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Commentary: Could Cuban Cigars Save the Non-Cuban Cigar Industry from the FDA?

30 Mar 2016

Obama Castro press conference, Havana

In April 2014, the Food and Drug Administration (FDA) took the first major step towards invoking its authority to regulate premium cigars. At the time, it seemed likely that by the end of 2014—if not certainly in 2015—the FDA would finalize its rule subjecting cigars to FDA regulation, including a pre-approval process for cigars introduced after 2007 that would cost cigar makers up to a projected $400,000 per new cigar brought to market.

The comment period for the proposed regulation closed in August 2008 after nearly 55,000 submitted comments, with over half of them from cigar smokers concerned about the impact of the new regulations. Since then, the rule-making process has slowed considerably.

It took over a year after the close of the comment period for the FDA to submit a proposed rule to the Office of Management and Budget (OMB), which finally took place last fall. Normally, the OMB review process is completed in 90 days, but nearly six months later there has been no further action. Now, rumors suggest the process is frozen. So why the delay?

The most likely answer may be Cuba.

After seemingly ignoring Cuban-American relations for most of his presidency, President Obama has taken significant steps toward normalizing relations with Cuba in the final years of his final term, culminating with the historic visit to Cuba earlier this month. With Cuban cigars being one of Cuba’s most notable and economically important exports, one can reasonably infer that thawing diplomatic relations may be throwing a wrench into FDA efforts to regulate cigars.

Consider the impact of the proposed regulations on Cuban cigars. The FDA has taken the position that, because of the text of the law that authorizes the agency to regulate cigars, it cannot exempt cigars introduced to the U.S. market after February 15, 2007. (We covered this in significant detail last year.)

For non-Cuban cigars, the impact would be huge. For Cuban cigars, none of which can be legally sold or marketed in the U.S. as long as the embargo remains law, the impact would be total.

As you should know by now, the FDA had two options in its proposal for regulating cigars. Option one would treat all cigars the same. Option two would create an exemption for premium cigars that meet certain criteria, including being composed mostly with long-filler tobacco, not being flavored, and having a suggested retail price of at least $10. (One estimate projected that 85% of cigars fall under the arbitrary $10 point.)

One open question about the FDA rules under either option is how cigars introduced after the 2007 cutoff, but already on the market when the rule goes into effect, would be treated—especially those introduced before the FDA took any action towards regulating cigars, or even before the bill authorizing the regulation was signed into law in 2009. Immediately pulling those cigars off the market would be extremely disruptive, not to mention impractical and grossly unfair. Therefore, a grace period where the cigars could remain on the market pending an application for FDA approval seems likely. Of course, non-Cuban cigars, like Cuban cigars, that are not currently on the market wouldn’t be helped by such an accommodation, and options for specifically exempting one country’s imports but not another would not be justified by the legislation (and also could violate international trade commitments, not to mention basic fairness).

For Cuban cigars, the majority of which would probably meet the premium definition, especially with likely price hikes due to increased demand should they become legal in the U.S., option two would allow Cuba’s most famous product to be sold almost immediately if and when the embargo ends. Option one, on the other hand, would keep Cuban cigars off the world’s largest cigar market until they undergo the pre-approval process. Considering that the FDA has taken years to rule on a small percentage of the pending tobacco products already waiting for FDA approval, that wait could be almost indefinite when they go to the back of the line after thousands of non-Cuban cigars.

Unfortunately, indications are the FDA has resisted option two (a purported leaked copy of the rule the FDA transmitted to OMB didn’t include a premium cigar exemption). Further rumors suggest the White House and OMB favored an exemption for premium cigars while FDA opposed one, which has contributed to the likely delay at OMB.

All of which brings about more questions than answers. But  now there’s certainly a compelling case that changing relations between Washington and Havana, and the potential impact on Cuban cigars, could be a significant reason for the delay in implementing a final rule regulating cigars.

If true, then possibly only the president’s unilateral desire to re-establish trade with Cuba is stopping the U.S. government from devastating American cigar retailers, non-Cuban cigar companies, and the tens of thousands of people in the Dominican Republic, Honduras, Nicaragua, and elsewhere that depend on making cigars for the American market. What does it say that the only thing that might save non-Cuban cigars is the desire to not harm the Cuban government-owned cigar industry?

In many ways, the question is as troubling as the answer. But given the destructive impact of FDA regulation on cigars, any reason for delay or possible reprieve would be most welcome.

Patrick S

photo credits: IIP Photo Archive

Commentary: FDA Still a Major Threat to the Premium Cigar Industry

15 Feb 2016

FDA-cigars-large

One of my 2016 resolutions is to ensure we update our Question of the Month (found in our right-hand sidebar) monthly. Last year, far too often our reader poll got neglected. So I recently took down January’s question and, as I updated it, noted the results of the voting, which I present to you below:

What do you think is the most likely impact of forthcoming FDA regulations on premium cigars?

A. Large manufacturers will adapt, but boutiques will close down.
B. Blends introduced after 2007 will be recalled.
C. The floor price for a premium cigar will rise to $10.
D. All of the above.
E. The industry will see few impacts.

“All of the above” led the voting with close to 40% followed by—and this was shocking to me—“the industry will see few impacts,” which got a whopping 22% of the vote. I was so struck by the realization that so many of our readers don’t see the FDA as a major threat to premium cigars that I felt compelled to address the topic today.

As you probably know, StogieGuys.com has written about the FDA extensively since at least 2007. Currently, we’re right on the cusp of learning how this will impact the industry. To bring you up to speed:

  • FDA regulations would be devastating to the thriving handmade premium cigar industry, even though there is no indication that such regulations would have any impact on youth smoking or public health.
  • Currently, the FDA has officially sent the latest version of its deeming rule on cigars to the Office of Management and Budget (OMB) at the White House for economic review. Now, the OMB is conducting its review of the FDA rule, and will then hand down the final regulations for implementation. This could happen any day, and it’s almost guaranteed to occur before the end of the Obama Administration.
  • Cigar Rights of America (CRA) and the International Premium Cigar & Pipe Retailers Association (IPCPR) have directed their lobbying efforts to OMB, which is charged with examining the economic impact of proposed FDA rules. The groups will attempt to show the potentially devastating economic impact the proposed regulations would have on cigars, including costing jobs both in the U.S. and abroad.
  • In its initial proposed rule, the FDA offered two options for regulating cigars: option 1 (which covers all cigars) and option 2 (which exempts handmade cigars over $10). Although the proposed rules transmitted to the OMB presumably include the agency’s decision on that important issue, it is unlikely the OMB will make public the agency’s intentions on the issue of a possible exemption.
  • While the OMB review may seem like a formality, those familiar with the creation of the initial proposed rule say the OMB was critical in advancing the option of an exemption for some cigars. If the OMB feels the FDA’s final version insufficiently addressed its previous concerns, it could request further revisions.

Now, I’ll be the first to admit the whole process is convoluted, drawn-out, and rife with complexities and other undesirables that render this story a difficult (and sad) one to follow. But I’m quite surprised 22% of our readers—folks who, by and large, regularly smoke cigars and love tobacco enough to read industry blogs and online reviews—could think the forthcoming FDA regulations will have few impacts.

Have they forgotten the FDA might wipe out every cigar introduced after February 15, 2007? Or that cigar innovation would likely come to a screeching halt? Or that cigar prices might rise considerably, as cigar options become exponentially more limited?

As far as cigars are concerned, the FDA is the defining issue of our era. Let’s try to keep in mind how important this is. And let’s not lose sight of what’s at stake: a thriving industry that caters exclusively to consenting adults and provides thousands of American jobs.

Patrick A

photo credit: Stogie Guys

Commentary: A Cigar State of the Union

13 Jan 2016

SOTU

Last night President Obama delivered his final State of the Union address. In that spirit, I offer my thoughts on the state of the cigar industry as we enter 2016.

In many ways, the state of cigars is as strong as it has ever been. This is our tenth year publishing StogieGuys.com, and the cigars being released today are of highest quality they have ever been.

Consumers are better educated, and they demand more of their cigars. Cigar companies have largely delivered better quality and more interesting flavors. One of the best trends is that new competition continues to challenge the status quo, which drives up quality.

Take a look at various top cigar lists and you’ll see lots of newer companies represented. Fortunately, their success isn’t a result of more established companies slacking off. Rather, the bar is continually rising. I honestly believe the tenth-rated cigar on most “Best of 2015” lists would have beat the number one cigar five or ten years ago.

Another sign of the health of the state of cigars is the fact that even those who have achieved the financial success to walk away rarely do. Statistically, when someone announces they are stepping down or retiring from a job in cigars, it most likely just means they are planning their return, armed with the lessons of their experience.

At the cigar shops you can see how all this benefits cigar smokers. The days where the vast majority of cigars for sale in most shops are made by a handful of the largest companies are increasingly in the past. Cigars have to earn shelf space more than ever, and companies large and small are upping their game to compete for that valuable space.

In short, cigar smokers have more and better choices than ever before. That’s the good news. But there are dark clouds on the horizon.

Impending FDA regulation continues to hover over the cigar industry with the potential to devastate the thriving competition that we’re enjoying. The fact that we enter 2016 without those regulations is a good sign, but literally any day regulations could be finalized. One cigar company executive told me not long ago that he expected many smaller cigar companies couldn’t survive FDA regulations, and I’m afraid that’s probably true.

The delay in the finalized FDA rules shows there is division within the executive branch over the extent of the need for regulation over cigars. While that’s a testament to the work of organizations that lobby for cigar rights, it doesn’t change the fact that the only way to fully stop FDA regulation would take an act of Congress. Going forward, cigar rights groups would benefit from more long-term strategy, instead of pinning their hopes to last-minute Hail Mary attempts to slip riders into massive appropriations bills.

Elsewhere, cigar rights are on defense, too. Smoking bans are not being repealed anywhere, while proposals for expanded bans and increased tobacco taxes continue to flourish.

We have work to do. There may never have been a better time to be a cigar smoker. Keeping it that way, though, won’t be easy. The old saying is eternal vigilance is the price of freedom; when it comes to the freedom to enjoy cigars, that has never been more true.

Patrick S

photo credit: Wikipedia

Commentary: Checking the Year-End Cigar Lists

11 Jan 2016

For one cigar company, the biggest gift of the year doesn’t come under the Christmas tree but at the top of Cigar Aficionado’s annual Top 25. This year, the legendary García family scored the win with their My Father Le Bijou 1922 Box-Pressed Torpedo.

Interestingly, My Father also took the top spot on Cigar Snob’s list, but it was the El Centurion H-2K-CT Toro that landed there. Cigar Journal’s number one choice was the Eiroa Classic Prensado, which did not appear on the other two lists.

As sure as winter brings cold weather, year’s end brings a seemingly endless array of rankings of cigars from magazines, blogs, and podcasts. Smokers argue about their value and validity, but you can’t deny the lists can make a difference in sales.

StogieGuys.com, by the way, doesn’t do a best-of list. Even with three regular smokers, we know it’s possible to evaluate only so many cigars, so we opt to present, without ranking, what we found to be the best we had during the year, and those that came very close.

Unquestionably, the most discussion of lists centers on the industry’s 800-pound gorilla, Cigar Aficionado. Love it, hate it, follow it, or ignore it, there’s no denying that a top rating by the slick publication moves the market like no other. Just ask Alec Bradley or Oliva. This year, perhaps CA’s most controversial topic of conversation was choosing General’s CAO Flathead V660 Carb at the number three spot.

I spent some time going through a number of the lists, especially those from CA, Snob, and Journal, as well as looking at some past rankings.

The first thing that jumped out at me was CA’s 2013 list. There at number nineteen was that same My Father Le Bijou 1922 Box-Pressed Torpedo that was tops this time. Last year, the highest a Pepín/My Father-branded smoke made it was seventeen. Of course, the My Father crew works with numerous brand owners, such as Tatuaje and Ashton, which often rank highly, and García’s Flor de las Antillas Toro was the top pick of 2012.

A noticeable oddity: Bringing up the rear of both CA and Journal’s Top 25 lists was the same boutique cigar: Sublimes Robusto Extra. Almost as close were the magazines’ rankings for La Boheme Pittore. Journal put it at eleven, CA one notch lower.

One of the most anticipated cigars of 2015—Steve Saka’s Sobremesa—didn’t place on any of the three lists. Another hot debut smoke, El Güegüense, from Saka’s fellow former Drew Estate colleague Nick Melillo, was only on Snob’s list, at twelve.

On the other hand, the blog Blind Man’s Puff had El Güegüense first and Sobremesa second. And Stogie Review’s Ben Lee rated them fourth (Sobremesa) and third (El Güegüense).

But just to show how much cigar preferences are a matter of personal taste, Lee’s top smoke was the Avo Syncro Nicaragua Toro. That same smoke was sixteen on CA’s list and didn’t show at all on the Snob or Journal selections.

Padrón, the brand cited often by many tobacconists as their best seller, had a cigar on each of the three magazine lists. Again, though, the ratings illustrate the variations in taste. CA rated the Padrón Family Reserve 50 Years Natural at five, Journal put the Maduro version at two, and Snob went for the Padrón Damaso No. 8 at fifteen.

Whatever your feelings about year-end lists, they are invariably a good place to start when you’re looking for new smokes. At the least, you know someone thought they were good.

George E

photo credit: N/A

Commentary: Random Thoughts from the Humidor (XXIII)

19 Nov 2015

In this edition of Random Thoughts from the Humidor, I look at Steve Saka’s radical transparency, the origins of the word “herf,” and suggestions for finding value cigars.

saka

The Original Cigar Blogger Pulls Back the Curtain

You don’t have to talk very long with Steve Saka to realize he isn’t the type to BS you. In fact, after sitting down with him during a couple of trips to Drew Estate while he was still with the company, I came to appreciate you could ask him just about anything, as long as you were prepared to hear an unvarnished, candid answer. So perhaps it shouldn’t surprise me to see his openness (especially on Facebook) about the process, including the challenges and anxiety, of creating his own cigar brand and bringing it to market. Even the info sheet that came with the samples he recently sent for review came with a leaf-by-leaf breakdown of the Sobremesa blend, something many established brands are still unwilling to provide (in part for fear of someone copying their blend). It’s a level of transparency you don’t often see. And yet maybe his candor shouldn’t come as a surprise. Before Saka was the driving force behind the creation of Liga Privada, he was the editor of what was essentially the first cigar blog, (before the word blog even existed). While the original Cigar Nexus domain is no longer online, you can still read the archive here, including the Monthly Officious Taste Test or M.O.T.T. (a not-so-subtle jab at then Cigar Aficionado executive editor Gordon Mott).

Herf, Established November 21, 1996

Speaking of Cigar Nexus, here’s a gem about the origin of the the word herf, which originated on the alt.smokers.cigars (ACS) newsgroup in 1996: “The un-official word of ASC is herf. Herf is a unique part of speech. It can be correctly used as a noun, a verb, an adjective, an adverb, an infinitive, a prefix, a suffix, and an explicative. The arcane word ‘herf’ first entered the ASC lexicon on November 21, 1996, and was quickly elevated to frenetic and common use by ASCers… Herf is now virulently spreading to worldwide common use as hip cigar parlance.”

Which Wrappers Are Most Likely to Produce Value?

Finding a good cigar isn’t all that hard these days. Finding a good cigar at a price that offers excellent value is harder. But if good values are what you are after, one thing to think about is wrappers. Connecticut wrappers, both shade-grown and broadleaf, are hardest to do on a budget, in part because good Connecticut-grown wrappers are increasingly in demand. So if you’re the type of person who seeks out that elusive bundle cigar that smokes like a pricier stick, you’ll improve your odds by sticking to Nicaraguan-grown Habano and Mexican wrappers.

Patrick S

photo credit: Stogie Guys

Commentary: Why ‘What’s New?’ Is Here to Stay

5 Nov 2015

cigars-new

One of the common themes on forums, blogs, and podcasts these days is dissatisfaction with the seemingly endless number of limited and special edition cigars. “I’m through chasing them,” is a typical complaint.

Tiring it may be, but don’t expect the trend to go away anytime soon (barring, of course, some U.S. Food and Drug Administration intervention). Ongoing changes in the cigar industry—from sales to buying habits—are likely to lead to more small releases.

I’m no industry insider, and I have no special knowledge. My conclusions are drawn from conversations with a few manufacturers and retailers, as well as keeping up with and observing the industry for quite a few years.

Consider:

— The premium cigar industry is not growing much, if at all, in terms of sales. Imports for 2014 were essentially the same as for the previous year. At least some manufacturers don’t anticipate 2015 to be much different.

— Much of the growth comes from new smokers, who are apt to be younger and not nearly as tied to a brand as are many older smokers. Retailers of yesteryear can tell you of the many, many customers who’d stop by once a week or month and pick up a box or two of the same cigar like clockwork. These days, customers are much more likely to be looking for what’s new and their repeat box purchases occur far less frequently, if at all.

— Events are driving a higher and higher chunk of sales. Whether a single store/brand affair or massive productions like Big Smoke or Smoke Inn’s Great Smoke, customers expect to be entertained and enticed, as well as given a bargain. Without something new to offer, vendors can find themselves at a disadvantage.

— The growing cigar production industry, especially in Nicaragua, has created bigger factories and more trained workers, both resulting in increased capacity. Those who want to create their own brand can find tobacco and facilities to do it.

Of course, none of this means every company’s success is dependent on novelty or constantly introducing new cigars. Dominant brands such as Padrón and Arturo Fuente continue to be industry leaders and seem virtually unaffected by trends or fads.

But for smaller, newer brands it becomes tougher to break out of the pack and that leads to efforts to distinguish yourself, whether that’s a massive ring gauge, a shop exclusive, a limited run, outrageous packaging, or something else.

I can’t say what lies ahead. But I wouldn’t look for the rate of releases to slow down anytime soon.

George E

photo credit: Flickr

Commentary: Random Thoughts from the Humidor (XXII)

4 Nov 2015

In this edition of Random Thoughts from the Humidor, I ponder what is meant by “flavored” cigars, keeping the palate fresh with milder smokes, and using cigars as currency for wagers.

KFC

Food for Thought on Flavoring

On Saturday I published a Quick Smoke of the Drew Estate MUWAT Kentucky Fire Cured (KFC) in the Just a Friend size. As I understand it, KFC is crafted at Joya de Nicaragua using tobaccos that are cured in a barn under fires of hickory and maple. The smoke from these fires imparts (in the case of Just a Friend, according to my palate) notes of barbeque sauce, chewy meat, hickory, leather, sweet tobacco, and peat. It’s an interesting product and process, though the cigars aren’t my cup of tea. In any event, some readers got me thinking with their comments. I hadn’t previously considered KFC to be flavored. Regarding cigars, I take “flavored” to mean infused with artificial flavors that are not naturally inherent in the tobacco leaves as a result of growing, cultivation, curing, fermentation, etc. So, in my eyes, fire-curing tobaccos—or barrel-aging them, for instance—does not make them flavored. I still think of these cigars as differentiated from, say, Flavours by CAO or Acid by Drew Estate. Perhaps the distinction is not important and this is simply a matter of semantics. Perhaps, though, as the government gets more and more involved in the regulation of premium cigars, this will become an important issue. Recall that a previous FDA proposal stated that under its option for a premium cigar exemption, a cigar would only qualify if it “does not have a characterizing flavor other than tobacco.” Would using fire-cured tobacco or tobacco aged in rum barrels be a violation? What about aging a finished cigar in cedar? To date, the FDA has not provided answers. And, in a particularly troubling development, we’ve learned it may not matter; an unauthenticated draft of the FDA’s deeming rules submitted to the Office of Management and Budget (OMB) was recently leaked, and the draft shows no exemption for premium cigars. But ultimately, if OMB reinstates an exemption for premium cigars, the notion of “flavored” may become very important.

Mixing Up the Rotation

I’m guessing most cigar smokers started smoking milder cigars, graduated to medium-bodied sticks somewhere along the way, and these days tend to focus on smokes with full body and strength. These seasoned cigar veterans may avoid mild cigars entirely, or they may relegate them to that occasional morning smoke as an accompaniment to a cup of coffee. (I’m basing these broad generalizations off anecdotal evidence, hundreds of conversations, and observations from the ever-expanding world of social media.) To these brothers of the leaf I say this: Don’t be afraid to mix up your rotation with a milder cigar now and then. Not only are these cigars highly enjoyable, but they often provide subtler, more delicate flavors that are harder to find in Nicaraguan powerbombs. Think almond, cream, hay, etc. As an added bonus, you may find your full-bodied favorites taste even better when you sprinkle in a Connecticut Shade smoke from time to time.

Cigars for Friendly Bets

I’m a lifelong Cubs fan and my colleague, Patrick S, is a diehard follower of the Mets (nobody’s perfect, right?). This year, our teams squared up in the National League Championship Series. Before play started—and long before the Mets were eventually vanquished by the Kansas City Royals—we each agreed to send the winner a five-pack of local cigars as a friendly wager. If the Cubs won, he was going to send me hard-to-find smokes from the PG Boutique near his home in Virginia. If the Mets won (as they did), I’d send a sampler of house blends from Tesa here in Chicago. Maybe it’s just me, but for friendly wagers—especially those that are sports-related—cigars just seem to be a more fitting form of payment than money, not to mention a chance to acquire smokes that can’t easily be bought locally.

Patrick A

photo credit: Drew Estate