Q & A with Jorge Luis Fernandez Maique, Habanos S.A. Co-President


21/02/2011

“Stick to the strategy of creating high added-value products that stand out due to the extraordinary properties of Cuban tobacco,” says this exec as he wraps up one of the Corporation’s main lines of work. In this interview, he sheds light on the company’s 2010 outcomes, shares his vision of the future and reveals some of the novelties to be launched within the framework of the 13th Habano Festival.

As new co-president of Habanos S.A., can you spell out the challenges the company is facing in these times of worldwide economic instability and what perspectives have you devised to work this out?

I took over as co-president of Habanos S.A. in 2010, at a time when sales climbed 2 percent in the international markets, thanks the appropriate management in a period of crisis, like the one that broke out in 2008, and a strategy to come up with attractive habanos for dealers and consumers. These have been key factors to minimizing the effects of a slumping economy worldwide that have even remained in some of those markets.

In recent years we’ve developed such habanos as the first Gran Reserva of Cohiba, a new Montecristo line called Open, the Wide Churchill of Romeo y Julieta, Ediciones Limitadas and Ediciones Regionales, virtually in all the 27 brands we have right now.

In addition, we rolled out the Cohiba Behike with its three vitolas (BHK 52, BHK 54 and BHK56), which became one of the most exclusive lines ever unveiled by Habanos S.A. and an immediate smash hit with a demand way higher than the actual throughput capacity for a habano that’s rolled in such limited quantities. This brand brought in the medio tiempo leaf, whose addition to the blend has demanded a tremendous joint effort on the part of tobacco planters, the Tobacco Institute, Tabacuba and the entire Cuban tobacco industry, together with the Regulatory Council that serves as meeting ground for discussing all the initiatives.

Therefore, the first thing here is to recognize the work conducted by the entire structure of Habanos S.A., together with Cuba’s tobacco industry, from the farming all the way to the marketing.

The goal is to keep the product on the same innovative track with the addition of holograms –like in the case of the Cohiba Behike- and very important security tracing measures, like the new Seal of Warranty of the Republic of Cuba, coupled with nonstop quality control in a bid to supply the markets and give the most demanding smokers the highest levels of classiness and exclusiveness.

That’s why I believe the main challenge is to stick to the strategy of creating high added-value products that stand out due to the extraordinary properties of Cuban tobacco and its best producing regions, especially in Vuelta Abajo, as well as in the rest of the production areas that contribute to make the habano the most prestigious item in the realm of tobacco.

In this edition of the Habano Festival, there’ll be some new launches that are already making a splash and building on expectations among habano aficionados. What strategies are they clinging to?

I’ll wrap up the main launches for 2011 as a token of the tremendous activity and dynamism inside both Habanos S.A. and the Cuban tobacco industry as the world’s leading groups in the market of totally hand-rolled cigars.

Habano is a product bestowed with a Denomination of Origin, manufactured through over a hundred manual processes with the finest raw material and by the most experienced hands that cherish skills that have been handed down for centuries from one generation to the next, from parents to offspring, and that a particular, very demanding public segment, hailing from everywhere under the sun, treasures as the very best of its kind; make no mistakes about it.

The Gran Reserva of Montecristo Cosecha 2005, presented in one of its flagship vitolas –the Montecristo No. 2- has been made with the finest tobacco leaves out of Vuelta Abajo, thoroughly handpicked and aged for five long years before being rolled at the celebrated H. Upmann factory, the one that has traditionally made the Montecristo brand –quite a benchmark in the habano sector. Just 5,000 numbered boxes containing 15 units apiece have been made for this occasion. So, this is an asset quite hard to come by due to its limited production and scarce availability.

Other launches announced for the weeklong festival are the Partagas Series E No. 2 and the Series D No. 5, plus a new vitola labeled H. Upmann Half Corona. What objectives does your company seek to meet within the vast habano offer?

Whenever we decide to launch a new product, it’s fundamental that this product could respond to the opportunity of pleasing both seasoned habano aficionados and those who are cutting their teeth in this interesting world, whose culture and traditions are every so often linked to the finest cuisine and to a lifestyle related to the world’s best products and items. 

In the case of Partagas –a brand founded in 1845- the new Series E, featuring the No. 2 vitola, joins the most genuine of the brand’s history. The unveiling of a new 54-ring gauge series enhances the offer of strong-tasting habanos to please a bevy of seasoned smokers who look for intense, strong-tasting habanos. So, this product targets that segment. The new Series D No. 5 vitola also broadens the offer of the prestigious Series D with a smaller habano (ring gauge 50 x 110mm), which gives smokers a chance to puff on a strong habano for a shorter period of time.

With that same view in mind, we want to launch the new H. Upmann Half Corona that clinches a balanced and aromatic taste in a format of less than a 20-minute smoke, very appropriate for both people who are taking their first steps into the world of habanos and those who count on less time and fewer places to puff on their habanos of choice.

Can you give us some detailed information on the evolution of sales and markets in 2010, as well as the most outstanding trends in the tobacco market?

For Habanos S.A., the year 2010 has generated upbeat feelings for all the things I mentioned at the top of this interview and because sales were up 2 percent amid very complex circumstances. We hope this trend to go stronger in 2011, even though those drawbacks will still prevail in some of the markets. Regions like the Middle East and Pacific Asia, however, have put good numbers on the board, and that could offset those other markets that are not faring so well.

A good case in point is Spain, where in addition to an economy in dire straits, the passage of antismoking legislation now bans smoking in all closed areas. That situation has made a dent in the overall consumption of tobacco products and these circumstances have spread great uncertainty across all outlets and stores, eventually making habano sales plunge.

Nonetheless, we hope the most troublesome markets could bounce back and by 2011 individual consumption in Spain will eventually rebound as well, despite tough limitations and restrictions imposed by the law.

Among those markets with the potential to fare well, we can mention Russia, a country that grew in 2010. We’re equally hopeful that huge markets with emerging economies, like Brazil, could make headway in the knowledge of the habano culture.

As far as consumer trends are concerned, we’re noticing an increasingly demanding habano aficionado. We’re also watching far more smokers jumping on the habano bandwagon, people who look for the very best and the most exclusive items money can buy, especially in emerging markets in Asia and the Middle East. In seasoned markets, like those in Western Europe, there’s a renovation in which experienced smokers and people getting increasingly interested in the culture, tradition and exclusiveness of the best habanos now coexist. And this is owed to some of our most prestigious brands, like Cohiba, Montecristo, Romeo y Julieta and Partagas, the ones newcomers are mostly drawn to. As to the evolution of formats and vitolas, the habano offer –boasting over 250 commercial vitolas- is quite broad and meets whatever preferences in terms of strength, aroma or size any smoker might have.

Either way, we continue to have a leading international position among smokers of habano brands. We continue to enhance our portfolio with each passing year through launches that meet the newest trends and legal restrictions, and those are some of the reasons that have encouraged us to unveil the H. Upmann Half Corona and the Partagas Series D No. 5.

You mentioned the case of the antismoking law in Spain. As a company, what do you make of these increasingly tougher restrictions on tobacco consumption in different parts of the world?

As Habanos S.A., we stand up for a vision of mutual respect between smokers and nonsmokers, and we advocate for the rights of smokers to enjoy their habanos in places designed for aficionados. Unfortunately, there’s a proliferation of guidelines that even limit those rights in spaces where only smokers were allowed, so they leave citizens without any options in terms of places to puff on their habanos. 

In countries with severe restrictions, like the UK, we’re watching the development of new habits derived from that ban, like a proliferation of outdoor locations for habano smokers. In the same breath, since the early days following the enforcement of these guidelines there’s been a trend now to have more terraces where people may smoke, and those places are far more abundant when cold weather conditions subside.

The guidelines are hitting smokers hard as it takes time for them to adapt to the new circumstances and eventually find places after a period of adaptation. However, we might expect common sense to set in and that those regulations –that are taking restrictions way too far- won’t evolve into development model. We strongly believe it’s possible to have a coexistence of places for smokers, even in closed spaces, with all due respect to the rights of nonsmokers.

I’d also like to mention the Duty Free and Travel Retail sectors that currently account for a quarter of all of our sales worldwide. We expect those niches to stage a comeback in terms of the number of passengers, as it’s expected to happen in 2011.

How do you assess the timeliness of the Habano Festival and what do you think the main values of a specialized event like this really are?

One of the virtues of the Habano Festival, let alone its leadership and trailblazing character in the realm of cigars, is its ability to combine a permanent format that comes around every year with the conception, creation and development of new ideas and activities that make it a far more attractive gathering with each passing edition.

On the one hand, during this festival we’ll be celebrating the first 15 years of the Habano of the Year Awards and the tenth anniversary of the Habanosommelier contest. These initiatives have already become traditions that have contributed to create a culture of habano in those places where there was no such thing in the past, to underscore its protected denomination of origin as a historic, exclusive product associated to the finest cuisine, cocktails and the fanciest deluxe brands all around the world.

On the other hand, this year we’ve also planned new activities that will surely have a tremendous acclaim, like the first-ever blind tasting session that has generated great expectations among those attending the festival. The public will have a chance to take a closer look at the skills of the best habano tasters in a very different competition. The habano taster is quite an institution within this Cuban industry, so this new activity will pay tribute to those who hold down this job.

I’m confident the 13th Habano Festival will be a new success and its more than 1,500 attendees from 80 countries visiting Cuba for this occasion will take back home a one-in-a-lifetime experience in terms of knowledge, culture and enjoyment of the centennial tradition the habano stands for, one of the greatest ambassadors of Cuba’s image all around the globe.