Cuba Cutting Tobacco Production?

[tigger]

Reuters Article

Have you heard anything about this Rob, Jose, anyone?

I don't like it...hoping it's mostly cigarette production.

[thechenman]

Interesting story. Thanks for posting. In light of all this, I can't believe Hsa still raises prices. Simply unfathomable. Cut your margins a bit and sell more cigars. As brutal as it is to say, a cigar ultimately is a commodity and in rough patches, sometimes you need to sacrifice margin for volume to hit revenue targests. It's a simple fact of life.

[blooz4u]

Interesting story. Thanks for posting. In light of all this, I can't believe Hsa still raises prices. Simply unfathomable. Cut your margins a bit and sell more cigars. As brutal as it is to say, a cigar ultimately is a commodity and in rough patches, sometimes you need to sacrifice margin for volume to hit revenue targests. It's a simple fact of life.

That's unfortunate, but I guess that's the reality. Cigars are a "luxury" for most....

[bobsled]

Yup, the articles blame it all on smoking bans too. Nothing said about the last 2 rounds of price increases. Dolts!

[bassman]

Perhaps less production will lead to higher quality. Often the best wine is made from vinyards with low yields.

[semery74]

They are uncompromising morons. It will be 1999 all over again if the embargo falls and there is no supply to meet demand. Stock up while you still can.

[samb]

Why must this happen when I am just now discovering Cubans?

[Punch Joe]

Saw it early this morning. Heard the same from Tabacuba. After all they control the production and the agricultural as a whole. Makes me wonder why the ONE released that report yesterday. Something is not quite clear to me though i can´t tell what is it right now.

[puros71]

Saw it early this morning. Heard the same from Tabacuba. After all they control the production and the agricultural as a whole. Makes me wonder why the ONE released that report yesterday. Something is not quite clear to me though i can´t tell what is it right now.

I also read that yesterday and was scratching my head wondering what the hell is going on. We will see with time what the outcome will be.

[aavkk]

Why must this happen when I am just now discovering Cubans?

Nah, dont sweat it. Cuban cigars are like the stock market, everyone thinks they can time it just right but ultimately you need to get in as early as possible and buy the "blue chip" smokes.

[SamuraiJack]

Perhaps less production will lead to higher quality. Often the best wine is made from vinyards with low yields.

I like that thought.

[tigger]

Thanks for your insight Jose.

We'll hope that less means better...

[MontrealRon]

Considering the extremely low cost of actually producing Habanos,

one is at a loss to follow the logic here.

With the dire state of the Cuban economy, though, any production that requires

hard currency inputs could be very hard to justify.

Other than the Tubos, though, what inputs are there in the cigar industry?

Boxes, bands, etc. are all locally made.

Why not then continue to make as many high quality cigars as possible,

keeping people working, and simply warehouse whatever the market is not ready to absorb.

Sure, the warehouses need to be climate-controlled, and that consumes energy,

but that can't be much on a per-box basis.

Even if the cigars are stored unbanded and unboxed, so what?

Even if only the leaf is stored, in bales, it could always be rolled later,

and would produce superior, ready to smoke cigars.

Surely, a little extra aging will do no harm.

Even if 5-10 years of storage would be needed,

Cubatabaco could concentrate on producing cigars that would benefit from the extended aging.

Such cigars could eventually be sold as Gran Reservas!

And what if there are a couple of bad harvests, or crop losses from disease or storms?

If the boycott is overturned, how will the demand be filled?

Maybe unbanded, unnamed cigars could be the first to be sold in the US market,

until the copyright issues over the famous brands are resolved.

Many consumers - myself included - are happy these days to pay around $100/box

for vintage machine-mades that went unsold for years when they were going for $25/box.

And most of these are from the high production era of the late '90's.

Yesterday's junk is today's collector's item.

In short, PLEASE, Cubatabaco, keep up production of Habanos at

whatever level today's high standards can be maintained.

Idle hands do no one any good.

Those not gainfully employed in the legitimate trade will be forced

to turn to the black market.

And you may not have the product you need, when you need it the most!

[tigger]

Other than the Tubos, though, what inputs are there in the cigar industry?

I assume that it's the cost of agricultural inputs - fertilizer and machinery primarily, that are driving the reduction.

Edited to add: Storage may well be an issue as well. I don't know how much hurricane damage there has been to curing/storage facilities in recent years, but they have building and maintenance costs associated with them as well.

[cigarros]

This info sounds awfully! It seems that prices will increase next year.

[MontrealRon]

I assume that it's the cost of agricultural inputs - fertilizer and machinery primarily, that are driving the reduction.

Edited to add: Storage may well be an issue as well. I don't know how much hurricane damage there has been to curing/storage facilities in recent years, but they have building and maintenance costs associated with them as well.

Hi, Tigger -

Would it not be logical for their international partners, i.e Imperial,

to advance sufficient funds to maintain production?

After all, what Cubatabaco, or is it now Tabacuba, does not produce, Habanos, SA cannot sell!

The Cubans, if necessary, could even allow the storage outside Cuba of any cigars so financed.

The sums involved may be large for Cuba, but are miniscule for Imperial.

[tigger]

Ron,

It would seem that way to me, but there are a few things I don't know:

-Imperial's financial situation

-The actual deal the Imperial (or Altadis, originally, I guess) made - whether it was only with HSA, or included Tabacuba. My understanding is that they're separate entities.

[Jimmy2]

Makes perfect sense cigars are not selling so why produce the same amount if they are not moving they will just fill the where houses.

As the cigar market is for the everyday smoker overall ( collectors and people who age cigars are a very small percentage) and if not buying and smoking cigars as years past because of the economy. Keeping production the same without the demand is a waste of money and is not productive from a business point of view.

Also with all these price increases I think a lot of people are not buying overall which is hurting them to.

The best thing for Cuban Cigar production and Quality will be the end of the embargo as it once was before pre 1962...

[Buch0]

The best thing for Cuban Cigar production and Quality will be the end of the embargo as it once was before pre 1962...

I find that hard to believe, I feel strongly for the point that if demand rises considerably, the quality will be sacrificed for the quantity. As someone above mentioned, I am banking on the fact that quality of the Habanos will benefit from the reduce in production.

[Jimmy2]

When the embargo ends the market for Cuban cigars will be as it once was mainly for the US .As with NC cigars (right now the US market) their construction are perfect maybe not the flavor but hell they can't help that.The US will not stand for a sub par Cuban cigar and they will have to be perfect in everyway to sell on a high level like they did pre 1962.I think most in other countries don't understand how big the market was when it came to Cuban cigars and tobacco in the US.

Do not be afraid of change if the embargo ends and as the American CC market will only make it even better for us all..

[Stalebread]

Why must this happen when I am just now discovering Cubans?

Another way to look at it is that current production is the best it's been in years. You're coming into the market at a great time.

[Stalebread]

I assume that it's the cost of agricultural inputs - fertilizer and machinery primarily, that are driving the reduction.

. . .

Not to mention fuel for farming and transportation.

Didn't Raul recently encourage fuel conservation by suggesting small farms use horses for plowing, etc. instead of borrowing the collective tractor?

[Stalebread]

When the embargo ends the market for Cuban cigars will be as it once was mainly for the US .As with NC cigars (right now the US market) their construction are perfect maybe not the flavor but hell they can't help that.The US will not stand for a sub par Cuban cigar and they will have to be perfect in everyway to sell on a high level like they did pre 1962.I think most in other countries don't understand how big the market was when it came to Cuban cigars and tobacco in the US.

Do not be afraid of change if the embargo ends and as the American CC market will only make it even better for us all..

Hard to say what will happen when the embargo ends. I suspect there will be a dip in quality/quantity at first before production adjusts to meet demand. That is, assuming whatever is in reserve cannot meet that demand.

Trying to understand your reasoning, Jimmy. When you say, "The US will not stand for a sub par Cuban" does that mean that the rest of the world does accept sub par Cuban cigars now? What about all the smokers in the US who enjoy legitimate but illegal Cuban cigars now? Are they smoking sub par Cuban cigars? Will the taste and expectations of smokers automatically go up when the embargo ends?

As I think about it, a case might be made for a post-embargo scenario in which novice cigar smokers who lack knowledge and experience will be drawn to Cuban cigars and will gladly accept sub par Cuban cigars. At least at first. I don't know that this will happen, I'm just looking at the possibilities from a different angle.

[Stalebread]

. . .

Sure, the warehouses need to be climate-controlled, and that consumes energy,

but that can't be much on a per-box basis.

. . .

I'm wondering how full the warehouses are now with unsold LEs and other slow-selling brands and vitolas?

[MontrealRon]

Hard to say what will happen when the embargo ends. I suspect there will be a dip in quality/quantity at first before production adjusts to meet demand. That is, assuming whatever is in reserve cannot meet that demand.

Trying to understand your reasoning, Jimmy. When you say, "The US will not stand for a sub par Cuban" does that mean that the rest of the world does accept sub par Cuban cigars now? What about all the smokers in the US who enjoy legitimate but illegal Cuban cigars now? Are they smoking sub par Cuban cigars? Will the taste and expectations of smokers automatically go up when the embargo ends?

As I think about it, a case might be made for a post-embargo scenario in which novice cigar smokers who lack knowledge and experience will be drawn to Cuban cigars and will gladly accept sub par Cuban cigars. At least at first. I don't know that this will happen, I'm just looking at the possibilities from a different angle.

I think Jimmy's point is that if quality were to drop drasticly from current levels due to a rush to supply the US market,

American smokers would not be accepting of such inferior product.

That, of course, remains to be seen.

We North Americans, sadly, have been much too accepting of junk of all kinds that is dumped on us.

We eat crap food, drink tasteless industrial beer, and spend endless hours watching "reality" TV.

Sure, there is a growing minority that eats local and organic, drinks craft beers and fine wine,

and even reads books!

Some even smoke and appreciate fine Habanos.

But there are plenty out there who buy by labels, not by quality,

and, unfortunately, there would probably be a good market, at least initially,

for anything sold as a "Genuine Hand-made Cuban Cigar".

Consider as well how many really poor NC's are sold in the US now.

Any CCs, as long as they draw, would be better,

even if they were not up to the standards that we at FOH have come to expect.