Have Habanos ever failed?


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18 minutes ago, Bijan said:

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.

Its no different than Habanos legally selling cigars to vendors who then flip them to other markets that are restricted or limited. Habanos knows what's going to happen anyways and adjusts the prices to account for the lost revenue. End of day, I get the concerns on regulation but people with money like cigars and typically the people with money also make many of the laws we abide by. I don't think Habanos is all that concerned given anti-tobacco laws are at an all time high and they literally can't roll enough Monte 4's to keep on the shelves. 

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23 minutes ago, tjkoala said:

It's no different than Habanos legally selling cigars to vendors who then flip them to other markets that are restricted or limited.

Let's put it this way, there's no one buying pot mail order from Australia, Switzerland or Hong Kong without giving it a second thought.

There's a big difference between a harmless vice that's technically restricted due to trade sanctions or tax collection and an actual controlled substance.

I'd definitely drive across the border with CCs but not pot even though it may be legal on both sides (the transport is still an offence and you'll end up with real headaches if you do get caught).

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15 hours ago, El Presidente said:

Anejado. 

 

.......my job here is done ;)

Seriously. The gall of them to release aged cigars that never existed in the first place?  Which begs the question. What the hell did these start off as?  They shouldve expanded on Revisado. That would have put them in the vintage game and allowed them to boost pricing.

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1 hour ago, tjkoala said:

Its no different than Habanos legally selling cigars to vendors who then flip them to other markets that are restricted or limited. Habanos knows what's going to happen anyways and adjusts the prices to account for the lost revenue.

How is that lost revenue to Habanos?  The first hop is their sale and they do not make anything additionally for each resale; legitimate or nefarious.

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Just now, BrightonCorgi said:

How is that lost revenue to Habanos?  The first hop is their sale and they do not make anything additionally for each resale; legitimate or nefarious.

I think it's more of a "lost opportunity" revenue.  They're seeing the market will bear a higher price.  The truth is, people who buy from flippers are probably never going to go to Cuba themselves or are too afraid of taking a chance with online retailers.

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18 minutes ago, BrightonCorgi said:

How is that lost revenue to Habanos?  The first hop is their sale and they do not make anything additionally for each resale; legitimate or nefarious.

If Habanos is selling a box of CORO for $200 to distributors, then the distributor flips it for $300 to a grey market that then sells it for $400 to someone that can't otherwise obtain the product, and then Joe Schmo who bought it off the grey market then sells the box after 4 year on BR for $1,000... there is certainly a point for Habanos to sit there and reassess their price strategy.

Why allow every stop along the chain to take a heavy share when they can just do a price hike across the board and force everyone else to take a slimmer margin? This scenario shows $800 in lost revenue for Habanos because the box of COROs they initially sold for $200 is magically worth $1,000. Habanos knows they can sell that box for much higher and let everyone else take a smaller share. The market is what the market is and Habanos wants every penny they can get out of the situation as does everyone else.

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47 minutes ago, tjkoala said:

If Habanos is selling a box of CORO for $200 to distributors, then the distributor flips it for $300 to a grey market that then sells it for $400 to someone that can't otherwise obtain the product, and then Joe Schmo who bought it off the grey market then sells the box after 4 year on BR for $1,000... there is certainly a point for Habanos to sit there and reassess their price strategy.

Why allow every stop along the chain to take a heavy share when they can just do a price hike across the board and force everyone else to take a slimmer margin? This scenario shows $800 in lost revenue for Habanos because the box of COROs they initially sold for $200 is magically worth $1,000. Habanos knows they can sell that box for much higher and let everyone else take a smaller share. The market is what the market is and Habanos wants every penny they can get out of the situation as does everyone else.

Perhaps Habanos should sell direct to consumers then?  They could also have their own distributors along with the established ones. If Habanos could do better with the Duty Free's; that would help enormously.  Outside of Beirut, no airport is really consistent or something to write home about.  The walk-in's need to be packed head to toe.  Bring back the Duty Free glory days! 

With tobacco, it's just too regulated world wide to play games with distribution.   A country could easily seize assets looking for their taxes.  Once it's beyond nickel and dime, it's too risky for Habanos.

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1 hour ago, BrightonCorgi said:

Perhaps Habanos should sell direct to consumers then?  They could also have their own distributors along with the established ones. If Habanos could do better with the Duty Free's; that would help enormously.  Outside of Beirut, no airport is really consistent or something to write home about.  The walk-in's need to be packed head to toe.  Bring back the Duty Free glory days! 

Yeah but for Habanos, the juice probably isn't worth the squeeze. Setting up a distribution network and learning all the ins and outs for each country for a heavily regulated product likely isn't worth it. It could even be more expensive than what they would make back in lost revenue due to all the people they would need to hire, warehouses, and regulatory expertise. Since they're the only game in town and Habanos doesn't really view NC cigars as a real threat to steal their die hard clientele, they'd rather just increase the price and force everyone else to take slimmer margins.

Long story short, Habanos knows what they have and are swinging their weight around because they have exclusive control over their product. This isn't a commodity like coffee where they're forced to sell at a set rate due to competition. 

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Hello, my name is James, and I will buy Montecristo #4s at any price. I will respond to your ad on Craiglist, sign up for the dark web, travel to foreign countries. I need my Monte 4s. 

I am a CC addict. 

Never been into Cohibas but did like the Trinis. Now that I have sold the majority of my boxes of both (thanks BR) I will not be buying them again. 

Off to meet some dude named "Charlie" under a bridge at sunset - he says he has a 5-pack of Monte 4s. Wish me luck. 

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13 hours ago, El Presidente said:

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. 

Wholesaling would have gotten them 5% of what they got from producing the Anejados. Even with up front cash it was so much less than what they got I'm sure they would do it again reputation hit and all. Not defending it but when you need cash, you need cash--brand damage be damned. And I'm really not sure how much long-term reputational damage was actually done by the program. It's mostly a footnote now and they're not exactly everywhere anymore. People just avoid them and have moved on. We're never going to get they real story behind them.

The issue is being so cash-strapped in the first place you're willing to compromise brand and reputation. Who knows, maybe Imperial couldn't stop them or told them not to do it and they did it anyway. Might have been the first shoe to drop in them getting out of there. 

13 hours ago, El Presidente said:

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.

I would say those numbers are extremely generous, but even if they are still making the same money they'd have to keep production levels as low as they are now which isn't realistic. Actually it would have to be even lower because losing 30% of Cohiba buyers means moving 30% less sticks and another 12.5% from the "reduced spend" buyers. They're still below 40% production now and there's plenty of Cohiba stock listed and not moving, and we know it's a limited supply as distributors have very little. Aren't vendors looking at this and asking themselves how much Cohiba & Trini they even want to take at these prices seeing as how it's not moving with the vendors that do have it?

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11 hours ago, NSXCIGAR said:

Aren't vendors looking at this and asking themselves how much Cohiba & Trini they even want to take at these prices seeing as how it's not moving with the vendors that do have it?

This is where you are confusing yourself. 

Distributors for the UK HK China ME Oz Asia etc can't get enough Cohiba even at the new prices.. In these and similar markets the new prices simply do not matter as people were walking into stores 4 weeks ago buying at or near these prices (fully taxed)  already. 

Countries affected: Spain yes. Germany yes but less. Other low tobacco tax locales. 

Spain was a major exporter of Cohiba to Asia via various means. Now Spain will likely order less Cohiba (you would think).......but that just means those other markets will pick up the quantities that they were buying from Spain.

How much Spanish Cohiba have we sold via FOH? Thousands of boxes over the past 4 years alone. 

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11 hours ago, El Presidente said:

How much Spanish Cohiba have we sold via FOH? Thousands of boxes over the past 4 years alone. 

Very interesting you say 4 year time frame. It makes sense that Spain had lots to offload when the world shut down, but even before that they were offloading their stock? That gives me a different perspective!

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9 minutes ago, El Presidente said:

Countries affected: Spain yes. Germany yes but less. Other low tobacco tax locales. 

So when they calculate market share are they counting all product going to Tabacalera as being sold in Europe not taking into consideration much of it is going to Asia? 

Why wouldn't HSA just give more boxes to PCC instead of Tabacalera? Why involve other distributors at all? 

Also isn't "can't get enough" just due to extremely low production at the moment? As I've admitted this certainly could work if production is kept extremely low--you just have a whole new set of complications.

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Just now, LordAnubis said:

Very interesting you say 4 year time frame. It makes sense that spain had lots to offload when the world shut down, but even before that they were offloading their stock? That gives me a different perspective!

It was clear that they were purchasing/holding far in excess of their domestic demand. 

 

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1 minute ago, NSXCIGAR said:

So when they calculate market share are they counting all product going to Tabacalera as being sold in Europe not taking into consideration much of it is going to Asia? 

Why wouldn't HSA just give more boxes to PCC instead of Tabacalera? Why involve other distributors at all? 

Also isn't "can't get enough" just due to extremely low production at the moment? As I've admitted this certainly could work if production is kept extremely low--you just have a whole new set of complications.

Distributor sales are all assumed to be within region. Less questions that way. 

Until a month ago, distributors had different pricing stuctures. Then there is politics.  Add those two factors and you have a market within a market. 

"Can't get enough"  is certainly impacted by current low production and that is a situation that is unlikely to improve significantly for a number of years.

However more importantly....B&M retail prices in these locales haven't moved more than a couple of dollars a stick if at all. They are big markets. 

Again, Spain is the big outlier.  Decrease of Cohiba/Trini (lesser) uptake there will be swallowed up in a heartbeat by H&F/Phoenecia/PCC/others. 

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28 minutes ago, El Presidente said:

Distributor sales are all assumed to be within region. Less questions that way. 

So we really don't know what Asian market share is? The official numbers are what, 25-30%? Could it be significantly higher?

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37 minutes ago, NSXCIGAR said:

So we really don't know what Asian market share is? The official numbers are what, 25-30%? Could it be significantly higher?

Nor do they know the market share of the US market/online market. 

The numbers that have been pumped out over the years have been a tad "rubbery". 

 

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1 hour ago, El Presidente said:

Nor do they know the market share of the US market/online market. 

The numbers that have been pumped out over the years have been a tad "rubbery". 

I wasn't aware how much was flowing between distributors. Sounds like a bit more than a "tad." Again, I don't know why they just provide less to Tabacalera and more to PCC.

But HSA isn't able to take advantage of the higher prices in China & HK. They have to keep prices low to keep prices stable there. So their margins don't change and there's no change in that market. They can't get enough at the "new prices" but they aren't paying "new prices" as new prices are their old prices. Obviously their demand hasn't changed but supply has for them and everyone else. 

The issue is trying to sell at the HK price everywhere else. That's the only area they're trying to sell "less for more" and it seems product isn't moving in these markets already. 

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8 hours ago, NSXCIGAR said:

Again, I don't know why they just provide less to Tabacalera and more to PCC.

If they provide to PCC and it ends up in high duty that's less sales than if they sell low duty in Spain and get muled/flipped and still sold at less than HK prices to HK customers.

To me in order to maximize their profits they'll have to have low duty/duty-free higher than before but less than HK/UK etc. That way the cigars still get muled/flipped but Habanos gets a bigger cut.

I think logically the tactic now is to have a short-ish period with HK/UK prices everywhere to get customers who bought muled/flipped cigars used to those prices, then raise HK/UK a bit and drop Cuba/duty free/Spain a bit. And continue bit by bit until they hit the numbers they want.

Anyways as Rob said they want to target the people who are willing to spend $1,500 or $2,000 for a box of Cohibas. At the same time they don't want half or two thirds of that money going to the local tax men rather than to them.

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Follow trends no. I don't think they have ever looked outside the window to see what is going on. Plenty of non Cuban brands do what ever they can to replicate Cubans ...bands , names , descriptions etc. Totally unoriginal with no sense of ownership. Gurkha tried it on with premium packaging and pricing with cigars that literally made you sick ! 

Will we see Cohiba and Trinidad sitting on shelves in three years , I don't think so. 

As for the current price increase. Finally they are doing what they should of done long ago. When you have a product that supercedes everything , that is far better than anything. You should be nailing it with a price point . You know when you are smoking Cohiba it is dream compared to the rest of the line up. 

Do I like it not really , are they worth it absolutely. So I am pretty sure they are sitting back now smiling with the biggest dose of free publicity they have ever had. 

I think they should have started off with Behike ten years ago.  (Selling) Cohiba at a premium is the right move , but primarily Siglo 1 to 6 along with Robusto the Maduro 5 formats and Esplendido , Lancero the smaller insignificant stuff leave it where it is. 

Do they know what they are doing maybe finally with some balls attached. With the best tobacco in the world you can do it and go hard as well. The market is clearly there .  I give them a tick . 

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29 minutes ago, Bijan said:

If they provide to PCC and it ends up in high duty that's less sales than if they sell low duty in Spain and get muled/flipped and still sold at less than HK prices to HK customers.

I was only thinking about pre-22 dynamics. I know Rob mentioned politics but what possible advantage could there have been to dump product with Tabacalera only to have them ship it all the way to PCC? Any money Tabacalera makes doing that is lost profit HSA could have made (or saved). In other words there shouldn't be any reason for regular distributor-to-distributor transactions except in isolated cases where one happens to have a glut of something the other needs badly.

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13 minutes ago, westg said:

that is far better than anything

I think folks around here at least agree that Cubans are better than NCs, but "far better" gets more debatable and less well defined.

I am fortunate enough to be able to buy a high end luxury car if I wished to, but I have never done it.

It is not that those cars are not "far better" from the "ok" car that I drive, it is that the additional luxury is not important enough to me to pay the much higher price.

The economics term for this is "marginal utility".    This is different for every consumer for every product as they weigh not just whether product A is "much better" than product B, but whether that difference motivates them to pay the "much higher" price for that particular product.

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4 hours ago, NSXCIGAR said:

 In other words there shouldn't be any reason for regular distributor-to-distributor transactions except in isolated cases where one happens to have a glut of something the other needs badly.

Trading between most distributors has been going of for as long as I have been around.  RE's have only intensified it. 

This is not a "dumping" of product issue. 

This is not even solely a "cigar issue". Wine/Watches/Caviar

Markets thrive wherever a significant price discrepancy exits. How many made the cigar pilgrimage to Andorra/Spain/Cuba to specifically buy low priced cigars?. Retailers made out like bandits, distributors made out like bandits, the consumer made out like bandits.......AND THERE IS NOTHING WRONG WITH THAT! :D

Biggest market = lowest price supplied = first divs/special treatment/close relationships = opportunity. 

Markets within markets evolve from those scenarios.  Business 101. 

Let's not forget a HSA VP spent some time away after a "Habanos B" operation was exposed.  Shenanigans. There should be more of it ! :rotfl:

Regardless of the field/product, where arbitrage markets exist, manufacturers/brand owners are closing them down as best they can. You can understand them wanting to protect their global distribution network against professional  arbitrage. It is the mechanism used that can raise eyebrows and sometimes hackles. 

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4 hours ago, El Presidente said:

Markets within markets evolve from those scenarios.  Business 101. 

I'm in no way blaming the distributors. I applaud them for taking advantage of the opportunity. Business 101 as you say.

It's HSA allowing it that is perplexing. If they know Tabacalera is sending the cigars to PCC give more to PCC and less to Tabacalera. Why price to create an arbitrage situation? Just seems easily preventable and HSA leaving money on the table. Obviously this only applies to regular production. 

 

4 hours ago, westg said:

Will we see Cohiba and Trinidad sitting on shelves in three years , I don't think so. 

Cohiba sat on shelves for years before at 1/2 the price they were in April. Yes, they eventually moved but Cohiba was never hard to find for 20 years. They're not making any more money from high duty areas. They're trying to raise prices in low duty areas that weren't paying anywhere near HK prices. 

Cohiba and Trini are languishing in the gray market right now. There is a very small pool of buyers outside of high-duty areas that will pay $1,400 for CoRo. I just can't believe that tripling prices on anything that is typically plentiful will succeed. As long as Cuba can only produce at 40% it's a fine move. If they want to get production up to even approaching where it had been until 2020 I simply can't believe it's going to fly. 

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