News from Cuba comes in every so often with anticipation and excitement. For some, this news will bring neither, but anyone with an interest in cigars should take note.
Late last week, the good folk at Habanos issued new directory to cigar importers round the world to disseminate to the merchants under their respective umbrellas. The orders related to a shake-up of pricing and for some markets, the news is severe. There is to be parity in pricing across the globe, aligning with that of Hong Kong – which happens to be the highest. This means that all markets will see a price hike, some more than others, Spain for example will be seeing increases of 200%.
What is the reaction to this? Well from where we are in Cigar Keep Towers, quite positive. Speaking to one leading member of the business, I am told that there has always been an underlying frustration that you can go to Spain and buy a Behike for under half the price of what you can get it for in London (if you can find any). There are also companies who try to circumvent the conventional routes through which Cuban cigars are sold by flying to countries where the stock is cheaper, and selling them without a word to the importer. This change will render their business practically dead as the overheads no longer exist and they created the bad faith relationship with the importer who may not be willing to take on such unscrupulous clients.
When speaking to one Mayfair Merchant, he is marshalling along very similar lines. That though the news has come out of nowhere, the outcome could potentially be very positive.
What does Cigar Keep think? Well there’s two sides to this coin. On the one hand we may see some vitolas becoming unsellable - the Trinidad Reyes will go in shops from circa £18 to £40. Now we all like a Reyes but…
On the flip side, we should consider how the extra cash will positively effect cigars as a luxury object. One of the great excitements of cigar smoking is the fact that as they are rolled totalmente a mano, so you are rolling the dice every time you pick one out of your humidor. The romance of Cuba’s questionable quality control is the only reason they get away with it (that and the better taste). But with prices across the world reaching levels that make every purchase a considered one, will there be some assurances from Cuba that issues related to plugs will be resolved? The hike won’t work if Cuba don’t resolve underlying issues that people have largely laughed off as “part of the fun”. Will all Cohibas be rolled at El Laguito? Will the extra fermentation actually take place? Would the community prefer money to be put into quality control over fancier boxes or an extra limited edition release?
The luxury market’s lifeblood is an assurance of quality. This has a real impact on merchants who by-and-large replace a plugged cigar gratis at a net loss to themselves which with this rise in prices, only seems more of a hit. So it is for the importers to work with Habanos to create these assurances.
All in all, this will be a developing story. Please see The Proprietor’s musings on the matter which looks at the implications from an investment and financial perspective, with insightful and fascinating comparisons with fine wines.