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Inside Cuban Cigars—A Talk With Cubatabaco Head Francisco Padron

Cigar Aficionado meets with Cubatabaco's top official, Francisco Padron, to discuss Cuba's cigar industry.
Marvin R. Shanken
From the Print Edition:
Rush Limbaugh, Spring 94

(continued from page 4)

Cigar Aficionado Editor and Publisher Marvin R. Shanken interviewed Padron in Mexico City in early December. They discussed the current state of the Cuban cigar industry and what the future holds for the country's cigar exports.

Cigar Aficionado: There has been a lot of talk that [the 1993] hurricane severely damaged Cuba's tobacco crops, and that this has affected quality and quantity, particularly for wrappers. What is the situation for production of Havana handmade cigars for export? What can we look forward to in the next few years?

Francisco Padron: The hurricane caused a great deal of damage. We lost about 60 percent of our crop. It was only a quantity problem, however. The quality was very good, very good. It is a pity that in this past year we have been having very good quality crops, but the quantity has not been good. We are not delivering enough cigars to the world market because of this.

C.A.: But the word was that the large leaf wrapper crop was annihilated, and that this was going to adversely affect the production of large-sized cigars--the double coronas, Churchills and so forth?
Padron: If you have a big crop, you deliver more large leaves and you have more room to produce more large cigars and to choose the best leaves. When you have a small crop, it's the inverse. Wrappers are a very delicate thing. So when the hurricane came, it hurt the wrapper crop. It hurt all of the crop, but particularly the wrapper crop.

But even with that problem, we produced [in 1993] about 200 million cigars for the domestic market. But we are not delivering anything to the export market that does not have the right quality because quality is the first thing above all for us.

C.A.: In 1993, what were the total exports for Cuban cigars?
Padron: About 57 million cigars in 1993.

C.A.: What did you export in 1992?
Padron: 67 million.

C.A.: And in 1991?
Padron: 77 million.

C.A.: And 1990?
Padron: More or less the same quantity, about 80 million.

C.A.: With the hurricane damage, what do you forecast your exports to be in 1994?
Padron: Let's first discuss how we are going to increase our production. Worse than the hurricane is the embargo, the double embargo. Right now, it's almost like there's an embargo from the other socialist countries. We used to buy from them, fertilizers and plenty of other things for our crops. What is hurting us the most is that we can't buy right now, nor have we bought from the eastern socialist countries during the past three years what we used to buy from them for the cigar crop.

C.A.: What are some of these things?
Padron: Fertilizers and plenty of other things. For example, all the covers or tents used for growing wrapper leaves came from the Soviet Union. And now we can't get them. We used to buy 20 million square meters. Oil, gasoline and diesel. That is very short, and this really hurts the crop.

C.A.: What do you do if you don't have the tenting for the wrap-per crop?
Padron: We reduce the crop. It is as simple as that. You can reuse about 30 percent of the old tents, but the storm [in 1993] destroyed all of the tents.

C.A.: That means those losses will affect future harvests?
Padron: We think that this coming crop will be a little better, and those afterward should be very big ones. For the '94 crop and on, we have solved almost all of our problems, almost everything.

C.A.: So a year from now you should be back to the '90 and '91 levels?
Padron: Even bigger.

C.A.: What is your target for 1995?
Padron: We think that in 1995, we should export 70 million cigars, and in 1996, we should have 80 million to 90 million.

C.A.: But what do you forecast for 1994?
Padron: There will be no more than 50 million cigars.

C.A.: No more? Some people say much less.
Padron: No. No. That is more or less what we are going to do. Remember this. We never, never export cigars unless they are of the right quality. Of course, you may not believe that we can choose or that we wouldn't take a lesser-quality wrapper from the domestic market production and use it for export. But that is not the case. We have to be careful, very careful. Besides, you know what decides the cigar is the shortest crop because we mix three crops. And if you have two short crops in a row, you have problems. So, we have been taking more tobacco from our warehouses.

C.A.: Another comment is that because of the difficult economic situation in Cuba, you don't age the cigars in warehouses as long as you used to because of the shortages in supply and the need for dollars.
Padron: That is not true for cigars. I have instructions directly from Fidel. He has said that I mustn't deliver cigars that are not the best quality. He says that they represent the image of the best quality of Cuba. So we never do anything else but deliver the best quality.

C.A.: In the numbers that you have given me for 1990 to 1995, what percentage is handmade versus machine made?
Padron: Now we only have about 10 million or 15 million machine-made cigars. That's it.

C.A.: So that's pretty steady. You are not looking to increase or decrease the machine made?
Padron: That depends on the orders. This is a business. If anybody asks for the cheaper machine-made cigars, we are going to deliver. Our priority, however, is handmade, not machine-made cigars.

C.A.: You are delivering in the area of 50 or 60 million cigars, and let's say 40 to 45 million are handmade. With the increasing demand for Cuban cigars, do you have any idea what the total world demand would be for handmade Cuban cigars?
Padron: Without the United States, we estimate the market to be from 90 to 100 million cigars.

C.A.: And with the United States?
Padron: 20 million more and increasing in four years.

C.A.: At the Cigar Aficionado seminar we held in New York, a panel discussed Cuba. It included Edgar Cullman, Nick Freeman, Theo Folz--top people in the cigar trade. We asked them about the embargo: how long did they think it would continue, given the current political environment and the leadership of Clinton. They seemed to have a consensus feeling that the lifting of the embargo was another five to seven years away. They added that in order to revitalize Cuba's cigar production it would take another five years. So, it would be 10 or 12 years before there is any balance of supply and demand, if the United States could buy Havana cigars. What would your response be to that?
Padron: I am not a politician. Things are moving. As Jose Martí [the legendary, 19th-century, Cuban political hero] said, "the most important thing in politics is what you don't see."

C.A.: A lot of people--cigar lovers--are disappointed that there has been no significant movement to bring things together between the two countries and that President Clinton has maintained the policy and given support to the Cuban-American Foundation of (Jorge) Mas Canosa. Do you see anything happening from the Cuban side that might lead to an end to the embargo, or is it really up to when the United States decides that it's enough already?
Padron: It is like a fight between Goliath and David. And you don't know who must make the first move.

C.A.: If the embargo ended tomorrow or two or five years from now, have you thought through how it would happen and what the scenario would be? You would have problems with certain brands as far as trademark issues, and with other brands you do not have a problem. Have you thought how you would introduce your brands to the American market?
Padron: First, there is going to be a fight. We have not been able to have the brand name in the United States because of the embargo. It was forced by you [the United States]. It was not decided by our side. Your side decided on this. So, maybe there is going to be a fight. But we are not going to fight in order to get our cigars into the United States. As we always say, a Habano [cigar] is a Habano [cigar]. With a name of Marvin or Padron or Meyer or whatever goes on the cigar, it is a Habano. So, we are going to let everybody know that we are here, and this is a Habano. We are not going to fight with somebody else because he owns the brand name of Cohiba or Montecristo in America. We have been living without that for a long time.

C.A.: So if you cannot resolve the issue, you would introduce new brand names which are Habano, and there would not be a conflict unless the government said that this issue must be resolved. You know the issue is that the families who lost the brand names say that they are entitled to have those brand names back, which is more confusing because of certain problems in the international market such as what has happened with Spain's tobacco monopoly, Tabacalera. Could you explain briefly what is the situation there as far as Montecristo, H. Upmann, Partagas and other brands?
Padron: In general, we have solved our disagreement in a way so that it will not hurt or create any problems for Tabacalera. This will help us to keep delivering Montecristo, Upmann, Partagas and others to the Spanish market.

C.A.: So you are continuing to supply Spain, but who owns the brand names now? I thought that the worldwide rights, except for a few countries such as the United States, Cuba, the Dominican Republic and others, were sold to Tabacalera by Consolidated and General Cigar?
Padron: Tabacalera owns the names. But they do not own the name in all countries. We own them in plenty of other key countries in the world.

C.A.: In what countries do you still own the brand name Montecristo,as an example, since it is your biggest brand?
Padron: We own it in the United Kingdom, Germany, Holland, Belgium, Switzerland, Canada and plenty of other countries.

C.A.: In what important countries does Tabacalera own the brand?
Padron: France and Spain are the most important. They are our two biggest markets.

C.A.: So you are supplying the brand to them, and you have worked it out to continue the flow. What about the situation with the French tobacco monopoly, Seita? There was a lawsuit regarding Montecristo and Partagas....
Padron: We are still in the courts.

C.A.: But I thought that you lost one of the lawsuits?
Padron: Yes, but we are now in the upper courts.

C.A.: Have they decided what you have to pay in damages? I heard more than $10 million....
Padron: No. No. They are asking for the sky. The stars. Everything.

C.A.: What are they asking?
Padron: I don't remember exactly. I don't want to even think about it.

C.A.: What is the lawsuit about? Who owns the name?
Padron: They want to get money for the use of Montecristo and Partagas since we introduced those brand names in France. This is an incredible thing because I can show you the figures. Montecristo and Partagas were nothing in the '60s and early '70s. We made the reputation of Montecristo and Partagas.

C.A.: As I remember, Montecristo was introduced into the French market around 1973, which is when it took off there?
Padron: Yes. Yes. We created the brand name, not them.


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