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February,
2006

A Shining Year for Imports of Premium Cigars

In the U.S., the premium cigar market is dominated by three top supplier nations which continue to gain a growing share of expanding imports.

By E. Edward Hoyt, III

Imports of premium cigars into the U.S. continued their climb last year, posting a 13.6 percent gain over 2004 according to U.S. Customs data analyzed and adjusted by the Cigar Association of America (CAA).

Based on tracking of nine key supplier nations (Bahamas, Dominican Republic, Honduras, Indonesia, Jamaica, Mexico, Nicaragua, Panama, and the Philippine Republic), the CAA reports that the U.S. imported 321.6 million premium cigars in 2005, compared to 283.3 million in 2004. In all, 322.9 million premium cigars were imported last year from all 21 countries of origins, compared to 285.5 million in 2004, a gain of 13.1%

This was the fourth consecutive year of import growth in the premium cigar segment and the largest gain to date during this growth cycle. The increase followed a jump of 12% in 2004 and cautious advances of 4% in 2003 and 4.8% in 2002. Total cigar imports into the U.S. across all statistical classes also grew, from 831 million cigars in 2004 to 848.2 million total in 2005.

The top three supplier nations of premium cigars -the Dominican Republic, Honduras, and Nicaragua - continued to increase their powerful market dominance, collectively capturing 98.5% of all premium cigar imports in 2005, up from 98% in 2004 and 97% in 2003. A total of 18 supplier nations accounted for the remaining 1.5% of all premium cigar imports, including four countries not represented at all in 2004: Denmark, Peru, Haiti, and France.

Premium cigar imports from the leading supplier nation, the Dominican Republic, leaped by 22.3% in 2005 to 179.5 million sticks versus 146.7 million in 2004. Its share of U.S. premium cigar imports edged up from 55% in 2004 to 55.6% in 2005. The nation also shipped an additional 212.5 million non-premium cigars to the U.S. in 2005, or 391.9 million cigars total. Overall, the Caribbean island nation accounted for 46% of all cigar imports to the United States.

Premium imports from Hondurus, the number two supplier, rose by 5.2% in 2005 to 87.7 million cigars, compared to 83.4 million in 2004. The Central American nation was responsible for 27.7% of all U.S.-bound premium cigar imports last year, down from 28.6% in 2004. It shipped an additional 45.3 million non-premium cigars to the U.S. in 2005, or 133 million cigars total, accounting for 15.7% of all cigars shipped to the U.S. last year.

Nicaragua, the last of the three major supplier nations, saw premium cigar shipments to the U.S. rise 5% to 50.4 million sticks in 2005, up from 47.9 million in 2004. The northern neighbor of Honduras in Central America accounted 15.6% of all premium cigars shipped to the U.S. while shipping an additional 6.3 million non-premium cigars for a grand total of 56.7 million U.S.-bound cigars, or 6.7% of all U.S. cigar imports.

Within the top three premium cigar suppliers, the Dominican Republic shipped more non-premium cigars (54%) to the U.S. than premium cigars (45%), while the opposite held true for Nicaragua (34% non-premium vs. 66% premium) and Honduras (11% non-premium vs. 89% premium).

The most significant change in ranking occurred in the relatively distant number four slot, where the Bahamas, with 1.64 million premium cigars, for the first time displaced Mexico to the number five position, and captured one-half of one percent of premium imports, representing a 37% jump over 2004's 1.2 million cigars. This followed a 64% jump in 2004, giving it a two-year cumulative gain of 124%. According to U.S. Department of Commerce data, 100% of the cigars exported from the Bahamas to the U.S. were classified as "Class H" or premium, and all are attributable entirely to boutique producer Graycliff Cigar Company of Nassau.

Mexico, meanwhile, continued a dramatic nine-year slide in U.S. market share, shipping only 1.4 million premium cigars U.S.-bound in 2005, a drop of 19% from 1.8 million sticks in 2004. Mexico's premium shipments peaked - along with the rest of the industry - in 1997, at 25.2 million cigars. In all, America's southern neighbor shipped a total of 2.1 million cigars to the U.S.

Sixth-place Indonesia saw its premium cigar shipments to the U.S. tumble 58% in 2005 to 640,000 cigars, down from 1.52 million in 2004 and following recent highs of 2.6 million sticks in 2002 and a recent low of 174,000 sticks in 2000, a highly erratic presence at best.

The remaining origin countries each shipped less than one-half million premium cigars to the U.S. in 2005, led by Switzerland (down 26% to 478,000); the Netherlands (down 13% to 428,000); the Philippines (down 55% to 291,000); Denmark (first appearance this year at 104,000); and Brazil (up 56% to 100,000).

Non-Premium Cigars
While 322.9 million large cigars that entered the U.S. last year were classified as "Class H" cigars - the highest tariff category for cigars (23 each and over) and the basis for determining "premium" cigar imports - 329.4 million additional large cigars were also imported, falling under the Class A-G designations (under 23 per stick in declared value). In all, 652.2 million large cigars were imported last year at total declared value of $318.9 million.

The leading suppliers of non-premium large cigars were the Dominican Republic (209.8 million), Honduras (17.7 million), The Netherlands(9.6 million), Nicaragua (6.2 million), Colombia (4.2 million), Germany (3.6 million), Denmark(2.9 million), Ireland (2 million), and Belgium (1.9 million).

Little Cigars
Consumption imports of "little cigars," those weighing 1.36 kg. or less per 1,000 sticks, rose by 22.9% in 2005, reaching 264.8 million units, up from 239.5 million in 2004. Leading countries of origin in this category, which includes the growing filter-tipped little cigar segment, is led by Brazil (79.5 million), India (68.4 million), Colombia (28.6 million), Honduras (28.6 million), Philippines (20.1 million) and the Netherlands (16.2 million).Germany(8.5 million), Belgium (5.1 million), and Ireland (2.9 million) also contributed to the sector.

In all, a grand total of 848 million cigars were imported into the U.S. for consumption in 2005, up 2.1% from 831 million units in 2004.

  Origin 2005 Share (2004) % Change
1 Dominican Republic 179460 55.60% 146715 22.30%
2 Honduras 87718 27.20% 83368 5.20%
3 Nicaragu 50366 15.60% 47927 5.10%
4 Bahamas 1642 0.51% 1205 36.30%
5 Mexico 1439 0.45% 1780 -19.22%
6 Indonesia 640 0.20% 1518 -57.80%
7 Switzerland 478 0.15% 653 -26.80%
8 Netherlands 428 0.13% 493 -13.20%
9 Philippines 291 0.09% 649 -55.20%
10 Denmark 104 0.03% 0 -
11 Brazil 100 0.02% 64 56.30%
12 Panama 65 0.01% 54 20.40%
13 Ecuador 39 0.01% 68 -42.60%
14 Germany 31 0.01% 32 -90.40%
15 Italy 21 0.01% 23 -8.70%
  All Others 52 0.02% 106 -50.90%
  Total 322874 100% 284945 13.10%


SMOKESHOP - February, 2006