Cuba's New Visionary
Habanos's Spanish co-head, Fernando Domínguez Valdés-Hevia, speaks of a bright future for Havana cigars.
From the Print Edition:
Sharon Stone, July/Aug 2004
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"It's all been done to improve quality and to improve the working conditions for the workers," says Domínguez. "The change has not affected the handmade process of making cigars. In a way, you are providing better conditions, which will at the end of the day improve the processes and the overall quality…. Cuban cigars are handmade and we want to keep the same processes that have been here for the last 200 years."
Habanos has already had a number of successes in the market in the last few years. Among the most successful were the creation of an annual limited-edition cigar series and specialty humidors, as well as new sizes for key brands. Habanos focuses most of its energy these days on "six global brands," as Domínguez describes them: Cohiba, Montecristo, Romeo & Julieta, Partagas, Hoyo de Monterrey and Quintero. "Global brands can be found everywhere," he says. "Other brands are mainly for specific markets. The resources of the company are limited, so we have to focus on main brands."
Last year, a new size, or vitola, was introduced to Cohiba, Siglo VI (52 ring gauge by just under 6 inches), to wide acclaim, and a similar size was launched for Montecristo this spring, called Edmundo. Trials are being undertaken with green-wrapper cigars (candela), which were highly successful before the revolution. Packaging for many of the major brands has been updated. And unpopular sizes have been canceled in many brands.
Nonetheless, some consumers and retailers are complaining that the market doesn't need so many new cigars. And they wonder why Habanos hasn't simply focused on improving the quality and availability of popular brands and sizes. Moreover, they say that too many specialty cigars, such as limited-edition humidors, are being released on the market.
"We think that we have cut back slightly on limited cigars and there is not an oversupply," says Domínguez. "The cigars are limited editions. We cannot make these cigars without the best tobacco, the best wrappers. So by virtue, they are limited. It depends on the results of the crop, of course. We have limited raw materials."
He says that the limited-edition cigars have definitely helped the overall performance of Habanos in the last year, and he expects them to continue to do so. "Last year, the general activity of Habanos improved in comparison with 2002 despite the world's problems," says Domínguez. According to a press release from Altadis in Spain in February, Cuban cigar sales increased by approximately 17 percent in dollar terms in the first nine months of 2003, but still lagged below full potential because of the international economic situation.
"You know that the handmade luxury products are always affected by downward trends in the world economy," he adds. "But we have noticed an improvement in the economic cycle mid-last year…in general terms, the activity of Habanos has improved, but for us the most important thing is quality. Volume has improved slightly, but quality has also improved. It is more important for us, quality and profitability, than volume."
Keeping quality at a high level may be difficult, however, if the U.S. market ever reopens it could throw the balance of production and quality out of kilter. However, Domínguez didn't seem too worried. "This is not under our control, of course, so we are managing with our current situation," he says. "So we are not focusing on that. When the embargo is lifted, this will be another situation and we will manage."
Domínguez says that there will most certainly be enough quality tobacco on the island when the United States opens. Tobacco yields are already improving each year and there are additional locations in Pinar del Río (Cuba's premium tobacco growing region) that can be planted, which will help increase the supply of good leaves. Plus, Habanos has contingency plans for training new rollers and opening new factories. Tobacco stocks are already on the increase, he says.
Over the years, I have heard various figures for the possible annual sales of Cuban cigars in the United States; 20 million has been a popular one used. Domínguez thinks that the potential for sales could be even more. He wouldn't be nailed down on an actual figure, but he did say that he thought the country could sell more than what Spain takes in a year, which is about 35 million cigars.
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