Moulay Omar Zahraoui, CEO of cigar manufacturer Habanos: « We are today the leader of premium cigars in Africa ».
Driven by the economic growth of recent years and its lot of emerging middle classes, the cigar is becoming increasingly popular in Africa. A favourable economic situation on which a handful of the continent’s brands are now seeking to capitalize. Among them, the Moroccan Habanos, which has a cigar manufacturing unit in Casablanca. For Ressources, the company’s CEO, Moulay Omar Zahraoui, looks back on this entrepreneurial adventure and explains his ambitions. Interview.
Ressources: Habanos has decided to specialize in the cigar market, a niche segment in the tobacco industry. Why did you make this specific choice?
Moulay Omar Zahraoui: There is certainly a part of family heritage in this entrepreneurial project. My father smoked cigars, so I was immersed very early on in a world where this art of living was fully integrated into daily life. Later, I trained and worked in the tobacco industry, particularly in Germany and South Korea. An initiatory approach that finally led to the creation of the Habanos company in December 2011. In fact, the period lent itself well to the company’s start-up: the Moroccan tobacco sector had just been liberalized and there was a historic opportunity to get started. I obtained the license to manufacture and distribute tobacco and very quickly began to invest. On this last point, I owe a lot to my family support.
Resources: a word about the raw material used, tobacco. Where does yours come from?
Moulay Omar Zahraoui: To secure our upstream, we have our tobacco grown by 550 tobacco growers in the Ouazzane region (northwestern Morocco, in the Western Rif), who occupy a total area of 120 hectares. In total, the value of the tobacco stock we own amounts to 28 million euros. But beyond the raw material, it was above all necessary to develop the know-how associated with cigar manufacturing, an activity that requires real expertise. As Habanos is the leading Moroccan company in this segment, we brought in specialists from Honduras and the Dominican Republic to train our local teams. This is a long-term job - they have been present in Morocco since 2014 - and is the sine qua none for achieving production excellence. Unlike some of our competitors, who use an ersatz of tobacco flavor, our cigars are only made from pure tobacco flavor, with 100% natural constituents1.
1 Each cigar is made up of three elements, the wrapper, which is the heart of the cigar, the binder, which consists of interleaved tobacco leaves that wrap the wrapper, and the filler, which is the last leaf that wraps the cigar.
Resources: the cigar is often associated with the world of luxury. Does the profile of your clientele correspond to this image?
Moulay Omar Zahraoui: Yes, the cigar remains a premium product, with a price in line with this search for quality (Habanos cigars sell for between 40 and 500 dollars a piece). It is therefore obvious that our products are primarily aimed at a demanding and informed clientele, most often from privileged backgrounds. The trend is nevertheless towards democratization. To accompany this movement, we have concluded a series of agreements with 24,000 tobacconists in Morocco, who can thus potentially distribute our products. And beyond our domestic market, we are now negotiating with distributors in other countries, in Africa and elsewhere, to whom we offer payment facilities of up to one million dollars
Resources: Let’s talk about Africa. In addition to Habanos, there are now a number of companies on the continent positioned in the cigar segment. Does this recent trend respond to a real African demand or is it more international?
Moulay Omar Zahraoui: African demand is definitely there. It now accounts for 20% of our company’s turnover and is growing rapidly, in the wake of economic growth, which has broadened the base of consumers who can afford the products we offer. For my part, I am convinced that the African cigar market is still in its infancy; we just need to develop new channels of communication, aimed at a wider audience. With this in mind, we organized the first cigar exhibition in Morocco in December 2019. A new edition is planned this year in Casablanca, from December 18 to 20.
Resources: A final word on your prospects. How do you see the future?
Moulay Omar Zahraoui: Today, we are the leader in premium cigars in Africa, a visibility on which we intend to build partnerships with distributors to establish bridgeheads throughout the continent, and beyond, in the rest of the world. We are already having constructive discussions with potential partners in the United States. In a market traditionally associated with Latin American productions (Cuba, Dominican Republic, Nicaragua…), we offer both novelty and quality. A rare combination that is ultimately a great card to play to establish ourselves in this fast-growing market.
The cigar, an old history and a bright future ahead
A symbol of epicureanism, the cigar is intimately associated with the discovery of tobacco by the conquistadores in America. Chronicles thus point out that Hernández de Boncalo, a Spanish chronicler and historian, would have been the first individual to import tobacco seeds into Europe in 1559, at the request of King Philip II of Spain. These seeds were then cultivated in the vicinity of Toledo, particularly in an area known as ‘los cigarrales’, because it was often invaded by cicadas. This could explain the uncertain etymology of the word cigar.
Cigars have since become a global market with attractive prospects. According to the firm Grand View Research, the global cigar market could reach $21.02 billion in 2025 against $16.99 billion in 2018. As for the high-end segment, that of hand-made cigars, it corresponds today to 18% of sales and 450 million units annually. These figures are commercially impressive for operators in the tobacco industry, but they cannot, however, avoid the very real risks of smoking for customers (cancer, cardiovascular disease, etc.).