It was no coincidence that Cuban President Fidel Castro joked about the quality and counterfeiting of Cuban cigars during a surprise speech at a gala dinner this February in Havana. The two subjects had been the top concerns for nearly everyone attending a five-day cigar festival called Habanos 2000, a celebration not only of the approaching millennium, but of the past, present and future of Cuban cigars as well. * "We are doing everything we can to combat this problem with counterfeits," said Manuel Garcia, a vice president of Habanos S.A., the government organization that globally markets and distributes Cuban cigars. Habanos organized the event, which attracted more than 1,000 cigar lovers, merchants and producers from around the world. "But there is only so much that you can do. Cuban cigars are like other expensive luxury products, such as Cartier watches or Chanel perfumes. They are all counterfeited." * Despite the widespread concern with counterfeits, the festival organizers devoted only one of the dozens of seminars and speeches to the topic. This left many participants leaving the event with little hope for improvement. "Counterfeiting is a huge problem in
Mexico," said Max Gutmann, the agent for Cuban cigars in that country. More than 2.8 million genuine Cuban cigars were sold there in 1998, but Gutmann estimates that "80 to 90 percent of all Cuban cigars sold in Mexico are counterfeit. We are trying to combat this problem but we are losing the battle." Nicholas Freeman, chairman of the United Kingdom's Cuban cigar agent, Hunters & Frankau, agreed. "Why are you solicited so much for counterfeit ci-gars in Havana?" he asked the panelists of the counterfeit seminar, which included a member of Habanos, a Cuban Customs official and a Canadian private investigator. "Can't it be stopped?"
Wilfredo Rodríguez of Cuban Customs said his organization confiscated about 530,000 fake cigars last year, compared to 275,000 in 1996. "A big problem is that many of the counterfeit cigars come from places outside of Cuba, such as Jamaica and Mexico," he said. To give Cubans their due, recent crackdowns on cigar peddling in the streets of Havana have greatly reduced the number of fake smokes sold to tourists.
The Cubans also may now have to deal with international crime syndicates that are dealing in phony habanos, according to panelist Rick Leswick, a private investigator specializing in counterfeited products in Canada. "Organized crime is involved in cigar counterfeiting now," he told the audience. "It is a good conduit for laundering money...counterfeiting knows no boundaries." He later added that his company had "discovered cocaine cartels that have gotten out of the coke business and into the cigar counterfeiting business. The profits are there but the penalties are not."
"The problem is even worse in America, where people cannot legally buy the real product," said Habanos's Garcia.
Cigar Aficionado estimates that 80 to 90 percent of the "Cuban" cigars in the United States are counterfeit. Only 6 million to 8 million legitimate Cuban cigars enter the United States each year.
Event participants were equally concerned with Cuba's insistence in rapidly increasing its cigar production. In 1998, Cuban factories produced 160 million handmade premium cigars and shipped nearly 130 million by the end of the year. This was a production increase of about 60 percent from 1997 and more than double the exports from just three years ago.
During his keynote speech to 600 guests at a seminar on the state of premium cigars, Marvin Shanken, editor and publisher of Cigar Aficionado, questioned how quality could be maintained with such large increases in production. He urged the Cuban government to rethink its strategy of planned production increases to 200 million cigars for this year and up to 240 million in 2000. (For a transcript of the speech, see "Cigars in the New Millennium," page 206.)
There were no poor quality or fake cigars smoked at the grand finale of the festival, The Dinner of the Millennium. Held at the grounds of the El Laguito Protocol Salon, the venue had been used only for official state events prior to the cigar dinner. More than 1,000 people packed the 1960s-era building, dressed in everything from slinky designer dresses and black woolen dinner jackets to jeans and snakeskin trousers. It was Central Park meets Gorky Park, with just a tiny bit of trailer park.
This was the fourth major gala cigar dinner for the Cubans, and it was clearly their best. The food, service and wine were unmatched for such a large-scale event in Cuba, although much of the success was due to the Spanish Meliá hotel group, which used its own staff for cooking and waiting. The dinner included such ambitious creations as poached salmon steaks stuffed with a fresh vegetable mousse and served with a light cream sauce and caviar. The wines from Spain's Rioja producer, Marques de Riscal, as well as Champagne from Moet & Chandon, put just about everyone in a festive mood. A thick and caramel-like Cognac from the House of Bisquit served at the end of the meal carried a Cohiba label. It's expected to be commercially available this year.
Habanos commissioned the El Laguito cigar factory--the main producer of Cohiba--to make three cigars for the dinner. The first was a standard Cohiba Siglo IV, a corona gorda-sized smoke, measuring 46 ring gauge by 5 5/8 inches. A special Trinidad cigar followed. It's a new cigar called the Robusto A, basically an elongated robusto with a 50 ring gauge by about 7 1/2 inches instead of the normal 5 inches. Something called a Cohiba Gran Corona was supposed to be the third cigar, but a highly popular Cohiba Esplendidos arrived at my table instead. It's a Churchill cigar, measuring 47 ring gauge by 7 inches.
While everyone was lighting up, Habanos presented its "Habanos Man of the Year" awards. Jean-Paul Kauffmann, a French publisher, won for communications; Raphael Levy, the Geneva-based agent for Cuban cigars in the Middle East and parts of Africa, won for business; and Jose Martinez Franco, owner of Estanco Magallanes in Madrid, won for retailing.
Castro arrived a short while after the awards ceremony, and all hell broke loose. He stole the show, with the crowd pushing forward to catch a glimpse of the aging revolutionary. "I almost feel like I am the one who is being auctioned off," he said, dressed in a blue double-breasted suit, white shirt and silver tie instead of his standard military fatigues.
In a sense, a part of Castro was auctioned off at the event, since he autographed the five specially made humidors, filled with choice Cuban smokes, that were auctioned off, raising $850,000 for Cuban medical aid.
Following the auction, one of the 21 Millennium Siglo XXI humidors was raffled. The immense treasure--6 1/2 feet wide, 3 1/2 feet high and 6 feet deep--was stuffed with 2,000 Cuban cigars across 20 brands. At least 2,000 tickets were sold at $100 each, and the winner was Zoltan P. Szabo, a 28-year-old Hungarian information systems executive living in Hong Kong.
Just when the room began to mellow, Castro launched into his surprise speech that covered much of the same material he used in 1997 at the Cohiba anniversary celebration. Addressing everything from cigars to Cuban education, Castro again assured the crowd that he "will never smoke again" but that "there are some things that I will never give up."
By the time he and his entourage left, the crowd was reeling on pungent tobacco, rich food, strong booze and mind-numbing rhetoric. Some people got so carried away that they were stuffing extra cigars, large ceramic ashtrays and crystal bottles of Cognac into their pockets. One man was even coveting the dinnerware on my table. But at that moment, the music stopped and the overhead lights were switched on. The party was over. Cigars in the New Millennium
On February 23, Marvin R. Shanken, editor and publisher of Cigar Aficionado, gave a keynote speech in Havana to an audience of more than 600 cigar manufacturers, retailers, distributors and aficionados from around the world. The occasion was a special symposium addressing the state of premium cigars. It was hosted by Habanos S.A., the global exporting organization for Cuban cigars. An edited transcript of the speech appears below.
Globalization is no longer a remote concept. It is here. Today. Now.
Who ever thought even five years ago that Chrysler would merge with Germany's auto leader, Mercedes-Benz? Or Deutsche Bank with America's Banker's Trust? Or British Petroleum with the American oil giant Amoco?
Or even that one of America's giant cigar companies, Consolidated Cigar Corporation, a shared owner of such international brands as Montecristo and H. Upmann, would be taken over by France's Seita, or Hollco-Rohr, with its Romeo y Julieta brand, among others, taken over by Spain's Tabacalera?
This fusion of global companies is happening faster and faster. At the same time, the computer has become a rocket engine that is transforming the business environment even more quickly and more profoundly. The high-tech revolution that once promised just increased productivity has now opened the door to the Internet and the World Wide Web.
The Net is changing commerce and information retrieval--forever. Companies like America Online, Yahoo, Amazon.com, and Microsoft will be household names tomorrow, as Standard Oil, General Motors and Macy's were yesterday. It's just a matter of time before online sales of cigars join books, CDs and other consumer products.
The net effect is simple. These companies, and the technology behind their growth, are bringing the world closer together, making it smaller and smaller.
The global information revolution, however, is not confined to commerce. People all over the world are more and more likely to move in unison. A trend in one country pops up on the other side of the planet one or two years later. In fact, there's already a common, if mostly unnoticed, phenomenon happening everywhere today.
More and more consumers, not just the super-rich, want to enjoy the best of everything: the good life. Each of us, rewarding ourselves for a job well done. A glass of wine. A round of golf. A vacation to an exotic island. A sporty convertible. An expensive watch. Fine caviar. A 20-year-old Cognac. A good cigar.
And so begins our story. For cigars have turned the world upside down in the last decade of the twentieth century...for the better! This new world of cigars affects all of us in this room. Yet here in Cuba, the epicenter of the handmade cigar--thankfully, the tradition of cigars has changed very little.
On my first trip to Cuba, in 1991, to research a cover story on Cuban cigars to appear in Wine Spectator, another consumer magazine my company owns, I was spellbound while visiting the great cigar factories of Havana. My colleague James Suckling and I met cigar rollers, many of whom had sat at the same workbench for 30, 40, 50 years.
As we toured the Romeo y Julieta factory, we heard the clapping noise of the chavetas--the rollers were welcoming us. The sound gave us goose bumps. But I remember the faces of the rollers--showing the strains of age, yet filled with great pride and a glowing sense of dignity. Every one of them dedicated to the art of cigar making. Doing God's work.
Then we traveled to Pinar del Río, to the Vuelta Abajo, to visit the vegas that grow the finest wrapper tobacco in the world. There, we met many farm workers, also people with enormous dedication.
Our trip to Cuba in 1991 seems like yesterday. I have many rich memories of that visit. But little did I know just how much the world of cigars was going to change between then and now.
At the time, however, the cigar's image had been dragged so low that people, especially in America, would not dare smoke in public for fear of a nasty look or verbal abuse. Movies featuring gangsters such as Al Capone, Lucky Luciano and Bugsy Siegel did not help raise the cigar's image. Add to that negative image the attacks of the health police and politicians bent on destroying tobacco, and the cigar smoker's world was crumbling around him.
In early 1993, the Environmental Protection Agency published a research report concluding that secondhand smoke kills 3,000 people a year in the United States. The anti-cigar fanatics had been handed a potent weapon, and it has been used successfully against us. At last count, more than 700 city, state and national laws restricting the enjoyment of cigars in public places have been passed.
That figure is astounding, but it's even more outrageous because the EPA's report was discredited last year by a federal judge in North Carolina. His ruling said: "The EPA publicly committed to a conclusion before research had begun; adjusted established procedure and scientific norms to validate the agency's public conclusion; failed to disclose important findings and reasonings; and left significant questions without answers." My editorials in Cigar Aficionado had been saying the same thing for five years.
In California, they just imposed new taxes that will increase the tax on cigars by 73.5 percent by August. This means a cigar that cost $4 this past December will cost $7 in September. Many tobacconists will go out of business. That law comes within the context of California already outlawing smoking in all workplaces and virtually all public places, including bars; some cities even ban smoking outdoors. Once a government imposes taxes and/or restrictions, don't expect any rollbacks.
Massachusetts just passed a new regulation that attempts to impose the same kind of warning labels on cigars as cigarettes, including cigar advertising.
In short, our rights have been, and are being, taken away. In many places in America, if you are dining at a restaurant and you want an after-dinner drink and a fine cigar, it's against the law. Go to the bar. Go outside. If it's raining, tough luck.
That scenario gives you some idea of the climate in which Cigar Aficionado magazine was born in 1992, and the ongoing battle against the anti-smoking forces. When people heard about the idea, the response was always the same: "A cigar magazine? You've got to be crazy." Maybe they were right.
But I'll tell you a secret. I didn't care.
Being here in Havana this morning is especially significant for me, because the idea for a cigar magazine really began right here, during my visit in 1991.
So, without research, without budgets and without a business plan, I just closed my eyes and listened to my heart.
Thus in September 1992, a new publishing category was created for the lover of the good life: the first cigar magazine. At the time, there were about 3 million cigar smokers in the United States. Today, there are an estimated 15 million cigar smokers in the United States.
Cigar Aficionado's mission seven years ago was simple and direct: "To educate and entertain. To help expand the market by introducing more and more people to the pleasures of a fine cigar." That mission remains the same today.
One of the early controversies we faced was whether or not to include Cuban cigars in our tasting reports. With the embargo waving its giant tail, thus making Cuban cigars illegal in the United States, clearly it was politically incorrect or maybe even "political suicide" to include Cuban cigar coverage in Cigar Aficionado.
Our view was simple. We could not, we would not, publish a serious international journal on premium cigars without including Cuban cigars. For a London- or Madrid-based publishing company, this would not have even been a question. But for a New York-based American publishing company, it caused considerable governmental and domestic cigar industry tension. Neither wanted it!
The magazine's international success supports our decision without further explanation. But when, in the summer of 1994, I interviewed President Castro for a cover story, the outrage in the United States from the Cuban-American community was considerable. Nevertheless, the issue was a great success because people in America, and around the world, wanted to hear from, and learn more about, a world leader.
While I don't want to be political today, I see a connection between what Cigar Aficionado has done to educate people about cigars and the potential for people in America to learn more about Cuba. The days of the cold war are far behind us now, and in every sector of the United States--in politics, in business and certainly among the American people--there is a growing momentum to end the misunderstandings of the past and begin a new era. The curiosity about Cuba is at an all-time high. And the desire is strong to be involved in the new Cuba that is being shaped today with the help and investment of the rest of the world. The time has come for new approaches on both sides of the Florida straits. But the big question remains: When will the embargo end?
And what will the end of the embargo mean for Cuban cigars? Will exports increase? Will prices increase? Will the total market grow? Will American smokers be willing to pay two or three times what they now pay for a Dominican smoke? Will they prefer the milder taste they have been smoking or the richer, spicier, stronger taste of a Cuban cigar? There is a multitude of questions, all without answers today.
As an industry, Cuba must ask itself: "Where do we go from here? Do we grow? Do we need to grow? What if we don't? What if we can't?"
Again, the future is unpredictable.
One dimension of the future in the cigar industry is absolutely clear. I dare say it's the difference between life and death for the industry. Consumers now, and more so in the future--your customers today, and future customers--will only pay for quality.
In the United States, we learned about quantity versus quality in 1997 and 1998, when more than 100 million poor quality, "no-name" cigars flooded the market. They were only on the market because of an acute shortage of established brands. Companies like Consolidated Cigar, General Cigar and Arturo Fuente were so short of cigars that they did not open new retail accounts for over two years. Once these brands were back on shelves, the no-name brands died a quick death, and their manufacturers were forced to dump cigars to discounters at pennies on the dollar.
Yes, quality matters. And quality will matter much more in the future. Price also matters. The manufacturers must set prices that are realistic. Importers, distributors and retailers must take reasonable markups. The days of hoarding "hot" or "rare" cigars are gone. Offer the cigar lover a quality cigar at a fair price or lose their business. Competition will get keener each year.
In Cigar Aficionado's robusto tasting in 1994, the top four cigars were Cuban. In our most recent issue [February], Churchills from Nicaragua, Honduras and Costa Rica, as well as Cuba, received high marks. Only two of the top six cigars were Cuban.
The message here is clear. While Cuban cigars continue to receive, on average, the highest marks in our blind tastings, cigars from the other premium cigar-producing nations are narrowing the gap. The non-Cuban cigars are stronger in taste than they had been before, in the tradition of full-bodied Cuban cigars.
Given the slowdown in the U.S. market in 1997 and 1998, many of those manufacturers who have uncontested international trademarks, such as Macanudo, Fuente, Avo, Davidoff and Ashton, are shipping their cigars, more and more, to world markets. They're receiving a warm reception.
Cuba makes great cigars. I remember great smoking moments, such as a powerful yet elegant Cohiba Esplendido, a silky smooth Montecristo No. 2, a rich, earthy Partagas Lusitania. These cigars have the finest tobaccos, and they're rolled by extraordinarily dedicated and gifted workers. But today, not all of Cuba's cigar production is up to that very special and high standard. Consistency has become a problem.
And this has been further aggravated by the explosion of counterfeit Cuban cigars.
As someone who loves cigars and cares deeply about the future health of the cigar industry, I can only ask Cuba to do the same thing that I have asked manufacturers in other countries to do. Cuba must review its premium cigar production plans. No country can expand production from 50 million to a targeted 240 million mostly handmade cigars in six years without compromising quality. It just can't be done. By any country. Including Cuba.
Let Cuba continue to expand tourism, increase production of sugar, nickel and biotech products to help aid its economic needs, but it must safeguard its most sought-after prestige export. Cigars are not commodities like rice or sugar. The only way to preserve the integrity of the Cuban cigar is to slow down its production growth.
To my mind, Cuba's exports of handmade cigars are already too high. Part of the mystique and romance of a Cohiba Robusto or a Hoyo de Monterrey Double Corona is the frustrating search for these uncommon treasures. Better to maintain their unique image and deliver a consistently high, world-class product at a high price, each and every time, than to compromise quality and fill the distribution channels to overflowing. Don't make a Cuban cigar easy to buy.
In my interview with President Castro in 1994, he said, and I quote, "The cigar has made our country famous. It has given us prestige. This prestige must be protected."
Cuba needs to tell cigar lovers of the world that it cares about its cigars, cares about the quality of its exports, more than the profits they generate. It is a very difficult philosophy given the difficulties of the Cuban economy.
I've shown you how cigar quality is improving in other countries. That improvement is only going to continue. Many cigar manufacturers have already slowed down their production. Tobacco is aging longer. Rollers are getting better trained and more experienced. And cigars are resting longer before getting shipped out the door. Cuba must do the same. That translates into better quality.
We believe that the world market will be a growing market for the handmade premium cigar, but only if the market is truly understood and supply and demand factors are considered. We all need to protect and defend the very integrity of the craft.
I wish for every cigar aficionado in the world, including Americans, to experience the pleasure of lighting up one of Cuba's great cigars. A Romeo y Julieta Churchill, a Punch Punch, a Montecristo "A". Only then will they understand just how great a great cigar can be.
During this conference, no doubt this complex market dilemma will be addressed by others. Let sound judgment, not politics or economics, prevail.
And to each of you, I offer my best wishes and a toast to your great national treasure, the Cuban cigar.