Cuba Cuts Back on Cigar Tobacco Acreage

Despite all the rosy projections for the cigar industry I have read and heard about for the last couple of years it looks like Cuba is going to cut back production by 30%.

Cash-short Cuba is slashing the amount of land devoted to growing its famous tobacco by more than 30 percent as the global recession and worldwide spread of smoking bans bite into sales of the country’s prized cigars.

Demand for Cuba’s cigars fell 3 percent in 2008 and earlier was reported down 15 percent in 2009 because of the recession and the smoking bans adopted in a growing number of places as a public health measure.

Cuba’s National Statistics Office, in a report posted on its web page (www.one.cu), said land to be planted with tobacco for next year’s crop had dropped to 49,000 acres (19,800 hectares), down from 70,000 acres (28,200 hectares), which was in turn less than 2008.

[SOURCE]

The theory from some of the cheerleaders in the cigar industry (Ahem, Cigar Aficionado) was that higher taxes and smoking bans would not affect premium cigar sales too much because, well, we will still buy expensive cigars despite all the roadblocks erected in front of us… just because we like premium cigars so much and our wallets are always full of money.

It is probably true that the Cubans are cutting back production of their lower level cigars; so Montecristo, Bolivar and Cohiba will not be affected as much – I’m guessing. It’s also true that the recession is having a significant impact on cigar sales. Actually, now that I think about it, according to Greg Mankiw’s blog:

The consumption of high-consumption households is more exposed to fluctuations in aggregate consumption and income than that of low-consumption households in the Consumer Expenditure (CEX) Survey.

Accompanying chart:

[caption id="" align="aligncenter" width="400" caption="The exposure to aggregate consumption growth of households in the top 10 percent of the consumption distribution in the CEX is about five times that of households in the bottom 80 percent. Given real aggregate per capita consumption growth about 3 percentage points less than its historical mean during the past year, these figures predict that the ratio of consumption of the top 10 percent to the bottom 80 percent has fallen by about 15 percentage points (relative to trend)."][/caption]

Basically, what this graph shows is that during a downturn there is less cigar money; especially amongst the wealthier cigar smokers.

I don’t think it’s too controversial to claim that the goal of governments all over the world is to create a permanent recession in the tobacco industry. Through increased taxes and more aggressive smoking bans, governments are in the process of destroying the cigar industry. It will take time but, with small, incremental steps, governments all over the world are working overtime to make cigars too expensive even for the so-called wealthy people who smoke them.

Cuba cutting back tobacco acreage may turn out to be a reaction to the global recession. Or it could be a harbinger of more serious cutbacks to come.

FIGHT BACK! Join Cigar Rights of America.

Cigar Aficionado June 2009

Just got my new issue of Cigar Aficionado today and on the cover is Jay-Z. As a younger guy I’m somewhat aware of who this guy is. Rapper, music mogul, with Beyonce, and an all-around cool dude. Basically, I just know what his image is – so the part about him probably won’t be all that interesting of a read. Oh well.

The top cigar of this issue is the Padron 1964 Anniversary Series “A” with a score of 95 points. That’s an impressive score indeed and one that I would most likely agree with. My New Year’s Day cigar was a Padron 1964 Anniversary Monarca and I gave it 95 points. Since then I have had a couple of cigars I would rank higher and I will be putting those reviews up in the future.

Then I come to the Editors’ Note. It’s always one of the more enjoyable parts of the magazine for me because it’s not just an advertisement for the rest of the magazine like so many other Editors’ Notes tend to be. It starts out with a nod to the current economic problems and how the fear of today is analogous to the fear from the Depression even if the current circumstances do not arguably warrant as much trepidation. Then they talk about S-CHIP and how the increase in taxes doesn’t seem like it’s going to put a damper on premium cigar sales anytime soon (that’s just what the tax-happy Senators and Congressmen wanted to hear).

And then, oddly, they say that more taxes usually leads to a drop-off in sales for the taxed items. This I completely agree with and, ironically, may explain why premium cigar sales didn’t slack off during the first quarter. When the government tells the people that they are going to raise taxes on a product on a certain date the people will act rationally and start stockpiling those products up to the date when the tax increases. Here’s an example of that and here’s another example.

Go to page four of this report and see the affect that stockpiling could be having on premium cigars. This report is mainly about a tax on cigarettes but I think that we’ll see a lot of the same things happening with cigars during the next couple of months. Maybe the taxes on cigars will have less of an impact due to its premium status but once you couple the new taxes with a soft economy I don’t know how we will see cigar sales increase for the next few months.

Alright, that’s it. I’m going to go and read the magazine and find a better cigar to enjoy (Hoyo de Monterreys are not my favorites by any stretch of the imagination). Have a great day!!!

Update on Nebraska Cigar Bar Exemption

Here’s an update on yesterday’s story about cigar bar exemptions in Nebraska; from Cigar Aficionado:

Many lawmakers opposed the original bill, not necessarily for its attempt to exempt cigar bars, but for its vague language. They felt the bill contained loopholes that would allow businesses to stock up on tobacco products to meet the definition of a cigar bar and permit patrons to smoke.

Since Friday, lawmakers have been fine-tuning details of an amendment that seeks to exempt cigar bars from the ban while tightening the language so other businesses couldn’t easily qualify as cigar bars.

By day’s end today, the bill being discussed would lower the revenue figure to 10 percent, but this percentage would be derived solely from cigar sales.

Lawmakers are expected to vote on the bill tomorrow.

Hopefully the amendment gets passed.

New Cigar Tax in Pennsylvania

From Cigar Aficionado:

The governor’s budget plan calls for a first-ever tax on premium cigars of 3.6 cents a stick. Coupled with the recent renewal of the State Children’s Health Insurance Program, taxes on a single cigar in the Keystone State could jump from 5 cents to roughly 43 cents per cigar.

It’s being sold as one of those “sin” taxes. Let me translate what a “sin” tax is:

A way for politicians to increase their power.

This is what politics is all about. People need to realize that once smoking is eventually banned (and it will be) the politicians will put non-smokers in their cross-hairs. It might be in the form of another “sin” tax, maybe on fatty foods or something else health related. And what really scares me the most is universal health care.

Whatever name it comes under, universal health care will be used to ram through whatever nanny-staters want in the name of “prevention.” See, if you couch new laws and regulations in certain ways almost no one can be against them.

Once universal health care comes about there will be a need to ration health care. The easiest way to do this is by prohibiting people who do something evil, like smoking or being fat, from getting access to health care. If you don’t live the life the government wants you to leave you will get left out.

If you view taxes on smoking as something that is good just wait. You’re next.

New York: A Cigar Smoker’s Hell

As I have been hearing from other cigar smokers on Twitter and through their blogs (HERE) New York’s Governor Paterson has just launched a broadside against everything from health clubs to cigars. Here’s the gist: NY spent itself into a hole and now they are going to tax a bunch of things more so they can dig themselves out of their hole.

From the NY Daily News:

Watch Out! They Now Want to Tax “Little Cigars” to “Protect” the Children

Here’s the first rule of social crusading: MAKE IT ABOUT THE CHILDREN.

That’s what was going on with S-CHIP a year ago and that is what is behind this newest assault on a legal product that we all enjoy – cigars. Here’s the gist of the whole thing from California’s Modesto Bee:

The packaging is pretty and the product sounds tasty, even a little wholesome. But inside the brightly colored wrappers that tout an assortment of flavors such as vanilla, strawberry and peach are cigars and cigarillos — and, according to public health advocates, a not-so-subtle strategy to target young people with cheap, candy-flavored tobacco.

Australia Heavily Taxing Cigars and Hurting Cigar Smokers

I’m sure that many of you have heard about the group Cigar Rights of America. They are a bunch of cigar lovers, including some of the biggest names in the industry, who are going around trying to fight for the rights of cigar smokers everywhere.

Why?

I’m glad you asked. Here’s the answer from CRA’s blog.