Sunday, April 29 2007
The renaissance of cigar smoking and enjoyment is continuing. The figures for February showed 23,095,000 premium ( handmade) cigars imported into the U.S., a 3% decline from the same period in 2006, but still good.
As usual, the Dominican Republic was the leader, with 12.84 million cigars entering the U.S., a little better than the 12.64 million brought in during February 2006. Nicaraguan imports were also up a little, to 4.53 million against 4.50 million last year. Only Honduran imports were down, losing almost 15% of last year's total at 5.63 million compared to 6.61 million in 2006. Small amounts of cigars also came in from Mexico (65,000) and the Philippines (24,000).
For the year, the figures are good and even slightly ahead of the roaring year in 2005. Through February, some 34.49 million premiums have been imported into the U.S., compared to 33.64 million last year and 32.45 million in 2005.
When you take into account the entire large cigars category, which includes machine-mades, the figures become staggering. For just the two months ended in February, some 72.7 million cigars came into the U.S., a sensational rise of 27% over 2006!
The other exploding figure is for little cigars, which have grown in popularity as a lower-priced alternative to cigarettes, Little cigars are most often the same size as cigarettes, but are made of cut and homogenized tobacco instead of paper and are taxed as cigars at a much lower rate than cigarettes. The U.S. Treasury's Alcohol and Tobacco Tax and Trade Bureau (TTB) is considering a proposed rule that would tax little cigars as cigarettes and the comment period ended on March 26. But while the rulemaking procedure goes on, imports of little cigars continue to go wild.
In February, 13.5 million little cigars came in, a rise of 200% over the February 2006 figures. For the year, the rise is even more fantastic as the two-month total for 2007 is 59.5 million against the 2006 figure of 11.9 million, an increase of 500%! Wow!
A lot of little cigars are made in the U.S. and exports of these items have been brisk as well. Exports of little cigars totaled 16 million in February, an increase of 63.1% over 2006 and year-to-date, U.S. little cigar exports total 23.67 million, a 102.5% increase over the same period in 2006.
Altadis, S.A. sent a clear signal last week to potential buyers that the company could be bought, but not at the 47 Euro (about $64 U.S.) per-share offer now on the table from Imperial Tobacco. The company's shareholder presentation noted that with the cigarette tax situation in Spain now settling down, it expects strong earnings from its market-leading brands such as Fortuna and will increase its profit margins from 34.5% to 41% in that division.
In cigars, the Altadis goals are to increase profit margins from the existing 34.5% to 37.5% by 2010 through (1) higher prices and margins, (2) increased activity in low-sales areas such as Africa, Asia, Latin America and Eastern Europe and (3) increased U.S. potential, including "clear upside potential for Cuban cigars in the U.S." Does Altadis know something about the U.S. trade embargo that U.S. President George W. Bush hasn't told us, or is it just blowing smoke?
Altadis presented a chart showing worldwide market shares of the leading companies: Altadis leading at 25%, followed by Swedish Match (13%), Swisher International (12%), ST Cigar (now including C.A.O.) at 11%, John Middleton at 10%, the Burger Group at 9% and all others comprising 20%.
Regardless of what the U.S. Congress is doing with potential regulation of tobacco products through the Food & Drug Administration, New York Governor Eliot Spitzer is pushing for tobacco prohibition wherever he can.
The latest example came on April 4 when the New York State Fair banned the sale of all tobacco products on the Fairgrounds. Michael Tarnowicz, the head of Connecticut Valley Tobacconist, will be one of the vendors immediately impacted: he had been selling his cigar lines, including Battleground, Old Powder Keg and Mysterioso, for the past eight years. According to Tarnowicz, "two other vendors also have been offering cigarettes and cigars to the public as well.
"This is seen as a very ominous development because the same people that enacted the [New York City] smoking bans are behind this initiative ‘to make New York the healthiest state' in the Union," wrote Tarnowicz. "What's especially troubling is this is the first time they have actually imposed a ban on the sale of [tobacco products]. This is seen as the start of a prohibition of the sale of tobacco products. We are currently seeking help from the Retail Tobacco Dealers of America, Cigar Association of America and New York City C.L.A.S.H. [Citizens Lobbying Against Smoker Harassment] to fight this madness, e.g., ban a legal product."
- 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 2007; All rights reserved.
