How most of the large U.S. cigar distributors became owned by European companies

[RPB67]

Major U.S. cigar companies are mostly owned by Europeans . . . for now!

Los Angeles, February 2 – The recent news that the Danish Skandinavisk Tabakskompagni acquired Nashville, Tennessee-based C.A.O. International through its wholly-owned subsidiary ST Cigar Group was only the latest in a continuing trend of European acquisition of the American cigar industry.

That ST Cigar Group – best known for its top-selling brand, Henri Wintermans – bought C.A.O. was not a shocker. The two companies had been working together since 2004 when an ST Cigar Group company began distributing C.A.O. cigars in Great Britain.

But the purchase now places most of the top U.S. cigar distribution companies in European hands, a trend which is likely to continue. Until the Cigar Boom of the mid-1990s, almost all of the major cigar distributors serving the U.S. market were American owned. That changed quickly toward the end of the decade:

• In 1997, Tabacalera of Spain bought its way into the American market with the purchase of machine-made giant Havatampa, Inc. and handmade distributor Hollco-Rohr, which owned the American trademarks for important Cuban brands such as Juan Lopez, Romeo y Julieta and Saint Luis Rey.

• In 1999, Swedish Match purchased the machine-made cigar business of General Cigar, giving the company a firm foothold in the U.S. market. The purchase gave Swedish control of brands such as Tiparillo and White Owl. Until then, it had been known for . . . matches, and had a tiny presence in the U.S. handmade with a couple of small, Indonesian-made brands.

Not long after, Swedish Match bought Miami-based El Credito Cigar Co. from Ernesto Perez-Carrillo, who owned the U.S. trademarks for La Gloria Cubana, El Rico Habano and Los Statos De Luxe, among others. It gave Swedish a solid foothold in the U.S. premium market which it would soon expand.

• Later that same year, SEITA, the French tobacco monopoly, purchased Consolidated Cigar Corporation for $370 million and assumed debt, placing the largest U.S. cigar distributor in foreign hands.

• By the end of 1999, Tabacalera and SEITA merged to form Altadis, S.A., bringing Consolidated, Hollco-Rohr and Havatampa under one roof.

• In 2000, Swedish Match took control of General Cigar, and completed its purchase in 2005. The acquisition made Swedish Match the second-largest premium cigar company in the world, behind Altadis.

• In 2003, Altadis purchased a controlling interest in J-R Cigars, the largest retailer of cigars in the U.S., with the option to buy the rest in 2008.

Another large U.S. player, Davidoff of Geneva, has always been European-owned, leaving the J.C. Newman Cigar Company as the only top-tier U.S. premium cigar company not owned by European interests today. Among the machine-made cigar distributors in the U.S. market, giant Swisher International – home of King Edward and the Swisher Sweets line – continues to be U.S. owned and operated.
%%pagebreak%% Of course, there are other, smaller companies which are not Europe-based: Camacho Cigars, Rocky Patel Premium Cigars, Tabacalera Perdomo, Toraño Cigars and others. But there are more discussions taking place. It may not be long before the only thing American about the cigars we smoke is the Surgeon General’s warning!

The U.S. isn’t the only country which has seen control of its cigar distribution migrate to Europe. It’s worth remembering that Altadis also purchased 50% of the Corporacion Habanos, Cuba’s distribution company in 2000, giving it significant control over distribution of Havana cigars. In fact, Altadis can now claim a leading role in the sales of cigars legally and illegally smoked by Americans!

As always, however, the story is far from over. The current financial situation within the greater tobacco industry indicates another round of consolidation may be afoot. The unending rumors about a takeover of Altadis, S.A. by Britain’s Imperial Tobacco are now being accompanied by new speculation about the future of Imperial itself, which could lead to the largest cigar company in the world being back in American hands. How?

• Imperial would have to buy Altadis, and it has the cash and borrowing power to do so immediately. Imperial is a cigarette company and has little tie to cigars, so it is possible that Altadis’s cigar business could be sold to another company, or spun off as an independent entity.

• But if Imperial bought Altadis, Imperial could be in line to be acquired by Altria, the American tobacco giant that includes Philip Morris U.S.A. and Philip Morris International. Altria, according to analysts, has seen its courtroom and regulatory fortunes improve to the point where it will spin off its profitable Kraft Foods segment as a separate company and leave Altria as a pure tobacco conglomerate (the company also had a significant share of a large British brewer, SABMiller).

Further, the Financial Times reported that the tobacco companies within Altria could be further broken up into the U.S. and international divisions as separate companies.

• But, after the spin-off of Kraft, “we believe Altria ex-Kraft is well positioned to be a buyer of other tobacco assets, notably UST at home and Imperial abroad” wrote Deutsche Bank analyst Marc Greenberg.

U.S. Tobacco is the leader in the highly-profitable smokeless tobacco area and Imperial – well, you know about Imperial.

It would be difficult for a U.S.-based Altria to acquire an Imperial Tobacco that has swallowed Altadis since a U.S. company could not hold any shares in a Cuban corporation such as Corporacion Habanos, S.A. So that would put half of the Cuban cigar distribution agency potentially back in play.

Maybe to be purchased by Davidoff of Genevato close the circle which started when Davidoff moved from Cuba to the Dominican Republic in 1990? Stay tuned!
~ Rich Perelman

[piperman]

Who needs magazines when we have you, I look forward to your post thanks for all you do.

[mrbl8k]

Originally Posted by piperman

Who needs magazines when we have you, I look forward to your post thanks for all you do.

Good read.. Thx

[Bob]

And I thought Kraft was only into food...

Thanks for the read...

[TrojanMan]

Great info!

One of my good friends has been interviewing w/ Imperial. He used to work for Phillip Morris USA. How ironic if he took the position only to be bought out by Altria.