The Fact of the Matter
Posted: Oct 14, 2009 9:40am ET
People in the Cuban cigar industry were not pleased with recent reports in the foreign press on the reduction of this year’s tobacco plantings. Among others, Reuters reported that the plantings of tobacco on the island was being cut by 30 percent, which would mean a 16 percent reduction in the tobacco harvest. The drop was attributed to falling sales of Cuban cigars in the global market.
“They got it all wrong,” said one cigar merchant in Havana. “The reduction is going to affect the sales of tobacco in bales, mostly for cigarettes. It has nothing to do with cigars.”
Added Ana Lopez, head of marketing for Habanos S.A., the global distribution and marketing organization for Cuban cigars: “Cigars only represent about 3 percent of the total tobacco crop on the island. The reduction in the tobacco harvest this year shouldn’t affect cigars.”
I didn’t speak to anyone who had the exact figures of how much of a reduction in tobacco planting there would be in Pinar del Rió, the key tobacco-growing region for Cuba’s premium cigars. I doubt any reduction will come with the vegas finas, the best tobacco plantations on the island. As one Cuban cigar man told me, “We need the tobacco for our reserves. As you know, cigars are a blend of different tobaccos from different years, so we need to collect and age the tobacco.”
I don’t understand the stigma about admitting that cigar sales are on the decline. It’s obvious that Cuban cigar sales are falling. The global economy is in worse shape this year than last, and in 2008 Cubans sold fewer cigars than in 2007. As I already reported, last year’s cigar exports revenues were down to $390 million from $402 million, but exports were still larger than in 2005 and 2006. Sell less but pay more seems to be the idea for Cuban cigars at the moment. But price reductions may come if they need to generate more sales. Who knows?
I have heard that warehouses in Havana are full of cigars. And that pressure has been put on global distributors to step in and buy, even if their markets are slow. But shipments of cigars from the island are not the key factor in all this. Depletions, or sales to consumers, are what really count, and apparently they are picking up a little. “We have to see what happens this autumn,” said a friend at Habanos. “But we feel positive. The last quarter of the year is always better for us.”
Some say that cigar exports from Cuba are down between 10 and 15 percent this year so far. Sales in cigar shops on the island have dropped between 40 and 50 percent, according to a couple of merchants I spoke to. “We just don’t have the customers at the moment,” said one. “Those people coming to the island don’t have any money to spend on cigars. They are mostly package tourists that just want a cheap holiday at the beach.”
However, for those visitors who are interested in buying cigars, the shops in Havana have an excellent selection. In fact, you can buy pretty much what you want. I bought a box of the new Cohiba Gran Reserva at Club Habana yesterday for $756, and a couple of friends bought some boxes as well. (I guess my children won’t be able to go to private school this term. But they will understand!)
The cigars are amazing. They look like the best milk chocolate. Great packaging. And there are only 5,000 boxes of 15 cigars each for the world. I still think it is a perfect cigar. Can’t wait to smoke one. I wonder how they are going to compare to the new line of Cohiba Behikes being developed at the moment? Its debut is expected during next year’s festival at the end of February.
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