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Posted

Spain’s Tabacalera set to take the cigar in US amid Cuba detente

Tobias Buck in Madrid

June 16, 2015

Financial Times.com

http://www.ft.com/intl/cms/s/0/26197be6-110c-11e5-9bf8-00144feabdc0.html#axzz3dB5p6eQX

One of the biggest beneficiaries of the diplomatic rapprochement between the US and Cuba is likely to be a Spanish tobacco group.

The company in question is Tabacalera, part of Imperial Tobacco, which owns a 50 per cent stake in Cuba’s official cigar export operation Corporación Habanos.

Since buying the stake 15 years ago, Tabacalera has played a key role in marketing and selling Cuban cigars in more than 150 countries around the world.

Now, with Washington restoring diplomatic relations with Havana, the Madrid-based company is hoping for a surge in business in the US, which accounts for two-thirds of premium cigar sales.

Fernando Domínguez, executive chairman of Tabacalera, says nearly one in three premium cigars sold in the US could soon come from the former enemy island.

“Given the indisputable recognition of Cuban tobacco and its unique portfolio of brands, I think Habanos can capture 20 to 30 per cent of the US cigar market in the first three of four years,” he says.

Banned in 1962, at the height of the cold war, Cuban cigars were a casualty of the enmity between the US and the island. The cigar-loving John F. Kennedy held back his signature until a member of his staff was able to snap up 1,200 of his favourite Cuban cigars from tobacco shops across Washington.

The US is the biggest market for puros, or premium cigars, with more than 300m smoked annually. For more than half a century, however, the import and sale of Cuban cigars from prized brands such as Cohiba, Montecristo and Romeo y Julieta was strictly prohibited.

Washington and Havana agreed to restore diplomatic relations last year, but the trade embargo signed by Kennedy in 1962 has yet to be lifted by the US Congress. In January, the US allowed individual travellers to bring in Cuban cigars worth up to $100 — a first step towards what tobacco executives hope would be a full opening

.

The increase in US travellers to Cuba has already led to a rise in cigar sales on the island, Mr Domínguez says.

“The numbers are still not significant, but they give an indication of the acceptance that Habanos will have in the US.”

The example of Tabacalera highlights how the US diplomatic shift is creating unexpected opportunities for business, particularly those from Spain, which ranks as the largest investor in Cuba.

Tobacco aside, Spanish tourism and leisure groups are entrenched on the island and hope to benefit from the expected influx of US visitors.

In a bid to enhance trade ties between the two countries, Luis de Guindos, Spain’s economy minister, will travel to Havana for an official visit next month.

“There is an opening in Cuba, and we are part of it,” says one official.

Posted

This will be very interesting to watch as it plays out. Especially the price point that Cuban Cigars will initially enter the US market at (assuming the embargo lifts).

Posted

This will be very interesting to watch as it plays out. Especially the price point that Cuban Cigars will initially enter the US market at (assuming the embargo lifts).

And I should add that it will be quite interesting to see the brands/quantities that will be pushed into the US market as well.

Posted

Pres, are you at all worried from your point of view if the embargo is lifted, or expect to see continued sales?

Posted

Pres, are you at all worried from your point of view if the embargo is lifted, or expect to see continued sales?

The one constant in this industry is change. Change inherently brings both challenges and opportunities.

Personally, sales are not likely to be an issue. I suspect adequate stock levels will pose a greater challenge. The latter is an area we are doing our best to address now.

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Posted

People seem to forget that Congress needs to lift the embargo and not the president. That being said, 2016 is an election year. Don't expect anyone to piss off south Florida or Florida in general with seats and a presidency in the balance. Once we get to 2017 anything can happen, but that would require Congress to act in a bipartisan manor. Neither party has shown much willingness to do that over the past 11-12 years.

  • Like 3
Posted

People seem to forget that Congress needs to lift the embargo and not the president. That being said, 2016 is an election year. Don't expect anyone to piss off south Florida or Florida in general with seats and a presidency in the balance. Once we get to 2017 anything can happen, but that would require Congress to act in a bipartisan manor. Neither party has shown much willingness to do that over the past 11-12 years.

X100. Read this folks!!! Embargo is not going anywhere.....yet.

  • Like 2
Posted

The impending fall of the embargo is a great exaggeration.

  • Like 2

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