Habanos S.A. Predicts Big U.S. Sales, Shows 2015 Cigars

Habanos S.A. Predicts Big U.S. Sales, Shows 2015 Cigars

Gordon Mott
Posted: February 24, 2015

Cuban cigar sales in the United States could reach between 70 and 90 million cigars a year if the 53-year-old trade embargo between the two nations is lifted, according to two executives of Habanos S.A., the Cuban tobacco monopoly.
The sales projection would represent a market share of between 25 to 30 percent of the U.S market, said Jorge Luis Fernandez Maique, the commercial vice president of Habanos S.A. His Spanish counterpart, Javier Terrés de Ercilla, the vice president of development of Habanos S.A., added that Habanos' long-term goal is to attain the same level of sales that it has in the rest of the world where, according to its own statistics, it maintains a 70 percent market share.
"But the consumer will be the final judge of that," said Fernandez Maique. Terrés added that it could take 10 to 15 years or more before the market for Cuban cigars in the U.S. attains the same level as in the rest of the world.
The announcement of projected U.S. sales came at the opening press conference of the Festival de Habanos 2015, the 17th year that the festival has been held in Havana, Cuba. The festival is expected to draw more than 1,650 participants from 61 countries and 220 accredited journalists from 25 nations. The five-day event features a trade fair with 67 exhibitors from seven countries, including Italy, Canada, Germany, Spain, Brazil, China and Cuba.
Habanos experienced a 1 percent decline in revenues in 2014 versus 2013, to $439 million, the result of crisis in various parts of the world, including the Middle East and Russia, according to Fernandez Maique. He added that the world premium cigar market is estimated at 450 million cigars, of which Habanos has a 70 percent share in units, and an 80 percent share in terms of revenues. He said that there are currently 147 La Casas del Habanos around the world, and an additional 700 Habanos cigar specialists and 1,600 cigar outlets that carry the company's brands.
Spain remains the largest market for Cuban cigars, followed by France, China, Germany and then Swizterland. Cohiba is the country's largest selling brand, followed by Montecristo, Romeo y Julieta and Partagás. In terms of regional sales, Europe is its largest market by far, representing more than half of the company's sales.
The two executives said that they viewed the announcement in December by U.S. President Barack Obama and Cuban President Raul Castro to begin normalizing relations between the two nations as "a positive move." But Terrés Ercilla added that it was still too early to tell whether or not there would be an immediate impact on the sales of Cuban cigars.
"U.S. tourists can only bring back $100 worth of cigars, so that's not a lot," added Fernandez Maique.
When asked if the opening of the U.S. market would represent a challenge for the Cuban cigar industry to maintain quality while increasing production, Fernandez Maique said the industry would never compromise quality. He said the Cuban cigar industry had gone through a "difficult period" around the year 2000, and that it had learned a lesson never to compromise on quality again.
"We believe we are now a leader when it comes to quality. ... and we will protect that jealously," said Fernandez Maique.
Fernandez Maique also acknowledged several recent harvests had been difficult and presented some real challenges to the Cuban cigar industry. He said those difficulties explained the slow release in 2014 of some of the Edición Limitadas, including the Cohiba Robusto Supremo, which did not reach world markets until November or December.

But he said that in 2015, Habanos was planning to release three new cigars, which will be presented during the Festival: the Romeo y Julieta Wide Churchill Gran Reserva Cosecha 2009, the Montecristo 80th Aniversario and the La Gloria Cubana Edición Especial Casa del Habano. The Romeo y Julieta measures 5 1/8 inches by 55 ring gauge and will be sold in boxes of 15. The Montecristo 80th Aniversario (6 1/2 inch by 55) will have a production of 30,000 boxes. The La Gloria Cubana Edición Especial La Casa del Habano, which honors the retail chain's 25th anniversary, comes in boxes of 30 with 15 Pirámides (6 1/8 by 52) and 15 Robustos Extras (6 3/4 by 48).
The executives also highlighted the new Añejado line, which has been blended with tobaccos that have between five and eight years of age. The two cigars are the Romeo y Julieta Pirámides (6 1/8 by 52) and the Montecristo Churchill (7 by 47). Each cigar is sold in boxes of 25, and each has a special Añejado band.