Habanos S.A. Predicts Big U.S. Sales, Shows 2015 Cigars

Habanos S.A. Predicts Big U.S. Sales, Shows 2015 Cigars

Cuban cigar sales in the United States could reach between 70 and 90 million cigars a year if the 53-year-old trade embargo between the two nations is lifted, according to two executives of Habanos S.A., the Cuban tobacco monopoly.

The sales projection would represent a market share of between 25 to 30 percent of the U.S market, said Jorge Luis Fernandez Maique, the commercial vice president of Habanos S.A. His Spanish counterpart, Javier Terrés de Ercilla, the vice president of development of Habanos S.A., added that Habanos' long-term goal is to attain the same level of sales that it has in the rest of the world where, according to its own statistics, it maintains a 70 percent market share.

"But the consumer will be the final judge of that," said Fernandez Maique. Terrés added that it could take 10 to 15 years or more before the market for Cuban cigars in the U.S. attains the same level as in the rest of the world.

The announcement of projected U.S. sales came at the opening press conference of the Festival de Habanos 2015, the 17th year that the festival has been held in Havana, Cuba. The festival is expected to draw more than 1,650 participants from 61 countries and 220 accredited journalists from 25 nations. The five-day event features a trade fair with 67 exhibitors from seven countries, including Italy, Canada, Germany, Spain, Brazil, China and Cuba.

Habanos experienced a 1 percent decline in revenues in 2014 versus 2013, to $439 million, the result of crisis in various parts of the world, including the Middle East and Russia, according to Fernandez Maique. He added that the world premium cigar market is estimated at 450 million cigars, of which Habanos has a 70 percent share in units, and an 80 percent share in terms of revenues. He said that there are currently 147 La Casas del Habanos around the world, and an additional 700 Habanos cigar specialists and 1,600 cigar outlets that carry the company's brands.

Spain remains the largest market for Cuban cigars, followed by France, China, Germany and then Swizterland. Cohiba is the country's largest selling brand, followed by Montecristo, Romeo y Julieta and Partagás. In terms of regional sales, Europe is its largest market by far, representing more than half of the company's sales.

The two executives said that they viewed the announcement in December by U.S. President Barack Obama and Cuban President Raul Castro to begin normalizing relations between the two nations as "a positive move." But Terrés Ercilla added that it was still too early to tell whether or not there would be an immediate impact on the sales of Cuban cigars.

"U.S. tourists can only bring back $100 worth of cigars, so that's not a lot," added Fernandez Maique.

When asked if the opening of the U.S. market would represent a challenge for the Cuban cigar industry to maintain quality while increasing production, Fernandez Maique said the industry would never compromise quality. He said the Cuban cigar industry had gone through a "difficult period" around the year 2000, and that it had learned a lesson never to compromise on quality again.

"We believe we are now a leader when it comes to quality. ... and we will protect that jealously," said Fernandez Maique.

Fernandez Maique also acknowledged several recent harvests had been difficult and presented some real challenges to the Cuban cigar industry. He said those difficulties explained the slow release in 2014 of some of the Edición Limitadas, including the Cohiba Robusto Supremo, which did not reach world markets until November or December.

 

But he said that in 2015, Habanos was planning to release three new cigars, which will be presented during the Festival: the Romeo y Julieta Wide Churchill Gran Reserva Cosecha 2009, the Montecristo 80th Aniversario and the La Gloria Cubana Edición Especial Casa del Habano. The Romeo y Julieta measures 5 1/8 inches by 55 ring gauge and will be sold in boxes of 15. The Montecristo 80th Aniversario (6 1/2 inch by 55) will have a production of 30,000 boxes. The La Gloria Cubana Edición Especial La Casa del Habano, which honors the retail chain's 25th anniversary, comes in boxes of 30 with 15 Pirámides (6 1/8 by 52) and 15 Robustos Extras (6 3/4 by 48).

The executives also highlighted the new Añejado line, which has been blended with tobaccos that have between five and eight years of age. The two cigars are the Romeo y Julieta Pirámides (6 1/8 by 52) and the Montecristo Churchill (7 by 47). Each cigar is sold in boxes of 25, and each has a special Añejado band.



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"Guys, You are getting way ahead of yourself! Due to Helm-Burton Act it will be a long time before the embargo is fully lifted. Exactly who knows but in 2 or 3 years from now it will all be the same if not even tightened up more when our next President is elected. It will be a long drawn out affair, for sure. " —March 9, 2015 15:54 PM
"Cuban cigar was the best primium cigar in the world! but the quality it's down!! the raw material is low and not optimal, the earth for cultivation is over exploited! The trade and his tactics are misleading and obsolete! If you want a good cuban cigar, they are need many change, for example: One brand, one factory; cigar cooperatives with private capital, etc. " —March 5, 2015 12:11 PM
"The Cubans have missed two generations of American cigar smokers, if you count 25 years as a generation. American smokers have become accustomed to tobaccos grown, and processed, in other parts of the world. Different flavors and smoking characteristics have become preferred (like Nicaraguan puros). These cigars are produced in a free market, as opposed to a monopoly, and have evolved to meet the desires of the consumer. After the dust settles, I don't think the Cubans will have a significant share of the US market. Like craft beer, quality cigars thrive on their individual characteristics and flavors, the Cubans don't know what we enjoy an I think, from the Cubans I've had, they know what they are in for. Don't forget, many of their best experts fled the island and, literally, found fertile soils elsewhere." —March 1, 2015 18:03 PM
"Hector, though I will fight viciously for your right to free speech, I find I disagree with allot of your observations. Here are my counter-points to your points. 1. The average consumer ‘will’ spend $30 on what you call an “unfermented” robusto, and do it time-and-time again; 1) because whether it’s fermented or not it’s a fantastic smoke, and 2) they’re doing it now with Padron, Davidoff and whole line of other facings. So, yes the average consumer will spend $30 bucks on a robusto if it’s that good - fermented or not. 2. Many Cuban cigars are 6 to 7 Euros now - for instance a Cohiba Siglo I. If you don’t see them hitting the shelves then, take a look at what’s happening now and you’ll see they already have. 3. There definitely “is” a backup of cigars waiting to hit our shelves as I am told by my sources in the Cuban market that Altadis/Imperial Tobacco have 1.5 billion dollars worth of Cubans in holding “right now”. Now whether they rotate them or not I don’t know, but I am told they “are there”. Just to let you know. 4. Swag? Come on Hector! Since when is a Behike BHK 52 swag? 5. I’m a tobacconist and though there is a “trend” toward large ring cigars, the vast majority of my customers ‘do not’ prefer them. And if you are partial to them you’ll find Cubans in that ring size as well (the Partagas Serie E for example). 6. As for counterfeits, I don’t buy stocks and bonds at a gas stations selling lottery tickets. Find you a reputable dealer and stick with them. 7. I don’t think the Chinese and European markets will even know the difference if and when Cubans become available in the US. Supply and demand will be met just like it is today “given” that Chinese buy them, and Europeans buy them; they’re a continent apart and still the demand is met. It will be like that if and when the US market opens. 8. Yes there will be trademark issues, but I don’t think a few million dollars spent on litigation is going to dramatically affect the price of a stick. That kind of money doesn’t even show up on their radar. 9. It’s ludicrous to think that everyone in the US who wants an authentic Cuban can now get one, and it’s demeaning to think that average people can’t spot a fake. Their just ‘not’ that stupid. So, as far as I can determine, it would be easy (if and when the embargo is dropped) to envision 25% to 30% of the market going to Cubans. It’s almost inevitable. These points you make are not circumspect to the whole truth (which is) Cuba makes some fantastic cigars and Americans would buy them if they could. And because they can‘t now the likelihood of a splurge of US purchasing once they become available is almost certain. I would agree that a 70% market share for Cuba is highly unlikely, but 25% to 30%? It’s in the bag!" —February 28, 2015 18:22 PM
"How muck tax will be placed upon these smokes? im sure that will just be another reason to give the FDA full control of the cigar market, we are screwed lol" —February 27, 2015 14:27 PM
"Seems to me like someone has an interest in keeping things the way they currently are. You forget to mention that those who want Cuban cigars already acquire them. Even though there are those that will spread propaganda that up to 80% are fakes, that isn't the case. When you see people proudly pulling out their fakes contained in limited edition glass top boxes and limited edition brands that do not exist, well that's laughable. A true cigar connoisseur KNOWS the difference. All cigars can be great. Like what you smoke, smoke what you like. The hype will die off and the market will stabilize after the newness wears off. respectfully, Ceasar Montoya Denver,CO " —February 25, 2015 13:08 PM
"AS FOR THE PURE CUBAN SUPPLY I SHALL PURCHASE DIRECTLY FROM HABANOS S.A. ALL OVER THE WORLD AND HAVE THEM SHIPPED TO ME DIRECTLY AND THE SAME GOES FOR A VERY LARGE SEGMENT OF PREMIUM CIGAR SMOKERS IN THE UNITED STATES- WILLING TO PAY FOR THE REAL DEAL FROM CUBA. THE MARKET IS READY IN THE UNITED STATES FOR THOSE THAT WANT THE VERY BEST AT ANY COST. THE PRICES IN EUROPE FROM HABANOS S.A. ARE IN LINE WITH THE PREMIUM CIGARS PRICES IN THE UNITED STATES NOW. IF YOU LOOK ON LINE- HABANOS S.A.CUBAN CIGARS ARE SELLING FROM A VARITY OF PRICE RANGE FOR ALL TO ENJOY AT ALL PRICE LEVELS THAT MATCH SALES PRICE OF CIGARS AVAILABLE IN THE UNITED STATES NOW- SO WHAT IS ALL THE NEGATIVE HYPE OTHER THAN TO PRESERVE A OVERPRICED MARKET OF NON-CUBA ORIGIN CIGAR COMPANIES THAT HAVE PREVAILED FOR THE LAST 50 YEARS THAT ARE ALWAYS ADVOCATING THAT THEIR TOBACCO IS OF ORIGINAL CUBAN SEED ORIGIN AND CONSTRUCTION TECHNIQUE WITH EQUAL CULTIVATION AND PLANTING SOIL FOR THE CUBAN EXPERIENCE OF PRE-EMBARGO. THE MYTH OF EQUAL CUBAN QUALITY BY THE PRESENT CIGAR PRODUCTION OUSIDE CUBA IS ABOUT TO BE BROKEN BY ITS OWN DESIRE TO BE COMPARED TO AND MARKETED AS THE CUBAN CIGAR ALTERNATIVE FOR THE LAST 50 YEARS. THE ECONOMY OF SCALE AND THE DESIRE FOR PREMIUM AUTHENTIC CUBAN CIGARS PRODUCTS WILL ALWAYS PREVAIL- OVER PRODUCTS THAT WANT TO BE COMPARED TO THE REAL DEAL. ALL WILL BE READY TO PURCHASE ONCE THE EXISTING CUBAN EMBARGO IS LIFTED AND THE CITIZENS OF THE UNITED STATES CAN ONCE AGAIN REGAIN THEIR RIGHTS OF FREE TRADE WITHOUT RESTRICTION. THE ABOVE CAPS WERE FOR THE DESIRE TO SHOUT AS LOUD AS POSSIBLE TO ONCE AGAIN BE FREE AS AN AMERICAN TO BUY WITHOUT POLITICAL EMBARGO RESTRICTIONS. ROBERT BENNETT HONOLULU, HAWAII " —February 25, 2015 00:57 AM
"Hi Gordon. Any idea when the 2015 Cuban cigar releases will be for sale in Cuba?" —February 24, 2015 18:57 PM
"How will the Cuban cigars industry deal with non cuban cigars sharing similiar names in the USA ? Cohiba et al.." —February 24, 2015 16:07 PM
"There is no way that Cuba will capture 25-30 percent of the U.S. market and while some may call their eventual goal of capturing up to 70% of the market ambitious; it must be called what it truly is, ridiculous. I believe there are several things you have to take into consideration when believing any of the drivel that Cuba shares, whether its the accuracy of any numbers, statistics or plan of action they present, they can only be called biased at best. To me there are just too many obstacles for them to have the smooth transition they are pitching. Let’s look at just some of the obstacles: 1. The “average” American consumer will undoubtedly smoke a Cuban, the forbidden fruit, but how many times will he or she will actually pay $30 for an unfermented robusto? 2. This embargo is more than 50 years in the making, and while American cigar consumers are loyal as their options, I don’t see $6 to $7 Cuban hitting your shelves. In this argument, brand loyal is code for meeting “allocated and budget smoking expenses”. 3. There is no backlog or surplus of cigars on hold in Cuba waiting to land on our shores. They can barely keep up with the worlds demand now, covertly importing Nicaraguan tobacco to satisfy them. 4. The higher end cigars, no names but you know who they are, will be the first to feel their presence. If you are spending $25 already, you will surely spend $30. I don’t know if the swag will be as good, but I do hear the backpacks they handout have all been to Angola! 5. The American consumer’s partiality towards large ring gauge cigars. Simple math, most Cuban’s are smaller ring gauges, currently with our market moved towards larger rings; more tobacco in a 7 x 70 Sancho Panza means two less coronas they can make or sell. 6. The counterfeit industry is probably the most anxious to see Habanos S.A.’s arrival. FYI, these boxes are going to get really good and harder than hell to spot!!! Trust me. 7. Do you think that the current market for Cuban cigars will sit idly by? While it is possible that the U.S. is already the largest market, there are no accurate numbers to prove it. Cuban cigars are status symbols and foreign markets (and most importantly their investors in Cuba) will not be cast aside, believe that. Yes the U.S. dollar is strong right now, but Europeans and Chinese businessmen will not be outbid or go away quietly for their puros. 8. By the time the first box of Cubans heads north, years of trademark litigation will have to be resolved, that will cost money and trust me it will be passed on. 9. The Cuban cigar is ever present in your local B&M (some of the best fakes live in the cigar cities of the U.S.) and if you want them you can get them, so to speak, whats the big deal? Are they expecting a surge in sales from Ken in Kansas and Norm from Nebraska? You don’t have to be an economist, but it does help to have excess to certain informational reports on Cuba. This whole Cuban cigar business is all about one thing, hard currency. Something the island has suffered through for years, especially after the fall of the Soviet Union. Cuba is in bad shape, deservingly so, its top 5 exports (Raw Sugar, Refined Petroleum, Nickel, Tobacco and Liquor) account for $6.5 billion dollars. Its 2nd largest source of revenue, tourism, brought in over $2 Billion. Can anybody guess what their top source of revenue was? Cash remittances from Cuban exiles approaching $3 Billion dollars, that billion with a “B” folks. Hard currency, “el billete” as they say on the street, is in high demand. Friends, do you think it matters to the Cubans if Americans buys their cigars? No, so why plan ahead to enter the market? “The more intricate the pattern, the simpler the underlying truth.” entry into a free American market will of course legally put Cuban cigars on American shelves for the first time in 50 years, but more importantly, they will drive the cost of these overrated cigars through the roof. Government experts predict anywhere from a 50% to 100% price increase. All the talk of upping production and taking over the market is propaganda, ironic huh? Why would Cuba flood an already scarce market with a product that people worldwide pay top dollar for and you can’t find? All the talk of taking over a large percentage of the marketplace is a smoke screen; first of all they can’t back up those claims with product and secondly, they don’t need to. Just the mention of making themselves so readily available in the U.S. will do exactly what Habanos S.A. and the government want, squeeze more hard currency out of their current buyers and start a price war with no downside for them." —February 24, 2015 16:06 PM