Cuban cigar dealer fights bans, hard times

[El Presidente]

The depressing part of this article (for me) goes further than the bans. It is the explicit marketing angle put forward by HSA executives. Target the rich.

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Cuban cigar dealer fights bans, hard times

http://in.reuters.com/article/idINIndia-49897920100705

Mon Jul 5, 2010 11:53pm IST

By Marc Frank

HAVANA (Reuters) - Improved economies and new tactics to fight smoking bans have led to increased sales of Cuban cigars this year, after a decline of 7.7 percent in 2009, the exclusive international distributor of the world's favorite cigars said on Monday.

"Through the end of May sales rose in practically all regions and were up overall 4.3 percent and the tendency continued in June," Manuel Garcia, vice president of sales for Habanos S.A. told Reuters in an interview.

The two big exceptions were in Spain and Greece, where current economic crises have hit sales, he said.

Cigar sales are an important source of income for the cash-strapped communist-led island, garnering $218 million last year.

The company, a joint venture with British tobacco giant Imperial Tobacco Group Plc, expects demand for premium cigars to fall a few percentage points in the coming years.

To boost revenues, it is targeting the highest end of the market and fighting what amounts to a guerrilla war against the global spread of smoking bans.

"Smoking bans and the economic environment do not allow you to smoke more, so 'smoke better' is our motto," Garcia said.

"If you used to spend 15 euros ($18.75) a day or a week on three cigars, now you might spend 16 euros ($22.50) on two higher quality ones," he said.

Last year the number of millionaires reportedly increased significantly as the world recovered from financial crisis, which was good news for luxury products like the famed hand-rolled Cuban cigar, the Habanos executive said.

"The more people with money, the better it is for us, if they smoke that is," Garcia said.

Sales are strongest in the Asia-Pacific region, in particular China, where the number of wealthy is growing faster than in other regions.

CURED COHIBA

"It is all about value added, collectibles, limited editions, exclusives," said Javier Terres, the company's development vice president, in the same interview.

Terres pointed to the company's latest limited edition of a specially cured Cohiba cigar, the Behike, that sells for at least 35 euros ($43.75) and has received twice the orders as the number available.

He said a significant reduction in tobacco planting and cigar production last year did not mean Habanos S.A. was on the ropes.

"Although Habanos sales dropped in 2009, its share of the premium cigar market improved," Terres said, "and now accounts for 71 percent of unit sales and 85 percent of value."

The numbers exclude the United States market, where sales are banned under the longstanding U.S. trade embargo against the island.

Revolutionary Cuba has never been known for backing down from a fight, so it is no surprise that Habanos is striking back against smoking bans.

"Our fundamental objective is figuring out how we can get around the bans and move forward in an extremely adverse environment," Garcia said.

"Even if you have money you have to find a place where you can enjoy a cigar, as it is not like a cigarette that you consume in five minutes on the run," he said.

The company has wholesale distributors in 70 countries, 142 specialized outlets called Casas de Habanos that promote cigars and other Cuban merchandise such as rum and coffee, and thousands of retailers that specialize in their product.

Terres said they were all hard at work promoting what Habanos calls "Comfortable Outdoor Smoking Areas" and private cigar clubs in countries such as Germany and the United Arab Emirates.

The creation of outdoor smoking areas had already reversed a downward trend in Britain, Terres said.

"The turn-around demonstrates the culture of the Habano continues to exist, but in a completely new environment," he said. (Editing by Jeff Franks and Alan Elsner)

[PADDYWHACK121272]

"It is all about value added, collectibles, limited editions, exclusives,"

oh sweet jesus, they have lost the plot...

[ChanceSchmerr]

I think I'm gonna be sick

[JMH]

Great. They're not selling as many cigars, so they're just going to make them more expensive to try and maintain profit.

[DrunkenMonkey]

Short-sighted, stupid business model. "We're fine with having fewer and fewer customers, as long as a few very rich people are willing to shell out $50 per stick". God help us.

[gk404]

I'm just shaking my head... They should be trying to increase consumption not decrease it. After all, people in Cuba gotta work. I have no qualms with them introducing super duper limited ninja editions that come in gold humidors for the wealthy few but they need to produce for the masses. Policy mirrors public opinion. The less we smoke the less we're going to miss it.

That's my 2 cents anyway...

[DrunkenMonkey]

I'd put in my two cents, but I think I'd best save it towards cigars.

You'll need them when all there is to smoke is Cohiba and ELs.

[Trevor2118]

Great. They're not selling as many cigars, so they're just going to make them more expensive to try and maintain profit.

Damm....I was in business for 30 years and never thought of this.

[Colt45]

"It is all about value added, collectibles, limited editions, exclusives," said Javier Terres, the company's development vice president, in the same interview.

Brilliant!

They'll find out what it's really all about (I'd hope) when competition opens up.

[partagasd4]

"Even if you have money you have to find a place where you can enjoy a cigar, as it is not like a cigarette that you consume in five minutes on the run," he said.

So what about those of us who aren't rich?

[OZCUBAN]

The writing has been on the wall for sometime.

Target the rich.

Put up prices.

Ignore your core market.

And guess what sales fall

IMO If cigars ,as in everyday lines ,were a bit cheaper i would buy a lot more,and i am sure i speak for most ,would that then not improve their (HSA) bottom line .

I am not against the concept of the EL series as in the past i have had some really exceptional cigars ,and i am sure that it is a good marketing tool to gauge reaction to a new line/model/vitlola.

Cigar prices in OZ are outrageous (mainly due to the ridiculous Taxes )

Do not know wether it is just me ,but does the every day punter subsidize a smaller portion of the market ?

If any one from HSA is reading this please do not abandon your CORE customers IMO that would be pure folly

Cheers OZ

[dicko]

The writing has been on the wall for sometime.

Target the rich.

Put up prices.

Ignore your core market.

And guess what sales fall

IMO If cigars ,as in everyday lines ,were a bit cheaper i would buy a lot more,and i am sure i speak for most ,would that then not improve their (HSA) bottom line .

I am not against the concept of the EL series as in the past i have had some really exceptional cigars ,and i am sure that it is a good marketing tool to gauge reaction to a new line/model/vitlola.

Cigar prices in OZ are outrageous (mainly due to the ridiculous Taxes )

Do not know wether it is just me ,but does the every day punter subsidize a smaller portion of the market ?

If any one from HSA is reading this please do not abandon your CORE customers IMO that would be pure folly

Cheers OZ

Great post Steve! I don't want to live in a world where the only cigars you can buy are gold embezzled gold lock black grain finish super $$$, i want a range of decent and affordable without the fanfare habanos.

[CigarmanTim]

Have they never heardx of the law of diminishing returns?