Spain’s Tabacalera set to take the cigar in US amid Cuba detente

Spain's Tabacalera set to take the cigar in US amid Cuba detente
Tobias Buck in Madrid

One of the biggest beneficiaries of the diplomatic rapprochement between
the US and Cuba is likely to be a Spanish tobacco group.
The company in question is Tabacalera, part of Imperial Tobacco, which
owns a 50 per cent stake in Cuba's official cigar export operation
Corporación Habanos.
Since buying the stake 15 years ago, Tabacalera has played a key role in
marketing and selling Cuban cigars in more than 150 countries around the
world.
Now, with Washington restoring diplomatic relations with Havana, the
Madrid-based company is hoping for a surge in business in the US, which
accounts for two-thirds of premium cigar sales.
Fernando Domínguez, executive chairman of Tabacalera, says nearly one in
three premium cigars sold in the US could soon come from the former
enemy island.
"Given the indisputable recognition of Cuban tobacco and its unique
portfolio of brands, I think Habanos can capture 20 to 30 per cent of
the US cigar market in the first three of four years," he says.
Banned in 1962, at the height of the cold war, Cuban cigars were a
casualty of the enmity between the US and the island. The cigar-loving
John F. Kennedy held back his signature until a member of his staff was
able to snap up 1,200 of his favourite Cuban cigars from tobacco shops
across Washington.
The US is the biggest market for puros, or premium cigars, with more
than 300m smoked annually. For more than half a century, however, the
import and sale of Cuban cigars from prized brands such as Cohiba,
Montecristo and Romeo y Julieta was strictly prohibited.
FT Special Report

Investing in Cuba

A rapprochement with the US has raised hopes that Cuba will open up to
the world, with hints of a slightly greater tolerance of debate and
experiments including a special development zone. Yet foreign investors
still face daunting hurdles.
Washington and Havana agreed to restore diplomatic relations last year,
but the trade embargo signed by Kennedy in 1962 has yet to be lifted by
the US Congress. In January, the US allowed individual travellers to
bring in Cuban cigars worth up to $100 — a first step towards what
tobacco executives hope would be a full opening.
The increase in US travellers to Cuba has already led to a rise in cigar
sales on the island, Mr Domínguez says.
"The numbers are still not significant, but they give an indication of
the acceptance that Habanos will have in the US."
The example of Tabacalera highlights how the US diplomatic shift is
creating unexpected opportunities for business, particularly those from
Spain, which ranks as the largest investor in Cuba.
Tobacco aside, Spanish tourism and leisure groups are entrenched on the
island and hope to benefit from the expected influx of US visitors.
In a bid to enhance trade ties between the two countries, Luis de
Guindos, Spain's economy minister, will travel to Havana for an official
visit next month.
"There is an opening in Cuba, and we are part of it," says one official.

Source: Spain's Tabacalera set to take the cigar in US amid Cuba detente
- FT.com -
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