What happens to HSA prices during a recession?

[Kaptain Karl]

As a newbie to CC's, I've learned how much prices have gone up in the past few years during this VERY strong economy. But, inevitability we will hit a recession here in the next few years. And since cigars are a luxury item, I could see demand for cigars (just like wine from where I live) plummet. Will HSA drop prices during a global recession to keep moving product?  

[Derboesekoenig]

Have they ever dropped prices? I didn't think so. Recessions and market trends and such are cyclical in nature, and I don't see the demand dropping much, if any, for habanos in general.

This is just my 2 cents though

[Scotch&Stogie]

Part of the price increases are also due to increased regulations and adjusted tax scales that increased the total tax per stick. Economy won’t have any impact on those increases. 

[Hookmaker]

Recession never hits cigar millionaires like us?

[Corylax18]

Tabacuba isn't responsible for the majority of the price increases. Look at the YUL Cigars list and you'll see that the on island prices have barely risen in the last 10-15 years. Its actually quite amazing. You need to look at the Price HSA is charging the distributors, thats were the real changes have occurred. The Cuban government has ZERO grasp on their actual costs, Profits, Operating Margin, etc. HSA on the other hand is a large multinational company that has a much better grasp on these concepts, which is why you've seen a steady increase in price to match the steady (recently) increase in demand. 

To directly answer your question though; No. Prices don't go down. 

[NSXCIGAR]

Don't recall HSA's prices ever going down in 2001 or in 2008-10--or ever, for that matter. Keep in mind, HSA doesn't sell cigars direct to consumers--they sell only to LCDH proprietors and to distributors who sell to vendors. Those parties might choose to cut prices during recession to move product, particularly higher end stock that's accumulating like sticky ELs and ERs, Cohiba Piramides or some slow-selling cigars like VRDA, SCEM or RyJ Ex 3. But that would generally be done as a discount or sale activity, not a formal price reduction

So with the distributors and retailers taking the bulk of the haircuts it's unlikely Cuba or even HSA is very attuned to the price and demand mechanism. I suppose stock will build up but they seem to have dealt with that issue effectively for many recessions in the last 40 years. I assume excess stock accumulated during economic downturns will simply compensate for poor crop years and inevitable shortages in subsequent years. IOW, cigar supply, demand and price market that tends to equalize over many years. This is no doubt baked in to the price and supply reserves in Cuba or with distributors. 

[SCgarman]

1 hour ago, Kaptain Karl said:

As a newbie to CC's, I've learned how much prices have gone up in the past few years during this VERY strong economy. But, inevitability we will hit a recession here in the next few years. And since cigars are a luxury item, I could see demand for cigars (just like wine from where I live) plummet. Will HSA drop prices during a global recession to keep moving product?  

Nope. Even Rolex watches, Birkin handbags, Italian supercars NEVER decrease in price, even in an recession. Prices on luxury goods only increase. If you cannot afford them, you don't buy them. Some other affluent chap most likely will!

[El Presidente]

2 hours ago, NSXCIGAR said:

Don't recall HSA's prices ever going down in 2001 or in 2008-10--or ever, for that matter. 

HSA pricing was stable  during the tough recessionary periods. 

Outside of that it is a 2-5% increase per year.

They get their "bracket creep" by bumping up the price of new releases. 

[Kaptain Karl]

Great information!! I’m a mortgage lender, we’re going through our own recession right now, and our business will most likely skyrocket during the next recession (rates are spiking right now, and should drop like they traditionally do during a recession so we tend to pick up a ton of refinances during a deflationary interest rate period) so I was hoping prices would dip while I have some extra income ???

[ac031898]

While I can’t speak for CCs specifically, I work in consumer packaged goods and it is fairly rare to take pricing down, even in a recession. Main issue is that even though a manufacturer/distributor may take costs down, that decrease is rarely fully passed through by retailers to consumers (if at all) since the cost reduction artificially increases the retailers margin rate and a decrease in retail price makes it harder to comp revenue from the prior year. One of those situations where real world dynamics interfere with the textbook examples of supply & demand. Kinda like airline baggage fees...may have been justified by $100+ barrel oil prices, but they never went away when oil slumped. Go figure!

[BinBin]

If anything there has been a huge increase in all these hobbies like whiskey and cigars. Even pipe tobacco is making a comeback. The demand will only go up in my opinion

[joshhooper7]

On ‎10‎/‎12‎/‎2018 at 11:33 PM, El Presidente said:

Outside of that it is a 2-5% increase per year.

A 5% increase on Montecristo No. 2 over the next 5 years would move a box from $289 to roughly $350. That's a scary thought!

[MD Puffer]

On 10/12/2018 at 4:09 PM, Hookmaker said:

Recession never hits cigar millionaires like us?

All jokes aside, the people who smoke CC's are probably recession-proof for the most part.