Cuba's cigar industry.....Smoked Out

[El Presidente]

Cuba's cigar industry......Smoked out

Rolling up under-the-counter trading in an emblematic product

http://www.economist.com/node/18621276?story_id=18621276&fsrc=rss

ONE of the reforms approved at this month’s Congress of Cuba’s ruling Communist Party was a change in the treatment of the country’s 3,000 or so state-owned enterprises. Their management will enjoy more autonomy, but they will be subjected to thorough audits. That follows a trickle of corruption scandals. The latest involves Habanos, the state cigar monopoly.

For over a decade Manuel García, Habanos’s commercial vice-president, was the public face of the Cuban cigar industry, living a jet-set life that most Cubans can only dream of. But this year Mr García was not there to greet visitors at the Havana cigar festival. Since August 2010 he has been in jail, accused of masterminding graft on a grand scale.

The cigar industry was nationalised shortly after the 1959 revolution. But it was only in the late 1980s that Cuba took control of distribution, informing foreign retailers that it would supply only one distributor per region, in return for a 50% stake in the business.

That did not prevent the small-scale peddling of black-market cigars on the streets of Havana. But in the past decade the system has faced a bigger threat from dozens of online cigar retailers operating mainly from Switzerland and the Caribbean. Many operated legitimately, but some offered improbably low prices.

Cuban investigators believe they were able to do so because Mr García and ten of his staff, who also face trial, sold genuine cigars at a fraction of their normal price to black-market distributors in the Caribbean in return for bribes. Up to 45m cigars may have been sold this way. Since handmade habanos fetch up to £40 ($65) each in shops in the St James’s district of London, the loss was considerable.

The fraud also hurt Imperial Tobacco, a British company which inherited a 50% stake in Habanos when it bought Altadis, a Franco-Spanish firm, in 2008. Imperial has made no comment on the affair. But like the government, it will hope that the new management team at Habanos preserves the lucrative monopoly in Cuba’s most famous product.

Rolling up under-the-counter trading in an emblematic product </H2>.

[gammon]

Customs are now clamping down on those black market cigars.

for each box of cigars without the proper papers, are taken and the tourist questioned as to who sold the product to them...

some of them get to fill out three pages of information and then there is a follow up by the custom officers or people from Havana.

the sellers are questioned and in fear of their status in Cuba, many of them will not sell any more to tourist when found,

The sellers are given a second chance... if found or named several times... they face certain consequences..

.

.

Now... how long will this last.......... before there is black market revolt.

.

. if the customs at the airport are bribed... they let the bunch of tourists carry their twenty boxes

Este es Cuba..que quieres....... many neeed the $$$$ Sad but true

[tmac77]

But in the past decade the system has faced a bigger threat from dozens of online cigar retailers operating mainly from Switzerland and the Caribbean. Many operated legitimately, but some offered improbably low prices.[/i][/size]

Everyone knew that it was going on for some time now, there just did not seem to be any political will to crack down on the issue until more recently.

Correct me if I am wrong Rob, but this would be a good thing for those who opperate above board as it reduces the ability of those retailers that sell the black/grey market cigars out of Europe and the carribean

[El Presidente]

Correct me if I am wrong Rob, but this would be a good thing for those who opperate above board as it reduces that ability of those retailers thatt sell the black/grey market cigars out of Europe and the carribean

Any day a pompous lying prick is taken under is a good day for the Industry.

[Dbone]

And this is why I'm glad I buy from Rob. I'm surprised Garcia thought he could get away with it.

[sblevit]

The gray market for CCs seems alive and well. So am I wrong to think that this crackdown has had little actual effect on the gray market, except perhaps around the edges?

[El Presidente]

The gray market for CCs seems alive and well. So am I wrong to think that this crackdown has had little actual effect on the gray market, except perhaps around the edges?

Some of the Swiss and CentralAmerican vendors would beg to differ.

There will always be parallel market importation / Grey market. What has changed is the sheer bulk of stock available coming via the Cental American route. This has been closed down, for now at least.

[aes8]

Any day a pompous lying prick is taken under is a good day for the Industry.

Don't hold back mate, how do you really feel

[aes8]

What has changed is the sheer bulk of stock available coming via the Cental American route. This has been closed down, for now at least.

AHHHHH! This might explain some things recently

[Holysmokes]

Maybe if Habanos would sell their products are reasonable prices, people would not be as interested in grey market cigars. Or maybe not...

[gigabyte056]

Grey market is the path to black market, black market is the path to fakes, fakes lead to suffering...

This is for Smithy

IMHO if there is a grey market online and people think that they can actually pay 30% less on authentic CC, they will be liable to buy fakes.

After they smoke the fake cigars then they talk about CC not being of high quality.

I wonder what the quality of Cuban jails is,it might actually reduce the pompousness of pricks...

[semery74]

I'm an advocate of the Grey Market product. Currently it is the only way to force competition in this monopolized/socialized market.

[Scdalak]

I mean did Garcia really think this wouldnt catch up with him?? At least Madoff knew someday his time would come. Hope Garcia enjoyed his jet set life while it lasted, a Cuban prison is no vacation..

[ChanceSchmerr]

Maybe if Habanos would sell their products are reasonable prices, people would not be as interested in grey market cigars. Or maybe not...

Remember, the ridiculous prices we pay are often a function of Customs and Duty taxes. Canadian Taxes on Cigars for example are over 300% depending on what province you are in.

I'm all for lower prices, but you have to be aware of what is driving the price too. That wasn't Habanos SA that levied such massive taxes on tobacco products in Canada.

[jedipastor]

I'm an advocate of the Grey Market product. Currently it is the only way to force competition in this monopolized/socialized market.

I see the point. The markup on Habanos is insane, which is why you can buy from the grey market for 20-40% off and someone still makes money off it. Monopolies are almost never good. The reason that market has thrived is because they do tons of buisness and the demand is high.

I'm not saying that some don't sell inferior stuff, and we all know that some places sell fakes. Only a fool would continue to buy product time after time when it's inferior (unless they didn't know the difference). But there are some good places, and they have loyal customers because they have good product for less.

The other major factor here is taxes--and honestly I think that's a bigger deal. Legitimate shops that can avoid passing rediculous taxes to thier customers are doing well, and I think they'll do even better in the future. And when the grey market runs dry, places like that (like THIS I should say), will have a hard time getting enough cigars to meet demand ... though it seems to me Czar already does, for many vitolas at least.