Cigars: New Global Pricing

Many of you may wonder why all the retailers stocking Havana cigars have increased their prices so significantly in recent days, so here is an explanation.

Last week Habanos S.A. announced a new global pricing strategy for their portfolio of handmade cigars. These new prices have been implemented upon global markets with immediate effect.

There are certain premium brands and products that have increased significantly including:

• All Cohiba sizes

• All Trinidad sizes

Montecristo 1935 Series

Montecristo Edmundos

Romeo y Julieta Linea de Oro

Romeo y Julieta Churchills

Partagas Series D, E & P

In addition to the above, the cost prices for global brands have also increased. This adjustment to prices is intended to harmonise the recommended retail prices of certain premium lines and brands across all markets. The new prices also reflect increased costs of production and high inflation in Cuba.

Our retail price increase is lower than the price increase implemented by our suppliers.

As CigarJournal.com reported exclusively on April 29, 2022 here, Habanos S.A. adjusted the prices for Cohiba, Trinidad, Montecristo 1935 and Romeo y Julieta Línea de Oro to the Hong Kong price level for all markets worldwide. The new price structure is in effect since yesterday, May 2, 2022. Consumer prices for the above-mentioned cigars have to be adjusted to a range of +/- 10 to 20% of the consumer prices on the Hong Kong market. It is expected that Spain will be the first market to implement the new prices, either this week or next.

Habanos S.A.’s intention is to turn Cohiba into a super-luxury brand, available only to the most powerful pockets. The rumor has been confirmed and it will be a matter of days, maybe weeks, before the price hike will hit the consumers. For Cohiba cigars, prices will multiply between 2.5 and 3, for Trinidad prices will be multiplied between 3 and 4, prices for Montecristo 1935 and Romeo y Julieta Línea de Oro will increase in a similar proportion.

There will also be price increases for the rest of Cuban cigars but by percentages consistent with the hyperinflationary world economy. The brands Montecristo, Hoyo de Monterrey, Romeo y Julieta, H.Upmann and Partagás will cost about 15 to 20 percent more, the rest of the portfolio will increase between 5 and 10 percent.

The reasons for this new price policy respond to something that sensible reasoning can deduce. The new recommended minimum prices for Habanos take the Hong Kong market as a reference. The proximity of Hong Kong to China is the key. Hong Kong has become the final destination for many of the cigars that were sold in Europe in recent years. The decision has the logic of putting an end to a dynamic that vitiated the European Habanos markets. For years, free agents have made a great business buying Habanos in Europe at prices that later were multiplied by three in China. Cuba tries to halt this with a stroke of the pen.

The strategy has been discussed internally in the company for the last few months. The initial idea was to gradually raise prices over a period of two/three years, which, perhaps, would be more assimilable for the markets, but finally, after intense deliberations, it was decided that based on the market situation and the high tension of demand, it was more convenient to implement the measure in one go.

Habanos has long had agreements with its distributors that is directly related to the purchase value of previous years and that agreement will continue to be respected, Cigar Journal has learned. This, on the other hand, disproves something that many have been saying without any basis: that Habanos is selling cigars in large numbers directly to China.

According to this agreement, Spain will continue to be the market that will receive the highest percentage of Habanos, slightly more than 12% of all production; a very similar percentage will remain for the local Cuban market, focused on tourist sales; the rest of the large exclusive distributors, Phonecia, Pacific, 5th Avenue, Coprova, will maintain their percentage of around 10% of production. And the remaining 35% will be distributed among the thirty smaller exclusive distributors that operate throughout the world.

Written by JAVIER BLANCO URGOITI for The Cigar Journal.