tobacco industry

Illegal cigar factories, called "chinchals," have been among the few alternatives for Cubans looking for work in the midst of this global economic crisis. Risking time in prison, employees roll counterfeit Havana cigars in order to make a living. The risk may be worth the return, but it's hard to say.

One roller refused to reveal the extent of his pay raise when moving from state factories to the black market ... but "raise" was implied. Working in the legit world, this employee earned $17 a month. Counterfeit cigars tend to sell for $30 to $40 per box of 25, a price that's up to five times lower than the official price set by the Cuban government.

The price competition is only one reason for the government's distaste for the counterfeit cigar business, but it's a powerful one. Cuba's official cigar company, Habanos S.A., saw a 3 percent drop in sales last year. The government also cites the need to protect the image of the brand and fight corruption on the island. Authorities confiscate 1,500 to 1,700 boxes of illegally manufactured cigars every month.

It could be a losing fight, however. Barriers to entry are low, as supplies are easy to secure. And, desperation plays a role. When you need to put food on the table, risks become more realistic.

The biggest problem with access to Cuba may not be production capacity, as many suspect. Trademark and copyright issues have the potential to be a greater problem, and there is no easy solution.

You've probably noticed that brands such as Partagas, Montecristo and Cohiba occupy your local tobacconist's humidor. A saunter through a duty free store at any airport outside the United States will put the same names under your nose. Of course, these cigars have nothing to do with each other. The latter are Cuban, the former are not and the companies have no relationships. Cohibas in the United States are not the "non-Cuban" or "legal" versions of a single company's product.

General Cigar Co. Inc., for example, sells Cohiba cigars in the United States. Cohiba is also a prominent Cuban brand. Unfortunately, Habanos S.A. never registered the name up here. Habanos sued General Cigar, and a nine-year battle followed. In 2006, the U.S. Supreme Court ruled against Habanos (shocking, right?), reasoning that the embargo barred a challenge to General Cigar's claim.

When the embargo is lifted, there will be more legal challenges, and several companies will have to change their names and labels – ultimately requiring the reconstruction of brand identities from scratch. Winning the brand battles will have profound consequences. For this reason, General Cigar has "invested" close to $3.5 million on lobbyists over the past 10 years.

As with all other Cuba-related speculation, there is no way to forecast where this issue will go in a post-embargo market. Even if we assume that the Cuban brands will lose their claims, the impact on the market would be nearly impossible to predict. What we do know, however, is that the transition will be far from easy.

Cuba, the Dominican Republic, Nicaragua: these are the countries you would normally associate with the cigar business. But, Greece? Believe it or not, a market for local cigars is growing in Greece, and it's defying the global economic downturn.

Domenico Cigars is a small, two-room factory in Greece that sources its seeds from Cuba. It only puts out 70,000 sticks last year (a record). Instead of positioning the cigars as rare or limited editions, the company offers them at a reasonable $5 each, which is about half the price of the imported hand-rolled Cubans.

The group received little help from Cuba. Though they were able to tour the factories and plantations, nobody offered tips. They weren't allowed to take notes. So, developing an operation in Greece led to plenty of trial and error, with the actual rolling being the hardest part.

Despite the fact that the seeds are Cuban, the cigars are distinctly Greek, thanks to the local soil and the effort that resulted in the current product. The locals, it seems, remain committed.

[AP Photo/Thanassis Stavrakis]

Sigmund Freud thought that sometimes -- just sometimes -- a cigar could be just that, a cigar. Well, I doubt he never envisioned a Camacho Select between Harmony's lips. What's this mean? A new year is upon us, and Camacho's latest calendar is on the market. The "making of" video has followed quickly. Now, you can get a feel for how the tobacco hotties wound up on the pages that adorn the walls of your favorite cigar lounges (or possibly your apartment).

Now, all Camacho needs is a cure for all the new cigar taxes that ail us.

[Thanks, @DylanAustin]

The 2009 Tobacconists' Association of America (TAA) Convention kicks off on Sunday, March 8. Tobacconists and manufacturers from around the world will converge on the CasaMagna Marriott for four days of reconnecting, deal-making and of course plenty of cigar smoking. I'm currently at this Cancun resort and am happy to give the attendees – and jealous onlookers – a few insights into the event's host.

Surprisingly, smoking bans have crossed the border, forcing the CasaMagna to be smoke-free. The lobby, restaurants, bars and guestrooms, for the most part, are off-limits for puffing. Fortunately, poolside smoking is fine, and you can light up in the bar that sits alongside the beach.

Igniting your cigar may be a challenge. With airlines frustrating efforts to carry torches, matches may be your only available option (unless you bleed your lighter and find someone to refill it for you in Cancun. The wind off the Caribbean is strong, so look for sheltered corners to use when firing up (there are a handful of them almost everywhere on the property).

A loophole in Mexico's smoking laws allows CasaMagna to welcome TAA's smokers into the Sa Si Thai restaurant, as it is a covered outdoor space. So, you'll be able to enjoy your favorite Avo, Fuente or Davidoff (or anything else) unmolested. The hotel has extended this restaurant's hours of operation to accommodate late-night indulging. After last call, you can retreat to your room's balcony to tie off the night with your preferred stick.

President Obama wants to create jobs, yet he isn't too worried about some that already exist. Miami's cigar manufacturers are watching April 1, 2009 with grave concern. The new State Children's Health Insurance Plan (SCHIP) takes effect on that date, resulting in a 900 percent tax increase on every cigar made in the United States – or imported here.

What's at stake?

For Miami, it's the many people responsible for rolling 75 percent of the 272 million cigars rolled in this country. Manufacturers and retailers alike are bracing themselves. A tax that takes the surcharge on hecho a mano sticks from 4 cents to 40.26 cents is cause for alarm.

So, as my sergeant used to say, "Smoke if you got 'em." At this rate, you may not have 'em much longer ... or at least not as many.

Even with two hurricanes ripping through the region, western Cuba is expected to produce one of its tobacco best crops in quite a while. The plants are ready for harvest in the Vuuelta Abajo section of the island, and barns are starting to fill with those that have already been plucked. Apparently, this year's take is oily, which should do something to make this year's batch flavorful (I hope).

The 2008 storms caused $10 billion in damage to the island nation, stretching the effects of the ongoing financial crisis. Approximately 5,000 curing barns were damaged (or destroyed), and the repairs are still not complete. Despite the fact that most of the harvest had occurred before the hurricanes reached Cuba, the crop remained secure, as Cuban officials acted quickly to move the tobacco to safer storage facilities. But, up to 2 million pounds of tobacco were lost, according to Habanos S.A.

[Via Reuters, photo by Ron Melendi]

Cigar Aficionado has long had a policy about news and retailers: it doesn't happen. Well, times are tough, and it looks like those walls are coming down. The magazine doesn't have much of a choice, particularly after word has spread of between 25 and 30 layoffs (heard it from two confidential sources). So, what happens next? The publication dives headfirst into editorial prostitution.

The newly opened Cigar Inn -- on Second Avenue between E 54th Street and E 55th Street -- features a Cigar Aficionado-sponsored smoking lounge, with leather chairs, a working fireplace and even a barber's chair (of little use ot me, thanks to mother nature. You can get your sartorial needs taken care of at the Brioni counter.

So, it's hardly surprising that this establishment is popping up regularly on the once sacrosanct pages of the cigar community's "bible." The good news, however, is that you'll be able to get a sense (however brief) of what your other options are in New York.

Why are sales of Cuban cigars down? The minute the subprime mortgage crisis turned global, of course, demand had no place to go but down. And, there's always the quality issue that has plagued manufacturers in recent years. So far, the damage hasn't been bad.

Habanos S.A., which makes the storied Montecristo, Cohiba and Partagas brands, moved $390 million in 2008. That's a drop of 3 percent from 2007. The company, a joint venture involving the Cuban government and Altadis, says that this hasn't affected profits significantly.

Unsurprisingly, Habanos blames smoking bans in France, Germany and the United Emirates (among others) in addition to the financial crisis. If you can't find a place to smoke, you aren't likely to do it as much (a trial I endured in Scotland last year).

But, economic conditions are still the main event, particularly when you consider the secondary effects.

International travel took a dive last year ... to the tune of 11 percent. What's that mean? American cigar dilettantes weren't able to piss away as much on Cuban sticks as they may have in the past. Duty free shops thus moved fewer cigars than usual, with total sales in these venues down 24 percent from 2007 to 2008.

Despite the slip in sales and claims that profitability isn't seriously impaired, Habanos isn't optimistic about the future. On the subject of the U.S. embargo on Cuba, typically a favorite topic of speculation, the company would only say that it has "much worse problems to deal with in the world."

[Via Latin American Herald Tribune, photo by Steve Zak]