My take on the US Cuba Proposed Policy Changes.

[parabola66]

I am extremely interested to see whats going to happen with all the NC sticks being labeled with "Habano Sungrown" wrappers and such, and what the fait of the Dominican Cohiba will be, as well as the other NC brands with names from Cuban brands of cigars..

This is a great start to open up channels of communication between the two countries and hopefully we may be able to get some of the criminals who fled to Cuba to avoid life in prison, not to name any names...

[puromaniac]

OK, seems this story has legs...or in this case, babies. Interesting how the details keep rolling out.

http://www.cnn.com/2014/12/21/world/americas/cuban-spy-artificial-insemination/index.html?hpt=hp_t1

[El Presidente]

Rob, if the embargo is lifted entirely what effect would you speculate that would have on global prices and quality?

They (Tabacuba) certainly have the capacity of making an extra 30 million cigars a year+. They have some time to get it right. I suspect you will see a large % increase in tobacco plantings over the next few years. I suspect there will be a significant increase in what is paid to the fincas for tobacco in order that it gets done. Fincas contract their tobacco (90% on average) to Habanos in advance. There are quality stipulations that can adjust the end price.

Right now, many farmers are growing less tobacco than they can so that they can sow other crops which yield a higher return. Tabacuba can turn this around by increasing the contract price.

Tabacuba will need to increase supplies of all tobacco but particularly wrapper which has been affected by two poor seasons. They need not only greater supply but a few good seasons to stockpile (mainly wrapper).

So looking at my Crystal ball for 2015/2016/2017

1. Not much will happen with the total lifting of the Cuban Embargo.
2. Global distributors will get nervous about longterm cigar supply and increase their stockpiles (subject to availability).
3. Cuba will pay a higher price to farmers in 2015/16 2016/17 in order to get as much supply as possible.
4. Logic (a rare commodity in this game) would mean a three year investment in its factories to get them all back to full capacity. At full capacity (currently) they have the ability of producing approximately 130 million cigars a year. Right now they produce 88 Million. The US market is deemed to have a demand for 50 million Cuban cigars a year (a figure touted by HSA) but my belief is that at least initially (the first 3 years of the total lifting) this is under estimating the likely demand. I wouldn't worry too much about trademarks, if dollars can't fix that issue then new brands will be launched.

Points 2, 3 and the first part of 4 above will result in 8-10% price increases to distributors each year for the coming 3 years. This should equate (roughly) to a 3-5% increase to the end consumer each year for the next 3 years.

They have the time to get the quality right. They just need to plan for the supply side and the production side (factory updates, rollers, associated staff). They have let go up to 40% of their rolling force since 2007 so there is scope to get some of these people back and plenty of time to train new ones.

Just my crystal ball. I could be very wrong.

[CanuckSARTech]

They (Tabacuba) certainly have the capacity of making an extra 30 million cigars a year+. They have some time to get it right. I suspect you will see a large % increase in tobacco plantings over the next few years. I suspect there will be a significant increase in what is paid to the fincas for tobacco in order that it gets done. Fincas contract their tobacco (90% on average) to Habanos in advance. There are quality stipulations that can adjust the end price.

Right now, many farmers are growing less tobacco than they can so that they can sow other crops which yield a higher return. Tabacuba can turn this around by increasing the contract price.

Tabacuba will need to increase supplies of all tobacco but particularly wrapper which has been affected by two poor seasons. They need not only greater supply but a few good seasons to stockpile (mainly wrapper).

So looking at my Crystal ball for 2015/2016/2017

1. Not much will happen with the total lifting of the Cuban Embargo.
2. Global distributors will get nervous about longterm cigar supply and increase their stockpiles (subject to availability).
3. Cuba will pay a higher price to farmers in 2015/16 2016/17 in order to get as much supply as possible.
4. Logic (a rare commodity in this game) would mean a three year investment in its factories to get them all back to full capacity. At full capacity (currently) they have the ability of producing approximately 130 million cigars a year. Right now they produce 88 Million. The US market is deemed to have a demand for 50 million Cuban cigars a year (a figure touted by HSA) but my belief is that at least initially (the first 3 years of the total lifting) this is under estimating the likely demand. I wouldn't worry too much about trademarks, if dollars can't fix that issue then new brands will be launched.

Points 2, 3 and the first part of 4 above will result in 8-10% price increases to distributors each year for the coming 3 years. This should equate (roughly) to a 3-5% increase to the end consumer each year for the next 3 years.

They have the time to get the quality right. They just need to plan for the supply side and the production side (factory updates, rollers, associated staff). They have let go up to 40% of their rolling force since 2007 so there is scope to get some of these people back and plenty of time to train new ones.

Just my crystal ball. I could be very wrong.

So....

You think they'll keep a talent like Hamlet stuck behind a sales counter then???? LOL.

[Puros Y Vino]

So....

You think they'll keep a talent like Hamlet stuck behind a sales counter then???? LOL.

He's good but he can bridge the millions of cigars gap alone.