Cuban cigar market update

Cuba supplies the world with its investment grade cigars. In fact, if it isn't hand rolled and made in Cuba, you can forget it from an investment point of view.

Davidoff Dom Perignon cigar
A pre-1992 Davidoff Dom Perignon cigar and the champagne it was named after

Cuba supplies four fifths of the globe's top-end cigars. The only place where Cuba has failed to penetrate is the US, where the trade embargo with the island has seen a ban on post-1962 made cigars.

And demand for the finest Cubans is rising fast.

Major distributor Habanos saw its sales increase by 9% during 2011, with sales to China, Hong and Kong and Macau particularly impressive, up 39%. The Chinese spend an estimated $335m a year on cigars, with the industry growing by around 30% per annum, states research from Market Avenue.

"The Chinese are quite heavy smokers and much more interested in luxury products. The best-seller there is the Cohiba, our most expensive cigar," Habanos development vice-president Javier Terres recently told the BBC.

Two of the most popular Cuban ranges with Western investors are Dunhills and Davidoffs from pre-1992, when production of the two brands ceased in Cuba. Both have shown strong price appreciation in recent years, with a box of 25 Davidoff Dom Perignons from the mid-1980s now auctioning for around £6,000, up from an initial purchase price of £250.

Boxes of 25 or more tend to show the greatest year-on-year rises at auction. Larger bodied cigars are generally most popular among investors, as they offer more sophisticated taste than their smaller counterparts.

Click here to learn more about investing in cigars.

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