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Jun
2015

The Cigar market

Cigar market overview

The consumption preference of wealthy Chinese has changed and matured over the past decade as new and more personal purchases have become the trend ranging from Supercars to luxury fashion, luxury watches, collectibles, golf and wine. Most recently, the cigar culture has become popular as people start to engage more with lifestyle related habits rather than visible material items. A greater number of people are trying to understand the cigar culture and history, and to enjoy the smoking habit. An increasing number of high-end hotels or clubs have also begun to set up cigar bars to cater for the new interest.

As the wealthy become more international and have improving tastes, they also like to associate with the cigar history and culture, and as a result, some of them have collected large numbers of cigars that they never smoke. One other driver for the growth of this market may be the government anti-corruption actions, because this campaign has focused on consumption of red and white wine, luxury cars, luxury watches and other luxury sectors that are popular and familiar; cigar consumption has not been used as an indicator.

International cigar companies also take a view that the Chinese cigar market will attain rapid development. In January 2014, Hans-Kristian Hoejsgaard, the CEO of Davidoff, is quoted as saying that China’s cigar imports will ‘increase exponentially’. China is now the world’s 7th largest cigar market, but Hoejsgaard believes that by the end of 2014 the country will have jumped to 4th. Data from the Havana Tobacco Company published on February 25th showed that the company’s global sales grew 8%, of which China achieved the highest increase.

In China, the following nine cigar brands are considered the world’s top players Cohiba, Montecristo, Romeo Y Julieta, Davidoff, H.Upmann, Hoyo De Monterrey, Partagas, Arturo Fuente and Dannemann. Those brands are the best choice to share with friends or send as a gift according to others. In addition to these imported brands, China also has its own high-end cigars; MaoDa, produced in Wuhan, that is the only domestic high-end cigar brand, the highest prices cigar costs approximately 300 RMB.

The popularity of high-end cigars has also led to the development of the entire domestic cigar industry, the features of which are:

  • Although the total sales volume of cigars is relatively small at present, the market is developing rapidly year by year. Middle ranged cigars and cigarillos are growing faster than high-end cigars.
  • The overall cigar market is in its infancy, and currently the Beijing, Shanghai and Guangzhou markets are relatively mature by comparison.
  • The consumption pattern is different in China, where middle range and low-end cigars share the most of the market, compared to that in western countries where high-end and middle range share 50% each.

Chinese consumers can rarely find cigars in a tobacco store and there are no cigar brand exclusive stores or counters in shopping malls. Currently many five-star hotels, high-end entertainment venues, clubs, restaurants and pubs have a cigar bar, which is where the major consumption takes place.

Due to Chinese regulatory restrictions, a general business will find it difficult to obtain a tobacco import license, and the government is also limiting the number of annual imports of cigars. As a result, cigars sold in hotels, clubs and cigar clubs maybe imported through an irregular channel.

Regulation of the market, creation of a new business model under the regulation and development of the cigar industry is a big challenge for both the Government and brands. Once this problem is solved, the Chinese market is predicted to generate huge business opportunities for everyone involved.
Policy

On June 4th 2013, the State Tobacco Monopoly Administration issued new regulations calling for effective enhancement of the marketing of the cigar industry and vigorously promotion of the sustained and healthy development of China-made cigars.

TOP 10 cigar clubs in Beijing

  • 1492 Havana House Cigar Club
  • Davidoff Cigar Bar
  • Cohiba Atmosphere Club
  • Beijing International Club – Cigar Bar
  • Hotel Kunlun – Cigar Store
  • Grand Hyatt Hotel Beijing – Redmoon
  • La Casa Del Habano
  • Lan Club – Cigar Bar
  • Cigar Ambassador Shop & Club
  • Changan Club – Cigar Bar

Consumer attitudes

Cigar smoking for the Chinese general public remains a novelty, below are some of their opinions on the matter:

  • Consumers don’t know much about cigars, especially to distinguish between different types.
  • Domestic cigars are considered as the low-end products and consumers believe that imported cigars are more authentic.
  • Many consumers have not yet mastered the correct method of smoking cigars.
  • Psychological feelings are an important motive for cigar consumers.
  • People believe cigar smoking demonstrates a high quality of the life, and only wealthy and successful individuals can smoke them.

Quotes from high-end cigar club members in Beijing

There are about 20 friends in our cigar group, and we all started smoking in1996 or 1997; it is an 18 years cigar smoking experience. The interesting thing for us is about our cigar tastes. At the beginning, we smoked cigars from different countries, different brands and different sizes, but now we only smoke Cuban cigars. Thursday night is our regular meeting time, we smoke and chat, then leave before the club closes at 11pm. Average attendance among us is about 30% to 50% of the group and we really enjoy it.

Speaking of cigar buying preferences, brands are just a reference to taste levels, size, colour, appearance, and construction are the major factors for our members who really know cigars.

A cigar is seen as a symbol of power and wealth. It is a good way to show a man’s taste. So as a successful man, I like a cigar.


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