The Stogie Guys

As we reported Friday, a legal ruling in the decade-long battle over the Cohiba brand name could be a major setback for the General Cigar Co. General, a subsidiary of Swedish Match AB and one of the largest premium cigar makers in the world, makes and distributes such famous brands in the U.S. as Macanudo, Partagas, Punch, Hoyo de Monterrey, Bolivar, La Gloria Cubana, and many others.

But the General brand at the heart of the controversy is Cohiba, perhaps the most famous trademark in cigars. Last month Cubatabacco, the storied Cuban tobacco monopoly (also known as Habanos SA), won a major victory in the latest decision in the protracted legal fight with General over the Cohba name. The key decision changed the standard that determines who has the rights to the Cohiba trademark—rendering a 2004 ruling against General Cigar Co. upheld.

The decision rests on a legal standard known as the “famous marks doctrine,” which states that a trademark is protected in a given nation if it is well-known, even though the mark is neither used nor registered there. The court found that despite the fact Cubatobacco didn’t file for a trademark on the Cohiba name, under the famous names doctrine it still retains the name’s rights.

The case is complicated by the fact that the Cuban trade embargo means that Cubatobacco can’t sell Cohibas in the U.S. Notwithstanding that well-known fact, the judge held that consumers were likely to be confused between Dominican-made and Cuban Cohiba cigars.

Judge Notes Cubatobacco’s ‘Cozy’ Relationship with Cigar Aficionado

The 2004 decision also provides a unique look into the premium cigar business. The first 70 pages of the decision read like a history of the Cohiba name and of cigar marketing practices, including fascinating details of the role played by Cigar Aficionado in establishing the Cuban Cohiba’s mystique.

At one point, in a discussion over how well-known the Cuban Cohiba was in the early nineties, the judge observes a “cozy relationship between…Cubatabaco’s marketing department and the editorial staff of Cigar Aficionado” that resulted in multiple “puff pieces,” or positive publicity for Cohiba.

The Future of General Cigar’s Cohiba Line is Uncertain

If the current ruling stands, the decision will mark the end of General Cigar’s “Red Dot” Cohiba lines. As part of the 2004 ruling, the judge ruled that General must turn over all its cigars and other materials that contain the Cohiba name. However, that order seems to be pending any appeal by General Cigar.

In a statement provided to StogieGuys.com, General Cigar’s Dan Carr, the senior vice president of sales and marketing, said “we strongly disagree with the Judge’s ruling and will continue to vigorously defend our position, up to and including (if necessary) taking an appeal of his ruling.”

We asked General Cigar what the ruling means for the immediate future of the Dominican Cohiba line, and if the company would continue to market and produce the cigar. We are told, however, that aside from the above statement, “given that this is pending litigation, we cannot comment further.”

–Patrick S

photo credit: Wikipedia

In a week and one day, millions of Americans will head to the polls to vote for the next leader of the free world. Both major candidates are former cigarette smokers: Republican John McCain smoked two packs a day until he quit three decades ago, while Democrat Barack Obama admitted having a cigarette as recently as this summer despite “quitting” early last year.

But being a former smoker (or even a current one) doesn’t make a politician good when it comes to taking positions that affect cigar smokers. Below are four areas where the next president could have a major impact on stogie enthusiasts with a look at the positions held by McCain and Obama in each area.

Tobacco Taxes

Industry insiders say a massive tobacco tax, such as the one proposed in the so-called SCHIP bill, is the most immediate threat to the cigar industry. This year only President Bush’s veto stopped what would have been a 256% increase in cigar taxes, meaning an increase of up to $3 per cigar. Obama clearly favors funding programs with tobacco taxes. He voted for the SCHIP cigar tax increase and has pledged to sign the bill into law. His campaign calls the senator “an ardent supporter of SCHIP.”

McCain’s position on tobacco taxes has been far less clear. He voted against versions of the SCHIP bill with the tobacco tax increase and has criticized the tax, taking the position that “it makes no sense to encourage people to live healthier…while making the government even more dependent on having people smoke.” However, McCain has a long history of advocating for tobacco taxes, specifically on cigarettes. Only a year ago he was quoted as saying, “I still regret we did not succeed” when asked about past efforts to increase cigarette taxes by $1.10 per pack.

Smoking Bans

Smoking bans have traditionally been a matter for state and local governments. Still, a national smoking ban (for so-called “public places” like restarants and bars) remains a possibility.  McCain’s views on this issue are not entirely clear, but he did not join fellow Republican Mike Huckabee in promising to sign a natinoal smoking ban.

Meanwhile, Obama seemed to indicate support for a national smoking ban but seemed to prefer keeping bans a state issue. In a New Hampshire debate, Obama told the audience, “If we can’t provide these kinds of protections at the local level, which would be my preference, I would be supportive of a national law.”

Regulation

As we’ve written before, Food and Drug Administration regulation of tobacco has the potential to be very damaging for cigar smokers. John McCain has been a advocate for regulating tobacco under the FDA since the mid-1990s when he co-sponsored a bill to that effect.  Indeed, the issue has been called “one of the most significant efforts of his congressional career.” In the past year, however, critics of McCain claim he has backed away from that position, despite the fact that he remains a co-sponsor of the FDA bill. The Arizona senator has continued to criticize the portrayal of smoking by Hollywood, perhaps indicating that he still would favor FDA regulation if it didn’t include increased tobacco taxes.

Obama is also a co-sponsor of the bill to regulate tobacco through the FDA. Anti-tobacco advocates say FDA regulation of tobacco is “inevitable” under a McCain or Obama presidency.

Trade

Trade policies might not initially appear to be an area of interest. But since virtually every handmade cigar is either rolled in other countries or rolled in the U.S. with tobacco from foreign countries, reducing barriers to trade is vital to preserve and increase cigar smokers’ access to a wide variety of cigars at reasonable prices. There are two major policies where trade most effects cigar consumers: (1) the Cuban embargo/trade sanctions currently makes some of the world’s highest-regarded cigars illegal for Americans; and (2) the DR-CAFTA free trade agreement eliminates or lowers trade barriers with cigar-producing countries such as the Dominican Republic, Honduras, and Nicaragua.

McCain has “typically voted in support of sanctions on Cuba” and demanded free elections before the embargo is lifted. Obama seems more open to changing the U.S. policy toward Cuba, “calling for travel and remittance restrictions on Cuban-Americans to be lifted” and expressing that “he would engage in bilateral talks with Cuba to send the message that the United States is willing to normalize relations with Cuba upon evidence of a democratic opening.”

Obama opposes CAFTA and voted against it. On his website, you’ll find an article titled “Why I Oppose CAFTA,” citing labor concerns and the loss of American jobs. McCain voted for CAFTA and consistently supported similar trade agreements.

–Patrick S

photo credit: AGORAVOX

Continuing the cigar industry trend towards consolidation, the Oettinger Davidoff Group acquired Camacho Cigars on October 1. The deal was announced today, but monetary terms have not been disclosed at this time.

Davidoff will acquire all of Camacho’s brands plus its Honduran facilities, including Camacho’s factory in Danli, Honduras, and its tobacco-growing estates in the Jamastran Valley. According to a press release, Davidoff will keep Camacho’s 534 employees in Honduras and its 27 U.S.-based employees.

Camacho Cigars’ portfolio of ten brands includes Camacho, Baccarat ”The Game,” La Fontana, Legend-Ario, National Brand, Repeater, Deluxe, Don Macho, Don Felo, and Nude Bundles. We have extensively reviewed Camacho’s cigars, including the Candela Monarca, Corojo Churchill, Coyolar Puro Torpedo, Select Robusto, and the Triple Maduro Figurado.

Oettinger Davidoff produced 30.8 million cigars in 2007 and has 3,344 employees worldwide. Its brands include Davidoff, Zino, AVO, Griffin’s, Private Stock, and Winston Churchill.

Dr. Reto Cina, CEO of the Oettinger Davidoff Group, described the aquisition: “With the addition of Camacho Cigars and Mr. Christian Eiroa, the Oettinger Davidoff Group has successfully united two families with a passion for cigars as a Premium Product and the ambition to strive unceasingly for the highest quality standards.”

Analysis

This deal makes sense on many levels for Davidoff. They acquire a solid and growing brand in Camacho which can be sold to the non-U.S. market (where Oettinger Davidoff is a market leader), including duty-free shops where 22% of Davidoff’s cigars are sold.

The deal also diversifies Davidoff’s cigar portfolio in two important ways. First, many of Camacho’s cigars are priced downmarket of Davidoff’s super-premium Davidoff, AVO, and Zino brands, giving the company a wider range of cigars at a more diverse range of pricepoints.

Additionally, the move diversifies Davidoff’s cigar production, meaning a hurricane or other natural disaster cannot wipe out the company’s entire growing capacity (currently based in the Dominican Republic). The larger market share may also increase Davidoff’s access to the best tobacco, which is becoming increasingly expensive and difficult to obtain.

On a larger scale, this acquisition continues a trend of industry consolidation. In addition to cigar makers buying other cigar makers, a big trend has been vertical consolidation where companies make acquisitions to control not only tobacco production and cigar making, but also distribution and retail sales. Faced with increasing tobacco taxes and smoking bans, plus possible FDA regulation that may require increased compliance costs, companies are combining to become leaner and more efficient.

–Patrick S

Photo Credit: Miami Herald

Each Saturday and Sunday we’ll post a Quick Smoke: not quite a full review, just our brief take on a single cigar.

Last year we gave El Tiante’s original lines—the Natural and the Maduro—high marks. Now I turn to the latest line, the Corojo which was released at the recent IPCPR trade show in Las Vegas. The oily corojo wrapper is similar in color to the Maduro, and I found much of the same fruit and cedar flavors that I’ve noticed from other El Tiante creations, only with some classic corojo spiciness. While it is the spiciest, most full-flavored El Tiante yet, it still slotted in as a medium- to full-flavored smoke. Construction was flawless with an easy draw, even burn, and sturdy ash.

Verdict = Buy.

–Patrick S

Here at StogieGuys.com, we make an honest effort not to grumble too often about government-mandated smoking bans and the anti-tobacco zealots who advocate them. While we’ve made no secret of the fact that such invasive bans limit choice, violate private property, and are justified only by shoddy “science,” we try to focus on the more enjoyable aspects of the wonderful hobby we all share in our daily coverage of the world of cigars.

But understanding what’s happening in the increasingly hostile smoking ban movement is an essential tool in asserting our freedoms as cigar smokers and standing up for the rights of restaurant and bar entrepreneurs across the nation. In that spirit, and since I haven’t written anything similar since March, I offer the following news items for your consideration. They are by no means all-inclusive; they’re simply a few of the more interesting smoking ban stories to surface as of late:

1. Charleston, WV: “Some Kanawha County bar owners are uniting Tuesday night to make one clear statement about the new smoking ban. They’re putting the ashtrays back out, allowing smokers to light up once again, and breaking the law. It’s all to protest the expanded ban, which eliminates smoking in most public places including bars and gambling parlors. It’s like old times inside the Black Hawk Saloon. Business is booming for owner Kerry Ellison on this night dedicated to smokers. Ellison is breaking the law and proud of it. He’s standing up against the smoking ban he says has cut his business in half.”

2. Davenport, IA: “Regardless of your opinion on Iowa’s smoking ban, some of the temporary administrative rules—such as the distinction between bars and restaurants—go beyond the intent of the law…Obviously, legislators intended for bars to permit smoking outside. However, instead of being explicit in their definitions, legislators defined bars as venues where serving food is ‘incidental’ to the consumption of alcohol, but they didn’t define ‘incidental.’…But the [Iowa Department of Public Health]’s definition means that bars serving burgers, chicken, or anything requiring a grill are considered restaurants. The Iowa law was already more strict than the one in Illinois, which permits smoking in almost all outdoor locations, including the outdoor seating areas of bars and restaurants. But the interpretation by IDPH pushed Iowa’s rules to the extreme.”

3. Chillicothe, OH: “An Ohio group is launching a campaign with the hope of repealing some provisions of the statewide smoking ban approved by voters and instituted in the spring of 2007…Opponents of Ohio Bans says the bill will restore exemptions to the smoking ban for family-owned businesses, outdoor patios and private clubs—organizations that have been vocal in opposition to the ban and have said they have been financially hurt by it.”

–Patrick A

photo credit: Flickr

Today Cigar Rights of America launches a four-day, five-city whirlwind “Freedom Tour” in Chicago. The event will be followed by tour stops in Milwaukee, Minneapolis, and New York before a final gathering in Orlando on Friday. The list of cigar makers attending the events reads like your dream humidor: Toraño, Ozgener, Rocky Patel, Padilla, Padrón, Avo, Drew, Oliva, Fuente…you get the idea.

In late May we first got word of the formation of Cigar Rights of America (CRA), a new organization whose stated goals are “to fight unjustified tax increases and halt smoking bans.” The organization’s logo (which looks like a silhouette of George Washington holding a cigar) and rhetoric hearken back to America’s founding principles of life, liberty, and the pursuit of happiness. The website announces:

“On a daily basis, your freedom to enjoy a cigar is being stripped away by an overzealous, anti-smoking movement. Their tactics are varied; be it through supporting onerous cigar taxes or lobbying government for restrictive smoking bans. The anti-smoking movement will stop at nothing short of the complete prohibition of tobacco.”

I recently spoke with Jeff Borysiewicz, owner of the three Corona Cigar Company locations, who described the details, goals, and challenges of the new organization, which aims to be the consumers’ voice against cigar taxes, bans, and other regulations.

Legally the CRA is a 501(c)(4), which means it is a grassroots membership organization that can advocate for or against legislation but cannot accept tax-deductible donations. Examples of other 501(c)(4) organizations include The National Rifle Association, MoveOn.org, and the American Association of Retired Persons (AARP).

Borysiewicz describes some “friction” from other industry groups, particularly the International Premium Cigar and Pipe Retailers (IPCPR) Association, but he thinks they now see the value of a new organization that focuses exclusively on representing cigar smokers, as opposed to retailers or cigar manufacturers. He envisions the CRA, the IPCPR, and the CAA (Cigar Association of America) as an Army, Air Force, and Navy ready to defend the rights of cigar smokers against harmful taxes and regulations.

While the CRA is currently dependent on industry sources for funding, the idea is for it to be completely self-sufficient within a few years. The aim of the “Freedom Tour” is to recruit 4,000 members. Within a year or two, Borysiewicz says the goal is a hundred thousand members or more—all fully activated and involved in fighting for their rights.

For details on the CRA “Freedom Tour” visit CigarRights.org.

–Patrick S

photo credit: CRA

Each Saturday and Sunday we’ll post a Quick Smoke: not quite a full review, just our brief take on a single cigar.

I picked up this rustic looking torpedo at the Morton’s/PG dinner I attended in July. Like most PG cigars I’ve sampled, I found impressive depth and complexity. Along with a warm tobacco flavor, there’s subtle fruit undertones (like a smooth Red Burgundy wine) and plenty of earth. Combined this flawless construction, and I can heartily recommend this cigar.

Verdict = Buy.

–Patrick S

photo credit: Stogie Guys