International pricing policy by Habanos SA

[El Presidente]

1 minute ago, SGD316 said:

The issue is everyone keeps referencing HK like it's some sort of infinite gold mine in perpetuity. It's never a smart business move to put all your eggs into one region's basket even if in the short term the market will bear the prices and demand will purchase the supply. 

HK markets are pretty fickle around a lot of things, HSA may find themselves holding the bag if the next "thing" comes around. 

 

HK - UK - Middle East  in terms of end price (retail) are roughly equivalent.  Combined, they would represent somewhere between 30-35%  of global market.  They won't be feeling any more pain than they are feeling now and sales are either steady (HK/UK) or booming (ME). 

Real concern (in terms of premium brand mark ups)  is for the major markets (etal Spain) where prices will treble.  Let's face it, HSA will find a market for Cohiba elsewhere if needed. 

NC's have never had a better opportunity to get a foothold in these markets. Not 10%  but 50% +.  Problem is that right now they do not have the spare stock to supply as the US market continues to boom. 

 

 

 

[ChicagoRob]

HK - UK - Middle East  in terms of end price (retail) are roughly equivalent.  Combined, they would represent somewhere between 30-35%  of global market.  They won't be feeling any more pain than they are feeling now and sales are either steady (HK/UK) or booming (ME). 
Real concern (in terms of premium brand mark ups)  is for the major markets (etal Spain) where prices will treble.  Let's face it, HSA will find a market for Cohiba elsewhere if needed. 
NC's have never had a better opportunity to get a foothold in these markets. Not 10%  but 50% +.  Problem is that right now they do not have the spare stock to supply as the US market continues to boom. 
 
 
 

Nudies with a golden opportunity here Rob. Time to up production.

[NSXCIGAR]

I'm still unclear about this so-called "HK" pricing standard. If distributors are charging retailers uniformly HK pricing is going to rise by the same amount as the rest of the PCC countries meaning HK pricing will still be higher than other countries because of duties that only apply in HK. 

There's simply no way to achieve uniform pricing in all countries. It's not up to distributors or HSA. 

[Steinberger]

On 5/20/2022 at 1:15 PM, Salomones said:

https://www.cigaraficionado.com/article/cohiba-55-aniversario-hitting-market-with-enormous-price-tag

 

I am out for EL at this Prices.

I think their 60th anniversary release should be priced at $1,966 per cigar.

[charlieminato]

13 hours ago, NSXCIGAR said:

If distributors are charging retailers uniformly HK pricing is going to rise by the same amount as the rest of the PCC countries meaning HK pricing will still be higher than other countries because of duties that only apply in HK.

Or distributors are forced to make less in profits because of their local taxes.

This is why standardized pricing is illogical with a product that is heavily-taxed on the wholesale level. In order for true "standardized pricing" to exist, HSA would then need to force distributors/stores in all of the high tax countries to lower their prices. I don't see a scenario where Hunters & Frankau is going to dramatically slash suggested prices in wake of this news. 

If HSA was serious about standardized pricing that would mean that prices would need to take into account currency fluctuations, local tax changes and also create a strict pricing policy that requires retailers to sell the cigars at the designated price a la the German government's policy. HSA has not said much to people other than distributors so it's tough to figure how much, if any, of that is being implemented. I would suspect absolutely zero of it.

[LOMTL]

Nice chit chat with one of my fav BM in Spain today. She goes like "I heard some prices will change soon, did you know? Anyway, prices are sent to us every saturday by BOE". 💬 👀 Two weeks ago she had no idea.

[NSXCIGAR]

5 hours ago, charlieminato said:

This is why standardized pricing is illogical with a product that is heavily-taxed on the wholesale level. In order for true "standardized pricing" to exist, HSA would then need to force distributors/stores in all of the high tax countries to lower their prices. I don't see a scenario where Hunters & Frankau is going to dramatically slash suggested prices in wake of this news. 

Good to see you here Charlie. 

Uniform retail pricing isn't just illogical--it's impossible as I've pointed out. At least it is with distributors between HSA and the retailers. 

This only works with PCC keeping the price to HK retailers at, say, $400 for CoRo, but selling to Rob in Australia for $800. Why would they even sell to HK when they can sell to a retailer outside of HK for so much more? HSA would have to dictate exactly what boxes, to where and for what price PCC sells effectively undermining PCC's function as a distributor. 

So as I said this scheme can only work if Cuba distributed the cigars themselves setting the prices for each country. But even if they did that they face the same dilemma as PCC in HK. Why sell to HK at $400 a box when they could sell to Australia for $800? And if HK is getting the boxes at $400 why not export-only duty-free wholesale them to other countries or gray markets at, say, $600?

The bottom line is that the entire concept of uniform retail pricing or standardizing pricing to one country is logistically impossible for cigars. 

[joeruby]

Far too many posts to read on this thread. On one of them I think El Prez said ‘take a breath’ Spot on.. I think it will always comes down to supply and demand. They can put up Cohiba prices all they like but if the demand wanes, well, down prices come. Cohiba up there with Rolex? Tell them they’re dreaming..

[Enduin]

Demand will not wane unless there is a major worldwide recession. The Prez mentioned in the other thread that after seeing the situation on the NC side while in Miami he's now convinced that Cohiba and the rest will be fine and Trinidad is the only question mark, and I think he's spot on! You look at the NC names that are mentioned often in the NC thread and there are already a lot of $20+ cigars and they sell just fine. There are also $50+ cigars and they sell no problem.

Don't get me wrong, as someone who is not made of money, I absolutely hate this price increases because it means I'm pretty much done buying almost all of my favorite cigars. I also hate that I'm getting priced out of a lot of other things I like because of inflation and price gouging. I'm just saying that considering everything that is going on right now the HSA price increase is not that unreasonable and is almost certainly here to stay.

[LordAnubis]

I don’t think it was supposed to be standard global pricing. I think it’s supposed to be standard global DISTRIBUTOR pricing. It’s all smoke and mirrors. We don’t know any of the equation to get to price on a shelf. If UK increases prices by double. Does that mean they were buying cigars from habanos at half the price PCC has been buying from habanos?  Like the government money press, retailers have a blank plate to print whatever pricing they want right now. And I reckon they are. 

[charlieminato]

2 hours ago, LordAnubis said:

I don’t think it was supposed to be standard global pricing. I think it’s supposed to be standard global DISTRIBUTOR pricing. It’s all smoke and mirrors. We don’t know any of the equation to get to price on a shelf. If UK increases prices by double. Does that mean they were buying cigars from habanos at half the price PCC has been buying from habanos?  Like the government money press, retailers have a blank plate to print whatever pricing they want right now. And I reckon they are. 

Hmm. I have been told that distributors were provided new wholesale pricing and a Hong Kong price list with (M)SRPs. 

[El Hoze]

I read that price list and in my mind the value discrepancies are obvious as is the playbook. Like reading a wine list priced to sell wine to people more focused on perception vs. value and that haven’t had enough experience drinking wine to exploit that approach. Luckily I drink alot. A number of these prices are beyond absurd. If someone knew I paid that much for a box of Cohibas I’d be embarrassed to smoke one in public regardless of how much money I had. Like some of the POS overpriced watches people walk around with. I’ve bought several expensive boxes of cigars over the years, Reservas, etc. These prices for these cigars is shocking. 

[Chas.Alpha]

It doesn't seem that a lot of cause/effect thought was put into this by HSA. Like @NSXCIGAR said, the only way to homogenize global pricing to match Hong Kong (especially for PCC) would be for PCC to sell CORO's to the HK retailers at the same rate, while doubling the price for other markets. An accountants nightmare to be sure. The only other logical progression is that HSA demands that the retailers outside of HK sell at HK rates, while letting them pocket the difference. Somehow, I doubt that is in their master plan...

Or, HK retail prices will triple along with everyone else, which would defeat the whole purpose of this crazy scheme to begin with.

Distributors with different price tiers almost demands corruption?

[Cairo]

7 hours ago, Enduin said:

NC thread and there are already a lot of $20+ cigars and they sell just fine. There are also $50+ cigars and they sell no problem.

NC cigars are their own world.    In the age of the Internet even cigars that promised to be "very high end" and "super premium" and  "B & M only" and "never discounted" got discounted--if you knew where to look.

The Internet competition in NCs is ferocious--and if there is any over supply of anything the discounting gets crazy.

Before I started smoking CCs one of my hobbies was finding the NC clearance sales and deals--there are a bunch of discussion groups and web sites online that kept track of them.

[NSXCIGAR]

8 hours ago, LordAnubis said:

We don’t know any of the equation to get to price on a shelf. If UK increases prices by double.

Well, we kind of do. The only real difference in retail pricing among the most competitive retailers are the duties. By competitive I don't mean higher-end retailers like hotels and casinos where pricing can be high. Standard tobacco shops or LCDHs. The only significant differences in retail pricing is a result of the duties. In other words I don't think there was much variation in what distributors were charging retailers outside of possibly some large-volume discounts as their cost from HSA was fixed. 

It seems like HSA's idea is to raise prices but only in low-duty countries to "bring all prices up" to the arbitrarily-chosen level of current HK pricing, but for that to work they'd have to continue to feed HK (or HK through PCC) the older, lower pricing to keep HK or UK or CAN pricing where it is. If HK is getting such low pricing why wouldn't they sell that cheap stock export-only duty free worldwide? Cuba would have to direct and monitor every box PCC sends or intends to send to HK as PCC has many countries they work with as opposed to H & F or Havana House. You'd also have to give that low pricing to PCC for those "HK destined boxes" but why would HSA want to sell cheap boxes to HK or the UK or CAN at all then? 

This whole idea is like a 5 year old thinking they can build an airplane out of backyard junk. It's economically and logistically illogical. Anyone who knows international import/export even just a little could tell them this is not feasible. I refuse to believe that this is a serious suggestion. I'm still in the wait-and-see camp. Whatever changes we see may still just be temporary.

[Fugu]

1 hour ago, NSXCIGAR said:

I refuse to believe that this is a serious suggestion. I'm still in the wait-and-see camp.

Yep, that would need them keeping permanent track of customs & excise duties plus special (tobacco/luxury/sin) taxes plus general taxation (GST/VAT) - worldwide! A complexity of a task hard not to put past a company that doesn’t even get the hang of how to spell ‘connoisseur’.... 🙄

[Enduin]

4 hours ago, Cairo said:

NC cigars are their own world.    In the age of the Internet even cigars that promised to be "very high end" and "super premium" and  "B & M only" and "never discounted" got discounted--if you knew where to look.

The Internet competition in NCs is ferocious--and if there is any over supply of anything the discounting gets crazy.

Before I started smoking CCs one of my hobbies was finding the NC clearance sales and deals--there are a bunch of discussion groups and web sites online that kept track of them.

I respectfully disagree about NCs being their own world. I think NCs and CCs are very much intertwined. NCs are always (even when very critical) paying homage to CCs and taking inspiration from Cuban stuff. CCs on the other hand are always looking at the more adventurous NCs side and (while they always consider their stuff superior) they often copy NC trends. We know OpusX being released at what was for the time an outrageous price and enjoying an obvious success price played a role in Cohiba developing the Behike line. Same for the fat ring gauge trend. And at the same time the NC side has been using buzzword like "Corojo tobacco" or "Medio Tiempo" that come from the CC world for years.

It is true that most NCs USED to be relatively easy to find discounted. I myself was a big fan of finding sales. Yet, I don't think I've ever seen an OpusX with any significant discount. Same for Atabey, Casdagli, or some of the other high end NC brands that pop up often in the NC threads.

I think there is a LOT of competition for NCs in the sub $10 range. But for the high end stuff (and I mean real high end, not fake high end like Gurkha LOL) I always see the same handful of names popping up. And they don't seem to struggle to sell at some pretty high prices. Which tells me that at this point in time a LOT of people are very willing to spend whatever the price to get something they want. I mean, people last year were willing to pay 3 times the MSRP for a Playstation 5...

[NSXCIGAR]

10 minutes ago, Fugu said:

Yep, that would need them keeping permanent track of customs & excise duties plus special (tobacco/luxury/sin) taxes plus general taxation (GST/VAT) - worldwide! A complexity of a task hard not to put past a company that doesn’t even get the hang of how to spell ‘connoisseur’.... 🙄

If that was the only consideration that's just bookkeeping. But it would be HSA micromanaging the distributors to the point of eliminating them--at least for distributors that supply multiple countries.

The other more intractable issue is that they would have to give the high-duty countries like HK, UK and CAN much better pricing than lower-duty countries. So HSA is willing to sell at steep discounts (and possibly losses) just to prevent the retail prices in HK, UK and Can from increasing by the same amount as the rest of the world? What happens if HK puts a new duty on next year? Is HSA going to sell at a loss to keep HK prices stable?

It is simply impossible to standardize retail prices across multiple countries and make money. And why on earth would you even want to? They would be the first I've ever heard to even attempt it because it's nonsensical. That's why I think this whole thing is some kind of scare tactic or short-term or the gray market is going to kick back in once supply increases so HSA pricing to distributors will be less of a factor for us. 

[Bijan]

46 minutes ago, NSXCIGAR said:

The other more intractable issue is that they would have to give the high-duty countries like HK, UK and CAN much better pricing than lower-duty countries. So HSA is willing to sell at steep discounts (and possibly losses) just to prevent the retail prices in HK, UK and Can from increasing by the same amount as the rest of the world? What happens if HK puts a new duty on next year? Is HSA going to sell at a loss to keep HK prices stable?

My prediction is they'll do that, but not to the point where prices are the same between duty and duty free, only closer.

So the difference between duty free and HK, UK, CAN prices will shrink, but probably not to the exact same level as duty free retailers. High duty will still be more expensive than low duty and duty free but just not such a big difference.

Edit: the logic being that they want to sell at the more profitable jacked up duty free prices. If they make them identical there is no incentive to buy duty free.

[NSXCIGAR]

27 minutes ago, Bijan said:

High duty will still be more expensive than low duty and duty free but just not such a big difference.

Gray markets and duty free have always been about the same. If prices rise for distributors they rise for both. Nothing will change. We'll still feel it. 

And they're using this HK pricing as some kind of gold standard but as soon as they raise prices HK prices will rise, meaning that old price is no longer the "HK" price. If HK prices are the standard what makes them think their market will tolerate higher prices? I thought the current HK prices is the standard? The "HK" price goes away as soon as they raise prices. The whole concept is paradoxical.

If they double Cohiba prices CoRo in HK will be $2,000. Canada will be $3,000. Do they actually think the market will sustain that? When CoRo languished on shelves at $500 just 18 months ago? 

[Bijan]

26 minutes ago, NSXCIGAR said:

If they double Cohiba prices CoRo in HK will be $2,000. Canada will be $3,000. Do they actually think the market will sustain that? When CoRo languished on shelves at $500 just 18 months ago? 

As I said from the point of view of profits they want to raise duty free prices and get people in high duty markets to buy duty free (by hook or crook). If they have to stop selling at retail in Canada that's probably not a problem, as long as cigars don't just sit on shelves.

[NSXCIGAR]

1 hour ago, Bijan said:

As I said from the point of view of profits they want to raise duty free prices and get people in high duty markets to buy duty free (by hook or crook). If they have to stop selling at retail in Canada that's probably not a problem, as long as cigars don't just sit on shelves.

I suppose you're correct--they could avoid the high-duty country discount if they tell the distributors to exclusively sell to duty frees in those countries but then as you point out all HK (or UK or CAN) cigars would be available only through duty-free. That would destroy those markets (and what's left of Canada's). You'd have to travel internationally to buy cigars and only 50 at a time? HK is only 25 cigars. And only NCs but no CCs available retail anywhere?

This harebrained scheme has my vote for dumbest business decision of the decade if it's real, which I'm far from convinced of.

[dodger29]

17 hours ago, joeruby said:

 Cohiba up there with Rolex? Tell them they’re dreaming..

Every Rolex I have ever taken out of a box has been perfect....every time. 😜

[Fugu]

10 hours ago, NSXCIGAR said:

If that was the only consideration that's just bookkeeping. But it would be HSA micromanaging the distributors to the point of eliminating them--at least for distributors that supply multiple countries.

Was just jesting. Concur with you guys. These things are out of reach of their control. Seriously, the whole idea is a joke. What they could do is a basic adjusting here and there between low and high-price / high-duty markets. But that’s it. Also, you have to keep in mind general market structures. A Spaniard would never pay Hong Kong prices, period. You’d eventually destroy markets. If you have that in mind, go for it, HSA.

With Iba and Trini they are already on route to replace the “smokers-base” for the “posers-base”.

Two further examples: 1. in markets where duty is paid on cigars at the moment of leaving the (bonded) importer’s/distributor’s warehouse, you always got boxes with different pricing on the shelves (well, used to, sort of, tough times 😂), depending on their age. 2. I got an offshore supplier, who sells on spot and does ship. You pay different, for the very same tangible box, depending on whether you buy in person at his offshore B&M or whether shipped out to your door. And HSA does have absolutely no say in it.

[MrBirdman]

On 5/21/2022 at 10:23 AM, coug28 said:

This is the semi-comical part of all this to me. So many saying they won’t pay luxury prices for a product with such inconsistencies…”I’ll just buy & smoke NCs instead”.  

Also the same people….”glad I stocked up, quality hasn’t ever been better in Cuban tobacco than 20/21 production!”

 

With all due respect, there is no logical inconsistency between those two positions. First, people who bought 19-21 stock based on the increase in quality did so in part because prices were expected to continue increasing faster than in the past. Even if they expected prices to stay flat, buying an inconsistent product when it is less inconsistent makes perfect sense. With prices going up, who wouldn't be happy about stocking up at lower prices when the quality was just as good?

Presumably those people stocked up at prices they felt were an acceptable value, but that is an entirely different and personal assessment. The increase in quality has been in the leaf, not so much construction. Now that you're paying twice as much for Cohiba, you're also paying twice as much for plugs and cigars that just aren't that good. So it's entirely logical for some people to conclude that, for them, the heightened quality of current production still does not outweigh the newer prices once you factor in the inconsistency premium. 

Also, most people here buy boxes without being able to fully inspect them personally ("fully inspect" meaning examining the entire box for plugs and other issues.) FOH absolutely reduces some of that uncertainty, but even Rob and crew aren't weighing or rolling every single cigar between their fingers to look for high plug rates. No vendor does, and it isn’t their responsibility to do all of HSA’s quality control anyway.

Even with recent production, I have still gotten the occasional box where most of the cigars are either plugged or so tight they irreparably suffer. I also have a downright nasty box of Connie 1 that's essentially compost because the quality is so bad. It's a risk everyone has to take when they buy CC, and one's price-tolerance for writing off boxes is a personal calculation.

If you are buying a single to smoke at a divan and can get a replacement for an unacceptable cigar, that’s another matter. Maybe that’s how most people in HK smoke CC or Cohiba. I don’t know. But I know that’s not how most people here buy their cigars. 

TL;DR - Those two positions are entirely compatible and not comical. Everybody would prefer to stock up at lower prices for the same product, and perceptions of value are a personal calculation that will vary great between individuals and over time as prices change.