For the week of December 3-7, 2007

HEARD IN THE HUMIDOR Highlights of the week in cigars and smoking from CigarCyclopedia.com

Los Angeles – The Cigar Association of America is the industry’s trade association, headed by Norman Sharp, now in his 26th year as its President. He gave an excellent summation of the size and shape of the industry in the U.S. in a question-and-answer session in the Winter 2007 issue of Cigar Magazine. Some highlights:

=> Sharp noted that in 2006, a total of 9.8 billion cigars (premium, mass-market and little) were sold in the U.S., making it easily the world’s largest cigar market. But that’s only 2.57 percent of the U.S. cigarette sales of 380.3 billion!

=> An April 2007 report by the U.S. Department of Agriculture estimated that $3.2 billion was spent on cigars compared to $83.7 billion on cigarettes in 2006.

=> Of the 9.8 billion cigars sold in total, 4.5 billion (45.92 percent) were little cigars and 5.3 billion were classified as large cigars (54.08 percent). The large-cigar total includes a little over 300 million premium (handmade) cigars with the rest (5.0 billion or 50.91 percent) machine-made. That makes the premium market barely 3.17 percent of the overall cigar market in the U.S. by volume.

=> In terms of dollar value, little cigars accounted for just 10.78 percent of sales ($345 million). Machine-made cigars are the largest segment, with 62.66 percent (about $2.005 billion) with premium cigars accounting for 26.56 percent or $850 million.

=> Sharp says the U.S. cigar-smoking population of all types of cigars is more than 13 million, "the overwhelming majority of whom smoke cigars on an occasional basis." He noted that after the U.S., the next-largest markets are France, Germany and Spain.

Sharp also pointed out the silliness of the current campaign by state attorneys general to try and have little cigars classified (primarily for tax purposes) as cigarettes. "Where there may be confusion in the minds of the attorneys general as to the difference between the two products, there is apparently no such confusion in the minds of consumers. As evidence, since 2000, cigarette sales in the U.S. have declined by 52.1 billion units, while little cigar consumption has increased only by 2.2 billion units. In fact, last year, there were more cigarettes sold in five days in this country than little cigars were sold in the entire year. This is hardly an indication that cigarette smokers are switching to little cigars."

Sharp helps to lead the fight against the SCHIP legislation in Congress and says he has never seen the industry or its consumers as united as they are today. And as Benjamin Franklin observed at the signing of the Declaration of Independence in 1776, "We must, indeed, all hang together, or most assuredly we shall all hang separately."

>> The Cigar Association of America’s newest import report, covering the first nine months of the year, is based on U.S. Customs data and showed strong imports in September totaling 31.35 million cigars. That’s up a very healthy 13.6 percent over the 2005 figures.

For the year, premium cigar imports are rolling along at about 7.5 percent ahead of 2005, already reaching 235.7 million in the first nine months of 2007. At this pace, imports will grow to 334.35 million, third-best ever and just a stone’s throw from the second-place mark of 334.58 million set in 1998, the final year of the Cigar Boom of the 1990s.

That’s almost too good to be true, but at 7-8 percent a year, the cigar industry’s big three – the Dominican Republic, Honduras and Nicaragua – can handle it. Imports from the Dominican were up modestly in September (+3.3 percent) and are up nicely for the year, by 3.1 percent, to 126.7 million so far in 2007. Honduran imports are likewise a little, by 3.3 percent for the year to 57.4 million.

The big growth has come from Nicaragua, which will shatter all records for cigar production this year. In the month of September alone, U.S. imports from Nicaragua were up 57.3 percent over 2006 and the year-to-date figures show 48.9 million cigars imported in 2007 against 38.4 million last year for an increase of 27.3 percent.

>> A new book on the life of famed Canadian portrait photographer Yousuf Karsh – Portrait in Light and Shadow: The Life of Yousuf Karsh – explains in detail the famous portrait he took of British Prime Minister Winston Churchill in 1941.

On December 30, Churchill addressed the Canadian Parliament and, according to the new book by Maria Tippett, Karsh was set the photograph him after the speech. But Churchill was "grumpy" and wanted to continue smoking his cigar, even in the picture. Karsh is to have said "I don’t want to take another one of those damn cigar portraits," and went up to Churchill and firmly but politely removed the cigar from his mouth!

Churchill, already seated for the portrait, simply scowled and Karsh captured the image, perhaps the best known of Churchill during the war period.

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Heard in the Humidor is a publication of Perelman, Pioneer & Company. Copyright 2007; All rights reserved.

Rich Perelman

12/3/07

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