Question By TR on Habanos and the Grey Market

[El Presidente]

What is the "grey market" and what is the ramifications for authorized Habanos SA retailers using the grey market?

Why does everyone selling fakes seem to have a friend in Miami with a relative that works in a cigar factory in Cuba?

1. The Grey Market refers to wholesale sellers of Cuban cigars who are not Habanos s.a Licensed distributors.

So when it is said that retailers purchase from the "Grey Market" it means that they are purchasing from non Habanos s.a licensed distributors.

Retailers use the grey market because as a rule the grey market provides better pricing. Flip side is that it also introduces stock risk in the way of a level of fake cigars. Fake cigars are often mixed in with real. The retailer knows this but takes the punt that the client doesn't know. If the retailer is caught out then he apologises, blames Habanos s.a distributor (because of course he purchases all his cigars through them ;-) ) and then proceeds to spread the rumour that even Habanos s.a retailers receive a level of fakes (which is false).

With Habanos s.a purchasing back 50% shareholding of international distributors while tightening stock movement control in Havana, Grey Market dealers may have an increasingly difficult time.

As for Licensee of Habanos s.a penalties on the retailer...there are none UNLESS he is found to be selling fakes. In that case assuming the right evidence is in place, the Licensee and Habanos s.a will enforce their trademarks as is the case currently in Singapore where PCC is taking action against a retailer who amongst other things was selling Cohiba Robusto LE's and R&J Double Corona's

[The Privateer]

» In that case assuming the

» right evidence is in place, the Licensee and Habanos s.a will enforce

» their trademarks as is the case currently in Singapore where PCC is taking

» action against a retailer who amongst other things was selling Cohiba

» Robusto LE's and R&J Double Corona's

Well, PCC doesn't seem to be doing a good job with that, as the confiscated stock was returned to the vendor (Cigar Affair) due to charges not being pressed within the stipulated time frame.

I had to mention the name for the record, as they really deserve to be taken down (yes, I have had bad experiences with them too).

[El Presidente]

» » In that case assuming the

» » right evidence is in place, the Licensee and Habanos s.a will enforce

» » their trademarks as is the case currently in Singapore where PCC is

» taking

» » action against a retailer who amongst other things was selling Cohiba

» » Robusto LE's and R&J Double Corona's

»

» Well, PCC doesn't seem to be doing a good job with that, as the

» confiscated stock was returned to the vendor (Cigar Affair) due to charges

» not being pressed within the stipulated time frame.

»

» I had to mention the name for the record, as they really deserve to be

» taken down (yes, I have had bad experiences with them too).

Well Well Well. I will follow up Dag for an update.

For what it's worth, my opinion is that there is insufficient ruthlessness by Habanos and the distributors in destroying the grey market where possible. Perhaps the major reason is that vested interests fare better by stoking it ;-)

[Fatshotbud]

» Well Well Well. I will follow up Dag for an update.

»

» For what it's worth, my opinion is that there is insufficient ruthlessness

» by Habanos and the distributors in destroying the grey market where

» possible. Perhaps the major reason is that vested interests fare better

» by stoking it ;-)

Hmmmmm........ could be.

[Van55]

Interesting thread. Thanks for the information!

[idesign]

» Well, PCC doesn't seem to be doing a good job with that, as the

» confiscated stock was returned to the vendor (Cigar Affair) due to charges

» not being pressed within the stipulated time frame.

»

» I had to mention the name for the record, as they really deserve to be

» taken down (yes, I have had bad experiences with them too).

Here's a link to the article about the late filing and the returning of the fake 'gars if anyone's interested in reading it....

http://thestar.com.my/news/story.asp?file=...981130&sec=asia

[kab55]

Very Interesting information

[the_mantis]

What about the practice of some online vendors using official Habanos distributors OUTSIDE of their region in order to get better pricing? Is this considered "grey market" as well? I know this practice is sure to be frowned upon by the local distributor, but is it bad business for the vendor?

Example: Say a vendor in Japan instead of purchasing from PCC decides to purchase from the official Habanos distributor of a Latin American country because they are offered a better price. It is still an official distributor...just not the one authorized for their region of the world.

Would said Latin American distributor get in trouble for doing this?

Would said Japanese vendor be "locked out" from purchasing from PCC from then on and would they still be able to claim authenticity if they bought from a distributor outside of their region?

Would said Latin American distributor still be held liable IF they sold counterfeits to vendors OUTSIDE of their assigned territory?

Would there be a possibility that official distributors would consider selling counterfeits to vendors outside their assigned territory?

I know...alot of questions, but I've often wondered about this.

[El Presidente]

» What about the practice of some online vendors using official Habanos

» distributors OUTSIDE of their region in order to get better pricing? Is

» this considered "grey market" as well? I know this practice is sure to be

» frowned upon by the local distributor, but is it bad business for the

» vendor?

»

» Example: Say a vendor in Japan instead of purchasing from PCC decides to

» purchase from the official Habanos distributor of a Latin American country

» because they are offered a better price. It is still an official

» distributor...just not the one authorized for their region of the world.

»

» Would said Latin American distributor get in trouble for doing this?

»

» Would said Japanese vendor be "locked out" from purchasing from PCC from

» then on and would they still be able to claim authenticity if they bought

» from a distributor outside of their region?

»

» Would said Latin American distributor still be held liable IF they sold

» counterfeits to vendors OUTSIDE of their assigned territory?

»

» Would there be a possibility that official distributors would consider

» selling counterfeits to vendors outside their assigned territory?

»

» I know...alot of questions, but I've often wondered about this.

This happens with regularity but a problem ensues.

License holders are not permitted under Habanos s.a license to sell into other territories. If a regional Licence holder discovers his is occuring into their region (and they have proof) then they will lodge a complaint with Habanos s.a. Habanos s.a will investiate. Each licensee pays a significant annual fee for the regional distribution area. I believe the level of dissatisfaction amongst distributors and the level of complaints re cross area distribution is the reason Habanos s.a is purchasing back 50% of the distributor licenses. No better way of controlling and enforcing the license system than being part of the operational mix.

Now certain regional license holders have sold into other territories, however, they never use their base trading company (which holds the license) to do so. They will use a third party company.

From a retailers perspective it is like being a little bit pregnant. You may initially purchase outside the local distributor for better pricing, but you are never dealing direct with another license holder. You are invariably dealing with a third party. You never really develop a strong bond with this third party, the relationship is based on product and pricing.

*You can never be 100% sure that 100% of your stock is legitimate.

*In the majority of cases you have never seen storage conditions.

*You can never return stock that is below quality.

*You can never say that 100% of your product is purchased through an official Habanos S.A Licence holder. Just ask them to name that Licence holder.....they never will.

Always remember that they are purchasing through a third party.

Once a retailer begins this trait they generally scour the world for lines of supply and best price. Their standards drop. They get caught out on a fake box here or a fake box there and then they go back to stating that all their stock has been purchased from an "official Habanos s.a License Holder" and that even these license holders have a % of fakes. This is false but it is the only way to save their arse.

How may people have purchased Taboada's? only to find out that not all the "Taboada's" have been rolled by Taboada ;-)

This is an industry which has all types: The Honourable, The Mostly Honourable and The Spiv

As we say here...."you wouldn't be dead for quids".

[Vetteman]

Wow, great thread!! Lot's of interesting comments and info.

[raney]

Very interesting post Rob, and I think I may have seen an example or two of what you're describing...

However, could you please help me with the secret decoder ring settings to properly translate the following little tidbit?

» As we say here...."you wouldn't be dead for quids".

;-)

Thanks

[El Presidente]

» Very interesting post Rob, and I think I may have seen an example or two

» of what you're describing...

»

» However, could you please help me with the secret decoder ring settings to

» properly translate the following little tidbit?

»

» » As we say here...."you wouldn't be dead for quids".

»

» ;-)

»

» Thanks

...."you wouldn't be dead for quids".= Interesting times....you wouldn't be anywhere else.