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April,
2005

Premium Cigar Imports:
Gaining Speed in '04

Following two consecutive years of modest, single-digit growth, premium cigar imports kicked into high gear last year, jumping into double-digit gains.

By E. Edward Hoyt III, Editor

Not since the breakneck gains of the mid-1990's cigar boom have premium cigar imports gained as much ground as they did in 2004. Last year proved to be a breakout year for growth of the premium cigar market in recent times, posting a 12% jump in imports to 311.3 million sticks, up from 278.2 million in 2003. It was the third consecutive year of growth, following cautious gains of 4% in 2003 and 4.8% in 2002.

The top three supplier nations to the U.S. - the Dominican Republic, Honduras, and Nicaragua - increased their stronghold on the market last year, collectively approaching a combined 98% share of all premium cigar imports, up from 97% in 2003. A total of 18 supplier nations accounted for the remaining two percent in 2004, including five nations that had registered no activity in the U.S. the previous year: Andorra, Chile, Colombia, Costa Rica, and Malaysia - albeit in minute quantities.

Leading the pack was the Dominican Republic, the long-standing, runaway leader in volume, commanding a 55% share of all premium cigars entering the market, up 6.6% in volume last year from 158.6 million to 169 million sticks, or a two-year gain of 11.5%. The Caribbean island nation's share of premium U.S. cigar imports dipped slightly from 57% in 2003. Imports from the number two supplier, Honduras, grew by 7.3% to 83.4 million units in 2004, and the Central American nation captured a 28.6% share of overall premium imports (up slightly from 27.9% in 2003). Honduras has seen imports to the U.S. rise by 21% over the past two years.

Of the top three supplier nations, Nicaragua registered explosive growth in its U.S.-bound shipments, jumping from 33 million sticks in 2003 to 47.9 million in 2004, an increase of 45%. Overall, Nicaragua accounted for 15% of premium cigar shipments to the U.S. in 2004, compared to 12% in 2003. Its two-year tracking showed an overall 27% gain in the U.S., tempered by a 12.5% drop in 2003 following big gains in 2002 and 2001.

The Dominican Republic, Honduras, and Nicaragua dominated the U.S. market last year, having collectively accounted for 303.8 million of the total 311.3 million premium cigars shipped to the U.S. last year - or 97.6 percent. A total of 18 other supplier nations contributed the remaining 2.4%, or 7.5 million cigars. While having negligable influence on the overall market, many of these individual origin countries often account for smaller, independent brands and boutique operations that are of special interest to retailers and smokers alike.

Mexico again held a very distant fourth-place ranking in 2004, accounting for little more than one-half of one percent of imports (.57%), or about 1.8 million cigars in all, down from .88% in 2003. Mexico's free-fall in the U.S. market has been dramatic; the N.A.F.T.A. nation accounted for over 10% of U.S. premium cigars as recently as 1995 and a hefty 25.2 million cigars in 1997.

Imports from Indonesia held steady at 1.5 million sticks, again placing it in fifth place. The Bahamas, however, saw a 64% jump in U.S.-bound imports, from 733,000 sticks in 2003 to 1.2 million in 2004, overtaking the Philippines for the 6th-place ranking and attributable entirely to boutique producer Graycliff Cigar Company of Nassau, Bahamas. Imports from Switzerland, meanwhile, grew by 59%, from 410,000 in 2003 to 653,000 cigars in 2004, while the Philippines saw shipments fall by 19%, from 799,000 sticks in 2003 to 649,000 in 2004, placing the country eighth in the ranking.

The remaining supplier nations shipped fewer than half a million cigars each to the U.S. in 2004, led by The Netherlands (493,000 cigars), Germany (322,000 cigars), and two origins appearing for the first time: Malaysia (276,000 cigars), and Andorra (105,000 cigars).

The Canary Islands (Spain) continued to drift as a player in the U.S. market. While U.S.-bound shipments did jump 405% in 2004, total cigars only reached 101,000 sticks, up from 20,000 in 2003. The Canary Islands, which were the leading supplier of premium cigars to the U.S. during the 1970s, hasn't held market power here in decades, having shipped a recent high of 2.1 million cigars to the U.S. in 2001 (out of 253 million total that year), and none in 1999.

Costa Rica, which had vanished entirely in 2003 in contributing to U.S. cigar imports, made a token appearance in 2004 with 43,000 premium cigars shipped to the U.S. The Central American nation peaked in the U.S. market in 2000 with 2.7 million cigars.

Jamaica, once a leading supplier to the U.S. market, shipped a mere 23,000 cigars to the U.S. last year, down slightly from 26,000 in 2003.

Non-Premium Cigars
While 307.9 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 - 307.7 million additional large cigars were imported under the Class A-G designations (under 23 per stick in declared value). In all, 615.6 million large cigars were imported.

The leading suppliers of non-premium large cigars to the U.S. was led by the Dominican Republic (197.6 million, or 64% of all shipments); India (24.1 million, or 7.8%); Honduras (19 million, or 6.2%); Nicaragua (10.3 million or 3.3%), Germany (8.7 million or 2.8%); The Netherlands (6.5 million or 2.1%); Ireland (5.1 million or 1.7%); Colombia (4.2 million or 1.4%); Denmark (3.3 million, or 1.1%); Belgium (1.4 million, or .5%); and Switzerland (1.3 million, or .4%).

Little Cigars
Consumption imports of "little" cigars, totaled 215 million in 2004, up 19% from 180 million in 2003. Origin countries for little cigars imported into the U.S were led by Brazil with 61.3 million sticks (28% of U.S. imports) and followed by the Philippines with 49 million (23%), Honduras with 31.3 million (14.5%), Canada with 22.5 million (10.5%), the Netherlands with 20.1 million (9.3%), and India with 10.8 million (5%).

In all, 831 million cigars were imported to the U.S last year, up 21% from 689 million in 2003.

Strong Market, Quality Product
A key factor that separates the current rise in imports from the boom of the 1990s is the much slower pace of growth, with no significant stress being applied to manufacturers in order to meet production.

In fact, tobacco and cigar quality is probably at an all-time high, with both tradition and innovation having returned to the growing fields, curing barns, and fermenting rooms of factories. It's a far cry from the wildly rapid expansion of cigar production during the boom, which resulted in a market flooded with poor or otherwise marginalized product. The question that lingers from that bad experience is, "How many smokers turned away as a result of lousy cigars?" The current mini-boom, despite a harsh anti-smoking climate and the (thankful) lack of widespread media hype, may finally answer that question, as truly great cigars supply the renewed marketplace interest - at a reasonable pace.


SMOKESHOP - April, 2005