Cuba's cigar crisis

Cuban cigar rollers test their latest batch

By Myles Neligan BBC News Online business reporter

Smokers who like nothing better than to round off a celebratory meal with a fine Havana cigar may find that their favourite indulgence is about to become a little more expensive.

Cuba's world-famous tobacco industry was devastated last month by hurricanes, raising the prospect of supply shortages next year.

The outlook for what has become one of Cuba's most lucrative export industries is grim, and it's bad news for cigar aficionados world wide.

"We're talking about a very serious problem," said Simon Chase, marketing director at Hunters & Frankau, the UK's exclusive importer and distributor of Cuban cigars.

"At the moment everything looks pretty bad. It's early days yet, but this could have an impact on prices next year."

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Cuba currently exports about 100 million cigars a year, having overcome persistent production problems after the collapse of the Soviet Union crippled the island nation's economy in the early 1990s.

Consumers are mostly male, mature - and they tend to be pretty well off

Simon Chase
Hunters & Frankau

Cuba's cigar industry and its flagship brands - Cohiba, Monte Cristo, and Romeo y Julieta - prospered on the back of a surge in demand for luxury cigars during the 1990s economic boom.

Cigar exports have become an important source of hard currency for the country's isolated economy.

But this year's hurricane season looks set to take its toll on the industry.

The bulk of the damage was caused by hurricane Lili, which swept through the Caribbean in late September.

Cuban tobacco farmers are used to dealing with tropical storms, but they were ill prepared for Lili which came along while they were still picking up the pieces left behind days earlier by hurricane Isodore.

The most seriously affected region was the western province of Pinar del Rio, where Cuba's finest tobaccos are grown.

Cuba's state-owned newspaper Granma reported that about half the tobacco plants under cultivation in Pinar had been damaged.

But the hurricane also flattened thousands of barns used to dry out tobacco leaves before they are rolled into cigars, raising fears that a high proportion of the tobacco stored in them may now be unsuitable for rolling.

Habanos, Cuba's state-run cigar marketing board, said last week that the hurricane damage would have a "significant effect on the 2002/2003 harvest."

Price impact

The likely effect on cigar prices will not be known until government officials have finished assessing the damage.

According to Mr Chase, stockpiles built up to guarantee even supplies could be sufficient to tide the market over.

Importers may also choose to absorb a moderate increase in the wholesale price themselves rather than pass it on to the consumer.

But if prices do rise significantly, sales of premium cigars - already tailing off from their late 1990s peak amid growing economic uncertainty - are likely to slow further.

"Luxury cigars are a celebratory, confidence-related purchase," explains Mr Chase

"Consumers are mostly male, mature - they don't start (smoking cigars) until they're about 35 - and they tend to be pretty well off."

The most expensive Cuban cigar - the Monte Cristo 'A' - retails at about £40 in the UK.

Sales in the UK have also been hit since 11 September by a downturn in the number of visitors from America, who are unable to buy Havana cigars at home because of the US trade embargo against Cuba.

The cigar industry is hoping that Cuba's tobacco output gets back to normal in time for the next economic boom

"Roll on the good times," Mr Chase said.