Pedro Perez—Former President, Tabacalera
A talk with the man behind Tabacalera, Spain's $7 billion tobacco company.
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Perez: In the north of Spain. Within the Farias brand, we have the so called Farias Centenario. The wrapper is Cuban. It's wonderful. It's the king of the machine-made cigars.
CA: Are all 5 million of your handmade cigars Cuban?
Perez: No. But the blends for them all contain Cuban tobacco. For instance, the leading brand is Condal. Condal is a handmade Canary Island cigar. I am tempted to say the percentage of Cuban tobacco, but this, as you know, is a secret. Condal, also, Peñamil. By the way, the Peñamil produced in the Canary Islands is quite different to the Peñamil produced in the United States by Swisher. The two cigars have nothing to do with each other because of their different blends.
CA: So the 5 million handmade cigars are all from the Canary Islands?
CA: Are you not also the largest buyer of handmade cigars produced in Cuba?
CA: Are all the cigars for consumption in Spain?
CA: It's very interesting. You produce your own cigars, using bulk Cuban tobacco in the Canary Islands, but you also supply the largest market in the world for Cuban cigars. I was told a few years ago that roughly 50 percent of the exports of all Cuban cigars go to Tabacalera, and mixed into that is a sizable amount of machine-made cigars. Last year, I understand that Cuba exported something like 55 million cigars of which 10 million were machine-made and 45 million were handmade. Those are the rough numbers I recall. So you bought 27 million?
Perez: Last year, we bought 27 million cigars, most of them handmade.
CA: That figure does not include any machine-made?
Perez: The Cuban machine-made cigars represent a very small percentage of our purchase.
CA: So what you're saying is that your share of the exported Cuban handmade cigars is more than 50 percent. If you're saying you purchased 27 million handmade cigars and the Cubans told me they exported a total of 55 million less about 10 million machine-made for a total of 45 million handmade, then Tabacalera represents roughly 60 percent of Cuba's handmade cigar exports?
Perez: Yes, but last year was a very particular year because of the shortages of tobacco.
CA: At its peak in the late 1970s and early '80s, when Cuba was exporting 90 to 100 million cigars, what was the highest quantity that you ever purchased?
Perez: In the past? In the Seventies? We bought about 52 million Cuban cigars.
CA: Of the 52 million cigars, how many were machine-made?
Perez: A very small percentage.
CA: There is a worldwide shortage of Cuban cigars, and most smokers of Cuban cigars will take anything they can get. What is it about your relationship with Cuba that has allowed Spain to be such a dominant partner?
Perez: We should start by saying that we, Tabacalera, invented the cigar. It was in our Seville factory that the cigar as we know it today was invented. It was there that the idea of the filler, binder, and wrapper was invented. The idea was then exported to Cuba.
CA: So Spaniards moved to Cuba and built the cigar factories?
Perez: Yes, they were Spaniards.
CA: I see. The cigar originated in Spain, but then production gravitated to Cuba where the tobacco was grown?
Perez: Right. This means that we always have been the first tobacco, leaf and cigar market for Cuba. It's been like that forever. It means also that for Cuba, we are their largest market. By far. As I mentioned, in rough terms, we buy 40 percent to 50 percent of the total cigar production and 75 percent of the total leaf production for export.
CA: How big are leaf exports?
Perez: In value terms, it's more or less equivalent to cigars, which is about $30 to $35 million worth of cigars.
CA: Does that mean that your total purchases of bulk tobacco and finished cigars equal about $70 million?
Perez: Yes. We buy roughly $70 million [worth] per year.
CA: Can I assume that Spain is also the largest overall trading partner for Cuba?
CA: Given the long-standing ties between Spain and Cuba, was the relationship altered during the period when the Soviet Union was a major financial partner with Cuba?
Perez: Not at all. Perhaps just to stress how profound the roots are between the two countries, you can examine the time of Franco's dictatorship in Spain [while] Fidel Castro was in power in Cuba. So, politically the two countries were complete opposites, but regardless, Spain was always the first western country trading with Cuba.
CA: In terms of the 27 million cigars which you import and distribute in Spain, what are the brands and sizes?
Perez: The structure more or less is the following: 50 percent of total consumption is Montecristo. Within Montecristo, half the demand is the No. 4 (petit corona). But, for instance, the No. 2 (torpedo) is also very appreciated. The second brand is Fonseca and the third is Partagas.