Marginal Revolution: The Cuban Cigar Mystery

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The Cuban Cigar Mystery

Why are Cuban cigars good? It's not as if communist economies are known for producing quality goods so why the exception for Cuban cigars? I have a few hypotheses:

Cuban cigars are not good. The contrary impression is due to rememberances of things past and the sex appeal of the forbidden fruit. (Testable hypothesis: Are Cuban cigars as highly prized in countries where they are not banned?)
The Cuban "terroir," the soil, climate and environment are unique. (Maybe but Communists destroy good terroir - see Zimbabwe, the Ukraine etc. - all the time.)
Castro puts a huge amount of resources and incentives into producing cigars because a) he likes to smoke and b) exporting cigars and doctors is good for the brand image. Cuban cigars are like Soviet chess.
Castro has basically privatized the cigar industry allowing for significant market incentives.

Comments are open for those who know more about cigars and the Cuban cigar industry.

Posted by Alex Tabarrok on December 21, 2005 at 07:10 AM in Economics | Permalink

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Comments

I don't know anything about cigars. But I do think a good deal of the mystique is the forbidden fruit factor you mentioned.

Posted by: Chris Meisenzahl at Dec 21, 2005 8:04:22 AM

I was at a wedding in France last week, and Cuban cigars were passed out at the reception. Everyone seemed to think it was a pretty fancy touch.

Posted by: tex ritter at Dec 21, 2005 8:34:13 AM

I haven't smoked cigars for nigh on twenty years now, but from memory Cuban cigars were better than others. In the US, I smoked Jamaicans; when I went abroad I smoked Cubans.

My understanding is there's four elements which result in a superior cigar: terroir, varieties (you need different varieties of tobacco for filler, binder and wrapper), tobacco growing and curing skills and cigar making skills.

Any political system may destroy terroir (look what we're doing to the North Slope of Alaska), but isn't forced to. It's probable that the Cuban government looked to preserve the tobacco-growing terroir, since cigars were, still are, an important source of hard currency.

The varieties available to cigar makers have evened out. By the time I quit smoking, Jamaicans were using good wrappers. So that's no longer a factor.

Both tobacco growing and cigar making are (unpleasant) labour intensive. In other countries, people move away from them. In Cuba, there were, presumably still are, few alternatives. Less turnover means more consistency.

Put together the preserved terroir and preserved skills and you probably have an explanation.

Posted by: jim at Dec 21, 2005 8:47:25 AM

Does anyone know of any blind "taste" tests done, where the testers have no idea which cigars are which?

I remember hearing something really interesting about Coke vs. Pepsi. During Blind Taste Tests, Pepsi often beat Coke. But when scientists were able to measure different thiings in the tasters' brains, they found all sorts of good things like "High sense of Self" and "Positive Feelings toward Self" when the people KNEW they were drinking Coke. These things did not happen when the tasters' KNEW they were drinking Pepsi.

I wonder if the same thing happens for Cubans?

Posted by: Ian Lewis at Dec 21, 2005 9:09:43 AM

Reporting from elsewhere in Latin America, I can verify that Cuban cigars are indeed preferred even where they are not contraband. In fact, the 'sex appeal' of Cubanos seems to be even greater -- perhaps because more cigar consumers here have actually had a chance to try them?

As long as you're addressing the issue, by the way, you could mention that Cuban rum is superior to any other as well. Havana Club is the top-shelf rum in every bar I've been to in Latin America. Unlike the famous Cuban cigars, the quality of their rum does not seem to be well-known to Americans.

Posted by: neil at Dec 21, 2005 9:30:04 AM

The American ban on Cuban cigars might be part of what makes them preferred throughout Latin America. Having a Cuban cigar is an easy and harmless way to stick it to the US.

Posted by: william at Dec 21, 2005 9:57:42 AM

In Costa Rica they like the US and grow their own tobacco (I think tariffs are high too) and they still smoke Cubans.

Posted by: michael vassar at Dec 21, 2005 10:05:38 AM

Regarding your hypothesis for [1]... we might be facing the case where Cuban cigars and American taste-buds are somehow "meant for each other". This wouldn't be the only case where American tastes are unique. (Similarly, the fact that French diet might gross-out an American wouldn't surprise us.)

Another idea... as far as I know, there are still stocks of legal Cuban cigars, priced at around 100 USD/cigar, that people like Mel Gibson smokes, left over from the '60s when it was OK to import them. This might help the analysis.

I live in Romania, an ex-Communist country and I got to live a few years of that. The quality of products was terrible. I think the effect worsens when the supply chain is considerably large (many intermediary stages of production). On the other hand, premium agricultural products kept their quality... these products weren't available to the general population but the production of luxury good was possible under Communism. (Although it managed to keep its pre-communism quality, not increase it, as western products did.) Some industries, like the foods and beverages, might see very slow progress, so '60s quality in cigars might not be fairly compared with '60s electronics quality, for example.

Posted by: Gabriel Mihalache at Dec 21, 2005 10:06:56 AM

United States of America has a lot of influence on the rest of the world. Especially when it comes to creating and promoting commercial brands. Whatever is sexy (or made to be so either by marketing firms or consumers) here is usually so outside of the US.

In my travels through Latin America I have found all things Cuban perceived as being cool. On numerous occasions people expressed their admiration of Fidel for 'being the only guy having balls to say NO to the US', no matter his policies etc.

One cannot be 100% certain on this before a scientific study is conducted, but could it be that the 'forbidden fruit' factor is an unexpected side effect of the US trade embargo? Similarly, books and movies of questionalbe artistic or literary value banned in some countries usually turn out as big hits in other parts of the world...

That's marketing for you....

Posted by: Captain N at Dec 21, 2005 10:08:03 AM

I think 3 is the main reason that Cuban cigars have not deteriorated. Under capitalism, Cuba may be able to make premium cigars more efficiently, but communism does not preclude the existence of some high-quality products. (Also see the AK-47, which has some drawbacks, but is still preferred by many who have a choice.)

Jim's explanation, that communism has caused stagnation which has left a better supply of skilled labor for the cigarmaking industry than might have happened under capitalism, seems to be a fairly plausible factor, too.

Regarding Ian's Coke v Pepsi comparison; I've read that the reason people prefer Pepsi in blind taste tests is that it's sweeter than Coke. But people don't always want a sweeter drink, which is why revealed preferences favor Coke.

Posted by: Anthony at Dec 21, 2005 10:57:24 AM

5. Communism works.

Hahaha...sorry, had to get that one in.

- Josh

Posted by: Wild Pegasus at Dec 21, 2005 10:59:03 AM

I like Anthony's explanation. I very much doubt that the 'sticking it to the US' explanation is the right one, though. While Latin Americans may well feel closer to Cuba than to the US (Cuba has done a lot to cultivate this), they certainly do not leverage their buying power in anti-US ways -- especially not at the movie theatres! But also music, cars, fast food, cigarettes, beer -- American products are generally considered superior just by virtue of being American. To turn it around, I haven't ever seen a Cuban restaurant in Latin America, and I know of nobody who enjoys Cuban music and eschews New York Latin jazz.

Posted by: neil at Dec 21, 2005 11:47:36 AM

I'm going to take a little issue with Anthony's statement on the AK-47. The AK is a fine rifle, but its primary virtue is its simplicity. The AK-47 was designed on three parameters: (1) Be manufactured inexpensively, (2) Be rugged as all hell, and (3) Be able to pump out a whole lot of ammunition. Kalashnikov managed all of these at the expense of high quality. He knew the shortcomings of Soviet industry and worked around them.

You can take an off-the-shelf M-16 (at least one of the newer ones) and turn it into a high-accuracy rifle. You just can't do that with an AK. They're not manufactured to tight tolerances.

Posted by: robbbbbb at Dec 21, 2005 11:49:43 AM

It's #2 plus the hundreds of years of tradition passed down amongst cubans (communist or not) as to how to grow tobacco, age tobacco, blend tobacco and roll cigars. That's why.

Posted by: bruce at Dec 21, 2005 11:56:33 AM

The market sets the price. The profit incentive exists. You have competition.

I don't think the relavent question is why does communist Cuba produce high quality cigars?

Given the above it makes sense they should.

I think the relavent question is does communist Cuba efficiently produce high quality cigars?

Posted by: BigMacAttack at Dec 21, 2005 11:57:44 AM

"Comments are open for those who know more about cigars and the Cuban cigar industry."

From what I know...and all my knowledge comes from listening to this guy (http://www.cigardave.com/cd/).

Cubans used to be great, but once castro took over people started leaving. It has taken many years for the industry to recover, but there are many cigars that are now better than or just as good as cubans. Most are located in south america.

I know that disagrees with what some have said, but that is what i know.

Posted by: cube at Dec 21, 2005 12:38:09 PM

it's down to the production technique - hand rolled on a maiden's thigh

Posted by: jej at Dec 21, 2005 12:39:28 PM

In my own experience as a cigar smoker, -new- Cubans are a cut above, although the rest of the region produces some almost equally high-quality products, many grown from seeds of Cuban origin. In the case of 40-odd-year-old "pre embargo" Cubans, reason number 1 applies. Cigars do not age well. I have had pre embargo Cubans twice. Both times they were dry and bitter, drew poorly, and had the small hollow cavities that cigars can develop if they aren't preserved well, which none are after that long. Pre-embargo cigars sell on a combination of brand equity and the snob appeal of an expensive product.

Posted by: NAL at Dec 21, 2005 1:08:28 PM

Coke vs Pepsi -- the tests were accurate. The problem is that Pepsi is sweeter than Coke, which is why it was preferred in the taste test format. But in th real world where people drink more than a couple of sips and often drink colas with food, Coke's more astringent taste is less cloying than Pepi and is preferred by a majority.

"look what we're doing to the North Slope of Alaska"

Is is so sad. It produced such a wonderful pinot noir, and the gewurztraminer was to die for.

Posted by: Robert Schwartz at Dec 21, 2005 1:21:14 PM

As one who smokes cigars infrequently, and has enjoyed a Cuban (No not that kind. A Cuban cigar.), my guess is that determining cigar quality is much more hazy/subjective, especially by the majority of cigar smokers who are rank amateurs, than even wine can be.

In both those cases, it is the labels that signal ostensible value to the consumer. That is why blind wine tastings are not undertaken nearly as often as they should be.

Random Aside to neil:

Havana Club may be a popular rum -- but is nothing compared to the Nicaraguan 'Flor de Caña'.

Posted by: Nico at Dec 21, 2005 1:31:46 PM

Can't believe no one has mentioned it yet, but 3(a) probably is not a factor.

Although many of the charicatures of Fidel still feature him puffing on a big fat Cuban, the fact of the matter is that he quit smoking almost 20 years ago and has been campaigning to reduce smoking among the population in Cuba. See, for example, this 1994 interview from Cigar Afficionado (and it's good reading anyways):
http://www.cigaraficionado.com/Cigar/CA_Profiles/People_Profile/0,2540,4,00.html

Posted by: Dan at Dec 21, 2005 1:56:31 PM

Cubans tend to have a good combination of rich flavor and high nicotine.

Personally, I prefer Dominican cigars to Cubans.

Posted by: Scipio at Dec 21, 2005 2:06:20 PM

I'll have to try that, if I can find it. Thanks.

Posted by: neil at Dec 21, 2005 2:48:57 PM

With wine, economic growth has led to more widely availabe good wines and the ability to eliminate some of the problems of bad vintages, but the first gorwth Bordeaux being of today don't seem to be any better than those of 100 years ago. I guess what I'm saying is, it's probably the terroir.

Posted by: joshg at Dec 21, 2005 3:37:59 PM

so basically there is no one reading this blog in germany or somewhere where cubans are legal who could just do a small taste test? I was also under the impression that the cigar rolling plants in Havanna hadn't changed in about a hundred years and that the workers there are treated fairly well (people read to them as they roll apparently). Also, I don't recall Fidel making the same mistakes that many communists countries (read N.K. and China) made when it came to farming, which would be instituting one way of farming for several areas that aren't suited for it. I wonder do they sell cubans in Taiwan or do I have to hit the mainland... ? =)

peace,
A

Posted by: andrew at Dec 21, 2005 9:48:37 PM

Communism is bad basically at economic coordination, markets don't send signals of consumer tastes, signal innovations that could reduce price if you switched your suppliers, etc. If you have a produce made using traditional methods, where tastes do not change, and few external supplies are needed then the coordination function of markets is much less important. You can just keep your good people down on the farm, tell them to grow tobacco the way they always have, and house the leaf drying and rolling facilities in the barn out back. There's really no reason why a communist country couldn't produce such a product quite well. Did the quality of Russian caviar drop under Communism?

Also, when a single product is made a national priority Communist countries can produce it well for a while using managerial methods. Russia produced excellent quality weapons during WWII (by the end of the war as good or better than German weaponry). Sputnik was pretty impressive for its time. etc.

Posted by: MQ at Dec 21, 2005 10:19:09 PM

Fidel did sell 50% of Habanos, SA to Altadis in September 2000.

http://www.altadisusa.com/company.asp

Cuban cigars did fall in quality in the late '90s but have had a resurgence since the private investment.

Tobacco tastes vary significantly based on where it is grown. Once someone develops a taste for Cuban tobacco, other cigars don't offer the same flavor.

Non Cubans score well in Cigar Aficionado's blind taste tests, but they are only available in the US. When you do find them in other countries, they are priced significantly higher than the Cubans, so people outside of the US will tend to stay with the Cuban cigars.

In my opinion, the best Cubans cigars are the best cigars in the world. In addition, they are cheaper and easier to find than the best non Cubans, like Opus X and Padron Anniversary. But my cigar smoking friends in HK always ask me to bring over the best of the Non-Cubans.

Posted by: kp at Dec 21, 2005 10:36:40 PM

I visited South Korea recently and bought a Cuban cigar while I was there. I can say that it was an excellent cigar, and I wish that I had some more. One thing I noticed is that it was especially strong. After smoking it, I felt a pretty strong buzz ... I hadn't smoked something that strong since college!

Posted by: Dan Morgan at Dec 22, 2005 2:10:31 AM

Please correct "the Ukraine".

Posted by: A Tykhyy at Dec 22, 2005 2:50:18 AM

The taste of the tobacco is impacted significantly by the soil it is grown in.
The soil is the reason Cuban wrapper tobacco taste the way it does.

In the mid-1970s I worked for Phillip Morris International in Venezuela.
We hired a group of Cubans that were very experienced in the tobacco
industry and experimented with a variety of seeds and soil conditions.
But were unable to recreate the taste of the Cuban wrapper tobacco.

This type of locational impact is much more important then many of us realize.
For example, the reason central Kentucky is the home of the horse industry
is the limestone in the soil seeps into the water and stregthens the horses
bones. So Kentucky horses are less likely to suffer broken legs.

Posted by: spencer at Dec 22, 2005 8:34:41 AM

There are two big factors that go into the quality of a cigar: terroir and production quality. Cuban terroir is pretty unique. (They also produce high quality coffee, another terroir-intensive product.) Production quality in Cuba varies a tremendous amount from brand to brand, and in general suffered a great deal in the 90s special period, but is now quite high for externally marketed brands like Partagas or Cohiba.

It is true that Cuban cigar factories use 19th century production technology, but the reason why it's a good job to have in Cuba is not because they treat the workers well. Workers sit side by side at small desks in large, humid rooms. They work hard. They do have a (propoganda) news reader at the front of the room, but it's not all the time and it's only to keep them alert. It's a good job b/c it offers an ordinary Cuban access to tourist dollars. I have been on the shop floor of the Partagas factory in Havana and seen with my own eyes workers selling cigars out of their daily production to tourists taking tours through the factory. I have seen the tour guide himself sell cigars. And I have also seem the same guide chide tourists for being too conspicuous in their purchases, saying, "I don't care if you buy the whole factory, except that I will get in trouble if you are caught."

So the problem with cigar production under a command economy is efficiency, not quality. Many more cigars leave the factory through the back door than through the tourist shop in the front hall. To oversimplify, this is because by ignoring incentives, command economies generally exacerbate the incentives that are naturally there. Whether or not laziness trumps corruption depends on how hungry people are.

Posted by: dee.are at Dec 22, 2005 9:54:41 AM

I'm a cigar aficionado. Big time.

Cuban cigars are not consistently the best on a cigar-by-cigar basis, but they are consistently very good. That's the difference.

Some Dominican or other non-Cubans are fantastic. Some are very good. Some are good. Some are lousy.

All Cubans are good. Some are very good. Some are great.

That's the diff.

Why? History, skills (both growing and rolling), pride, etc etc.

Posted by: Don Schenck at Dec 22, 2005 11:34:40 AM

I started smoking cigars overseas where Cubans were legal and have continued to smoke cigars for many years now. I have smoked many cigars, both cuban and non, while discussing this topic.

It is interesting that cubans are the standard by which all cigars are measured, whether a person has smoked many or none. Furthmore, specific brands are considered the benchmark within given shapes and guages, ie. montecristo#2, RJ Churchhill. So when many people speak of cuban cigars, these top tiered cigars are what they are refering to. After smoking many of them over the years, I would argue that they are very good cigars. And at 20-30 USD per stick, I would expect them to be.

But how many of us spend 20-30 USD every time we smoke a cigar. Smoking a cuban cigar is usually occurs during some other greater event, or the act of smoking a cuban cigar is treated as special event unto itself. Either way, the cigar is going to be good, cuban or not.

So, are cubans the best cigars in the world? Maybe. But for many the best a non-cuban cigar will ever be is better than a cuban. However, the best a cuban can be is the best cigar they have ever had.

That's what being a yardstick gets you...

Posted by: James at Dec 23, 2005 12:44:59 PM

Ian, the reason folks "chose" Pepsi vs Coke was that some people can taste a difference between sugar and high fructose corn syrup. Coke switched to corn syrup years before, so if you were a person able to distinguish a difference, then Pepsi would taste better to you. The blind taste testing ended when Pepsi finally gave in and started using corn syrup too. For a few years after that, one could get kosher Pepsi around Passover. I have no clue why, but for some reason, corn syrup isn't kosher for passover (there is a rather complicated schema of what's kosher generally, and what is specifically kosher for passover, but dude, don't ask this goy, find a rabbi to explain it). Pepsi stopped making kosher Pepsi when the company wanted to appease Arab interests to gain market share in the MidEast.

Add me as another vote for the "forbidden fruit" idea. My father would purchase cuban cigars just to smuggle them back into the US when returning from trips. For him, the forbidden nature of them was the thrill, not the smoke, as he didn't smoke cigars other than the ones smuggled by himself.

Posted by: Peter at Dec 24, 2005 2:27:13 PM

The Cuban cigar issue is very much like the desire for Coors beer in the American Midwest and South in the 1970s. The quality and perceived superiority of Coors beer was that it could not be purchased East of the Mississippi River. The attitude was to have something you could not obtain legally or easily, e.g. Cuban cigars. Like an old Alabamian once told me, "a watermelon always taste better when it is stolen." Enough said about contraband Cuban cigars!

Posted by: Danny McDaniel at Dec 25, 2005 3:38:20 PM

I smoked Cubans in England a couple of times. I am no cigar afficionado, but I did find them more enjoyable (smooth, and flavorful) than others I have tried in the US. I think that 3 or 4 are probably the reasons here, although there might also be some kind of tarrifs, etc that the US places on cigars being imported which reduces their (marginal dollar) quality in the US?

Posted by: Darin London at Dec 27, 2005 11:30:21 AM

ya i have in depth knowledge about cuban cigars. i am also having full description about these cigars online.

Posted by: gelfey at Feb 1, 2006 5:45:23 AM

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Posted by: gelfey at Feb 1, 2006 5:45:39 AM

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Posted by: gelfey at Feb 1, 2006 5:45:40 AM