Competing Cohibas eye end of Cuban trade embargo

Competing Cohibas eye end of Cuban trade embargo
by Mark Drajem/Bloomberg News
Wednesday June 24, 2009, 7:00 AM

Cohibas, Partagas and Montecristos from Cuba. For U.S. cigar
aficionados, the names spark thoughts of civil disobedience.

As President Obama moves to ease restrictions on trade with Cuba, cigar
lovers are savoring the prospect of legally lighting up a smoke that has
long required a black-market connection and a willingness to flout the law.

"There's a mystique about a Cuban," said John Anderson, owner of W.
Curtis Draper Tobacconist, a cigar shop in Washington, D.C. "Cuban
tobacco has become the forbidden fruit."

The possible end to the 47-year-old embargo on Cuban trade has
intensified a legal and lobbying fight between cigar makers Swedish
Match of Stockholm and Imperial Tobacco Group of Bristol, England.

Each wants exclusive rights to sell Cuban-made brands in the United
States, the world's largest market for premium cigars.

Swedish Match sells cigars in the United States made in Honduras and the
Dominican Republic under Cuban brand names.

It bought the brands from families that fled Cuba after Fidel Castro
seized their cigar companies in the 1960s. Imperial distributes
Cuban-made cigars under many of the same names to the rest of the world
through an agreement with the Cuban government monopoly, Cubatabaco.

"Before serious commerce resumes, this is going to have to be resolved,"
said Robert Muse, a Washington lawyer who advises clients on
Cuba-related issues.

Opening the U.S. market to Cuban cigars may jeopardize the jobs of the
147 workers at the U.S. headquarters of Swedish Match's General Cigar
subsidiary in Richmond, Va., according to Gerry Roerty, the unit's
general counsel.

"The market is going to be turned upside down," Roerty said in an
interview. After waiting for almost five decades, Americans "will buy a
Donald Duck cigar if it's a Cuban."

Obama lifted prohibitions on Cuban-Americans traveling to the island in
April and eased restrictions on shipping clothing, seeds and other gifts
to Cuban residents.

Before the United States takes further steps, Obama says Cuba needs to
free political prisoners and allow freedom of speech and religion. House
Ways and Means Committee Chairman Charles Rangel (D-N.Y.) predicted last
month all travel and trade prohibitions, imposed by President Kennedy in
1962, will be lifted by the end of next year.

Cuban cigars, hand-rolled from the tobacco of the Vuelta Abajo growing
region, hold a cachet in popular culture that dates back to the island's
days as a playground for gamblers, novelists and mobsters.

The day before Kennedy imposed the embargo, he dispatched Press
Secretary Pierre Salinger to buy 1,000 Cuban-made Petit Upmanns,
according to an account Salinger wrote in 2002.

"A Cuban embodies so much more than smoke," said James Suckling, who has
written articles on Cuba for Cigar Aficionado magazine.

He estimates Americans consume about 20 million Cuban cigars a year,
enjoying them while traveling to Mexico or the Caribbean or stowing them
in luggage on the way home.

The forbidden fruit carries a premium: A box of 25 Cohiba Robustos costs
$304 on the Hong Kong-based Cigars of Habanos website, where shoppers
are offered the option of shipping to the United States without regard
to the government's ban.

A Dominican-made version sold online by Holt's Cigar of Philadelphia
sells for $175.

Because of the low acidity in the soil and a temperate climate, Cuban
cigars have an earthy aroma and a "full taste" that make the best of
them the finest cigars in the world, said Benjamin Menendez, a Cuban who
fled the country in 1960 after Castro confiscated his family's cigar
company, Menendez y Garcia.

Not all Cuban cigars meet those standards, he said.

"People are told they have a Cuban and they immediately assume they are
good," said Menendez, who has blended tobacco around the world and at
age 73 hosts 150 cigar tastings a year for General Cigar. Once Americans
can buy Cuban cigars at their local tobacco shop, "a
lot of people are going to be disappointed."

Swedish Match and Imperial Tobacco both sell Dominican-made cigars in
the United States and together account for almost half of the sales in a
U.S. market for premium cigars that the Swedish company estimates at
$850 million annually.

After cigar makers fled Cuba, Cubatabaco began exporting cigars under
brands such as the Menendez family's Montecristo and H. Upmann, and
developed new brands, such as Cohibas.

Because of the embargo and U.S. court decisions, Cubatabaco couldn't
keep the trademarks in the United States, and General Cigar bought
brands from the refugees.

Through an acquisition, Imperial owns a subsidiary that took the same
stance, buying brands such as Montecristo from exiled families.

That created the divided cigar market, in which one company owns a brand
such as Partagas in the United States and another does so around the world.

Cuba lost the U.S. rights to Cohibas when General Cigar registered the
brand in the 1970s. General Cigar has so far fended off a 1997 lawsuit
brought by Cubatabaco to reclaim that name. A new ruling in the case may
come within months.

General Cigar has spent more than $5 million lobbying Congress over the
past eight years. It got lawmakers to strike a provision in a 2001
measure that it says would have allowed Cuba to barter cigars for food
or medicine.

Imperial began lobbying this year for the first time since at least
2000, spending an initial $30,000, according to Senate records.

The fate of the Cuban trade embargo is more than an idle topic for
discussion among the lobbyists, lawyers and politicians who frequent
Shelly's Back Room in Washington. Regulars at the cigar parlor located
between the White House and the Capitol share the dream of getting their
hands on a legal Cuban cigar.

"Cuban cigars are legendary," owner Bob Materazzi said. "Anybody who is
a cigar geek is interested.

"Competing Cohibas eye end of Cuban trade embargo - NJ.com (25 June
2009)
http://www.nj.com/business/index.ssf/2009/06/competing_cohibas_eye_end_of_c.html