Cuban Cigar Prices Set to Rise if Embargo Ends
- Thread starter CeeGarOne
- Start date
ChuckMejia
The General
But all our great NC brands will remain reasonably priced right? 
Mr. McSquirelly
Joe Bananas
First of all, as a former hack reporter, this article contains no relevant information at all. I do respect David Savona. I think his journalism is as fair and balanced as one can expect from a writer who is tied-in deeply with industry folks. But the real issue here, I believe, is the massive international copyright litigation that Habanos S.A. will face. There are 27 brands in the Habanos S.A. profile, give or take a few machine-rolled cigars popular with Cubans. The greater question on this matter, which no publication or reporter has truly explored in all its depth, is how two of the largest tobacco conglomerates in the world are going to resolve the inevitable and pending copyright dispute.
Let's look at the facts for a moment. Habanos S.A. is jointly owned by Altadis S.A. and Cubatabaco, the state-owned arm of tobacco production. Altadis is a subsidiary of Imperial Tobacco, a massive conglomerate and worldwide purveyor of all things tobacco: cigars, cigarettes, pipe tobacco, snuff, and chewing tobacco. Currently they have the exclusive rights to the following Cuban and Dominican brands: H. Upmann, Montecristo, Quintero, Romeo y Julieta, Guantanamera, Juan Lopez, San Luis Rey, Trinidad. That's only 8 brands of 27. Once the Embargo has been lifted, these brands will most likely be available immediately. But can Habanos S.A. realistically expect to grab 70 percent of the market with these brands alone? Not likely. Prices for the American consumer will be higher probably than in U.K. and Canada. Would I buy a $500 box of Monte 2s, when I could buy a $180-$240 box of good Nicaraguans or Dominicans? Hell no. With higher demand comes higher prices and, most likely, lesser quality--another notch in the belt of Domestic producers.
Now let's consider General Cigar, a subsidiary of Swedish Match. Here's their profile direct from Wikipedia:
"In 2014, the US cigar market was estimated to more than 5 billion cigars (excluding little cigars) of which Swedish Match produced 1.1 billion sticks of cigars. The cigar market grew 9 percent compared to 2013 in terms of volume. Two thirds of the chewing tobacco sold in the US is produced by Swedish Match. Chewing tobacco is a 275 million US dollar market (manufacturers’ sales). In 2014, the operating profit for cigars and chewing tobacco increased by 8 percent to 1,109 MSEK (1,029 MSEK in 2013). In addition, Swedish Match holds a 49 percent ownership in Scandinavian Tobacco Group (STG) which is the world’s largest cigar producer and manufactures more than 50 percent of the world’s pipe tobacco. The company produces 3 billion cigars and 5,000 tons of pipe tobacco per year."
When Fidel Castro seized all the assets of private tobacco growers and manufacturers in defense of the state, the owners fled the island for greener pastures: Dominican Republic, Honduras, Nicaragua. They took with them the inalienable rights to their brands. Eventually, most of them sold to General Cigar. So essentially, the brands rightfully belong to General Cigar/Swedish Match. Habanos S.A. controls the rights to the tobacco used for these brands, but not the brands themselves. Brands like Bolivar, Ramon Allones, Punch, Cifuentes, La Gloria Cubana, Hoyo de Monterrey, Partagas: they all fall under General Cigar's exclusive rights of ownership, simply because the company bought the rights from the original exiled owners after the Cuban Revolution. Unless Habanos S.A./Altadis/Imperial Tobacco settles with General Cigar/Swedish Match out of court, I don't think GC will just roll over and allow Habanos S.A. to distribute freely in GC's American market. Nor should they. It would spell the end for them.
The U.S. cigar market is 5 billion cigars per annum. Habanos S.A. wants a 70-percent share of that market. That's roughly 3.5 billion cigars per year. It would take Habanos S.A. 20 years or more to capture that share of the market. Every Cuban citizen would be working in cigar factories! LOL! And sadly enough, the corrupt Castro regime would pocket every penny. I honestly don't think Congress wants to see that happen. Only if the Castro regime allows re-privatization of its tobacco industry will Congress lift the Embargo for cigars specifically. I don't think we will ever see all 27 brands in the U.S. market. We'll definitely see Altadis equivalents sooner than later, but at insanely high prices and lower quality due to overproduction. Duty-free vendors will still be the best option, but customs will most likely take a more aggressive approach to screening, because real tax dollars will be at stake. A lot of people are saying this will all happen soon, even by year's end. But ships of state change course slowly. Just my 2 cents, but that article--like so many others to date--seems to gloss over the real fundamental legal difficulties of this process. And I always end up with more questions than answers after reading them.
Let's look at the facts for a moment. Habanos S.A. is jointly owned by Altadis S.A. and Cubatabaco, the state-owned arm of tobacco production. Altadis is a subsidiary of Imperial Tobacco, a massive conglomerate and worldwide purveyor of all things tobacco: cigars, cigarettes, pipe tobacco, snuff, and chewing tobacco. Currently they have the exclusive rights to the following Cuban and Dominican brands: H. Upmann, Montecristo, Quintero, Romeo y Julieta, Guantanamera, Juan Lopez, San Luis Rey, Trinidad. That's only 8 brands of 27. Once the Embargo has been lifted, these brands will most likely be available immediately. But can Habanos S.A. realistically expect to grab 70 percent of the market with these brands alone? Not likely. Prices for the American consumer will be higher probably than in U.K. and Canada. Would I buy a $500 box of Monte 2s, when I could buy a $180-$240 box of good Nicaraguans or Dominicans? Hell no. With higher demand comes higher prices and, most likely, lesser quality--another notch in the belt of Domestic producers.
Now let's consider General Cigar, a subsidiary of Swedish Match. Here's their profile direct from Wikipedia:
"In 2014, the US cigar market was estimated to more than 5 billion cigars (excluding little cigars) of which Swedish Match produced 1.1 billion sticks of cigars. The cigar market grew 9 percent compared to 2013 in terms of volume. Two thirds of the chewing tobacco sold in the US is produced by Swedish Match. Chewing tobacco is a 275 million US dollar market (manufacturers’ sales). In 2014, the operating profit for cigars and chewing tobacco increased by 8 percent to 1,109 MSEK (1,029 MSEK in 2013). In addition, Swedish Match holds a 49 percent ownership in Scandinavian Tobacco Group (STG) which is the world’s largest cigar producer and manufactures more than 50 percent of the world’s pipe tobacco. The company produces 3 billion cigars and 5,000 tons of pipe tobacco per year."
When Fidel Castro seized all the assets of private tobacco growers and manufacturers in defense of the state, the owners fled the island for greener pastures: Dominican Republic, Honduras, Nicaragua. They took with them the inalienable rights to their brands. Eventually, most of them sold to General Cigar. So essentially, the brands rightfully belong to General Cigar/Swedish Match. Habanos S.A. controls the rights to the tobacco used for these brands, but not the brands themselves. Brands like Bolivar, Ramon Allones, Punch, Cifuentes, La Gloria Cubana, Hoyo de Monterrey, Partagas: they all fall under General Cigar's exclusive rights of ownership, simply because the company bought the rights from the original exiled owners after the Cuban Revolution. Unless Habanos S.A./Altadis/Imperial Tobacco settles with General Cigar/Swedish Match out of court, I don't think GC will just roll over and allow Habanos S.A. to distribute freely in GC's American market. Nor should they. It would spell the end for them.
The U.S. cigar market is 5 billion cigars per annum. Habanos S.A. wants a 70-percent share of that market. That's roughly 3.5 billion cigars per year. It would take Habanos S.A. 20 years or more to capture that share of the market. Every Cuban citizen would be working in cigar factories! LOL! And sadly enough, the corrupt Castro regime would pocket every penny. I honestly don't think Congress wants to see that happen. Only if the Castro regime allows re-privatization of its tobacco industry will Congress lift the Embargo for cigars specifically. I don't think we will ever see all 27 brands in the U.S. market. We'll definitely see Altadis equivalents sooner than later, but at insanely high prices and lower quality due to overproduction. Duty-free vendors will still be the best option, but customs will most likely take a more aggressive approach to screening, because real tax dollars will be at stake. A lot of people are saying this will all happen soon, even by year's end. But ships of state change course slowly. Just my 2 cents, but that article--like so many others to date--seems to gloss over the real fundamental legal difficulties of this process. And I always end up with more questions than answers after reading them.
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Solid write up and I tend to agree this is going to be a huge mess. Stock up on your cigars now I guess.
