Cuba curbs tobacco harvest as cigar sales fall

[cigarros]

Cuba has been forced to cut its tobacco harvest in response to a fall in demand for its famous Cuban cigars.

This year's harvest of tobacco leaves is down 14% on last year, according to one of the country's state-run newspapers, Guerrillero.

"There was a reduction in planting due to limitations on resources caused by the economic crisis," the report said.

Sales of Cuban cigars fell by 8% last year, while production has fallen even further.

Falling sales have pushed down production by even more. Last year, Cuba produced 73 million cigars for export.

That compares with the 217 million made in 2006.

But part of that reduction comes as Habanos, the company that produces and sells the cigars, runs down its stockpiles.

The hand-rolled cigars are a major export for the Caribbean island, although they are limited by a long-running US trade embargo.

Spain is the single biggest export market, where the recent introduction of a smoking ban has hit consumption.

Falling airline passenger numbers has also hit duty-free sales.

Source

[El Presidente]

The report is pretty much spot on.

Keep in mind that the harvest held for 08/09 were budgeted at around 150 million cigars. On top of that there was already 3-5 years general tobacco reserves. Half production last year in the factories would have extended those reserves.

Late 09 early 10 stock has been excellent reflecting higher quality leaf (particularly wrapper) being used. It all bodes well for some excellent quality production over the next couple of years.

[cigarros]

Rob! It's just awful! It is very unpleasant to read that Cuba had a such crisis in tobacco farming and we can indirectly affected after this. I really hope that everything will be fine!

[partagasd4]

Rob! It's just awful! It is very unpleasant to read that Cuba had a such crisis in tobacco farming and we can indirectly affected after this. I really hope that everything will be fine!

I think we should all smoke twice as much so we can help them out.

[MontrealRon]

Being the cynic I am, I can't help wondering if the recent increase in quality is due to more older, aged, tobacco being used in production, which in turn is more due to lower sales leaving a stock surplus rather than a concious effort to boost quality?

My suspicion as well.

Also, maybe a reduction in output means less stress in the factories and more time to do a proper job?

Probably means half the workers laid off, with the other half even more stressed out in fear of the same fate.

[PigFish]

More marketing blundering by Tabacuba! The less tobacco you sell the more market share you risk, the more stock sits on shelves, the less money you make, the more the worker gets paid for not working. What if 2011 is a double dip recession year? Are these folks planning on warehousing a decade of tobacco? Sounds like we are going back to the years '99 and '00...

Roll some good common man cigars in petit coronas, coronas and traditional lonsdale sizes. Sell them by the half wheel or private band them for retailers like Rob. Get your cigars on the streets and in the hands of enthusiasts and new smokers. Create some market share from the ground up. Get some simple pleasures in the hands of those who have cut back on smoking because of the cost. Bring them back in... don't lose them to someone selling blunts!

Cigar smoking is becoming way too exclusive. That is a nice illusion that builds market bubbles from tulip bulbs to real estate but those days are gone. Are you listening Tabacuba??? There is no intrinsic value to tobacco except to those who imbibe. It is time to bring good Cuban cigar tobacco back to its roots and if you wish to share the market in parallel with those with large disposable incomes and roll your super-behemouth, de-luxe edition cigars, so be it. Excluding the common man from smoking good cigars due to the artificial elevation of cigar prices is a huge mistake. In this political and economic environment you risk everything by doing so.

Ask yourself this. Would you buy 100 Belicosos Finos private banded by Rob for $300 bucks knowing that they were Cuban and rolled along side your favorite model??? Hell yes! Would a strategy like this sell cigars... hell yes??

Is anyone at Tabacuba bight enough to figure it out??? Hell no!

Mr. Piggy

[Habanos2000]

Late 09 early 10 stock has been excellent reflecting higher quality leaf (particularly wrapper) being used. It all bodes well for some excellent quality production over the next couple of years.

My thoughts exactly.

[El Presidente]

Being the cynic I am, I can't help wondering if the recent increase in quality is due to more older, aged, tobacco being used in production, which in turn is more due to lower sales leaving a stock surplus rather than a concious effort to boost quality?

Also, maybe a reduction in output means less stress in the factories and more time to do a proper job?

There has been a drive to replenish tobacco reserves since 2000. By 2005 they reached the point of 3 years reserves where they could utilize proper aged tobacco (2 2/ year old Ligero/ 18 month Seco/ 12 month Volado) in all cigars. It is no secret that late 05 / 2006 saw a dramatic turn in "smokeability" of young Habanos.

As for the mood in the factories, yes, lower production has seen an improvement during 09 in construction becoming more evident as the year went on.

However, layoffs, cut pay (less hours) decreased morale in the factories.

[paesano]

You have to wonder what the % of sales have been lost because of the bans and tax screwings we have taken in the US. Shops are closing at a rapid rate anf THEY just don't get it! They ARE going to shut this entier industry down in our lifetime, so stock up BOTL.

[cigcars]

You have to wonder what the % of sales have been lost because of the bans and tax screwings we have taken in the US. Shops are closing at a rapid rate anf THEY just don't get it! They ARE going to shut this entier industry down in our lifetime, so stock up BOTL.

[ahbroody]

I will agree the 09 stuff I have had has been amazing. They are not smoking like fresh cigars often and are showing a fair amount of complexity.

[Wicky]

I will agree the 09 stuff I have had has been amazing. They are not smoking like fresh cigars often and are showing a fair amount of complexity.

Looks like the clock has come around.

[OZCUBAN]

More marketing blundering by Tabacuba! The less tobacco you sell the more market share you risk, the more stock sits on shelves, the less money you make, the more the worker gets paid for not working. What if 2011 is a double dip recession year? Are these folks planning on warehousing a decade of tobacco? Sounds like we are going back to the years '99 and '00...

Roll some good common man cigars in petit coronas, coronas and traditional lonsdale sizes. Sell them by the half wheel or private band them for retailers like Rob. Get your cigars on the streets and in the hands of enthusiasts and new smokers. Create some market share from the ground up. Get some simple pleasures in the hands of those who have cut back on smoking because of the cost. Bring them back in... don't lose them to someone selling blunts!

Cigar smoking is becoming way too exclusive. That is a nice illusion that builds market bubbles from tulip bulbs to real estate but those days are gone. Are you listening Tabacuba??? There is no intrinsic value to tobacco except to those who imbibe. It is time to bring good Cuban cigar tobacco back to its roots and if you wish to share the market in parallel with those with large disposable incomes and roll your super-behemouth, de-luxe edition cigars, so be it. Excluding the common man from smoking good cigars due to the artificial elevation of cigar prices is a huge mistake. In this political and economic environment you risk everything by doing so.

Ask yourself this. Would you buy 100 Belicosos Finos private banded by Rob for $300 bucks knowing that they were Cuban and rolled along side your favorite model??? Hell yes! Would a strategy like this sell cigars... hell yes??

Is anyone at Tabacuba bight enough to figure it out??? Hell no!

Mr. Piggy

Well said Piggy as usual you have your finger on the pulse a voice for the common man well done Ray

[cigarros]

Yeah Mr. Piggy! You're right! It's difficult not to agree with your argument!

[DrunkenMonkey]

Pure wisdom from the Pigfish once again.

[DrunkenMonkey]

You have to wonder what the % of sales have been lost because of the bans and tax screwings we have taken in the US. Shops are closing at a rapid rate anf THEY just don't get it! They ARE going to shut this entier industry down in our lifetime, so stock up BOTL.

Come on, take heart. Even with the bludgeoning taken from governments, there must still more cigars being smoked now than ever before. Anyone have access to these sorts of stats? I'd like a graph showing annual worldwide cigar consumption over the last 200 years. I bet it wouldn't look so bleak in perspective.

[jacksfull]

Come on, take heart. Even with the bludgeoning taken from governments, there must still more cigars being smoked now than ever before. Anyone have access to these sorts of stats? I'd like a graph showing annual worldwide cigar consumption over the last 200 years. I bet it wouldn't look so bleak in perspective.

The OP story would seem to indicate otherwise. Either that, or Cuba is losing market share to other countries. I haven't researched the numbers, but I tend to think the whole market is down. NC producers seem to be rallying around the same philosophy... make 'em bigger, call 'em Limited Edition or something like that, and charge more for 'em. (Fact is, I tend to think it's Altadis' experience doing this w/ NC's that is the inspiration for some of HSA's more questionable recent decisions).

Like Mr. PigFish said, if they'll respond to the REAL market pressures that currently exist I'll do my part to keep their torcedores busy. So, Behikes, RE's and LE's make a big splash publicity-wise... cool. But how many of us can smoke these on a daily basis? It's the 3-a-day(+) crowd that forms the foundation for the industry. We may not want to spend a bundle on every cigar we smoke, but we can be a most reliable and steady revenue stream.

[MontrealRon]

Excellent analysis, Pigfish.

I especially love the idea of a special program based on the three traditional sizes,

and I'd like to see them priced around $2/mareva, $2.50/corona, $3/lonsdale.

Something like the JLP program, which has been such a huge success,

only a step or two up in quality, with Vuelta Abajo leaf, and long filler.

After all, labour and materials cost them next to nothing,

so almost the entire wholesale price of a cigar is pure profit.

If Cuba can afford to sell the "peso" cigars on the local market for the equivalent of 5 cents,

surely they can make money, and lots of it,

selling bulk cigars for $2-3.

[PigFish]

Excellent analysis, Pigfish. ...

After all, labour and materials cost them next to nothing,

so almost the entire wholesale price of a cigar is pure profit.

If Cuba can afford to sell the "peso" cigars on the local market for the equivalent of 5 cents,

surely they can make money, and lots of it,

selling bulk cigars for $2-3.

I started writing an article, a business summery on this very issue yesterday. It was then I heard a voice from the garage!!! It'was my Harley! It said stop wasting your time writing to those boneheads at Tabacuba and come out and twist my throttle. And that is what I did.

I don't know why I bother to rant about this anymore. I know why Tabacuba won't follow my advice. I have known it for a long time now. Since proving my 'theory' is next to impossible for me, I will once more keep it to myself and watch as the best cigars in the world get compromised by a bunch of corrupt, incompetent boobs that call themselves Tabacuba.

Thanks for the support Mates! -Piggy

[Colt45]

There is no intrinsic value to tobacco except to those who imbibe.

.... but we can be a most reliable and steady revenue stream.

Guys, really - stop with the common sense. Go buy yourselves a shiny box of whatever is the latest and greatest. Image is everything.

[mazolaman]

I think all the European smoking bans won't have helped.

I knew a couple of good bars in London where you could puff away with a drink or coffee,they were always busy!

They must have lost some custom from this.

[groza]

Guys, really - stop with the common sense. Go buy yourselves a shiny box of whatever is the latest and greatest. Image is everything.

I can imagine some evil mastermind in a bunker deep under Havana planning the next marketing coup ... gold-plated bands, boxes etc!

[PigFish]

Guys, really - stop with the common sense. Go buy yourselves a shiny box of whatever is the latest and greatest. Image is everything.

Yeah baby... boxes, bands, 60 ring gauge, more filler tobacco, less taste, the sky's the limit with me Man; bring it on! Why stop at $100 a stick... do I hear $200??? For Easter we should demand cigars shaped like little chicks; Man-Peeps we can call them! They can come in a little Cuban hen house; correct placement would be above the eggs! -LOL

Cheers Mate! -Piggy

[rhea]

hey.

I'm writing an IB student writing a commentary on this very artticle, cuz i find it very interesting.

However, there are a few things I'm yet to understand:

1. ARE cuban cigars price elastic/ inelastic?

they are expensive, have many substitutes BUT are addictive.

2. If a want to link tobacco havest with demand fall of cigar with the help of CROSS ELASTICTY, how will I be able to do that?

PLZ HELPP OUTT!!

I'M really stuck!