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Winter, 2007

Another Good Year for Habanos

by Reinhold C. Widmayer

The market for Cuban cigars continues to grow worldwide, with regional and limited editions adding to their success.

As 1,000-plus visitors from some 60 countries celebrated their love for Cuban smokes at the IX Festival del Habano recently in Havana, the officials of Habanos S.A. raised their glasses to a successful 2006.

Cuban-made cigars have held the No. 1 spot five years in a row in the world market of premium cigars. With 80% market share worldwide (excluding the United States, where the embargo still bans Cuban products from the shelves) the classic Havana dominates the palates of aficionados around the globe.

And even in the United States, the myth of Cuba’s brown gold is a desirable forbidden fruit to most of the country’s cigar lovers. At last count, senior executives at Habanos S.A. estimated that 5 mn Cuban cigars — about 3.2% of the country’s production — are consumed by Americans annually, in addition to about 3 mn counterfeits (many of them originating from Nicaragua and the Dominican Republic).

Habanos S.A. commercializes Cuban cigars in more than 120 countries. The corporation is a joint venture between the island’s government and the European Altadis Group (which is half French and half Spanish).

Further growth expected
The United States constitutes the main market for premium, handmade cigars, with a consumption of 330 mn units in 2005, according to the most recent statistics released by the Cigar Association of America (CAA). But “with the exclusion of the USA, the quota for Cuban cigars reaches 80%,” said Manuel García, the commercial vice-president of Habanos S.A., “with a considerable growth in relation to the previous period and considerable increases in the period that recently concluded.” 

Europe is the main market for Cuban premium cigars with 67% of the total sales, followed by America with 16%, the Middle East with 12%, and the Asia-Pacific region with 5%. As for individual countries, Spain is still No. 1, with more than 30% of sales, followed by France, Germany, the market in Cuban foreign currencies (tourists to Cuba), and Switzerland. 

Cuba sold about 160 mn of its world-famous cigars in 2005, in line with recent years’ sales. Sales numbers over the past few years have averaged around 150 mn cigars or US$350 mn (282 mn euros) annually.

For 2006, Garcia expects significant growth, mainly from sales in the Far East and in the new member states of the European Union. According to Natalja Sokolova from the Cigarhouse in Tallinn, Estonia, “For us, there was already a dramatic increase three and four years ago … about 20 to 25% annually. That was related to the opening of cruise ship lines to Tallinn. The growing popularity of cigars and a higher customer awareness and knowledge are good for the business. Last year, we noticed about 10% growth compared to 2005.” In Estonia, the Montecristo No. 4 is by far the best-selling Cuban cigar, followed by Romeo y Julieta No. 3 and No. 1. The Cohiba Siglo II and Siglo I round out the top five Havanas.

In Germany, Chrisoph Puszkar, marketing manager at 5th Avenue Products Trading GmbH, the exclusive importer of Cuban cigars, said that Havanas are gaining strength there as well. “A lot of that has to do with quality. The problems we had faced about five years ago are long solved.” In Germany, sales of lower priced vitolas, such as the Romeo y Julieta Mille Fleur, the Quintero Brevas, or Partagás Aristocrats, have increased significantly whereas the higher priced cigars show a slower growth rate. In other markets, however, the main focus is on the expensive brands like Cohiba.

“I would say that in Germany, cigars from Cuba account for roughly 45% in volume and probably 50% of total cigar revenues,” Puszkar said.

A glimpse Down Under
Although a relatively new market, steady growth over the past 10 years now ensures that just over 1 mn Cuban cigars are sold in Australia each year — not bad for a country with a population of just over 20 mn.

Returning from a trip to Australia, José Antonio Candia, marketing specialist with Habanos S.A., acknowledged that he likes what he has seen there. “After visiting a number of stores and lounges, it is evident that many people are keen on cigars and are helping develop a cigar culture. Australia is a very young market but smokers are becoming more aware of the Cuban culture and tradition of cigars,” he said.

Visiting Melbourne, Sydney, and Brisbane, Candia also noted the challenges ahead with anti-smoking laws and he applauds many cigar lounges that are staying open despite increased political and financial pressure. As a guest of Pacific Cigar Co., the licensed distributor of Habanos S.A. cigars in the Asia-Pacific region, he said he looks forward to further growth of the Australian market.

The Casa del Habano concept
An increasingly important distribution channel for Havanas are the nearly 100 Casa del Habano specialty shops (www.lacasadelhabano.cu) in 44 countries, which account for 15% of total sales. These franchise shops carry Havanas only, and usually provide a cigar lounge with a full bar to their customers. The most recent openings were in Prague, Madrid, and two additional Casas in Germany (Nuremberg and Hamburg in 2006). For this year, at least two more Casas in Germany alone are expected to open their doors.

Habanos S.A. currently has 358 brands and formats on its list of products. Now there are plans to discontinue 44 vitolas; among those likely to be axed are the Sancho Panza Sancho, El Rey del Mundo Tainos, Partagás No. 1, as well as the Diplomaticos No. 1 and No. 3. It is not yet clear whether one of the exclusive importers will campaign for the retention of one of these vitolas in an effort to prevent its disappearance.

Aficionados of big format cigars will particularly enjoy the new H. Upmann Magnum Especial whose dimensions are 170 x 21.8 mm / 63?4 x 55. It comes in a special box of 20 cigars. A Reserva version of the Montecristo No. 4 is to be produced and will come in a special wooden box holding 20 cigars.

Also this year, a number of Habanos cigars will be available in tubes. This form of packaging, which is presently already being used for the Siglo II and VI, is also intended for the Siglo III, IV, and V, as well as the Montecristo Petit Edmundo and the H. Upmann Magnum.

Habanos S.A. plans to introduce the following Ediciónes Limitadas around mid-2007:

  • Trinidad Ingenio (165 x 16.7 mm / 61?2 x 42) in a varnished box containing 12 cigars.
  • Romeo y Julieta Escudos (141 x 19.8 mm / 51?2 x 50) in wooden boxes of 25.
  • Hoyo de Monterrey Regalos (137 x 18.3 mm / 53?8 x 46) in a wooden box of 25 with a sliding lid (SLB).
Cohiba — star of the Habanos Festival
A third Cohiba line will be the focal point of Habanos lovers in 2007. In the United States, which is the reference market for premium long-filler cigars, a large demand was recognized for the cigars with dark wrapper leaves that taste mellow and somewhat sweet. In other markets, there is also a demand for the Maduros.

Also available in Cuba are varieties of dark wrapper leaves that have been grown and cared for in the research laboratories of Cuban tobacco producers for years. These wrapper leaves are similar to those used for the Ediciónes Limitadas. All of them were matured carefully in bales for five years.

After the Classic Cohiba and the Linea Siglo, the Maduro is considered the third pillar of Cohiba. At first there will be three sizes, measuring 140 x 20.6 mm / 5 1?2 x 52, 115 x 20.6 mm / 4 1?2 x 52, and 110 x 15.9 mm / 4 1?3 x 40, all of which have a small pigtail at the head. The line was presented to the world public at the IX Habanos Festival.

The latest marketing strategy: Ediciónes Regionales
Ediciones Regionales (regional editions) is a rather new type of marketing of Cuban cigars. Perhaps the success of the Ediciones Limitadas (limited editions) is what played an important part while contemplating how to provide collectors with additional specialty items. Or maybe the national importers wanted to create something of their own in order to differentiate from importers in other countries. In any case, the previous limited editions were always sold out after a short while.

The beginnings of the Regionales can probably be traced back to sometime in 2003. The first step was taken by the German company of 5th Avenue with their birthday edition of the Robaina Robaina. Hunters & Frankau in England followed with the Ramón Allones Belicosos. However, back then there wasn’t much talk of “regional editions” — it was simply a vitola produced for one single market.

Since the first appearance of the Ediciones Regionales, the standards according to which they can be launched have changed somewhat. The following common characteristics of these cigars have been established:

  • The quantity is between 1,000 and 1,500 boxes, or 10,000 and 30,000 cigars usually (there are exceptions to this rule).

  • Ediciones Regionales are available only in brands that are not to be found in the top bracket of the Habanos brand pyramid. Presently this group is comprised of Cohiba, Montecristo, Cuaba, Trinidad, and Robaina. (The Robaina Robaina for Germany is — as the first regional edition ever — an exception.)

  • The Ediciones Regionales are developed and commissioned by the respective national distributor as well as possibly the distributor’s dealers.

  • The distribution is also only handled exclusively through some of the national dealers.

  • No more than two vitolas can be offered as Ediciones Regionales every two years. New special editions can only come on the market once again after two years have passed.

  • The box, or any other form of packaging (that which is usual for the respective brand), should carry the imprint of “Torcido exclusivamente para ...” The first boxes provided with this imprint were the Swiss Punch Robustos.
As mentioned previously, Ediciónes Regionales were produced in quantities of between 10,000 and 30,000 cigars. Now, larger quantities may be ordered. The quota of Ediciónes Regionales for Germany in 2006 was 60,000 each of Bolivar Colosales (156 x 19.8 mm / 6 1?8 x 50, price: EUR 14.00 per box of 50) and Por Larrañaga Lonsdales (165 x 16.7 mm / 6 1?2 x 42, price: EUR 8.50 per box of 25). There is currently no upper limit on this. The boxes are all numbered consecutively.

There are plans that in the future, only one vitola is to be permitted per market instead of the current two. It will be supplied exclusively for two years and may subsequently be sold on other markets. Special formats can no longer be ordered: vitolas must be selected from the brand’s standard vitola list.

Distribution International - Winter, 2007
Distribution International is published by Lockwood Publications, Inc., 26 Broadway, Floor 9M, New York, NY 10004 U.S.A., Tel: (212) 391-2060. Fax: (1)(212) 827-0945. Printed in the U.S.A.. HTML production and Copyright © 2000 - 2007 by Keys Technologies and Distribution International Magazine. All rights reserved.