Cigar Weekly

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Los Angeles – The bad news is that the number of cigars imported into the United States dropped once again – for the sixth straight month – in a year-over-year comparison of the latest results, now for November of 2009.

The good news is that the drop was slight, leaving some hope that the full-year 2009 figures will surpass the weak 2008 totals. In November, imports of premium cigars totaled 27.18 million, down a modest 8.0% from the 2009 total of 29.53 million. In detail:

=> The Dominican Republic rebounded to lead the import parade with 11.95 million cigars sent to the U.S. in November, but that was still down from the 14.17 million in the same month in 2008. For the year, Dominican imports are up, primarily thanks to the huge pre-SCHIP sales in February and March, at 124.90 million cigars, ahead of the 103.64 million in the first 11 months of 2008.

=> Honduran imports continued to slump, down again at 7.30 million cigars sent to the U.S. In November, down from the 8.55 million figure from November 2008. After a string of six straight years with increasing exports to the U.S., Honduran totals will drop for 2009; after 11 months, Honduran exports to the U.S. are down by more than 18% at 63.92 million, compared to 78.06 million for the same period in 2008.

=> The star of 2009 has been Nicaragua, which will set a new export record to the U.S. for the full year and which will increase its U.S. cigar exports for the sixth consecutive year. For November of 2009, some 7.68 million cigars were exported to the U.S., slightly ahead of the 6.65 million sent in November 2008. For the first 11 months of 2009, Nicaragua has already registered a new record for cigars exported to the U.S. at 70.79 million, up 10.7% over the 2008 total of 63.95 million and ahead of the full-year 2008 total of 70.15 million, then a record.

As usual, these three countries dominate the U.S. cigar-import totals with 99.1% of the total, with small amounts coming from the Bahamas, Costa Rica, Indonesia, Mexico and the Philippines. The monthly import report is compiled by the Cigar Association of America based on U.S. Customs data, which has consistently missed counting cigars exported by these smaller countries, as well as from Jamaica. That country is listed as not having any cigars exported to the U.S. in 2009, even though Barrington House International continues to sell tens of thousands of cigars in the U.S. annually.

In any case, the decline in year-over-year import totals are a continuing sign of weakness in U.S. premium cigar sales, with six straight months of declines, some of which have been severe. For the first 11 months of 2009, the import total was 262.23 million, still up a modest 5.65% over the same period in 2008 of 248.20 million. That means that if December imports stay about the same as in 2008, the all-year total will be around 285 million, still quite respectable.

In fact, since the CAA revised the annual import totals to remove higher-priced little cigars from the 2004-2008 figures, a full-year import total of 285 million would rank as the fifth-highest ever, behind the Cigar Boom years of 1997 and 1998 and the "Cigar Renaissance" years of 2004 and 2005.

While premium-cigar imports continued to languish, imports of machine-made cigars continued to zoom:

=> Imports of large cigars, which now include what used to be brands classified as "little cigars," but which have been upsized to be sold as large cigars (at a different tax rate), reached 188.62 million in November, close to five times the number of large cigars imported in the same month in 2008.

For the first 11 months of 2009, large-cigar imports totaled 1.366 billion units against 564.79 million from January-November 2008, a ratio of about 2.42:1. That’s staggering.

=> As was expected, little-cigar imports – now taxed at the same rate as cigarettes – have essentially collapsed. Counting both tariff categories of small cigars, only 7.78 million were imported in November 2009 compared to 38.78 million in November 2008. For the first 11 months of 2009, little-cigar imports totaled 184.17 million compared to 366.75 million the year prior.

Combining all categories – premium, large and little cigars – the overall cigar import totals to the U.S. are still well ahead of 2008. For January-November of 2009, cigar imports totaled 1.81 billion units, way ahead of the 1.18 billion for the same time in 2008. But, in an ominous note for cigar sellers, the total value of the cigars brought into the U.S. for sale in 2009 was actually less than for 2008: $391.45 million vs. $397.64 million. So despite so many more cigars coming into the U.S., the per-cigar value was less, meaning the mix was significantly tilted toward inexpensive, small machine-mades.

>> The ferocious 7.0-magnitude earthquake that rocked Haiti on January 12 devastated that already-poor country, but help has been coming in from around the globe, including from cigar companies with operations in the neighboring Dominican Republic.

Although the Dominican suffered little damage from the quake and its many aftershocks, the country’s common border with Haiti has been fully mobilized, especially with support headed toward the Haitian capital of Port-au-Prince according to the Dominican government:

"The southern region of the D.R. has been a stable staging area for the Haiti relief effort and a reliable alternative route into Haiti. Three key airports and a roadway in the D.R.'s southern region are being used to receive international relief supplies through mostly rural areas of the D.R. not frequented by visitors. The D.R. government has stationed military, police and immigration officials along the D.R. border reinforcing relief efforts to help Haiti. The D.R. has strong border control permitting only crossings for humanitarian reasons, while also sending critical supplies, equipment, medical experts and millions of dollars for food and relief kitchens directly to Port-au-Prince."

The western end of the Dominican includes several tobacco farms, including General Cigar’s plantation in Mao, which imports Haitian workers for six months at a time to help with planting and harvesting of leaf. The workers are housed on-site and fed three meals daily, in addition to earning wages and being provided with basic health care. These kinds of programs have played a role in improved relations between Haiti and the Dominican, which have had a stormy relationship over many decades.
Among the assistance undertaken by some of the Dominican’s top cigar companies:

=> Altadis U.S.A. donated $25,000 to Food for the Poor, which is providing food support for quake victims and via the Montecristo Relief Organization, is matching, on a dollar-for-dollar basis, up to $125,000 donated by Altadis U.S.A. staff, suppliers and customers through February 15. (Donations can be send to Montecristo Relief Organization, Haiti Earthquake Relief, c/o Altadis U.S.A., Post Office Box 407179, Fort Lauderdale, FL 33340-7166.)

=> General Cigar is using its corporate Social Fund to send funds for Haitian relief, which will be channeled through the Association of Industry of the North Region, a Dominican-based organization that will send the money on to Catholic charities in Haiti.

In addition, General is creating an agricultural outreach program to support Haiti’s farming infrastructure. This is an extension of programs General has already undertaken in the Dominican and will be designed to help Haiti overcome its problems of deforestation and infertile soil, using staff agronomists to introduce soil management and reforestation projects.

General’s chief operating officer, Dan Carr, said in a statement that "As a company with strong ties to Haiti, we are deeply saddened by the recent tragedy and feel we have a responsibility to assist the country. In recognizing the immediate need for financial donations, and the necessity for sustainable support, we have committed to a long-term action plan to help in the rebuilding of the country."

=> The Fuente & Newman families are also working in support of Haitian relief. A company statement noted that " In response to the devastating earthquake that struck Haiti, the Fuente and Newman families are using their connections in the neighboring Dominican Republic to provide desperately needed supplies to the Haitian victims. Trucks supported by the Cigar Family Charitable Foundation are driving an estimated 300-mile direct route from Santiago, D.R. to Port-au-Prince to provide water, food, basic medical supplies, blankets, tents and radios. If you would like to support these efforts, please send donations to the Cigar Family Charitable Foundation - Mission Haiti, P.O. Box 2030, Tampa, FL 33601."

It’s a remarkable outpouring of support from the Dominican people; their country was overrun by Haiti in the 19th Century and only won its independence from the Haitians in 1844. But the Dominican now has a fairly stable democratic government and the second-largest economy (behind Cuba) in the Caribbean, putting it in a position to help its neighbor.

The Dominican tourism ministry noted that normal business operations continue in the D.R. and ProCigar, the association of Dominican cigar manufacturers, confirmed that the third ProCigar Festival scheduled for February 14-19 will go off as planned.

>> Short fillers: Find our latest tasting review, of six newer blends from giant Altadis U.S.A., in our News & Views archives for January 29.