Leave aside the geopolitical discourse between China and the West, the recent turmoil inside Habanos S.A., and the ever-present global supply chain issues, there is one thing we can’t deny: China still matters, a lot. As we all know, the situation in Cuba and inside Habanos S.A. is currently precarious, to say the least. They have a new and mysterious shareholder syndicate with little experience in the premium cigar business. In addition, the 2020 to 2022 period saw Cuba go through crisis after crisis: COVID-19, unrest, explosions, fires, and then a terrible storm. Then Hurricane Ian destroyed hundreds of tons of tobacco leaf, thousands of curing houses and, more importantly, the morale of the dedicated tobacco workers across the island.
So why is the above important, one would ask? The answer is simple: For the first time in the past 20 years, the opportunities for new-world cigars to enter the Chinese market and dislodge the Cuban stronghold is real and, some would say, unavoidable.
There is one thing all manufacturers, distributors and smokers alike can agree on: China has a massive and rapidly growing middle class that likes to try and enjoy premium cigars, and most of them are now turning to new-world cigars. A good friend in Hong Kong said to me: “Cuban cigars will be for the rich collectors; new-world cigars will be for the people.” You do the math. However, China has some of the world’s most stringent tobacco sales and advertising regulations, a complicated tobacco monopoly and little history with premium cigars. But in China, there is always a way, and Hong Kong appears to be well positioned to serve that newly found appetite for premium, new-world cigars.
A local and well-established Hong Kong company, TimeCigar, partnered with Cigar Journal in 2022 for the launch of our Chinese language digital version and they are one of the better- positioned players to help us understand the true size of the China market and how to better serve it, from both the manufacturers’ standpoint as well as the consumer side. Founded by Chinese entrepreneur Terry Chau and rooted in Hong Kong, TimeCigar has been a consistent destination for premium cigars and accessories for Chinese buyers since 2006.
As I have personally witnessed, TimeCigar has poured millions of dollars into the latest digital technology and operational logistics to successfully develop their e-commerce platform connecting cigar makers and Chinese smokers. Through years of hard work, Terry and TimeCigar have managed to introduce hundreds of new cigar brands to China and have gained a solid reputation for quality and service. Over the years, Terry has worked closely with companies such as Habanos S.A., Davidoff, Tabacalera, Plasencia, Perdomo, and many others to source premium cigars through reliable channels that guarantee 100 percent authenticity. We sat down with Terry and his management team at their very well-appointed cigar humidor and showroom in Kowloon for a conversation about cigars and China.
Jorge Tapies: How did you get started in the cigar business?
Terry Chau: When I was young, I saw many bosses and rich people smoking cigars, which was a symbol of success and wealth, and I wondered if I could one day become one of them. When I entered the industry, I found out that cigars were rolled mostly by less fortunate people, and that made me think I could help tobacco workers all over the world and help develop and grow the cigar industry in a huge market like China. That is my ultimate goal in the cigar industry.
JT: What are the most important things that manufacturers wanting to enter the Chinese market need to know? And how can TimeCigar help them achieve that?
TC: China has a very complex tobacco monopoly system. It has been daunting for foreign cigar manufacturers and brand owners to enter the country, especially the smaller boutique cigar brands, which find the official cigar-import license process onerous and expensive. However, there’s another way for them to legally enter China. It’s possible to ship cigars into mainland China, as long as consumers pay a ‘personal postal and articles tax’ of 50 percent, which is paid on delivery of the goods. TimeCigar provides an excellent online platform to bring together cigar brands and Chinese consumers, and it is all above the law. We want to be the new-world cigars’ ‘gateway to China.’ We now have over 100 staff in our office and climate-controlled bonded warehouses combined here in Hong Kong. We are the only registered online cigar merchant in China, with a legitimate and transparent operating model that complies with all Chinese consumption laws, customs, logistical and fiscal regulations.
JT: Estimates for the US put the number of cigar smokers at around 9 to 10 million. How big do you think the cigar market in China is? Do you think China could develop a cigar culture similar to the US or Europe? Or could Chinese brands even possibly made in Nicaragua, Dominican or Honduras?
TC: The potential of the China market is massive, and the prospects are huge. As you know, the market is still very young, but they are learning fast from the established markets in Europe and the US. The China market is compatible with the traditional European model, and at the same time it can accommodate the American market with big volumes, and young and energetic cigar lovers. It’s difficult for me to estimate when the Chinese market could reach 10 or more million cigar lovers, but I can only guarantee that when the market matures, there will be way more than 10 million cigar customers.
The US cigar market started in the 1990s, and it took 30 years to develop. China’s has just started, and I think it will definitely surpass the US and European markets within 20 years.
At TimeCigar, we’re now handling over 2,000 parcels daily (approximately 50,000 sticks) through our multilingual 24-hour call center and we have over 150,000 active customers who demand an easy, reliable and secure platform for their cigar purchases.
Just to give you an idea of the size of the China market for premium cigars, in terms of our demographics, 85 percent of our active consumers are between 18 and 40 years old – millennials, who ‘live online’ and are very much connected to the international cigar scene. The average ticket size for our website went from USD 200.00 to over USD 300.00 in the past two years.
However, I also think that due to their geographic influence, the Caribbean and Latin America will continue to produce the best tobacco – even adding labor costs and other factors – and that the worldwide market will continue to be dominated by European and American cigar brands in the foreseeable future.
JT: Who is the typical Chinese cigar smoker? Or does that not exist?
TC: There are three typical types of cigar lovers in China: The first type was typically the boss-level, international businessman who smoked a lot of Cuban and Davidoff cigars. This group of consumers purchased most of their cigars in Hong Kong.
The second type of cigar lover was able to travel outside China to buy cigars, impeded in recent years due to COVID-19, and they were middle-to-upper-class, with newly acquired wealth and perhaps not very familiar with online buying patterns, relying mostly in European contacts to do the purchasing.
The third category is the new and younger generation of cigar smokers, who have a wide range of preferences, budgets and consumption levels, plus good English and are accustomed to online consumption habits. This is where the massive growth will come from in the future.
JT: Do lots of women smoke cigars in China?
TC: There are women who enjoy cigars in China, but at this stage, there’s no comparison with the level of female cigar lovers in Hong Kong and Europe. However, it will be a growing market nonetheless, and we plan to address that segment as well, because the market has never really listened to them.
JT: How are cigar smokers perceived in Chinese society?
TC: It’s mostly thought that cigars used to be a luxury item, but now they have become an ‘affordable luxury.’ Cigars are now becoming very common consumer items in big Chinese cities. Smoking cigars in China is a symbol of taste, purchasing power, and enjoyment of life, and it’s no longer an unattainable luxury hobby. Of course, like in Europe and the US, lots of wealthy Chinese like to show off their wealth with rare and vintage cigars, but this is only a small part. The era of showing off wealth is actually gone in China. The attitude towards cigars is purely enjoyment, which is different from the previous generation.
JT: Does TimeCigar sell to other Asia countries?
TC: No, we’re only focused on the Chinese market.
JT: What’s your view on the current Cuban vs new-world cigar situation?
TC: The uniqueness of Cuban cigars is irreplaceable; Cuba’s position is unshakable, but Cuban cigars only serve a small group of consumers at the top of society. New-world cigars can reach the majority of cigar lovers. If we talk about profit and prospects, the market trend is good for new-world cigars, but in terms of brand value and single output value, Cuban cigar brands are still far ahead. In China, Cuban and new-world cigars are facing two different markets. I still believe in my original intention of entering the cigar industry: I want more Chinese people, at all levels, to have the opportunity to try premium cigars, so that the stakeholders in this industry, from tobacco farmers and cigar rollers to brand owners, are able to grow their businesses and be successful. Promoting new-world cigars in China is my lifelong goal.
JT: What is your view on the counterfeit and ‘Cuban custom-rolled’ markets for Cuban cigars in China and Asia? Are both these issues as big as they are in places like the United States and Latin America? What can TimeCigar do to combat this in the Asia Pacific region?
TC: You can’t stop counterfeiting in the market, it just never stops. In the past and today, lots of counterfeit cigars continue to enter the US and European markets. However, as the market matures, the number of counterfeits will naturally decrease, as consumers are educated and more discerning when making purchases. Education plays an important role in solving the counterfeit problem. We hope that our collaboration with Cigar Journal will help us to more effectively convey true and relevant information about cigars to Chinese cigar lovers. Chinese consumers still have a lot to learn when it comes to how to distinguish between counterfeits and genuine cigars.
With Cuban custom, hand-rolled cigars, I’m not very experienced, mostly because I’ve been doing business only with Habanos products. Of course, some of my customers are avid cigar lovers, and they will consume lots of Cuban custom-rolled cigars, but this is not a well- established industry, and it can only be regarded as a gimmick. I really can’t speak to the counterfeit market in China because I’m not involved in those circles – and I prefer it to stay that way.
JT: Where do you see TimeCigar in five or 10 years?
TC: We want consumers to give us a chance to build our own brand. The reason we partnered with Cigar Journal is because we all want every Chinese cigar lover to recognize both of our brands. Hong Kong is a very unique place in Asia, and we have many opportunities to reach Chinese cigar lovers. The information flow in logistics is one of the best in the world, and the regulations are rigorous, so our future development must be very systematic in order to face the market. I continue to improve the professional quality of TimeCigar’s team, providing better service to our consumers. I really don’t know what will happen in the next five or 10 years, but I want to voice out to the world that there’s a man in Hong Kong who’s very enthusiastic about the future of the cigar industry, and he’s waiting to meet every cigar lover in the world! I hope that all suppliers and consumers will get to know our brand, and that we can serve Hong Kong and Chinese cigar lovers. Time alone will tell!
JT: What is the most memorable cigar you’ve ever smoked and why?
TC: The cigar that impressed me the most was the Hoyo de Monterrey Double Corona. I can’t remember when I smoked it, but the body and aromas were so complex – from light to strong, complicated and exquisite. A complete and perfect cigar.
Originally posted on February 11, 2023 @ 8:17 am