The multi-million sums surrounding tobacco

When the XXII edition of the Habanos Festival closed in the Cuban capital on the night of February 28, astronomical figures had been presented by the directors of a company that is recognized worldwide for producing the best Premium cigars and which exclusively markets 27 brands, all rolled by hand, around the globe.

With total sales worth $531 million in 2019, the commercial stability and loyal clientele that Habanos S.A. has achieved over the years was clearly demonstrated. According to recent statements by the co-presidents of the brand, Inocente Núñez and Luis Sánchez-Harguindey, the markets behave satisfactorily, and they continue in the leading position worldwide while increasing their presence and sales, especially in emerging markets, such as mainland China and the Middle East, which are becoming increasingly important for Cuban cigars.

Here I must make a necessary parenthesis to reflect on the negative effect that the novel coronavirus pandemic could have on this Cuban export item. As China is one of the growing markets for Cuban cigars, and the epicenter of the disease, the recovery of the Chinese economy will be decisive for the geographical recovery of this product.

Likewise, tobacco export earnings are highly difficult to predict in these circumstances, especially if we take into account that the main markets for Cuban cigars in the world are European countries such as Spain and France, where COVID-19 is leaving a tragic mark on the economy.

The consolidation of Cuban tobacco as an export product is not only based on its enduring fame, but on the constant commitment of its producers to quality and craftspersonship in its manufacturing process, since their consumers increasingly appreciate unique products.

This is not possible without good inner working. The Cuban tobacco industry brings together 45 enterprises of various lines, of which 23 are dedicated to the production of the leaf, as work carried out by 800 cooperatives and 16,690 farmers over an area of ​​37,000 hectares throughout the country; an effort which entails inherited experience and the support of scientific projects.

On the other hand, the social responsibility of this company is somewhat contradictory, since for many years the closure of the Habanos cigar festival comes with the auction of humidors, to raise funds for the Cuban public health system, a sector that denounces the bad habit of smoking. On this occasion, 4.27 million euros were raised through the auctioning of six humidors.

It’s safe to say that things are not so bad in this world of bands, vitolas and aromas. However, some reports have revealed the possibility that Habanos S.A. lose its partnership with the British Imperial Brands PLC, responsible for marketing all the island’s tobacco products across the world, as the latter is considering the idea of ​​dissolving the partnership to raise up to 2.6 billion dollars in 2020 through the sale of its assets.

If this were to take place, a move which comes due to the rise of electronic cigarettes and pressure from rivals with higher investment budgets and more popular brands, other investors, perhaps from the Asian market, could be interested in the Cuban business.

The Habanos S.A. corporation already occupies 70% of the world market share and owns 155 Casas del Habano specialist cigar stores, even under the U.S. blockade. As such, it is logical to assume that investing in this company can only bring benefits once the commercial blockade is finally lifted, since the plans are to open stores in the main cities of the United States. According to the joint venture’s own estimates, without the blockade, the percentage of high-quality cigarettes in the northern neighbor would rise by up to 30%, which would increase income by up to 60%, around 680 million dollars.

 

Habanos S.A. sales in the last five years (USD)

2019: 531 million, growth of 2%

2018: 537 million, growth of 7%

2017: 500 million, growth of 12%

2016: 445 million, growth of 5%

2015: 428 million, growth of 4%

 

Main markets:

  • Spain
  • China
  • France
  • Germany
  • Cuba
  • Lebanon
  • Switzerland
  • United Arab Emirates
  • United Kingdom
  • Canada
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