On a roll: Will Cuban cigar sales hot up as US-Cuba relations thaw?

Posted: 09-Mar-15 12:54

Cuba and its cigars are virtually synonymous, and they sell well to European, Canadian and Chinese visitors. The US market, however, is tantalisingly in sight. What are the prospects for the cigar industry now that relations are being normalised?

On a roll: Will Cuban cigar sales hot up as US-Cuba relations thaw?

Cuban cigar makers are looking forward to the newly announced US rules that will allow more Americans to travel to the island and legally bring back small quantities of the coveted hand-rolled 'stogies' for the first time since the late 1950s.

Havana recently hosted its annual cigar festival, and as it shut its doors for another year officials said that on-island sales of 'habanos' were likely to double from 3 million to 6 million. Jorge Luis Fernandez Maique, vice-president of Habanos SA - a venture between Cuba's state-run Cubatabaco and the British company Altadis - said: "This is an important jump in just one year... it's a boom for the Cuban market."

That 'jump' would be only a small increase in the company's overall annual production, which reaches around 100 million premium units. That's just to satisfy mainly European and Chinese consumers, but the American market is the glittering prize as it's the world's largest market for cigars.

Habanos estimate that it could capture nearly a third of that market, should the US trade embargo fall. At the inauguration press conference for the 17th International Cigar Festival, Fernandez Maique said: "Some will think that it's a rather conservative figure, but that would make us into the market leaders."

His company's sales last year were $US439 million, which was down one per cent on 2013 ( blamed on delays in the tobacco harvest caused by bad weather and the negative impact of taxes in Europe).

The company could make around US $15million just from half of the current 600,000 US visitors taking home $50 worth of cigars - which is half of their recently agreed $100 tobacco and alcohol allowance... and barely touches the $3,000-4,000 limit extended to Canadians, Europeans and Chinese visitors. That's before export to the US is taken into account, which could see production numbers double.

Bad weather, poor harvests and overseas taxes aside, the lack of infrastructure is an immediate concern - with inadequate resources down to the very basis of the manufacturing chain, how can 200 million cigars be made?

In any case, only the approval of Congress can allow any of those things to happen. Since the late-2014 announcement that Washington and Havana would move to restore ties, getting the smaller and simpler matters sorted (such as reopening embassies) has taken far longer than expected.

It's fair to say that Cuba's cigar brands and vendors are looking forward to a healthy bump, if not a jump in sales, despite or even because of the current system and infrastructure. They are confident in a superior product that's practically synonymous with Cuba - now all they need is for Washington to get a move on so they can claim a slice of the American pie.


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