Buyer Beware: Counterfeit Cigars
Not the real thing—counterfeits of the top Cuban cigar brands are flooding the world market.
From the Print Edition:
Fidel Castro, Summer 94
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Premium cigars are just another product on the long list of luxury goods counterfeited and sold around the world. If there's a demand for it, whether it's a Cartier watch, Givenchy perfume or a Cohiba cigar, counterfeiters will make and sell it. According to the Comite Colbert, an organization of 70 of France's luxury-goods producers including Cartier, Christian Dior and Louis Vuitton, the international counterfeit business costs manufacturers billions of dollars a year. The lost sales in Europe alone due to fakes is estimated at more than $500 million, according to a recent study released by the European Economic Community.
"We can't estimate how much our members lose a year due to counterfeits, but they probably lose more than they sell in a year due to the problem, and that equals $5 billion," says Christian Blanckaert, president of the Comite Colbert.
"It is very, very difficult to stop counterfeiting cigars," adds Padron. "In Cuba, we have tried to do our best. We have stopped small factories and people from doing it. But outside it is very difficult. For example, you can go to Switzerland and pay the duties and then you put whatever you want in the market. A few days ago, there were 200 boxes of Cohiba caught in Brussels. They said that they were Cuban, so I sent my fellow there. They were all fakes. I was in Beirut recently, and I went to the monopoly's warehouse. There were hundreds of boxes of counterfeit Cohibas. The monopoly said that they took them away from a fellow who was trying to smuggle them into the country."
Padron and other cigar executives interviewed couldn't put an estimate on the global counterfeit-cigar business, but most agreed that the losses in retail sales to bogus smokes could be in the millions of dollars. In fact, Ernst Schneider, the president/general director of Davidoff International, admits that the main reason his company decided to go into the perfume and fashion business was to protect its brand name from counterfeiters. Products had popped up all over the world with the name of Davidoff on them--from vodka in Holland to T-shirts in Italy. Someone was even selling Davidoff ice cream in Spain. Until Davidoff began producing men's after-shave, ties and eyeglasses, the firm had no legal recourse to stop unauthorized producers from using its brand name.
"I cleaned up the whole world market, which cost me a fortune," Schneider admitted in an interview in New York (see story, page 65, Spring '94).
"We had 32 lawsuits to clean the (world) market. The cost was about 3.5 million Swiss francs ($1.95 million)."
However, Schneider admits that stopping counterfeit cigars is a much more difficult task than putting an end to the unauthorized use of his brand. Although it has been less of a problem since Davidoff began producing cigars in the Dominican Republic, his company was plagued for many years by phony cigars coming from Central and South America, especially Brazil. Schneider said that his company suffered from the production and sale of counterfeit Davidoffs in Brazil for nearly 16 years. Located near Sao Paulo, a company under the ownership of the Koenig family made Davidoff cigars in the same sizes and packaging. The company was named Davidoff Commercio y Industria.
"We tried to make an arrangement with them, but it never worked," says Schneider. "We could never trust them. They always started selling cigars again. We did not get one cent back for all the money we spent on stopping them. This is what happens when you have a luxury brand."
To make things worse, the Brazilian cigar producer even guaranteed the product, stating on the box that the cigars could be returned or exchanged with an authorized Davidoff merchant if the consumer was not satisfied. The British Davidoff agent still has a box of 25 Brazilian cigars in his office, which he inadvertently exchanged for a customer who said that the cigars were unsmokable. "We just assumed that they were the real thing," says Simon Chase, of Hunters & Frankau, who worked for Davidoff 11 years ago. "We were surprised, to say the least, when we received the cigars in the mail, and we had already made good on the cigars with the real item."
Brazilian courts, however, recently ruled that the only company authorized to use the Davidoff name is Davidoff of Geneva. But that doesn't mean that damage wasn't done to the company.
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