Cuban Cigar Sales Reach Record Highs as Chinese Demand Surges

China, Cuba Cigar DealHabanos S.A.’s revenue from international sales rose 12 percent to a record ~$500 million in 2017 thanks to the growing Cuban cigar market in China, the company announced Monday at the annual cigar festival in Cuba.

Habanos S.A., jointly owned by Cuba’s state-run Cubatabaco and Britain’s Imperial Brands, owns the trademarks of every brand of Cuban-made cigars and cigarettes exported globally, including high-end brands like Montecristo, Cohiba, Romeo y Julieta, and Partagas.

The company announced that sales in China rose 33 percent in value last year. The Chinese export market is the company’s third largest after Spain and France.

“Without doubt, there is potential for China to become the biggest market at a global level,” Habanos Vice President of Development Jose María Lopez told Reuters after the company’s annual news conference. The sales boost was reportedly triggered by the launch of new products by the firm, as well as several good tobacco harvests on the island.

Lopez’s outlook was positive, citing a strong demand and “excellent” weather conditions. The hurricanes that wrought havoc throughout the Caribbean last year left Cuba’s largest tobacco-growing region, Pinar del Rio, unscathed.

Cigars are the Cuban economy’s top export. The island nation still can’t sell its tobacco products to the U.S., which is the largest market for cigars in the world, because of a decades-old trade embargo.

Improved bilateral relations under former U.S. President Barack Obama boosted international travel and domestic cigar sales. Obama’s policy changes allowed American travelers to Cuba to carry back as much tobacco and rum as they can for personal use, which may have contributed to the 13 percent increase in domestic revenue Habanos S.A. reported in 2016.

Lopez said President Donald Trump’s tougher policies toward the island, including new travel rules for U.S. tourists, have not had an impact on sales. The company reported a 15 percent increase in domestic revenue last year.

“We trust that despite [U.S. President Donald] Trump’s measures the Cuban market will continue to grow in 2018,” Lopez said.

Habanos S.A. signed an agreement with China National Tobacco Corporation (CNTC) last year with the aim of increasing cigar exports to China. Under the agreement, the Cuban firm will assist China with the manufacture of tobacco products while expanding the sale of its premium products in the Chinese market.

Habanos S.A. has reportedly had an eye on the emerging market in China for some time now. Javier Terres, vice president of development, told Xinhua News last year that China “will be a very important market for Habanos.” Cuba already claims a large share of the Chinese tobacco market. It reportedly accounts for over 50 percent of sales by volume and almost 70 percent of sales by revenue.

Source: 2.27.18 Cuban cigar sales hit record as Chinese demand surges.pdf