Habanos looking at massive shortages. Consumers, retailers, and official Habanos distributors are facing shortages that are only growing. The reason is a perfect storm of circumstances to which the Cuban cigar manufacturer, Cubatabaco, does not have an answer. A shortage of large wrappers due to far from good crops in combination with a rise in demand. Add in the Covid-19 pandemic, which is the cause of much lower production and a heavy disruption in the supply chain are causing havoc in the stock of Habanos, and its exclusive distributors worldwide. The only thing that would make the situation more dire for Habanos would be the end of the Cuban embargo.
Among the first to reach out to Ministry of Cigars about the shortages were retailers in The Netherlands and Germany. Both Habanos Specialists and La Casa del Habano franchises. Large cigars have been an issue for a few years, but it is getting increasingly to get them, even for La Casa del Habano stores. A lot of brands and vitolas are currently not available for retailers, as distributors don’t have stock. And distributors can’t get stock, as there simply aren’t enough cigars being made in Cuba at the moment. Our friends at L’Amateur de Cigare heard the same stories from retailers and wrote a piece on the issue last week.
Not just the Benelux and Germany
“90% of the Cuban catalog is out of stock. For the remaining 10%, you can get deliveries every day if you want, but essentially small formats – smaller than the robusto. There are no robustos or anything larger than that,” says a French retailer to L’Amateur de Cigare.
“There has been a shortage in supply for premium cigars (Behike, limited editions, etc.) for several years,” explains Nicky Meire, the marketing director of Cubacigar, the importer for Benelux. “But this year, shortages are also sometimes affecting standards, like the Partagás D4 or P2, and all robustos more generally. We even sometimes run out of José L. Piedras or Quinteros! Deliveries still arrive regularly; we receive cigars – just not enough of them.” The president of Italian importer, Diadema, Andrea Vicenzi concurs: “There are issues on all types of products, but shortages are more frequent on large formats.” “I think the word ‘shortage’ is a bit strong,” counters Juan Giron, the communication manager of Spanish importer, Tabacalera. “But we do occasionally run out of stock on certain lines, which obviously represents an inconvenience for our customers.”
The covid-19 pandemic is partially to blame for the current stock issues. Cuba did not escape Covid-19. Several factories had to close, either for a few days and others, like the big La Corona factory in Havana, had to close the doors for two months. The factories that remained open could only work on half capacity due to social distancing. This even though the tobacco industry has been exempted from the lockdown measures. The cigar industry is fundamental for the island’s economy, and Cuba considers it an essential industry. “When a positive case is identified in a galera, four lines around the infected individual, in total 25 rollers, re immediately sent home to isolate for one week,” explains Nicky Meire, who recently returned from a trip to Cuba.
A large number of factory workers were sick, and those who are sick cannot work. Since schools are not open, many parents who work at the factory have to stay home to take care of their children. And most factories do not have the physical space to maintain social distancing while producing the same number of cigars. Even if they did, the packaging department would be the following bottleneck, with a lack of space for social distancing. Even if they would have, box factories could not provide enough cigar boxes anyway. Factories tried to counter the problems by rotating teams and adding Saturday as a working day. But it isn’t enough to make up for lost time and production. “The cigar is an artisan product,” explains Juan Giron. “This is not an industry where you can increase output at the push of a button.” Several sources revealed to Ministry of Cigars that Cubatabaco produced less than 70 million cigars, about 70% of their production in the last few years.
When the cigars are ready, the next issue follows. Most of the cigar transports are cargo on regular, commercial, passenger flights. Since those flights are a rare thing nowadays, so is the opportunity to export cigars. Part of it is solved by sea freight, but that makes cigar transports less flexible. The travel time is longer and the orders have to be large enough to fit in a 20 or 40-foot container. 5th Avenue, the Habanos distributor for Germany, Poland, and Austria, and PCC (Asia Pacific) are using sea freight as a way to get stock in.
For years, Cuba has been facing issues in the agricultural and pre-industrial areas of the cigar industry. There aren’t enough large wrappers to make all the large cigars that consumers want. Crops aren’t good enough to supply those large leaves.
In 2019, Cuba had a large and good crop. But the farmers had a lot of problems last year, with barely making the minimum of hectares of tobacco set by the Cuban government. And the outlook for 2021 isn’t too favorable due to severe tropical storms at the beginning of the 2021 tobacco season.
And with all the hardship when it comes to growing tobacco, producing cigars, and getting them to the destination comes another problem. A growing demand, which is usually a good problem to have. People working from home have more time to smoke, and demand goes up. Others, who instead of going to restaurants have no choice to stay home light a cigar for the first time, and become regular smokers, creating more demand. In some countries, the demand for Cuban cigars went up by more than a quarter.
Some distributors have the stock to manage the extra demand, but they won’t be able to do that for long. “It hasn’t affected our turnover yet, because we can dig into our stock,” explains Andrea Vicenzi for Italy. “But we may feel the effect more strongly in the coming months.” “A few years back, we took the position of keeping a year’s stock of all lines, in our main bonded warehouse,” relates Jimmy McGhee, communication manager for Hunters & Frankau, the exclusive importer of Cuban cigars to the United Kingdom. “This policy may have preserved the British market to a certain extent.”
And what happens with a drop in production and a rise in demand? People start to hoard, scared of missing out. You can say that Cuban cigars are the equivalent of toilet paper at the start of the pandemic. People are stockpiling, only contributing to the situation. And that creates other problems, such as rumors and conspiracies. A popular one is that the Chinese buyers of Altadis are stockpiling cigars for the Chinese market. Even though logic and facts do not support those rumors.
“We will never sacrifice the quality of our cigars to meet demand,” says Habanos. “Because we know that when our aficionados smoke a Habano, they are looking for a unique, high-quality experience, and our main objective is to give them that experience. We are convinced that once the global situation has returned to normal, supply will become more stable.” And with that, Habanos realizes that the problem will drag on for a few years. Due to the shortage of tobacco, plus all the backorders, Habanos simply can’t make up for it next year.
So if you are a tobacconist or a fan of Cuban cigars, expect shortages for at least the next three years. And without creating another run, we suggest either stock up on your favorite marca and vitola, or looking at alternatives. Cuban alternatives, or cigars from other countries, countries with fewer production problems.
all the quotes are courtesy of L’Amateur de Cigare & Laurent Mimouni