IN DEFENSE OF HABANOS SA

[Montaigut]

IN DEFENSE OF HABANOS SA

With the exception of some political threads few subjects bring more emotional responses than those dealing with Habanos SA. Cuban cigars aficionados have a love-hate relationship with the organization for reasons that are numerous and range all the way from matters of politics to vitola preferences and discontinuations. Earlier threads give a fairly representative picture of those reasons.

Habanos S.A. is blamed for corruption, incompetence, arrogance and poor management amongst other things. Some of this blame is probably deserved, some is probably not. The inner workings of private or state owned companies are not available with sufficient transparency to permit meaningful discussions, only suppositions.

Consequently this argument is not intended to discuss those points. Instead it will deal with two components of the Cuban cigar business that are likely to have the most impact on aficionados in the short to medium term: marketing on the one hand and production on the other hand. Production here is taken in a larger sense that ties intrinsically quality, craftsmanship and creativity in each and every step of the process from the cultivation of tobacco to the finished cigar in its packaging. Furthermore, this argument will show the antagonistic nature of these two components and the inherent risks for the future of Cuban cigars that ensue.

For the best part of four decades, since the early 1960’s to be precise, the production of Cuban cigars has been under total state control. During this period it can be argued that Habanos SA in its present form, as well as in that of previous incarnations, has been a generally responsible custodian of all that makes Cuban cigars legendary. Under the imposed stewardship of Habanos SA the Cuban cigar culture, craftsmanship, know-how, passion and quality have been preserved. The enduring aficionado’s passion for Cuban cigars is sufficient proof of that statement.

In 2000, the Cuban state allowed Habanos SA to enter into an equal partnership with a multinational company. Why did Altadis buy into Habanos SA and why was it allowed to do so by the Cuban state? The answer to this question is straightforward, at least for the first part. Altadis was in the business of growing and returning a profit for its shareholders. Cuban cigars at the time were a unique and promising growth opportunity: worldwide recognition, outstanding quality in the most part, low cost production environment and more importantly under-performing through poor marketing. Altadis did indeed keep its promise of high return to shareholders when it was taken over by Imperial.

The second part of the question is impossible to answer with any degree of certainty but one can imagine a number of reasons: large selling price, corruption that comes with such sums, the desire for the state to increase revenues, etc. In the end, what only matter is that the deal was approved.

So then what impact, if any on the business of Habanos SA, can be attributed to the arrival of Altadis/Imperial? Who is responsible for the new marketing decisions? For reasons stated above, suppositions are not a good basis for meaningful discussion. Fortunately there is data available from the pre and post-Altadis periods that can help shed some light into the business plan of the new Habanos SA organization.

Firstly there is data on vitola discontinuations. In the four (4) decades prior to the arrival of Altadis in 2000, a total of 245 vitolas were discontinued from production. Some of those include brand terminations as well such as Cifuentes, La Escepcion, etc. From 2000 to date some 218 vitolas were discontinued. The year 2002 alone saw over 100 vitolas discontinued. (This information is readily available on CubanCigarWebsite.com. Any error in compilation of the data on the website is mine). Any claim that discontinuations are attributable to a lack of profitability is ludicrous in a non-cost based production environment.

Secondly there is evidence of changes in the marketing strategy of Habanos SA. As supporting data there is the trend towards extracting more value from the products by the introduction of premium priced series: Limited Editions (2000), Habanos Collection (2001), Habanos Selections (2003), Reserve (2003), Regional Edition (2005), Replica Ancient Humidor (2006), Grand Reserve (2009). That is not to say that Habanos SA did not launch premium series prior to 2000: as evidence the Millennium Reserve (1999). (This data is also available on CubanCigarWebsite.com).

Clearly these combined data and marketing initiatives show a trend towards attrition at the lower end of the range and a trend towards premium/higher priced products. This is the first step in increasing profitability of any business.

The second step is concerned with reducing costs. Cigar production is an extremely labor intensive activity. Hamlet in a video shot in London mentioned that some 300 pairs of hands or manipulations are involved in the production of a single cigar. Any efficiency expert would drool at the thought of being assigned to a cost reduction/efficiency improvement program in cigar production. I leave the possible “efficiency improvements” to your imagination but do postulate that most would be to the detriment of quality.

This brings us to the argument that marketing and production are inherently antagonistic in nature as far as cigars are concerned. By antagonistic I mean they do not share the same values.

Cuban cigars are the product of artisans. This term is used here in its noblest sense. An artisan (from the Italian: artigiano) is a skilled manual worker who makes items that may be functional or strictly decorative. An artisan is therefore a person engaged in or occupied by the practice of a craft, who may through experience and talent reach the expressive levels of an art in their work and what they create. Indeed there are torcedors in Cuba that have elevated their craft to the level of artistry.

The adjective “artisanal” is often used in marketing and advertising as a buzz word to describe or imply some relation with the crafting of handmade products. Many of these products were traditionally handmade but are now commonly made on a larger scale with automated mechanization in factories and other industrial areas.

Modern marketing is the product of consumption and often describes itself as a process. It is a process that comes with specific tools used interchangeably regardless and independently of the products. The tools include analytical methods, evaluation criteria, data mining, segmentation, etc. and are used for one purpose and one purpose only: increased revenues and margins.

Backlash from the marketplace is the one motivation for marketing to concern itself with quality.

The best example that can be used here to highlight the disconnect between marketing and production is the recent launch of the Montecristo Open series. It is my contention that the marketing half of Habanos SA was attempting to phase-in a rebrand of its flagship product into a more profitable morph: new names, new colors, new themes and extensive ad campaign. No doubt test panels were included in the name, color and ad campaign selection. No doubt production and product blend were not as the less than lukewarm post-launch market reaction generally shows.

There is an eerie similarity here to an earlier marketing attempt at rebranding by a popular soft drink company. The New Montecristo: it’s the same but it tastes better…

The one exception to marketing that would make it an ideal fit with Cuban cigar production is the luxury market. I will not belabor this point further; any scenario on this subject is certainly not in the interest of the average aficionado.

Often the argument is made that Habanos SA should be disbanded and cigar production left to free market and enterprise. This is wishful thinking at best. The current Habanos SA partnership is exactly what any free enterprise would dream of: an extremely cheap, skilled, well controlled labor pool and production infrastructure for which it has absolutely no responsibility whatsoever and from which it extracts generous profits.

The results of the unlikely alliance of a free enterprise entity with a non-cost based production entity will be evident in the short to medium term but I suggest that for aficionados the alliance is fraught with more potential risks than rewards.

I make no apology. As long as the production component of Habanos SA stands up to soulless, mercantile and reductive marketing and fights for keeping the passion and the artisan guilds alive and healthy in Cuba I will stand by and defend it. And so should you.

Dan

[CaptainQuintero]

Nice peace

I pretty much agree with you. Starting the hobby just over five years ago and in the UK I've been lucky enough to smoke a lot of the discontinued vitolas and the new releases. The quality control and construction evident around the turn of the century was at least in my experience, of such poor quality that something drastic had to change. Time and again I've picked up numerous deleted Lonsdales and Serie Dus etc and literally had to throw them away due to construction. Since 2005 the issues have have vastly been reduced, that's not to say eliminated but it seems a far cry from the millenium. HSA had to do something and decided on the path which they thought would bring them to most profit and still retain or improve the quality of production. With the new developing countries like China and Russia racking up the cigar purchaces it would have been idiotic of them to not change their catalogue to take advantage of the new wealth coming from those countries. With the end of the embargo not in sight and the destruction of smoking culture in the West, HSA hda to turn it's focus back towards the rich elite of emerging economies, just like Cuba did when Spanish Dukes, English Lords and other European landed gentry were rolling around in beds of cash in the 1800-1900s.

As with anything I still just find what I like and buy it, if that is no longer available I find something else and buy that. Doesn't matter if it's cigars, music, alcohol, films etc..

I mean when the Beatles broke up/were killed off. It would have been silly to go 'Right no more music for me, everything else is crap.' You have to bend with the wind sometimes IMO.

[PigFish]

Hey mate... Nice bit of writing and research. Thanks for posting.

I won't drag your thread down to my level but I have to say that it is every bit as full of supposition as any of the rest of them, mine included. Neither of us have accurate accounting records of the Cuban owned tobacco company. As a result none of us can claim success or failure as a result. We can all taste success and failure of the final product however. We can decide for ourselves if we enjoy smoking out of the smaller catalogue of cigars more now than before, or less now then before! Can we not do that?

Unless I read you wrong, you appear to make a point that many discontinuations were made in the pre-H SA partnership time period. Moving forward this idea has not changed as discontinuations are still the norm. If loss of market share and decline of total production were linked to this factor and they continue to do it, just suppose this for a moment, could it not be a reason to stop doing it now?

What has really changed then. We have EL's and RE's some good some bad, many with dubious reputations with seasoned smokers. Many older costumers reject them. We have newer products that don't seem to sell and get discontinued just like some older ones do. The news from Cuba is generally still that they will be making less cigars for less people.

Lets contrast this for a moment. During this same time period the cigarette company has been under constant attack as well by governments. They have been fined billions by oppressive judiciaries, yet cigarette companies still make a ton of money!!! Why? Because the cigarette companies are run by pro's and Tabacuba is not! The death grip of the people that run Tabacuba has never changed!!!

Oh... and as to why the Cuban government went with an agreement with H SA to partner with Altadis; they are broke! These lousy run countries are alway broke (notice I took the politics out of it). This lousy run country has its people bring their own toilet paper and sheets to the hospital. You call that success too I imagine! Unfortunately the Cuban government runs its companies, such as Tabacuba et al, just as poorly!!! (IMHO)

Cheers. -Piggy

[Cohiba Stevie]

Im with captain quintero on this one.

I do still firmly believe the inner workings of habanos sa/altadis are impossible to both define and/or comprehend...

This in turn leads many of us to "suppose"

Just my two cents

[Nino]

Montaigut,

thank you for the well-thought and detailed expose you present !

Here's my 2 cents worth I'd like to comment on - all quick and dirty over a beer and a H.Upm. Majestic -

Regards

IN DEFENSE OF HABANOS SA

With the exception of some political threads few subjects bring more emotional responses than those dealing with Habanos SA. Cuban cigars aficionados have a love-hate relationship with the organization for reasons that are numerous and range all the way from matters of politics to vitola preferences and discontinuations. Earlier threads give a fairly representative picture of those reasons.

Habanos S.A. is blamed for corruption, incompetence, arrogance and poor management amongst other things. Some of this blame is probably deserved, some is probably not. The inner workings of private or state owned companies are not available with sufficient transparency to permit meaningful discussions, only suppositions.

Agreed : Which is why no charges have been made against the arrested top mngt. of HSA for a long time now.

Consequently this argument is not intended to discuss those points. Instead it will deal with two components of the Cuban cigar business that are likely to have the most impact on aficionados in the short to medium term: marketing on the one hand and production on the other hand. Production here is taken in a larger sense that ties intrinsically quality, craftsmanship and creativity in each and every step of the process from the cultivation of tobacco to the finished cigar in its packaging. Furthermore, this argument will show the antagonistic nature of these two components and the inherent risks for the future of Cuban cigars that ensue.

For the best part of four decades, since the early 1960s to be precise, the production of Cuban cigars has been under total state control. During this period it can be argued that Habanos SA in its present form, as well as in that of previous incarnations, has been a generally responsible custodian of all that makes Cuban cigars legendary. Under the imposed stewardship of Habanos SA the Cuban cigar culture, craftsmanship, know-how, passion and quality have been preserved. The enduring aficionados passion for Cuban cigars is sufficient proof of that statement.

Disagreed : In the early 60's all brands/marcas were to be discontinued in favour of a "general brand" - total flop.

In 2000, the Cuban state allowed Habanos SA to enter into an equal partnership with a multinational company. Why did Altadis buy into Habanos SA and why was it allowed to do so by the Cuban state? The answer to this question is straightforward, at least for the first part. Altadis was in the business of growing and returning a profit for its shareholders. Cuban cigars at the time were a unique and promising growth opportunity: worldwide recognition, outstanding quality in the most part, low cost production environment and more importantly under-performing through poor marketing. Altadis did indeed keep its promise of high return to shareholders when it was taken over by Imperial.

Disagree : Cuba was broke and in the end game of the "special period" and desperately needed openings to the free world for cash and ideas.

The second part of the question is impossible to answer with any degree of certainty but one can imagine a number of reasons: large selling price, corruption that comes with such sums, the desire for the state to increase revenues, etc. In the end, what only matter is that the deal was approved.

See previos remark.

So then what impact, if any on the business of Habanos SA, can be attributed to the arrival of Altadis/Imperial? Who is responsible for the new marketing decisions? For reasons stated above, suppositions are not a good basis for meaningful discussion. Fortunately there is data available from the pre and post-Altadis periods that can help shed some light into the business plan of the new Habanos SA organization.

Firstly there is data on vitola discontinuations. In the four (4) decades prior to the arrival of Altadis in 2000, a total of 245 vitolas were discontinued from production. Some of those include brand terminations as well such as Cifuentes, La Escepcion, etc. From 2000 to date some 218 vitolas were discontinued. The year 2002 alone saw over 100 vitolas discontinued. (This information is readily available on CubanCigarWebsite.com. Any error in compilation of the data on the website is mine). Any claim that discontinuations are attributable to a lack of profitability is ludicrous in a non-cost based production environment.

Secondly there is evidence of changes in the marketing strategy of Habanos SA. As supporting data there is the trend towards extracting more value from the products by the introduction of premium priced series: Limited Editions (2000), Habanos Collection (2001), Habanos Selections (2003), Reserve (2003), Regional Edition (2005), Replica Ancient Humidor (2006), Grand Reserve (2009). That is not to say that Habanos SA did not launch premium series prior to 2000: as evidence the Millennium Reserve (1999). (This data is also available on CubanCigarWebsite.com).

Clearly these combined data and marketing initiatives show a trend towards attrition at the lower end of the range and a trend towards premium/higher priced products. This is the first step in increasing profitability of any business.

Agreed : But is a niche, luxury market based mostly on super-rich Asians and Russians viable ?? Bread, butter and rent are paid by the mass market I dare say.

The second step is concerned with reducing costs. Cigar production is an extremely labor intensive activity. Hamlet in a video shot in London mentioned that some 300 pairs of hands or manipulations are involved in the production of a single cigar. Any efficiency expert would drool at the thought of being assigned to a cost reduction/efficiency improvement program in cigar production. I leave the possible efficiency improvements to your imagination but do postulate that most would be to the detriment of quality.

Agreed : Any "western" company would drool to have a state work force paid 20 $ a month - even China has improved labour conditions and pays more.

This brings us to the argument that marketing and production are inherently antagonistic in nature as far as cigars are concerned. By antagonistic I mean they do not share the same values.

Cuban cigars are the product of artisans. This term is used here in its noblest sense. An artisan (from the Italian: artigiano) is a skilled manual worker who makes items that may be functional or strictly decorative. An artisan is therefore a person engaged in or occupied by the practice of a craft, who may through experience and talent reach the expressive levels of an art in their work and what they create. Indeed there are torcedors in Cuba that have elevated their craft to the level of artistry.

... and still struggle to survive on wages that are scandalous.

The adjective artisanal is often used in marketing and advertising as a buzz word to describe or imply some relation with the crafting of handmade products. Many of these products were traditionally handmade but are now commonly made on a larger scale with automated mechanization in factories and other industrial areas.

See above comment.

Modern marketing is the product of consumption and often describes itself as a process. It is a process that comes with specific tools used interchangeably regardless and independently of the products. The tools include analytical methods, evaluation criteria, data mining, segmentation, etc. and are used for one purpose and one purpose only: increased revenues and margins.

Backlash from the marketplace is the one motivation for marketing to concern itself with quality.

The best example that can be used here to highlight the disconnect between marketing and production is the recent launch of the Montecristo Open series. It is my contention that the marketing half of Habanos SA was attempting to phase-in a rebrand of its flagship product into a more profitable morph: new names, new colors, new themes and extensive ad campaign. No doubt test panels were included in the name, color and ad campaign selection. No doubt production and product blend were not as the less than lukewarm post-launch market reaction generally shows.

Agreed.

There is an eerie similarity here to an earlier marketing attempt at rebranding by a popular soft drink company. The New Montecristo: its the same but it tastes better…

The one exception to marketing that would make it an ideal fit with Cuban cigar production is the luxury market. I will not belabor this point further; any scenario on this subject is certainly not in the interest of the average aficionado.

Agreed : Proven by facts.

Often the argument is made that Habanos SA should be disbanded and cigar production left to free market and enterprise. This is wishful thinking at best. The current Habanos SA partnership is exactly what any free enterprise would dream of: an extremely cheap, skilled, well controlled labor pool and production infrastructure for which it has absolutely no responsibility whatsoever and from which it extracts generous profits.

Any company based on "western values" behaving like this would be boycotted by its customers.

The results of the unlikely alliance of a free enterprise entity with a non-cost based production entity will be evident in the short to medium term but I suggest that for aficionados the alliance is fraught with more potential risks than rewards.

Agreed.

I make no apology. As long as the production component of Habanos SA stands up to soulless, mercantile and reductive marketing and fights for keeping the passion and the artisan guilds alive and healthy in Cuba I will stand by and defend it. And so should you.

Disagree : Disband it and let free market, decent wages and new players in. The production component of HSA is also, in parts, made up of soulless, corrupted and reductive "apparatschiks" - no need to keep them running a "solo" show.

Dan

Nino

Again - Dan : just my 2 cents worth - thank you for taking the time and effort to detail your view.

[Colt45]

As I've mentioned any number of times, personally I don't look for HSA to perish, simply for competition to open.

Let Cuban privateers produce Cuban cigars without interference or intervention.

[mazolaman]

As I've mentioned any number of times, personally I don't look for HSA to perish, simply for competition to open.

Let Cuban privateers produce Cuban cigars without interference or intervention.

We all know that wouldn't happen.

It would inevitably become foreign owned companies, who have share holders, and I'm afraid the quality would plummet.

But, maybe I'm just being negative.

It would be interesting to know how much the HSA gets per box..to see who makes the most from a box of cigars.

Probably the tax man.

[Trevor2118]

As I've mentioned any number of times, personally I don't look for HSA to perish, simply for competition to open.

Let Cuban privateers produce Cuban cigars without interference or intervention.

I have not formed an opinion on this myself, but I wonder:

1. If the "exclusiveness" aspect of the "Cuban Cigar" would diminish?

2. If the the physical quality of the tobacco selected would diminish in the rush to produce "Cuban" cigars? Would more tobacco from the lesser regions be used? Would we get a range of Cuban "quality" similar to that present in Non-Cuban brands and is that a good or bad thing?

Trevor.

[jedipastor]

I'll give you that it's impressive that HSA is still in business at all, and therefore they're done a pretty good job all things considered. But that's a huge consideration. Compared to other companies and even other cigar manufacturers, they are among the worst in the world on every possible measuring scale.

It just so happens that they have some of the best natural product in the world to work with, but that's not their doing. In fact, in my opinion they are not good stewards of what they've been given. When the free market eventually holds sway in Cuba again, we'll see that fine tobacco treated as it should be. Everyone will be better off!

[Montaigut]

Hi Nino,

Thanks for taking the time to respond; I hope it was a good use of an H. Upmann Majestic!

To clarify my last point and your response to it - "Disband it and let free market, decent wages and new players in. The production component of HSA is also, in parts, made up of soulles, corrupted and reductive "apparatschiks" - no need to keep them running a "solo"show"

My point was not that keeping the HSA monopoly is the best alternative; by all means it is not. I would however postulate that ensuring that any alternative remains Cuban is in the best interest of the Cuban people. I agree that in a ideal world free market would result in an overall improvement in the business: better wages and conditions for workers, better and consistent quality and responsiveness to customer demands. In an ideal world yes.

In the current world of business practice this is unfortunately not the case. You state that "Any company based on "western values" behaving like this would be boycotted by its customers" in response to my point about the sweat shop conditions in Cuba. This statement is invalidated by the continued success of too many multinational "western values" based companies thriving on such practices. Sweat shops are not the exclusive purview of Cuba. The names of those companies are well known to anyone with even only a passing interest in business. But that is the subject of a totally different discussion.

My thread is intended to deal with the cigar production environment as it exists today in Cuba; politics and wishful thinking excluded. I stand with anyone in HSA who will fight to defend and preserve this wonderful and passionate cigar culture against reductive marketing practices. I made the assumption, perhaps incorrectly, that these people would be issued from the production side of the business. My own experience, both in production and marketing, tells me this is usually the case.

Smooth draws and fragrant cigars to you.

Cheers

Dan

[Nino]

Hi Dan,

thank you for the detailed reply and further clarification of standpoints !

Now - on my second morning coffee, no cigar yet - :

Then we agree that HSA can disappear as well as the monopoly it represents as long as passionate cigar makers and entrepeneurs, preferably Cuban, with a sense of social justice and excellent products take over. Agreed ... ;-)

I was thinking of all those western brands, from I-whatever gadgets to running shoes, that produce in sweat shops, that was exactly my scenario. Once in a while consumers do get awaken to the ugly facts ...

I'd agree with you in that most of the production staff in Cuba are passionate and professional guys, but that is not a reason to maintain HSA and less to fight "with them".

I've met some terrible factory directors that were all "party line" BS robots and plain blind idiots, corrupted and ignorant, and very passionate and professional guys who either despair in their fight vs HSA or else have the biblical patience of Job to stay on and try to "harm the product the least possible" and make the best out of the situation.

A good day to you, Dan - off to my morning RASCC

Nino

[khomeinist]

Well.... I am definitely not one to 'bend with the wind.' It is clear that there are some rather fundamental philosophical differences at the heart of this debate. I think when you stay quiet and let things happen, they are more likely to occur again in the future, but that is a matter of personal politics, perhaps best reserved for arenas other than tobacco consumption.

I believe that Nino raised a few serious issues with this essay (been reading Lukacs Dan? haha). I was going to write a snarky retort about how this reminds me of a college freshman essay (ok I still got that zinger in) but let me just highlight the final two paragraphs. A bit of a dialectical montage if you will.....

Montaigut quote...

The results of the unlikely alliance of a free enterprise entity with a non-cost based production entity will be evident in the short to medium term but I suggest that for aficionados the alliance is fraught with more potential risks than rewards.

I make no apology. As long as the production component of Habanos SA stands up to soulless, mercantile and reductive marketing and fights for keeping the passion and the artisan guilds alive and healthy in Cuba I will stand by and defend it. And so should you.

end quote....

Could you elaborate on the risks and rewards? Did you favor any of the discontinued vitolas prior to cancellation? What do you foresee happening in a liberalized Cuban cigar market?

How is HSA standing up to 'soulless, mercantile, and reductive marketing?' Couldn't higher-margin cigars aimed at the 'elite' consumer be classified as soul-less? Your Monte Open example seems to contradict your closing thesis.

Is your fundamental argument that a cigar market that is more open to neo-liberal economic practices more likely to produce both inferior labor conditions and consumer products?

Personally, I think liberalization is necessary. The current model is corrupt and seems to contain the worst elements of both capitalism and communism. Workers need better pay. Consumers need to retain access to the highest-quality cigars for a fair price. Let a wider range of people handle marketing and distribution for specific brands.

Nobody can tell me that the whole-scale inventory deletions are good for the long-term future of tobacco culture. I agree with Ray completely in this regard. If you cut out the 'average' smokers, you will seriously maim the long-term prospects for the industry. And from a worker perspective, are factory employees seeing a significant cut of these high-margin fat cigar returns? HAHA. I seriously doubt it. Like I said. This is an awkward marriage between competing socio-economic theories. The worst form of capitalism, in my opinion, is that which binds itself to an oppressive political culture. I think that liberalization is the only solution at this point......

EDIT... I posted this during another exchange between Dan and Nino. Some points were addressed. I will let my post stand.

[Montaigut]

Well.... I am definitely not one to 'bend with the wind.' It is clear that there are some rather fundamental philosophical differences at the heart of this debate. I think when you stay quiet and let things happen, they are more likely to occur again in the future, but that is a matter of personal politics, perhaps best reserved for arenas other than tobacco consumption.

Please do not imply that there are philosophical differences at the heart of this thread. There are none unless of course you consider the conflicting interests of mass marketing and artisanal production to be matters of philosophy. This is all this thread is concerned with. I am sorry if the multiple appearances of the letters HSA are instantly linked to politics but that is not my problem or the object of this discussion.

I believe that Nino raised a few serious issues with this essay (been reading Lukacs Dan? haha). I was going to write a snarky retort about how this reminds me of a college freshman essay (ok I still got that zinger in) but let me just highlight the final two paragraphs. A bit of a dialectical montage if you will.....

I gladly leave the dialectics to you.

Monatigut quote...

The results of the unlikely alliance of a free enterprise entity with a non-cost based production entity will be evident in the short to medium term but I suggest that for aficionados the alliance is fraught with more potential risks than rewards.

I make no apology. As long as the production component of Habanos SA stands up to soulless, mercantile and reductive marketing and fights for keeping the passion and the artisan guilds alive and healthy in Cuba I will stand by and defend it. And so should you.

end quote....

Could you elaborate on the risks and rewards? Did you favor any of the discontinued vitolas prior to cancellation? What do you foresee happening in a liberalized Cuban cigar market?

Potential rewards: HSA becomes more responsive, closer to its customer base and delivers a wide range of attractive products.

Potential risks: smaller catalogue, less vitola options, blander blends, high prices and Cuban cigars become just another cigar.

Discontinuations up to now have not prevented me from finding cigars to my taste; they just make it harder and harder. Prior to 2000 discontinuations were the result of normal attrition i.e. no customer demand for the particular vitola. Since 2000, systematic discontinuation is part of a wholesale rationalization process that can only be detrimental in the long run.

I am much more concerned with what is going to happen to the cigar culture in Cuba in the present HSA morph for as long as it exists than I am with what a liberalized Cuban cigar market will look like. This can have much more impact on liberalization than anything else.

How is HSA standing up to 'soulless, mercantile, and reductive marketing?' Couldn't higher-margin cigars aimed at the 'elite' consumer be classified as soul-less? Your Monte Open example seems to contradict your closing thesis.

You misunderstand my statement. I clearly write about the production component of HSA.

Again you misread my point. My argument is clear about the fact that the Monte Open experiment is a pure marketing construct conducted in some isolated office: soulless.

Is your fundamental argument that a cigar market more open to neo-liberal economic practices will be more likely to produce both inferior labor conditions and consumer products?

No. My fundamental argument is exactly the opposite: that the current structure of HSA is in a position to do just that. Until HSA changes/disappears it is the only game in town in Cuba and only somebody within the organization can act to prevent this outcome. These are the folks within HSA that need supporting. Whishful thinking doesn't help them.

Personally, I think liberalization is necessary. The current model is corrupt and seems to contain the worst elements of both capitalism and communism. Workers need better pay. Consumers need to retain access to the highest-quality cigars for a fair price. Let a wider range of people handle marketing and distribution for specific brands.

We generally agree on this point.

Nobody can tell me that the whole-scale inventory deletions are good for the long-term future of tobacco culture. I agree with Ray completely in this regard. If you cut out the 'average' smokers, you will seriously maim the long-term prospects for the industry. And from a worker perspective, are factory employees seeing a significant cut of these high-margin fat cigar returns? HAHA. I seriously doubt it. Like I said. This is an awkward marriage between competing socio-economic theories. The worst form of capitalism, in my opinion, is that which binds itself to an oppressive political culture. I think that liberalization is the only solution at this point......

That is precisely what my thread is drawing attention to: HSA is definitely showing signs of walking away from its "average" customer base.

EDIT... I posted this during another exchange between Dan and Nino. Some points were addressed. I will let my post stand.

[khomeinist]

Let me respond to a few of your points. I am not sure that this is a case of misreading or merely a failure to understand the basis for certain assertions....

Please do not imply that there are philosophical differences at the heart of this thread. There are none unless of course you consider the conflicting interests of mass marketing and artisanal production to be matters of philosophy. This is all this thread is concerned with. I am sorry if the multiple appearances of the letters HSA are instantly linked to politics but that is not my problem or the object of this discussion.

Certainly there are philosophical differences. One's feelings towards differing political, economic, and social systems is definitely a function of one's theoretical perspective. Are the interests of 'mass-marketing' and 'artisinal production' conflicting? I doubt it. Many wines, breads, etc tout artisinal origins and yet are part of large marketing operations. Artisinal can be packaged as a value-added concept as much as anything else. Also, I am not sure you can define the 'object of the discussion,' as if these concepts and not linked with larger issues.

I gladly leave the dialectics to you.

My references to Lucaks and dialectics were comedic in nature. 'In Defense of History and Class Consciousness' is a classic text. One or two readers will get my reference.

Potential rewards: HSA becomes more responsive, closer to its customer base and delivers a wide range of attractive products.

Potential risks: smaller catalogue, less vitola options, blander blends, high prices and Cuban cigars become just another cigar.

Thanks for addressing my question. Don't these contradict each other a bit though? We would be rewarded with a wider range of products yet a smaller catalog? Which one do you see as more likely? Wouldn't the introduction of new players increase the likelihood that consumer choice will increase? The NC market is actually quite varied. Why blander blands? The NC market has many bold blends. Why just another cigar? Wouldn't certain entrepreneurs want to distinguish themselves in the marketplace by presenting 'artisinal' vitolas with 'unique' or 'historical' blends? I do not see a clear answer to this question.

Discontinuations up to now have not prevented me from finding cigars to my taste; they just make it harder and harder. Prior to 2000 discontinuations were the result of normal attrition i.e. no customer demand for the particular vitola. Since 2000, systematic discontinuation is part of a wholesale rationalization process that can only be detrimental in the long run.

No debate here. Well stated.

I am much more concerned with what is going to happen to the cigar culture in Cuba in the present HSA morph for as long as it exists than I am with what a liberalized Cuban cigar market will look like. This can have much more impact on liberalization than anything else.

So what is going to happen under the current morph? Do the trends look good to you? I have personally given up on hoping for change from within. I would like to see this corrupt entity broken up.

You misunderstand my statement. I clearly write about the production component of HSA.

Again you misread my point. My argument is clear about the fact that the Monte Open experiment is a pure marketing construct conducted in some isolated office: soulless.

Did I misunderstand your point or did the point implode do to excessive contradictions? What will keep HSA from further Monte Open schemes? By all accounts the Monte Open is popular in certain markets. Would you argue that we need to be more supportive of the few things that HSA is doing right to create some sort of positive feedback loop?

That is precisely what my thread is drawing attention to: HSA is definitely showing signs of walking away from its "average" customer base.

Right. So should we root for this entity to go away or just hope that some noble individuals change it from inside? Are there any incentives for such internal change to occur?

Not trying to be antagonistic. Your essay is interesting. I am just having a difficult time teasing out the pragmatic elements. Does this just boil down to a half-glass conundrum?

Cheers.

RIP Partagas, LGC, ERDM, and Diplomaticos.......

[Montaigut]

Hey mate... Nice bit of writing and research. Thanks for posting.

I won't drag your thread down to my level but I have to say that it is every bit as full of supposition as any of the rest of them, mine included. Neither of us have accurate accounting records of the Cuban owned tobacco company. As a result none of us can claim success or failure as a result. We can all taste success and failure of the final product however. We can decide for ourselves if we enjoy smoking out of the smaller catalogue of cigars more now than before, or less now then before! Can we not do that?

Unless I read you wrong, you appear to make a point that many discontinuations were made in the pre-H SA partnership time period. Moving forward this idea has not changed as discontinuations are still the norm. If loss of market share and decline of total production were linked to this factor and they continue to do it, just suppose this for a moment, could it not be a reason to stop doing it now?

What has really changed then. We have EL's and RE's some good some bad, many with dubious reputations with seasoned smokers. Many older costumers reject them. We have newer products that don't seem to sell and get discontinued just like some older ones do. The news from Cuba is generally still that they will be making less cigars for less people.

Lets contrast this for a moment. During this same time period the cigarette company has been under constant attack as well by governments. They have been fined billions by oppressive judiciaries, yet cigarette companies still make a ton of money!!! Why? Because the cigarette companies are run by pro's and Tabacuba is not! The death grip of the people that run Tabacuba has never changed!!!

Oh... and as to why the Cuban government went with an agreement with H SA to partner with Altadis; they are broke! These lousy run countries are alway broke (notice I took the politics out of it). This lousy run country has its people bring their own toilet paper and sheets to the hospital. You call that success too I imagine! Unfortunately the Cuban government runs its companies, such as Tabacuba et al, just as poorly!!! (IMHO)

Cheers. -Piggy

Hi Ray,

If you are saying that each one of us has cigar tastes that vary to some degree (more or less) and that a constantly shrinking catalogue offering is consequently a bad thing because it will make it increasingly difficult to find a cigar we like as a result then we agree!

Cheers

Dan

[canadianbeaver]

2. If the the physical quality of the tobacco selected would diminish in the rush to produce "Cuban" cigars? (ie would more tobacco from the lesser regions be used?) Would we get a range of Cuban "quality" similar to that present in Non-Cuban brands?

This is exactly what I think will happen. And you can bet Pete Johnson will be at the head of the line.

[canadianbeaver]

And thank you for these insightful, educational and intelligently written posts.

[CaptainQuintero]

I think the comments about wishful thinking carry more weight than is currently being given. Essentially 'aficionados' (I hate that term, it's like someone proclaiming themselves an expert) in this argument don't seem to have the purchasing power to stop deletions or influence the directions HSA go down. No one can seriously say that the deletions are some kind of malicious act, there is obviously some kind of hard business fact behind the cause, be it they did not pull their weight financially or they were not being manufactured in good enough quality (Which is harder to roll to a high standard, a Monte Open Master or a Laguito no 1?). We know that across the World people responded to the deletetions with letters and I'm sure people like Rob made their feelings known to the right people. But still the deletions continue and we get more ELs Grand Reservas etc etc. HSA would not go out of it's way to kill a part of it's customer base, so it has to be tht HSA feels they have no choice but to continue down it's line of thinking:

-Less cigars being produced but in turn higher construction quality.

-Less cigars being produced but in turn HSA is aging a lot of high grade tobacco to release in the future. How many people have complaing that the NC companies have been doing this for year? Now Cuba starts to do it and people complain.

-More 'high end' cigars with a greater profit margin means more cash for HSA which hopefully in turn means better production, the greater chance of new cigars being made and conditions for workers along the whole process being imporved.

Obviously HSA had to do something drastic with the way Western governments have turned against smoking. If they changed nothing and took no action to attract customers from emerging markets then would the Cuban cigar even exist today? I think the most people can hope for until HSA feels they are in a lot better place financially is to try to influence their distributors with the RE program and let those sales figures push HSA to make more choices. So essentially we can either 'hope for the best' or vote with your wallet on mass when your favourite vitolas are released and boycott those which are not. But even saying that, look how popular the Monte Sublimes/Grand Edmundos have been. Maybe cigar trends have just turned.

Essentially if Cuban cuts non performing cigars from it's catalogue and replaces them with big earning, fancy banded cigars for the Chinese etc so the company can survive then I'm fine with it. There are plenty of cigars I enjoy out there and hopefully when things become more stable in Cuba the catalogue will expand again. If you can't bend with the wind in regard to something you can't change and continue to get wound up about it, you end up wasting so much time and effort going red in the face you miss the little gems that do come along from Cuba.

[canadianbeaver]

A bit of a side note that may be of interest:

A couple of days ago in Havana a lady in my husband's office went to a LCDH approved store (or whatever they are called, one that sells REAL cigars) and purchased a box of Punch Churchills for me. She paid $220 which I knew they were going to cost.

She told us she befriended a cigar aficionado at the store who instructed the staff to select another box from the back. She got the impression there was a 2 tier market, with the goods on display intended for the less sophisticated consumer. Also kind of cool was she locked them in the hotel vault until departure day because they have a humidor in there. So they obviously know how to take care of their tourists.

Not sure what this means but here is the box she brought to me (and please dear Lord do not tell me they are fake! ):

[Colt45]

We all know that wouldn't happen.

I'm not positive we can know for sure I readily admit that my outlook is rather simplistic - I just think that there are Cubans already in

place who are more than capable of producing great cigars on their own (perhaps even with a little outside investment).

I have not formed an opinion on this myself, but I wonder:

1. If the "exclusiveness" aspect of the "Cuban Cigar" would diminish?

2. If the the physical quality of the tobacco selected would diminish in the rush to produce "Cuban" cigars? Would more tobacco from the lesser regions be used? Would we get a range of Cuban "quality" similar to that present in Non-Cuban brands and is that a good or bad thing?

Trevor.

Trev, as to point one, that was part of my question in the "what's in a name" discussion. I guess it's subjective, and dependent on how

we each look at cigars and why we smoke them.

To point two - we've had discussions about how HSA is storing (not utilizing) all the tobacco currently available, laying off rollers, that

there is fertile unplanted land that could be used (though at what cost?), etc.

There are obviously a number of possible scenarios for ending the monopoly. One might be that a small number of legitimate producers come into

being, and have equal chance at obtaining quality tobacco. Through my rose colored glasses, I'd expect high quality with great consistency

of that quality.

[PigFish]

Personally, I think liberalization is necessary. The current model is corrupt and seems to contain the worst elements of both capitalism and communism. Workers need better pay. Consumers need to retain access to the highest-quality cigars for a fair price. Let a wider range of people handle marketing and distribution for specific brands.

Nobody can tell me that the whole-scale inventory deletions are good for the long-term future of tobacco culture. I agree with Ray completely in this regard. If you cut out the 'average' smokers, you will seriously maim the long-term prospects for the industry. And from a worker perspective, are factory employees seeing a significant cut of these high-margin fat cigar returns? HAHA. I seriously doubt it. Like I said. This is an awkward marriage between competing socio-economic theories. The worst form of capitalism, in my opinion, is that which binds itself to an oppressive political culture. I think that liberalization is the only solution at this point......

EDIT... I posted this during another exchange between Dan and Nino. Some points were addressed. I will let my post stand.

... this is one of the best quotes on the subject I have seen yet.

This is only missing one thing. The cigar industry cannot be closed looped. You must have new customers. You cannot depend on a competitor to lure the customer and intend on taking that customer at a later date. A company must have entry products and a means to involve the curious at a level he/she wants to risk participation.

Cheers! -Ray

[CaptainQuintero]

A company must have entry products and a means to involve the curious at a level he/she wants to risk participation.

Cheers! -Ray

Ah but how many Entry level cars does Ferrari/Bentley/Rolls Royce produce? Their sales were dropping in the West but now they are riding huge profits down to huge sales numbers in China and India. It seems to me that for better or worse HSA is going after the luxury business model in the same way.

[khomeinist]

For worse

[PigFish]

Ah but how many Entry level cars does Ferrari/Bentley/Rolls Royce produce? Their sales were dropping in the West but now they are riding huge profits down to huge sales numbers in China and India. It seems to me that for better or worse HSA is going after the luxury business model in the same way.

I knew someone would bring this up! Of the millions of successful companies that sell reasonably priced goods to multiple millions of people someone selects the few companies that cater to the very rich and say, "It can be done!"

Mate as you and the folks at H SA appear to think alike, please join with them and buy my share of $50.00 cigars. You like the business model, please support it.

I am afraid that after reading the news of my friend Guy I am in a rather foul mood. -The Pig

[CaptainQuintero]

I knew someone would bring this up! Of the millions of successful companies that sell reasonably priced goods to multiple millions of people someone selects the few companies that cater to the very rich and say, "It can be done!"

Mate as you and the folks at H SA appear to think alike, please join with them and buy my share of $50.00 cigars. You like the business model, please support it.

I am afraid that after reading the news of my friend Guy I am in a rather foul mood. -The Pig

Like it or not Cuban cigars are a luxury item. It's like complaining that Krug don't make enough champagne for the common man. That's right they don't, if you want lower cost champagne you buy a different brand, getting hot headed and red in the face isn't going to make the executives at Krug bring out a cheap bottle of bubbly. The argument that 30 years ago they used to sell bottles at a lower price is a moot point, 5 years ago gold was a lot cheaper too.

There is no need to be rude either. I like discussing things with you, there's no need for abrupt and off hand replies.