Smoking bans make Cuban cigar industry jittery

Smoking bans make Cuban cigar industry jittery
Tue Feb 28, 2006 4:49 PM ET

By Anthony Boadle

HAVANA (Reuters) - Smoking bans around the world have cast a pall of
uncertainty over the Cuban cigar business which is angling for emerging
markets such as China to keep growing, retailers said.

In Cuba, where the government has been unable to enforce a year-old
smoking ban, hundreds of wealthy aficionados and cigar sellers are
enjoying unrestricted smoking in public this week at the annual festival
of the Habano, Cuba's premium hand-rolled cigar.

They were greeted by smiling fashion models at a reception in Havana's
enormous Capitol building on Monday night.

"Despite the world's determination to stop people smoking, the sale of
cigars is bearing up quite well," said Hong Kong entrepreneur and
international socialite David Tang.

"We had a very good year in 2005, but the uncertainties are growing
hourly," said Simon Chase marketing director at Hunters & Frankau,
exclusive Habanos distributors for Britain.

British lawmakers voted two weeks ago to ban smoking in all pubs, clubs
and indoor public spaces in England from mid 2007, adding to the growing
list of countries taking a tough stand against smoking. Anti-smoking
campaigners said the ban would save thousands of lives.

Spain, Cuba's largest cigar market, banned smoking in all offices and
certain other public places as of Jan 1.

Cuban cigar maker Habanos S.A., a joint venture between the state-run
tobacco industry and Franco-Spanish tobacco group Altadis <ALT.MC>, is
preparing for a difficult year in 2006.

"World cigar consumption has not been affected yet," said Habanos vice
president Javier Terres. But retailers in Spain are not replenishing
their stocks due to the two-month-old ban, he said.

Responding to a trend toward smaller cigars, Habanos launched the Short
Churchill, a robusto version of Winston Churchill's favorite cigar
brand, the Romeo y Julieta.

CIGARS IN CHINA

Habanos is turning for growth to new markets in the Middle East, Latin
America and Asia, including China where the rise of capitalist
entrepreneurs has increased cigar smoking.

The cigar maker hopes Cuba's close ties to its communist ally will
further open up the tightly regulated Chinese market, where there are
four Casa del Habano franchise shops with a fifth due to open in 2007.

"They are still mostly foreigners who are buying cigars, because the
Chinese cannot really afford them at the moment, but no doubt that will
come one day," said Tang, who represents Habanos in Asia.

While smoking is discouraged in China, it will go on flourishing because
the government rakes in $14 billion in tobacco taxation, Tang said.

Cuba, where Europeans first came across tobacco 500 years ago and soon
copied the native habit of smoking the leaves, banned smoking in indoor
public places last year. But the ban is widely ignored and it is not
unusual to encounter people smoking in elevators.

Cuba exported 160 million cigars last year, covering 70 per cent of the
non-U.S. market. More than 400 million cigars are sold each year in the
world, half of them in the United States, where the sale of Cuban cigars
has been banned since 1962.

The prohibition has spawned a trade in counterfeit Cuban cigars, such as
imitations of famed Cohiba brand, President Fidel Castro's favorite
until he gave up smoking in 1985.

Aficionados are resigned to the advance of smoking bans. Even the star
attraction at this year's festival, British actor Joseph Fiennes, an
occasional smoker, said he supported them.

"Any ban on smoking that really is there to protect the rights of those
who don't smoke can only be a good thing," he said in an interview.

Die-hard cigar smokers said they won't stub out.

"People like us who just cannot give up cigars will go on smoking in our
lavatories, in our sheds," said Tang. "When it is outlawed totally,
there will still be people smoking. ... We will become criminal."

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