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April,
2009

The top three supplier nations of premium cigars to the U.S. accounted for 97.1% of all imports in 2008.
Premium Imports Fall in 2008

But by how much may be anyone’s guess, as data for prior years has been declared inaccurate thanks to unknown quantities of little cigars mixed into the government data.

By E. Edward HOYT III

In 2008, an estimated total of 276.5 million hand-made premium cigars were imported into the United States. However, efforts to compare last year’s results with prior years has run into a roadblock: the Washington-based trade group Cigar Association of America (CAA), which discloses the results each year based on government data, explains that all data for 2007 and prior years is inaccurate because it contains an unknown quantity of little cigars.

The CAA already takes into account manufacturer-supplied data to adjust for machine-made cigars that are included in import totals for the Class H tariff category (the highest-price category which encompasses all “premium” cigars), but has no way of being able to make estimates to compensate for little cigars that tainted prior year’s totals. The discrepancy may likely have grown more significant as the booming little cigar segment itself grew significantly in recent years.

That said, premium cigar imports in 2008 dropped—but by how much, exactly, may never be known. Total 2007 premium imports to the U.S. were reported as 337 million, a fairly steep 22 percent drop in one year’s time; 2007’s inflated numbers, however, mean the decline was less, but with little guidance as to how much less.

With or without erroneous 2007 data to compare, the Dominican Republic had a rough year, shipping 110 million premium cigars to the U.S. in 2008 or a dominant 40 percent share of all such products, compared to a reported 177 million in 2007, which would indicate an extremely steep 38 percent drop, and a ceding of market share to both Honduras and Nicaragua.

Honduras commanded the second-largest share of premium imports, about 32 percent or 87.8 million sticks, a 4 percent rise from 2007. Nicaragua, meanwhile, held the third and last significant slice, 25.4 percent, or 70.1 million sticks, a one percent rise over 2007. Together, the Dominican Republic, Honduras, and Nicaragua accounted for more than 97 percent of all premium cigar imports, while 17 other countries together vied for the less than three percent remaining.

Compared to 1999, the year when premium cigar imports fell to their lowest recent level following the peak of the cigar “boom,” hand-rolled cigar imports in 2008 were ahead by 11 percent. However, imports were 255 percent larger than the market was in 1977 when an estimated 78 million premium cigars were imported.

Honduras, at 87.8 million premium cigars, reached its second-highest yearly export total ever to the U.S., behind only the industry peak boom year of 1997 in which it shipped 112.4 million premium cigars to the U.S. Nicaragua, which may be the least affected of the top three supplier countries as far as little cigar data errors, held nearly steady, showing a slight one percent uptick in premium shipments to the U.S. last year. In all, it has posted volume gains in its U.S. exports in eight of the last nine years, a 289 percent growth record since 1999.

The field of remaining premium cigar exporters to the U.S. narrowed in 2008, even as they collectively gained an increase in share, up from 1.7 percent in 2007 to 2.7 percent in 2008, but there continues to be a huge gap between the third-largest supplier in volume—Nicaragua—and the next-largest contributor to the U.S. market, which in 2008 was Mexico with 1.42 million premium cigars, up 4 percent from 2007 and representing the second straight year of gains. Mexico exported a record-low 1.1 million premium cigars to the U.S. in 2006, following nine straight years of declines after a peak year of 25.3 million in 1996, but its volumes have mostly stabilized in the past few years.

Belgium jumped by five positions in the ranking to reach the number five position, posting a 164 percent increase in premium cigar shipments to the U.S. to 1.3 million sticks in 2008, compared to 493,000 in 2007.

None of the remaining supplier countries broke the one million mark. Germany was in sixth place, jumping 23 percent from 515,000 in 2007 to 634,000 last year. Philippines, at number seven, dipped by nine percent to 618,000 cigars. Switzerland, at number eight, dropped six percent to 421,000 cigars.

The Bahamas fell from fourth place and 1.49 million cigars exported to the U.S. in 2007 to ninth place last year and only 465,000 cigars, a 69 percent plunge in volumes. The Bahamas burst onto the scene in 2004 with 1.2 million cigars and peaked in 2005 with 1.64 million.

The next four countries all posted large percentage gains on relatively small volumes. Denmark’s volumes rose by 200 percent to 120,000, up from 40,000 in 2007; Ecuador’s rose 35 percent to 113,000, up from 84,000; Costa Rica rose 124 percent to 112,000, up from 50,000; and Guatemala jumped by 190 percent to 90,000 compared to 31,000 in 2007.

Brazil continued a steep decline, falling 22 percent to only 38,000 sticks versus 49,000 in 2007. Jamaica’s volumes fell by 50 percent to an all-time low of 9,000 sticks.

There were seven countries that had exported at least some premium cigars to the U.S. in 2007 but shipped none last year: Bolivia, Ireland, Netherland Antilles, Panama, Spain, United Kingdom, and Venezuela. The total declared (wholesale) value of all imported premium cigars in 2008 was $312.7 million.

OTHER IMPORT CATEGORIES
Class H large cigars represent only one segment of all cigar imports—non-premium large cigars totaled 391.5 million in 2008, compared to 476.8 million in 2007, and represented $48.1 million in declared value. The Dominican Republic again led this segment, by a huge margin, with 243.2 million cigars imported in 2008, followed by India with 40.4 million, and Nicaragua with 34.7 million.

Little cigar imports totaled 409.9 million sticks with India leading the imports by volume with 180.9 million sticks, followed by the Dominican Republic with 56.9 million, Honduras with 56.4 million, and the Philippines with 26.3 million. In all, 1.29 billion cigars were imported in 2008.


SMOKESHOP - April, 2009