Cuban cigar sales drop amid global crisis

Mon Feb 23, 2009 4:18pm EST

By Jeff Franks
HAVANA (Reuters) - Sales of Cuban cigars, considered the finest in the world, dropped 3 percent to $390 million in 2008 as the world financial crisis and the spread of anti-smoking laws cut demand, officials said on Monday.
The falling sales reflected a decline in the market for luxury products in general as global economic worries mounted, said Manuel Garcia, vice president of Habanos S.A., the worldwide distributor of Cuban cigars.
Speaking at a press conference kicking off Cuba's annual cigar festival, he said 2009 was likely to be a "very complicated" year, but Habanos expected to maintain sales at around the 2008 level.
Three hurricanes raked Cuba last year, including powerful Gustav which cut through the heart of the island's prime tobacco growing state of Pinar del Rio, but Garcia said they had done minimal damage to tobacco supplies.
"Luckily, there was no effect on the harvest and there continues to be sufficient raw material to meet demand," he said. Thousands of tobacco curing barns were damaged by the storms, but most were rebuilt in time for the curing season, Garcia said.
Garcia said laws prohibiting smoking in public places had gone into effect in various countries last year, including some that are big customers for Cuban cigars.
Also, the number of worldwide airline passengers had fallen by a reported 11 percent, he said, which slowed the "duty free" market where Habanos sold about a quarter of its cigars.
He said the top global markets for Cuban cigars, which include well-known brands such as Montecristo, Cohiba, Partagas and Romeo y Julieta were, in descending order, Spain, France, Germany, Cuba and Switzerland.
Due to the 47-year-old U.S. trade embargo against Cuba, the communist-led island's cigars cannot be sold legally in the United States, the world's largest cigar consumer.
New U.S. President Barack Obama has promised to ease, but not eliminate the embargo.
If it were lifted, "it is probable that an opening of that market would signify a great possibility and great potential for our products," Garcia said.
Cuban cigars are so popular that Habanos, a joint venture between Cuba and British tobacco giant Imperial Tobacco Group PLC, has about 70 percent of sales in its current markets, said vice president of development Javier Terres.
He said an estimated 230 million to 250 million cigars will be smoked in the United States this year.