Why are Cuban Cigars so Expensive? Part 1
by David "Doc" Diaz
Wednesday, February 29, 2012
The premium cigar industry has enjoyed a renaissance since the early to mid-1990s, as many new converts have rediscovered premium hand made cigars. The demand for these higher priced products has yet to reach its peak, according to many industry analysts, and prices for many “boutique” cigars have been steadily increasing. Cuba in particular has been able to command prices that reach the $20-$30 range (per cigar) and beyond!
According to cigar historian, Tony Hyman, Cuban cigars have always been in short supply, in great demand, and have carried a lot of prestige. They were exclusive to nobility prior to 1762, after which came a deluge of Cuban cigars and tobacco around the world. This article will address the following question: Why are premium Cuban cigars so expensive?
Most products deemed to be at the head of their class – Rolls Royce, Rolex, Armani, etc., are characterized by extremely high-end materials, extraordinary attention to detail and exquisite craftsmanship. While farm equipment, machinery, fertilizers, and other materials may be a bit harder to come by in Cuba, it's hard to make the case for Cuban cigars having any more attention to detail or craftsmanship than good cigars rolled elsewhere. So, why the exorbitant prices?
(Illustration at left courtesy of Tony Hyman, National Cigar Museum)
The scope of my answer will be delimited to a small sub-section of the worldwide cigar market: premium hand made cigars. These are the cigars that command very high prices and yet, within the current worldwide context, they represent a small segment of the cigar market. There are a good many different types of cigars that are smoked around the world and, believe it or not, the vast majority are not premium smokes, nor do they come from Cuba.
The World Cigar Market
Cigars that are made today come in three categories: 1) Cigarillos, 2) Cheroots, and 3) Cigars Proper. From the point of view of the U.S. Federal government, which taxes their production and sale, non-cigarillo, non-cheroot cigars are classified as either “small,” (weighing no more than three pounds per thousand) or “large,” (weighing more than three pounds per thousand). Most of the premium hand made cigars today are found in the large cigar category, but that doesn’t mean that the highest percentages of large cigars are handmade. Since the late 1800s many cigars have been, and still are, made using automated machinery. Most cigars manufactured today are not considered premium sticks, nor are they hand made. In other words, premium hand made cigars represent a very small percentage of the overall cigar market worldwide.
Many premium cigar smokers may be surprised to know that, even at the height of the cigar boom of the mid-1990s, of the top 10-leading cigar producing countries worldwide Cuba did not even make the list (1998. Perry, J. L., et al). It may further surprise you to know that, at that same time, the U.S. was not only the top cigar-consuming nation in the world it was also the top cigar-producing nation (see Tables 1 and 2).
To provide some historical sense of scale, in 1883 more than 5,000 U.S. cigar factories rolled 3.2 billion cigars using 284 million pounds of domestic tobacco. Just 13.8 million pounds of leaf came from Cuba, the Philippines, Puerto Rico and Sumatra, combined. That’s less than one-half of one percent! (Hyman, History 1878-1915)
While Cuba has not had a major influence on overall world cigar production in the last century, it has nevertheless influenced the premium cigar market and its cigars do command higher prices, on average, than its non-Cuban counterparts. So, the question in this two part series will be, “How did such a small island nation become the source of such high demand for premium cigar tobacco and cigars and why are their cigars priced so high?”
Below: Early Caribbean Farm
(Illustration courtesy of Tony Hyman: National Cigar Museum)
Geography and world commerce have played a major role in the current pricing of cigars from Cuba. Tobacco culture and cigar usage in Cuba date back to pre-Columbian times when the Native Americans in many parts of Latin America smoked rolled-up tobacco leaves. Cuba has always possessed in its different regions the ideal conditions for the cultivation of both sugar–which became their first institutionalized cash crop–and tobacco. Both crops have flourished in Cuba because both are perfectly suited to the climate and ecology of the country.
Tobacco planting in the Vuelta Abajo was first recorded around 1580 (Hyman, History 1492-1762). For cigar tobacco, this region, in particular, had then, and continues to have the ideal combination of light, gravelly soil, humidity, and rainfall to grow the world’s finest wrapper leaf (Dambaugh, 1956).
Cuba’s Relationship with Spain
We all have heard the story of how Columbus introduced tobacco to Spain. Spain, as one of the superpowers of the day, returned the favor and introduced world commerce to Cuba. When European settlements became common on the island, first sugar, and then tobacco were institutionalized as cash crops. Spain without a doubt saw dollar signs in the future of Cuban tobacco and the Spanish government promptly took over the tobacco trade in Cuba in 1557 (Ortiz, 1947, pp. 286-289), which lasted, with some interruptions, for over 200 years.
As would be expected, intervention by the Spanish government resulted in a vigorous tobacco-smuggling trade. In fact, the illicit sales of Cuban tobacco and cigars became so troublesome that the Spanish crown forbade the growing of tobacco in Cuba for 8 years between 1606 and 1614 (Perry, 1998). How’s that for philanthropy? And, doesn’t it all remind you a bit of the present 50-year old Cuban embargo?
During the supposed monopoly, Cuban tobacco growers basically ignored the royal proscription and continued to send their leaf and products abroad. By the 1760's, Havana cigars were being smoked in England. By 1788, Germany was producing their cigars using Havana leaf and it is said that U.S. production of Havana leaf cigars started between 1801 and 1810 (Perry, 1998).
Spain’s attempts to tightly control the tobacco trade lasted until somewhere between 1817 and 1820 (Hyman, HISTORY 1762-1862; Perry, 1998), when the crown finally permitted Cuba to export cigars to countries other than Spain, thus creating the international market for Cuban cigars (Stout, 1997, pp. 12- 13). While this may have seemed like a reprieve for Cuba, which could now freely market its wares to the world, Spain levied a stiff export tax on all exported cigars and tobacco.
European label, c1900, depicts Indians giving tobacco
(Illustration courtesy of Tony Hyman: National Cigar Museum)
While the aristocracy of Spain and other well to do populations may have been impressed with the mystique of Cuban tobacco and cigars, Cuba, historically, played a small role in the supply/demand equation of the worldwide cigar market. Nevertheless, premium Havana cigars established a worldwide reputation for excellence. With financial augmentation from the Spanish government, Cuba was beginning to shape its reputation and mystique that it could provide the highest quality cigars and tobacco. Cuba would remain the benchmark against which all other tobacco and subsequently cigars were measured.
The rationale for why Cuban cigars are priced so high begins with environmental and ecological factors. In Cuba, there has existed for centuries, the perfect means and conditions to satisfy the demand for premium tobacco and handmade cigars.
However, sufficient conditions don’t automatically imply necessary conditions. Based on the quality of the climate, soil, and level of experience with tobacco production, it is clearly no fluke that Cuba is in a position to demand high prices. But, Cuba isn’t the only country whose climate and soil conditions can produce world-class cigar tobacco.
What makes Cuba different is that, historically, they benefitted from a strategic alliance with, then world superpower, Spain. Cuba had a key “talent agent” in Spain, who was able to not only spread the gospel of Cuban tobacco to all of Europe, but was also in a position to benefit from Cuba’s position as a premier tobacco producer. Thus, because of Spain’s vested interest in Cuba for her natural resources (including tobacco), they promoted Cuba as a premier supplier of high quality tobacco.
Though Cuba would not end up as a significant force in the supply/demand equation worldwide, they dominated the high-quality markets during the nineteenth century because they had the strength of a great product and a secure place in the economic market, thanks to the Spanish crown. These two factors would later help them to capture the attention of what would become a significant niche market (i.e., premium hand made cigars) in the 20th century.
In part 2 of this series on why Cuban cigars are so expensive, I will discuss a variety of historical factors that led to the most recent cigar boom, which in turn led to the rediscovery of premium hand made cigars. The boom caused a shortage of premium cigars worldwide and in part 2 I will relate the economic factors that have allowed Cuban cigars to fetch higher prices in the open market.
Dambaugh, L. N. (1956). “Tobacco Production: Vuelta Abajo Region, Cuba.” The Journal of Geography, 55 (December) 442-446
Hyman, T. (2012) CIGAR HISTORY 1762-1862, U.S. Industry Begins. Cigar History Museum. Retrieved from the Web on Feb. 11, 2012. http://cigarhistory.info/Cigar_History/History_1762-1862.html
Hyman, T. (2012) CIGAR HISTORY 1878-1915, Golden Age. Cigar History Museum. Retrieved from the Web on Feb. 11, 2012. http://cigarhistory.info/Cigar_History/History_1878-1915.html
Ortiz, Fernando. (1947). Cuban Counterpoint: Tobacco and Sugar. New York: Alfred A. Knopf.
Perry, J. M., Woods, L. A.,Shapiro, S. L., and Jeffrey W. Steagall (August 6–8, 1998). The Cuban Cigar Industry as the Transition Approaches. Retrieved from the Web on Feb. 11, 2012. http://www.ascecuba.org/publications/proceedings/volume8/pdfs/42perry.pdf
Stout, N. (1997). Habanos: The Story of the Havana Cigar. New York: Rizzoli International Publications, Inc.
About the Author
David "Doc" Diaz is the publisher and the editor of the Stogie Fresh Cigar Publications. He has served as an educator, researcher and writer and has taught in the Health Education and Health Science field for over 30 years. He possesses an earned doctorate from Nova Southeastern University. Doc is a Certified Master Tobacconist (CMT), having received this certification from the Tobacconist University and is a member and Ambassador of Cigar Rights of America (CRA).blog comments powered by Disqus