Starting a cigarette business in today's climate - almost free cigarettes?

Submitted by Patrick Grote on Mon, 05/23/2005 - 2:40pm.

If you're thinking about starting a business that's exciting. Many options and avenues exist for you to look at which business to start and how to do it. Would you consider something as old school as the cigarette business?

The cigarette business has undergone a transformation of epic proportions. Here are just a few of the issues facing the cigarette business:

Loss of customers - The market for those who smoke tobacco is shrinking. How do you find the profit in a shrinking customer base?
Government penalties - The government mandates the amount of money cigarette makers have to pay in programs and taxes due to the tobacco settlement.
Foreign market pressure - Tobacco can be grown inexpensively in other countries.

Bob and Mike Ammerman thought it'd be a good time to start a cigarette company. The father and son wanted to continue the family tradition of farming and thought they knew how to make a quality cigarette. In 2001 they took the plunge and started Kentucky's Best.

Kentucky's best cigarettes are a niche business at its best. They offer over 21 styles and don't use additives for their product, which differentiates them. And that is the key being a successful nice.

What makes a good niche company? The following are three attributes:

Find a subset no one else offers - This is the definition of a niche, but one most people overlook. It's easy to think your in a niche, but you need to find the subset and exploit it. In this case, the niche Kentucky's Best offers is American cigarettes of high quality.
Make your product unique - Once you've found your niche you have to effectively determine the uniqueness of your product. In terms of Kentucky's best they offer three unique aspects: 1) They are family owned, 2) They don't use additives and 3) They offer a broad spectrum of products in their niche.
Drive your customers - Some folks think that getting customers is they key. They're wrong. You have to drive your customers. You have to attract, retain and convert your customers to evangelists. Kentucky's Best does this through their website and the culture they've created.

Notice that none of this is based on pricing. Kentucky's Best isn't a discount brand as is typically known, so price isn't their niche and typically it shouldn't be yours.