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Commentary: Cigar Renaissance or Unhealthy Bubble?

5 Mar 2015

tobacco-overheated

Discerning cigar smokers still flinch at memories of the cigar boom of the mid ’90s. From 1993 to 1997, annual handmade cigar imports skyrocketed from under 100 million to well over 400 million.

The result wasn’t good for consumers. Many established manufacturers couldn’t ramp up production while still meeting quality standards, and lesser quality “Don Nobody” brands flooded the market.

Good cigars were suddenly difficult or sometimes impossible to find, while poor and mediocre cigars were being sold for high prices. From the perspective of consumers for whom cigar smoking was more than a fad, the bursting of this cigar bubble was a good thing, even if it took a few years for things to stabilize.

For the industry, the boom wasn’t so bad. First off, they sold a lot of cigars in the peak of the boom, and the smart ones had enough foresight to be ready to weather the coming bust.

The longer-term benefits to the industry were the lessons learned. Cigar makers are rightfully weary of sacrificing quality for quantity, even as total handmade cigar production has crept up towards mid-boom numbers.

So, at some point, the question has to be asked: Are handmade cigars approaching another bubble that’s about to burst? There are good reasons to think not, but maybe some warning signs too. First off, the growth has been far more steady this time. Also, you don’t hear as much from industry types about a coming end to boom times, which I’m told was seen by many as almost inevitable during the mid ’90s, even if the exact timing or speed of the collapse were largely unanticipated. The counter is that it’s hardly unusual for bursting bubbles to not be anticipated by most people in them, otherwise people wouldn’t lose so much money in those bubbles.

One of the things that worries me is the ever-increasing price of new cigars, especially the increasing number of cigars sold by companies that aren’t themselves cigar makers. Many of these cigars are of good quality, but they don’t always offer particularly good value for smokers, in part because they have to buy their cigars before they sell them to retailers.

Then there are the pending potential shocks to the established cigar industry. FDA regulation has the potential to wipe out numerous brands introduced in the past few years. Other possible market-shattering events include the full end of the Cuban Embargo, or a natural disaster striking a major growing region.

I don’t want to bum anyone out here, but cautious optimism is usually a more intelligent outlook than unrestrained exuberance. While a collapse like the cigar industry saw after the peak of the ’90s cigar boom seems unlikely, industries don’t usually grow forever.

Patrick S

photo credit: Stogie Guys

Drew Estate

4 Responses to “Commentary: Cigar Renaissance or Unhealthy Bubble?”

  1. neno Thursday, March 5, 2015 at 10:03 am #

    I can’t help but agree. It feels largely helpless to attempt to control the market. We’ll always survive though, as long as legislation doesn’t kill us.

  2. Chuck P Thursday, March 5, 2015 at 5:07 pm #

    I agree prices are going up but I don’t feel like I’m getting anything extra for it. Not sure that means there is a bubble that is going to burst, but I don’t impulsively ask “What’s new?” anymore when I drop by my local shop. Instead I’m sticking with the dependable standbys.

  3. JMac Thursday, March 5, 2015 at 5:46 pm #

    The cigar blending palette is broader than it has ever been. On the one hand one can imagine greater nuance in flavor, on the other it is easier for middling blenders to blend middling cigars. If flavor profiles go toward niche tastes the bubble will jiggle along. If everything goes to the middle or worse then the bubble will burst. It comes down to the same question now as it was in the 90s: is it all about the cigars, or is it all about the money? There is a divergence out there; we’ll see which side wins. There are plenty of fine cigars out there right now for those who enjoy variety. And there are plenty of ho-hum cigars you will never smoke but once.

  4. John Friday, March 6, 2015 at 4:43 pm #

    The impending FDA regulations could possibly ruin the industry. Manufacturers may have to vet their cigars according to new FDA regulations. That would apply to every robusto, toro and Churchill in a line. That could also include cigars that have been on the market for years. But maybe not and that is a big reason the market is being flooded with new sizes and brands, to get them on the market before the regulations take effect.

    I just wish the FDA would do what they are going to do and stop torturing us.