Interview with Javier Paredes, partner of Kukenan Tobacco Trading in Caracas, Venezuela.
JT: Who is Kukenan Tobacco Trading and why did you get into the business?
JP: Kukenan Tobacco Trading is proud to be the new official distributor for Habanos in Venezuela. Our journey began in late 2019 when we secured the distribution rights, though due to pandemic-related challenges, we didn’t import our first box of cigars until June 2021. It was a long wait, but well worth it. Prior to our tenure, there was another distributor who performed nicely for several years. However, from the mid-2010s, we noticed a significant decline in cigar availability, both in terms of retail outlets and product range. While we can’t pinpoint the exact cause, we recognize that the market was robust during that period, possibly even stronger than it is today. Those were the days of high oil prices, which created a cascade of wealth throughout Venezuelan society. Today, of course, the economic landscape has shifted considerably.
As the previous distributor’s presence began to wane, my now-partner and COO, Héctor Arias, identified an opportunity to bring genuine Cuban cigars directly onto the market. He launched what was then called Purohabanos Venezuela, which quickly gained traction and become a major player despite the lack of a physical store. It was a gray market operation, which we transparently declared to Habanos S.A. [HSA] in our initial pitch.
This was how I first encountered Héctor, meeting him at a McDonald’s near my office to purchase a box of H. Upmann Royal Robustos. While buying a box of cigars in McDonald’s was not the premium retail experience we now strive for, Héctor’s expertise, articulation, and transparency impressed me immensely. He even showed me the invoices for the cigars when I asked, demonstrating they were purchased from a main La Casa del Habano in Havana. He earned my loyalty as a client for years.
The turning point came during one of Héctor’s home deliveries. Over a Don Alejandro and some Diplomático rum, I proposed we pursue getting the official distribution rights. We had joked about it and I knew it was a dream of his. Initially I was met with laughter, but Héctor’s expression soon turned serious when he realized I was genuine. Thus, fueled by Habanos and Venezuelan rum in my living room, we quickly formulated our plan.
The first question was: “How do we reach Habanos?” Our initial attempts to contact Habanos via email were unsuccessful, and kind of naïve, to be honest. Undeterred, I took the advice of a dear late friend, Nino Muñoz, during a trip to Havana. He encouraged me to “suit up,” resumé in hand, and physically knock on Habanos’ door – a throwback to how business was done in the 1970s. To my surprise, this bold move resulted in an immediate welcome and an hour-long conversation with an HSA representative. From there, the rest is history, as they say. This experience reinforced to us the value of perseverance, personal connections, and thinking outside the box in business. It’s a philosophy we continue to apply in our operations at Kukenan Tobacco Trading.
JT: Tell us about the resurgence of the Habanos culture in Venezuela.
JP: Cigar culture, particularly Habanos, has long been an integral part of Venezuela’s medium-to-high-income demographic. However, over the past two to two and a half decades, it has increasingly become a luxury primarily enjoyed by the upper echelons of society. This shift can be attributed not only to the steady rise in Habanos prices but also to the erosion of the middle class due to political and economic challenges in our country. The implementation of widespread public smoking bans under the Chávez administration also played a significant role in reshaping cigar culture.
These factors, combined with distribution issues in the final years of the previous distributor’s tenure, led to an extremely low market share for Habanos in Venezuela. The market became inundated with counterfeit cigars, which eroded consumer trust in the few remaining suppliers. This situation also paved the way for cigars of other origins to gain a strong foothold in the country.
In recent years, we’ve witnessed a renaissance of cigar culture in general, with a particular resurgence in Habanos. We take pride in attributing a significant portion of this revival to our concerted efforts in promoting and educating consumers about Cuban cigar culture. We’ve conducted two highly successful Habanos Academy courses, reaching over 100 professionals working at our various points of sale, and hundreds more through our day-to-day training practices.
We’re seeing a renewed trust in our Habanos Points, and consumers are increasingly recognizing the benefits of smoking genuine Cuban cigars. The mystique and allure of Habanos are once again permeating the market, rekindling the passion for these exceptional cigars.
JT: What are the challenges of distributing and selling Habanos in Venezuela, price ranges, affordability, market reach, etc.?
JP: Operating in Venezuela presents unique business challenges, encompassing both opportunities and obstacles that make our market distinct.
In the context of our specific business, our primary challenge lies in educating both retailers and consumers about Cuban cigars. Ultimately, consumer demand drives retailer behavior, so our focus is on cultivating knowledgeable, discerning customers. This education initiative serves a dual purpose – it naturally marginalizes the market for counterfeit cigars and deters the emergence of unauthorized sources. Rebuilding consumer trust has been, and continues to be, our primary mission.
We recognize that there will always be a segment of the market drawn to “cheap Cubans,” which are invariably counterfeit. However, our target is to ensure that this group consists only of those who were not Habanos’ intended consumers to begin with. Our goal is to expand the market of educated, quality-conscious cigar passionados who appreciate the true value of genuine Habanos.
JT: Which distributors have you learned from and do you respect?
JP: Among the Habanos network of nearly 40 distributors, many have established impressive track records over the years. As the newest addition to this esteemed group, we constantly seek advice, best practices, and gold standards from our more experienced counterparts.
Three companies in particular stand out as role models in various aspects of the business: IEPT (Mexico), Phoenicia (primarily the Middle East), and Hunters & Frankau (UK).
IEPT, led by Pablo Velasco and the legendary Max Gutmann, is approaching its fortieth year in the business. As fellow Latin American distributors, they understand our unique regional challenges and exemplify strong values, drive, and determination. Their openness to sharing insights has been invaluable to us.
Phoenicia, under Walid Saleh’s leadership, demonstrates brilliant distribution strategies across a vast territory, maintaining exceptional standards of execution in their markets. Their approach serves as constant inspiration for our operations, despite the difference in scale.
Hunters & Frankau (H&F), operating in one of the oldest and most sophisticated markets globally, sets the benchmark for point-of-sale execution. The quantity and quality of their retailers are truly unparalleled. We look to learn not only from H&F as a distributor but also from the retailers in the UK market, aiming to elevate our own retail partners to similar levels of excellence.
These distributors embody the heritage, expertise, and innovation that we aspire to in our own market. Their success stories serve as both inspiration and practical guides as we continue to grow and refine our operations at Kukenan Tobacco Trading.
JT: What is the future of the Habano against new world cigars.
JP: The Habano will always retain its crown as the king of cigars. However, we must acknowledge that new world cigars are gaining significant traction, not only due to their excellent branding and quality control but also aided by Habanos’ strategic shift towards the luxury market segment.
It’s no secret that Habanos have become somewhat scarce over the past decade, primarily due to the tremendous growth in demand from China and the Middle East. Understandably, Habanos S.A. is capitalizing on the situation. While this is a sound business strategy in the short term, I believe it’s crucial to consider the long-term implications.
There’s a risk of alienating a substantial market segment – the young, middle-class consumers who aspire to partake in the unique experience that only Habanos can offer. When faced with the choice between a premium-priced Habano and a good quality USD 6.00 non-Cuban Robusto, many of these potential customers may opt for the latter.
I’m confident that Habanos S.A. is aware of this dynamic and is likely developing strategies to cater to this crucial market segment. It’s a matter of time (and cigar production capacity) before we see strong initiatives to address this “recruitment” challenge and ensure the long-term sustainability of the Habanos market.
At Kukenan Tobacco Trading, we’re committed to bridging this gap by offering a range of Habanos that cater to various price points while maintaining the exceptional quality and prestige associated with Cuban cigars.
JT: How do you see the new Habanos S.A. under its new ownership – the challenges and opportunities? Are we going to see a rationalization of distributors as Habanos plans to move to a “Rolex” model worldwide?
JP: With new ownership come new strategies, and it’s evident that the current management is focused on maximizing return on their investment. The financial results thus far indicate that they’re succeeding in this objective.
I prefer to approach this subject with optimism. My hope is that the new ownership recognizes and values the unique character that the distribution network has developed over the years. Each market has its own nuances and challenges, and the current network of distributors has accumulated a wealth of knowledge and best practices tailored to these individual markets.
While I haven’t seen any concrete evidence of a planned rationalization of distributors – it hasn’t been a topic in our meetings – I understand that innovation and change are often part of new ownership strategies. If changes to the distribution model are considered, I hope that the wealth of market-specific knowledge and the unique challenges of each territory will be taken into account. At Kukenan Tobacco Trading, we’re prepared to adapt and evolve alongside any changes in Habanos S.A.’s strategy, always with the goal of providing the best possible experience for Habanos enthusiasts in Venezuela.
JT: What are your views on the ever-increasing market for fake Cuban cigars?
JP: The proliferation of counterfeit Cuban cigars is an ongoing challenge that, realistically, will only intensify. As Habanos continues to create more super-premium products within its portfolio, the incentive for producing sophisticated fakes increases exponentially. We’re seeing a parallel with other luxury goods markets, where counterfeiters have reached a level of quality in packaging that’s almost indistinguishable from the original. Of course, while they may replicate the box, they can never truly recreate the unique combination of Cuban soil and craftsmanship that makes a genuine Habano.
Habanos S.A., its suppliers, and the distribution network are making concerted efforts to implement increasingly sophisticated anti-counterfeiting measures. However, it’s inevitably a game of catch-up, much like in other luxury goods sectors.
Our focus, which we believe aligns with Habanos S.A.’s strategy, is on educating retailers and consumers. They are the primary line of defense against the counterfeit market. By fostering a deep understanding and appreciation for genuine Habanos, we create a market of informed consumers who can discern and demand authenticity.
At Kukenan Tobacco Trading, we invest heavily in educational initiatives and rigorous authentication processes to ensure that every cigar we distribute is genuine. We believe that maintaining the integrity of the Habanos brand is crucial not just for our business, but for preserving the rich tradition and unparalleled quality of Cuban cigars.
JT: What are your recommendations for new and experienced Habanos smokers? What are your favorite Habanos and why?
JP: For both novice and seasoned Habanos enthusiasts, my primary recommendation is to choose your cigar wisely. Ideally, select a vitola whose smoking duration aligns with the time you have available. There’s a certain reverence in enjoying a cigar from start to finish – leaving it half-smoked is almost sacrilegious in the world of fine cigars.
Secondly, I always advise friends and clients to exercise patience with their cigars. Allow them to rest for at least a year after the boxing date. This is when, in my experience, a cigar begins to reveal its true character. For those fortunate enough to have the capacity to age boxes of cigars, it’s one of life’s most rewarding pleasures. Much like a fine red wine or vintage Champagne, a well-aged Habano pays tremendous dividends in terms of flavor and complexity.
As for my personal favorite, I have a particular fondness for the Partagás 8-9-8. Despite its current scarcity, for me, it represents the perfect marriage of my preferred vitola (Dalia) with my favorite flavor profile (Partagás). It’s a cigar that beautifully balances power and elegance, offering a unique experience within the Habanos portfolio. Its ability to age gracefully, developing nuanced complexity over time, further cements its status as my top choice.
JT: Any chance of seeing a Venezuela Regional Edition anytime soon? I have always thought that a Bolivar Regional named “Avila” or “Orinoco” would make a very nice collectable cigar.
JP: Our market is very small, which makes it a challenge. But we like challenges, don’t we? So, yes, we will apply for our regional edition soon, even if it takes up a good part of our warehouse for some time. I did say I like to age cigars, didn’t I? It seems I might be setting myself up for quite the “aging experiment” here!
One thing is for sure, we’ll do our best to work with the Habanos team to make it memorable. And I must say that that “Orinoco” name you’ve suggested has a certain ring to it. I tell you what – I’ll trade you that name idea for one of the first 10 boxes! You know what they say: Good ideas are like good cigars – best when shared. You guys have got yourself a deal.
Who knows? Maybe in a few years, we’ll be enjoying our “Orinoco” Regional Edition together, paired with some fine Venezuelan rum here in Caracas. Now wouldn’t that be something to look forward to?
Info:
Kukenan Tobacco Trading
Torre Banco Occidental de Descuento
La Castellana, Chacao
Edo. Miranda
Caracas 1060
Venezuela
W: www.kukenantobacco.com
E: [email protected]