Where does HSA go from here?

[El Presidente]

Lets call 2000 - 2020 the HSA game and they are now at half time.

After a promising first quarter they have hit the wall in the second. One of their leaders is in custody for corruption, their big plays of LE and RR are no longer entirely effective, once loyal crowds are staying away on the basis of tough economic times, troubles getting to the game (restrictions) and general boredom and disillusionment with the management committee whose decisions are seen as both baffling and disenfrachising.

Sounds like some football teams we all know

You have just been appointed the new HSA CEO, an opportunity or a poisoned challice?

Here is your brief:

"Three year contract to turn around the fortunes of the company and the joint venture.

Limitations you must take into account:

1. You have a diminishing retail arm. Your traditional network of bricks and mortar retailers are going to the wall or doing it tough across the world. Increased legislation won't help this during your tenure.

2. You don't have a lot of money. You need to maintain or increase return on investment while increasing sales.

3. You do have excellent reserves of quality tobacco however 80% of your profit comes from 20% of your catalogue.

As CEO, light a cigar, take a nip of rum and put forward 1-3 positive points/ideas which you believe will get you back in the game.

[cigcars]

*What they COULD do is bring back those discontinueds that were breaking everybody's heart to lose...The Punch Black Prince, quality Dunhills, LaGloria Cubano perfectos and petite coronas, La Escepcion...if they can keep Belindas and Troyas they should be able to keep LaEscepcions, etc.

[daboose]

3 Year Plan ...

- Quality Control

- Reduce Prices

- Survey the “diminishing retail arm” for which vitolas to discontinue or return to market; especially at reduced pricing

If successful after 3 years ...

- Maintain Quality Control

- Gradually increase prices

- Hold the line!!!

[CanuckSARTech]

....Sounds like some football teams we all know

You have just been appointed the new HSA CEO, an opportunity or a poisoned challice?....

I think there's a pretty good possibility that the new "coach" may go in for the 2nd half with the cocked gun already in his mouth and ready.

[Colt45]

No easy task and I'm sure it's a tough job.

First, I'd try to get back to basics - focus on quality and consistency. I think it would have to be priority number one.

Second, I think I'd consider doing away with anonymous cigar rolling in the factories. In factory X, we roll Partagas and Bolivar, and proudly so.

Third, re-evaluate how we approach all our customers - core, fringe, collectors, etc - adjust production of products as necessary.

[aes8]

Rob,

Very good and intriguing exercise.

First off 3 years is not long enough to make a significant change or at least not long enough to see any significant returns on the changes you might implement.

Some notes to keep in mind:

Cuban cigars are generally a luxury item and as with most luxury items their demand and consumption will rise and fall in direct relationship with discretionary income available to those consumers so inclined to part take in this activity.

Second, Thanks to the grey market, I am going to assume, (open for argument and debate) that the largest market for Cuban cigars, although technically illegal, is the United States.

Therefore given the current sluggish US economy with no foreseeable significant improvment in sight your task will be even more difficult that you have framed in your challenge.

So now to my suggestions:

1. Eliminate 30% of the highest paid non-roller positions. Change the compensation scheme from salary to incentive based. (Might already be taking place given the news of recent weeks).

2. Continue the transfer of low margin, low production regular brands of cigars to the high price and assuming high margin RE and LE's. (I can't believe I am even proposing this but it makes economic sense in the short term)

3a. Go back to what you do best. Producing great regular production cigars at fair prices. Leverage you strengths which is your cache of premium Cuban tobacco.

3b. Rebuild you brand from the grass roots. Send liaisons to strategic areas and meet with your key distributators ON A REGULAR BASIS AND LISTEN TO THEM. Develop more custom rolls for distributors and finally concentrate on the regular production cigars.

Just my 2 cents

[Rogers72]

1.) Cut Prices at LCDH's by around 15% to make them fall closer in line with other retailers. Then work on making these LCDH's more visible at their popular tourist destinations. Lobby governments at these tourist destinations to get the fakes out that are selling like hotcakes to the clueless customers.

2.) Have one EL each year and use the Regional Release program to bring back old favorites with their old blends. Make these more available to everyone by allowing distributors from around the world limited access to RR from other markets. Only do one RR each year for each market so that you can focus on it and get it right. If you get the blends right and don't oversaturate the market with them, feel free to charge a little more. Use the craftmanship and raw materials that you were wasting on the oversaturation of the RR and EL programs to shore up your flagships (Sir Winston, MC #2, Lusi, CoRo, Esplendido, etc.). Don't raise the prices on these flagships but make them worth the money that you are already charging.

3.) You should have enough of a glut of skilled rollers and raw materials to improve your budget cigars. Lets do it. And while youre at it, pick a few other cigars and make them budget cigars. It's easy, just drop the price on some things like the Diplomaticos, Por Larranaga, Sancho Panza, etc. BUT improve quality b/c you have the rollers and Raw materials.

Now once you follow these three easy steps, your are gonna have a shitload of cash coming in. Pay the rollers more, institute a good roller training program, put more into the R&D of future crops and how to blend them (don't think that you know it all in this department...you can put out some bland **** at times.)

[MPS]

Privatize the entire industry, but there is no chance for that is there. Seemed to have worked just fine back then.

[in0gravity]

This is an interesting challenge. What is Habanos paying?

First and foremost you need to have a consistent product, therefore quality control is the most important part.

Secondly trim down the portfolio, meaning cut down on all the special releases (collection book series, reserve series, travel retail series an so on) and concentrate on the core production. You can always bring them back when the worst is behind you.

Thirdly I would introduce a completely new brand. Making it low priced but packed with tons of flavors.

Should all this work after one year I would start growing from within, meaning investing in the infrastructure and build better protection for the warehouses/ cigar farms (I don't know if there is anything like hurricane proof), train the rollers, creating better working environment.

These are just thoughts and maybe won't work but one can dream.

regards

Lars

[riderpride]

Some good suggestions so far. I would like to see an attempt to improve employee morale; crank the music up (or start with turning it on) on the rolling floor, and for the love of God, please install doors and seats in the stalls in the washrooms!!! Yeah, H Upmann factory, fricken gross. I've been on tours to a few factories, and it's probably the most uncomfortable working environment I've ever seen (note: I haven't toured Reebok in China... )

Another way to improve morale is to have specific factories dedicated to rolling certain brands; it would create a friendly competitive environment and result in greater consistency as there is no specific formula for each cigar. Sure they get specific leaves, but the quantity of each varies from stick to stick, roller to roller...

[Habanos2000]

"Three year contract to turn around the fortunes of the company and the joint venture.

Limitations you must take into account:

1. You have a diminishing retail arm. Your traditional network of bricks and mortar retailers are going to the wall or doing it tough across the world. Increased legislation won't help this during your tenure.

2. You don't have a lot of money. You need to maintain or increase return on investment while increasing sales.

3. You do have excellent reserves of quality tobacco however 80% of your profit comes from 20% of your catalogue.

1. I see the diminishing retail arm a symptom of the (long term) false fears created by the anti-tobacco lobby and (short term) economic downturn. While we just need to wait out the economic cycle, we need to incentivise our retailers to grow their sales and we need to fight any false publicity regarding cigar smoking. Let the retailers tell us what they need to be more successful. They know better than we do what it will take in each of their respective markets; whether it be discounts for larger purchases, longer credit terms, etc.

2. Lower prices on certain brands with a focus on increasing sales volume in order to engage more 'potential' cigar smokers that are reluctant consumers because of the expense. We need to get the volume up and then take advantage of the larger scale.

3. Maintain the profit margin on the top 20% sellers. Reinvent the LE program so that those cigars are really something 'special'. For example, release previously discontinued vitolas as LE's. Look up some "old school" cigar sizes, brands, and styles, and use those as the basis of the LE program. Also, all cigars must smoke great out of the box.

[jman]

1. Lower your prices, and cut way back on products to ensure quality control

2. Get rid of LE's and create new brands that are small, hip, and are marketed towards grabbing young new cigar smokers

3. Stop acting like stupid socialists and open up the flood gates, stop your out dated distibution program, better marketing

1. Could you imagine HSA in a free market envirnoment

[PigFish]

I am not takin' the bait... not this time! H SA et al is just to ****ed up to fix. Someday someone in the free world will produce a smokable cigar and I can stop supporting these stupid bastards, worrying about their stupid market models, giving them hints, thinking up ways to save their stolen business and just enjoy cigars again! Thinking about fixing H SA makes my eyes water blood! These people deserve the Darwin award.

-the

[El Presidente]

I am not takin' the bait... not this time! H SA et al is just to ****ed up to fix. Someday someone in the free world will produce a smokable cigar and I can stop supporting these stupid bastards, worrying about their stupid market models, giving them hints, thinking up ways to save their stolen business and just enjoy cigars again! Thinking about fixing H SA makes my eyes water blood! These people deserve the Darwin award.

-the

Thanks Piggy!

....you do know that they love reading your stuff

[PigFish]

Thanks Piggy!

....you do know that they love reading your stuff

If that is the case; now that you are done reading it I may just take it down!!!!

H SA..... are you listening?

come a little closer!

closer!!!

... closer

FU

[CanuckSARTech]

No easy task and I'm sure it's a tough job.

First, I'd try to get back to basics - focus on quality and consistency. I think it would have to be priority number one.

Second, I think I'd consider doing away with anonymous cigar rolling in the factories. In factory X, we roll Partagas and Bolivar, and proudly so.

Third, re-evaluate how we approach all our customers - core, fringe, collectors, etc - adjust production of products as necessary.

I love Colt's suggestions. I'd have to thoroughly agree with him.

For me, his second suggestion is absolute tops for me. I think it's annoying as all hell that no one has/has bothered/has announced that they've cracked this latest iteration of the factory codes. I for one would like to know exactly what factories are making my cigars, and as Ken has said before, even a code maybe for the roller themselves. That way, if I hit on an absolute awesome box, I can try to seek out similar gloriousness in other purchases down the line.

To me, it's an absolute mystery why H S.A. has bothered to go to such extensive lengths to keep all of this secret. Obviously it's been proven that customers want this info, as evidenced by the many webpages and listings over the years of the factories list from previous versions of the codes (NIVELCUSO, for example, IIRC). Customers want to know this info.

... 1. Continue to expand the production of 10-count boxes as a conversion tool.

I also really love this. I would like nothing better than to see most all vitolas and marcas be available in 3-packs (tubos or not), 10-boxes, and then 50-cabinets. I think that this would cut down on a lot of overkill in their packaging production, by just having these 3 sizes. For those just wanting a taste/try of something new to them, you have a 3-pack (you need to try more than one to be definitive). Then, 10-boxes are a step into the realm, for those that want to put a bit of age on some sticks, and also to maybe allow smaller purchases by newer cigar smokers, while allowing their budget to stretch farther and with more variety (more variety leads to more favourites, which leads to more and bigger purchases down the line of the 50-cabs for long-term aging of preferred smokes).

[CanuckSARTech]

My own personal suggestion to add (besides the one of Colts and the one of Tomwaits' that I agreed to also)....

I would like to see them revamp the EL line. Only one or two really good, really exceptional EL releases per year. But then, to add to that open gap left maybe, a "Premium Aged" line. No, not necessarily the same as the EL or Reserva (those are special formats and/or blends usually). Here me out....

I would want them to do a "Premium Aged"/"Prima Anejo" selection of stock. Here's my rationale - H S.A. currently has waaaay excess capacity and leaf stock, correct? So, how about trying to do a selection of say their 5 or 10 best-selling formats (Monte 4's and 2's, CoRo's, SPN1's, etc.), and just roll and do everything the EXACT SAME with them. Same as about-to-be-shipped current releases. But then, just do a special packaging (no extra bands - just maybe a special main label on the boxes), and H S.A. can age and store these on their own accord for 3 or 5 years. Hell, have a couple Prima Anejo 3 Anos and then maybe even up to Prima Anejo 7 Anos, or so. Obviously, start with the 3 year offerings, to see how things go.

Once the market recovers, there's bound to be those looking again for premium stock that's already aged. This is very hard to find with many retailers, and usually only with specialty auctions or so. There is really not much of an additional cost for H S.A. (same cigars, same boxes, just an extra sticker maybe), the only real cost is storage facilities, which I'm sure they can sort out with Atladis or bigger distributors.

I'd like to see H S.A. try something like this - simple, but with a definite cost return for little overall upfront costs for them. True, they'd have to sit on things for 3 years or more to start with, but they have the excess leaf now as it is, right?

Just a thought. Thanks for the discussion on this, RA. Some neat thoughts and ideas that us "non-business/non-execs" are able to share.

And seriously, Pres. If H S.A. is actually looking to fill a position like that, I'm game. I could definitely convince my wife for us to move down there - she's an RN, her skills are easily transferable! Gawd, I would enjoy the sun and cigars year-round; be a Canadian ambassador to all the Canucks and Europeans who are always there.

[Puros Y Vino]

Here is your brief:

"Three year contract to turn around the fortunes of the company and the joint venture.

Limitations you must take into account:

1. You have a diminishing retail arm. Your traditional network of bricks and mortar retailers are going to the wall or doing it tough across the world. Increased legislation won't help this during your tenure.

2. You don't have a lot of money. You need to maintain or increase return on investment while increasing sales.

3. You do have excellent reserves of quality tobacco however 80% of your profit comes from 20% of your catalogue.

As CEO, light a cigar, take a nip of rum and put forward 1-3 positive points/ideas which you believe will get you back in the game.

Here's my noobish crack at it.

1.) Leverage the Internet more. Do more promotion. Despite anti-tobacco sentiment there's a strategy out there. Look at the pro-marijuana advocacy. It is gaining ground at the grassroots level, politicians are starting to think about it (ie. taxes). Young adults are the market for it. Cigars need to be marketed to that group as well. Part of that involves the lowering of prices. Cigars are luxury items as alluded to above, however. It does not mean the target group be so tightly defined. BMW and Porsche sales are up. Why? They introduced new vehicles for price ranges that gave lower earning demographics access to those badges (prestige). Forget about marketing to the USA (I assume they don't anyways due to the embargo). Americans are the largest growth market despite the embargo. They're smart consumers. They will meet their needs. Concentrate on other world markets. Cuba has excellent medical research facilities we're told. They should chime in and investigate the effect of cigarettes vs tobacco vs...marijuana?? The latter two are all natural rolled and smoked. I'm sure they will score far better against cigarettes despite being a "health risk" themselves. Its time to start lobbying, one way or another.

2.) Reduce brands and vitolas. Limit the amount of LE's RE's. So they're really special but don't charge the hell out of it. Let buzz about those cigars grow at the grassroots level. Increase quality. Implement something like 6 Sigma to really track, measure and improve processes from seed to roller to box. The rise in quality will strengthen the product base.

3.)While reducing lesser brands. Boost the marquee brand production a bit, lower the prices slightly. On the lesser brands, lower the prices so that inventories will reduce. Take the short term hit, get rid of that stuff and make the sought after brands better quality and lower priced. Listen to your customers! Don't get rid of stuff they like unless you have the numbers to justify it.

[winelover]

1. Habanos SA needs to concentrate on tapping into Far Eastern markets, particularly China, South Korean and Japan. These markets are currently the most important for many of the big tobacco firms who sell countless cigarettes including high brow brands such as Dunhill and are also still relatively smoker friendly. In Korea smoking is still very popular and you can still smoke anywhere. I just wonder why everyone smokes cigarettes and nobody smokes cigars? If tobacco advertising is permitted in any of these countries then a strong focus should be made at marketing cigars from the exclusivity perspective as they are suckers for high value brands - being amongst the biggest markets for Burberry and Louis Vuitton and top end whiskies for that matter.

2. I would like to see a signature on every box from the torcedor or his supervisor so that all cigars can be traced. Then if there is positive feedback about a particular torcedor then he should be rewarded and promoted. Similarly if there is negative feedback the torcedor should be given additional training or they should look again at the quality of the constituent tobacco. This is the best way of guaranteeing high standards and justifying the current pricing. After all most suppliers do not distinguish between PE / HQ / and PSP. I think Dunhill do this already with their NCs.

3. Stop disenfranchising the existing client base by getting rid of many of the classics. I can't believe that the Partagas Series du Connaisseur range is no more. Also I do not understand the proliferation in shortened versions of cigar sizes. Why should there be 'short' robustos and 'short' belicosos? These smokes are small enough already. If I need a quick hit I can have a RASCC or a Dip 5. Also I don't want to have to disclocate my jaw to get my mouth round the 56 behikes.

[El Presidente]

If that is the case; now that you are done reading it I may just take it down!!!!

H SA..... are you listening?

come a little closer!

closer!!!

... closer

FU

You know you have people all over havana and pinar running to the illegal internet connection and calling their friends saying:

(insert speedy Gonzalez music here)

Apure Apure Amigo !!!!! mire lo que el Sr Piggy ha dicho ahora!!!! AYYYYYYYYYYEEE!!!!! Esta loco!!!!

[PigFish]

You know you have people all over havana and pinar running to the illegal internet connection and calling their friends saying:

(insert speedy Gonzalez music here)

Apure Apure Amigo !!!!! mire lo que el Sr Piggy ha dicho ahora!!!! AYYYYYYYYYYEEE!!!!! Esta loco!!!!

Robert... Amigo... if after many years smoking Habanos and many years praising them, buying them by the thousands, stalwartly defending their taste and experience over that of other makers, encouraging others to support the lesser produced brands and vitolas, to experience their delights; if after all that they care less about my opinion which is obvious to me, I am not about to believe they give the slightest thoughts to what I post about them on a cigar board!

Frankly mate you have a reason to post about cigars; you sell them (not to discount your passion)! On the other hand there are the rest of us. We contribute here out of passion alone, more often in the eyes of others (non cigar smokers), a passion misplaced. If there is a "sane" person whom resides in this place it is likely you and even more likely you alone!!! Posting and proffering opinions about cigars on the internet, when one observecs ones own behavior with a critical eye, is likely one of the biggest wastes of ones' time. If I saw my wife doing something similar I would shake my head and think the cheese has slid off her cracker!!! I do it regardless, I just love cigars and enjoy the cigar community.

With that said, whatever you wrote about me for the sake of others in a language I don't understand is likely wholeheartedly true! I love you anyway mate.

And if Ken does not want the shotgun, send it to my house. You have my address. It will go a long way to clearing your name since I was not the one to win the Tampa cigar contest!!! Now I am gonna' email Lisa and ask her to spike your wine with a laxitive!!! -R

[CanuckSARTech]

...With that said, whatever you wrote about me for the sake of others in a language I don't understand is likely wholeheartedly true! I love you anyway mate...

He said you're the life of the party, Piggy!

[Omskakas]

Some ideas...

1.) HSA needs some good advertising and PR. Maybe some product placement in a good movie or two. Or they need movie like "Sideways" was for wines. Cuban cigars need to be brought to be fashionable somehow. I'd also put up a forum for fans where you could contact and get answers from high level representatives. If not their own forum, they should hire some people to visit forums like this and give some official information. Now, HSA feels like it doesn't listen customers at all. It might listen retailers, but not us that buy and smoke their products.

2.) Cigars revisited. Bring back a discontinued cigar from the past every year instead of an EL. Promise to bring it back for good if it sells.

3.) I might be alone, but I actually think Monte Opens were a good idea. It's a famous brand habano for those who don't like the taste of habanos. It's like what Bud Light is for beers! It might be a good way to introduce habanos to new consumers. But how to do it better? I know! You know there are bad tasting dry Dutch cigars at every store and gas station? Make a product you can sell everywhere! Design a mini humidor that can keep 3 panatela or mareva size cigars humidified for 6 months, make it relatively cheap (machine made), make it tasty (good quality tobacco, a blend that can't go wrong) and sell it every gas station and corner kiosk. New customers hooked --> Profit!

[Puros Y Vino]

Some ideas...

1.) HSA needs some good advertising and PR. Maybe some product placement in a good movie or two. Or they need movie like "Sideways" was for wines. Cuban cigars need to be brought to be fashionable somehow.

On that note, I am beginning to notice cigars are creeping into movies. The most recent example being Wall St 2. There are three distinctive shots with cigars.

1st scene - Floor trader walking around with lit torpedo puffing away before he makes his exit.

2nd scene - Shot of Michael Douglas smoking what I'm sure is a Cohiba Gran Reserva.

NOTE: The picture is a screen cap from youtube. If admins have to remove. Feel free to do so.

3rd scene - Shot of Josh Brolin smoking a cigar while talking to Shia's character.

Maybe Oliver Stone is an aficianado? Or he wanted to play on the cigar = rich big-shot stereotype?

I know I've seen a few more in recent movies, but the details escape me. Maybe a new thread to highlight cigars in the arts?

[Omskakas]

^I haven't seen the movie, now I have to.

In my favorite TV-serie, Boston Legal, cigars played a big role. Almost every episode ended with cigars and drinks on a balcony. In season one I'm sure I saw a Cohiba band, later the bands were all removed.