HEARD IN THE HUMIDOR
Highlights of the week in cigars and smoking from For the week of November 5-9
Los Angeles – The amazing story of the United States cigar market – the largest in the world – continued in August as imports rose once again. Even while being battered by smoking bans and threatened by an enormous tax increase in the State Children’s Health Insurance Program (SCHIP) bill in Congress, imports of premium cigars into the U.S. rose almost five percent in August over 2006 figures for the same month and are ahead of the year-to-date figures for 2006 by more than 6.5 percent!
According to figures provided by the Cigar Association of America, based on U.S. Customs data, 32.85 million premium cigars were imported into the U.S. in August 2007: 18.1 million (55.0%) came from the Dominican Republic; 8.7 million (26.4%) came from Honduras and 5.9 million (17.8%) came from Nicaragua. Minor amounts came from Mexico and the Philippines.
For the year, the totals are now 204.4 million premium cigars imported through August. That’s well ahead of the 2006 total of 191.8 million and even the 2005 total of 190.8 million. The 2005 figure is significant because it turned out to be the third-biggest year on record for imports at 329.5 million, behind only the Cigar Boom years of 1997 and 1998.
In fact, at the present rate, imports for 2007 would reach 331.5 million and take over the no. 3 spot in history, not far from the 1998 total of 334.6 million in the last year of the Cigar Boom. That’s a total that most cigar industry executives thought might not be reached again for many years, even decades. It could be surpassed just nine years later.
As always, the biggest contributor to the import total is the Dominican Republic. Already in 2007, it has sent 110.2 million premium cigars to the U.S., 53.9 percent of the total. Honduras remains in second place with 49.1 million (24.0%) with Nicaragua not far behind at 42.7 million or 20.8 percent.
Cigars remained the biggest seller for Swedish Match during the first nine months of 2007, but there may be some tougher times ahead for the Swedish owner of General Cigar. The latest financial report showed Swedish had $388.3 million U.S. in cigar sales through the first nine months of 2007 (converted from Swedish Kronor). That was down three percent from the 2006 figures, although sales were even in the third quarter for 2007 compared to 2006.
Operating profits were another story, with cigars second in importance to snuff. Cigars yielded $84.7 million in profits (21.8 percent margin) for the first nine months of the year, down 10 percent from 2006. Snuff was a much bigger earner at $144.6 million (40.1 percent margin), but even that figure was down 20 percent from last year.
However, the future might be a little tougher. “Acquisition-related costs, including amortization on acquired intangibles, and somewhat weaker prospects for the rest of the cigar business imply that the operating margin for cigars in the fourth quarter 2007 could be lower than the average for the year.” Moreover, the report indicated that the decline in operating profits were due to “a weaker performance in premium cigars.”
Short fillers: “We knew the Punch figure was rare and would generate interest, but the final sale price exceeded our wildest dreams.” That was the reaction of auctioneer Philip Weiss to the sale of a 19th Century, five-foot-tall figure of Punch credited to Samuel Robb on October 21 in Oceanside, New York. Estimated to bring in from $100,000 to perhaps $150,000, the hammer finally came down at a staggering $542,400! The figure came from the personal collection of Joseph Kedenberg, a musician known as “Keden on the Keys,” who died in 1983. His enormous collection of advertising memorabilia of all kinds had never been exposed to the public and the two-day sale included 1,600 lots and grossed more than $1.6 million . . . with the recent World Series held at Coors Field in Denver, reporters asked all about the famous humidor used for baseballs there. It’s not large at nine feet square and seven feet high, and is one of two adjoining rooms used for storage; the larger one is used for beer. While it can hold about 400 dozen baseballs, the Coors Field humidor wouldn’t do much for cigars.
Temperature is good at 70 degrees (F), but the relative humidity is only 50 percent, much too low for cigars (70 percent is considered optimum). However, the humidor has worked for the Rockies to make their home park not quite the hitter’s paradise it has been in prior years. The controlled temperature and humidity negate the effects of altitude, which was shrinking and therefore hardening the baseballs by a small percentage before the humidor came into use.
Heard in the Humidor is a publication of Perelman, Pioneer & Company. Copyright 2007; All rights reserved.