The impact of the Cuban shortages
The impact of the Cuban shortages. A few weeks ago, both L’ Amateure de Cigare and we wrote about the undeniable shortage of Cuban cigars. A perfect storm of circumstances is creating this shortage, and it will take a few years for Tabacuba and Habanos to solve the issues. And it could have some serious consequences, both for Cuban cigars and new world cigars. As a large retailer said to us “If I order 100 boxes of Cuban cigars, I’m lucky to get 5.”
A slowdown in special releases
One of the things that might happen is for Habanos and Tabacuba will slow down the number of special releases. For the last few years, there have been more than 15 regional editions from Cuba annually. By lowering that number of releases, Tabacuba could free up both tobacco and production capacity to fulfill the demand for the regular production cigars.
Each year, the Cubans make a few other special releases as well. Annyally three edicion limitada, a (gran) Reserva, exclusive releases for La Casa del Habano, and other Habanos selections such as the ‘year of the Chinese zodiac calendar’. Slowing down on these releases could also help to produce more regular production cigars. But since the demand for such specialty releases is so high, Habanos might not want to go that route.
Lesser points of sale
Another option could be a reduction in the number of retailers that sell Habanos cigars. Habanos works with several retail concepts or tiers. The first tier is non-Habanos concept tobacconists. The lowest tier of the Habanos concepts is the Habanos point, a concept for smaller shops that don’t have space for a large portfolio but still have knowledge about Cuban cigars and a passion for it. After that, there is the Habanos Specialist tier. Different Habanos distributors have different qualifications for Habanos Specialists, but a degree from the Habanos Academy is mandatory as well as a walk-in humidor. And then there is the top tier, the La Casa del Habano franchise. These shops carry a large selection of Cuban cigars, and Cuban cigars only.
Distributors in certain countries might have to make the decision not to supply the non-Habanos branded shops. And to put a stop to new Habanos Points and Habanos Specialists for the time being. It could be a prelude to something that we have been saying in private for years, that Cuban cigars will only be sold through La Casa del Habano stores if the demand exceeds the supply badly. It is a very logical and realistic scenario when the Cuban embargo is lifted in the United States for example. But right now, Habanos distributors won’t go that far, yet. Only the shops without a Habanos concept should worry.
A new cigar boom
Cuban cigars are still dominant in sales outside the United States. It is not the 70% market share that Habanos claims they have, but in 2019 they were not far off. Since Habanos did not reveal how many cigars were made in 2020, we can’t do a breakdown of cigar sales. But if the rumors are true that Tabacuba only made 70 million cigars, the market share of Cubans is much smaller than the year before. And that’s when cigars from other countries come in.
Retail space is expensive, and every empty spot in retail humidors all around the world that can’t be filled with Cuban cigars will be filled with cigars from other countries. And if a cigar smoker can’t get his favorite brand, he will switch to something else. Some purists will never light up a cigar from another country than Cuba, but many other Habanos smokers will be more adventurous. And they might be in for a pleasant surprise. Sources in New Zealand told us that the only retailer for Habanos shut the doors during a lockdown. Many customers had to make the switch to New World cigars. The feedback that the distributor received was overwhelming. Many hardcore Habanos smokers told him they will switch to New World as the construction is much better, and there are more exciting flavors to discover in New World cigars.
Since countries such as Nicaragua, Honduras, and the Dominican Republic do not face the agricultural problems that Cuba has been facing for years, they can supply enough cigars. They are the ones that will profit most from the problems that Cuba is chasing.
Conclusion
The situation with the shortages of Cuban cigars will have an impact, and most likely a permanent impact. Most likely there will be lesser points of sale for Cuban cigars, and maybe even lesser special releases for the next few years. Retail humidors will see an increase of brands from other countries with Nicaragua as the front-runner. And the sales of new world cigars will increase.
Once Cuba has the agricultural problems, production problems, and logistic problems under control, the number of retailers might rise again. But by then, many cigar enthusiasts that are now strictly Cuban have discovered many great cigars from Nicaragua, Honduras, Dominican Republic, Costa Rica, and other cigar-producing countries. And that will change the landscape forever. Retailers that fill empty space with New World cigars won’t return that space to Habanos the moment there is new stock, so Cuba has to fight a fight they never fought before. While the new world brands are used to that fight, with fierce (yet friendly) competition. All in all, the current problems will have a long-lasting effect. And one thing is certain, Habanos raises its prices every year, and with shortages those prices will rise even quicker. Low supply and high demand. Habanos might even price itself out of the market.
