Inocente Núñez Blanco and Luis Sánchez-Harguindey Pardo de Vera come across like brothers, or at the very least, best friends. They laugh. They joke. They finish each other’s sentences. The two co-presidents of Habanos S.A. have jointly led the company since 2012, and there’s no sign that either is ready for that partnership to end.
“Here, I have a cigar for you,” says Núñez Blanco, a 63-year-old Cuban. He pulls a cigar out of a black case and hands it to Sánchez-Harguindey, a dapper 51-year-old from Spain who arrived late after thinking his counterpart was still in his office down the hall at the company’s Havana headquarters. The cigar is the same brand and size Núñez is smoking, a Cohiba Siglo VI. They light up, kidding each other jovially about their miscommunication. Núñez Blanco is taking great pleasure in being the one who arrived on time.
The two colleagues are seated in a well-known hotel cigar bar in Cuba, lounging on a big sofa and a bulky armchair. To one side of the high-ceilinged room, there is a walk-in humidor and a cigar-rolling bench, and on the other side, a big cart with all of Cuba’s best rums. The floor-to-ceiling windows give a glimpse of the Capitolio—Havana’s replica of U.S. Congress—and the main square of the Parque Central. The executives are away from the office, and away from the daily pressures they face running one of the world’s most prestigious cigar companies, the Cuban cigar monopoly known as Habanos S.A.
They are both ready to talk.
Behikes are top of mind. The super-luxury line extension of the Cohiba brand has been in extremely short supply around the world. Shipments to distributors are infrequent and in extremely limited quantity. One distributor admitted those boxes never saw a retail shelf, but went straight to his best customers.
“People are saying all the time that we don’t have enough medio tiempo,” says Núñez Blanco, referring to a small, extremely potent leaf that emerges at the top of the stalk near the end of the tobacco plant’s life—it is a key ingredient in the Behike blend, with half a leaf used in the BHK 52 and the BHK 54 and a whole one in the BHK 56. “I’ve been to Pinar del Río. We have plenty of medio tiempo. The issue is wrapper. We don’t have enough high-quality wrapper.”
Sánchez-Harguindey jumps in. “Behike is a good example. Quality is the most important thing to us and we can’t put an inferior product out in the market, especially in our luxury brands. We are never going to stop making Behikes, as some people have expressed concerns that we might discontinue it. We have never thought that. It has a special place in our plans. It is the top luxury product in our portfolio.
But why then are the two co-presidents so certain that the Behike shortage is coming to end?
“We have seen a large quantity of tercios [large bales weighing up to 150 pounds] of wrapper in Pinar del Río. They have been aging, and Tabacuba [the production side of the tobacco business in Cuba] says they are ready for use,” says Núñez Blanco, although he declined to be specific about just how many bales were going to be available. “And it’s not just Behikes. We are going to have enough aged, high-quality wrapper for all the Limited Editions and other high-value products in the coming year.”
Sánchez-Harguindey continues: “The truth is we have generated greater demand for these high-value products, like the 50th Anniversary Cohiba, the Línea 1935 Montecristo or the Romeo y Julieta Gran Churchill, which we are going to start releasing very soon. But the wrappers on those products have to be perfect, no veins or stains. Our problem is thanks to us. We have created more demand for these high-value products. When you have large cigars in a luxury brand, they need a whole unblemished leaf. A little cigar like a mareva [the Cuban factory term for a petit corona], you can trim the leaf and still have a good-looking wrapper. So we know what we need, and we are working with Tabacuba to generate what we need.”
Both men chime in with the reasoning behind their prediction of an end to shortages: three excellent harvests in a row, starting in 2016-17 and running through both of the last two years, 2017-18 and 2018-19. The latter two crops also produced high-quality wrappers, according to the executives. While the 2016-17 crop initially looked promising for wrapper too, that tobacco developed green spots during the curing and aging process. So even though that leaf was of good quality, it wasn’t suitable for rolling around high-end products.
“Tobacco in the end is an agricultural product. When 2015-16 was a difficult season, it affected our production. What is true, however, is that Tabacuba has recovered during the last two crops and has produced extremely high-quality tobacco,” says Sánchez-Harguindey. Núñez Blanco quickly adds, “because of our difficulties in 2015, we worked very hard to improve the soil quality with fertilizers in the main Pinar del Río growing region beginning in 2016. With the new hybrids we are using, we have seen much better and much bigger wrapper leaf, and everyone knows that wrapper from Pinar del Río is a better leaf, with a unique texture, with a body rounded out with natural oils that give them better elasticity, and a brilliant tone and color.”
Núñez Blanco says the Cuban government has contracted for an increase in acreage for the 2019-2020 growing season and that it should put the total plantings above 30,000 hectares. He says last year’s production area barely reached 30,000 hectares, and that the country produced 30,000 tons of tobacco, an average of one ton per hectare. Sánchez-Harguindey emphasizes that part of the work with Tabacuba “is to increase the efficiency in the fields so we can produce more than one ton per hectare, and still maintain the highest quality possible.”
Most of the tobacco for Cuba’s fine cigars comes from Criollo 2010 and Corojo 2012 seeds, relatively new hybrids that have shown resilience to blue mold and other diseases, while producing bigger leaves. But, Núñez Blanco adds, some farmers are still using an older seed. “Some growers are still using Criollo 1998 because they like the results better, and they say their farms are not affected by the same diseases as other areas. But that’s their decision.”
The discussion of the growing season prompts another big question: how will the economic difficulties and the serious shortages of gasoline experienced last summer in Cuba affect the agricultural sector? “We officially inaugurated the growing season on October 10, so all the major producers started planting,” says Núñez Blanco. “We have stockpiled all the necessary resources for this season. We have enough fertilizers, fungicides and most importantly enough gas. The government knows how important tobacco is to the economy, and they have given us their maximum assurance that they can fulfill all our needs for this season.” Sánchez-Harguindey also asserts that the government is supplying all of Habanos and Tabacuba facilities with sufficient gas to maintain air conditioning and to ensure that all employees are able to get to their jobs. “We have not cut back on any of our essential activities,” he says.
One unessential activity that remains the focus of Habanos is the scourge of counterfeit cigars. “We have taken some specific measures,” Sánchez-Harguindey says, “such as new seals on the boxes, holograms on our bands and distributors are now putting their own seals on Habanos’ boxes. By 2024, because of a new European Union regulation, we will also have tracers on every box of cigars from the time they leave Cuba, right down to the retailers’ shelves.”
“We have a product with a lot of value, an elite product and there will always be counterfeits,” says Núñez Blanco. “But we are very active, and every time we find or hear about a problem we alert our distributors.” Both men say it is impossible to single out any one country or region where counterfeits are a bigger problem than elsewhere. But Sánchez-Harguindey says, “it is usually more common in countries with high tax rates because there is an even greater discrepancy between the official Habanos price and a counterfeit.”
New hostility between Cuba and the United States, triggered by a Trump Administration decision to halt all cruise ship stops and limit some air flights to provincial cities, doesn’t really worry either man. “We are a global company,” says Sánchez-Harguindey. “In our Cuba shops, our sales are down a little bit because there aren’t as many Americans coming here. But we are offsetting that with tourists from other parts of the world, and from growth in other markets. Last year, for instance, we showed growth in all our major markets, so if you have a political, or economic or social crisis in one territory, it is easier to offset it in other areas. In the past, we’ve experienced those shortfalls in the Middle East, in Asia, or in Europe, but we’ve always found growth in other areas.”
As for the long term, Núñez Blanco is clear: “We are looking forward to the prospect that American consumers will be able to buy our products. But it’s not here yet.”
One subject that is impossible to ignore is the announcement that Imperial Brands, the 50 percent stakeholder in Habanos S.A., is seeking a buyer for its premium tobacco business. Rumors have swirled repeatedly about a long list of potential buyers from China, Russia, the Middle East and Europe. But to date, there has been no announcement of who that buyer might be.
“As the Cuban shareholders, we want a new owner who will develop the business and is committed to the business and our product for the long term,” says Núñez Blanco. “Who will it be? We don’t know, but whoever it is they have to comply with that expectation.”
Although they are unable to talk specifics because of the pending sale, Sánchez-Harguindey will say, “There have been a lot of meetings with a lot of interested candidates and Imperial has already discarded a lot of them during this first phase because they didn’t comply with the profile it wanted.”
Núñez Blanco adds, “The Cuban negotiators will provide continuity and permanence for the work that we’ve been doing, and the help and collaboration that we have had in the past. That must be comprehended. Imperial knows that the buyer must observe these characteristics and requirements that are indispensible for the products we are making here. To preserve the prestige and the growth of the business. That’s what the Cuban part wants.”
Both men talk about preserving the continuity, the expertise and the collaboration they share. Núñez Blanco’s history harks to his youth when he studied agronomy at the Institute of Tobacco, graduating in 1973 after concentrating on tobacco; while he spent many years in banking and the ministry of the economy, his activities always related to the tobacco industry. Sánchez-Harguindey has been associated with Cuba and tobacco since 1998, arriving here first with Tabacalera, working for various co-presidents before taking the post himself in 2012. He has a deep knowledge of not only tobacco, but the tobacco industry.
“There’s a know-how that’s been gained over the years, and that isn’t going to be lost,” Sánchez-Harguindey says. Núñez Blanco nods in agreement.