Cuba, the centrally planned cigar, and its rivals

Abstract

K E Y W O R D SCuba, planned economy, trade | 2901 JONES 2 | CUBA, CIGARS AND INTERNATIONAL TRADE From a commercial perspective, cigars fall broadly into two categories: a small premium segment comprising large, hand-made varieties, made from select tobacco leaves, and sold at the highest price points; and the mass-market segment of machine-made, cheaper and smaller cigars, cheroots and cigarillos. 1 Cuba, the Dominican Republic, Nicaragua and Honduras dominate the global market for premium cigars. Reputation-based branding and exclusive distribution distinguish premium cigar varieties, with carefully cultivated "pedigrees" of their constituent tobacco leaves, labour-intensive production processes, historical features and appellations of origin. Premium cigar manufacturers promote their brands through chains of exclusive cigar bars and annual fairs, conventions and other promotional events. Specialised cigar publications and industry organisations conduct premium cigar tastings and ratings in the same way that vintage wines are rated and ranked for quality. Premium cigars are lifestyle luxury goods, designed to be enjoyed as a special experience, with a smoking duration of from 30 min to 3 hrs. The mass-market, machine-made segment, in contrast, spans a wide range of differentiated varieties, designed and priced for more frequent consumption, branded and promoted for mass appeal and typically sold through wider commercial distribution beyond specialised cigar shops. These cigars are usually smaller in circumference and length, may have filters and flavour infusions and have smoking durations of 10-30 min.Cuba's comparative advantage in premium cigars is based on the particularly favourable microclimate and soil in the Vuelta Abajo and Semi Vuelta regions in the Pinar del Rio province of western Cuba. 2 This area supports the cultivation and seasoning of the slow-burning and aromatic wrapper, filler and binder tobacco leaves used in making the iconic Cuban puro premium cigar, with all tobacco components sourced exclusively in Cuba. Seed type, soil, climate and growing conditions significantly affect the quality of cigars and in fact determine the distinctive taste of cigar varieties (Freccia, Jacobsen, & Kilby, 2003). Cuba became a major source of commercial tobacco production in the early days of Spanish colonisation and originated the development of hand-rolled "cigarros" (Wikle, 2015). Based on this legacy, Cuba continues to cultivate its traditional growing methods and delicate skill-intensive techniques of rolling the cigars by hand, which also determine the quality of the finished product. Factorbased sources of comparative advantage, combined with traditional skills and a long history of cigar production, have created a premium for Cuban cigars that is comparable to the reputational advantages of regional appellations for fine wines from France. 3 Freccia et al. (2003) note in their hedonic study that this "non-functional" utility element appears to have a strong influence on Cuban cigar prices, as the attr...