Chen Zhi’s Fall and the Crisis of Cuban Cigars
Cuban cigar giant Habanos faces a crisis after its major investor, Chen Zhi, was sanctioned and extradited. Aggressive price hikes alienated loyal customers, driving them to New World competitors, while US blockades have halted exports.
Key points
- Chen Zhi, a Cambodian-Chinese tycoon, held a stake in Habanos, the marketing arm of Cuba's cigar monopoly, through a consortium led by Hong Kong investors.
- In April 2022, Habanos raised prices significantly, pegging them to high Hong Kong rates, which boosted revenue to $827mn by 2024 but alienated traditional customers.
- On October 14, 2025, the US and UK sanctioned Chen and his Prince Group, alleging involvement in transnational fraud and human trafficking.
- Chen was extradited to China in January 2026, and liquidators were appointed for his companies, including the entity holding his Habanos shares.
- US blockades on Cuba have disrupted shipping, leading to the cancellation of Habanos' annual charity gala and auction in Havana.
- Retailers report a shift away from Cuban cigars toward 'New World' brands from Nicaragua and Honduras due to rising prices and inconsistent quality.
Background
Cuba's cigar industry, a vital revenue source under a US embargo, has long relied on Habanos for global distribution. The industry faced structural issues, including outdated production infrastructure and a lack of investment, which limited output compared to competitors like the Dominican Republic. Prior to Chen's involvement, Habanos was a joint venture between the Cuban state and UK's Imperial Tobacco, which sold its stake in 2020.
Why it matters
The collapse of Chen Zhi's influence exposes the fragility of Cuba's cigar economy. Aggressive pricing strategies have permanently alienated core consumers, while geopolitical tensions and sanctions threaten the industry's ability to export. This shift accelerates the rise of New World cigar brands, potentially reshaping the global luxury tobacco market.
What to watch
Liquidators are seeking buyers for Chen's Habanos shares, likely ending his ownership. Habanos must navigate ongoing US blockades and supply shortages while competing with New World brands that offer better quality and availability. The company may need to reassess its pricing strategy to recapture lost customers.
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