Rampant smuggling has resulted in a slump in sales for Thailand's sole importer of Cuban cigars, leading the agent to decide to diversify its product portfolio into other imported consumer goods such as food, wine and clothing.
Hong Kong-based Pacific Cigar (Thailand), authorised distributor for all Cuban cigar brands, has decided not to carry out any further retail expansion of its cigar imports, but will seek new imported products to boost sales, the distributor's general manager said yesterday.
"We're considering what food products have potential on the local market, and we're likely to begin with European imports for leading hotels," said general manager Prasobsook Thawilvejjakul.
"We expect non-cigar sales to account for around half of our company's total sales within the next five years," he said.
Pacific Cigar (Thailand) is a subsidiary of Pacific Cigar Co, which controls around 75 per cent of the Cuban cigar market in 20 Asia-Pacific countries.
Smuggling has been a major contributing factor in Pacific's decision to diversify into other products, said Prasobsook, who added that the market for smuggled cigars was thought to be around two times larger than for legal imports due to attractive prices.
Another reason for the company's shift in direction, he said, was sluggish growth.
Cigar sales in Thailand - currently at around 350,000 units a year - have been growing at an annual average of around just 5 per cent. The total annual market value is around Bt60-65 million, of which Pacific's Cuban imports have a market share of around 50 per cent, or Bt35 million.
Prasobsook said that tourists accounted for around 85 per cent of the company's sales, which meant that events such as September 11 and last year's Bali bombing had affected sales.
Import duties, he said, were another impediment to improved sales, with cigars attracting a minimum 60-per-cent import duty.
Cigars in Thailand, said Prasobsook, were on average around 50-per-cent more expensive than in Europe, at prices ranging from around Bt60 to Bt1,500 per cigar. This range was the bare minimum at which Pacific could afford to sell them, he said.
"A reduction on cigar import duties would not only result in tourists - particularly those from the US, which has an embargo on Cuban products - purchasing more, but would also encourage domestic consumption," he said.
Prasobsook added that Pacific only planned to open two more cigar outlets in Thailand - one on March 20 this year and the other in 2005 - and would in future concentrate on distributing cigars through mini-marts and hotel kiosks in tourist destinations countrywide.
Naranart Phuangkanok
THE NATION