With the boom years of the nineties long gone, manufacturers in one
of the Dominican Republic’s most distinctive industries – cigar
production – must now confront a further period of uncertainty.
They fear the air of gloom following September’s terrorist attacks
in the US is likely dramatically to affect sales prospects for a
product which is emblematic of letting the good times roll.

Cigar exports were growing at an astonishing rate only a few years
ago, when the US market for premium cigars rocketed from 100
million in 1994 to 400 million in 1997. The Dominican Republic sold
around 280 million cigars in the US in 1997, according to Hendrik
Kelner, manufacturer of several brands and the president of
Procigar, a leading exporters’ association.

Now, although Kelner says the Dominican Republic still sells around
300 million cigars in the US annually, only around 190 million are
premium, hand-rolled cigars. The rest are machine-made, employing
fewer people. Kelner says only a couple of dozen Dominican
factories remain from the 140 that were operating at the height of
the boom, many of them started up virtually overnight.

Tobacco production has been severely affected by inventories piling
up: at one stage some factories had six years’ worth of stocks.

The Dominican Republic still has almost two-thirds of the US market
(which of course is closed to Cuban cigars), and its exports, under
favorable free-zone conditions, have remained stable over the past
three years at more than $320 million annually.

This is partly due to a growing market for premium Dominican cigars
in Europe, which has traditionally favoured the Cuban variety.
Kelner says his country is now selling around 25 million premium
cigars to Europe annually. “This [market] used to be 100% Cuban but
there are some countries, like Germany, where they now sell more
Dominican cigars than Cuban ones, and in other countries such as
Sweden or Switzerland we have about a 40% share,” he says. “There
are other markets like France and Spain where we have a small
share, but it is growing slowly.”

Kelner also feels the Dominican Republic can still expand in the US
with more aggressive promotion. Paradoxically, promotion was
limited during the boom, when it was felt that the flood of
poorer-quality cigars onto the US market was damaging the Dominican
brand and image. “It affected all the others,” he says.

“This year, before September 11, we had seen an increase in sales,
which began with the lowest-priced cigars and then took in the
mid-priced cigars. What we haven’t seen is a sales increase in
super-premium brands.” Now there is fear that a new decline in the
US appetite for ostentatious cigar consumption could nip in the bud
this improvement in sales.