Cigar Industry

Cuba’s American Plan

The leaders of Habanos S.A. tell Cigar Aficionado about a long-term strategy for the U.S. market
| By Gordon Mott | From Damian Lewis, January/February 2016
Cuba’s American Plan
Photo/Lazaro Luis
The copresidents of Habanos S.A.: Luis Sánchez Harguindey (left) and Inocente Núñez Blanco are developing a gameplan for the day when Cuban cigars can be sold in the United States.

For the last 55 years, Cuba's cigar company has focused on the rest of the world, not the United States. Despite ignoring their northern neighbor on an official level, illegal shipments of millions of cigars provided ample evidence of the potential market across the Florida Straits.

December 17, 2014 changed everything. President Obama's announcement of a diplomatic initiative to restore normal relations with Cuba, and the expansion of legal travel opportunities for Americans there, triggered the conversation that had been on hold since 1962. If the U.S. government was moving toward normalization, it meant that the prospect of the trade embargo's end was a reality, and for Habanos S.A., the country's cigar monopoly, there was no time to waste.

For Habanos copresidents Inocente Núñez Blanco and Luis Sánchez Harguindey, the time is now.

"We are preparing. We are preparing the agricultural side. We are preparing the industrial side," says Núñez Blanco, who was named copresident in February.

"We saw the announcement as a very positive one," says Sánchez Harguindey, who has been copresident since 2012. "We don't know when [the end of the trade embargo] is going to happen, nor can we speculate. But it is a great opportunity to have access to a market that makes up two-thirds of the world market for premium cigars. We do believe in a very short period of time we can capture 20 to 25 percent of that market. We are excited about the possibilities."

While the executives declined to give exact details of their preparations, they spoke in general terms during a November 2015 interview in Havana.

"This year, we are increasing the acreage that is being planted in tobacco," says Núñez Blanco. "We are expanding mostly in traditional areas where tobacco has been grown before, and we are recovering farmland for tobacco production." He also said there is a big investment in agricultural technology for farmers, who are being given an unspecified incentive to take part in the program. "Our focus is in Pinar del Río, but we are also expanding plantings in the central region of the country so we can achieve the guarantee of both higher quantities of tobacco and higher quality," says Núñez Blanco, adding that the government is also trying to encourage new farmers to start planting tobacco.

The expansion program includes training new rollers and creating new factories dedicated to the production of premium cigars. The executives declined to say how many new factories would be built, nor would reveal how many factories are dedicated to premium cigars in Cuba today.

"It is all part of our development project," says Núñez Blanco. "Not just for production but for the benefit of the entire tobacco industry."

The potential reopening of the U.S. market also raises several other questions. When asked whether Cuba is considering new brand names that do not have trademark conflicts in the United States, Núñez Blanco says: "We are thinking about everything, from zero to 1,000, everything."

The copresidents reject any notion that Cuban cigar tobacco would become available to producers in other countries after the embargo ends. "No. That will never happen," says Núñez Blanco. "That is not part of our strategy, nor is it part of our thinking."

One piece of good news, at least at this point in the growing season, is that the 2015-2016 harvest appears to be on schedule. Núñez Blanco says that in most parts of Cuba plantings had been done ahead of schedule. Other sources told Cigar Aficionado that there had been some problems—and some replanting—due to heavy rains in late October, but the copresidents say that was never a widespread problem, and in fact farmers in most areas completed their planting early.

The positive agricultural report is important because Cuba continues to suffer from a shortage of tobacco, especially higher-grade tobaccos. Superpremium cigars, like the Cohiba Behike series and Hoyo de Monterrey Double Coronas were in short supply, or totally absent from retail shelves, in Havana in November, due in part to very bad harvests in 2012-13, 2013-14, and a small harvest in the most recent growing season, 2014-15.

"We do have a momentary shortage of tobacco," Núñez Blanco admits. "But we are trying to minimize it and find solutions, especially in regards to the balance in the market between our Ediciónes Regionales [Regional Editions] and our traditional brands."

Sánchez Harguindey suggests that the tobacco shortages complicated the delivery of some of the special cigars that Habanos produces every year, such as Edición Limitadas. "We are trying to increase efficiencies and productivity to get things to market when we announce them," he says. Cigar smokers have been awaiting the third Edición Limitada for 2015, the Hoyo de Monterrey Maravilla (9 inches long by 55 ring gauge). The other two ELs, the H. Upmann Magnum 56 and the Ramon Allones Club Allones arrived at tobacconists toward the end of last summer.

Several other special-production cigars revealed at the 2015 Festival del Habano were not yet available in the world's cigar shops as this issue went to press. Those include the Montecristo 80th Aniversario and the 2015 Gran Reserva, a Romeo y Julieta Wide Churchill Cosecha 2009.

The copresidents were coy about the plans for Cohiba in 2016, the brand's 50th anniversary. There were rumors, which the executives refuse to confirm, that the special Cohiba cigar released at the Festival would be a 60 ring gauge, or some kind of thicker ring gauge cigar. [Editors' Note: At the time of publication, details on the 2016 releases had yet to be confirmed. For updated information click here.]

"We have been following the trends of consumers with thicker cigars. We will never abandon thinner ring gauge cigars, but we have to follow the trends in the market. So, there may be some surprises in the bigger ring gauges," says Sánchez Harguindey.

In addition to Cohiba, the two other brands to be highlighted at the Festival are a Cuaba 20th Anniversary cigar, and the Hoyo de Monterrey Reserva Cosecha 2012, which will be the same size as an Epicure No. 2.

Sánchez Harguindey emphasizes that there will be no big changes in Habanos' special programs: Edición Limitadas, Regional Editions, Reservas, Gran Reservas and Añejados. "We have these five programs that are working very well," he says, "and we want to keep building on them."

Habanos intends to release new Añejados, or aged cigars, in 2016. They will join the Montecristo Churchill Añejados, and the Romeo y Julieta Pirámide Añejados. Sánchez Harguindey declined to reveal brand names for the new Añejados.

"Just like the situation with the Ediciónes Limitadas, we do not want to saturate the market with these special cigars, but given the value they have brought to us, it is clear that next year we are going to have some surprises in this category," he says.

Habanos releases nearly 40 new cigars annually, the bulk of them Regional Editions, which are cigars that are made for a specific Habanos market. Some examples are the Edmundo Dantes Conde 109 for Mexico, or the Diplomaticos Excelencia, a robusto size for Cuba in 2015.

"We always try to meet the needs and requests of our distributors, but in a rational way," says Sánchez Harguindey. "We want to maintain a balance between the Ediciónes Regionales and our other products."

When asked how many boxes of these special editions were planned, the copresidents say it varies according to the market, or the special cigar. "It can be 20,000 or 100,000 depending on the market, and the type of cigar," says Sánchez Harguindey. He says that especially applies to cigars like the Añejado series, where they do not release production figures. "They are limited-production cigars. That's all we will say," says Sánchez Harguindey.

He also reaffirms that the market will receive new packaging designs like the Selección de Petit Robustos 2015, which went on sale last summer. There have already been special selections of Robustos and Pirámides, and Sánchez Harguindey expects there will be others.

Sánchez Harguindey believes part of the special selection strategy is to highlight the specific taste of a brand. "A mark should have its own taste," he says. "Like in the United States, where brands highlight their origins, we want to highlight the brand character."

Núñez Blanco says that Cuba's continuing efforts against counterfeit cigars have made inroads. "We have fewer problems today," he says. "Can't say we don't have some problems, but there are less."

"With any luxury product, it is impossible to eradicate fakes," adds Sánchez Harguindey. "People will always try to imitate you. We keep trying new methods, but with our new bands, the holographs and the other security measures, they have helped. We have been working with a track-and-trace software that allows people to go online to check codes so they can be sure they are buying legitimate products. We are using all methods to try to minimize the problem."

The copresidents say that all their efforts—new products, anti-counterfeit measures, new social media efforts—are designed to bring Cuban cigars closer to the consumer with a great degree of confidence.

"With the markets we have, and the strategies we are implementing at the local level in places from Asia to Europe, and all the emerging countries, as well as in our emerging markets," says Sánchez Harguindey, "we are very enthusiastic about the future."

Cuban Habanos S.A.
"Who does Habanos S.A. think they are fooling ?, Themselves yes. Amicalement, Guy, France" —September 13, 2016 06:31 AM
"I was told by the owner of a major cigar company while at the IPCPR that due to the FDA regulations Cuban cigars will never be sold in the US. Legal or not. " —September 12, 2016 16:08 PM
"“The copresidents reject any notion that Cuban cigar tobacco would become available to producers in other countries after the embargo ends. "No. That will never happen,"” Anyone who ever had dreams of a Fuente-made Cuban cigar or Pepin-made Cuban cigar or DE-made Cuban cigar can forget them. It’s never going to happen. Read the above quote. Then read it again just so there’s no mistake. These Cuban officials just gave all the fanboys a hard kick in the pants with a dose of reality. Good night. " —May 2, 2016 19:39 PM

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