Sunday, March 01 2009
The second ProCigar Festival closed February 20 in Santiago, Dominican Republic, with at least one manufacturer noting that changes have already been caused by the new SCHIP taxes as well as the economic slowdown.
During an interview following a lengthy tour of the tobacco fields which supply his Tabadom factories, the famed grower and blender Henke Kelner noted that although he had to lay off some workers late last year because of the economic slowdown that was affecting sales, production was rising again. The reason? Not better sales so much as the demand from retailers for cigars in advance of the April 1 imposition of the new SCHIP-mandated Federal taxes.
Because of the added demand for cigars now, Kelner is running his factories six days a week, but knows there will be a slowdown after that as store inventories will be high. However, those cigars which are on store shelves prior to April 1 will be able to be offered at pre-SCHIP prices as there is no floor tax on large cigars that penalizes cigar shops for holding inventory prior to the new taxes taking effect. So Kelner's Davidoff, Occidental Cigars and OK Cigars factories are working hard to satisfy demand at pre-SCHIP prices. After April 1, however, he fears a significant slowing.
In the meantime, he explained during the tour of the fields and the growing complex, the work of planting tobacco goes on. In order to control the quality of the tobacco that is raised, Kelner and his team provide the seedlings – more than 10 million, all grown in greenhouses – for not only his own farms, but those of 80 other farmers who are contracted to provide tobacco for Tabadom's leaf-growing and processing affiliate. Moreover, these contract farmers are also provided with expertise, pesticides and everything they could need to grow quality crops.
>> While premium cigar sales were down in 2008, but were still quite respectable by historical standards. Figures released for December 2008 by the Cigar Association of America showed that for the year as a whole, premium cigar imports totaled 271.25 million, down 63.92 million or 19.1%. That's a significant drop, but the 2008 figures can't be directly compared to 2007 totals because new tariff regulations separate out some of the more expensive little cigar brands, so the 2007 figures include some unknown number of little cigars.
However, taken on face value, the 271.25 million figure still represents the ninth-highest import total ever for premium cigars and would have been a record as late as 1997. If you discount the two-year Cigar Boom frenzy of 1997-98, the 2008 total would have been a record as late as 2001!
Moreover, while 2008 was a dismal year for Dominican-made cigars, imports from Honduras and Nicaragua were both up over 2007. The highlights of the December report:
Dominican imports went down from 177.63 million in 2007 to 110.66 million (-37.7%) last year, and was the difference in the annual figures. Look for stronger totals in the first three months of 2009 as retailers try to fill their shop with cigars purchased prior to the imposition of new SCHIP-imposed taxes.
Honduran imports actually went up in 2008, rising 3.8% to 87.82 million. That's the second highest total ever from that country, behind only the ridiculous 112.36 million during the Cigar Boom in 1997. Honduran imports have now risen for the five consecutive years.
Nicaraguan imports also went up in 2008, increasing by 1.3% to 70.15 million. That's an all-time record for Nicaragua and the sixth straight year that the U.S. import total has risen. Premium cigar imports from Nicaragua have more than doubled since 2003 and were just 18.03 million ten years ago.
Even with the decline in Dominican imports, the "big three" cigar-exporting countries contributed 99.0% of all U.S. premium cigar imports. And, even though premium cigar imports went down, total cigar imports rose once again!
A total of 1.20 billion cigars of all types – premium, machine-made and little – were imported into the U.S. in 2007, but that figure rose by 8.1% in 2008 to 1.298 billion cigars! While premiums were down 19.1%, machine-made large cigars jumped by 11.3% to 616.6 million. Little cigars continued their rise, increasing by 31.7% to 409.9 million last year. With severe new taxes hitting the little-cigar sector on April 1 – each pack will be taxed the same as cigarettes – it will be interesting to see how sales fare in the future.
The total of 1.3 billion cigars imported does not, of course, count cigars made in the U.S. by machine-made giants Swisher International, John Middleton or others. Those companies and other U.S. machine-made cigar manufacturers had a strong export year in 2008, increasing American large-cigar exports by 7.6% to 130.95 million units. U.S.-made little cigar were on a roll, upping their 2007 export total by 45.3% for the year to 288,686,000! Smoking may be down, but as these figures show, hardly out.
>> "Our number one priority is to offer our customers the finest cigar in the world," said Davidoff U.S.A. president Peter Banninger. "The Puro d'Oro product has not yet met our expectations and reached Davidoff's high standard of premium quality and excellence. We are confident that Davidoff will be prepared to introduce Puro d'Oro in Spring 2010."
The all-Dominican Davidoff Puro d'Oro, featuring a specially-grown wrapper, was scheduled to debut in June of 2009, just ahead of the International Premium Cigar & Pipe Retailers Association convention and trade show in New Orleans in August. The blend, whose name means "pure gold," was announced to the Davidoff sales staff at the national sales meeting in the Dominican Republic in January.
When introduced, it will be the eighth Davidoff blend, after the Aniversario, Classic, Grand Cru, Special Series, Thousand Series (the five original, Dominican-made lines that debuted in 1990), Millenium Blend (2001) and Maduro (2008).
- Rich Perelman in Los Angeles
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Reprinted by permission. "Heard in the Humidor" is a publication of Perelman, Pioneer & Company. Copyright 2009; All rights reserved.
