Cuba's famed cigar industry recovering from crisis

Cuba's famed cigar industry recovering from crisis
By Marc Frank
HAVANA | Tue Jun 14, 2011 12:36pm EDT

(Reuters) - Production of Cuban cigars and tobacco leaf are on the rise
after falling on hard times in the country famed for its "puros" due to
smoking bans and the international financial crisis, according to local
reports.

The dexterous fingers of Cuba's cigar makers rolled out 81.5 million of
the much sought-after smokes last year, compared with 75.4 million in
2009, according to a report released by the National Statistics Office
on its Web page (here).

Cuba's finest tobacco leaf is grown and cured in western-most Pinar del
Rio province where the just-concluded harvest produced 25.4 million
leaves, according to local radio reports, compared with the previous
year's 22.4 million leaves.

While the figures are up, they are still well below 2008 when Cuba
produced just over 100 million cigars for export and Pinar del Rio's
tobacco harvest totaled 26 million leaves.

The partial recovery is due largely to growing demand in Asia --
particularly China -- where the new rich are keen for the largest and
most expensive cigars, said Gonzalo Fernandez, deputy director of
marketing at Habanos S.A., the worldwide distributor of Cuban cigars.

China has climbed into third place, behind Spain and France, among the
largest markets for Cuban cigars.

Cigars are one of Cuba's top exports.

Its taste for top brands adds to Habanos' bottom line because "around 75
percent of (revenue) come from the five most expensive of our 27 brands
such as the Cohiba and Trinidad," Fernandez told Reuters.

The company, a joint venture with giant British tobacco company Imperial
Tobacco Group Plc, reported sales of $368 million in 2010, up 2 percent
from the previous year.

"So far this year the positive trend has continued," Fernandez said.

The global financial crisis put a dent in sales of luxury goods such as
Cuban cigars, while smoking bans that have spread around the world are
the bane of the cigar industry.

Habanos is trying to counter the effects by offering more lines of small
cigars that can be smoked quickly during a work break and cigars
tailored for women smokers.

Cuba's premium cigars dominate the world market with 70 percent of sales.

That jealously guarded market share excludes the United States, where
Cuba's cigars are banned under a decades-old trade embargo against the
Communist island.

The huge domestic demand for lower-quality cigars, which cost as little
as a few cents and are made from tobacco grown elsewhere in the country,
showed no sign of slowing despite local smoking bans, which like many
other laws, are more tolerated than respected.

About 300 million were produced last year, similar to 2009 and compared
with 278 million in 2008.

Some 200,000 private farmers and family members depend on growing and
curing tobacco under contract with the government.

Tens of thousands of workers earn a living rolling the crop into the
famous cigars.

(Editing by Jeff Franks and Maureen Bavdek)

http://www.reuters.com/article/2011/06/14/us-cuba-cigars-idUSTRE75D4JQ20110614