Category: Cigars

Trump Bans Cuban Tobacco

U.S. President Donald Trump has banned U.S. citizens from bringing Cuban tobacco and alcohol into the U.S. as well as staying at Cuban government-owned hotels.

“Today, as part of our continuing fight against communist oppression, I am announcing that the Treasury Department will prohibit U.S. travelers from staying at properties owned by the Cuban government,” Trump said at a White House event. “We’re also further restricting the importation of alcohol and Cuban tobacco.”

Since being in office, Trump has been rolling back a detente with Cuba initiated by former President Barack Obama. Under Obama’s policy, U.S. citizens were allowed to bring back as much Cuban alcohol and tobacco as they could fit in their bags for personal use.

Under Trump’s ban, citizens will be able to buy Cuban alcohol and tobacco while in Cuba but will not be allowed to bring it back to the states.

“The current U.S. authorities insist on the application of a sanctions policy against Cuba that has not achieved the proposed objectives in 60 years,” said a Cuban embassy official in Washington. “It is a wrong policy that is widely rejected by American society and even among Cuban Americans.”

Political observers suggest Trump is trying to lock in the Cuban-American vote in Florida for the upcoming November presidential election.
September 24, 2020
Premium Cigar Makers Get Reprieve from FDA

Photo: 13 Motortion – Dreamstime.com
The District of Columbia on Aug. 19 ruled that the U.S. Food and Drug Administration (FDA) cannot enforce premarket review requirements for premium cigars until it considers a “streamlined” process for cigar makers to equate their products to older ones.
The ruling means that premium cigar companies will not have to file for product approval on the Sept. 9, 2020, deadline. This ruling applies to almost all cigars found in humidors across the country except for flavored and infused cigars, which are not considered premium by the FDA.
Companies will not need to file paperwork with the FDA to prove that their products are premium; rather, any company selling a cigar that does not meet the definition of “premium cigar” will be subject to the Sept. 9 premarket approval deadline and will need to file for substantial equivalence or another approval pathway.
The ruling does not require the FDA to enact a “streamlined” process for premium cigars but says it must study the issue and cannot require premium cigars to go through substantial equivalence or another process until after that study is complete.
The ruling came from a lawsuit against the FDA by three cigar trade groups: Cigar Association of America, Cigar Rights of America and the Premium Cigar Association (PCA). “This is another monumental victory for the premium cigar industry,” said PCA’s Scott Pearce. “This comes on the heels of legal victories striking down warning labels for premium cigars.”
August 21, 2020
Scandinavian Tobacco Raises its Guidance

Photo: STG
Scandinavian Tobacco Group (STG) has raised its full year guidance. According to STG, the negative impact of the Covid-19 pandemic on the company’s business has been less profound than anticipated earlier in the year as tobacco consumption across markets and categories has displayed significant resilience.
“The current change in consumer behavior in the U.S. as more people work from home has resulted in a likely overall increased consumption of handmade cigars and a strong growth in the online business,” the company wrote in a statement.
“Combined with a stronger-than-anticipated resilience in sales volumes of machine-made cigars and smoking tobacco—and a continued strong internal cost focus—Scandinavian Tobacco Group can for the first six months of 2020 present 4.9 percent organic growth in net sales, 21 percent organic growth in EBITDA and a free cash flow before acquisitions of DKK547 million ($86.76 million).”
According to STG, financial performance also remains positively impacted by phasing in certain markets, which will affect the results in the second half of the year. “While visibility around the financial outlook remains lower than normal it is expected that the change in consumer behavior in the U.S. will continue for the rest of the year,” STG stated.
Based on the year-to-date numbers including a strong performance in the month of July, a successful initial integration of Agio Cigars and assuming no material disruptions to our supply-chain, the group has revised its full-year guidance as follows: EBITDA organic growth of more than 9 percent (previously: 2 percent-plus); and free cash flow before acquisitions: more than DKK1 billion (previously: about DKK850 million)
STG will announce its second-quarter results on Aug. 28, 2020.
August 14, 2020
Nat Sherman to Close Premium Cigar Business

The Entrance to the historical Nat Sherman Townhouse in Manhattan (Photo: Askoldsb | Dreamstime)
Nat Sherman will shut down its premium cigar businesses by the end of September.
The 90-year-old company will close both its wholesale cigar business and the company’s iconic New York City retail location known as the Nat Sherman Townhouse.
Altria Group, which purchased Nat Sherman in 2017, had wanted to sell the premium cigar business but reached no deal despite initial interest from buyers.
“We worked hard to successfully transition Nat Sherman International to a new home,” said Jessica Pierucki, general manager and managing director for Nat Sherman. “The Covid-19 pandemic created new challenges that were unfortunately too big to overcome.”
“Leading what has become Nat Sherman International’s final chapter these last nine years has been the honor of a lifetime,” said Michael Herklots, vice president of Nat Sherman International. “Hopefully, our premium cigars will live on in the humidors of our greatest fans and be appreciated with fond memories for many years to come.”
Nat Sherman International includes the retail store as well as the wholesale premium cigar and pipe company. The cigarette portfolio is handled by a different Altria division and is not affected by the closure.
August 6, 2020
For the Long Haul

Photo courtesy of VCF
Despite declining sales and considerable regulatory pressure, smokers are likely to still enjoy cigars 100 years from now.
By George Gay
It is instructive to read what the U.S. Centers for Disease Control and Prevention (CDC) says about the first report of the U.S. Surgeon General’s Advisory Committee on Smoking and Health, which was published in 1964. According to the CDC’s website, the committee concluded that cigarette smoking [my emphasis] was a cause of lung cancer and laryngeal cancer in men, a probable cause of lung cancer in women and the most important cause of chronic bronchitis. And the CDC goes on to say, in the next sentence, “The release of the report was the first in a series of steps, still being taken more than 40 years later, to diminish the impact of tobacco use [my emphasis] on the health of the American people.”
It is noticeable how the CDC’s piece glides effortlessly from cigarette smoking, said to be the proven cause of these diseases, to the more general tobacco use. Clearly, since no distinction is being made between cigarette smoking and tobacco use, which could include, for instance, the consumption of snus, there was never any hope that regulators and the anti-tobacco community were going to recognize the more nuanced divide that separates cigarette smoking and cigar smoking.
It cannot be denied, however, that there is a world of difference between cigars and cigarettes and the way in which they are smoked, something that is given tacit recognition in many countries where the two products are separated by definitions and tax levels. Cigars and cigarettes are produced largely from different materials in different ways, so it is not surprising that they don’t look alike, they don’t taste or smell alike and they are consumed differently, including, in respect of cigars, less frequently. Additionally, cigars have a different, more limited consumer profile to that of cigarettes, with the former being enjoyed mainly by older men.
And while cigarette smoking is a habit, some say an addiction, cigar smoking can reasonably be seen as one of life’s simple pleasures, verging on a hobby among some people. Fred Vandermarliere, the CEO of VCF (Vandermarliere Cigar Family), which owns owners of J. Cortes and Oliva Cigars, said in an email exchange that taking an hour out of a day to smoke a cigar alone or with friends had the effect of clearing his head—it was a type of destressing that was similar to, though not the same as, the relaxation he enjoyed while cycling. But he said that cigar smoking, like all indulgences, should be enjoyed in moderation. “Don’t smoke, but enjoy,” he added.

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Lopped in with cigarettes
The case of mistaken identity that has seen cigars bracketed with cigarettes has been a major obstacle for the cigar business because it has meant that, in large part, cigars have suffered at the hands of regulations developed with cigarettes in mind. In the U.K., where, according to Scott Vines, the managing director of Tor Imports, regulation has banned the display of tobacco products in all shops except the country’s 120 specialist tobacconists, there has been a big reduction in stores stocking handmade cigars (HMCs). This is unsurprising. You don’t have to be an expert to realize that a business that relies partly on regularly offering new products and limited editions, as the cigar business does, needs more retail exposure than is the case with cigarettes.
But all is not lost. Vines said his company, as part of “the ongoing battle,” lobbied the government via its industry body, the Imported Tobacco Products Advisory Council, and had gained some notable exemptions, such as that concerning what otherwise would have seen standardized packaging applied to larger cigars. This exemption, though seemingly insignificant, is seen as being a very important one for the handmade cigar community. As Vandermarliere pointed out, cigars comprise a niche product with low volumes but high numbers of formats, which means that the introduction of government-mandated pack changes and track-and-trace requirements, for instance, are more detrimental in respect of cigars than in the case of cigarettes, where higher volumes help spread the costs of such changes.
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For Vines, with sales concentrated in the U.K., a huge hurdle is provided by a system of yearly duty increases that has pushed U.K. cigar taxes to the highest level in Europe. High taxes inevitably mean high retail prices and, in this case, an increase in consumers buying through the websites of companies based in countries with much lower taxes and retail prices. Purchases from Belgium, Germany, the Netherlands, Spain, Switzerland and the U.S. are said to make up most of this trade, which some estimates put at more than 30 percent of the U.K. market.
Given these issues, it’s not surprising that cigar volumes are declining in the U.K., though much of this decline is occurring in respect of sales of machine-made cigars (MMCs), while sales of HMCs are said to be “holding up.” Along with the retail-display restrictions and increases in taxation, downward pressure on cigar sales has been created too by the country’s system of high product-registration costs and, especially, the 2007 introduction of a ban on smoking in public places.
Partly because of this fall in volume, but also because of a switch to cigarillos from larger vitolas [Cuban formats], the value of cigar sales in the U.K. is also decreasing, though this fall in value has been partly offset by the yearly increases in duty, which inflate sales prices. Now, about 70 percent of all cigars smoked in the U.K. are cigarillos, which sell at a lower retail price than do HMCs and larger MMCs.
Declining volume sales were reported also by J. Cortes, which operates around the world but whose main markets are the U.S., France, Spain, Belgium, Italy and the Netherlands, though Vandermarliere also made the point that sales of premium HMCs were fairly stable while those of other cigars were declining. In part, Vandermarliere said, the decline was down to the cigar industry’s tobacco heritage, which meant that it attracted government regulations in the form of smoking restrictions, for instance. But he suggested that the industry was partly to blame for government interference because in producing some products that looked similar to cigarettes it was blurring the cigar/cigarette distinctions.

VCF’s factory in Belgium
Evolving preferences
Whether the emergence of such products could be justified on the grounds of “consumer demand” is debatable, but it is indisputable that cigar-consumer preferences are always evolving, something else that distinguishes cigar smokers from most cigarette smokers but aligns them with consumers of, say, fine food and wines. Vandermarliere said that, in general, though with the exception of those in the U.S., consumers used to know only about Cuban cigars—as they used to know only about French wines. But preferences and tastes had expanded so as to appreciate the special qualities of cigars from other sources. And he gave as an example Nicaragua Fantastic puros [cigars], made by Oliva Cigars, which was acquired by J. Cortes in 2016 and which propelled the U.S. from almost nowhere to the No. 1 spot on the company’s list of markets.
Vines painted a similar picture when turning his attention to the evolution of the U.K. market. Alongside the switch that had occurred to smaller MMCs, the HMC market had undergone a radical shift in recent years. About 90 percent to 95 percent of the large cigars sold in the U.K. 10–15 years ago had been of Cuban origin, with the remainder being accounted for by all the New World cigar-making countries combined. That had changed considerably with Cuban-origin products now accounting for about 65 percent to 70 percent of the market and New World cigars growing share every year. Indeed, away from London, the share of New World cigars is even higher, with some areas having a 50-50 split. This change is said to have been fueled partly by a consumer desire for new cigar experiences, including the different flavor profiles offered by products from countries such as Nicaragua, the Dominican Republic, Honduras and Mexico, and partly by importers improving the range of New World cigars on offer in the U.K.

To help prevent the spread of Covid-19, VCF equipped its employees with these stylish masks.
Coping with Covid
The question arises, of course, as to what effects the Covid-19 pandemic has had on supplies from such origins and, indeed, on sales in consuming countries. With factories in Sri Lanka, the Dominican Republic, Belgium, Nicaragua and Miami, VCF was bound to be affected by the Covid-19 pandemic, and so it was, but the level of disruption varied hugely—from having to close its Sri Lanka facility for five weeks, during which time workers continued to be paid, to only minor issues in the Dominican Republic. On the retail side, while tobacco was seen as a necessary product in almost all markets and was therefore available through general stores, a lot of markets saw the closure of specialized shops, which put downward pressure on sales. And this downward pressure only added to issues that had been encountered in China and Hong Kong since the beginning of the year. In the U.S., however, many consumers switched to online sales, and Vandermarliere was confident that his company would easily weather the Covid-19 storm. Certainly, he said, by being as flexible and agile as possible, and by keeping in close contact with and protecting its staff, VCF so far had been able to continue delivering cigars.
Meanwhile, Vines reported that, along with other businesses classed as nonessential, Tor Imports had had to adapt rapidly to continue trading in “any way considered close to normal.” “Tor Imports took the decision not to furlough any of its workforce but instead work with our customers [retail] even more closely to help deliver the same levels of customer service as prior to these strangest of times,” he said. This meant the company had had to change the way it managed its workforce, with the office and warehouse being operated on a skeleton-staff rota to ensure staff safety and the rest of its people working from home. This led to the discovery of new ways of working, such as with Zoom calls, and an improvement in internal and external communications.
Given this, it is possibly not surprising that Tor Imports seems to have weathered the pandemic rather well, but I hardly expected Vines, in answer to a question, to say that the company had done “remarkably well!” It had delivered above-average sales, he said, partly because customers geared up with a solid online offering had positively thrived during a lockdown that had coincided with unusually good weather for the U.K., allowing many consumers working from home to enjoy cigars.

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It is not surprising that Vines takes a positive view of the future. After all, if you can conjure increased average cigar sales during a pandemic that causes lockdowns around the world, anything is possible. And one of the things that came into its own during the lockdown and that will be retained is the virtual cigar event. Such events, said Vines, had been a huge success, allowing cigar manufacturers to take part in multiple events in the same week without having to travel huge distances.
But another reason for confidence, perhaps, is that Tor Imports has added a second string to its bow. It has its own brand of cigars, Charatan, which it bought from British American Tobacco in 2018 and which is made by Joya de Nicaragua. Expanding distribution of Charatan cigars outside the U.K., coupled with that of Charatan Pipe tobacco, which is already available in Switzerland and Norway, is said to be a key part of the company’s strategy.
Vandermarliere, too, is confident about the future, but he has no illusions. Cigar manufacturers, he said, were operating in a market that was declining under a lot of regulatory pressure, so they weren’t giant tech companies that could look forward to doubling their businesses in five years. Nevertheless, J. Cortes believes that in 20, 50 or even 100 years from now, people would still be enjoying good cigars. And because of that belief, this family company with global reach would continue to invest in the cigar industry. Times would be tough, but then they would be tough for companies in other industries too, he added.
Part of this confidence is down to the way that Oliva Cigars has invested to ensure supplies of tobacco. It has invested in tobacco stocks and even in tobacco farms in Nicaragua, where it is introducing techniques to manage land and water resources responsibly—in a way that will allow tobacco to be grown there for the next 50 years at least.

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George Gay is Tobacco Reporter’s European editor, but his territory spans the globe. Based in London, George has covered the tobacco industry since 1982, initially for a U.K.-based publication and since 2004 for Tobacco Reporter. George’s understanding of industry issues, combined with his keen sense of observation and dry wit, have earned him a loyal following among Tobacco Reporter’s readers.

August 1, 2020
Cigar Makers and FDA Meet About Rules

Photo: Tobacco Reporter archive
Attorneys representing U.S. cigar makers met with the Food and Drug Administration (FDA) to present arguments as to whether part or all of FDA’s deeming regulations should be thrown out or modified, reports Halfwheel.
The two-hour meeting, which took place via a videoconference, primarily concerned the substantial equivalence process, is part of the ongoing Cigar Association of America et al. v. United States Food and Drug Administration et al. case.
In previous rulings, Judge Amit P. Mehta of the U.S. District Court for the District of Columbia removed the requirements for warning labels on premium cigars, while siding with the FDA on other issues.
On the subject of extending the Sept. 9 submission date once again, the FDA said that it would not request a further extension while Department of Justice attorney Garrett Cole noted that if an extension did occur, it would be a two-month extension.
July 23, 2020
Honduras Orders Cigar Factories to Close

Photo courtesy of Sebastian Zimmel
The Honduran government has ordered the closure of cigar factories as the number of Covid-19 cases in the area spikes.

The city of Danli and the district of El Paraiso will return to phase zero as of Wednesday, July 22. This means only pharmacies, supermarkets and gas stations will remain open.

The closure will reportedly last for at least 15 days.

This will be the second government-mandated closure this year. The first came after Covid-19 began to hit the area—only six cases were confirmed at the time. The number of confirmed cases has now reached over 30,000, including the Honduran president. There have been 835 deaths as of Friday.
July 20, 2020
Court Strikes Warnings for Pipes and Cigars

Photo: Tobacco Reporter archive
A U.S. federal appeals court has ruled that the U.S. Food & Drug Administration (FDA) cannot require warning labels for cigar or pipe tobacco products, reports Halfwheel.
In a unanimous ruling, the U.S. Court of Appeals for the District of Columbia Circuit decided in favor of the plaintiffs in a case brought by the Cigar Association of America and others against the FDA.
Judge Gregory Katsas wrote that the FDA failed to produce evidence that the warning labels would reduce the number of smokers.
“The Deeming Rule does not consider the impact of health warnings on smoking cessation and adoption rates,” he said. “In fact, the rule scrupulously avoids the issue, and the FDA rarely even contenders otherwise. Instead, the FDA candidly acknowledged that ‘[r]eliable evidence on the impacts of warning labels … on users of cigars [and] pipe tobacco … does not, to our knowledge, exist.’”
Earlier this year, a U.S. District Court ruled that FDA could not require warning labels on premium cigars. The most recent decision throws out the district court ruling and modifies it to include all cigars and pipe tobacco products.
July 8, 2020
Altadis USA Releases Henry Clay Limited Edition

Photo: Altadis USA
On the heels of the 2019 launch of the Henry Clay War Hawk cigar brand, Altadis USA is releasing the limited-edition.
A collaboration between Rafael Nodal and A.J. Fernandez, the Henry Clay War Hawk Rebellious limited edition is handmade in Nicaragua. With just 1,200 boxes produced, shipping begins July 15 for this cigar available in 20-count boxes.
“We are extremely proud of what we accomplished with our 2019 War Hawk, which was made at La Flor de Copan in Honduras and earned exceptional ratings,” said Nodal, who is Head of Product Capability for Tabacalera USA.
“With the War Hawk Rebellious Limited Edition, we are offering adult consumers a complex, medium-bodied, Nicaraguan blend that complements the original War Hawk and provides smokers with a unique Nicaraguan experience,” Nodal said.
June 25, 2020
Scandinavian Tobacco Reports Sales Increase

Photo: Scandinavian Tobacco Group
In the first quarter of 2020, Scandinavian Tobacco Group delivered net sales of DKK1.79 billion ($263.56 million), showing an organic net sales growth of 5 percent. The first quarter of 2020 includes the integration of Agio Cigars.
The company has updated its 2020 financial guidance after seeing the outcome of the first quarter and gaining a better understanding of how Covid-19 may affect the company in the coming quarters. It expects the EBDITA to grow more than 2 percent and free cash flow to be about DKK850 million.
Niels Frederiksen
The guidance is based on assumptions of a moderate decline in organic net sales growth for the full year with the highest decline in organic net sales growth in the second quarter and a gradual normalization over the third and fourth quarter as markets reopen and with no material disruptions to the supply chain. The company expects a contribution from cost savings in relation to the integration of Agio Cigars of about DKK70 million to DKK80 million in 2020 as well as further benefits from the Fueling the Growth program. Special costs are expected to be about DKK415 million to DKK435 million, including a noncash impairment charge of DKK109 million. The intention to initiate the previously announced share buyback program at a total value of up to DKK300 million remains unchanged.
“In the middle of a unprecedented global pandemic with a high degree of volatility and uncertainty in most markets, we are able to present a solid result for the first three months of 2020 with net sales growth and a strong cash flow as well as we have revealed the plans for creating significant value with the integration of Agio Cigars,” said Niels Frederiksen, CEO of Scandinavian Tobacco.
May 20, 2020