Sunday, April 12 2009
"Swedish Match estimates that the global market amounts to approximately 15 billion cigars, with North America and Western Europe being the two largest markets, accounting for more than 90 percent of global
cigar sales.
Hand-rolled premium cigars account for less than 3 percent of global volume but account for more than 25 percent of the total sales volume.
"Premium cigars are produced mainly in Latin America and the Caribbean with about two-thirds of this production estimated to be sold in the U.S. Outside the U.S., other important premium cigar markets are Spain, France and Germany.
"The market for machine-made cigars in the U.S. is estimated by Swedish Match to amount to more than 7 billion cigars, and has been growing at an average rate of 2 percent per year in volume terms over the past several years. In 2008, the U.S. machine-made cigar market is estimated to have grown by more than 8 percent in volume, with fastest growth coming from the little cigar segment. The European market is estimated by Swedish Match to amount to more than 5 billion cigars, and is estimated to have declined by less than 3 percent in 2008. The decline in Europe is partly due to the enactment or expansion of smoking bans, most notably in the Netherlands and France."
That’s the world cigar situation as noted in the new Annual Report from Swedish Match, published in advance of its annual shareholder meeting scheduled for April 28 in Stockholm. The report contained other highlights, including:
=> "Premium cigars on the North American market accounted for 41 percent of the Group’s total cigar sales in 2008. Swedish Match estimates that the North American market for premium cigars declined by pproximately 5 percent in volume terms during 2008, to approximately 270 million units. The trend in the U.S. has been toward a higher percentage of smaller premium cigars."
=> "Swedish Match is the market leader in the U.S., with a market share estimated by Swedish Match to be in the range of 30 percent, measured in number of cigars sold."
=> "Consumers of premium cigars in the U.S. are brand loyal, but enjoy trying new varieties of their favorite brands. Continuous new product development and line extensions are therefore very important in this category."
That’s Swedish Match’s view of the U.S. premium-cigar situation at present, with Macanudo remaining the national brand leader and major sales roles for Partagas, Punch, Hoyo de Monterrey, Cohiba, La Gloria Cubana, Don Tomas and Helix. In the much-larger machine-made category, Swedish Match is the no. 4 player in the U.S., behind Swisher International, Altria’s John Middleton and Altadis U.S.A., on the strength of its Garcia y Vega and White Owl brands. The company report noted that "During 2008, little cigars continued their upswing in popularity in the U.S., while there was continued movement away from certain flavored cigars, toward natural wrapper and lightly aromatic cigars. As natural wrapper cigars tend to sell at higher retail prices than these flavored cigars, this trend has positive impact on sales."
Swedish Match reported sales of $440.15 million in cigars (converted from Swedish Kronor) in 2008 and operating profits of $82.9 million. The company employs 11,866 people in total, with the largest staff numbers in the cigar-production countries of the Dominican Republic (3,429, 61% of whom are women), Indonesia (1,793, 83% women) and Honduras (1,817, 50% women). The U.S., which includes some production staff, has 1,325 Swedish Match employees (64% men) and the headquarters country, Sweden, is only fifth in staff count at 898 (54% men).
The report paints a positive picture of the company’s cigar business, but with the obvious concern over the downtown in U.S. and European consumption thanks to restrictions and the economy. Worth noting was that more than 7,500 or 63% of the company’s employees are involved in cigar manufacturing in the Dominican, Honduras, Indonesia and Belgium, not including the U.S. employees who make Garcia y Vega and other brands in the plant in Dothan, Alabama. If the new federal and local taxes cause further slides in consumption, those folks are going to be hurt, with no bailout in sight.
>> A largely unnoticed, but especially insidious aspect of the Florida Senate Bill 1840, which would impose substantial new taxes on cigars as well as cigarettes, is a "floor tax" which would be imposed not only on wholesalers and retailers, but also on consumers! Section 7(3) of the bill states:
"A surcharge is imposed upon the use or storage by consumers of tobacco products in this state and upon such consumers at the rate of $1 for each ounce, with a proportionate surcharge at the same rate on all fractions of an ounce thereof. The surcharge imposed by this subsection does not apply if the surcharge imposed by subsection (2) on such tobacco products has been paid. This surcharge does not apply to the use or storage of tobacco products in quantities of less than 1 pound in the possession of any one consumer."
The proposed tax rate – designed to raise up to $86 million and which would be effective on July 1 – is $1 an ounce. A standard Churchill-sized cigar weighs about 0.55 ounces, so it would be taxed at 55 cents each ($13.75 per box of 25); a trendy 60-ring by 6-inch Toro would bring an additional tax of 60-65 cents per cigar or perhaps $16.25 per box of 25! So for a smoker who owns 10 boxes of cigars, the personal tax on his existing home stock could be $150 to $200 depending on the total weight! Of course, this tax – on top of the new Federal cigar tax rate of 40.26 cents each – would have to be paid by retailers and distributors. The bill was approved by the Senate’s Ways and Means Committee by a 16-1 vote on April 7. Florida smokers are asked to contact their state senators and protest this unthinkable tax on cigars and on consumers.
- Rich Perelman in Los Angeles
Want more? Join us for daily coverage of cigars, accessories, people and issues at CigarCyclopedia.com.
-----------------------------------------------------------------
Reprinted by permission. "Heard in the Humidor" is a publication of Perelman, Pioneer & Company. Copyright 2009; All rights reserved
