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Making the Case: The Cigar Boom and Bust of the 1990’s
I'm a Miami boy, born and raised. Unlike my father who was born in Cuba, I did not grow up with tobacco fields in my backyard. Like most young kids, I knew very little of what my father did for a living. However, although he was traveling to far away countries growing tobacco (the Dominican Republic, Nicaragua and Ecuador), I was at least able to see the final product when I visited the warehouses in Miami. That sweet and unique smell of tobacco aging in bales would envelop me as a child when I periodically visited my father's local offices. While I enjoyed the aroma of the tobacco and was in awe of the vast quantity of bales in the warehouse, my father and his partners were not so enthralled. Those bales represented inventory that they could not sell. The times were the 1970s and 80s and the cigar business was in a deep stall, if not a death spiral. In those decades, tobacco growers almost couldn't give away premium aged tobacco. However, in just a few short years, the handmade premium cigar business would explode and experience a boom-bust cycle that would drastically alter the face of the industry…for the better.
The “face of the industry” literally changed. Back in the 1970s and 80s, you did not see twenty, thirty, or many forty year old men smoking cigars. Smoking cigars was something your grandfather did. Almost from one day to the next, instead of a picture of your grand-dad smoking a stogie on the front porch, you now had beautiful women like Demi Moore and super athletes like Michael Jordan gracing the cover of magazines smoking handmade cigars. While the image of cigar smokers was changing drastically, the sheer number of cigars being imported and sold was even more mind boggling.
At the end of 1990, it is estimated that approximately 90-100 million handmade cigars were imported into the U.S. Starting in 1992, the industry saw a percentage increase in imports of:
By the end of 1996, almost 300 million cigars were imported. That's a 200% increase in just six years. The boom was in full throttle.
I joined my father in the cigar business on June 1, 1996. “How convenient,” you might say. By looking at the numbers above, you could reasonably accuse me of jumping on the cigar bandwagon. However, you can't only focus on the good years. I grew up in the very lean years of the business. My father literally told me to get an education and do something other than cigars. So, while some may be tempted to argue that I was opportunistic in my timing, the reality is that I was grateful to finally have an opportunity to work in the business that had been in my family for three previous generations.
To work in an industry that was skyrocketing was a wild ride. I will never forget my first industry trade show that was held during the summer of 1996 in Cincinnati, Ohio. Back then, the tradeshow was called the RTDA (Retail Tobacco Dealers of America). The RTDA was a four day trade show where distributors would take orders from retail tobacconists. By the second day of the show, I wanted to close our booth. In just two business days, we took orders that I knew we could not deliver in a year. I remember my father telling me that his concern was not that we would have to close the booth, but rather he was concerned that I would believe that the experience I was having at this tradeshow represented the reality of the cigar business. My father had been attending the RTDA for over 25 years and he had never seen anything remotely like this before.
The fascinating thing about operating in a business boom cycle is that you are constantly kidding yourself about how long it will last. The constant topic of conversation between growers, manufacturers and distributors was how long before the cigar bubble would burst. From the smallest to the largest company, the standard answer was 2-3 years. Just as every motorist pulled over for DUI only had “a couple of beers”, the end of the boom was always at least two years away.
During the boom, my father and I were involved in the manufacturing of several private-label brands. While the business was going great, the day-to-day was brutal. Every client was angry that they were not getting their monthly shipments. I will never forget witnessing the lines of clients that would stand outside the door of one of the largest handmade cigar manufacturers in the world, Nestor Plasencia. Nestor made a variety of different brands in the mid-1990s and it looked like a veritable “Who's Who” of the cigar industry waiting for an audience with him at his factory in Danlí, Honduras. Everyone would storm into his office angry at the state of their backorders, but after a short time they would leave satisfied that all would be well. Two months later, they were back at the factory and the process would begin all over again. The reality of the industry was that the demand for cigars was much greater than the supply. Because it takes years to go from the seed to cigar, it was literally impossible to meet the demand. Thus, everyone was on back order, and everyone was upset at the business they felt they were losing because they didn't have the cigars to ship.
At a recent Sunday Sermon, my pastor defined the process of “burning out.” He said it's gradual, gradual, gradual, then “all of sudden.” The cigar boom did not burn out. There was no gradual, gradual; it was literally all of a sudden.
As someone who made his career growing tobacco, my father was amazed at the amount of tobacco he saw being grown in the mid- 1990s in the countries of the Dominican Republic, Nicaragua and Honduras. It seemed like tobacco was being grown in every street corner. The boom impacted everyone up and down the supply chain. After a couple of years, the cigar factories were finally able to secure the amount of tobacco needed to meet the demand. I could finally call my private label clients with good news. We were now ready to ship exactly what they ordered.
After shipping the full orders for just two months, the phones started ringing: “Charlie, can you hold off on my next month's shipment. I'm getting heavy on inventory.” Without exception, every single distributor client was suddenly in panic mode because they could not sell their inventory. Retail tobacconists cancelled orders and the cigar industry was in full retreat mode. One of our largest distributors (who shall remain anonymous) told me that they were getting more cigars in through their back door than out through the front. In plain English, more cigars were being returned to their warehouse then they were shipping. The boom was over, almost overnight.
I could write an entire article about the consequences of the bust cycle. Suffice it to say that most brands that were being sold in the boom disappeared in the market, several distributors closed shop, factories closed and sold excess inventory for pennies (the lucky ones), and many growers decided to plant other crops. The biggest question left was whether cigars were just a fad that would go the way of the “pet rock,” or did this boom-bust cycle lay the seeds for a real cigar market that would take us into the 21st century?
If you're reading this article, then you know the answer. Today, thanks to the renaissance of cigars that started in the early 1990s, we have a vibrant industry that continues to grow and evolve. There is a real culture of men and women who enjoy those special moments that can only be experienced while smoking a premium cigar.
I'm not old enough, nor well versed enough, to know the entire history of premium cigar smoking in the U.S. However, I feel confident declaring that today is the golden age of premium handmade cigars (Discounting, of course, the maniacal intrusiveness of government on our industry). The quality of cigars is excellent, the availability is pervasive, the variety is endless and the consumer is well informed. While the boom time was thrilling and the bust was destructive, we are all reaping the rewards that were sown during those turbulent times.