Cuba's economy and smoking Bans

[G-man]

By Marc Frank

HAVANA, June 21 (Reuters) - Global economic woes and the worldwide spread of smoking bans are taking their toll on Cuba’s famous cigar industry, with the just-completed harvest of the country’s finest tobacco down 14 percent over 2009, local media said on Monday.

In westernmost Pinar del Rio, <NOBR>home of (http://www.cigarbid.com/auction/forum/forum.cfm?action=list&forumID=1&messageDisplay=0000000374838#)</NOBR> Cuba’s most famous tobacco, the harvest came in at 22.4 million leaves, down from 26 million in 2009, according to Guerrillero, the province’s Communist party weekly.

The area’s tobacco is used as wrapper leaf and part of the filling in Cuba’s prized cigar brands, including Cohiba, Montecristo, Trinidad and Partagas.

"There was a reduction in planting due to limitations in resources caused by the economic crisis," the weekly said.

Cuba’s premium cigars dominate the world market with 70 percent of sales.

That jealously guarded market share excludes the United States, where Cuba’s cigars are banned under the 48-year-old U.S. trade embargo against the communist-led island.

But the industry has fallen on hard times in recent years, with production of cigars for export down from 217 million in 2006, to 123 million in 2007 and just 73 million last year as the business drew on its stored inventory, the government reported this month.

Cash-strapped Cuba cut the amount of land devoted to growing its famous tobacco by more than 30 percent last year.

Sales from cigar <NOBR>exports (http://www.cigarbid.com/auction/forum/forum.cfm?action=list&forumID=1&messageDisplay=0000000374838#)</NOBR> fell to $218 million in 2009, down from $243 million in 2008.

In contrast, domestic demand for lower-quality cigars, which cost as little as a few cents and are made from tobacco grown elsewhere in the country, showed no sign of slowing.

About 300 million were produced last year, compared with 278 million in 2008, the government said.

The exclusive distributor of Cuban cigars, Habanos S.A., a joint venture between Cuba and British tobacco giant Imperial Tobacco Group Plc, was not immediately available for comment.

Some 200,000 private farmers and family members depend on growing and curing the precious leaf under contract with the government. Tens of thousands of workers earn their living hand rolling the crop into the famous "Habanos" or "Puros" for export.

[nicwing]

There's nothing for it boys, we've just got to get our heads down and smoke more.

It's for the Cubans you understand.

I don't want to see any of you without a fine Cuban cigar in your mouth and any time, just think of those poor babies with nothing to eat and smoke up!!

[G-man]

Won't you buy my cigars
http://farm1.static.flickr.com/22/26582799_f18947bc53.jpg
Look ToeTo nobody wants our fine Cuban cigars !
This will cripple all involved in the cigar industry!
And in turn jack the prices up.
Well my fellow B/SOTL we are becoming dinosaurs .
A sad day for us aficionado's

[Habana-Habanos]

Or it could mean lower prices as people need to be attracted. Depends what way you look at it from.

[nicwing]

Yeh like that's going to happen. Haven't you heard about the Behike?

It's actually going the other way. Look at the stats. Machine cheap cigars at the same level, expensive hand made cigars down so focus on the top cigars smoked by people who want and can afford the best, result - Behike!!:rock::rock:

[tupacboy]

i can't even afford the ring on the behike...

[G-man]

i can't even afford the ring on the behike...
And you won't be able to afford to look at them :eek: ROTF

[captain duff]

A nice article based on these facts and figures from the Guardian today: http://www.guardian.co.uk/commentisfree/2010/jun/24/cuban-cigar-exports-drop

[eggopp]

They need to lower prices (significantly) so 'I' can buy more and boost their economy :rolleyes::rolleyes:

[Drewmidorn]

There's nothing for it boys, we've just got to get our heads down and smoke more.

It's for the Cubans you understand.

I don't want to see any of you without a fine Cuban cigar in your mouth and any time, just think of those poor babies with nothing to eat and smoke up!!

Trying my best Nic.... trying my best!

[Soulmanure]

That does not bode well--the US really ought to shift its policy, but that is obviously a low priority these days.

[captain duff]

Indeed, although interestingly surveys in recent years show a significant shift in US public opinion, with the majority now supporting normalisation of relations and the lifting of the trade embargo. Perhaps the most interesting element of this is that apparently the majority the younger generations of cubans in the US are now in favour of ending the embargo/travel restrictions. Traditionally of course the 'cuban vote' in key electoral states like Florida favoured hard-line Republican anti-Castro positions and this was a huge factor in political decision making in Washinton (as is the 'Jewish vote' in relation to Israel). Now this appears to be breaking down, but it has yet to translate into any meaningful policy shift from Obama.

Of course, while the lifting on travel in particular would be a huge boost to the Cuban eceonomy in terms of expected large numbers of US tourists who would then travel there, it may not be of immediate help to the cigar industry due to all the legal issues surrounding the various rival brand names which would no doubt last for many years and cost a lot of money in legal fees etc to sort out...

[monkey66]

Be careful what you wish for. Lifting the embargo is unlikely to have a positive result on the price/quality of Cubans.


That does not bode well--the US really ought to shift its policy, but that is obviously a low priority these days.

[tippexx]

Be careful what you wish for. Lifting the embargo is unlikely to have a positive result on the price/quality of Cubans.

Have faith Monkey. I think once our cousins can legally smoke Cubans they'll quickly separate the wheat from the chaff and through demand and their customary wholesale/retail price competitiveness, get prices back to a realistic level.

[daverave999]

It really could be a lot worse than a 14% drop. I suspect it's more about the economic situation than smoking laws considering that Spain is such a large consumer, and their economy doesn't exactly look robust at the moment.

[nicwing]

It really could be a lot worse than a 14% drop. I suspect it's more about the economic situation than smoking laws considering that Spain is such a large consumer, and their economy doesn't exactly look robust at the moment.

But someone recently told me that the Spanish market was dreadful at the moment. This could be a major factor as I gather the UK market is buoyant thanks in good part to yourselves!!!

[G-man]

Although there would be some fights over trademark rights some of the key players in the cigar industry already retain the rights to some of the Cuban brands. It would be a win win to all involved. Like most mega corps. based in the US the plans have already been put into motion for the embargo lifting.

[daverave999]

But someone recently told me that the Spanish market was dreadful at the moment. This could be a major factor as I gather the UK market is buoyant thanks in good part to yourselves!!!
Yeah that was my point. :biggrin1:
They've got no money so they ain't buying anything!

[captain duff]

Although there would be some fights over trademark rights some of the key players in the cigar industry already retain the rights to some of the Cuban brands. It would be a win win to all involved. Like most mega corps. based in the US the plans have already been put into motion for the embargo lifting.


How would this work though? For example, it took years of protracted court cases in a number of countries for the 'fake' american budweiser to come to a compromise over distribution with the proper czech stuff. But surely in the case of Cuban cigar production things are even more complicated due to companies being nationalised after the revolution and then their names being re-established by former owners elsewhere. Now if the lifting of the embargo did not lead to a fall in the current regime in Cuba you then have the issue of logo copyright being complicated by actual legal ownership issues don't you, assuming that Cuba was not about to allow their industry to be privatised (and if it was that certainly wouldn't be of benefit to the workers in it in my opinion!)...

[Soulmanure]

My guess is that one of the effects of a change in US/Cuba relations would be a general boost in their economy due to the return of the tourist industry, which would mean a general rise in the standard of living.. The mitigating factor will remain the global economic downturn. Until that shifts, people will be smoking less in general. But an increase in US smokers couldn't help but be a boost (though that would mean a tax increase for us).

[rokkitsci]

Have faith Monkey. I think once our cousins can legally smoke Cubans they'll quickly separate the wheat from the chaff and through demand and their customary wholesale/retail price competitiveness, get prices back to a realistic level.

I don't think it's the prices that will be the problem. My main worry is that in order to meet the production needs opening up trade with the US, the quality of the stogies will take a terrific hit. What with most Yanks not knowing a CC from an El Fuma del Suomi Ballaboosta Elegante Culebra with the fermented Turkmenistani llama intestine wrapper, they'll be happy as little girls to finally be smoking "the real deal" whilst the rest of the knowledgeable cigar-smoking world will be racing to the loo to get the foul taste out of their mouths.

[Soulmanure]

Possibly--a way to compare would be to find out if pre-embargo cc's were lower in quality to what we got later. As well, you still have the demands of a world market that might abandon them if there was a drop in quality,

[Paulie]

Interesting article.

An interview in a recent CA magazine of Benjamin Menendez who is a Senior VP of General Cigar, he makes a compelling arguement that if the embargo was lifted the queue would be round the block for CC's during the first week. By the second it would be much smaller once buyers realise that Nc's are just as good and in some cases better than CC's for much less $$$

I tend to agree, I think if and when the embargo is lifted, it will have a 'spike' effect on demand which will then soon balance out to be easy to manage without a loss of quality.

[cbob]

What with most Yanks not knowing a CC from an El Fuma del Suomi Ballaboosta Elegante Culebra (snip), they'll be happy as little girls to finally be smoking "the real deal"

You make a good point, but I know many seasoned smokers in the U.S. of A. who are quite used to Cuban cigars. They have been buying and smoking them (illegally) for all these years.

I'd be more worried about all the extra fakes that will be flooding the internet at inflated prices due to the perception that an unrestricted US market is a license to print money. There are already so many folk who have a bad opinion of Cuban tobacco based on product they have purchased from "trusted" online vendors that I suspect that Habanos will continue to raise prices on specialty, hard to copy vitolas to attract those discriminating smokers who are not sure if too many regular production cigars are not counterfeit. As long as we are happy to walk into our local B&M and plunk down $100 for a "Limited" or "Regional" cigar, the only question will soon be "how high can the prices go?"

[G-man]

My take on the whole thing ! The cigar Boom of the 1990s. Those who know their history will be fine those that want to be pompis will pay for $hit and think they are the cats Meow. LOL