Habanos Reducing Supply to Switzerland

[VeguerosMAN]

23 hours ago, Marco_011t556 said:

Hmmm...interesting thing is, China Tobacco and Custom Authority has knocked a lot of private CC channel (no authorized license). All those people are with millions dollar stock. As for authorized channel, supply of CC is extremely limited, because CT is promoting its own cigars..

So, the very weird dynamics - largest demand country has its own domestic made cigar, while people are still fancy Cuban cigars. Will the shipment restriction (all will be taxed with 50%, max of 1 box allowed each time, etc) be tight? Who knows...

I wouldn't be shocked if China Tobacco would take over Cuban tobaccos and use them to make their own cigars. New Chinese brands might emerge advertised as Cuban puros in the future. 

[MrBirdman]

On 5/9/2024 at 12:22 PM, El Presidente said:

This move appears to be a vertical integration power play. Perhaps one of several.

I think that’s the case too, though it’s not mutually exclusive from sending extra supply to Asia (or at least China) as I believe HSA owns the mainland distributor outright. 

HSA may be identifying distributors with solid profit margins they’d like to capture and hoping to pressure them into selling out. Makes sense especially for high margin items like Cohiba, even if it’s an incredibly rotten way to treat longtime businesses partners. 

[LOMTL]

On 5/9/2024 at 11:57 PM, Li Bai said:

Well I just got news from Andorra and it's appalling...Cohiba, Trinidad, RYJ Linea de Oro and Cupidos, not much more.

The owners of The Cigar Shop are very concerned about their future 🥲🥲

Remember when they would have literally everything aged or not at unbeatable prices? I used to shop there every year. Last haul in Feb of 23 was magnificent boxes DCs, SWs, RY Churchills. Called up two months ago, asked about some DCs and they laughed at me!

[SCgarman]

2 hours ago, VeguerosMAN said:

I wouldn't be shocked if China Tobacco would take over Cuban tobaccos and use them to make thier own cigars.  New Chinese brands might emerge advertised as Cuban puros in the future. 

Let's up the ante a bit. I wouldn't be shocked if Cuba eventually became a Chinese territory. Taiwan is in the crosshairs already. If Cuba becomes part of China, then by default China owns the world market in Cuban cigars. China's ultimate goal is world domination. They know how to play the long game.

[El Presidente]

Taking Sinophobia out of the equation ....it is hard to argue that the current situation isn't 100% Cuba's fault. 

The purchase of 50% of Imperial's share of HSA  went to the Sino group largely because: 

1. No bank wanted to work with interested Euro/ME/Asia bidders due to International financial system embargos. 

2. The risk of Cuba as a JV partner was deemed too high. 

Merger, acquisition, control  is very much a western capitalist construct. Apparently,  It is being executed at a remarkable level before our very eyes within the Cuban cigar sector. It may have a fair way yet to go. 

Unique? Hell no.  From Monsanto to Apple/Ikea etc, vertical integration is the goal. 

Understandable as a pure business move?  Certainly. 

As consumers are we happy about it?  Hell no. 

[NSXCIGAR]

1 hour ago, SCgarman said:

Let's up the ante a bit. I wouldn't be shocked if Cuba eventually became a Chinese territory. Taiwan is in the crosshairs already. If Cuba becomes part of China, then by default China owns the world market in Cuban cigars. China's ultimate goal is world domination. They know how to play the long game.

I would bet very much against that. China would have to occupy militarily and that's not going to happen. How are they going to get 100,000 troops and equipment to Cuba? Taiwan is a different story. Within arms reach, ethnically Chinese, small island. I actually think it's inevitable. 

China can certainly play the long game but Cuba does not. Short of occupying militarily which is just not realistic Cuba will milk China until they say uncle. It's impossible to be profitable in Cuba. They will skim any profit you have right off the top. HSA making too much money? Tabacuba raises their prices. They'll make you pay the workers $200 an hour which the state keeps. They have the system for separating money from naive investors refined to an art. 

[KCCubano]

6 hours ago, NSXCIGAR said:

I would bet very much against that. China would have to occupy militarily and that's not going to happen. How are they going to get 100,000 troops and equipment to Cuba? Taiwan is a different story. Within arms reach, ethnically Chinese, small island. I actually think it's inevitable. 

China can certainly play the long game but Cuba does not. Short of occupying militarily which is just not realistic Cuba will milk China until they say uncle. It's impossible to be profitable in Cuba. They will skim any profit you have right off the top. HSA making too much money? Tabacuba raises their prices. They'll make you pay the workers $200 an hour which the state keeps. They have the system for separating money from naive investors refined to an art. 

They will soon run out of countries to milk! 

[NSXCIGAR]

6 hours ago, KCCubano said:

They will soon run out of countries to milk! 

There's a sucker born every minute! 

[MrBirdman]

11 hours ago, SCgarman said:

I wouldn't be shocked if Cuba eventually became a Chinese territory

This isn’t the 19th century. Power is projected through capital much more efficiently than bullets. If someone ran “invade Cuba to capture Cuban cigars!” up the flagpole in Beijing they’d probably be institutionalized. 

[VeguerosMAN]

18 hours ago, SCgarman said:

Let's up the ante a bit. I wouldn't be shocked if Cuba eventually became a Chinese territory. Taiwan is in the crosshairs already. If Cuba becomes part of China, then by default China owns the world market in Cuban cigars. China's ultimate goal is world domination. They know how to play the long game.

Were you thinking of military invasion? China could take over Cuba without using military, for they are both communist allies.  Huawei has a base in Havana already. 

[Arabian]

6 hours ago, VeguerosMAN said:

Were you thinking of military invasion? China could take over Cuba without using military, for they are both communist allies.  Huawei has a base in Havana already. 

China has their own version of communism, they love to practice capitalism along with it. The American method is too expensive and not sustainable. They are into business. I work with a major Chinese company and it seems every project from what I see has a Chinese corporate hand in it. Historically, China presence reached far away lands through commerce and trade. 

[SCgarman]

6 hours ago, VeguerosMAN said:

Were you thinking of military invasion? China could take over Cuba without using military, for they are both communist allies.  Huawei has a base in Havana already. 

No. Cuba would forfeit itself as a sovereign nation and become a Chinese territory. The Cuban people would have food, fuel, shelter and a better quality of life. They would be under Chinese rule. This would give China an island literally 90 miles from the Florida coast. This is the ultimate game of chess, and to the victor go the spoils!

[helix]

Whatever happens , rest assured the Cuban government will make the worst choice.

[SCgarman]

Rolex should reduce their supply of Swiss watches to Cuba. To none at all! Take that you Habanos MF'ers 🤣

[VeguerosMAN]

20 hours ago, SCgarman said:

No. Cuba would forfeit itself as a sovereign nation and become a Chinese territory. The Cuban people would have food, fuel, shelter and a better quality of life. They would be under Chinese rule. This would give China an island literally 90 miles from the Florida coast. This is the ultimate game of chess, and to the victor go the spoils!

Makes sense, but do you think the US will allow that to happen? 

[LigSecVol]

On 5/9/2024 at 2:12 AM, Taco said:

Big ups to Charlie at half wheel for article.

FWIW, the article was originally posted on on CIgar as mentioned by Halfwheel:

 

[NSXCIGAR]

On 5/12/2024 at 5:00 AM, Arabian said:

China has their own version of communism, they love to practice capitalism along with it.

I'd consider China's current economic approach to be much more fascist than communist. Nominal private ownership subject to state control. This is a much more effective system as it allows some capital to accumulate and gives more input to the nominal private owners than communism which sucks up all capital and allocates it according to the politburo. It still doesn't allow much capital for things like R & D and entrepreneurship which is why China only makes things and doesn't develop things. 

When you put your capital in Cuba it is simply a gift to the state. They don't operate like China. Capital doesn't exist there. They don't honor contracts. China is used to dealing with the west that does honor contracts. They have no idea who they're about to get involved with. Well, maybe they do because they deal with North Korea. They should expect the same treatment. 

On 5/12/2024 at 3:56 AM, VeguerosMAN said:

Were you thinking of military invasion? China could take over Cuba without using military, for they are both communist allies.  Huawei has a base in Havana already. 

Cuba can take anything it wants whenever it wants. The Cuban army decides who has what in Cuba. Whoever has the guns has the control. 

On 5/12/2024 at 11:05 AM, SCgarman said:

No. Cuba would forfeit itself as a sovereign nation and become a Chinese territory. The Cuban people would have food, fuel, shelter and a better quality of life. They would be under Chinese rule. This would give China an island literally 90 miles from the Florida coast. This is the ultimate game of chess, and to the victor go the spoils!

Cuba will seize every Chinese investment well before it was profitable enough to benefit either country. If Cuba starts producing things with Chinese capital that means factories, tools and equipment have been established. Cuba will just take it. They are only interested in the short term. If China steps a foot far enough over the line Cuba will clamp down on it and burn every bridge. The state is not interested in the Cuban people. They are interested in how can the party elites get as rich as possible as quickly as possible. The Cuban government approves every yuan that goes into Cuba. They have no intention of giving it back. 

9 hours ago, VeguerosMAN said:

Makes sense, but do you think the US will allow that to happen? 

Probably not but I'm assuming that's not a factor for this discussion.

[VeguerosMAN]

On 5/13/2024 at 12:28 PM, NSXCIGAR said:

I'd consider China's current economic approach to be much more fascist than communist. Nominal private ownership subject to state control. This is a much more effective system as it allows some capital to accumulate and gives more input to the nominal private owners than communism which sucks up all capital and allocates it according to the politburo. It still doesn't allow much capital for things like R & D and entrepreneurship which is why China only makes things and doesn't develop things. 

When you put your capital in Cuba it is simply a gift to the state. They don't operate like China. Capital doesn't exist there. They don't honor contracts. China is used to dealing with the west that does honor contracts. They have no idea who they're about to get involved with. Well, maybe they do because they deal with North Korea. They should expect the same treatment. 

Cuba can take anything it wants whenever it wants. The Cuban army decides who has what in Cuba. Whoever has the guns has the control. 

Cuba will seize every Chinese investment well before it was profitable enough to benefit either country. If Cuba starts producing things with Chinese capital that means factories, tools and equipment have been established. Cuba will just take it. They are only interested in the short term. If China steps a foot far enough over the line Cuba will clamp down on it and burn every bridge. The state is not interested in the Cuban people. They are interested in how can the party elites get as rich as possible as quickly as possible. The Cuban government approves every yuan that goes into Cuba. They have no intention of giving it back. 

Probably not but I'm assuming that's not a factor for this discussion.

Cuba is going through some rough times right now and China is a Super Power. I think China can bully Cuba into submission if they choose to. 

[Habanoschris]

On 5/9/2024 at 4:17 PM, BrightonCorgi said:

People said that about used cars a couple of years ago. Tides change and economic situations can be a different reality in 5-10 years.

I think there are more and more newer & younger consumers interested in luxury items each year w/ cash on hand. 

I like the optimistic and wise/practical train of thought that market conditions ebb & flow but imho I'm not so sure supply is going to really catch up with demand for cc anytime in near future. Habanos has learnt they can set their own price points & it seems that will be hard to "unlearn" anytime soon. 

 

[NSXCIGAR]

19 hours ago, VeguerosMAN said:

Cuba is going through some rough times right now and China is a Super Power. I think China can bully Cuba into submission if they choose to. 

Bully how? China will own nothing in Cuba no matter how much money they pour in. China (via HSA) doesn't even control the CC industry. Tabacuba does. They'll never give up control of that.

This pivot to China for HSA while no doubt prompted by the new Chinese owners isn't without business merit. They see the west as dying. Tobacco continues to be regulated. The US isn't opening up any time soon. The demand for the most expensive cigars is in China by a factor of 100 over Europe. But if they think HSA is going to be some cash cow it won't be. The more revenue HSA gets the more Tabacuba will charge them for materials insuring the bulk of profits always stay in Cuba. You cannot make money in Cuba. I think after 20 years Imperial figured that out and wanted nothing more to do with HSA. They'd have been better off putting their $500M into an index fund from 2000-2021.

Cuba will play ball with China until they start to ask for some return on investment. Then they'll tell them to kick rocks and your stuff now belongs to us. Unless China sends in troops they're burnt. Cuba has no interest in maintaining any long-term economically positive relationships. If they did they'd pay back their loans and stop screwing every party they do business with. 

[Li Bai]

2 hours ago, NSXCIGAR said:

Cuba will play ball with China until they start to ask for some return on investment. Then they'll tell them to kick rocks and your stuff now belongs to us.

China is well aware of those practices, I don't think they're that naïve. Time will tell what is actually going on.

[SCgarman]

8 hours ago, NSXCIGAR said:

Bully how? China will own nothing in Cuba no matter how much money they pour in. China (via HSA) doesn't even control the CC industry. Tabacuba does. They'll never give up control of that.

This pivot to China for HSA while no doubt prompted by the new Chinese owners isn't without business merit. They see the west as dying. Tobacco continues to be regulated. The US isn't opening up any time soon. The demand for the most expensive cigars is in China by a factor of 100 over Europe. But if they think HSA is going to be some cash cow it won't be. The more revenue HSA gets the more Tabacuba will charge them for materials insuring the bulk of profits always stay in Cuba. You cannot make money in Cuba. I think after 20 years Imperial figured that out and wanted nothing more to do with HSA. They'd have been better off putting their $500M into an index fund from 2000-2021.

Cuba will play ball with China until they start to ask for some return on investment. Then they'll tell them to kick rocks and your stuff now belongs to us. Unless China sends in troops they're burnt. Cuba has no interest in maintaining any long-term economically positive relationships. If they did they'd pay back their loans and stop screwing every party they do business with. 

So will China eventually get tired of this dysfunctional relationship, and sell their partnership off? What do you see happening? Other than Cuban cigar prices continue to skyrocket until only the mega-rich can afford them? 

[VeguerosMAN]

9 hours ago, NSXCIGAR said:

Bully how? China will own nothing in Cuba no matter how much money they pour in. China (via HSA) doesn't even control the CC industry. Tabacuba does. They'll never give up control of that.

This pivot to China for HSA while no doubt prompted by the new Chinese owners isn't without business merit. They see the west as dying. Tobacco continues to be regulated. The US isn't opening up any time soon. The demand for the most expensive cigars is in China by a factor of 100 over Europe. But if they think HSA is going to be some cash cow it won't be. The more revenue HSA gets the more Tabacuba will charge them for materials insuring the bulk of profits always stay in Cuba. You cannot make money in Cuba. I think after 20 years Imperial figured that out and wanted nothing more to do with HSA. They'd have been better off putting their $500M into an index fund from 2000-2021.

Cuba will play ball with China until they start to ask for some return on investment. Then they'll tell them to kick rocks and your stuff now belongs to us. Unless China sends in troops they're burnt. Cuba has no interest in maintaining any long-term economically positive relationships. If they did they'd pay back their loans and stop screwing every party they do business with. 

If Cuba has no interest maintaining long term economic relationships with China or any other countries for the matter, then they are doomed. Cuba has no choice but to ask China for help from the mess they are in right now.  In return, China will have their presence in Cuba, just like they have presence in Africa countries for "helping" them out. 

[helix]

China's just pissin around in Cuba to irk the yanks same as Russia, they know full well nothing is ever returned on investment in Cuba.

[NSXCIGAR]

21 hours ago, SCgarman said:

So will China eventually get tired of this dysfunctional relationship, and sell their partnership off? What do you see happening? Other than Cuban cigar prices continue to skyrocket until only the mega-rich can afford them? 

I don't see China selling anything. They'd pull out and take the haircut. That's if Cuba doesn't outright seize the fixed capital first. Depends on how much China puts in. Cuba's MO is usually to just let things run and skim as much off the top as possible making the investment worthless. In my opinion the 50% share of HSA is worthless. I think it might have simply been a strategy to help China corner the CC market. The elites want cigars and $1 billion is worth it to them. As I said Cuba ultimately controls all CC profits through Tabacuba. We see HSA revenue but we never see HSA net profit. I would imagine it's shockingly low. 

21 hours ago, VeguerosMAN said:

If Cuba has no interest maintaining long term economic relationships with China or any other countries for the matter, then they are doomed. Cuba has no choice but to ask China for help from the mess they are in right now.  In return, China will have their presence in Cuba, just like they have presence in Africa countries for "helping" them out. 

As long as the party is in power nothing will change. The party knows that as long as they keep a minimal standard of living the people will be kept in line. I'll admit they're getting close to the limit these days but the Cuban way is to simply plan to escape. The state knows this as well and they actually prefer it as less people means the limited resources go farther.

Challenging the regime is the last thing on anyone's mind there and I'm there several times a year and know many people there. I've never seen more people actively making plans to escape. You're going to see more of it since Spain approved the program for Cubans with Spanish descent to obtain Spanish passports. Thousands of Cubans have obtained their Spanish passports in the last year and are planning to get the hell out of there. 

21 hours ago, helix said:

China's just pissin around in Cuba to irk the yanks same as Russia, they know full well nothing is ever returned on investment in Cuba.

Can't rule it out. Also China hasn't really put that much into Cuba. They may never. China's already in the red with them since they agreed to cancel debt last year and "restructure" some trade agreements. This may have been a fig leaf to get them to agree to the proposed "spy base" that was reported. That costs them nothing and they got some cash, a new trade deal and their debt wiped out. What has China got so far? I've seen this movie before. How many times has Cuba had their debt cancelled and trade deals revised with other countries? 

I really don't see China pouring significant money down this sinkhole. 90 miles off the US coast they know is very ill-advised for them to try and make inroads. I think they want to see if Cuba is willing to honor any deal and I think they'll be quite disappointed.