Have Habanos ever failed?

[LordAnubis]

In line with the top terrible releases of this century, with all the uproar about Habanos current ideas.

Im curious, has Habanos ever made a choice that has been so terrible for their business/objective that it cost them dearly? Im not talking what upset you, im talking the whole business/industry. 

I would argue the massive production ramp up and poor quality of the 2000s was probably the only one that comes to mind to me, but i don't even know how much of a commercial success that was, maybe it worked out well for them?

They have had releases that been big hits (despite our uproar here, and again we are not the majority of habanos smokers), they have moved to trends such as thicker cigars and i think that has been a success for them. Even right now with all the pricing furore, they are selling out cigars everywhere in the world, so really another big success it looks like.

So as much as we love to hate on them, have they ever really made a grave error that has almost sunk them?

[NSXCIGAR]

Since HSA can't go bankrupt it's hard to really know what they could do to sink themselves. I would agree they were likely in pretty dire straits by 2000 as I doubt they would have brought in a third party unless they had to. 

Impossible to know if an individual product results in profitability or not but their gross revenue has been increasing steadily since Imperial entered the picture so on an annual basis they've been successful, although we'll never know what net income is so do we know how successful HSA really is? Imperial felt the need to get out of dodge after 20 years so who knows what is really going on.

 

[El Presidente]

23 minutes ago, LordAnubis said:

I Even right now with all the pricing furore, they are selling out cigars everywhere in the world, so really another big success it looks like.

Whoa Tonto!

You can't declare success when they have just left the starting gate on this one.

It may indeed prove to be a master-stroke in the short term but even that is not a given.

Long term they have unlocked doors that they had controlled for a generation.

The law of unintended consequences is now in play 

[LordAnubis]

6 minutes ago, El Presidente said:

Whoa Tonto!

You can't declare success when they have just left the starting gate on this one.

It may indeed prove to be a master-stroke in the short term but even that is not a given.

Long term they have unlocked doors that they had controlled for a generation.

The law of unintended consequences is now in play 

Sure, however they are "rolling with the punches" so to speak and are maximising money right now. In 3 years time maybe Cohibas will sit on shelves forever and they'll deep discount everything again, again rolling with the punches. But for now in the current climate i think they've nailed it. 

My one main argument would infact be that Habanos has always been behind the ball, never in front of it. Really they copy other proven trends rather than setting the trend. So seems to me they are a pretty well calculated minimal risk operation. As much as we think (an i am aboslutely one of them) they are numpties and have no idea what they are doing, history seems to be mostly on their side (i'd liek to see an example of when they were wrong and hence this post). What hapens out of this once in a millenium cigar climate we are in today is anyones guess ofcourse.

[El Presidente]

Anejado. 

 

.......my job here is done 

[Fuzz]

56 minutes ago, El Presidente said:

 

You can't declare success when they have just left the starting gate on this one.

 

Why not? Politicians do it all the time!!

[NSXCIGAR]

7 hours ago, LordAnubis said:

Even right now with all the pricing furore, they are selling out cigars everywhere in the world

It's been like 12 days. How can you know? Distributors are still bone dry. 

 

6 hours ago, El Presidente said:

Anejado. 

Not so fast...they could have been profitable. Cigars taken off the trash heap sold for $300/box. Took 6 years but they pretty much moved them all. 

Did it taint HSA's reputation? Possibly. But as long as they shut the program down at some point and don't put out a dodgy release like that again it will be forgotten. 

[BrightonCorgi]

They've failed their core fan base and have done a poor job promoting Habanos, the lifestyle and passion for cigars.  They've missed the boat on cementing Habanos as part of a luxury lifestyle to the degree jewelry, cars, alcohol, and fashion have in digital age.

They've tried to cater to local consumers via distributors with Regionals.  Regional have been a semi-miss if you think about the red tape and how one sided the collaboration is.  Habanos lacks anyone with the pulse on what's hip and where it's going.  They're reactionary at best with poor execution.

They miss the nostalgia element that consumers crave. 

If a product goes down market/down quality, coming back up is difficult.  The connotation of inferiority is like a a death sentence.

[El Presidente]

1 hour ago, NSXCIGAR said:

Not so fast...they could have been profitable. Cigars taken off the trash heap sold for $300/box. Took 6 years but they pretty much moved them all. 

Did it taint HSA's reputation? Possibly. But as long as they shut the program down at some point and don't put out a dodgy release like that again it will be forgotten. 

.......I wish my bankers were as easy to convince as you 

[NSXCIGAR]

7 minutes ago, El Presidente said:

.......I wish my bankers were as easy to convince as you 

Hey, I'm not saying they were profitable--only that they might have been. They certainly couldn't do much else with that leaf and they ended up moving it at a premium price (albeit it took awhile). And they apparently have the Fundys coming so I doubt they'd keep kicking themselves in the nuts if they were losing money.

[El Presidente]

3 hours ago, NSXCIGAR said:

Hey, I'm not saying they were profitable--only that they might have been. They certainly couldn't do much else with that leaf and they ended up moving it at a premium price (albeit it took awhile). And they apparently have the Fundys coming so I doubt they'd keep kicking themselves in the nuts if they were losing money.

It was a fail simply because of the reputational and opportunity cost. There are still Hoyo and Romeo  Anejado avalable through PCC. I won't touch them. 

For them, this was their tilt at the vintage market. 

They didn't just tilt they .....

 

 

Now the Trini aged may have been the one to work but at $2K+.......

excuse the pun but whatever chances they may have had......that ship has sailed 

 

 

[Bijan]

 

3 hours ago, BrightonCorgi said:

They've failed their core fan base and have done a poor job promoting Habanos, the lifestyle and passion for cigars. 

One sad thing to consider is that aside from the US, cigars don't have a future anymore.

If you look at Canada, Australia, New Zealand, the UK, Ireland etc. Taxation, plain packaging, smoking bans, etc. Mean that in 30 years selling cigars may no longer be a viable business.

In 30 years it may no longer even be possible at all, with the sort of laws in new Zealand where current smokers are grandfathered but the next generation won't legally be able to buy any tobacco products at all.

[NSXCIGAR]

3 hours ago, El Presidente said:

It was a fail simply because of the reputational and opportunity cost.

No disagreement there was some degree of reputational damage. Opportunity cost, again, what were they going to do with that leaf? Now, I think it's safe to say at this point this was almost certainly not a ground-up project but was more of a post-hoc scramble to package up a crap sandwich. In that case I would say it was a smashing success. 

If it was in fact a ground-up project I would agree it was a total disaster and almost certainly misallocated resources. 

 

5 hours ago, BrightonCorgi said:

They've failed their core fan base and have done a poor job promoting Habanos, the lifestyle and passion for cigars.  They've missed the boat on cementing Habanos as part of a luxury lifestyle to the degree jewelry, cars, alcohol, and fashion have in digital age.

They've tried to cater to local consumers via distributors with Regionals.  Regional have been a semi-miss if you think about the red tape and how one sided the collaboration is.  Habanos lacks anyone with the pulse on what's hip and where it's going.  They're reactionary at best with poor execution.

Can't disagree with most of that. HSA's general marketing is pathetic. Their YouTube channel has 4100 subscribers. They actually produce some pretty polished-looking content but obviously nothing interesting. They have zero interaction with customers and hide behind distributors. 

The ER program is more of a cash-flow generator I feel than a way to please customers. How many customers of that region are going to buy the particular cigar they make? They get the cigars prepaid and then take years to make them.

And talk about bad marketing--they love to have these big launch parties and release announcements and yet don't even release the cigars until years later. Gee, I think a lot of people who read about a new cigar might want to pick some up but so much time goes by they forget they even read about it. CA gives nice spread on the RG Coronas de Lonsdales or the QdO 52 and they never show up. How about just keeping your mouth shut until you're ready to go? And seriously--how long does it take to roll up a first batch of 10,000 sticks? 

They let brands many of us love languish with only one or two models for no reason. If they're not going to use SLR or Dip or LFDC can I please have them? Every brand is someone's favorite. They should never be unable to get a cigar from their brand. 

[LordAnubis]

1 hour ago, NSXCIGAR said:

They let brands many of us love languish with only one or two models for no reason. If they're not going to use SLR or Dip or LFDC can I please have them? Every brand is someone's favorite. They should never be unable to get a cigar from their brand. 

I personally like the culling cycle. There was one reason and one reason only when i started in cigars and had no idea about CC vs NC, that i chose down the CC path. Pure and simple it was there were only 10 cigars to chose from in the CC world, where there are about 8 billion different cigars in the NC world. Aint nobody got time to trawl through all the absolute shit to find the good NC's. Where as Cubans you can pretty much go through the entire catalogue in a few weeks.

Again, there are deletions, but from what you hear the deletions were certainly warranted as those things just didn't sell other than to a unique set of customers.

[chris12381]

That “Habana 2000“ experiment was sure interesting. 

[El Presidente]

2 hours ago, NSXCIGAR said:

Opportunity cost, again, what were they going to do with that leaf? 

They could have sold the tobacco to the Euro wholesale buyers as they have done for 30 years, got money upfront and kept their already dented reputation from being further pumelled.

They could have put it into a whole new project. They could have supported existing lines. You are right. Everything sells eventually. ROI/Opportunity cost are the scorecards and here they failed dismally before you even look at brand damage. 

Maybe they learned something. 

They have 50% the stock production so double the price of the big income generators. Let's give them the benefit of the doubt that they have done the math. They lose 30% of their Cohiba buyers altogether and another 25% of existing Cohiba buyers reduce their Cohiba spend. Worse case scenario, they still make the same money.  Brand damage is significant but they may have done the marketing research and they were already coming in just above kiddy fiddlers and just behind ambulance chasers. There is nothing to lose there. Just rolling with CPI + 8% on  likely  low 3 year production volumes is a loss maker.........might as well go "Big Bang" and see if it  bloody works as they find new markets for Cohiba while eliminating much (not all) of the arbitrage market.  

Now no plan survives first contact with the market so they will have a plan B/C if this is a complete CF. However, they have the distributors by the short and curlies and a significant % of the global market will see no or minimal change. They can now afford to wait and see for 6-8 months. They are not looking at forums/FB/Twitter or Insta. They are looking at the numbers for  Spain/Germany (how much Cohiba was actually being sold within Spain prior?),  the emerging market's of Asia/China/Middle East.  High tax mature markets are of little concern to them as little has changed. 

They may indeed win on the profit scoreboard short term but they have left the door open to serious NC competition in all global markets and there are very good players who are happy to try and take advantage. 

The problem? A shortage of NC tobacco. There doesn't look like anywhere near  enough to take on HSA root and branch (all markets) within the next three years.

Maybe HSA knew this. Maybe we are selling them short. 

Maybe they have learned their lessons and truly have a masterplan. 

 

Then maybe they are 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Duxnutz]

2 hours ago, NSXCIGAR said:

No disagreement there was some degree of reputational damage. Opportunity cost, again, what were they going to do with that leaf? Now, I think it's safe to say at this point this was almost certainly not a ground-up project but was more of a post-hoc scramble to package up a crap sandwich. In that case I would say it was a smashing success. 

If it was in fact a ground-up project I would agree it was a total disaster and almost certainly misallocated resources. 

 

Can't disagree with most of that. HSA's general marketing is pathetic. Their YouTube channel has 4100 subscribers. They actually produce some pretty polished-looking content but obviously nothing interesting. They have zero interaction with customers and hide behind distributors. 

The ER program is more of a cash-flow generator I feel than a way to please customers. How many customers of that region are going to buy the particular cigar they make? They get the cigars prepaid and then take years to make them.

And talk about bad marketing--they love to have these big launch parties and release announcements and yet don't even release the cigars until years later. Gee, I think a lot of people who read about a new cigar might want to pick some up but so much time goes by they forget they even read about it. CA gives nice spread on the RG Coronas de Lonsdales or the QdO 52 and they never show up. How about just keeping your mouth shut until you're ready to go? And seriously--how long does it take to roll up a first batch of 10,000 sticks? 

They let brands many of us love languish with only one or two models for no reason. If they're not going to use SLR or Dip or LFDC can I please have them? Every brand is someone's favorite. They should never be unable to get a cigar from their brand. 

Agreed. Laughable I can’t even find a box of their most widely produced cigar (Monty #2) at the moment (not even FOH!). 

[El Presidente]

10 minutes ago, Duxnutz said:

Agreed. Laughable I can’t even find a box of their most widely produced cigar (Monty #2) at the moment (not even FOH!). 

Touch base. Have plenty 

[tjkoala]

7 hours ago, Bijan said:

In 30 years it may no longer even be possible at all, with the sort of laws in new Zealand where current smokers are grandfathered but the next generation won't legally be able to buy any tobacco products at all.

I wouldn't get all doom and gloom, laws can be changed and people tend to not respond favorably when they see that people in another country can access creature comforts that they can't. Even in Dubai you can still find a stiff drink, something you're not supposed to do.

[Bijan]

6 hours ago, tjkoala said:

I wouldn't get all doom and gloom, laws can be changed and people tend to not respond favorably when they see that people in another country can access creature comforts that they can't. Even in Dubai you can still find a stiff drink, something you're not supposed to do.

On the flip side, Dubai (UAE) now has close to a 100% tax on cigars/tobacco. When a few years ago at least they had no income tax.

Though yeah in Dubai or Abu Dhabi you can still get smoking hotel rooms pretty easily (at least until the last time I was there 2-3 years ago).

And again Canada, Australia, etc. are not outside the norm. It's a ton of countries that are cracking down on tobacco. And even in the US maybe 3-5% of the population are cigar smokers.

 

6 hours ago, tjkoala said:

Even in Dubai you can still find a stiff drink, something you're not supposed to do.

Well in the US (and practically everywhere else) you can get heroin and cocaine, but that's not something a legitimate business can get involved in publically.

Take the situation with alcohol in Iran for example, where it's about as easy to get as pot in the US states where it's not legalized and consumption is sort of like the prohibition era in the US, where people probably drank more, but again the people involved in that can't credibly call themselves "legitimate" businessmen.

[tjkoala]

1 hour ago, Bijan said:

Take the situation with alcohol in Iran for example, where it's about as easy to get as pot in the US states where it's not legalized and consumption is sort of like the prohibition era in the US, where people probably drank more, but again the people involved in that can't credibly call themselves "legitimate" businessmen.

Well yeah, its not technically legal, but just because the product isn't legal doesn't mean its still not extremely profitable for the manufacturer. Look at just about nay illicit substance or product the public actually wants and you'll see people who have become fabulously wealthy off the fact that the item is restricted and driving the product cost up. End of day, making things illegal doesn't really work and there are tons of examples of this. People always find a way to get what they want. Just look at all the Americas on FOH.

[Bijan]

Just now, tjkoala said:

Well yeah, its not technically legal, but just because the product isn't legal doesn't mean its still not extremely profitable for the manufacturer. Look at just about nay illicit substance or product the public actually wants and you'll see people who have become fabulously wealthy off the fact that the item is restricted and driving the product cost up. End of day, making things illegal doesn't really work and there are tons of examples of this. People always find a way to get what they want. Just look at all the Americas on FOH.

You're right it's extremely profitable, probably more profitable. The problem is that a legitimate company can't take in those profits. The profits are going to be go to smugglers and drug dealers.

I don't think there's an example of a publically known international joint venture company operating in the heroin, cocaine or even pot market (where pot is not legal).

If Habanos has no market left in most of the world and can't officially sell to the US either, it's going to be hard to continue operating as at present. Best they can do is supply leaf or cigars to smugglers and dealers, but those smugglers and dealers will take the profits.

[BrightonCorgi]

1 hour ago, Bijan said:

On the flip side, Dubai (UAE) now has close to a 100% tax on cigars/tobacco. When a few years ago at least they had no income tax.

Though yeah in Dubai or Abu Dhabi you can still get smoking hotel rooms pretty easily (at least until the last time I was there 2-3 years ago).

And again Canada, Australia, etc. are not outside the norm. It's a ton of countries that are cracking down on tobacco. And even in the US maybe 3-5% of the population are cigar smokers.

Never been impressed with the cigar selection in UAE.  I bring my own.  One of the few Bonvoy locales where there are smoking facilities within the hotels.

[tjkoala]

1 minute ago, Bijan said:

I don't think there's an example of a publically known international joint venture company operating in the heroin, cocaine or even pot market (where pot is not legal).

If Habanos has no market left in most of the world and can't officially sell to the US either, it's going to be hard to continue operating as at present. Best they can do is supply leaf or cigars to smugglers and dealers, but those smugglers and dealers will take the profits.

Sure there is, look at Perdue Pharma and the mess they made with pain pills in America. 

For Habanos they don't need all markets to be open to cigar sales, just a few that are able to then distribute the products to the destination country. This is the whole point of the price increase, to edge out secondary profits for grey market sellers looking to supply the US and China with volumes of CCs. They want a part of the action and if the secondary market is willing to pay $2,000 USD for a box of COROs they'll get their cut of the cake.

[Bijan]

4 hours ago, BrightonCorgi said:

Never been impressed with the cigar selection in UAE.  I bring my own.  One of the few Bonvoy locales where there are smoking facilities within the hotels.

They had great selection a decade or more ago. Apparently lots of discontinued 2002-2003 cigars (punch SS, Hoyo du dauphin, etc). But I think it dried up by around 2010 or shortly after.

 

4 hours ago, tjkoala said:

Sure there is, look at Perdue Pharma and the mess they made with pain pills in America. 

Those pain pills were legal at the time and generally prescribed by doctors at least at first.

That's different from starting a heroin or cocaine business direct to consumers.