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Davidoff's No. 1

Cigar Aficionado interviews Davidoff's director general Ernst Schneider.
Marvin R. Shanken
From the Print Edition:
Rush Limbaugh, Spring 94

(continued from page 4)

C.A.: Please answer this question; I am dying to know. Do you have inventories or do any of your subsidiaries have inventories of Davidoff Havanas?
Schneider: Well, you know that we have an agreement with Cubatabaco that since the first of January [of 1993] that the Davidoff Havana cigars should not be sold. They are falsifications from a legal point of view, and when somebody is selling Davidoff Havana cigars today, we can go to court and confiscate them.

C.A.: I understand you can't sell them today, but I'm asking whether you have any stocks left.
Schneider: We tried to sell as many as possible before the year-end of 1992. But we took back some from certain retailers to help them. So we have a small stock.

C.A.: Small? How small?
Schneider: A small stock. Small enough so that it is enough for you and me to smoke (laughs).

C.A.: That doesn't sound large enough to me. I had a vision of a huge warehouse with millions of cigars.
Schneider: No, no. There are not large stocks.

C.A.: Let's talk about a topic of great emotion: the U.S. embargo against Cuba. It affects you indirectly as a businessman with your new generation of Davidoff cigars. What percentage of your business is in the United States versus the rest of the world? How does the embargo or lifting of it affect your future plans in the United States?
Schneider: I feel that it will be very positive when the embargo is lifted because there are two points in my view. One is that what is forbidden is more interesting, and many people are smoking Havana cigars in the States to say "I have a Havana cigar." The day when the Havana cigar is free to be bought in the United States, this idea you can forget. The other point is that naturally when the Havana cigar becomes open to the American market, you will have a big turnover in the beginning, and then it will go down, and you will have to build up the market from the bottom. But it won't influence my market.

C.A.: At our recent cigar seminar in New York, the panel of industry experts believed that the embargo will not be lifted for the next five, six, seven years, and, then it would take another five to 10 years to rebuild stocks of aged cigars that would be like the cigars of old. So we are talking about 10 to 15 years before the United States could enjoy a volume of properly aged Cuban cigars. It is a long time.
Schneider: It is a long time. But I am more optimistic. I feel that when there is normalization with Cuban and American relations, you will really be able to do business like you should be able to; in four years' time, you can get good results in producing cigars there. Naturally, then you would need to add years to mature the cigars. But you should be able to get in that time what you need and what you like.

C.A.: If the embargo is lifted, what do you think the range of world demand for Havana cigars would be, after an initial period of boom?
Schneider: I already said that you have to build up the market from the bottom. Don't forget that before the embargo, the United States imported about 25 million to 28 million cigars; so this is a figure, and when you have to build up from the bottom of the market again, it will take time. Also, the American consumer is used to lighter cigars; that's clear.

C.A.: How would you estimate the global market? Do you think it would be 120 million?
Schneider: No.

C.A.: Would it be less?
Schneider: Less.

C.A.: Let's move to a more sensitive subject. When one thinks of Davidoff, there is always an issue of price. First, there's the American who looks at your price in relation to other premium brands like Macanudo and Partagas, which are $2, $3, or $4 each. Then there is the more obvious conflict in a market like London where a Havana Davidoff sells for about $15 and a Dominican Davidoff for about $10. Some people may think that the price/value relationship for your new cigars has been altered. What do you say to that?
Schneider: That's very simple. You know that in Havana, you have cigars from $2 up to $20. That's exactly the same situation with those from the Dominican Republic. Why? I said the main points to be successful include price and quality. When you know how many operations you have to do to make a cigar; what you have to do to find the best tobacco, the best leaves, the best binders; you have to stock for three years' time at least; what you have to do to make the best blends. And when you make the final cigars, tell me which pleasure that goes on for one hour or one-and-a-half hours costs less than my cigar?

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