By Jay Amberg Bloomberg Lifestyles. Cigar news.Bloomberg.com. Fri, 22 Sep 2000, 10:38am
EDT.
Havana, Sept. 22 -- Global cigars merchants returning from recent trips to
Cuba said Habanos SA, Cuba's global marketer and distributor for its cigars, is
considering production cuts of 8 million-10 million cigars.
Leaf shortages and what could prove to a crippling drought could be
prompting the action. Responding to complaints from both cigar merchants and
consumers, Habanos SA is also preparing to institute new, more stringent methods
for quality control.
"As far as I know, there has been persistent talk within Habanos about
slashing production because of leaf shortages and a bold move on the part of
Cuban management to restore consumer confidence in the quality of the Cuban
product,'' said a Cuban cigar merchant who sells to an international clientele.
The merchant, who wants to remain anonymous, said there's no doubt this
year's shortage of large wrapper leaf from Pinar del Rio province, home of
Cuba's best cigar tobacco farms, is a major factor in the company's internal
talks about a reduction in the island's production of premium cigars.
Because Cuba's premium cigar industry is the island's third leading producer
of hard currency, behind tourism and sugar, it's assumed if production cuts were
authorized they would have to have the approval of President Fidel Castro.
Fragile Product
Wrapper leaf, grown under tenting to minimize the thickness of the leaf and
protect it from the hot Caribbean sun, is one of three components of a premium
cigar. The other two are the filler and binder.
The wrapper leaf is important because it's the dressing for the cigar, or
what the consumer sees first. Many cigar aficionados base their purchases on the
appearance of the wrapper.
That's why so much care and attention is devoted to its planting,
maintenance, harvest, fermentation and eventual use in the rolling galleries of
the Havana cigar factories.
Cuban cigar experts also say the wrapper leaf grown in western Cuba
contributes 7-10 percent of the flavor in a premium cigar.
"All you have to do is inspect some of the bales of wrapper leaf that
are coming into Havana to see that there's a lack of big leaf,'' the merchant
said. "While I wasn't keeping count, I'd say for every group of 50-60 small
to medium leaves there was maybe one or two that could be used on a double
corona.''
In terms of production cuts, the merchant said numbers he heard were
consistent with those being discussed by Habanos SA, from a low of 5 million to
10 million cigars this year.
Last year, Cuba exported about 150 million cigars and company export targets
this year were about 160 million-170 million.
"I'll tell you one thing, with the shortages of big leaf and lack of
appreciable rain since last winter, if things don't improve in Cuba we'll all be
smoking robustos and petit coronas (Cuban) next year,'' the source said.
Robustos and petit coronas are smaller cigar sizes, compared with the larger
Churchills, double coronas and gran coronas.
Production cuts seem to be the norm in the premium cigar business this year,
especially among the world's leading producers.
On Tuesday, Altadis SA, the world's biggest cigar maker and the company that
owns 50 percent of Habanos SA, was reported to be in the process of closing
cigar factories in Jamaica, Honduras and Nicaragua, according to the Spanish
newspaper La Gaceta de los Negocios.
For its U.S. sales, the world's largest market for premium cigars, Altadis
is expected to consolidate its premium cigar operations at its factories in the
Dominican Republic where Altadis USA manufactures its best-selling Dominican
versions of the original Cuban brands, Montecristo, Romeo y Julieta and H.
Upmann.
Altadis was formed last year by the merger of Spain and France's biggest
tobacco companies, Tabacalera SA and Seita SA.
Cutbacks and consolidation in the global market for premium cigars were
caused by a significant drop in incremental sales since the 1993-98 cigar boom
went bust.
Quality Control
Habanos SA is also reported to be considering new quality- control methods.
Based on information from sources in Cuba familiar with the quality control
at the Havana cigar factories, the factory manager now has overall
responsibility for the quality of the cigars leaving the factory.
The new system, currently under review, would have a representative from
Habanos SA make final inspections of all cigars leaving the factory.
If the Habanos quality control representative approves specific production,
then the cigars would be released and prepared for sale. If they're rejected,
the factory manager is made aware of the reason for the rejection. Too many
rejects and the factory manager could face demotion or replacement.
Habanos SA is reported to be taking this measure because of growing
complaints from its big retail customers, specifically its La Casa del Habano
franchises and authorized Habanos retailers, about poor drawing cigars and
sloppy construction.
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