Tony Hoevenaars is the Managing Director of Cubacigar Benelux. Cubacigar Benelux is the distributor of Cuban cigars in The Netherlands, Belgium, and Luxembourg. And recently, they filed a lawsuit versus the Dutch state about the new legislation. Reason for us to do an interview with Tony Hoevenaars.
Cubacigar Benelux went to court against the Dutch government, why did Cubacigar Benelux take that step?
The new law has the goal to make smoking less appealing. Especially for the younger consumer. They want to do that by strict packaging demands. And the ultimate goal is a smoke-free generation by 2040.
The main issue with the new legislation is the fact that the packaging has to be smooth and mat. Glossy packaging and embossing are no longer allowed.
For machine-made products, that isn’t a big deal. For cigarettes, roll-your-own and the European style machine-made cigars it is a one-time job to alter the packaging. And production can continue as before. The difference will be hardly noticeable, as colors and logos are still allowed. The impact of these changes is almost void. For both the producer and the consumer. And these are the categories of products that appeal to the younger smoker.
It is much different for premium, handmade cigars. In our case, almost all our cigars come from Cuba. Once a year, Habanos is taking orders from all the Cuban cigar distributors worldwide. And then starts producing. It’s an order for hundreds of different SKU. And those are produced in dozens of factories in Cuba. Habanos and Tabacuba already stated that it’s impossible for them to create packaging for an individual market to comply with local legislation. And everyone that knows a bit about socialistic Cuba knows that its true.
So, it means that our orders come in the original packaging. And that we have to order new packaging for all our different sized SKU. And that creates problems:
1) High costs. The original packaging is useless and new boxes have to be ordered.
2) It’s relatively expensive because we can’t order in bulk due to constantly changing legislation. Plain packaging is coming too.
3) Additional costs since we need to hire staff to repack the cigars into the new boxes.
4) Surrounding countries as Belgium and Germany took advantage of the opportunity in the EU legislation. The EU legislation allowed exemptions for cigars. Many cigar smokers and collectors will drive to Germany or Belgium to get the cigars there in the original packaging. Considering the huge difference in looks, we expect that this will cost both us, and the Dutch retailers a substantial part of the turnover.
5) A lot of the special Habanos releases are limited editions. Either limited for La Casa del Habano shops (The Netherlands has four) or for Habanos Specialist. The word ‘limited’ will be prohibited in the new legislation as well. These editions won’t be profitable after repacking, these editions will lose a lot of value without the beautiful lacquered boxes, humidors or ceramic jars. These editions count for more than 20% of our turnover, but especially for the La Casa del Habano shops, it is more than double. The retailers live from these products and without them, they probably have to close shop.
Compared to the machine-made products, especially cigarettes, this new legislation hits the premium cigar industry hard. The traditional elements of the packaging, especially the limited editions, are part of the cost of the products and will be unsellable with the new legislation. Add the fact that cigar smokers will travel to neighboring countries to get the cigars in the original packaging and it’s clear that Cubacigar Benelux will be hit hard, out of proportion, by the new legislation. And an exemption for premium cigars won’t have an effect for the smoke-free generation at all. Since premium cigars only count for less than 0.02% of the tobacco sales in The Netherlands. And in addition, it’s not the kind of tobacco that is being used by the younger generations. We hope that the Dutch government will see this and is open for a dialogue.
What is the current status of the case?
The court date is Monday May 27.
When do you expect a verdict?
In principle within six weeks, yet our attorney expects that the court will extend the period with another six weeks. So we hope on August 19th of this year,
Will the legislation be postponed until there is a verdict?
We will request that at the court and expect that our request will be granted.
What are the consequences if Cubacigar Benelux loses the case?
We expect a decline in turnover of at least 30% in short term. That’s because of the loss in sales of the limited editions. And because of consumers shopping abroad. Within a few years, the loss will increase to over 50%. That’s because shops that rely on premium cigars sales will have to close the doors.
Is the regulation between The Netherlands and the other Benelux countries different? If so, how?
They are totally different. Belgium announced plain packaging for cigarettes, shisha and roll-your-own tobacco. But they exempt cigars, including machine-made cigars. And in The Netherlands, machine-made cigarillos are treated as cigarettes It doesn’t only mean no plain packaging for cigars, but also no full-color warning labels with ugly pictures. Luxembourg has the same legislation and exemption as Belgium.
Cubacigar Benelux must not be the only party with these issues. Has there been an attempt to include other distributors in this lawsuit?
There has been contact. Direct between us and other parties, but also through our lawyer Kenneth Defares. He works or has worked for other tobacco companies as well. But for several reasons, other distributors didn’t show interest.
Why didn’t they join?
That’s not clear. We do have our ideas and suspicions but I rather not speculate. That’s a question you will have to ask our colleagues.
Wouldn’t a combined effort made more sense; wouldn’t it make the case stronger?
Most definitely. But it looks like that most of them surrendered. And are happy that the implications for machine-made cigars are limited.
Isn’t it time that all premium cigar distributors in The Netherlands, from small to large, sit down together and start to fight for their combined interests?
There have been attempts but those led to nothing.
What are the reactions to the announced lawsuit from the industry? And from the consumers? What kind of feedback did you get?
From the market, both retailers and consumers, only positive feedback. We had contact with several other distributors but they didn’t speak out. They are waiting for the verdict.
Cubacigar is a daughter of Habanos. Is this a test case for other countries?
No, totally no. Habanos gave us permission for our step but is not involved in any way.
Are there any other European countries that face the same issues with pending legislation?
Could Cigar Rights of Europe help out in the fight against the increasing legislation?
Honestly, I hardly know that organization.
How do you see the future for Cubacigar and the cigar retail in the Benelux?
In The Netherlands, it depends on the outcome of the lawsuit. In Belgium and
Thank you Tony for this interview.
Ministry of Cigars will continue to follow the lawsuit. We will give updates as soon as there is anything to report.