The Real Roll

Tobacco has been cultivated for centuries in the region, yet the Dominican tobacco industry is barely a century old. In that time, however, according to the Tobacco Institute of the Dominican Republic (INTABACO), the country has claimed top spot among the key tobacco producer countries with exports of 514.5 million units as of YE2013.

Exports of cigars and snuff stood at $577.3 million from the 2012-2013 harvest, with a cigarette volume of 1.8 billion units of assorted brands. Export revenues claim an 8% stake in total merchandise exports, while tobacco generates 8.5% of fiscal revenue on merchandise taxation. Raw tobacco exports of $92.4 million went to the primary market of North America.

CHAIN SMOKE

Such endeavor naturally requires manpower, and indeed, Central Bank data indicates that one in 10 jobs at Dominican duty-free zones were tobacco related. The 5,500 tobacco producers employ around 55,000 agricultural workers, while product manufacturers employ an additional 63,000 people, the majority, around 60%, being women. The overall tobacco production chain creates 118,000 direct jobs that support an estimated 350,000 people, according to industry statistics.

Concerned at an erosion of brand equity, tobacco producers from the Dominican Republic, Cuba, Honduras, Ukraine, and Indonesia in 2014 challenged Australia’s “Plain Packaging Tobacco Law.” The concern was that the law, reflecting international moves to curb smoking in general, would be mimicked by other nations, with plain packaging severely denting brand equity, especially in the face of cheap imports. The World Trade Organization (WHO) has yet to rule on the case.

KEEPING IT REAL

The Dominican Republic boasts over 125 brands of cigar. It follows then that competition is fierce, and moreover the local industry already competes with poor quality and, more worryingly, counterfeit products. In 2013 INTABACO executed 22 operations against the latter, with 11 successful seizures amounting to 6,000 boxes of counterfeit cigars domestically valued at around Ps438 million. These operations continue successfully in 2014, with over Ps9 million in fake products being destroyed in one operation in May alone.

THE TYPES

The premium quality hand-made cigars made by Dominican producers mostly use foreign-grown tobacco—only 15% of tobacco used in the industry is Dominican, with other varieties being imported from India, Pakistan, and Bangladesh.

In planning the 2012—2013 harvest, INTABACO’s focus was the volume of tobacco sown to prevent over-production and preserve price levels. Official figures indicate an increased demand for machine-made cigars—not the prestige brands. However, this is significant for native tobacco (amarillo parado) producers in a wider geographic area. Out of the 100,000 tasks INTABACO scheduled for the harvest period, 28,952 were related to this group of tobacco producers. For the harvest period, the budget for agricultural management stood at Ps962.6 million, the bulk, at Ps47 million, going on production and extension activities, while research received Ps2.3 million.

One of the country’s prime producers of hand-made cigars is TabaDom, which produces roughly 25 million cigars per year, with one-third destined for sale under the Davidoff brand. The company predominantly exports to the US. Another major exporter is Tabacalera de Garcí­a, which exports close to 100% of its hand-made cigars to the US and Europe.

While domestic consumption remains low, tourism, a major Dominican industry in its own right, continues to contribute to the tobacco business. Factory tours are a popular item on the itinerary of many visitors. Meanwhile, events like the annual Procigar Festival put cigars in the spotlight, bringing together producers, retailers, and consumers.