The premium cigar industry saw notable financial shifts in 2024, with both Habanos S.A. and Scandinavian Tobacco Group (STG) reporting revenue growth.

Habanos S.A. expanded rapidly with a 16% revenue increase, STG remained the larger company overall but faced declining profitability. This raises a key question: if Habanos S.A. continues on its current trajectory, could it eventually close the revenue gap with STG?

Habanos S.A.: Strong Growth, Driven by Premium Demand

Habanos S.A., the Cuban state-controlled company responsible for distributing Cuban cigars worldwide, reported $827 million in revenue for 2024, marking a 16% increase over the previous year. This strong growth was fueled by high demand in China, Spain, Switzerland, the UK, and Germany, reinforcing the global appeal of Cuban cigars.

A key factor behind Habanos S.A.’s success is its exclusive focus on handmade, high-end cigars, which continue to be positioned as luxury products. The company has further strengthened its brand with new product launches and limited editions, appealing to collectors and premium cigar enthusiasts. With Cuban cigars commanding premium prices due to their perceived quality and exclusivity, Habanos S.A. has managed to increase revenue without expanding production volume. Despite ongoing U.S. trade restrictions, demand remains strong, particularly in regions where high-end goods are flourishing.

STG: Higher Revenue, But Profit Declines

Scandinavian Tobacco Group remains the larger company by revenue, reporting approximately $1.35 billion in 2024, a 5.4% increase from the previous year. However, despite growing sales, STG’s net profit declined, falling from $173 million in 2023 to $138 million in 2024. The company’s EBITDA margin also dropped, indicating cost pressures or shifting market dynamics.

Unlike Habanos S.A., STG operates across a broader market, selling both premium handmade cigars and machine-made cigars. While this diversified portfolio allows STG to maintain a larger total revenue, it also exposes the company to pricing and margin pressures, particularly in the lower-end segments. The decline in profitability raises concerns about whether STG can maintain its financial strength in the long term, especially if demand continues shifting toward ultra-premium cigars.

Can Habanos S.A. Close the Revenue Gap?

While STG still generates significantly more revenue than Habanos S.A., the Cuban company’s faster growth rate suggests it is gaining ground. In 2024, Habanos S.A.’s 16% revenue increase far outpaced STG’s 5.4% growth, reinforcing the idea that demand for premium, handmade cigars is currently stronger than the broader cigar market.

That said, STG’s total revenue remains substantially higher. At $1.35 billion, it still holds a commanding lead over Habanos S.A.’s $827 million. Even with continued growth, Habanos S.A. would need to sustain this pace for several more years to close the gap.

A key factor in this dynamic is profitability. While Habanos S.A. benefits from strong pricing power and exclusivity, STG is dealing with declining margins, which could impact its ability to invest in future growth. If STG’s profit decline continues, it may be forced to adjust its strategy, either by shifting more toward premium cigars or by improving cost efficiency in its mass-market segments.

Final Thoughts

Habanos S.A.’s rapid growth and strong pricing power position it well for continued expansion, particularly in premium-driven markets like China and Europe. However, STG still leads in overall revenue, and closing that gap will require sustained long-term growth from Habanos S.A.

The bigger question is whether STG’s declining profitability signals deeper structural challenges in the machine-made and lower-tier cigar market. If profitability pressures continue, STG may need to adapt its business model, while Habanos S.A. could further strengthen its dominance in the high-end cigar space.