Cuba's New Cigar Chief
From Vegas, Mar/Apr 2006
The Spanish co-head of Habanos tries to strike the right balance between tradition and modernization
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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?