Date: July 2019
Author: Inspector Z

Price hikes for Cohiba, Quai D’ Orsay, and other brands in the Hababos portfolio. A few months ago, Habanos SA silently raised the prices for Cuban cigars. And slowly, distributors around the world are starting to receive cigars with new prices. And that automatically means that they raise their prices too.

Cohiba gets hit hard

The highest price hike in percentage is for the Cohiba Behike. The price is raised by a whopping 13%. But that’s not all. The Cohiba Esplendidos, Lanceros, Piramides Extra, and Silo VI are raised by 8%. All other Cohiba cigars got a 5% price rise.

Quai D’Orsay is considered a very affordable Cuban cigar. So Habanos decided to raise the prices by 8%. As for all other brands, those prices are raised by 4%. Except for the small cigars. The Minis, Clubs, Puritos, and Shorts remain as they were.

Every year at the Habanos Festival, Habanos releases a press release with turnover numbers. And every year, the revenue rises. Yet the production remains around the same number. With price hikes like these, 2019 promises to be another record-breaking year for Habanos.

Governments profit too

The end consumer gets hit harder than just the nominal price rise of Habanos. That price raise get tippled or more before the cigar ends up in your humidor. The percentage of the retail price will be the same. But it’s not a simple matter of paying the nominal price rise of Habanos. Let’s explain in a hypothetical equation. And we’ve taken the tax percentages for The Netherlands. A fixed tobacco tax and a fixed sales tax. The percentage and retail percentages are hypothetical. 

Ministry of Cigars Price hikes for Cohiba

Habanos sold the Cohiba Behike for €10. The tobacco tax is 6%. That makes the cigar €10,60. The distributor sells them with a 35% margin. So they profit €3,71 per cigar. The retailer pays €14,31 for the cigars. And they also sell it with a 35% margin. They make €5 on each cigar. That makes the cigar €19,31. Add 19% VAT which equals to €3,67 and you have a €22,98 cigar in your hands.

In the new situation, the cigar is €11,30 because of the price rise. And it’s not a case of adding €1,30 to the price, paying €24,28 retail. The new situation is €11,30 + 6% = €11,98. Then the 35% distributor margin, which is now €4,19. That makes it a €16,17 cigar for the retailer. €1,30 already became €1,86. Now the retailer adds his margin of 35% or €5,66 to the cigar. Before sales tax, you now pay €21,83. After the government takes another 19% cut worth €4,15, the retail value is €25,98. So that €1,30 price raise from Habanos, makes the cigar exactly €3 more expensive. And this is with a hypothetical sales price, Cohiba Behikes are more expensive so the price hike is bigger.

In the end, the whole chain gets a higher nominal income because of the price rise. Including the governments, who all are coming down on tobacco. And shooting them in their own foot, making this cash cow very expensive. And cigar lovers are paying the price.

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