6 months into Cigaramageddon: Industry snapshot.

[El Presidente]

If you stay in any one industry long enough, you will likely see at least one "sliding door moment" where the industry axis shifts and your direction is radically altered.  It is then a matter of adapt or die. 

The above sums up the Cuban cigar retail and wholesale industry as it stands today.

30 second background

Even before covid, tobacco planting and cigar production had been on a steady downward trajectory. There are a plethora of reasons but the key ones were poor pricing policies for farmers and the subsequent mistrust, lack of fuel, lack of farming essentials (pesticides/fertilisers), increasingly decrepit infrastructure.  These are Tabacuba issues, not HSA issues. 

What you had was a duck. On the surface is all gala events featuring a glossy range of new high ROI cigars. Below the surface was  bedlam. 

Things were already tough with Trumps Cuba crackdown. Then Covid 19 came, the tourists didn't, economic collapse, currency mayhem, riots, blackouts, food shortages, mass emigration. 

Cigar production is a close quarter enterprise. Factories were closed for extended periods and when not closed were subject to reduced numbers of rollers roughly one in four seats. It didn't really matter as most of the female rollers were at home looking after their children/grand children as schools were closed. 

Meanwhile the world stuck at home went on a cigar buying spree.  It was boom time in retail land. Over three months, distributors warehouses were emptied, retailers shelves were emptied, Habanos warehouse was emptied with little to no stock coming in. 

Tough times called for strong leadership but in this case the Cuban side of the business reverted to doing what the state does best, lie. 

"everything will be fine in six months". 

 

Solution?    

CIgarmageddon. May 2022. 

Homogenisation of global Cuban cigar pricing pegged to the HK market.  Essentially, make way more from way less. 

I have to say that if I am impressed with anything in this sorry saga is how close they have come to attaining their goal in such a short period of time. I was skeptical. 

 

6 Monthly report card? 

Industry. 

• Cuban cigar distributors and retailers have moved in large part to Non Cuban suppliers to try and  fill their warehouses and shelves. Non Cuban cigar suppliers are largely not ready to supply in such volume as they are also coming off a difficult covid production period. 

       Net Result: Collapse of trust in Habanos s.a as retailers and distributors are abandoned.  Score: FAIL 

       I feel for retailers who put big dollars into B&M's and were largely fed bullshit and then cut loose. Some distributors have performed/behaved  better than most. Kudos to H&F/PCC and others who did/do their best to spread the stock evenly in order to at least keep something on B&M retailer shelves.  

       Online retailers are generally in a far better position than B&M's. That is because they (we) are use to hustling, dealing, turning on a dime.

       The online retailers transition to a high percentage of  Non Cuban sales has been achieved at speed. That will continue. 

       

Consumer Trends

    B&M.   

•         No distinguishable change in traditionally high priced global markets. Their challenge is not selling Cohiba VI at $2500, Their challenge is getting any/ enough Cohiba Siglo VI. 
•         Traditionally lower priced markets (such as Spain) are scrambling to fill shelves with Non Cubans. The new HSA pricing structure is not resonating with the local market. Than again, there is little stock to really test that market. Even Quintero/Jose Piedra/Vegueros are few on the ground and these will likely be the lifeblood of many a small town spanish estancos. 

       

   ONLINE

•        Stock supply is down at least 50% on 2019 levels at the best known retailers who are well connected.  Some grey market suppliers are down 90%. Everyone that I know of is moving into the Non Cuban sphere. 

       Consumer trends have been interesting: These are FOH numbers but in my discussions with other online retailers the trends are similar.  

                 US demand initially down some 37% but drifting back month on month. 

                 China demand up some 66% 

                 General Asia (non China) demand up 53%

                 UK demand up 41% initially although has come off over the past month due to currency slide. 

 

     Caveat  The increase in demand from high price markets is largely a result of a lack of stock in those markets. 

 

Summary. 

              Prices is sustainable as long as stock supply remains low. There is no likelihood of a stock buildup before 2024/25 and even then we

              are assuming Cuba's structural position improves. This may be as good as it gets for the rest of the decade. 

              The two biggest markets affected appear to be Spain and the US market. Both markets represent largely value buyers albeit Spanish 

              were largely B&M and the US online.  China/Rest of Asia/UK have for now taken up the online slack.             

              There are some pricing anomalies (Cohiba Siglo I/II & Trinidad) that probably need to be addressed. Even in high end markets they are 

              are struggling to move. 

 

That should bring you up to speed 

[HarveyBoulevard]

Good read and thank you for taking the time to provide some insight.

[El Presidente]

8 hours ago, HarveyBoulevard said:

Good read and thank you for taking the time to provide some insight.

6 months is early days yet. 

Perhaps the best example of how the industry sees Habanos s.a right now was that their high end booth last month in Dortmund was largely abandoned. It was a ghost town and normally it is well populated. 

Consumer wise I think the trends are still evolving. I am not overly convinced that US centric online Habanos retailers are going to sell many Drew Estate to New York. Developing markets maybe but they would have needed to have developed those markets already.  Pivoting now is going to be tough. 

No one is comfortable in the industry. That is a pool that some love to swim in. 

 

[shokao]

Thanks for sharing. Appreciate all the inside view of the market nowadays.

[sam]

Thanks for this update.  I’m appreciating the 1/4 box offerings in 24:24 to accommodate. —-sam

[Rhinoww]

Appreciate the insights. Quite a bummer but regrettably not very surprising. 
I do view some good news in that production has not been limited to the higher selling Monte and Party only. 
still waiting on seeing the big dogs come back into the distribution stream. To me, the DC/Churchill/898/big Robustos are the canary in the coal mine. Until those larger more challenging to roll non Cohiba sticks start showing up in larger numbers, we still have a long way to go to get back to any normalcy 

[frenchkiwi]

Yes very enlightening.

My initial thought is - need to set up (or continue) a thread on what NCs are appreciated by habanos smokers.

I dipped in years ago, it was fun to start but never really found anything that I would smoke more than once. No prejudice against Nicaragua, Dominican Rep, Ecuador, etc but the terroir of everything i've tasted didn't really suit me, typically stronger flavoured tobacco or just a different profile that i didn't enjoy, much like Rum.

But i could see how others enjoy, and i did enjoy the odd one as a one-off experience. (e.g. Ilusione Bombones, great after two other cigars and a bunch of whiskies towards the end of a game of poker... much like a maximum peat ppm whisky... a situation i'm in very infrequently!)

[bishop532]

 I’m wondering how much longer the Cuban government can hang on with the mess they are in. A change at the top would be good for a lot of reasons, imo.

[Cairo]

2 hours ago, El Presidente said:

I am not overly convinced that US centric online Habanos retailers are going to sell many Drew Estate to New York.

Wise words.

For those not familiar the price competition for NCs in the US is ferocious--lots and lots of online vendors competing with each other--and great online discussion groups helping newbies find the deals.   The European Habanos dealers are way above those prices--except for one vendor who shall not be named that has been offering great sales on Davidoffs for years.   

[El Presidente]

29 minutes ago, bishop532 said:

 I’m wondering how much longer the Cuban government can hang on with the mess they are in. A change at the top would be good for a lot of reasons, imo.

one would suspect that if the water got too hot, it would be military coup.....of the military 

• well orchestrated 
• a different socialist vision
• military assets protected
• new dialogue with the US
• nothing really changes 

[bishop532]

5 minutes ago, El Presidente said:

one would suspect that if the water got too hot, it would be military coup.....of the military 

• well orchestrated 
• a different socialist vision
• military assets protected
• new dialogue with the US
• nothing really changes 

Meet the new boss, same as the old boss, eh? That doesn’t sound like much fun…

[kmax]

Thanks for sharing. Prior to the price increase i smoked Cuban cigars almost exclusively with the occasional Fuente and padron sprinkled in. 
Last five  months i have only purchased from 24:24. To compensate i have been trying many non-Cuban cigars Tatuaje, Warped, and some Dunbarton offerings. 
This is something I have never done. 

[BettyHumpder]

3 hours ago, frenchkiwi said:

Yes very enlightening.

My initial thought is - need to set up (or continue) a thread on what NCs are appreciated by habanos smokers.

I dipped in years ago, it was fun to start but never really found anything that I would smoke more than once. No prejudice against Nicaragua, Dominican Rep, Ecuador, etc but the terroir of everything i've tasted didn't really suit me, typically stronger flavoured tobacco or just a different profile that i didn't enjoy, much like Rum.

But i could see how others enjoy, and i did enjoy the odd one as a one-off experience. (e.g. Ilusione Bombones, great after two other cigars and a bunch of whiskies towards the end of a game of poker... much like a maximum peat ppm whisky... a situation i'm in very infrequently!)

you should try the aladino line. standard (lighter) or corojo reserva (bolder). honduran puro. they punch way above their price point.

[ha_banos]

2 hours ago, BettyHumpder said:

you should try the aladino line. standard (lighter) or corojo reserva (bolder). honduran puro. they punch way above their price point.

Aladino eh? Might pick up a couple tonight. MO is the sole distributor here in the you-kay.

Also what's happened in this climate is more counterfits are creeping in and making more noise. I don't think we can ignore this. This will also impact legitimate faceless online sellers.

[Bill Hayes]

Solved, more Nudies! 😄

[RDB]

Just from watching 24:24, it seems like ‘real’ availability has actually improved over the past six months. We see a wider range of offerings, and there’s more available (not sold out) when I log on in the morning UK time. That’s good news relative to a year ago when things were officially cheaper but virtually impossible to find. Clearly supply overall is crushed, with empty shelves at major retailers. But the new prices seem to be balancing supply and demand better.

[Islandboy]

15 hours ago, El Presidente said:

That is a pool that some love to swim in. 

Great time to jump in a pool of nudies!

[porkchop]

Seems like there will be increased diversion of tobacco within Cuba. So many industrious people leaving the island, using their connections to make $ abroad. More "branded" "customs rolls". 

[SCgarman]

15 hours ago, bishop532 said:

 I’m wondering how much longer the Cuban government can hang on with the mess they are in. A change at the top would be good for a lot of reasons, imo.

Exchanging one group of thugs for another? I can't see any improvement 

[MrBirdman]

Fortunately for me this has coincided with a growing interest in skinny (or skinnyish) vitolas from NC makers. More and more lines are producing lanceros, and while they aren’t all winners, some are. And unlike with Habanos, NC makers don’t charge an outrageous premium for them. I really like being able to light up a solid, enjoyable skinny any day without feeling like it needs to be a special occasion or I need to particularly focus on the cigar. 
 

22 hours ago, El Presidente said:

There are some pricing anomalies (Cohiba Siglo I/II & Trinidad) that probably need to be addressed. Even in high end markets they are 

The new pricing scheme for Trinidad was never going to work outside the Fundadores and maybe the Esmerelda. The brand lacks the cache of Cohiba for those who buy to “make a statement” [🤮], and the blend, while unique, isn’t especially distinctive compared to what else is out there. 

[bishop532]

59 minutes ago, MrBirdman said:

Fortunately for me this has coincided with a growing interest in skinny (or skinnyish) vitolas from NC makers. More and more lines are producing lanceros, and while they aren’t all winners, some are. And unlike with Habanos, NC makers don’t charge an outrageous premium for them. I really like being able to light up a solid, enjoyable skinny any day without feeling like it needs to be a special occasion or I need to particularly focus on the cigar. 

This is exactly where I’ve been the last year to 18 months. A lot more skinny options in the NC world, and a fair number are actually pretty damn good. And there are even a few options in the 6 x 32 to 7x 36 range, which I appreciate. 

[bishop532]

5 hours ago, SCgarman said:

Exchanging one group of thugs for another? I can't see any improvement 

Just curious what makes you all so sure the only option is another socialist paradise run by the military? I think there’s a decent to good chance the US would see it as an opportunity, and prop up something at least marginally capitalist. Now, if that’s what you mean by “thugs”, then I guess I see the point, but I have a feeling you were repeating what @El Presidente was saying. If so, what am I not seeing? 

[El Presidente]

1 minute ago, bishop532 said:

Just curious what makes you all so sure the only option is another socialist paradise run by the military?

There are a few options including a populace uprising supported by US elements (if not directly by the US Govt). 

Keep in mind however that central and south america is more and more "pink" in it's political leanings. In terms of Cuba, everyone wants change but exactly how that change is to come about is a point of contention. paraphrasing a line from that documentary I posted yesterday referring to last years riots:  "many of the Cuban people are like caged animals in a zoo. They have lived in a cage all their lives.  When the cage door was swung open, many were afraid to go out." 

If the pot begins to boil, an orchestrated internal military coup would buy time. By orchestrated, it wouldn't surprise me if the plan isn't in the top drawer already. 

Shiny new leader/congress. Shiny new plan. Shiny new promises of freedoms. Wipe the slate clean with the US. Protect as much of the military commercial asset and influence base as possible via new corporate holdings. 

Just my 2 cents. 

[bishop532]

1 minute ago, El Presidente said:

Keep in mind however that central and south america is more and more "pink" in it's political leanings. In terms of Cuba, everyone wants change but exactly how that change is to come about is a point of contention. paraphrasing a line from that documentary I posted yesterday referring to last years riots:  "many of the Cuban people are like caged animals in a zoo. They have lived in a cage all their lives.  When the cage door was swung open, many were afraid to go out."

I had meant to watch that documentary but didn’t get the chance yet. I’ll make sure to do so - it looks interesting. 

Thanks! 

[Fuzz]

Talking US politics is not fruitless... it is banned.

Only warning.