An Interview with Ernesto Perez-Carrillo

Owner, El Credito Cigar Co., Makers of La Gloria Cubana, La Hoja Selecta, El Rico Habano and Dos Gonzales

Ernesto Perez-Carrillo was quietly making cigars in Miami in 1992 at his El Credito Cigar Co. Local cigar lovers and a small cult of smokers nationwide coveted his La Gloria Cubana brand as well as three other brands he made at the small factory in Miami's Little Havana district. His production of fewer than one million cigars a year allowed him to keep his loyal customers supplied, and permitted him the luxury of keeping inventories of tobacco. He could age his tobacco as well as his cigars, and bring them to market when they were ready. Then, a sterling rating in Cigar Aficionado for his La Gloria Cubana Wavell and a subsequent story about his family-style operation in the Spring 1993 issue of Cigar Aficionado changed Carrillo's life forever.

Within months, orders for La Gloria Cubana outstripped Carrillo's ability to make them. He admittedly lost track of just how many back orders he had, as the stories among his loyal followers became legendary; some waited up to six months for an order to be filled. Many people, instead of giving up, made a pilgrimage to the El Credito factory on S.W. 8th Street.

Finally, the pressure in Miami became too great, and with the advent of new factories in the city, Carrillo knew that competition for rollers and skilled laborers would raise the already high cost of making cigars in America. He began looking for property outside the country, settling on a location in the Dominican Republic. In a wide-ranging interview last November with Marvin R. Shanken, the editor and publisher of Cigar Aficionado, Carrillo discussed the trials and tribulations of the past four years, and his incredible success.

Cigar Aficionado: When did you open your factory in the Dominican Republic?

Carrillo: We closed the deal in November 1995, and we began making cigars as of April 8, 1996. By coincidence, that is the same month and day I took over the factory in Miami in 1980. We've been rolling cigars there now for about six months.

CA: What motivated you to open a new facility in the Dominican Republic after you've had a very successful small business in Miami? Why did you decide to expand your business?

Carrillo: I'd been coming to the Dominican Republic to buy tobacco. About four or five years ago, I went to look at a site there and thought to myself, "If I ever was going to open up in the Dominican Republic, it would be somewhere away from the rest of the free zones," where, as you know, most of the cigar factories are. I went down in 1995 to buy tobacco, and the day before I was leaving I went to see Mr. Federico Dominguez, who's the owner of [an industrial park in the Pisano free trade zone], and he said, "Let me show you around the park." So, we looked around, and I saw this place. I fell in love with it right away.

CA: What was going on in your business that led to the decision to expand in the first place?

Carrillo: There was no room for growth in Miami. Miami is a very limited market nowadays, especially with all the new factories opening up. I decided if I wanted to grow, and reach more consumers, spread my cigars around more, I would have to do it somewhere else.

CA: In 1996, how many cigars in total were you able to produce in Miami?

Carrillo: In Miami, we produced about 1.2 million.

CA: How many of those are La Gloria Cubana?

Carrillo: La Gloria Cubana was about 80 percent of the production.

CA: Are you at a point now where you can't produce more than 1.2 million in Miami?

Carrillo: Right.

CA: Are you at your total capacity in Miami?

Carrillo: I'm at it now.

CA: In your factory in the Dominican Republic, how many different brands are you producing?

Carrillo: We are producing La Gloria Cubana, La Hoja Selecta, El Rico Habano and Dos Gonzales.

CA: How many cigars did you produce between April and December?

Carrillo: We ended up with 2.2 million cigars.

CA: What percentage was La Gloria Cubana?

Carrillo: About 60 percent.

CA: And the next largest brand?

Carrillo: Second was El Rico Habano and third was La Hoja Selecta.

CA: So in 1997 you'll produce 1.2 million in Miami and how many in the Dominican Republic?

Carrillo: In the D.R., about six million.

CA: You will go to six million?

Carrillo: That's what we're shooting for. The only thing that might hold us back is lack of tobacco, which is a big problem now.

CA: I think people are interested to know, first of all, is there a designation on the cigar band that says whether it's from Miami or from the Dominican Republic?

Carrillo: Yes. It will be on the cigar box or bundle. We have to mark that on the bottom.

CA: But not on the band.

Carrillo: No.

CA: Is the blend exactly the same?

Carrillo: The blend is the same blend that we use in the Miami factory: Dominican and Nicaraguan tobacco.

CA: Let's talk about the blend of La Gloria Cubana, just to make it clear. The wrapper is from where?

Carrillo: Ecuador.

CA: The binder?

Carrillo: It's from Nicaragua.

CA: And the filler?

Carrillo: It is from the Dominican Republic and Nicaragua.

CA: What's the mix between the two?

Carrillo: We use about 75 percent Dominican and about 25 percent Nicaraguan.

CA: Is there any particular leaf that you specialize in, in the blend that you make?

Carrillo: We use piloto Cubano, Cuban-seed tobacco from Nicaragua and the Dominican Republic. The Dominican tobacco comes from Villa Gonzales, La Canela and Jacagua. In Nicaragua, we use tobacco from Estelí and some Jalapa.

CA: How many rollers do you have in Miami and how many rollers do you have today in the Dominican Republic?

Carrillo: In Miami, we have 30 rollers and in the Dominican Republic, we have 228.

CA: And do you plan to expand the number of rollers in either location?

Carrillo: In the Dominican Republic, we do plan to expand our rollers to about 300. In Miami, we would like to expand to about 40.

CA: Are these basically new people who have never rolled before that you are training, or are these experienced people that have worked at other factories?

Carrillo: We have some experienced rollers, but most have been people trained by us. We started that back in November 1995 and we trained over 180 people in our shop.

CA: Are there more men or women rollers?

Carrillo: It's half and half.

CA: Do you find that a woman roller is more gifted than a man roller, or vice versa? Or are they about the same?

Carrillo: In the Dominican Republic I find that the men are more gifted, especially in the bunching of the cigars. The women, however, are equal, or in some cases, better in the rolling.

CA: Do they take an equal amount of time to train, whether it's a man or a woman?

Carrillo: It's the same amount of time.

CA: How long does it take to bring someone off the street and sit him down at a training table with an instructor before he's able to roll cigars with the La Gloria Cubana brand name?

Carrillo: First of all, we send them to a program in the Dominican Republic run by Infotec, a government agency that provides job training; we support it with a payroll tax. They receive 220 hours of instruction. They just show them the basics. When they come work for us, after about two or three months, we put them up in the tobacco room to grade tobacco and to work all over the plant. We don't just sit them down right away. After about usually three weeks, we sit them at a table and they start making cigars. They might do 10, 20 cigars, 25, 50 cigars a day.

CA: Do those cigars then go into bundles?

Carrillo: No, because we use different tobaccos for that type of cigar. We sell them as seconds. "Apprentices' Cigars" we call them.

CA: How long does it take before they make a La Gloria?

Carrillo: I'd say about four months.

CA: In Miami, the newcomers are usually people that were in Cuba. Is that right?

Carrillo: Right.

CA: Therefore, you don't need a training program in Miami?

Carrillo: No, we don't have a training program in Miami.

CA: Have the 30 rollers spent their life rolling cigars?

Carrillo: Yes. With the exception of four, who have recently learned in the factory, most have worked in Cuba, in the well-known factories of Havana and Pinar del Rio.

CA: I would imagine, then, the demographics are quite different in that they're young people in the Dominican Republic and, generally speaking, older men or women in Miami.

Carrillo: In Miami, they average about 40 years old. I don't think you find too many of the older generation making cigars today as was the case when my father was making cigars in 1968.

CA: With the explosion of cigar factories in Miami, have you lost many of your rollers to competitors in the last several years?

Carrillo: We lost a lot of people. At one time, we had about 40 rollers, then we lost about 15 to competitors. Because of the new popularity of cigars, everyone is opening up a cigar factory. The first thing they do is try to look for experienced cigar rollers. And I was one of the most visible ones there, so that's where they went.

CA: I assume that was a problem.

Carrillo: It was a problem until I opened up in the Dominican Republic. It was one of the main reasons I opened the factory there. I saw this coming.

CA: How much time are you spending in the Dominican Republic versus Miami?

Carrillo: I spend about 20 days out of the month.

CA: In the Dominican Republic?

Carrillo: Right.

CA: What was it like to open a factory in the Dominican Republic? Did you have a lot of problems in getting started or did it go smoothly?

Carrillo: Quite frankly, it was lot smoother than I thought it would be. And a great part of the reason was that I have a management team working with me in the Dominican Republic who I guess, you know, are great kids--Felix Rodriguez, Olmedo Pichardo and Noemi Perez. They have helped me through the whole process, got me the people to work in the factory. So it wasn't as hard as it would have been if I hadn't had these people.

CA: How about the companies that have been in the Dominican Republic a long time. Did they welcome you as a new competitor, or didn't they want to help?

Carrillo: No, as soon as I came in, I got their assistance. And, like I said, I found no problem in getting whatever help I needed from the bigger companies there.

CA: Any in particular?

Carrillo: The Fuentes. They helped me with molds, presses and boxes to make my first shipments. They were the ones that were really in the forefront to say, 'Whatever you need.' They still are.

CA: With everyone short of rollers, and everyone having big training programs, isn't there the potential for problems in hiring rollers away from other factories?

Carrillo: It has created problems. I couldn't be sure if a job applicant had been working in other factories, or whether they left a year ago, six months ago. But as soon as we found out that these people were not telling the truth, then we just let them go. That's one thing down there in the Dominican Republic; you know everybody respects each other's work. If a worker comes to me from the Fuentes or General [Cigar Co.] or MATASA or wherever, we call them and make sure it's OK to give them work.

CA: If you make 1.2 million cigars in Miami and 6 million in the Dominican Republic, that's 7.2 million cigars, with the majority La Gloria Cubana. Didn't you used to sell a lot of your cigars out of your store?

Carrillo: We still do.

CA: But you also ship to a small group of selected retailers around the country. Doesn't the dynamic change when you increase your production sixfold? In many ways, you've gone from a mom-and-pop operation to real commercial volume. How are you going to deal with that? How are you going to handle the increase in shipments?

Carrillo: It has changed dramatically. It's not easy. As a matter of fact, I'm going to start looking for a building just to handle the cigars from the Dominican Republic. And our shop on 8th Street has gone to a point where we can't handle all the volume.

CA: From that store, do you only sell the cigars made in Miami or do you also sell your Dominican cigars?

Carrillo: No. Right now from the Miami store, we only sell the cigars made in Miami. And that's the way we will keep it.

CA: The cigars you make in the Dominican Republic you're going to ship across the United States?

Carrillo: Correct.

CA: Will the cigars stop in Miami or will you sell directly to retailers all over the country?

Carrillo: They'll be distributed through Miami for the time being.

CA: So you don't have a warehouse there.

Carrillo: Not yet, but we're looking for a warehouse near the 8th Street location.

CA: Before you began production in the Dominican Republic, how many retailers in the United States carried La Gloria Cubana?

Carrillo: We had about 178.

CA: Most complained they got maybe 5 percent of what they needed. Are you going to add retailers?

Carrillo: For the time being, we are going to stick with those retail customers that want more cigars. They've been patient enough to wait all this time and those are the ones for whom we're going to try to maintain supplies for the time being.

CA: So you're not going to expand and increase the number of retailers?

Carrillo: We're not going to increase unless we have the excess capacity to increase.

CA: Are you saying that every city now has at least one retailer that carries La Gloria Cubana?

Carrillo: No, there are a lot of cities, especially in the Midwest and on the West Coast, that don't have them. There are a lot of places that still don't carry La Gloria Cubana.

CA: How does my reader, who wants your cigar, get your cigar?

Carrillo: That's a good question and frankly, I know we have to expand and spread the cigars to different cities. But I want to give these people who have been waiting for me all this time, some reward.

CA: If a consumer calls your office on the phone, will you send them the list of stores around the country that carry your cigars?

Carrillo: If they call, what we'll do is tell them they can get it at such and such a store. The problem that we had is when the consumer goes to the store, he finds that the retailer is out. When a retailer gets a batch of La Gloria Cubana, they sell out within two to three days. It's a real problem for the retailer and myself because you usually end up with an upset customer.

CA: As a curiosity, when you ship to a retailer, how many boxes are in an order?

Carrillo: We average, depending on the size, from 40 to 50 boxes. But it can range from 30 boxes to about 120.

CA: And how many times a year might they get that?

Carrillo: About four times a year.

CA: So even though the retailer is in St. Louis or Memphis, he's going to get his shipments?

Carrillo: Yeah, it's a steady thing. We rotate. It's something they're going to get whether they call or not.

CA: People found two things attractive about La Gloria Cubanas: it is a well-made, rich-tasting cigar and it was reasonably priced. Today, costs have gone up. The growers want more, you've built a new factory, you're doing a lot more. Have you adjusted your prices, for instance on a Wavell?

Carrillo: Three years ago, I think it was $1.95. If I'm not mistaken, now it's about $2.85.

CA: $2.85. Are you going to continue to increase prices?

Carrillo: I don't know, I try to keep the prices as low as possible. What I try to do is cut costs on my end. Of course, if it's a question of my costs going up tremendously, that's the only time I'll raise cigar prices. I have this philosophy that I make a good cigar, a quality cigar, at a price that most people can afford.

CA: What happens if hotels or restaurants, which are getting more and more into offering cigars, want to sell your cigar? Do you sell to hotels and restaurants?

Carrillo: We haven't. We sell mostly to retailers and to wholesalers.

CA: I've heard stories where a retailer, who is not one of your 178, will go into a store, buy five boxes at--I'm making up the number, but let's say, $80 for the box. Takes it to his store, marks it up to $150 or whatever, and sells it. So it's like a double markup because customers want your cigar.

Carrillo: That's one of the biggest problems I have. I mean, I have had a lot of problems during my years making cigars. But I find this to be one of the biggest problems, where you have people charging excessive amounts, especially when I am trying to sell the cigar as low as I can at a decent price. And we see that people are charging 12, 15, 20, 22 dollars for, let's say, a torpedo. It makes me sick. I don't think it's fair for the consumer, and I don't think consumers should pay this price unless it's priced that way originally.

CA: Is there any way to characterize the retailers who do get your cigars? Are they the old-line, top retailers?

Carrillo: Yes, places like Mike's in Miami, Holt's in Philadelphia, Arnold's in New York, Jack Schwartz in Chicago. They were the ones that started with us, and they're loyal to us and we're loyal to them.

CA: Your number two brand after La Gloria is El Rico Habano. Is that less expensive?

Carrillo: Yes.

CA: How much less? Ten, 20 percent?

Carrillo: About 10 percent.

CA: Are you going to increase production of that brand?

Carrillo: We're going to be increasing the production, because that cigar is selling very well. That's an old Nicaraguan blend of tobacco, except for the wrapper, which is from Ecuador. It's full of body. I think that once people start smoking a cigar--let's say they're starting with a mild cigar--they want to move to something a little stronger, like El Rico, which would be a full-bodied cigar. And that's starting to sell very well. We haven't exposed it to the public so much because we've been tied up with La Gloria.

CA: What other brands do you make?

Carrillo: We make La Hoja Selecta, which is a mild cigar. Then a couple of months ago we started making Dos Gonzales, which is another brand that was very popular. It was one of the first brands made in the Dominican Republic.

CA: And all of these are distributed wherever you sell La Gloria? You don't have any exclusivity with anyone in terms of these brands?

Carrillo: No. We'll sell to anyone who prices our cigars at our suggested retail prices.

CA: Are those two new brands pretty much the same kinds of blends, the same kind of tobacco?

Carrillo: No. La Hoja Selecta is a blend of Dominican and Nicaraguan. It's a milder tobacco that we use. Dos Gonzales is an all-Dominican cigar.

CA: Including the wrapper?

Carrillo: No, the wrapper is Connecticut shade. We use Connecticut shade wrapper for both La Hoja Selecta and Dos Gonzales.

CA: You use Ecuadoran wrapper on La Gloria Cubana and El Rico Habano. Is that because you've been working with it a long time?

Carrillo: That's it. The Ecuadoran wrapper we've been using since '68, since my father started the company in Miami. When we came out with the other two brands, La Hoja Selecta and Dos Gonzales, I wanted to use something else for people who like a Connecticut shade wrapper. It's a very good wrapper and a lot of people like that. For El Rico and La Gloria, we've been using the Ecuadoran wrapper from the beginning.

CA: If you're going to do 7 million-plus cigars in 1997, do you have a five-year plan? At what point do you reach a maximum production level, or is it a continuous growing process?

Carrillo: I said 7 million, because that's the amount of tobacco I am going to get this coming year. I'm sure that we could double that if we had the tobacco. But the situation being as it is now with tobacco that's hard to get, we really don't know how much is going to be available. For that amount of cigars, I know I'm fine.

CA: Given the pressure on shipping, from the time that you roll a cigar until you ship it, how much aging does it get?

Carrillo: In the Dominican Republic we give the cigars a minimum of 14 to 21 days before we ship.

CA: In Miami?

Carrillo: No. No.

CA: By comparison. How much?

Carrillo: In Miami, it is like two to three days. In Miami we don't really have the room to keep the cigars.

CA: What about aging the tobacco before you roll it?

Carrillo: The tobacco that we're going to start using in 1997 is from 1995 because we've been building up inventory for the past year.

CA: How many months of aging will it have?

Carrillo: It will have a minimum of about 12 months.

CA: Are you comfortable with those time frames--the 14 to 21 days after the cigar is made and the 12 months of tobacco aging? Would you like to see it aged longer?

Carrillo: If you can keep it longer, it might improve it. It takes about 15 days after a cigar is made to lose its excess humidity while keeping the humidity that it needs. I feel that after 14 to 21 days, the cigars are in good shape to be smoked. We test constantly to see if that is the right amount of time.

CA: I'm sure you are aware that more and more companies are going public as a way of raising equity capital to expand their businesses. I also guess that investment bankers knock on your door all the time. Do you plan to stay private or do you at some point plan to go public?

Carrillo: Right now, I intend to stay private and the main reason is because I like what I do. I like making my own decisions and not having to answer to anybody. I like being independent and this is one of the main reasons. You know, money, we all need money, but money is not something that really motivates me to work. I need to have this independence where I can do whatever I want to do and not worry about letting everybody know.

CA: Are any members of your family in the business?

Carrillo: My wife, Elena.

CA: And what does she do?

Carrillo: She helps run the Miami operation and the distribution.

CA: You also have a daughter, right?

Carrillo: Lissette, who is 23, goes to law school at Columbia University in New York.

CA: Have you discussed the possibility of her someday joining you?

Carrillo: We discussed it before she left for school. I think now she's changed her mind about that. She really likes law, especially tax law. So I think that's probably what she'll pursue.

CA: Do you have other children?

Carrillo: I have a son, Ernesto, who's 15.

CA: Ernesto. Does he ever work in the factories?

Carrillo: He helps out during the summer. Shipping and that type of stuff.

CA: Your father was in the business. How far back does your family go in the tobacco business?

Carrillo: Since 1907.

CA: Was that your grandfather's generation?

Carrillo: My grandfather and his brother started making cigars on the sidewalks. They had a little cigar table and they made their cigars and they sold them for a penny.

CA: Where was this?

Carrillo: In Cuba. Havana, Cuba.

CA: So they were in the business and they handed it down to your father?

Carrillo: When my father started out, he worked for Cuban Land Leaf Tobacco Co., which was an American company that would buy Cuban tobacco and resell it in the U.S. or wherever.

CA: What year was that?

Carrillo: That was about 1928.

CA: So he worked for an American company, but in Cuba.

Carrillo: He used to be the tobacco buyer.

CA: Tell me a little bit about his life.

Carrillo: He was a man with a lot of guts. There's a story about him, one time before the [Second World] war; there was an excess of tobacco and nobody, none of the big companies, wanted to buy any tobacco.

CA: They didn't need it?

Carrillo: So he went around, he bought everything that he could get. He would buy it for, let's say, a dollar a pound, whatever. A fortune at that time. And he had a warehouse in Havana full of tobacco, I think, at one time he had over 4,000 bales or something like that. The war came and there was no tobacco to be found, so the only person to have tobacco was him. At that time he sold that tobacco; he made a large amount of money and that helped him to become independent.

CA: What was his name?

Carrillo: Ernesto Perez-Carrillo.

CA: Did he come to America at some point?

Carrillo: He would visit the U.S. while he was in the Cuban senate, which he got elected to in 1954 and in '58.

CA: The senate in Cuba?

Carrillo: He represented Pinar del Río. In '59, he had to leave Cuba because he was being pursued. And he was here for about 10 years before he decided to start making cigars again.

CA: In 1959, he came to Miami, and what business did he go into?

Carrillo: He had a bar. He had a restaurant. You know, all kinds of different things.

CA: Was he allowed to take some money out of Cuba?

Carrillo: No.

CA: So he started with nothing when he came?

Carrillo: Nothing. Absolutely nothing. My father was the type of person that money meant nothing to him. He didn't have that much money in Cuba, and when he came over he didn't have any money. He never thought of abandoning the island; the only reason he did it was because he was arrested at different times [for being a member of the liberal party].

CA: So he came in '59 and he later opened the cigar factory El Credito. What year was that?

Carrillo: He created it in 1968.

CA: In '68 and he started making...

Carrillo: El Credito. He started making fumas and cazadores, short filler cigars in the 44- to 46-ring gauge and different lengths. His first real big customer was Hank Greenberg from Suburban News, Chicago. And that's how he started making long, Cuban-style cigars.

CA: Were they a distributor or retailer?

Carrillo: They had three or four stores in Chicago. In the premium cigars, [my father] would make five or six different sizes and sell it under El Rico Habano.

CA: When did La Gloria Cubana come into being?

Carrillo: La Gloria Cubana came about in 1972. But that was mostly sold in the store or through mail orders. My father would come home at night and go through the Yellow Pages. At that time they had the addresses to send mailers and that type of thing. And my mother, myself, my wife would send them out.

CA: How were you able to get the La Gloria Cubana name?

Carrillo: My father registered it. In Cuba, where we had the El Credito cigar factory, the La Gloria Cubana factory was there also. And at that time, he had bought the rights of the brands from the people at La Gloria.

CA: What year was that?

Carrillo: I'm not exactly sure when, but I know when he came here, he registered it and he had no problem.

CA: When did you enter your father's business?

Carrillo: I entered it in about 1968, '69. At that time, it was just mostly a part-time job.

CA: What were you doing?

Carrillo: I was at school. When I was 19 I got married. Then I started playing music; I wanted to become a drummer. And I still worked with him part-time also. Now, as time went by, I started getting more and more into the business, learning whatever I could from it and from the people that worked there. In 1980, unfortunately, my father passed away. I took over the estate and started going to the RTDA [Retail Tobacco Dealers of America] shows. I started trying to build the business up.

CA: When you took over the business in 1980, how many cigars was El Credito making?

Carrillo: That year we made 850,000.

CA: And what kind of cigars were they?

Carrillo: Well, they were the typical Miami cigar. They were a blend of Dominican, Brazilian, some Honduran tobacco and Ecuadorian wrappers. They were a milder cigar than the La Gloria is now. For about five or six years after my father passed away, I went through a lot of hard times because the demand wasn't really there. We were working with very little capital.

CA: How did you earn your capital?

Carrillo: Actually, I was losing money. I remember my accountant one year, I think it was in 1984 or 1985, told me, 'I think this is going to be your last year in the cigar business because you have lost $20,000.' I thought about it for a while and decided I couldn't let all this effort go to waste, so I fired the bookkeeper. I didn't want anybody tellingme that my business was in ruins. But, as it turns out, we were losing the money...

CA: But 800,000 cigars was a lot of cigars in those days.

Carrillo: But that was in 1980. By 1985, we had fallen to about 500,000 cigars.

CA: Was that the low point in terms of production?

Carrillo: Right.

CA: Because today, in Miami, you're only doing a million two. Would you be doing 10 million today if you'd had the capital?

Carrillo: Yes. But at that time, they were different times. There wasn't the demand that you have now.

CA: And you were selling them for nothing. Your prices were ridiculous.

Carrillo: There was absolutely no markup. I think at that time, the assumption was if you made $40, $50 on a thousand cigars, you were doing great.

CA: My understanding is that you made cigars in the 1980s basically for the Cuban and Spanish customer base in Miami.

Carrillo: Yes, that's true. We made a lot of short-filler, Cuban-style cigars. They were 40-cent cigars.

CA: Forty-cent cigars! What percentage of your cigars in those days were sold at that price?

Carrillo: It was about 70 percent. We sold in a lot of small cafeterias to other people that resold them.

CA: When did you start to believe that you had a national brand?

Carrillo: Quite frankly, I have to say it was pretty much after the [Cigar Aficionado story].

CA: When the story came out.

Carrillo: Right. That's when it started really.

CA: You started getting phone calls from retailers? From consumers? Who?

Carrillo: Everybody--everybody wanted the cigars. Before that, we sold the cigars in just a few places, like in the East.

CA: The brand wasn't hot?

Carrillo: It wasn't hot. I remember the sales on the torpedos. I mean, we'd sell them, but it's nothing like it is right now. Right now they are one of the most popular sizes that we sell.

CA: And that started after your Wavell got a 90 in Cigar Aficionado?

Carrillo: Completely. The day that the magazine article came out, we were at the RTDA [convention]. To be frank, when I used to go to those RTDA shows, if I sold 600 cigars, I'd be happy. I remember the times we'd go to RTDA and come back with orders for 400, 500 cigars. When we got rated in that issue, we got orders in one day for 26,000 cigars. In one day. Then, the phone calls into Miami were tremendous.

CA: People used to tell me they would call you and no one would pick up the phone.

Carrillo: It was impossible. We had to put in an answering service. One time we got like 170 calls a day. Who could answer those calls? It was incredible. And that's really when the brand became known nationally and worldwide.

CA: And, you still don't have someone answer the phone?

Carrillo: I gotta get Americanized.

CA: Isn't it time, then, to have a staff, to have an organization?

Carrillo: [laughs] Yeah, I think so. I think it is time to get something like that.

CA: I gotta believe you're working day and night. And it's impossible; it would seem to me that it would be impossible for one man to do it all himself.

Carrillo: Right. It is impossible. And I do have a few people that work with me, but I do need more help. To delegate more...

CA: You need an organization! Not just rollers; you need salespeople, administrative people, a billing department...

Carrillo: That's right. It's time that I do have that because it is getting out of control.

CA: And with the numbers you're talking about, I always thought that the most serious flaw that you had was that you grossly underpriced your product. Therefore, you didn't have the margins to invest in a staff to manage a growth of the business. And I'm not sure that in the past four years you have created the organization you need in order to build your company; this is 1996, the beginning of 1997; you're going from a million to 7 million. Doesn't it scare you?

Carrillo: It scares me to a point, but you know I haven't really given that much thought to building an organization. And I have to build one; like you said, I can't do it all by myself. Just traveling back and forth takes up a lot of time. And you do need good people to help you. I just hadn't been able to find the people that I need in administration.

CA: Do you plan to expand at all in Miami or will all of the expansion take place in the Dominican Republic?

Carrillo: The expansion at this time will take place in the Dominican Republic. If I were to expand, of course, if I get cigarmakers in Miami, I'll keep expanding. The situation there now is that there are so many new cigar factories opening up that it becomes very difficult.

CA: Let's be real about this. Do you in your heart feel that you are able to maintain the high quality, when you have almost a boutique operation in Miami, now that you are in a commercial-size factory in the Dominican Republic? Is there any change in the quality of the product in your opinion?

Carrillo: Well, you know, I'm not just going to say this because I opened up in the Dominican Republic. The cigars are going to sell. We've had a lot of success with the Dominican cigars. That's not a problem. Because there's more space there, there's more labor. I think we can improve the cigars in the Dominican a lot faster than at the factory in Miami. For the simple reason that we have the space, we have the manpower, and it's cost-effective.

CA: Is improving quality in the Dominican Republic a function of buying better quality tobacco or training more proficient rollers?

Carrillo: It's a whole process, a whole process that comes from the time that you get the tobacco to the time that you make [the cigars]. For instance, in the Dominican we have four supervisors checking all the cigarmakers--how they're folding the leaves, how they're rolling the leaves, all this type of thing. In Miami, we can't find a person that we would call a supervisor to do this type of thing. Because there's not really someone that's experienced enough in what I want them to do. I think in the Dominican we'll be able to improve a lot in the way the cigars are made. There's room for improvement in the Dominican Republic; you're working with people who want to work and need to work and are anxious to do a good thing and make a good product, because their livelihood depends on the cigars that they're making.

CA: Has the quality of the cigar in Miami suffered because you're in the Dominican Republic 20 days a month?

Carrillo: No. Because, these people, Cuban cigarmakers, first of all, they're very professional, they're very proud of what they're doing.

CA: How do you handle quality control at the two locations?

Carrillo: In the Dominican Republic, we have four supervisors; we have five more people that check the cigars after they're made. In Miami, we have one person checking the cigars because of the low volume.

CA: What about boxes? I hear there's always a shortage.

Carrillo: That's a big problem.

CA: Do you ever have the cigars ready but can't ship because you don't have the boxes?

Carrillo: Right now, in the Dominican Republic, we must have over a million cigars ready to be shipped, and we're not shipping anything because we just don't have the boxes.

CA: Where do you get the boxes from?

Carrillo: We're looking into different places, a cigar box company opening up in the Pisano free trade zone, called Mantis. There are three other people that want to start up box companies this year. Hopefully, we'll be able to get a lot more boxes. That's a big problem right now in the industry.

CA: What about boxes in Miami?

Carrillo: First of all, they only make wood boxes at a very high cost. They're expensive. What I want to do next year is change all La Gloria Cubana, El Rico Habano and La Hoja Selecta to a colored box. I found they're easier to make. I like them better; they're prettier with the colors and stuff. And they're not as expensive as the cedar boxes.I think there's going to be a problem with cedar down the road. So much now is being used to make cigar boxes, there's going to be a problem with shortages.

CA: Are there any problem areas other than the boxes at this point? Is shipping a problem?

Carrillo: Cellophane is becoming a problem now because of the demand. Cigar molds are also a problem. We have now about 20 people that should have started working with us about a month ago and we're still waiting because we don't have enough molds or presses. The thing in the Dominican Republic is that people are just going haywire and they can't keep up with the demand for anything.

CA: When do you see the cigar boom slowing down to a more normal growth rate than the staggering numbers that we're experiencing today?

Carrillo: I think that the only thing that will slow it down, and I think it is very important for the tobacco growers to be aware of this, is the pricing factor. Unfortunately, we've come into a situation that is unique. I think the only thing that will stop this boom is the prices of cigars. I mean, really, people can't afford to pay 10, 12, 15 dollars for a cigar.

CA: How much is your most expensive cigar?

Carrillo: Six dollars.

CA: What size it is?

Carrillo: It's the pyramid, a large torpedo.

CA: What is your largest size of La Gloria in terms of volume?

Carrillo: The Wavell.

CA: What does that sell for today?

Carrillo: $80 a box retail.

CA: In the Dominican Republic, what is your largest selling cigar size?

Carrillo: Everything we make in the Dominican Republic is for the United States, so it would be the Churchill. We also sell a lot of the Charlemagne and the torpedo. We have 10 people making torpedos in the Dominican Republic.

CA: Do you make many maduro cigars?

Carrillo: No. We're going to start this in '97.

CA: In the Dominican Republic?

Carrillo: Right. In Miami, we'll [someday make] make maduro; in the Dominican it's gonna be in 1997. Everybody knows maduro wrapper is going to get very, very expensive. And hard to get.

CA: When you think about the cigar market and the future of your company, what thoughts go through your mind?

Carrillo: I don't think it's a boom anymore, I think it's an industry, an industry just on a growth surge. But it won't be if we keep making the mistakes which are being made now, overcharging for cigars and this type of stuff. I think all manufacturers are trying to make the best quality cigar possible. And I think that this cigar fever can last for a long time, if we just control what is happening. We can't let it get out of hand and look short-term, or this is going to die in five years or 10 years. But it will never die unless the industry itself kills it.

CA: What is your attitude towards the explosion of new cigar brands entering the market, hundreds of new brands that didn't exist three years ago? What impact will they have on the market?

Carrillo: All of these brands are making it hard to get as much tobacco as you want. I think as long as we're here for the long-term, we won't have any problems. I can't see anybody coming in for the short term just to make a profit. Cigar making is something that you have to do because you love doing it, not because you make money. And if you look at it in the short term, you're not going to last. Competition is great because it keeps everybody on their toes. The only problem is, of course, the lack of tobacco, lack of workers, that type of thing. But I don't have any problem with new brands. I mean, as long as they are in it for the long term and don't want to mess around with me, I have no problem with any of the new brands coming into the market.

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