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Walfrido Hernández Mesa and Luis Sánchez-Harguindey: Habanos, S.A. New Co-Presidents

Amid the ongoing shaky and uncertain economic situation worldwide, and in the face of antismoking regulations, what was Habanos, S.A.’s strategy in 2012?

Luis Sanchez-Harguindey (L.S.H.): In fact, the current economic situation poses by itself a challenge to the advance of any business. The increasing regulatory framework our business is marked by makes that scenario look even bleaker and challenging. However, the strength and potentials of our company and our distributors turn today’s environment into quite an opportunity.

The strategy laid out by Habanos Corp. pursues a clear-cut objective: to strengthen our world leading role by increasing sales and profitability. For that purpose, we’re focusing on two basic elements: our product, and our customers and consumers.

At a product level, the combination of such prestigious brands within the industry, such as Cohiba, Montecristo, Romeo y Julieta, Partagas, Hoyo de Monterrey or H. Upmann, just to name a few of the most celebrated and well-positioned brands worldwide, coupled with the undisputed quality of the Vuelta Abajo tobacco, simply make our Habanos one-of-a-kind products. On the basis of this major asset, our strategy puts the spotlight on our global brands and banks on the reinforcement of the exclusiveness concept by means of the launch of new products that harmoniously combine innovation and tradition.

As far as our customers and consumers are concerned, on the one hand we’re determined to keep spreading the Habano culture through our emblematic and exclusive Casa de Habano and Habanos Specialists stores, and on the other hand, we’ll continue delivering one-and-only activities and experiences that would allow lovers of our Habanos to enjoy a characteristic and unique lifestyle.

The fruits we’re reaping now, derived from the advance of our strategy, are actually positive and very encouraging in the face of the future. All throughout 2012 and regardless of the complicated situation, Habanos Corp. saw its sales go up by 4 percent, but if we base this growth on a fixed exchange rate, then the figure is as high as percent.

What’s coming up in 2013? Can you give us a few hints?

Walfrido Hernandez Mesa (W.H.M.): The Habano Festival is a unique opportunity in which every year a part of the launches Habanos, S.A. will roll out on the world market in the coming months is presented.

This time around, in which the Festival is celebrating its 15th anniversary, we’ve got some especially outstanding launches in store: two new vitolas from an essential Habano brand: Montecristo, as well as the first Grand Reserve for such a historic brand as Partagas.

As to Montecristo, many aficionados consider it a taste benchmark among Habanos. Its Clasica and Edmundo line, with their signature mild-to-strong taste, are preferred by many enthusiasts from every nook and cranny of the planet. The unveiling of a new vitola in the Clasica line –Montecristo Petit No. 2, which will for sure go stronger as a figurado in the new breed following in the footsteps of the now larger-than-life Montecristo No. 2, its source of inspiration– and the presentation of the Double Edmundo, a new Edmundo that rounds out the two references that have made this line one of the most sought-after Habanos ever, will definitely pack quite a wallop.

Moreover, these are the two launches of choice to introduce the new Montecristo band, famous for its simplicity and elegance that now gets a new lease on life with the addition of new visual and security elements which respect the brand’s tradition and boosts up its image dramatically, with full respect for its history and tradition.

As far as Partagas is concerned, the first Grand Reserve for this centenarian brand, founded in 1845, will be unveiled in the course of the Festival. These Habanos have been completely rolled by hand using long filler, with tobacco leaves harvested in 2007 from the finest plantations of the world, in Vuelta Abajo. The ligero leaves used in the blend of this new Grand Reserve of Partagas –known for the strong taste of its vitolas– hail from the tobacco district of San Juan y Martinez*, a condition that gives this blend the right strength that Partagas delivers. For its part, the seco leaves were handpicked from the tobacco district of San Luis*, that give these cigars their peerless scent, one of the reasons it’s so famous both in Cuba and around the whole wide world. All the leaves have been thoroughly aged for five years tops, so we’re confident that the Lusitanas vitolas, with their magnificent looks, will be blockbusters among our consumers.

Last but not least, I’d like to mention a launch that shows that Habanos, S.A. never forgets about those who are in times of crisis and still want to enjoy the taste of the Habano in more accessible segments. An update and renovation of three new vitolas that will replace the ones currently available for the Vegueros brand. These are trendsetting vitolas that pay tribute to all those tobacco planters in Cuba who make Habanos possible: the Vegueros.

Will this new edition of the Habano Festival keep its luring expectations in terms of content and turnout?

L.S.H.: Make no mistakes about it. The Habano Festival is no doubt a rock-solid event in which year after year more than a thousand people from some 70 countries come to Cuba to enjoy one of their favorite passions: the Habanos. In addition to Habano devotees and professionals, such as distributors and retailers, this year we’ll have a magnificent international turnout from the fields of culture, gastronomy, cinema, fashion, sports, luxury business and collectors.

The Festival, organized for the first time in 1999, has panned out to be a world-class event, and in my opinion, there are several reasons that bear this out.

First of all, we count on the best product in the market, a product that has woven its own legend for years, featuring brands that are undoubtedly the most recognized, acclaimed and prestigious around the world. Another reason is the passion, that passion that people show day after day in making this miracle called Habano: farmers, the Tabacuba staff, the cigar rollers and the rest of the factories’ payrolls, the Habanos, S.A. team and its distributors, all the way down to our customers and consumers, whose satisfaction is the name of the game in our business. But we can also add the matchless framework provided by the island of Cuba, its places and its people, I really find it hard to believe that there’s any other event in the world that could hold a candle to this Festival.

Like in previous Festivals, we’ve gone the extra mile to take the attendees’ expectations up a notch. To pull that off, in this edition we’ll combine traditional activities, like the guided visits to the plantations or the Habano alliances –this time around featuring the prestigious Spanish wines from Rioja– with something new called Tobacco & Gastronomy, in which the tobacco from Vuelta Abajo will be linked to haute cuisine like never before.

Since it cannot be otherwise, the closing of this Festival will be the Gala Dinner in which, as Walfrido mentioned earlier, we’ll launch the first Grand Reserve of Partagas in its 17 years of history; we’ll also present the Habano Awards, recognizing all those who contributed this past year to enhance its history and culture, and to top it all off we’ll have the traditional humidor auction.

In a word, this 15th Habano Festival will surely be a clear example of the dynamism, the nonstop evolution and innovation our business is marked by, and whose end aim is no less the chance to offer the best possible experience to all Habano buffs.

What other new things do you have in store in terms of alliances and other surprises coming with this Habano Festival?

W.H.M.: As Luis said, the 15th Habano Festival will bring on a new alliance: Habanos-Rioja, which promises to be a major moment in this edition because two denominations of origin with great tradition behind them will be bonded together, two denominations of origin that continue setting trends and reinventing themselves.

Habanos is always looking for prestigious products that could serve as references in their own categories to beef up those links among historic denominations of origin. In this 15th Habano Festival, Rioja is the one. It’s a winemaking denomination of origin that brings history and is a token of Spanish-made quality wines.

It’s also important to underscore the historic ties between Spain and Cuba that brought the Rioja wines to the island nation since time immemorial. There are Customs documents that certify the entry of Rioja wines to the island nation for centuries in a continuous inflow, and that’s no better token that the pairings between Habanos and Rioja have been going on since the early 19th century at the very least. Many Spaniards from the Iberian Peninsula wanted to continue enjoying their wines of choice once they settled down in Cuba.

This time up, we’ll be celebrating this much prestige and history of two denominations of origin, Habanos and Rioja, through a peculiar alliance that will pair Habanos with the finest modern and classic Rioja, broken down in these two categories.

The opening stage was held in Madrid and great cellars were chosen. We’ll be able to enjoy the presence of its wines in this Festival and you can rest assured this is going to be one of the highlights.

I’d like to add that, as in previous editions, we’re expecting to have personalities from different walks of life coming from different nations. We hope this edition will celebrate all those people who have traditionally attended our Festivals, who give us their trust and support with their presence here.

Luis, this is your second stint with Habanos. What are your top challenges and projects now as co-president?

L.S.H.: For me it’s an honor to be here, next to Walfrido, at the helm of Habanos Corp. I consider myself a lucky man because I can get my job done in such a passionate business as this one, a business that hinges on a product I also enjoy so much as a consumer.

Indeed, we can say this is my second stint with Habanos Corp, after serving a tenure between 2001 and 200, first as Corporate Development Chief and later on as Finance Vice President. However, from that first moment to date I’ve been in contact with the world of Habanos and I’ve kept a close eye on its evolution, from different posts I have served at the Imperial Tobacco Group, a company that owns 50 percent of Habanos Corp.’s shares.

During my first stage, I saw the development and growth of our business that, since its creation, came into being with a clear global intention. Today, that intention has given way to a reality, with the presence of our Habanos in over 150 countries through our distributor network. Therefore, we have a bright present and a much brighter future on the road ahead. The advance of our strategy, as we mentioned earlier, will allow us to strengthen the benefits and the revenues in our secured markets, and well as to spread our culture and expand our sales in other potential markets, especially in Asia –China is gaining momentum with each passing year– the Middle East, Eastern Europe –Russia is clearly leading the pack there– Brazil and Latin America.

With that view in mind, we count on the best product money can buy, the best distribution network, the most passionate customers and consumers in the business, and the best staff. Therefore, this is no doubt a winning combination we’ll manage and run efficiently in a bid to meet our growth goals.

Walfrido, you’ve been in the Habano business for many years, from agriculture and other positions in Cuba. What are your main challenges as co-president? What new perspectives and markets are opening up for Habanos in 2013?

W.H.M.: I’ve got no doubt in my mind that my top challenge as co-president is to work hard to keep Habanos on the top position it has historically held, and in the same breath, have the possibility of pleasing our most demanding smokers.

Personally, it’s a tremendous privilege and a huge responsibility to represent our country’s most genuine product that, through its history, has meant to be a part of our Cuban identity.

My former experience, in which I’ve spent 33 years, makes me a passionate doer of all the work linked to this product, from the seedlings all the way to the rolling of Habanos. This also makes me commit myself to this production chain and, therefore, to our job, which prompts us to be closer to it with each passing day, to keep improving the quality and maintain the leading position that we have.

2013 brings new challenges. The world economy has been waiting too long for a rebound and the consumers want to have the trust in the economy back, to be at ease with the economy.

Habanos, S.A. has battened down for the crisis by means of innovations and launches, by keeping a grip of secured markets in Europe and the emerging markets in Asia, the Middle East and South America.

It could be welcome news if we could see stronger economies in those countries that have secured markets for Habanos, if we see people recovering the trust. If that were the case, that would bring a chance to put growth back on track. That development would surely bring along an opportunity to lay the groundwork for further sales of Habanos in those markets. On the other hand, Habanos keeps improving and augmenting its presence in emerging markets in Asia and the Middle East.

In recent years, the combination of good outcomes in the emerging markets and the good evolution of some secured markets in Europe have allowed us to offset sale downfalls in other nations that have been hit harder by the crisis in the Eurozone.

As to the near future, we’ll continue putting our smart money on those opportunities, on the strength of our top brands, like Cohiba, Montecristo, Romeo y Julieta and Partagas, essentially tagging along with our most exclusive products, like Limited Editions, Reserves and Grand Reserves, plus others focused on specific channels and countries, such as the Regional Editions and those specifically designed for Duty Free.

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