SIC 2121
CIGARS



This industry consists of establishments that primarily are engaged in the manufacture of cigars. Manufacturers of other tobacco items are treated in SIC 2111: Cigarettes ; SIC 2131: Chewing and Smoking Tobacco and Snuff ; and SIC 2141: Tobacco Stemming and Redrying.

NAICS Code(s)

312229 (Other Tobacco Product Manufacturing)

Industry Snapshot

The cigar industry has experienced dramatic growth in recent years thanks to increasing acceptance of cigar smoking among the "Generation X" population, a resurgence in "cigar evenings," and the popularity of the Internet where cigars are being sold in record numbers. The magazine Cigar Aficionado, introduced in 1992, is generally credited with the upturn in the cigar industry. No longer a passion for older men alone, changing demo-graphics find "twentysomethings," both men and women, participating in cigar evenings and joining the traditional 35- to 65-year-old traditionalists in the purchase of premium cigars. Celebrities have also helped add to the allure, adorning the cover of Cigar Aficionado and showing up frequently at soirees boasting "stogies."

The cigar industry was enjoying this continued re-birth in the late 1990s. The United States had about 1 million premium cigar smokers. The number of cigars smoked in the United States increased about 50 percent between 1993 and 1996. However, the sluggish U.S. economy weakened cigar sales in the early 2000s, and the anti-smoking trend among consumers and the government was expected to impact cigar sales as well.

Organization and Structure

Serving the industry, The Cigar Association of America, established more than 50 years ago, consists of regular members (the cigar makers headquartered in the United States) and associate members (including foreign cigar manufacturers, importers, leaf dealers, and other suppliers.) The organization's principle activities involve maintaining cigar industry statistics, public relations efforts, and lobbying federal and state governments on issues of import to the industry, especially taxation of their products.

Background and Development

Like other tobacco products, the sale of cigars had dropped off as Americans became increasingly concerned about the effects of tobacco smoking on health and fitness. In the mid-1970s, volume was more than 5.5 billion, and at the industry's peak in 1964, unit sales reached 9 billion cigars. The volume of cigar sales fell about five percent a year during a 15-year period, dropping to 2.2 billion units sold in 1991.

While the upswing in the cigar market was strong, consumption still doesn't match the record highs of the mid-1960s. Cigar smokers have traded quantity for quality. They smoke fewer cigars, but when they do smoke, they often smoke cigars of a high quality. Declines in volume have been offset by increases in prices and a growing market for premium cigars. Sales in dollars have risen to about $700 million in the early 1990s. In 1995 imports of premium cigars rose to 176.3 million units, an increase from 1994's level of 132.4 million. In 1996 imports increased to $294 million.

Changes in distribution systems also helped the industry, as more discount stores and supermarkets began carrying a wider variety of cigars, especially the higherpriced cigars. The Internet has also played a role in cigar sales, with companies like J.R. Cigar finding it difficult to match demand. In late 1996, J.R. Cigar even began turning down orders from new customers as it struggled to fill orders. Mike's Cigars, Famous Smoke Shop, and J.R. Tobacco make up the "big three" of the discount cigar mail-order business. All were enjoying a renaissance in the late 1990s. Manufacturers were sitting on back orders in the 5 to 6 million unit range in 1996.

Laws prohibiting smoking in public places, increased taxes on tobacco products, and medical findings that cigars cause mouth, throat, and pancreatic cancer have had an impact on the U.S. cigar industry. According to an American Cancer Society study published in November 1999, "cigar smokers [also] experience a 30 percent increased death rate from heart disease before age 75." Cigar manufacturers have been combating these obstacles by increasing promotional activities with wholesalers and by introducing new products in various sizes. Their efforts were working—cigar smoking was still high, even among high school students.

Current Conditions

The cigar industry continues to deal with the sale of both authentic and counterfeit Cuban cigars in the United States. The Cigar Association of America has been trying to halt the sale of these illegal products, estimating that they cost U.S. cigar makers $28 million a year. Approximately 6 million Cuban cigars are smuggled into the United States every year. The sale of Cuban cigars has been illegal in the U.S. since 1962, when President Kennedy signed the Cuban trade embargo.

Habanos, a Cuban cigar seller, "has signed a contract with China's state tobacco monopoly to sell hand-rolled premium Havanas to the tightly regulated internal Chinese market," according to the March 12, 2000 edition of the San Jose Mercury News. After China, the only large, unconquered market is the United States.

The U.S. Census Bureau reported in late 1999 that there were 38 U.S. establishments in the cigar industry, employing 3,845 people. Additionally, the 2000 value of product shipments reached $3.43 billion.

Industry Leaders

Many U.S. companies are involved in this industry. Some of the majors include Swisher International Group Inc.; Consolidated Cigar Holdings Inc.; 800-JR Cigar, Inc.; and General Cigar Holdings, Inc. Swisher, based in Darien Connecticut, produces mass-market cigars such as Swisher Sweets and King Edward and premiums such as Bering and La Primadora. Sales in 1998 were $267 million. Swisher went private in 1999.

Consolidated Cigar Holdings is the largest U.S. cigar maker with brands such as Antonio y Cleopatra, Don Diego, Dutch Masters, El Producto. Its revenue in 1997 was $299 million. In 1999, Consolidated Cigar was bought by France's SEITA, since merged with Spain's Tabacalera to create Atladis (the world's fourth-largest tobacco company).

A leading distributor and retailer of premium cigars, 800-JR Cigar had 1999 sales of $317 million. In March 1999, the company announced that it is in the position to receive the first legal shipment of Cuban cigars if and when the embargo ends.

General Cigar Holdings markets premium cigars including Macanudo and Temple Hall, as well as mass-market cigars such as Garcia y Vega and Tiparillo. The company saw sales of $182 million in 1999.

Workforce

Still, the industry has needed to respond to change. While cigars were once handmade products, technology has taken over in most companies. In Miami, however, Cuban and Central American immigrants in a half dozen small cigar factories have continued to make hand-rolled cigars. With a decline of qualified cigar rollers, cigar-rolling is becoming a lost craft.

The making of a hand-rolled cigar is a complicated, slow process. The tobacco reaches the factory and is then baled so that it can age for 18 months to 2 years. The tobacco is then blended and rolled by a master blender. After bunching, pressing, and wrapping, cigars are individually inspected, then they are sent to the aging room where they remain for 21 to 180 days.

Further Reading

"800-JR CIGAR, Inc. Supplies Havanas." PR Newswire, 14 March 2000.

"Chinese Market Opening to Cigars." San Jose Mercury News, 12 March 2000.

"Cigar Smoking Increases Early Death From Heart Disease." PR Newswire, 7 November 1999.

Edelman, Vladimir. "Blowing Smoke: The Cigar Renaissance." Inc. Online, 1 July 1996.

Flanagan, William G. "Cigar Madness." Forbes, 21 April 1997.

United States Census Bureau. "Manufacturing-Industry Series." 1997 Economic Census. Washington, D.C.: GPO, 18 May 1999.

United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from http://www.census.gov .

User Contributions:

Comment about this article, ask questions, or add new information about this topic:

CAPTCHA