CWNews

Heard in the Humidor for March 5th, 2010

Highlights of the week in cigars and smoking from

For the week of March 8-12, 2010

Los Angeles – There are plenty of people in the cigar industry who are worried about its future. Those in Florida – the headquarters state for the U.S. cigar trade – are doing something about it.

More than 100 people, including more than a dozen Florida legislators from the House and Senate, participated in the first Florida Cigar Summit at the landmark J.C. Newman Cigar Company headquarters in Tampa on February 26.

The discussion, focused on the importance of the cigar industry to the state, was led by Eric Newman, a third-generation cigar maker and president of J.C. Newman and the current chair of the Cigar Association of America and Jeff Borysiewicz, owner of Corona Cigar Company and a board member of both the International Premium Cigar & Pipe Retailers Association (IPCPR) and Cigar Rights of America (CRA).

Borysiewicz noted that cigars have been made in Florida since 1831 and that an estimated 70% of all cigars made or sold in the U.S. come through the state at some point, a figure which will rise when Davidoff of Geneva relocates its U.S. headquarters from Connecticut to Tampa later this year. Further:

=> The state has more than 60 family-owned small businesses involved in the cigar trade, including cigar makers, distributors, leaf brokers, importers and related companies.

=> Florida is home to more than 250 retail cigar stores, many of which are active in their communities in addition to being employers.

=> All told, an estimated 5,500 people are directly or indirectly employed by the cigar trade in Florida.

The point of the meeting was to emphasize the drastic impact of additional taxation on what is essentially a hobby for the few million cigar smokers in the United States. Tobacco of all kinds has been a convenient whipping boy for legislators looking for more tax revenue, but with increased regulation and taxation, what was a thriving industry a century ago all across the state has now been reduced to the point that the only major manufacturer of cigars still left in Tampa is J.C. Newman.

The attending legislators toured the factory, which now makes only machine-line cigars and heard from each level of the cigar trade in the state, with the common message of maintaining the industry by not imposing additional taxes.

"We hope that this event sets a national example of the type of discussion that needs to take place in every state," said Borysiewicz. "By educating our political leadership at the local, state and federal level on the implications of tax and regulatory policy on cigar consumers and the entire supply chain, hopefully they will be less inclined to consider harmful legislation and budget measures."

Although Florida has the lion’s share of the cigar business in the U.S., cigar lovers and tobacconists in every state are similarly challenged and represent small business and their employees, who jobs are on the line as state and local taxes on all types of tobacco products continue to increase. More meetings like this one, held on a state-by-state basis, can only help.

>> After six straight months of decline, imports of premium cigars into the U.S. ticked upward in December and finished what turned out to be a historically-strong year on a positive note.

The December import figures, circulated by the Cigar Association of America and based on U.S. Customs data, showed 24.60 million premium cigars entered the U.S. in the last month of 2009, a 6.7% increase over the December 2008 figure of 23.05 million. It was only the fourth month of 12 last year in which imports surpassed the 2008 year-vs.-year totals. Still:

=> Dominican imports led the way, as usual, with 9.61 million cigars imported into the U.S., up 37% from the December 2008 total of 7.01 million.

=> Honduran imports perked up to 7.07 million in December, still 38% short of the 9.76 million from December 2008.

=> Nicaraguan imports continued on fire with 7.88 million cigars imported, up 27% from the December 2008 total of 6.20 million.

For the year, the national results were mixed, but the overall totals were good:

=> Dominican imports rose to 134.51 million, up 21.6% over 2008.

=> Honduran imports dropped to 70.99 million, down 19.2% and breaking a streak of five consecutive years of increased exports to the U.S.

=> Nicaraguan imports set a new record for the sixth straight year at 78.67 million, up 12.2% over the 2008 total of 70.15 million.

These three countries accounted for 99.1% of premium cigars imported into the United States in 2009, with small amounts also coming in from the Bahamas, Costa Rica, Indonesia, Mexico and the Philippines. Only Mexico had more than a million cigars imported at 1.8 million, but the figures for these small contributors are also quite likely inaccurate given their size.

All together, 2009 imports totaled 286.83 million, a 5.7% increase over the 2008 total and a historically significant total. In November, CAA revised its historical figures for import totals for the past half-dozen years to try and eliminate higher-priced little cigars from the totals. This revision wipes out the reports of 300 million-plus import years from 2004-2007 by as many as 63.6 million cigars a year and makes the 2009 total of 286.83 million premium cigars the fourth-highest on record, behind only the Cigar Boom years of 1997 (417.78 million) and 1998 (334.58 million) and the 297.70 million from 2005.

Still, the future is uncertain for premium cigars as the industry continues to consolidate. But there’s also no question that a lot of machine-made cigars are being enjoyed and the figures there are startling:

=> For the full year of 2009, sales of machine-made cigars – including those "little cigars" which were upsized to fit into the large-cigar category to avoid being taxed at the same rate as cigarettes – zoomed from 616.74 million to 1.515 billion in one year! Wow!

=> Imports of "little cigars" fell dramatically as expected, from 409.87 million in 2008 to 191.88 million in 2009 thanks to the new SCHIP taxes.

But putting all of the figures – premium, machine-made and little cigars – together and the total imports of all types of cigars rose 53.6% in a year to 1.994 billion. That’s a lot of cigars and a good sign for the future.

Also worth noting: the total declared value of cigars imported into the U.S. in 2009 included $250.2 million from the Dominican Republic, $84.9 million from Honduras and $71.1 million from Nicaragua, significant amounts of hard currency for the economies in those countries.

>> Short fillers: Find our review of the 2010 Tobacco Plus Expo in Las Vegas in our News & Views archives for March 5.
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