Tobacco Asia

Volume 19, Number 4

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32 tobaccoasia / Issue 4, 2015 (September/October) Q: The hot subject at the moment is the lift- ing of the embargo for Cuban cigars in the US. What do you think the consequences will be in the world and the US for distributors and con- sumers: are they going to have less cigars on the markets, will the prices go up, or will the Cubans still manage to control the trade? A: It could be anybody's guess when the embargo is going to be lifted. It is now up to the American political system to de- cide but a lot of people seem to say it's going to take at least two to three years before the embargo is lifted. And before the embargo is lifted, nobody will be able to sell Cuban cigars in the United States. It will be a long process, which means that the Cuban tobacco industry has some time to prepare. What are going to be the consequenc- es in the US? In the short term, as soon as the embargo is lifted, I'm sure there will be an immediate rush on Cuban cigars. It's been a forbidden fruit for many years, so I'm sure everybody will want to try them and then when all the ones who wanted to try them have done so, the Cubans will gain a certain market share. I'm not a spe- cialist of the American market but some people say they might get 20-30% market share, which seems fair since they have 70% of market share outside of the US. What are the consequences for the rest of the world? Well, the Cubans and their industry are able to adapt. It will be a challenge for them but I am sure they will adapt to the increased demand and even- tually make more cigars. It's not going to be a "big-bang", it will be a long process. They're probably going to stockpile and be as ready as they can be. But it's difficult to predict: nobody knows how many cigars will be in demand neither from day one nor the year after because nobody has the ex- perience of this market situation, as it has been the same for the last 50 years or so. Something that has been forbidden before will suddenly be allowed for the Americans who smoke 300 million cigars a year. Certainly most people in the US will say "yes I want to taste a Cuban ci- gar now" but then how many are going to continue? Q: In the mid-1990s, during the presidency of Liñares for Habanos S.A, they wanted to reach 200 million cigars for the export and it has not been a success: the cigars where badly made and would not draw perfectly. Do you think that now, after almost 20 years, they will be able to reach such volume? A: I'm not able to tell you much about what happened in the 1990s, except to say that everybody agrees that there were a lot of problems. I would assume that the Cubans have learned from what they ex- perienced: the demand was growing very quickly and they clearly had problems but equally, they learned a lesson from that ex- perience and they know that if they increase volumes, at the same time they have to look after the quality of the cigars because you can't have one without the other. Q: At the moment, are you pleased with your supply of "leading brands"? A: I don't think it's any secret that there have been difficulties for Cuba and the industry in the first half of this year. I think that even people from Imperial To- bacco have said that in the press that they have logistical problems with the supply chain. This month it has improved and hopefully, according to Habanos, it's now going to be better for the rest of the year. Q: Since you've now spent 12 years in Asia Pacific, do you think that Cohiba will still be the leading and best-seller or do you expect that the consumers will start to purchase other brands? In Europe, lots of people enjoy Partagas, Monte- cristo, Romeo & Julieta… A: Again, it depends very much on the market. Yes, I think that people will experiment with other brands. I think the Interview Dag Holmboe – C.E.O. Asia-Pacific for The Pacific Cigar Company Ltd. (exclusive distributor for all Cuban cigars in Asia-Pacific) Asian consumers tend to go for the top brands: they start at the top and work backwards, unlike in Europe where con- sumers start at the bottom of the rank and work upwards. So yes, they are trying other brands and countries of origin but Cuban cigars have been in Asia for over 20 years and Cohiba is leading in Asia. Mainland China is very Cohiba-driven. In Australia and Thailand, Cohiba does not seem that popular, compared to the rest of Asia Pacific. Taiwan is very strong for Cohiba, as well as Macau since the cus- tomers are mostly from Mainland China. And of course, people are going to try different cigars but I think the consumers will try them and will fall back to what they were smoking before. Q: Since you have a large retail network, do you see an increase of new, younger adult consumers? A: Yes, especially in those markets with growing consumption such as Tai- wan. Taiwan is a good example: there are a lot of younger adult consumers who are smoking cigarettes and start to enjoy smoking cigars, which is in the trend. Q: What do you think about Japan? Ev- erybody has big expectations for this country with a large smoking population. You are market leader over the region and in Japan but do you believe the market will expand as much as maybe some other markets like Taiwan or China? A: It will expand but I think it will expand slowly in stick terms, and at a modest rate. I think the younger genera- tion is more open to concepts, ideas and cigars. When you go to bars where you can smoke, it's relatively young adults that are smoking. Younger people start smoking, meaning that we have a pos- sibility of growth opportunity. We need the younger generation to grow the busi- ness and if we get Japanese cigar smok- ers relatively young, it's positive… And if it hasn't grown so much in the last few years, it's probably because the economy didn't grow so much and they don't want to smoke very expensive cigars. If the economy improves, they will have more money to spend, but yes, I'm optimistic about it. In conclusion: 2016 is going to be a good year! Dag Holmboe By Eric Piras

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