If the Premium Cigar Industry Was a Singular Publicly Traded Company – I’d Short It

The numbers look bullish. The fundamentals don’t.

Jonathan Lipson | Founder & President | Cigar Profit Consulting | Book Exploratory Call

The Villain Nobody Wants, but Everybody Needs

Hedge funds get a bad rap. Most see them as Wall Street’s villains - cold, clinical, profiting off failure while everyone else roots for the feel-good ending. But take away the headlines, and hedge funds have one job: they call bullshit. They see what everyone else ignores and don’t care if it makes you uncomfortable - they profit when the crowd gets sloppy.

If the Premium Cigar Industry Was a Singular Publicly Traded Company – I’d Short It

It’s like a craps table. Most people bet with the shooter, cheering for a win. Hedge funds are the ones stacking chips on the dark side, betting against the roll. Easy to hate, right? Nobody trusts the guy wagering against the crowd.

Then came COVID. A swarm of self-proclaimed anti-capitalists turns Reddit into a casino floor and out-capitalists the capitalists - breaks a hedge fund. GameStop’s rally becomes the anthem. For a flash, narrative beats numbers. Some cash out winners, others get flattened. But here’s what never changes: the math. GameStop is still moving discs in a digital world, still torching cash, still limping in a dying game.

That’s what most people never see. Hedge funds don’t exist to kill. They keep score. They’re the seatbelt in a swirling car wreck, reminding you slick stories can only hide ugly numbers for so long. The counterweight. The villain that makes sure there’s just enough fear in the room to keep things honest.

Now, point that lens at premium cigars.

If the hedge funds came sniffing around, it wouldn’t be about applause for biggest booths or who posts the flashiest factory selfie. They’d cut through industry chest-thumping, asking what nobody on Instagram wants to answer. Who’s actually moving product at retail? Who’s turning boxes weekly, not just landing them monthly? Who gets repeat buys, not launch hype? While the industry’s cheering the roll, they’re silent, counting odds in the corner and cash at the cage.

Bravado gets rewarded around here, not scorekeeping. The media amplifies launches, drops, and new distro - but that’s not cash flow, and it’s sure not sell-through. Drop a fund manager in the mix, and they’re not booing - they’re finding the risk, gut-checking every narrative, and watching for the story that folds once the math bites back.

It’s simple: if you’re investable, you stare down the hard questions. If you’re not, you spin stories because you know the fundamentals can’t keep up. This isn’t cynicism - it’s accountability. That’s where the short case starts.

If you’re running a cigar business and you find yourself spending more energy on the sizzle than the steak - bigger events, flashier packaging, longer press releases about “brand legacy” - ask yourself: who are you performing for? If all your “growth” can’t be tracked back to actual product moving into actual hands, all you’ve built is narrative leverage. And when the leverage stops holding, you fall faster than you think.

Numbers vs. Narrative: Imports and Illusions

In cigars, the scoreboard isn’t clear. Wall Street gets messy, but at least you can find the baseline. Here, most heavyweights are private - narrative, not numbers, run the show. Sure, a few trade on the market. You could dig up a report or two, but the real action? No earnings calls, no SEC filings, no analysts ready to poke holes. Everything the media gets is self-reported - if you’re lucky - or comes from Facebook and one glittery metric everyone worships: imports.

Every uptick in imports, the press blasts “growth.” Trade groups use it to wave the flag, retailers put charts on the wall. But you see what a hedge fund would see: swelling warehouse inventory, buying cycles yanked around by trade show dates, and factories pumping out more than anyone could smoke in three lifetimes.

Imports aren’t consumption. They’re shipments. Shipments can be jammed, gamed, and hustled. Fill the channel, imports spike. Calendar shift? Front-load Q1, watch the number fly, then deal with the hangover. None of this proves more cigars are being sparked and smoked. It’s just a fatter pipeline, nearly at a breaking point.

Short-sellers are wired to hunt for this - phantom demand. Motion disguised as growth. Imports show trucks running from port to warehouse - not boxes in a customer’s hand.

Retailers already know. Their backrooms are stuffed. Discount bins overflow. Reorders slow. House brands start flying because price points flatten everything else. Import charts never catch those tells.

No fund worth its salt reads that chart alone. They cross-check. Days-on-hand rising. Sales on promo creeping up. Stacks of inventory sitting too long. Reorder cadence for bestsellers slipping from biweekly to monthly. If reorders stretch but inbound product keeps rolling, that isn’t growth, it’s gridlock.

Shipments lie. Channels can be stuffed, but you can’t force anyone to light up box number two. If sell-through stops lining up with sell-in, that gap is risk - soon it’s cash tied up, then written down.

People outside the industry may not get it: a warehouse full of boxes is a cash sink, not an asset. Every box that doesn’t move on schedule is a box that needs discounting. One bad import quarter, and you’re suddenly running clearance sales you swore you’d never do. The specials, the BOGOs, the “throw in a hat or a lighter” goes from marketing to plain desperation. You want healthy growth? You need inventory turning, not just pallets arriving.

And while social numbers pile up, and everyone’s sharing “import records,” only a handful admit that last year’s record is this year’s price dump. The sharpest players know: volume in isn’t victory, it’s a liability unless you’ve got the churn to match.

Distorted Cycles: PCA and the Whipsaw

The PCA show used to be July. Orders rolled in, new lines dropped, retailers loaded up for the year - holiday gifting pulled it all together. Back then, the game was almost predictable.

But holiday gifting died in the 2000s. Now? Spring and summer rule - real smokers buying for themselves. The show moved early. On paper it made sense. In the real world? The whipsaw started.

Moving the show didn’t just bend the cycle, it locked up working capital. Brands had to shove out deposits, stretch production, and sit tight while sell-through limped behind. Now, payables slam in before customers are buying. Add factory breaks, slow ports, bad weather - timing is not your friend, it’s a handcuff.

Retailers get cagey. They space out orders, ask brands to hang onto shipments, try to clear out before reloading. What looks like a soft back half isn’t only demand, it’s working capital running the show. When the calendar calls the shots, margin bleeds and nobody wants to admit it.

No rhythm? Inventory planning is casino night. One quarter is bloated, the next is ragged. Projections mean less than last year’s forecast - it’s all guesswork.

The public? They see Q1 imports jump, Q2 dip, media “experts” rush to call a bull run or panic, then pull back. Numbers say Q1’s up 7%, H1 up 4%, but brands and retailers are living chaos. Headlines say “momentum.” Inside, it’s pure scramble.

A hedge fund sees that bleed a mile away. Disconnect between the newsfeed and the register is where a short gets built. Long inventory cycles, frantic end-of-year pushes, too much carry into January, then more fumbling in spring. That's not value - that’s a hamster wheel.

If you’re running a retail operation, you’re probably tired of being told every spike or dip matters. You know the truth is in the middle - the grind, the drag, the real cost of “just one more reorder.” The brands pushing hardest for “partnership” when what they want is to jam your shelves, get their quarter, and hope you don’t notice that three facings is six too many come August.

And when a vendor pushes “don’t miss out” or hits you with the forecast that says “this year is different,” all you see is leverage - they’re managing their cash, not yours. The shuffling calendar is a lesson: if you aren’t planning on your own terms, you’re planning to take someone else’s risk.

Consumers, Premiumization, and the Tariff Trap

After COVID, consumers hit humidors like lottery winners. Stimulus, cheap credit, itch to spend - stacked boxes, popped corks, no one blinked at a $15 stick, no one gawked at a $30 limited. Premiumization sounded like prophecy.

Reality interrupts. Card debt up, savings gone, the middle market is gone or heading for the exits. Folks stretch what they buy, drop down tiers, cut the ritual if they have to. Brands? Still mashing the premium pedal - no pause, no rollback, just more price on “average,” no relief on limiteds.

Disconnect? It’s growing. Buyers push down, brands force up. And then tariffs crash the party. Goodbye NAFTA, hello port fees - Nicaragua, Dominican, Honduras, Mexico, it hits everyone. Blame Washington? More like hide behind the excuse for a new price tier and pretend the consumer won’t flinch.

Tariffs are supposed to justify, but when the math’s ugly, they make the story even weaker. Few percentage points at the border doesn’t justify what shows up on the receipt.

Consumer patterns shift fast. Price cliffs form.

Under $10? The buys still happen.

$12–$14? People think twice.

$15? That’s a choice.

Over $20? Now it’s a treat, not routine.

When price creeps over a line and the experience doesn’t go with it, buyers reroute. You see it when a guy picks robusto over toro to save bucks. Singles instead of boxes. House lines instead of halo brands. Bundles when the crowd’s about the atmosphere, not the packaging. That’s not customers “protesting,” that’s customers adapting - and premiumization cracks when the cash stops matching the story.

Big players catch the slack on both sides - halo brands for story, value to cover the volume. Smaller folks? No counterbalance. If they raise price, they lose traffic. If they hold price, cost wins. Add tariffs, middle gets gutted.

Strip it all down, the picture is clear: fundamentals blink red and this is hedge fund country.A barbell market with a hollowed-out middle isn’t stability. It’s tradable chaos 

And that chaos - that’s the one thing this industry still manages to deliver in bulk.

Always Reactive, Never Proactive

Nothing moves in cigars ‘til it has to. When there’s pain, the market shifts. Before that? Wait. Leadership only grabs the umbrella when soaked. Brands act only after the shelves empty. Retailers change price when the damage is done. Trade groups lawyer up after the battle is lost.

When times are fat, you get away with that. When things turn? That lag becomes a killer. Big players can weather it; small operators get rolled.

Inefficiency kills slow. It’s five missed chances, not one big loss. Regular routines - CRM is just emails. Forecasts are gut feelings. E-comm is “add to cart,” not a plan. Loyalty means stamping a card, not leveraging a database. Retailers buy what feels right, not what the data says will move.

None of this is rocket science. Weekly dashboards, kill slow SKUs, real-time feedback loops, cadence for pilot and learn. Survive on basics, stay tight. If you’re not, the short thesis isn’t just possible - it’s staring you in the face.

Creativity’s not punished. Drift is. If you’re steering with a rearview mirror, not the windshield, you’re not leading - you’re coasting.

Walk the trade show. How many booths are there with last year’s wins versus who’s actually ready with a clean, data-driven plan for this quarter? Too many companies are still talking about the win from three years ago, hands in their pockets, wondering why the old playbook isn’t working. The difference between the survivors and the soon-to-exit is the difference between running on headlines and running on the till.

When a retailer calls out a trend, brands should be listening in real time - act on it, adapt, instead of waiting for it to turn into lost customers. When the first sign-ups drop on the loyalty program, fix the experience before the next ninety drop, not after. If you’re not measuring, you’re waiting to be measured - by your competition, by the customer, by the list of overdue bills on your desk.

But if you keep waiting for pain to force your hand, don’t be surprised when the next punch comes from outside - because regulation doesn’t wait for anyone to get their act together.

Regulation Hits Where It Hurts

California isn’t trying to ban cigars outright - they’re smothering with process. If you're not on the list, you’re not in the shop. Pay to play. File the forms. Do the dance, just to stay in business.

Texas? Rules up on displays, marketing, signage - cigars get pulled in like bystanders in a parade.

Industry’s reaction - quiet. Trade groups look away, manufacturers shrug, retailers eat the cost. That’s not defense. That’s opting out.

Compliance here isn’t one wall, it’s a labyrinth. A registry. A flavor rule. A signage shift. By themselves, a hassle. Stacked? They get heavy fast - crushing small brands, making big brands bigger by default.

Hedge funds aren’t guessing. They read the precedent and price the future. When the industry doesn’t push back, it’s rolling out the red carpet for the next cost. The more costs, the less confidence. That’s the DNA of a great short.

If you’re betting against the industry, this drip-feed of compliance is the trophy case. When the industry shrugs, cost compounds and the competition gets thinner.

Every new compliance rule is a stress test - who actually has process locked down, who’s running on inertia. In the next year, “compliance manager” is going to be the only job that matters at a dozen shops. Some will get their systems together, some will get rolled up in acquisition, and some will just fade to black with a quiet website update. Watching the industry shrink from within, as cost after cost gets rolled into the operating plan, is how the “expansion” story finally runs out of gas.

The danger isn’t in the ban. It’s in submitting to a slow squeeze. If you’re hoping the next legislative season goes easy, you’re already deciding for the regulator, not yourself.

The Short Call

Stack it up - imports faked by timing, prices drifted up by “tariffs,” consumption quietly falling, regulators ratcheting up, industry slow to respond. Leaders pretending premiumization is a growth story, when buyers are just tightening the belt.

That’s not a buy. That’s a roadmap for the short.

If premium cigars were a stock, you wouldn’t buy these dips. You’d limit risk, focus on the players showing discipline, not hope. Lean in on the ones who match receipts to claims, who balance price to actual demand. Cut out the story-spinners and bet on numbers.

You want off the wrong side of this trade? Cut the mysticism. Start measuring. Prove sell-through. Make prices work for the customer, not the spreadsheet. Bring calendars back in line with real buying habits, not factory production.

Until that shows up in action, the short case doesn’t budge. And maybe that’s healthy - maybe that’s what finally forces change.

If you’re reading this and feeling uneasy, good. That’s the voice of survival instinct, not pessimism. It’s wired into every winner who’s lasted longer than a news cycle. Winners cut quick. Losers cut last. And in this market, the last ones to move may not get to cash out at all.

Face Facts. Fix Fundamentals. Survive and Win

Let’s make it simple: If your cigar business was a stock, would you buy it today?

If you’re hesitating, you know already - it’s time to move. Let Cigar Profit cut through the fog,

dig into the numbers, and get your brand ready for what’s really coming.

Step up, fix what matters, and earn your spot at the table. Otherwise you’re betting the house on hope - and hope is never a strategy. Book An Exploratory Call With The Cigar Profit