Cuba's New Cigar Chief
The Spanish co-head of Habanos tries to strike the right balance between tradition and modernization
From the Print Edition:
Vegas, Mar/Apr 2006
Buenaventura Jiménez Sanchez-Cañete, 47, has been the new co-head of Habanos S.A., the global distribution and marketing organization for Cuban cigars, for a little over half a year now. The Spaniard exudes the excitement and optimism that comes with a new job.
Originally from Granada, Sanchez-Cañete has spent most of his adult life working for the Spanish tobacco giant Tabacalera S.A., which in 1999 merged with the French tobacco multinational Seita to form Altadis S.A. He has done everything from manage machine-made cigar factories to coordinate the distribution of tobacco products throughout Spain. A warm and gentle man, he lives in Havana with his Spanish wife, and enjoys hiking and motorcycling as well as everything the Cuban capital has to offer in the way of culture and entertainment. However, after spending 10 to 12 hours a day in the office, he rarely has free time. His co-workers-both Cuban and Spanish-speak fondly of the man, who is clearly a team leader and an excellent motivator. I met with him in Havana in November to discuss the future of the Cuban cigar. The interview was conducted in Spanish.
James Suckling: The word on the street is that you are very knowledgeable about cigars. How did you learn about the business?
Buenaventura Jiménez Sanchez-Cañete: I can assure you that I am passionate about the tobacco world, but to say that I know it all would be wrong. I think you can spend years doing this, and every time you talk to somebody you discover new things. Of course, I have the knowledge that having worked in this sector has given me. However, this cigar world is so rich and big that you are discovering new things all the time.
JS: Now that former co-head Fernando Dominguez Valdés Hevia has left, what do you think you can bring to Habanos? Your philosophy is different from his.
BJSC: No. The first thing I would say would be that Fernando has made a vast contribution to Habanos's operation together with [co-head Oscar] Basulto and the rest of the team.
JS: And Fernando did a lot in a short time, too.
BJSC: I believe that it would be stupid on my part to try to do something different because I have only been here five months. I have seen the strategy that is being followed. This company, Habanos, as a trading company, sells premium cigar brands that are renowned worldwide. I believe in the sales strategy that is in place.
There are actually two strategies-one that looks ahead and the second that looks back. The main purpose of this second one is to get the industry to improve on the quality of the finished product. The industry has a lot to do, but I would say that the most important issue is to improve on the quality. We are selling a premium product and every single worker in the factory should be aware of this. There is a lot to be done in this sense, to preserve and improve the quality of the product.
JS: Are your sales steady? Some say around 150 million to 160 million Cuban cigars are being sold worldwide.
BJSC: I would tell you that there are different kinds of markets. One of them is the European market; as you know, this market is very important for Habanos. Our sales to Europe may be 60 to 65 percent of our production. The American market could be our biggest market, but we do not have access to it.
JS: At least not officially, right?
JS: I don't smoke that many Cubans in the States. Aren't most fakes?
BJSC: Well, that also happens to Louis Vuitton. High-end products are generally forged. What I mean is that even if campaigns and legislation are getting more and more difficult [against smoking] in the first-world countries, where we have our strongest markets, consumption is stable. It has not comparatively increased, but you can also say it has not decreased.
I could say that consumption for this market is steady. I can also mention that there are other places where we have introduced ourselves and have won some space slowly but surely, in those places where we do not have a market quota. If there is a country where we supply 40 percent of premium cigars, we do our research to understand why we haven't grown our presence to 70 percent. Perhaps we need to open a Casa del Habano there or pursue a special follow-up for that country. On the other hand, we have emerging markets where consumption is growing. This area is mainly the Asian-Pacific countries, Middle Eastern countries and Central and South American countries.
JS: What's your growth in 2005…seven percent or something?
BJSC: I can't tell you, but it's in line with 2004.
JS: Do you think there is a limit for prices? It seems like every year you increase prices.
BJSC: No. I don't think so. I don't know if there has been a significant increase in prices in past years. It's also true, when analyzing the increase in prices, that there were markets that already had very high prices to start with, perhaps due to high retail margins, etc…and other markets that had traditionally low prices, such as the Spanish market.
JS: The increase in prices was also applied to the domestic market, right?
BJSC: Yes, because it doesn't make sense if there are major differences [between the domestic and export markets]. When distortion happens in the market, it becomes very hard to control parallel trading.
JS: Aren't the prices here in Cuba very similar to those in Spain?
BJSC: No. They are still 20 percent lower [in Cuba].
JS: But with the exchange rate and commissions they are more expensive in my opinion. And then you have to deal with the customs people at the airport who can treat you like a criminal. It's too difficult.
BJSC: I understand perfectly well. Let's see.
JS: It's too difficult. It's almost easier to buy in the Madrid airport for some people than to buy in Cuba.
BJSC: As for the situation with the airport, you are totally right. They are enforcing the law, and the law is to present invoices for your purchase. You will need an invoice even for one box of 25 cigars. The reason behind this is that we have had problems with informal channels of distribution.
JS: You mean smuggling….
BJSC: Well, not really smuggling. It's just that people would spend $20,000 in cigars because it was allowed. The other thing is that when these people return to their countries, they should not be able to bring in $20,000 in cigars without the proper documents, but somehow they manage to take them into the country. So yes, officials at the airport are really enforcing this regulation. This of course is no excuse for these officials to act pushy or rudely. They can ask for documents in a polite way.
James, you went to the new factories yesterday [Partagas and H. Upmann]. What did you think?
JS: The most interesting part was seeing that the workers were taking their jobs seriously. In the past I saw that the factories were not that well organized. Some workers didn't take the job seriously and now you can really notice the difference. You must be proud of that change.
BJSC: That's what I've been telling you all along. The strategy is to look back-where there are investments to be made. When you are at the same place and doing the same thing for 50, 60 or 100 years, it's very difficult to change things. So then you have to take advantage of moving to a new facility to make changes in the procedure, organization and other things, too. And as you say, you have to work in a more serious fashion.
JS: I saw people in the new factories who looked happier than before because they now work at a place that looks nice and is modern and clean and also very different from what they have at home. Don't they feel better at the factory than at home?
BJSC: Well, they have air-conditioning and electricity.
JS: Yes. But you still hear some people say that it's sad that some of the old factories in Havana are not being used anymore-that the tradition has been broken. What do you think?
BJSC: I think it's very difficult to find the right balance between keeping the tradition and improving on productivity, quality and yield. You have to keep in mind that this country will one day compete with factories in the Dominican Republic, in Mexico and other countries and they will need to have the organization that will allow them to compete at the same level with other countries. If for the production of X amount of cigars, other countries require a certain number of workers, then in Cuba the factories will need approximately the same number of workers…. You have to adapt to the new system without losing the positive part of tradition and know-how.
JS: Do you think new brands or new shapes will be launched in the near future?
BJSC: We have 33 different brands. I think that is good enough.
JS: You also have these new sizes for specific markets, like the Ramon Allones Belicoso for England. Will this continue?
BJSC: We have decided that we want to promote what we call regional specialties. In saying "region," we are referring to a part of the world.
JS: So it's not a matter of a specific country, then?
BJSC: No. It has nothing to do with a specific country. It refers to a region where we may perhaps have strong distributors and they know the client and these clients may like a certain kind of cigar. We have limited the number of regional specialties for next year.
JS: They have to buy 1,000 boxes minimum, no?
BJSC: No, James. I don't think it works like that. What I mean is that if I create a regional specialty for the Asian-Pacific area, it will not be the same as if I create another one for England…. In one case we may produce 50,000 cigars and in the other it could reach 200,000.
JS: What is your opinion about fake cigars?
BJSC: We strongly fight forgery. The Cuban government gets involved and tries to reach agreements with other countries in order to fight against this. We have absolute control over the movement of tobacco in bales, so that it is used as it should be.
JS: Do you think the forgeries are done here in Cuba or somewhere else?
BJSC: I think the majority of the forgeries are from the D.R., Mexico, Brazil, Nicaragua, Honduras and many other places. Plus, I believe that the majority of them are manufactured with tobacco that isn't Cuban. I cannot say for sure that fakes do not leave Cuba.
JS: But doesn't that happen, too?
BJSC: But the quantities are not significant. It happens sometimes that you are surfing the Internet and you stumble onto someone that offers you Cuban fakes.
JS: Did you know that there is a Web site where you can buy the boxes, labels for Cuban cigars. You can buy it all! It's crazy.
BJSC: There's a lot of money behind this!
JS: Yes. You're right. It's tough to stop.
BJSC: My opinion is that the only way to solve this problem is by educating the consumer. You must have a consumer who knows and wants to buy the real thing.
JS: At the end of the day, you can't control it all.
BJSC: May I say that we have a very strong legal department in Habanos and they are working hard in this direction. The distributors also keep an eye open for irregularities and when they do catch something, they take measures to counterattack because at the end of the day, they are losing business with this. So then our distributors also give us their support in this sense. All of them in general share with each other their know-how and experience in dealing with this kind of problem. I can tell you this is a problem we are working on.
JS: The fact that this is happening is a sign of the success of your product.
BJSC: Why, yes. Of course.
JS: What's the latest with the Cohiba lawsuit in the United States?
BJSC: I believe it is still pending an appeal in the Supreme Court. It is still at a stage, until the end of the year, where the other side is presenting its allegations. After this, the Supreme Court will decide if our appeal is accepted or not. So this is where we stand right now. We are in the process. This is the information I have. I don't know anything else.
JS: The case looks difficult for you.
BJSC: I know that not all of the cases that get to the Supreme Court are accepted by it. I don't know anything else; the only thing I can say is that we are in the waiting process for the appeal.
JS: Everybody wants to know what will happen when the U.S. market opens for Cuban cigars. Do you think that you can increase production to meet American market demand?
BJSC: I believe that the land is there and an increase in production is perfectly possible. The capacity is there.
JS: What about the ownership of the brands? There are a number of brands that have problems.
BJSC: When the day comes when the American market opens, for me as a co-president of Habanos, it will be wonderful news. Even if difficulties would come up, such as problems with the brands or being able to react quickly to the new demand, it would be wonderful to have access to the biggest consumer market of premium cigars in the world. I hope someday the embargo is lifted and we can then have a presence in this important market.
JS: There are people from your traditional markets, such as the English market, who are worried that when the American market opens to Cuba, they will not receive enough supplies and they will also lose many of their customers.
BJSC: Let me start by repeating that, in my knowledge, the industrial and agricultural capacities are there [to increase production]. The second point I want to make is that those distributors should follow the stock policy we recommend, not because of the possibility that the American market would suddenly be available, but mainly because this is a natural product. You see that tomorrow Hurricane Wilma, instead of striking Cancún, can strike over here, and you know how much destruction it caused over there. There are years where instead of a harvest of 100 [acres] you will have a harvest of 50.
BJSC: If I were a distributor, I would have months of stock in my warehouse in my country. Habanos recommends a minimum of six months of stock; however, in my opinion I would even go as far as saying that a good distributor should have a minimum of one year's stock, and for some even slightly more.
JS: That sounds like a lot.
BJSC: Going back to your question, then. We think that the distributors, apart from the fact that we at Habanos have already taken into consideration the idea that one day the embargo will be lifted, should not be worried. What they should be is prepared; they should have enough stock to carry them through difficult times.
Photo by James Suckling
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