Caribbean cigar sales down in U.S.

FDA reg­u­la­tions drive to­bacco busi­ness to Europe, China

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - EZRA FIESER

Rad­hames Ro­driguez is us­ing a rare to­bacco and special wrap­per to roll 50,000 of his new pre­mium cigars, the Pulita, in the Do­mini­can Re­pub­lic. U.S. afi­ciona­dos shouldn’t get their hopes up, though — the lim­ited-edi­tion cigar won’t be on sale any­where near them.

Named af­ter Ro­driguez’s grand­fa­ther, who started the busi­ness 60 years ago, the Pulita will only be mar­keted in Europe. That’s be­cause Ro­driguez can’t face the headache and cost of com­ply­ing with the U.S. Food and Drug Ad­min­is­tra­tion’s new to­bacco reg­u­la­tions.

“It just costs too much and takes too much time,” said Ro­driguez, vice pres­i­dent of Taba­calera El Artista. “We’re go­ing to fo­cus on the Ger­man and Ital­ian mar­kets in­stead.”

Since Au­gust last year, ev­ery time Artista or other cigar-mak­ers in­tro­duce a new prod­uct for the U.S. mar­ket, they must gain ap­proval from U.S. au­thor­i­ties at the cost of tens of thousands of dol­lars or more. The re­sult? Busi­ness is down by a third this year at the El Artista fac­tory in the fer­tile Cibao Val­ley, one of the world’s largest pre­mium and lim­ited-edi­tion cigar mak­ers.

Across the Caribbean coun­try, pro­duc­ers are grap­pling with FDA reg­u­la­tions. Some are tem­po­rar­ily cut­ting pro­duc­tion in hopes Pres­i­dent Don­ald Trump’s ad­min­is­tra­tion will re­scind the rules. Oth­ers are spurn­ing the U.S. en­tirely, choos­ing to sell their new spe­cialty prod­ucts in Europe and Asia,

● where China is set to over­take the U.S. as the world’s largest con­sumer of cigars.

Ro­driguez said he would have to pay for ap­proval for each of the five sizes of the Pulita he had planned on pro­duc­ing.

“We would price our­selves out of the mar­ket in the U.S.,” Ro­driguez said.

Typ­i­cally more than a thou­sand special edi­tions or new re­leases are in­tro­duced each year, though they make up only a frac­tion of the 315

mil­lion pre­mium cigars pro­duced an­nu­ally. They are of­ten sought af­ter by afi­ciona­dos for their unique taste and com­mem­o­ra­tive value.

“The FDA reg­u­la­tions are cre­at­ing a sit­u­a­tion in which these new, ex­cit­ing cigars won’t be avail­able in the U.S.,” said Hen­drik Kel­ner, pres­i­dent of the As­so­ci­a­tion of Do­mini­can Cigar Man­u­fac­tur­ers, and vice chair­man of Tabadom Hold­ing Inc., which pro­duces David­off brand cigars. Reg­u­la­tors are cre­at­ing a new “for­bid­den fruit” for U.S. smok­ers sim­i­lar to Cuban cigars.

The FDA in­cluded pre­mium

cigars when it de­cided to re­view reg­u­la­tions for to­bacco prod­ucts, in­clud­ing hookahs and e-cig­a­rettes, for health rea­sons. In late July, the agency said it would re­view sci­en­tific data and con­sump­tion pat­terns re­lated to pre­mium cigars.

Still, the num­ber of cigars in­tro­duced at the In­ter­na­tional Pre­mium Cigar & Pipe Re­tail­ers trade show in Las Ve­gas in July was down about 30 per­cent com­pared with last year, ac­cord­ing to the cigar pub­li­ca­tion

the term for a bun­dle of cigars.

Sales in the U.S., fore­cast

to reach about $7.9 bil­lion this year, are pro­jected to grow by less than 2 per­cent a year through 2021, off from the dou­ble-digit growth the in­dus­try had seen in pre­vi­ous years, ac­cord­ing to Euromon­i­tor In­ter­na­tional. Mean­while, the Chi­nese mar­ket is ex­pected to grow from $7.9 bil­lion this year to $11 bil­lion in 2021.

“The fu­ture of the pre­mium cigar in­dus­try in the U.S. is un­cer­tain,” Ro­driguez said. “So we’re go­ing to keep work­ing hard on other mar­kets where we’re not un­der such a big threat.”

Bloomberg News/DEN­NIS M. RIVERA-PICHARDO

Owner Manuel Que­sada in­spects a bun­dle of cigars at his Que­sada Cigars plant in the Do­mini­can Re­pub­lic. For a for­eign cigar-maker to break into the U.S. mar­ket can cost tens of thousands of dol­lars.

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