Tobacco Retail Business Plan Leave a comment

Introduction

Kiowa Smoke Shops LLC, (Kiowa) has been in operation as a family business since the early 1960’s. Kiowa offers named brand tobaccos, cigars, cigarettes, and roll-your-own accessories.

The tobacco industry has been in serious decline for the past ten-years due to increasingly hostile regulation, judicial decisions and tobacco opposition groups. Kiowa has experienced a decline in client base, rising costs, and difficulty with distribution channels. The management had to make drastic staffing cuts and reduce pay for the first-ever time. It is for this reason that the company is seeking to create a revitalization plan for the future. The plan includes lowering costs, increasing efficiencies, new distribution channels and marketing channels. It also includes a new venture, a combined cafe/tobacco store.

The Company

Kiowa Smoke Shops LLC is a Kansas Limited Liability Company of the class C. Kiowa is exclusively owned by Mr. Fernando Renaldo and his wife, Elizabeth. The company has no plans to add new owners in any of the near future.

In 1960 Mr. Carlos Armando Renaldo and his family left their native Cuba for the U.S. Mr. Renaldo’s family had been tobacco growers in Cuba for generations, but the communist revolution in his homeland had left no opportunities for growers outside of government controlled communes. After his arrival in America, Renaldo used the connections he had with his family to open Santiago Cigar Store in Orlando. Santiago&#8217’s was open to the growing Cuban population and the shop thrived for 18 years. In 1979 the elder Renaldo sold the business to his son Fernando, who relocated the firm to Kansas City, Kansas. To conform to the image of the midwest, the younger Renaldo changed the name to Kiowa Smoke Shop. The company has been able to prosper enough that Mr. Renaldo was able to purchase two other shops.

Products

Kiowa Smoke Shops carries the most variety of named and specialty tobacco products in the Kansas/Missouri region. These cigars come from Mexico, Spain or India and are also available in the UK. We also sell cigarettes, including foreign and national brands, as well rolled-your-own products. This is for clients who wish make their own cigarettes.

The Market

The United States is both the world’s largest tobacco importer and exporter, and also the second largest tobacco producer in the world, just behind China. The majority of U.S. tobacco is used to make cigarettes. The decline in cigarette smoking and exports of cigarettes has been 16 percent since 1991. Other tobacco products have suffered a similar drop. This makes the current market unfavorable for Kiowa Smoke Shops. In November 1998, the Master Settlement Agreement (MSA), which required cigarette companies to increase their prices in order to pay the settlement’s payments, was signed. Consumption has been reduced by higher prices. As private tobacco opposition continues to push for the end of smoking in the country, so does the long-term decline.

Kiowa possesses a number of competitive advantages however. These includes established supply channels and its various cost advantages that are difficult to replicate, multiple locations in the Kansas City area, and our future combined cafe and tobacco store that will create more volume and greater client loyalty. This facility will serve as a pilot to test the long-term economic viability of the idea. If it proves popular, we plan to expand all of our facilities to include this unique customer experience.

Kiowa’s marketing capabilities are limited. We plan to advertise in specialty magazines like Smokehouse and Cigar Connoisseur. We also plan on advertising in a few local magazines, such as Kansas Highways, Midwest Life or others that target upper-income persons. We are also looking for partnerships with internet companies to provide links to our website. These efforts will be intensified as we launch our online order features.

Financial considerations

Kiowa does not have any debt and plans to remain so. Our revitalization efforts should result in higher profits by the end year 1. Over the next three year, we expect to see increased profits from our revitalization efforts. We do not expect any cash problems.

1.1 Objectives

The overall decline in the industry has caused lower profit margins, higher risks and higher costs. Therefore, in order to remain a viable firm, we have created a revitalization plan that includes the following goals.

• Cut costs by 15% in the next three years, and finally by 20% by concentrating on inventory overhead.
• Increase our customer base with the launch of our new website. Select advertising campaigns in the country will help increase awareness about our products.
• Differentiate our patron’s purchasing experience through the creation of our tobacco cafe.

1.2 Mission

The Kiowa Smoke Shops strives to offer quality products, brands, and responsive service for a good price. Kiowa seeks to offer a unique experience to its patrons by stocking the most comprehensive tobacco products available for its discerning consumers and creating an intimate and comforting environment for the specialty and recreational tobacco customer. Kiowa will keep up the best standards in the tobacco industry.

1.3 Keys to Success

With the industry being increasingly pinched by declining numbers of customers and more and more hostile judicial and federal regulations, we must insure the following priorities:

• To maintain a high level of profitability, we must expand our customer base.
• Increase customer retention through high quality of service.
• To reduce collection days, improve accounting practices and increase cost assessment, and decrease costs.