Introduction
Kiowa Smoke Shops LLC is a family-owned business that has been in operation since the 1960’s.
The tobacco industry has suffered serious declines in the last ten decades due to increasingly restrictive regulations, judicial decision and tobacco opposition group. Kiowa has seen a declining client base, increasing costs, and increasing difficulty with distribution channels. For the first time management has been forced to reduce staffing levels and institute pay cuts. This is why the company created a revitalization strategy for the future. This plan will reduce costs, improve efficiencies and create new distribution and market channels.
The Company
Kiowa Smoke Shops Limited Liability Company is a class-C Limited Liability Company that has been officially registered in Kansas. Kiowa’s sole owners are Mr. Fernando Renaldo & Elizabeth Renaldo. The company is not planning to bring on any new owners in the near future.
Carlos Armando Renaldo was born in Cuba and emigrated to the U.S. in 1960 with his family. Although his family was tobacco growers for generations, the communist revolution in Cuba had made it impossible for them to grow outside of the government-controlled communes. He was able to use his family connections in America to establish Santiago Cigar Store, Orlando, Florida, once he arrived in America. Santiago’s was a catering shop that served the growing Cuban community in the area. The shop grew steadily over the next 18 year. Fernando Renaldo became the older brother and sold the business in 1979 to Fernando. In Kansas City, Kansas, Fernando took over the operation. In order to fit in with the Midwest’s image, Renaldo the younger renamed Kiowa Smoke Shop. The company has grown enough to allow Mr. Renaldo the opportunity to buy two more tobacco shops.
Products
Kiowa Smoke Shops provides the Kansas-Missouri with the greatest selection of specialty and brand name tobacco products. You can find cigars made in Mexico, Spain and India as well as the UK. We also stock cigarettes of all brands and roll-yourself products for clients who wish to make their cigarettes.
The Market
The United States is the largest exporter and importer of tobacco in the world and second largest producer of tobacco, after China. The vast majority of U.S.-grown tobacco is used in cigarettes. However, both cigarette consumption and cigarette exports have fallen 16 percent since 1991, and the consumption of other tobacco products has suffered a similar loss. This creates a market environment that is not favorable to Kiowa Smoke Shops. The Master Settlement Agreement (MSA), signed in November 1998, has forced cigarette companies to raise prices due to the payments. Consumption has been reduced by higher prices. The long-term drop in cigarette use due to noneconomic factors continues. Private tobacco opposition as well as health care organizations continue their push for complete elimination of smoking throughout the country.
However, Kiowa has a lot of competitive advantages. These include established supply networks and its cost advantages that make it difficult to duplicate, multiple locations in Kansas City and our future combined cafe/tobacco shop that will create greater volume and better client loyalty. This facility will act as a pilot project to determine the long-term profitability of this concept. If it proves successful, we plan to expand our facilities in order to provide this unique experience to all customers.
Kiowa is limited in the types of marketing it can do. We plan to advertise in specialty magazines like Smokehouse and Cigar Connoisseur. We are also targeting local magazines like Kansas Highways and Midwest Life that target upper-income individuals. We are also working with other internet companies to establish links to our existing informational site. When we launch our online ordering features we will intensify these efforts.
Financial Considerations
Kiowa does not have any debt and plans to remain so. Our revitalization efforts will result in increased profits by Year 1. We expect to see a lot of our profits going into new websites and cafe ventures over the next three-years. We don’t expect to have any cash issues.
1.1 Objectives
The overall fall in the tobacco industry has meant lower profit margins and increased costs. The following goals have been set for a revitalization program to help us remain a viable business.
- 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.
- We created our tobacco cafe to differentiate our patrons’ purchasing experience
1.2 Mission
Kiowa Smoke Shops will offer high quality products, great brands, and excellent customer service at a competitive price. Kiowa is committed to providing a unique customer experience by offering the highest quality tobacco products to its customers. They also create an intimate, comfortable atmosphere for recreational and specialty tobacco customers. Kiowa will always maintain the highest standards of customer service in the tobacco business.
1.3 Keys To Success
The industry is being squeezed by declining customers and more hostile federal and judicial regulations. We need to ensure that the following priorities are met:
- Expand our customer base to retain a sufficient level of profitability.
- Customer retention can be increased by providing high-quality service.
- To reduce collection days, improve accounting practices and increase cost assessment, and decrease costs.