Cuban, Chinese Tobacco Corporations Sign Agreement on Cigar Trade

China-Cuba-Cigar-Deal-300x200China National Tobacco Corporation (CNTC) and Cuban cigar producer Habanos S.A. signed an agreement in Havana over the weekend with the aim of increasing Cuba’s cigar exports to China.

Co-heads of Habanos S.A., Luis Sanchez-Harguindey and Inocente Nunez, and CNTC general manager Ling Chengxing signed the agreement on Sunday. Under the agreement, Habanos S.A. will assist China with the production of tobacco products while expanding the sale of its premium products in the Asian market.

“With the support of the Cuban side and the Chinese side, and the Chinese and Cuban people, I am sure that Cuban tobacco is going to do very well in China,” said Ling, who is also the director general of the State Tobacco Monopoly Administration, which regulates the Chinese tobacco industry.

As a renowned producer of quality cigars, Cuba claims a large share of China’s overall tobacco sales. The island nation reportedly accounts for over 50 percent of sales by volume and almost 70 percent of sales by revenue.

Habanos S.A. has reportedly had an eye on the emerging Chinese market for some time. Javier Terres, vice president of development, told Xinhua News in February that China “will be a very important market for Habanos” and that it is the corporation’s third most important market in the world.

Founded in 1994 and jointly owned by Altadis and Cubatabaco, Habanos S.A. owns the trademarks of every brand of Cuban-made cigars and cigarettes exported around the world, including top-quality brands like Cohiba, Montecristo, Romeo y Julieta, and Partagas, which are all sold in China.

Habanos S.A. reported sales revenue of about $445 million in 2016, a 5 percent jump from the previous year. Strong markets in countries like France, Germany, Spain, and Britain contribute to a large portion of the corporation’s international sales. The U.S. is the only country where Habanos S.A. doesn’t sell cigars because of the trade embargo against Cuba that was passed by Congress in 1962.

Former U.S. President Barack Obama eased trade rules in 2016 by allowing American travelers to Cuba to carry back as much tobacco and rum as they can for personal use. Obama’s changes to U.S.-Cuba relations spurred a tourism boom that may have contributed to the 13 percent sales increase Habanos S.A. reported in the domestic market last year.

Despite the global decline of smoking, cigar sales have reportedly been growing at 4 to 5 percent a year. The age of the typical cigar smoker is also reportedly getting younger, likely because of the perception that cigar smoking is a relaxing and “cool” activity. The tobacco industry markets cigars as something to “enjoy,” not to “smoke.” It also emphasizes the fact that cigar-smoking does not have to involve any smoke inhalation and that on average, a smoker consumes about three cigars a week.

Sources: 7.24.17 Cuban, Chinese Tobacco Firms Sign Deal on Cigar Trade.pdf & 2.28.17 Chinese Market “Significant” for Cuban Cigars, Manufacturer Says.pdf