Farmer's Voice

Lifting Embargo On Cuba Could Be Game Change For Cigar Industry

Tampa Bay Online reports that if the US trade embargo on Cuba is lifted, it will be a game changer for the US cigar market, with industry experts saying the company poised to profit most from the legalization of Cuban cigar imports is Imperial Tobacco Group, the international partner of Cuban State-owned cigar company Habanos, which is expected to quickly introduce Cuban brands in the US and corner the market in the short term.

Richard Feinberg, a nonresident senior fellow with the Washington-based Brookings Institution who has authored several studies on the Cuban economy, said Habanos and Imperial Tobacco would increase their tobacco production by 50% over five years to meet theUSdemand.

Imperial Tobacco spokesman Alex Parsons said there would be a significant increase in production if theUSmarket opens, though he could not confirm the 50% projection. Carlos "Carlito" Fuente Jr., president of Arturo Fuente Cigar Co. inTampa,Florida, acknowledged that when Cuban cigars enter theUSmarketplace, consumers will rush to them at the expense of his Dominican blends, but said he does not expect to take an economic hit.

Fuente said he instead sees an opportunity for global expansion, explaining that Habanos and Imperial, in the short term, would have to pull cigars from other markets to meet US demand and that he would target those countries to fill the void left by Imperial.

In the long term, Fuente said he is confident his company will find a way to create its own blend using Cuban tobacco. The Fuente family would not want to grow tobacco inCubaunder the Communist regime, but if there is a regime change, he would consider adding a small farm on the island while keeping the Dominican Republican as his hub. John Oliva, president and CEO of Tampa-based Oliva Tobacco Co., which has farms in Honduras, Nicaragua and Ecuador, said he would be interested in adding a fourth farm in Cuba if US law allowed it, although he would hesitate to do so under the Communist government.

The Olivas and Fuentes are the last of the majorTampacigar families with roots inCuba, but Johannes Werner, editor of the online economic publication CubaStandard.com, said he does not think such roots matter asCubais unlikely to allow its premium tobacco to go to anyone other than Imperial Tobacco.

Gordon Mott, editor of the magazine Cigar Aficionado, said there are a lot of variables to this equation, including whether the same Cuban government will be in place, whether Cuba will maintain control over its tobacco, whether Imperial's deal with Habanos will remain intact, and whether foreigners will be allowed to purchase land on the island.

Opening theUSmarket to Cuban cigars "would be a short-lived peak of the Cuban market but a long-term peak for the cigar industry," Mott said. "There is equally great tobacco being grown in the Dominican Republic, Honduras, Nicaragua, Mexico and other regions," and "[w]hen people realize this, they'll try them all and find the one they like the best," he explained (Tampa Bay Online 5/11).