like many,
bought them above MSRP due in part because they are HTF and I wanted them before someone els got their hands on them.

Just my 0.02 worth!

Brian

 

[ThankYouForNotSmoking]

I've heard this before (probably from you or from someone parroting you), and it doesn't seem so contrarian to me. Ford tried the same thing with the GT, Audi is doing the same thing with the R8, it's a well known marketing strategy. And it works. I think the ESG is the exact same thing, but for Ashton.

 

[Mark Twain]

Fuente is a company and they need to make money. I agree with what Andrew has said, except for one point of clarification. Fuente only gives certian B&Ms Opus X. I think one of the retailers can clear this up, but I believe that a B&M has to sell a large amount of regular Fuente cigars to even get the chance to sell Opus x. These companies only get 4 shippments a year and they sell out (in most cases) very fast.

So if Opus x is a loss leader, why would customers have a reason to come into their local B&Ms anytime between shippments?

I do think Andrew is right, It just seems confusing to me. Prehaps the Anejo and Hemingway maduros can also be put in this category as loss leaders for B&Ms. It makes sense that Fuente would want an increase in sales around the holidays.

 

[NullSmurf]

I'm with TYFNS in that I recall you discussing this elsewhere.

Loss leader marketing is a well known and practiced concept. Limited releases, "special releases" for well performing retailers, and the Casa Fuente outlets tells me that the Fuente family is employing some serious talent in product management. Look at what they've accomplished. Look at what the gougers gouge. There aren't many hearts here that don't skip a beat or two at the sight of selected bands in the Fuente line.

 

[Mrepp]

I think its all about the prestige the name carry’s. People want what they cant have thus the limited release. People think opus they think Fuente and are more inclined to buy there products when opus aren’t available. As for vendor gouging, I don’t see too many of them moving those products with the exception of cbid.

 

[FlyFish]

Andrew, you started this just for me didn't you?

To me advertising and marketing don't count. The advertise the Opus to get you to go looking for it knowing you'll but the other cigars. To me that is Fuente advertising, not Opus X advertisiing.

I being an accountant would have to see books to believe that this cigar is a loss leader. How much does it cost to make an opus Robusto vs a Green band Rothschilde? Does it cost three times as much to plant, harvest, ferment, blend, roll, package and ship one cigar vs the other? I would have a very hard time believing that to be true.

I would have to believe that it costs more to make the Opus, but three times more?

 

[moki]

Andrew, you started this just for me didn't you?

To me advertising and marketing don't count. The advertise the Opus to get you to go looking for it knowing you'll but the other cigars. To me that is Fuente advertising, not Opus X advertisiing.

I being an accountant would have to see books to believe that this cigar is a loss leader. How much does it cost to make an opus Robusto vs a Green band Rothschilde? Does it cost three times as much to plant, harvest, ferment, blend, roll, package and ship one cigar vs the other? I would have a very hard time believing that to be true.

I would have to believe that it costs more to make the Opus, but three times more?

I found it hard to believe too. And yet, unless I misunderstood him, I heard this from a very solid source of information on the subject.

 

[fetterjohn]

Area 51 doesn't exist!

 

[badhangover]

Fuente gets an awful lot of mileage out of the Opus X line of cigars, driving people to retailers to look for them, bolstering their brand, and the associated merchandising, etc. In this light, the limited, 4x a year release makes a whole lot of sense. It also makes sense that the amount of "special stuff" Fuente sends to retailers is tied to how much other product they sell, when seen in this light.

Why does Fuente discourage retailers from selling Opus X cigars online? Because then the lure to get people into the local store to purchase the cigars (and hopefully others, once they are there) is gone. The drive that keeps people coming back to their local stores looking to see if these cigars have arrived disappears as well.

A well articulated supposition. I am going to make a question regarding the two paragraphs quoted above.

Why do you suppose Fuente, by this rationale, seems to appear beholden to B&M cigar retailers? The espoused business principle seems to be to reward B&M retailers for selling a threshold volume of Fuente products to receive consideration for the Opus line. Could online retailers not achieve the same volume of Fuente product and earn a sum of Opus inventory as well? Just as Fuente encourages B&M retailers to successfully sell their regular lines by rewarding them Opus X products, couldn't the same be said as a discouragement for online retailers? It is suggested that online retailers are given lower tier consideration than their B&M brethren, and yet their sales receipts add just as much to the Fuente bottom line. Why would online retailers be shortchanged in such a manner?

Is it because, as you suggested, that Fuente wants to encourage the physical process of seeking out Opus X's in B&M's? That would be laudable, as it compels customers to actively participate in the cigar enthusiast experience. Yet, it also has the harmful (business model) effect of turning those disappointed customers, who were unable to procure Opus X cigars, into happy converts of other (super) premium cigar lines. Padrons and Tatuajes, for example. I can easily imagine a person inside a retail walk in humidor expressing disappointment at not finding an Opus X and the owner consoling him by leading him in the direction of other equally (subjective) stellar products. Fuente may very well have just lost a customer then. Yet, when a person searches for something online and cannot find their specific product, they generally tend not to "browse" as much, because they have not invested their time and trouble in a trip to the B&M and will not feel disappointed to end their quest empty handed.

Now, the argument can be made that the formerly disappointed person who purchased that Padron or Tatuaje may become a true cigar enthusiast. An enthusiast who, over time, may end up purchasing a large amount of Fuente cigars over the course of his lifetime. I would consider that a possibility, but a tenuous position point. The customer may instead become embittered by what could appear to be inventory manipulation by Fuente and instead decide to pursue a lifetime's enjoyment of cigars without ever needing to return to the Fuente product line. A personal "boycott", if you will.

 

[moki]

Why do you suppose Fuente, by this rationale, seems to appear beholden to B&M cigar retailers? The espoused business principle seems to be to reward B&M retailers for selling a threshold volume of Fuente products to receive consideration for the Opus line. Could online retailers not achieve the same volume of Fuente product and earn a sum of Opus inventory as well? Just as Fuente encourages B&M retailers to successfully sell their regular lines by rewarding them Opus X products, couldn't the same be said as a discouragement for online retailers? It is suggested that online retailers are given lower tier consideration than their B&M brethren, and yet their sales receipts add just as much to the Fuente bottom line. Why would online retailers be shortchanged in such a manner?

Brick and mortar retailers are Fuente's bread and butter. I think that goes without saying...

Is it because, as you suggested, that Fuente wants to encourage the physical process of seeking out Opus X's in B&M's? That would be laudable, as it compels customers to actively participate in the cigar enthusiast experience. Yet, it also has the harmful (business model) effect of turning those disappointed customers, who were unable to procure Opus X cigars, into happy converts of other (super) premium cigar lines.

This isn't as much of an issue as you might think. For instance consider the Nintendo Wii situation. When it was first available, you simply could not buy it online unless you wanted to buy it through someone who had paid retail, and was jacking the price up accordingly, and reselling it (sound familiar?).

Even now, most stores do not allow you to buy this product online. They want you coming into the store to buy it. Why? Because they get more residual sales of other items if people physically come into the store. People are more likely to buy additional games, accessories, etc. if they are exposed to it in person, in a store.

I spoke with several store managers, and they all said the same thing regarding the Wii. I asked why they didn't just sell them online avoid the hassle of people constantly calling them, visiting them, etc. to see if they had Wii's in stock. The answer was that getting the traffic through the store was a good thing whether they had 'em in stock or not. And when people did come into the store to buy it, they were much more likely to buy other Nintendo games an accessories than if it was sold online.

Indeed, even now, the only places to get a Wii online force you to purchase a bundle, which essentially forces you to buy other games/products that you would probably buy of your own volition if you were in the store.

Is anyone worried that you'll buy an XBox instead? Not at all...

 

[badhangover]

I can only speak for myself. I have a negative impression of Opus X cigars. Some reasons for that are within Fuente's control and some are not ('ya know, the standard biggies: price, strict inventory control, hype, etc). That negative impression of them does have an effect on my possible purchases of other Fuente products as well.

 

[prophetic_joe]

This thread is offering some really good insight and ideas about this topic keep it coming guys.

 

[Gator]

IMO, if the Opus and Anejo msrp were much higher than it is now, people would still want them just the same, but i'm a big fan so maybe others might not see it like i do.

 

[badhangover]

IMO, if the Opus and Anejo msrp were much higher than it is now, people would still want them just the same, but i'm a big fan so maybe others might not see it like i do.

Really? Hmmmm, okay. I'm assuming you mean if they actually sold for that much higher MSRP price and not with additional "grey market" price markups. Is this a correct assumption, or would you still pay more than that much higher MSRP?

Oh, heck, I'll just ask the question I really mean to ask. What do you think your ceiling price for Opus and Anejos might be? A secondary question, if I may: How often do you think you would smoke them at that higher price?

For the record, I will state that I am not very fond of Opus X. That is admittedly for reasons that have nothing to do with the cigar itself. I just personally find the cigar to be overvalued and overhyped. I do not expect others to share my opinions and I do not mind at all the opinions of others in their enthusiasm and/or endorsement of Opus X. I appreciate another enthusiast's quest for a quality cigar experience and Fuente products are generally of excellent construction across their entire product line.

 

[lordlister]

IMO, if the Opus and Anejo msrp were much higher than it is now, people would still want them just the same, but i'm a big fan so maybe others might not see it like i do.

I disagree. Take the GOF, Forbidden X Christmas releases, and the Padron 1926 line for example. Even though these are limited production cigars, they are all relativeley easy to obtain due to their high price.

I think it would be healthy for Fuente to raise their MSRP, it just makes sence. Even though my state has about averge tobacco taxes (22%), all the B+M's that get Opus X sell that at 50% more than MSRP. They still fly off the shelves, 2 at a time per customer per day at max, and are gone within days. If the $17 perfection X's fly off the shelves, but the $37.50 forbidden X's gather dust at many online retailers, there's got to be a price point in between where the cost vs. supply vs. demand equation equibrilates. For Fuente, however, the questioon is whether or not such a situation would be in their best interest. I think the obvious answer is no (since they haven't done anything about it over the decade). They're counting on this marketing frenzy over Opus X equating to improved sales of all their lines.

 

[Gator]

IMO, if the Opus and Anejo msrp were much higher than it is now, people would still want them just the same, but i'm a big fan so maybe others might not see it like i do.

Really? Hmmmm, okay. I'm assuming you mean if they actually sold for that much higher MSRP price and not with additional "grey market" price markups. Is this a correct assumption, or would you still pay more than that much higher MSRP?

Oh, heck, I'll just ask the question I really mean to ask. What do you think your ceiling price for Opus and Anejos might be? A secondary question, if I may: How often do you think you would smoke them at that higher price?

For the record, I will state that I am not very fond of Opus X. That is admittedly for reasons that have nothing to do with the cigar itself. I just personally find the cigar to be overvalued and overhyped. I do not expect others to share my opinions and I do not mind at all the opinions of others in their enthusiasm and/or endorsement of Opus X. I appreciate another enthusiast's quest for a quality cigar experience and Fuente products are generally of excellent construction across their entire product line.

yes to your 1st question, and i still would smoke just as many as the higher msrp because i really like the cigar and i can afford them. Like i said, i'm a big fan of the higher end Fuente products, not because of the hype, but simply because i really like the cigars.

Take the Anejo, which has a (for discussion purposes) msrp of $8. IMO, it's on the same level w/ many sticks that sell for close to $15-20, so sure, i wouldn't mind paying $15 for an Anejo. Same applies to the Opus. Like you said, this is my opinion, you may not agree, that's just reality.

I find it interesting that folks can pay big $ for wine and high end whiskey, yet bitch over a few dollars on a cigar, and don't get me wrong, that's not directed at anyone, just a general observation.

 

[opusXmarco]

Hi, I'm Marco and I'm an OpusX whore...:blush:

 

[moki]

Here's another angle on the Opus X cigar as a loss leader concept. Look at this thread, for example. Just the fact that it exists means the cigars are being talked about. Let's say Fuente doesn't make money on Opus, as has been put forth... this is about the cheapest and most effective advertising you could possibly buy, both for Fuente and for the rest of their product line.

As has been noted before, many industries do things like this. Why did Dodge make the Viper? I'm sure they make money on the car, but it wasn't made as a profit center, it was made to bolster the image of the company.

Whether you like Opus X cigars or not, or whether you like the "hype" surrounding them is irrelevant. What is germane is that you're talking about 'em.