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Cuban Cigar Maker Eyes 25-30 Pct of US Market if Embargo Lifted

  • Reuters

A Montecristo Cuban cigar box is displayed during the XVII Habanos Festival in Havana, Feb. 23, 2015.

A Montecristo Cuban cigar box is displayed during the XVII Habanos Festival in Havana, Feb. 23, 2015.

Cuban cigar-maker Habanos S.A. expects to immediately gain 25 to 30 percent of the U.S. premium cigar market if the United States lifts its trade embargo and up to 70 percent of the market within a few years, the company said on Monday.

Habanos S.A., a 50-50 joint venture between the Cuban state and Imperial Tobacco Group PLC, generated sales of $439 million in 2014 without direct access to the U.S. market.

As the monopoly guarantor of Cuba's signature export, Habanos S.A. also promised to preserve the quality of its Cohibas, Montecristos and Romeo y Julietas should it need to ramp up production to meet any new U.S. demand, which it estimated at 70 to 90 million units per year right away if the United States were to strike down the embargo.

"Some might consider that figure a little conservative, but I can tell you that with that figure, 25 percent, we would be the market leaders," Jorge Luis Fernandez Maique, commercial vice president, told reporters at the start of Cuba's annual cigar festival.

The prospect of the United States removing its 53-year-old ban on trade with Cuba improved after the United States and Cuba announced on Dec. 17 their intention to restore diplomatic

U.S. President Barack Obama has already eliminated some trade and travel restrictions, allowing Americans to legally Cobring back up to $100 worth of Cuban tobacco and alcohol for personal use.

Obama, a Democrat, needs the Republican-controlled Congress to lift the embargo completely.

Democratic lawmakers on recent trips to Cuba said overturning the embargo would be difficult, but it was possible to build a majority with free-market and farm-state Republicans who oppose it.

Should that occur, Habanos S.A. within 5 to 15 years would expect to capture 70 percent of the U.S. market, similar to the market share it has elsewhere in the world, company executives said.

Fernandez Maique called the new rules that allow Americans to import $100 worth of cigars "symbolic" and "not something that is going to make our sales explode."

But lifting of the embargo completely would, and Fernandez Maique said any increased production would not impact the quality of the Cuban cigar, which most aficionados consider the best in the world.

"We are never going to give up on quality," Fernandez Maique said.

Fernandez Maique and Javier Terres, the vice president for development, declined to estimate the sales impact in dollar terms because it might betray the company's U.S. pricing strategy.