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David Ozgo.
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David Ozgo touring Nu Way Tobacco Company with c.o.o. Tom Kirby.
David Ozgo, president of the Cigar Association of America (CAA), updates Tobacco Asia on the US premium cigar sector – but also an FDA-proposed ban on “flavored cigars”.
Tobacco Asia (TA): CAA is perhaps the best-known and leading trade association for the United States cigar industry. What are the organization’s prime objectives and duties?
David Ozgo (Ozgo): The Cigar Association of America represents all tiers of the cigar industry in the United States. We have many of the large manufacturers of cigars as our members, both in popular priced as well as premium segments. But we also represent numerous industry suppliers and we have a number of retailers as members, too. Though we’re based in Washington, DC, we are active across all 50 states and maintain a lobbyist in almost every one of them. After all, that’s where the rubber really hits the road. Many of the regulations that the cigar industry has to follow come out of state capitals.
TA: Could you please give us some facts and figures on the state of cigar consumption in the United States?
Ozgo: Certainly. Well, when we look at both popular priced and premium cigars, about 75% are imported into the US. But when looking exclusively at the premium market, between 90% and 95% of everything enjoyed in the US is imported. As far as total market size in 2021 is concerned, it was an exceptional year for cigars in the United States. Both popular priced and premium cigar volumes were up over 14%. That is a turnover of more than 15 billion cigars. Looking strictly at the premium market, volume grew 26% as measured by imports, reaching almost 460 million sticks. To put that into perspective: 2021 was the first year that we exceeded 400 million premium cigars since 1996. So, it was truly a very, very special year for us.
TA: A 26% increase for premium cigars… that’s a lot, actually. What are the main origin countries in that segment?
Ozgo: The three primary countries where we’re importing premium cigars from are the Dominican Republic, Nicaragua, and Honduras. There are a few other countries that also export to us, but those three are the primary origins.
TA: What about Cuban cigars? Are they still officially banned in the US?
Ozgo: Yes, the ban is still in place. As a result, we import from the three countries that I have mentioned. And they’re all making exceptional products. When you look at international rankings, Dominican, Honduran, and Nicaraguan cigars are all rated just as highly as their Cuban counterparts.
TA: David, would you say that the United States currently is the world’s largest market for premium cigars, particularly Caribbean products?
Ozgo: While exact data is difficult to come by, the United States is doubtlessly the largest market globally. Obviously, we’re a big country and as I mentioned earlier, the demand for premium cigars is really growing nicely. Part of what happened in terms of growth is of course down to the fact that cigars [in the US] are not a habit. They are a hobby. During the Covid-19 lockdowns, people had a lot more time on their hands.
Prior to the lockdowns, Americans would spend up to two hours each day commuting to and from work. Well… with so many people suddenly working from home, they said:
“Gosh, I have an extra two hours in my day and can now spend those on recreational activities.” Incidentally, when we saw that 26% sales increase [for premium cigars], it tagged along with a large sales increase of humidors, too.
TA: I understand. But then again, you always can count on the FDA, which quite recently proposed new regulations regarding flavored cigars. What is actually on the books?
Ozgo: Well, since the Tobacco Control Act was passed in 2009, the FDA has enjoyed full regulatory authority over tobacco products. What they are now proposing is a ban on “characterizing flavors” in cigars. Now, any time a government agency in the US proposes a regulation, they have to go through a clearly defined set of steps. However, [regarding flavored cigars] we have reached the end of that process. On August 2, final comments were due to the FDA.
Obviously, we filed extensive comments that anyone can read on our website. In total, the FDA received over 70,000 comments and most of those were against the proposed ban. The regulator now has to review all those comments before it can issue a final rule making. We don’t expect to hear from them until sometime next year, but believe that we’ve made such an overwhelming case against the ban that we’re reasonably hopeful that the FDA will decide not to implement the ban.
TA: David, maybe it’s a good time that we clarify at this point which kind of flavored cigars are factually targeted for a potential ban. Every cigar is flavored. It’s tobacco flavored. It has tobacco aroma. So what is the FDA aiming at?
Ozgo: That’s actually a very, very good question. When we look at the popular priced cigar market, between 37% and 47% [of all currently available products] might end up qualifying as flavored cigars. A lot of that has to do with the fact that the FDA says that “anything but tobacco flavor” falls into the scope. But, tobacco is a plant that often takes on the character-istics of plants nearby.
If you’re growing tobacco near a field where you’re also growing coffee beans, it’s going to take on some of those characterizing [coffee bean] flavors. It’s really not explicitly clear how the FDA will ultimately define what a “characteriz-ing flavor” is; and that makes it very, very questionable as to what exactly falls under the ban and what does not.
TA: Do you think that, maybe, they are talking about added flavorings? There are chocolate flavored cigars around, as well as coffee flavored, vanilla flavored, caramel flavored ones, and what not.
Ozgo: If there’s something with chocolate flavor, where there’s flavoring added, yes, those types of products would be subjected to the ban. But, there remains the question: If the tobacco itself is getting infused through a natural process, would those products then also be subjected to the ban? When you look at some of what the FDA has published, you quickly realize that it’s any kind of “characterizing flavor.” Unfortunately, that is just very ambiguous wording.
TA: There also are tobaccos which are infused during the curing process, for example with rum or scotch. Is that perhaps what the FDA would classify a “characterizing flavor”?
Ozgo: That’s an absolutely wonderful question and I think it speaks to the fact that maybe the FDA should not go down this path, because it’s so hard to define what exactly a “charac-terizing flavor” is supposed to be.
TA: What was the FDA’s rationale behind proposing that ban?
Ozgo: The FDA believes that [a ban] is somehow going to reduce tobacco usage among youths. That was the whole reason why the Tobacco Control Act was passed in the first place. Yet one of the strongest arguments that we have [against the ban] is that underage persons simply do not use flavored cigars. Looking at government data, we know that only three tens of 1% of 12-to-17-year-olds have used a flavored cigar in the past month. I’ve been looking at underage usage rates of everything from alcohol to marijuana to various illegal drugs for over 20 years, and I have never seen a number that low. In any case, it’s illegal for a retailer to sell [a tobacco product] to anyone under the age of 21. Ultimately, from a public policy perspective, there’s really nothing to be gained from banning flavored cigars. We believe that the proposed ban is really a solution that’s in search of a problem.
TA: Supposed they push through that ban nevertheless, what would the factual consequences be?
Ozgo: While there is nothing to be gained from a public health perspective, there is a lot to lose. Firstly, there is the question of personal autonomy. Adults should be allowed to be adults. When President Obama signed the Tobacco Control Act, he said that the law would still allow adults to make their own choices. But, if you’re proposing a prohibition on something, adults no longer have the option to make a choice. Secondly, from an economic perspective, the proposed ban would be a disaster. I already mentioned that between 37% and 47% of cigars would fall under the ban. Banning them would reduce retail sales by an estimated 3.8 billion dollars, causing various levels of government to lose 750 million in excise tax revenue. More importantly, we estimate that the ban would also cause the loss of around 16,000 jobs. There would be no public health benefits but only dire economic consequences. That’s about as bad a public policy as it can possibly get.
TA: Thank you for this very insightful interview, David.