If the embargo ends

[goin' fer smoke]

(Question borrowed from Smoke magazine - it better phrased what I have been meaning to ask)

With Fidel’s recent health issues, the Cuban embargo is back on everyone’s mind.
If the embargo were lifted how would it affect the industry?

 

[gpugliese]

The market would be flooded and quality would plummet.

If Fidel croaks, his brother would take over. It's rumored that Raul is much worse than Fidel, so I don't think the embargo is going to be lifted anytime soon (which is fine by me).

 

[RX2010]

if the embargo keeps the cigars good, I can't see any good reason, as a selfish american, for it to be lifted

 

[CWS]

Habanos is a well oiled machine. I dont think the market will be flooded but I do see prices going up.

 

[Halon]

Yeah, I'd stockpile as many embargo habanos as I could, because I know prices will soar and/or quality will plummet.
Having high-quality habanos after the embargo ends would probably be an extremely wise investment.


TYLER

 

[Electric Sheep]

The first thing problem would be the brand-ownership/distribution issues. Altadias owns lots of the brands, but not all...General holds several, including most of the bigger names, and of course MATASA holds one as well (Fonseca). It may take YEARS to sort out those very complex issues.

After that, then you've got the potential quality drop off, which while not certain, COULD happen if Habanos SA decideds to radically increase production to meet the increased demand. Sure, lotsa CCs already end up here in the US, but if the embargo is lifted, every Tom, Dick, Harry, and Jane will want to buy Cubans. We could experience the same kind of supply/demand problem that happened during the boom--not that I was around then, but I've heard plenty of stories about those years.

Last but not least, there could be a substantial price hike; I'd bet that Habanos SA could put whatever price they wanted to on Cuban cigars and they'd sell like hotcakes regardess. At least, they could for a few years till the excitement wore off.

But of course, all that is conjecture. :yes:

 

[cvm4]

There would be a shortage and prices will go up because they would be taking from other regions shipments to give to the US. There is only so much good tobacco that can be produced at Vuelta Abajo. So to meet with demand, they could also grow in sub-par regions which would yield sub-par tobacco. But the impending court battle over who owns the cigar names will take a few years to get sorted out anyway.

 

[MichiganM]

There would be a shortage and prices will go up because they would be taking from other regions shipments to give to the US. There is only so much good tobacco that can be produced at Vuelta Abajo. So to meet with demand, they could also grow in sub-par regions which would yield sub-par tobacco. But the impending court battle over who owns the cigar names will take a few years to get sorted out anyway.

Pretty much what I was gonna say.

 

[jmatkins]

I agree with all of you wise men. I wounldn't be buying any CC any time soon if the embargo were lifted. The price would shoot and and shortly after the quality would go down. I need to try some good CC before this all happens.

 

[matalo]

Here is another tangent on this question. I think the prices for NCC will go down to peak the interest of the non cigar smoker and to keep the regular smoker loyal.

Your thoughts?

 

[smokem94]

Habanos is a well oiled machine. I dont think the market will be flooded but I do see prices going up.

I agree with Chuck.....one other issue is fakes......they would definitley go up also.

 

[Jwrussell]

There are a number of things hinting at the embargo actually ending in my mind. I know plenty disagree, but I think when Fidel finally croaks you'll see the embargo go away.

Now for the part people are REALLY going to disagree with. When the embargo goes down, yes, you'll see some increase in prices. IMMHO you will NOT see quality dramatically affected. Here's how I see it going down:

Habanos SA will set up a handful (at most) LCDH's in the states. If I had to guess, it would be NY and somewhere in Cali, though Miami might be high on the possibility list as well. Cuba will do everything they can to up production to help supply but what you will most likely end up with is higher prices and the same amount, or close to it, in product. I simply don't see Habanos SA cutting quality to get more product out. They'll simply live off the higher margins they are able to sell at.

Further, you won't see Habanos SA quality tobacco in current NC cigars. You will probably see quite a bit more of the Don Gabriel-like cigars out there with Cuban filler and something else as a wrapper. My guess is that Cuba will make a killing selling off it's lesser quality tobacco that might not have been worth all that much during the embargo to NC manufacturers who want to market Cuban tobacco to the US market, at least for a few years until the market stabilizes.

Now for the part that will affect our community the most: Source discussions. It may seem like an oxymoronic statement, but these are going to become even MORE verboten. In this age of internet shopping you'll see a ton more vendors pop up selling "authentic cuban cigars". They won't be. And your average joe cigar smoker will buy from them without ever knowing there is such a thing as BoTL, CW, etc. And the trusted vendors who do sell authentic cuban cigars will be guarded even closer than they are now.

Oh, and you can bet there will be some strong legislative pushes to totally ban, or in some other way inhibit, overseas shipments to the states. The states are going to want their tax dollars damnit.

Just my .02, and it may be all wrong...only time will tell.

 

[Scottological]

My guess is that Cuba will make a killing selling off it's lesser quality tobacco that might not have been worth all that much during the embargo to NC manufacturers who want to market Cuban tobacco to the US market, at least for a few years until the market stabilizes.

Now for the part that will affect our community the most: Source discussions. It may seem like an oxymoronic statement, but these are going to become even MORE verboten. In this age of internet shopping you'll see a ton more vendors pop up selling "authentic cuban cigars". They won't be. And your average joe cigar smoker will buy from them without ever knowing there is such a thing as BoTL, CW, etc. And the trusted vendors who do sell authentic cuban cigars will be guarded even closer than they are now.

Oh, and you can bet there will be some strong legislative pushes to totally ban, or in some other way inhibit, overseas shipments to the states. The states are going to want their tax dollars damnit.

Just my .02, and it may be all wrong...only time will tell.

Absolutely right. To my mind, one of the most exciting aspects of the post-embargo world will be to see what companies like Padron can do with Cuban tobacco. There's a whole world of fantastic hybrids out there just waiting to come into existence. However, if the lifting of the embargo coincides with market reforms within Cuba per se, we may see the Padrons of the world paying Cuban farmers top dollar for their product and thus effectively "stealing it away" from Habanos SA. But like I said, that's assuming there is market reform within Cuba and private ownership of the tobacco fields - which is not exactly guaranteed.

Regarding sources: they will still be valuable to US consumers for the same reason they're valuable to Canadian and British consumers - taxes. Also, we can be sure that Habanos SA will continue to keep their old stalwart customers happy with a consistent supply of the good stuff. Europe and Asia are, after all, larger than the US marke with a loyal customer base. Assuming Habanos SA has any business sense at all - which they do - they won't mess with their existing customers.

 

[carbolicsmoke]

There was a recent article I read - I think it was in the most recent Cigar magazine, that Habanos SA has been preparing for years for the embargos end. And towards that end they have prepared thousands of acres ready to cultivate when that happens - it will probably take a couple of years before the supply demand ratio reaches equilibrium but ultimately, after some growing pains I think we all benefit.

 

[Mikes]

You can bet on a LCDH on 6th street right here in Austin Texas. I have a friend who had a lcdh and still has the connects in Havana. I am sure with the franchise fee, a great store location, and my vast cigar knowledge:wink: this will happen assuming the embargo really does lift.

mikes

 

[sli38]

All the cigars coming from Cuba will be going through JR's and you can bet on a substantial increase in $$$$.......For the Cuban people I hope it happens soon, but I doubt it. I plan on having enough stashed away before the embargo ends to last through my retirement........

 

[pharmgator]

I'd make Don Alejandro an offer he couldn't refuse

 

[Wasch_24]

There are a number of things hinting at the embargo actually ending in my mind. I know plenty disagree, but I think when Fidel finally croaks you'll see the embargo go away.

Now for the part people are REALLY going to disagree with. When the embargo goes down, yes, you'll see some increase in prices. IMMHO you will NOT see quality dramatically affected. Here's how I see it going down:

Habanos SA will set up a handful (at most) LCDH's in the states. If I had to guess, it would be NY and somewhere in Cali, though Miami might be high on the possibility list as well. Cuba will do everything they can to up production to help supply but what you will most likely end up with is higher prices and the same amount, or close to it, in product. I simply don't see Habanos SA cutting quality to get more product out. They'll simply live off the higher margins they are able to sell at.

Further, you won't see Habanos SA quality tobacco in current NC cigars. You will probably see quite a bit more of the Don Gabriel-like cigars out there with Cuban filler and something else as a wrapper. My guess is that Cuba will make a killing selling off it's lesser quality tobacco that might not have been worth all that much during the embargo to NC manufacturers who want to market Cuban tobacco to the US market, at least for a few years until the market stabilizes.

Now for the part that will affect our community the most: Source discussions. It may seem like an oxymoronic statement, but these are going to become even MORE verboten. In this age of internet shopping you'll see a ton more vendors pop up selling "authentic cuban cigars". They won't be. And your average joe cigar smoker will buy from them without ever knowing there is such a thing as BoTL, CW, etc. And the trusted vendors who do sell authentic cuban cigars will be guarded even closer than they are now.

Oh, and you can bet there will be some strong legislative pushes to totally ban, or in some other way inhibit, overseas shipments to the states. The states are going to want their tax dollars damnit.

Just my .02, and it may be all wrong...only time will tell.

Excellent post and I agree with ALL of it.

 

[Ratbert]

Great, well thought-out post by jwrussell...it certainly seems like our Federal government would see overseas sales to the US as being a huge cash cow that they could tax the hell out of. You want Cuban cigars, my pretties? Well then pony up some big bucks because in my opinion, Uncle Sam is gonna want to take a huge bite out of what you're spending to have them sent here from Europe, Asia, etc. This would dovetail perfectly with the current anti-smoking movement to sin-tax tobacco dealers into submission.

 

[vperlman]

Here is another tangent on this question. I think the prices for NCC will go down to peak the interest of the non cigar smoker and to keep the regular smoker loyal.

Your thoughts?

From your lips to God's ears, my friend!