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Cuba's Best Market

When the U.S. embargo is lifted, Cuban officials expect America to be its biggest consumer
From the Print Edition:
Catherine Zeta-Jones, September/October 2009

A reporter from Bloomberg recently telephoned to discuss the imminent legalization of importing Cuban cigars to the United States. I thought the caller was slightly optimistic because I think it will be a number of years, at the soonest, before we see the abolishment of the U.S. trade embargo against Cuba. The reporter, however, seemed convinced the end was near, especially after the loosening of travel restrictions between our country and Cuba.

One of the most interesting tidbits of information he divulged was that sources told him that close to 80 million cigars were lying in warehouses in Havana waiting to be shipped to America the moment the embargo was lifted. I would love to know his sources! It is possible there are that many Habanos cigars in Cuba, but I think it is more likely the result of a global sales slowdown rather than a commercial strategy for Cuban cigars in the United States.

Cubans are not particularly fond of storing and aging cigars for long periods of time. Bails of tobacco are one thing. I remember in the early 1990s, that the cigar industry had thousands of bales of tobacco, particularly strong filler tobacco like ligero, with five to six years of age. Even today the Cubans age their strongest tobacco up to three or four years in bales.

Rolled tobacco is another thing, however. Cigars lose their character much more quickly on the island, and they are more fragile than leaf tobacco. Power shortages, hurricanes, bugs and other difficulties can wreak havoc on aging smokes on the island. I have very close friends who have lost thousands of dollars worth of rare smokes in poorly stored places in Havana.

The Bloomberg article dated June 19 said that "the possible end to the 47-year-old embargo on Cuba trade has intensified a legal and lobbying fight between cigar makers Swedish Match AB of Stockholm, and Imperial Tobacco Group PLC of Bristol, England. Each wants exclusive rights to sell Cuban-made brands in the U.S., the world's largest market for premium cigars."

As you probably know, Swedish Match, through its U.S. company General Cigar, and Imperial, through Altadis USA, produce and sell in the United States numerous Cuban-origin cigar brands that are made in various countries such as Nicaragua, Honduras and the Dominican Republic. Among others, General has Partagas and Cohiba and Altadis Montecristo and Romeo y Julieta. General has the most to lose since it does not own the global rights for such brands, while Altadis does.

It said later in the article that General Cigar, the U.S. subsidiary of Swedish Match, had spent more than $5 million over the past year lobbying Congress over Cuban cigar brand ownership and importation issues. The story added that Imperial just began recently lobbying—although he didn't mention how or what—and spent $30,000. (That seems absurdly little. I have a friend who spends more in a month on his stash of Cuban cigars! So that doesn't sound very serious.)

Moreover, I have no idea why Imperial would be lobbying Congress considering, as I just wrote, it already owns the distribution rights for a number of key Cuban brands in the world—including for the United States. Besides, if and when the American market opens, Habanos S.A., the global distribution company for Cuban cigars, could simply open up shops in Miami or New York or anywhere else in the states and sell them under new brands. Imperial owns 50 percent of Habanos, and the U.S. market represents a quick way to recoup part of its multibillion-dollar investment in Habanos' owner Altadis SA as well as increasing profits and share price.

As General Cigar's counsel, Gerry Roerty was quoted in the Bloomberg piece about the potential for Cuban cigar sales in the United States when it all becomes legal: "'The market is going to be turned upside down,' Roerty said in an interview. After waiting for almost five decades, Americans 'will buy a Donald Duck cigar if it's a Cuban.'"

The funny thing is that we Americans already smoke a lot of Cuban cigars. For years I have been telling people—including CNN and other news organizations in interviews—that Americans illegally buy about 8 million to 10 million Cuban sticks a year. But earlier this year when I was living in Cuba for more than a month, I realized that I was grossly underestimating the amount.

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