The Montecristo War
From the Print Edition:
cigar case, Summer 93
(continued from page 3)
Members of Spain's political elite might be in for a surprise the next time they ask for the humidor at one of their preferred Madrid restaurants such as the Paradis, just around the corner from the Spanish Parliament. Montecristo, one of politicians' favorite smokes and the largest selling Cuban cigar brand in Spain, may be removed from the market if relations between the Spanish tobacco monopoly and the Cuban cigar marketing organization deteriorate further.
As of mid-March, Spain's Tabacalera and Cuba's Cubatabaco were holding a series of confidential meetings to discuss the future of Montecristo and a slew of other brands, including H. Upmann, Por Larrañaga, Partagas, Ramon Allones and La Gloria Cubana. In September 1991 Tabacalera bought the world rights--excluding Cuba, the United States and the Dominican Republic--for $10 million from Cuban Cigar Brands, a partnership formed by American tobacco giant Consolidated Cigar and Spain's Internacional Cifuentes. Court cases in Spain and France have, in effect, supported Tabacalera's ownership of the brands, leaving its relationship with Cubatabaco tenuous at best.
It's become a battle for Montecristo. Both Cubatabaco and Tabacalera know that nothing else sells like the prestigious brand with its unique brown band and yellow, gold and red decorated box. The stakes are high. Montecristo is Cuba's largest selling export cigar, with annual sales of 30 to 35 million cigars, or about half of the total exports of Cuban cigars. European retail sales of Montecristo were over $200 million last year. In 1991, the Spanish smoked more than 20 million Montecristos, accounting for 70 percent of the Cuban cigar market in Spain. During the same year, Montecristo comprised about 50 percent of the French market, or nearly six million cigars. Meanwhile, the British puffed away on two million "Monties" during the same period, while the Swiss took another one million.
Many of the cigars in the Montecristo range are the benchmarks for their respective sizes and shapes. "Montecristo is considered a reference point for all Cuban cigars," says Bruno Vuaille, a director with the French tobacco monopoly SEITA. "For Frenchmen, it is the first Cuban cigar they ask for." For example, Montecristo No. 4, a petite corona that measures 5 inches long by 42 ring gauge or 42/64 of an inch thick, is the world's most popular Cuban cigar, with annual sales of about 20 million. Other textbook Montecristo vitolas, or shapes, include the No. 2, the thick pyramid-shaped 6 inch by 52 cigar; the No. 1, the 6 1/2 inch by 42 lonsdale; and the No. 5, a short 4 inch by 42 cigar. (See accompanying story for production information.)
Although it has won court cases in Switzerland and Portugal, Cubatabaco is incensed over losing control of Montecristo in its two key markets, especially with financial damages now being accessed in both; in France alone they could total well above $100 million. To make things worse, last year's French court of appeals decision also banned the sale of Montecristos in France, sending Frenchmen across the border to Belgium, Switzerland, Spain and Britain in search of their favorite cigar. The sales of Cuban cigars in France have been cut in half. Moreover, the decision prohibits the French monopoly from producing its 100 percent Havana leaf cigarillo, the Mini-Montecristo, which had annual sales of more than 15 million.
"We can replace the sales of Montecristo with other brands, but it won't happen overnight," notes Vuaille of SEITA, who is now promoting its Mini-Quai d'Orsay cigarillo to replace the Mini-Montecristo. "For another two or three years, we are going to miss a lot in the Cuban cigar business. We can only hope that there is a solution to this whole thing."
What that solution will be remains to be seen, and Cubatabaco now refuses to comment on the situation. However, sources close to the upper echelon of Cubatabaco say the negotiations have been in a stalemate. "It was always understood that Tabacalera would sell the brands to Cubatabaco after it took control of them," confides one source. "Cubatabaco was happy to pay the same price for the brands. However, after gaining the ownership of the brands, Tabacalera wanted to become the European distributor for them. The Cubans are very upset."
Alfonso Gota Losada, Secretary to the board of Tabacalera, explains that when the company's board of directors approved the trademark purchase, it did not specify any future sale. He says that one of the main reasons for buying the brand was to avoid getting into a jam like their French counterparts. If Tabacalera was not the brand owner today, Montecristo probably would have been removed from the market by now, unless Cuban Cigar Brands had agreed otherwise. Now with the brands firmly in hand and the court decisions in Spain and France assuring its ownership in those markets, Tabacalera believes that it can come to an agreement with the Cubans. "We have the trademarks, but we don't have the cigars," Gota clarifies. "They have the cigars but can't sell them because we have the trademarks. We're condemned to understand each other. Tabacalera does not want a confrontation with Cubatabaco. We want them to recognize that we're the owners of the trademark. We're aware that they have the labor, the raw materials and the [cigar making] tradition."
The Cubans are not going to be easily won over. "We are dealing with the problem at the moment," maintained Francisco Padron, Director of Cubatabaco, during an interview last November. "Some things are more complicated than they seem .... If we cannot solve our problem with Tabacalera, we are going to launch a new brand name as a substitute for Montecristo. We would then withdraw the brand [Montecristo] from Spain. No problem."
Cubatabaco had been considering two replacement brands for Montecristo, Behike and Cubatabaco, but its agents vetoed the names during meetings in February. "These were ridiculous names," said one agent. "How could they think that these names could replace Montecristo?"
Vuaille echoes the views of many tobacco merchants affected by the feud. "No one wins in this situation," he declares. "It is a little like the situation in Yugoslavia; if the parties don't want to sign an agreement, what can you do?"
The ownership of Cuban cigar brands has long been contested. When most of the original brand owners fled the island after the Revolution in 1959, they took their trademarks with them and set up shop in various other countries including Jamaica, Honduras, the Dominican Republic, the United States and the Canary Islands. Some sold their trademarks later to major U.S. cigar companies such as Consolidated Cigar and General Cigar. This is why Americans buy cigars under the same label as Cuban brands, such as Partagas and Punch, but the cigars come from other countries. In fact, later this year Consolidated Cigar plans to introduce across America a Montecristo produced in the Dominican Republic. American cigar lovers have no other legal choice while the U.S. embargo against Cuba continues.
The Cubans, however, claim they still own the brands and have continued to produce most of the key ones since the Revolution. They believe that the brands belong to the country where they are produced--Cuba. "There is only one Partagas," declares Rafael Guerra, assistant director of the El Laguito Factory on the outskirts of Havana. "And Partagas is made in Havana. It is as simple as that."
Angel Pereia, a Havana-based historian who is working on a book about the history of Cuban cigar brands, adds that it was Cubatabaco which built Montecristo into what it is today. "The problem was that Montecristo was always second party to H. Upmann, ever since the former owners, the Menendez family, first owned H. Upmann," says Pereia. "It wasn't until after 1962 that the brand got any sort of push. Take the French market for example. From the brand's creation in the mid-'30s until 1958, Montecristo represented less than 1 percent of the French market. [Now, it is 50 percent of the market.] So, the development of Montecristo in France was all done after the Revolution. The court decision doesn't make sense."
Consolidated Cigar and Internacional Cifuentes concurrently began a string of court cases in Europe in the mid-'70s that questioned the ownership of Montecristo and other cigar brands. Consolidated Cigar had already bought the world rights to Montecristo, H. Upmann and Por Larrañaga, while Internacional Cifuentes, a Madrid-based company owned by the Cifuentes family, continued to own the trademarks of Partagas, Ramon Allones and other brands after the Cuban Revolution. Both companies had decided that it was time to take the Cubans to court because they had been selling millions of cigars a year in Europe under the disputed brands without their approval.
According to Dick DiMeola, Executive Vice-President and Chief Operating Officer of Consolidated Cigar, the court cases took years to come to fruition. The key European markets, Spain and France, seemed to be taking the longest with the various appeals through their court systems. When Tabacalera contacted Internacional Cifuentes a few years ago about buying its trademarks, Internacional Cifuentes then contacted Consolidated about coming into the deal, and they formed a partnership in the Bahamas. "It was the opportunity to finally realize something positive out of this after 15 years of litigation," notes DiMeola. "It was very appealing to us. The price was good, and when you think back and think about how many cigars you would have to manufacture and sell to make that sort of money, it was a pretty big figure. It was a sensible thing to do, although very emotional at the same time."
DiMeola says that they never asked Tabacalera why it wanted to buy the brands or if Cubatabaco was involved in any way. "Of course, it crossed our minds," he admits. "But they can do whatever they want with the trademarks. I always thought that the Cubans would be happier with the trademarks in the Spanish hands than in our hands, to be candid about it. We never attempted to influence them in any way about this."
Nonetheless, another lawsuit was introduced in France in early March. Hoping for similar results with the Montecristo case, Internacional Cifuentes is suing over Partagas. "It makes you wonder where it's all going to end," Vuaille says. "I don't know for how long this will go on, but it is going to be expensive."
While lighting up another Mini-Montecristo from SEITA's leftover stock, he adds, returning to the Tabacalera and Cubatabaco problems, "The Cubans are going to lose as the producers of Montecristo, and we and Tabacalera will lose as distributors. So, in the end all three of us are going to be losers."
Not everyone, however, was anxious about the situation. Cigar merchants outside of France reported an increased interest in Montecristo, and the thought of Spain losing the brand only added to their delight. "We have had some good rebound off of the Montecristo business in France," says Geoffrey Mairias of Desmond Sautter Ltd. in London. Montecristo and other Cuban cigar brands have never been contested in Britain due to its unique trademark laws. "We have customers who once only bought in France now buying from us. They were used to saving quite a bit of money buying Montecristo in France. Now they are just happy to get the cigars."
If the situation ends for the worse, Spain's politicians with an appetite for the brand can always follow the example of their counterparts in France. "Every serious cigar aficionado has one friend or another in either Geneva, London or Brussels," says one Paris cigar merchant. "They can always buy their Montecristos through them."
The Making Of Montecristo
Enrique Mons, one of Havana's great cigar aficionados and the head of the humidor room at La Casa de Habano, the city's most prestigious tobacconist, could smoke anything he wants, considering the vast selection of cigars in his shop--all the sizes and shapes of Cohiba, Hoyo de Monterrey and Punch, among others--but when he decides to smoke a cigar he usually picks a Montecristo. "I have always smoked a Montecristo", says Mons. "It's a unique cigar with unique character. The blend is rich, but more importantly, the wrappers are very special."
If Montecristo is not Cuba's best cigar, it is certainly its biggest and best known. Each year, more than 30 million cigars are shipped out of Havana bearing Montecristo's brown and white band. This huge volume makes it necessary for the brand to be produced in seven different factories. Most are in Havana including H. Upmann, La Corona, Partagas and Moncada. Most of these factories produce the ubiquitous Montecristo No. 4, called the Mareva by cigar rollers. About 20 million are made each year. H. Upmann has been making Montecristo the longest, since its original owners, the Menendez family, founded the brand in 1934.
The current factory for H. Upmann, called the Fabrica José Martí, is located behind the Partagas factory and a few minutes' walk from the Capitol. H. Upmann over the factory in 1944. Connoisseurs of the brand know that this factory makes the very best Montecristo cigars and scour cigar shops for boxes printed with the José Martí code on their underside--"JM."
Benito Molina, Manager of José Martí, wasn't surprised to hear this. "We have the best rollers here," he boasts, smiling smugly to himself with a large pyramid Montecristo No. 2 clenched between his teeth. "We control the production of Montecristo from here." Molina says that he and a group of technicians constantly monitor the production of Montecristo in the other factories. They select the tobacco from the Vuelta Abajo region and stipulate what goes into the blends for each cigar shape and size. In addition, nearly all of the wrappers are selected and processed at José Martí. "We really look for a special wrapper," Molina says. "It is not so much the color. What is more important is to have the oiliness come through the wrapper. This assures a rich smoke."
Besides oily wrappers, Montecristo cigars are often said to show a woody or light nutty character. Molina says this is due to how they age the wrappers, which are matured for a month in warehouses with cedar-lined walls. "This preserves the aromas and flavors of the tobacco," he explains.
Although there are 11 different cigars in the range, the best Montecristos are usually considered the larger vitolas. This includes the mammoth "A," 9 1/4 inch long by 47 ring gauge or 47/64 of an inch thick; the robust No. 2, a 6 1/8 inch long by 52 pyramid; the sleek Especial, 7 1/2 inch by 38; and the classic No. 1, a 6 1/2 inch by 42 lonsdale. The Menendez family originally thought of giving the different models numbers. "Apparently everybody had an opinion on what to call the vitolas of Montecristo, and Señor Menendez got tired of it," says Angel Pereira, a historian who is researching a "book on the various Cuban cigar brands. So he decided just to call them 1, 2, 3, 4 and 5."
The Montecristo "A" was introduced later, but the newest sizes are two thin and elegant Especiales, the normal one at 7 1/2 inches long, and the No. 2 at 6 inches. Both have a ring gauge of 38. These two cigars were apparently introduced in the early '70s, after the same format had been developed for Cohiba. The Especial is exactly the same size as the Cohiba Lancero, and the Especial No. 2is identical to the Cohiba Corona Especial.
Some aficionados actually prefer the two Montecristo vitolas to Cohiba, since they are often better made. In fact, Francisco Padron, Director of Cubatabaco, admitted this November that he was slightly disappointed in the quality of Cohiba Lanceros and that Montecristo's Especial seemed to be better made.
By comparison, the No. 2 and "A" are more difficult to produce than the Especial range and require only the most skilled hands to roll. Molina says that these two vitolas are exclusively produced at his factory. "We only use grade seven rollers for those two cigars," Molina says, which is the highest skill rating that a cigar roller can attain and may take five to seven years to achieve. "We have 200 rollers in total in this factory and only 40 can make the No. 2. Even fewer can make the 'A.'"
In all, Molina estimates that the production of the No. 2 equals about 1.2 million cigars while the "A," a mere 15,000. Most of the Montecristo "A"s are made by one man: Jesus Ortiz Dionisio Gonzales. He is said to be able to make 200 "A"s a day, which is superhuman considering the average roller does about half that with much smaller cigars. He is to cigar rolling what Babe Ruth was to baseball. Walking up the stairs of the Fabrica José Martí with Molina, one can see Ortiz sitting at his workbench with the warm afternoon sun shining on his lanky figure. He works quickly and proficiently, all alone without any interruptions. Molina catches a glimpse of him. "I spent 15 years rolling cigars myself," Molina muses, still admiring the superstar. "I was never a grade seven. I was a very small roller, only grade five."
With the opportunity to smoke dozens of different types of cigars, Molina is puffing away on a No. 3, the standard Montecristo corona. "The only problem with the 'A' is that it takes almost two hours to smoke," he complains, blowing smoke from his corona. "It would be a crime to smoke an 'A' and not finish it. That is why I prefer the 3. It is the perfect size and the perfect smoke."
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