Now that relations with Cuba have thawed and we are no longer in a cold war with our neighbors the in Caribbean everyone wants to know where the Cuban Cigar market is headed.
Early this spring President Obama normalized relations with Cuba and get ready for a flood of Cuban cigars here in the U.S. or not, depending on your read of the political tea leaves and the production capabilities of Imperial Tobacco Group!
Some things you need to know about Cuban Cigars:
You can now travel back from Cuba and legally bring in a hundred bucks worth of Cuban Cigars. In the past it was blatantly illegal to come home with a box of cigars from Cuba; but this is no longer the case.
What’s going to happen to happen to downstream availability of Cuban Cigars? No one really knows what the big picture is. Habanos S.A. which is partially owned by the Cuban government and Imperial Tobacco Group PLS (which is UK based) have told the press they expect to take 30% of the premium cigar market here in the U.S. and/or around the rest of the world.
And, as they ramp up production of Cubans the next 3-5 years they anticipate taking a greater share of the overall cigar market. That’s a hard call; but we think Cubans will erode market share of many cigar manufacturers.
But, it’s been over 50 years since American cigar smokers have been able to fire up a Cuban stick; so, it’s hard to anticipate how their cigar consumption habits will change and the change in market share for other premium cigar manufactureres.
The U.S. cigar market is a huge one, we consume more cigars than any other country in the world. Right now the Dominican Republic is the largest importer to the U.S. cigar market, with Nicaragua and Honduras coming in next. Without the U.S. market Cuba still exports over 100 million premium cigars around the world.
Supply and Demand Issues for Cuban Cigars Have Shifted
But, the Cuban cigar manufacturers have not produced a product for the U.S. market in in over 50 years and many experts think the non Cuban manufacturers in Nicaragua, Honduras and the Dominican Republic have caught up to and/or surpassed the quality of Cuban Cigars. And, consumers don’t change their habits overnight.
And Cuban cigar manufacturers have supply chain and growing problems to meet the anticipated demand. They have not planted enough fields and cigars are akin to making premium scotch, requiring aging to make a great product.
The process of planting tobacco seeds and harvesting the tobacco leafs is very labor intensive, taking a great deal of time and the curing and aging processes are also time-intensive.
Making a hand made cigar that is individually hand rolled is hard to do and some think Tobacco Group PLS will not be able to ramp up things as quickly as they think they can.
Think About the French Wine Industry when Projecting Cuban Cigar Market Share
If you are a premium cigar smoker that is weighing these issues think about the wine industry. For centuries the wine industry was dominated by French companies but that is no longer the case.
Today wines from Napa and Sonoma counties and elsewhere have taken significant market shard from French growers and this may repeat itself with the Cuban cigar companies. Consumer tastes have shifted and the value of a hand made Cuba cigar may not be as significant as the Cuban government and Tobacco Group PLS think.
Stay tuned and if you have questions about cigars give us a call – we have answers about cigars, pipe tobacco, smoking accessories and any and all things tobacco related.