Habanos S.A. Reducing Supplies of Cuban Cigars to Switzerland

The supply of Cuban cigars in Switzerland will be reduced, a move that could signal yet another transformational change in how Cuban cigars are sold around the world.

As first reported by Cigar, Intertabak AG—the Swiss distributor of Cuban cigars—made the announcement in a letter sent to retailers last month. In the letter, the distributor reportedly told its customers that Habanos S.A. was cutting the supply of Cuban cigars that would be sent to Switzerland. Per multiple sources, the reason for this move is that Habanos S.A. is shifting supplies from distributors that it partially owns to distributors that are majority- or entirely owned by Habanos S.A.

Habanos S.A. is a joint venture, owned half by the Cuban government and half by a group of still unnamed Asian investors. The company is responsible for the distribution and marketing of Cuban cigars around the world, which it does through local distribution companies. Technically, those ownership stakes are held by a separate company, Altabana SL, which is owned by Habanos S.A.’s two owners. It is understood that Altabana owns at least 50 percent of every one of the local Cuban cigar distribution companies around the world.

Intertabak AG is owned half by Altabana/Habanos S.A., while the Villiger and Lévy families own the other 50 percent.

When asked about the change, Habanos S.A. provided the following statement to halfwheel:

The company Intertabak is our long standing official distributor in Switzerland and, for confidentiality purposes, Habanos, S.A. does not makes public any contractual details with any of its partners/distributors.

The demand of Habanos is experiencing a steady increase, mainly in emerging markets, and, naturally, our company will do its utmost to match this demand and satisfy our consumers. Having said that, Habanos, S.A. manages a global business and it is our goal not only to increase our sales in emerging markets, but also to consolidate our position in our mature markets as it is the case of Switzerland.

A representative for Intertabak AG declined to comment.

At least one report has indicated that the supplies might be cut by as much as 40 percent. That report also mentions that the only way to avert that reduction would be to change the ownership structure of Intertabak AG.

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Other distributors are aware of the changes in Switzerland, though some—including those at businesses that are not majority-owned by Habanos S.A.—have told halfwheel that they haven’t been informed of any changes to their supplies. Others declined to comment.

It’s unclear whether Switzerland is the first or only country to be informed that its supplies will be reduced going forward. While Cigar reported that it would impact distributors, plural, it could be possible that this move is being made specifically to affect Intertabak/Switzerland.

If Habanos S.A. treats all of its distributors the same and begins reducing supplies to every distributor that it only owns half of, it would have massive implications in two vital growth markets: Asia and the Middle East.

Pacific Cigar Co. is the distributor of Cuban cigars in most of Asia and Oceania, though not mainland China; Phoenicia TAA Cyprus Ltd is the distributor for the Middle East and much of Africa. Financial records of Imperial Brands, plc—which owned half of Habanos S.A. until late 2020—indicate that, as of 2020, Imperial had 25 percent stakes in Pacific and Phoenicia, meaning that Habanos S.A.’s total stake in each was likely 50 percent of each company, the same amount of ownership it has in Intertabak.

These are not only two key growth markets. Records show that as of 2022, Pacific and Phoenicia were the company’s two most profitable distributors. Given all of this, many are skeptical that Habanos S.A. will treat all of the distributors the same.

For its part, Switzerland is not some minor player in the Cuban cigar world. Habanos S.A. said it was the third-largest market for Cuban cigars in 2023.

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The distribution changes would be the second massive change to how Cuban cigars are sold in the last two years. In 2022, Habanos S.A. announced a massive price hike that saw the prices of some Cuban cigars triple. There were smaller but still substantial price increases in 2023, and a more moderate one was announced earlier this year.

These price hikes have literally paid off. Habanos S.A. reported $721 million in revenue for 2023, shattering its previous record revenue year by more than $175 million. Those record financial results have come at a time when Cuba is experiencing massive shortfalls in tobacco production and presumably is rolling fewer cigars compared to pre-COVID levels.

Notably, these changes occurred after Imperial sold its share of Habanos S.A. and the associated businesses.

Multiple sources have told halfwheel that the new co-owners have been aggressive in trying to increase the profits from the Cuban cigar monopoly. Their timing has been impeccable. Following COVID-19 lockdowns, sales of cigars skyrocketed both in the U.S. and abroad. Furthermore, demand for luxury products as a whole has increased dramatically, and companies in nearly every industry have increased prices.

As for the motivation, the most basic answer would seem to be profits. By taking cigars from a distributor that Habanos S.A. only owns half of and moving them to a distributor that is a fully-owned subsidiary, it would allow Habanos S.A.’s owners to retain more of the profits from the sales of those cigars. This would be especially attractive if Cuba is unable to produce more cigars and/or continue to increase prices.

As to where the cigars from Switzerland might go, Imperial’s financial records show that before the sale, it had 50 percent stakes—as opposed to 25 percent—in roughly 10 distributors:

• Coprova S.A.S. (Listed as Caribbean, but Coprova is the distributor of Cuban cigars in France, Algeria and Monaco)
• Cuban Cigar S.L. (Canary Islands)
• Cubacigar Benelux N.V. (Belgium, Luxembourg & the Netherlands)
• Dalso S.R.L. (Dominican Republic)
• Empor (Portugal)
• Habanos Nordic AB (Scandanvaia)
• Infifon (China)
• Puro Tabaco SA (Argentina/Chile)
• Top Cigars Corporation LLC (Russia)

Some of this information may be outdated. For example, Cubacigar Benelux N.V. changed its name to Laguito 1492 NV.

Imperial’s annual report also listed it as the sole owner of Tabacalera SLU (Spain) and SEITA, which distributed José L. Piedra and Quai d’Orsay in France, though that is now under the control of Coprova.

For reference, China (Infifon) and Spain (Tabacalera) were the #1 and #2 markets for Cuban cigars in 2023.

Brooks Whittington contributed to this story.