Home > Cigar Stars Index Page > Edgar M. Cullman Jr.
An Interview with Edgar Cullman Jr
President and Chief Executive Officer, Culbro
Corp.
Culbro Corp., the corporate parent of General Cigar, has been enjoying
an exciting year. Business for the cigar subsidiary is booming, and
the corporation is repositioning itself to become a major player in
not only cigars, but in cigar-related merchandise and upscale
products. The biggest change has come at the top. The company's
longtime chief executive officer, Edgar M. Cullman Sr., 78, turned
over the day-to-day operations to his son, Edgar M. Cullman Jr.
Cullman, 50, has been preparing for this job his entire adult
life. After graduating from Yale University in 1968, he went through
stints in the Army and then Manufacturer's Hanover Trust Co. as a
management trainee. He joined General Cigar Co. in 1974, and became
senior vice president for cigars and tobacco in 1976 and later that
year, the executive vice president for marketing. He became executive
vice president and chief operating officer of General Cigar in 1978
and was appointed in 1980 to president of the division as well as a
member of the board of directors of Culbro. In 1983, he was named
executive vice president of Culbro and took over as president the
following year.
Cullman's rise to the company's top job couldn't have come at a more
challenging time. But his strategy is simple: keep the company at the
top of the cigar industry. He discussed his plans for Culbro, and
General Cigar, in a wide-ranging interview this past June with Marvin
R. Shanken, editor and publisher of Cigar Aficionado magazine.
CIGAR AFICIONADO: This year begins a new era for Culbro. How would you
articulate your father's contribution to the company, and has the
transition been difficult?
Cullman: Well, first let me say the transition wasn't difficult. The
decision was one that he knew he had to make. It was just a question
of when. He knew that it was going to happen, and he knew who was
going to be taking over. That's made it easier. For his achievements,
you've got to go back to 1961, when my father first bought in to the
General Cigar Co. He bought a controlling interest at that point. It
was really the culmination of his love of tobacco and the cigar
industry. Over the years, he added a lot of businesses, many of which
are not part of Culbro today. But the cigar business is still part of
Culbro and it has been his vision all along and his love. He realized
that if he could put all of those efforts against a business that was
less difficult than the cigar business, he might have made more
money. He might have been more successful, but at the end of the day
he wouldn't have been as happy because he loved the cigar
business. For him, it's been difficult to separate what is business
and what is personal interest. If there's a legacy that he passes on
to me, it is that if you hang onto it long enough, and you believe in
it, it comes back.
Look at what is going on today in the cigar business. I pushed to
de-emphasize the cigar business in the '80s and early '90s. We were
struggling. You couldn't shed assets fast enough to maintain any
viability. It is remarkable what has happened. So if there's a legacy
here, it's to follow your heart and the things that you really believe
in. You can add tremendous value in that kind of situation. That's
what he has done all of his life.
CA: When you joined the company in 1974, what was your attitude
towards cigars, and has it changed?
Cullman: I knew very little about cigars except through my father's
discussions at the dinner table or other places. In 1974, after
getting discharged from the Army, I had spent about three years with
what at that time was Manufacturer's Hanover Trust Co., which is now
Chase bank. I knew very little about the cigar business or the tobacco
business, but I enjoyed smoking cigars, I enjoyed the legacy. The
family legacy.
It was reassuring to know that I was entering a business that was not
necessarily started by my father or even by my grandfather, but
started really by my great-grandfather. That gives you a certain
feeling of a place that you belong. And I felt right along that I
belonged. I started working in Puerto Rico, where we were sorting
Connecticut wrappers. I learned the process from A to Z. I lived down
in Puerto Rico. My wife was pregnant with our first child and very
upset that I wasn't home, but we lived through those first years. It
was a real learning experience.
CA: How long did you do that?
Cullman: It wasn't that long. I spent from 1974 to about 1976 in a
training mode in various positions throughout the company. I was in
Puerto Rico. I was in Kingston, Jamaica; Tampa, Florida, where we had
an operation; and in Philipsburg, Pennsylvania, where we had a cigar
factory. I was moving from our handmade factories to our machine-made
factories. Throughout, I was learning everything about the cigar
business. From tobacco growing and processing through cigar making.
CA: After that "training program," what happened in the next two or
three years?
Cullman: My father constantly pushed me to do things. Just as I was
getting comfortable understanding something, he would push me on to
something else. I became head of the Connecticut operation, which was
at that time the real estate business, the nursery business and the
tobacco-growing business. All three divisions reported to one person,
who was also head of the tobacco business; that influenced the
emphasis that was given to the other two businesses. I was a sort of
King Solomon who sorted out the needs of the various businesses. I
learned a lot about the nursery business and the real estate
business. From there, I went on to be president of General Cigar. I
also had been head of all tobacco operations, where I worked with
Alfons Mayer [the head tobacco buyer for the company].
CA: How big was General Cigar in terms of revenues when you became
president in 1980?
Cullman: Less than half of what it is today. Our peak year was in 1969
when revenues were around $250 million. In the late '70s, it was
struggling at around $50 million. But we've been growing rapidly. In
1994, revenues were about $88 million and climbed to $124 million in
1995, and in 1996, we expect at least $135 million.
CA: Let's go back for a minute. You are the fourth generation in the
business. How did it start?
Cullman: My great-grandfather, who came from Germany, started in
tobacco and later wrapper tobacco for cigars.
CA: When was the peak of Culbro tobacco farming operations in
Connecticut?
Cullman: Well, I guess there were several golden eras. My grandfather
started growing tobacco around 1910 in the Connecticut River
Valley. That was when Connecticut Shade was introduced to the
Connecticut valley. Prior to that he was dealing in tobaccos from
around the world such as Indonesia and other countries.
CA: In an earlier interview with your father, he said that Culbro, at
one point, had about 1,800 acres of tobacco?
Cullman: Yes.
CA: Today, how many acres do you own of wrapper tobacco land, and of
that, how much is being farmed?
Cullman: We still own about 5,500 acres of land in Connecticut, but
most of it is not available for tobacco now. I shouldn't say most of
it. A good portion of it. We have about 330 acres that we're growing
this summer.
CA: Isn't that substantially lower than in the past?
Cullman: Way down.
CA: But with the demand for large-leaf Connecticut wrappers growing so
rapidly, why is the farming operation getting smaller and smaller?
Cullman: It actually has increased in the last three years. It was
down to about 200 acres, when we hit our lowest point. The biggest
problem is that every acre costs at least $25,000 to grow. It's just a
risky and expensive business. We're able to today, because of our
involvement with the grower Oliver Thrall, to have access to a lot
more tobacco than we had before. Thrall is one of the growers in
Connecticut who used to be with Windsor Shade. He has broken away from
Windsor Shade as of last year. We processed tobacco for him in the
Dominican Republic. And our agreement is such that we have first pick
of certain tobaccos that he grows.
The real demand is for tobaccos for premium cigars, not for
domestically made cigars. What we used to do is sell a significant
portion of our tobacco to English buyers and use some of the rest for
ourselves and for domestic cigars. The higher primings, the tobaccos
that had more guts, were used for Macanudo. But we really are not in
the business of growing tobacco for other manufacturers.
CA: How many acres does Thrall farm?
Cullman: He farms about 300-plus acres.
CA: But unlike Windsor Shade, you're vertically integrated.
Cullman: Yes, in that we use a lot of the tobacco we grow.
CA: And what you don't use for yourself, the higher quality tobacco,
you sell primarily to the English market?
Cullman: Right.
CA: It's not sold to other cigar manufacturers?
Cullman: We sell a little bit, but not a significant portion.
CA: And what portion of Oliver Thrall's crop do you end up with?
Cullman: He makes offers of tobacco to us, and we buy what we like for
Macanudo.
CA: Between these two operations, you're basically able to get what
you need for Macanudo and other cigars. Of course, Partagas has a
Cameroon wrapper, so it's not part of these operations?
Cullman: No, it's grown in Africa.
CA: Have you sold some of your agricultural properties?
Cullman: Yes, we sold bits and pieces here and there. And, we've
developed certain portions of the land for real estate. We use about a
thousand acres for the nursery business, but in general, we still have
plenty of growing acres.
CA: Let's talk about some of your brands. You can't start a
conversation about cigars without talking about Macanudo. Why does
Macanudo enjoy sales that no other brand in America can match?
Cullman: I think there are several reasons, Marvin. The first is that
for every cigar that is made for the Macanudo brand, we have attempted
to create a consistent smoke. So every time you buy a box or buy a
single cigar, you know what you are getting. We do that with a
tremendous inventory of tobacco, especially with the filler and
binder. We age that tobacco. It's like what goes on in the champagne
industry. They'll take seven or eight years of vintages and constantly
blend them so that the end result of non-vintage bottles is a very
good champagne that is consistent every time. There's no aspect of
vintage to it. It's the same thing with our tobacco. Tobacco is a
product of nature. It is affected by the weather and other factors to
create a crop that is very strong, very mild, or it can be a heavy
crop or a thin crop. If you have enough tobacco on hand, you can blend
it several years together so that the outcome is a very consistent
product. That's the first step.
The second factor is that we have consistently paid attention to
Macanudo both from a marketing point of view as well as a sales point
of view. We have not de-emphasized in any way the importance of
Macanudo. That's one of the reasons you see Macanudo much more widely
distributed than any other premium cigar. We even have concerns that
we've gone too far. We pushed the brand into areas where maybe it
doesn't belong, where it doesn't fit the brand's image. On the other
hand, we have allowed some people to try Macanudo that maybe would
never have tried it before, because it's available in a small
superette on the corner that an individual might go to but wouldn't
necessarily go to the tobacconist in the mall. And so they see it
there, and yes, it's expensive, but you know, relative to the price of
beer or anything else, it's not out of the question, so they might try
it. That's one of the reasons why we have a wider audience, because we
have this wide distribution and we've pushed it. We have a sales
organization unlike many of the cigar companies in the premium
end. They work both on our domestically made cigars and our premium
handmade cigars. They carry both in their cars and they are
responsible for the distribution of both. That's one of the reasons
that Macanudo is consistently out there.
CA: What about the brand's marketing or advertising?
Cullman: We have been very consistent. We have always been an
advertiser. Even before Cigar Aficionado, we were advertising Macanudo
in various publications. As the industry declined, we were less
aggressive, but still we were out there advertising.
CA: I remember seeing Macanudo ads for years, especially the golf ads.
Cullman: Exactly. We had various slogans, including, "This is a moment
for Macanudo." They were very consistent, and I think that's another
example that explains the brand's success.
CA: During the recent boom of the last three or four years, how has
Macanudo responded in terms of sales, demand, inventory? Where, for
instance, is it's volume today versus 1992, and where do you see it in
five years? It is my understanding that Macanudo is in the
15-million-unit range.
Cullman: Well, we've hit a completely new high for Macanudo. We
reached a peak in 1986, and declined from then until about 1993. But
Marvin, it is our policy not to talk about specific unit sales for our
brands, so I can't give an exact number.
CA: But Macanudo has not only responded to market demand, you've also
increased the number of sizes, as well as moved up the price to
reflect increased cost, market demand and the aging of tobacco
inventory.
Cullman: Well, we have introduced new sizes. I am smoking a Hyde Park,
as an example. That's a new size to the Macanudo line. It was a
response to consumer interest in heavier gauge cigars. Our
best-selling cigar today is the Baron de Rothschild, but it's very
rapidly being overcome by the Prince Philip, which is a much heavier
gauge cigar. In any case, we have added sizes, we have subtracted
sizes. During this incredible surge in the cigar business, we've
actually taken sizes off and discontinued them so we can concentrate
on the sizes that have the most interest from consumers. We have also,
as you know, added the vintage line and this summer we'll be
introducing a whole new look on the vintage line at the RTDA [Retail
Tobacco Dealers of America] convention.
CA: Will you tell us about that?
Cullman: The concept is that we will be producing a limited number of
four vintages: 1978, 1984, 1988, and then we'll be introducing a new
vintage with 1993. And we'll be sending them out as a package.
CA: How many cigars in the package?
Cullman: The cigars will be packaged by vintage and in one size
only. But the retailer can buy a package of four different vintages
for sale in their store.
CA: What kind of production will you have on this new line?
Cullman: It's not huge, but it's still a couple of million cigars in
all, including the 1993.
CA: Where were you able to get tobacco for that?
Cullman: We've held it just for this purpose. What really gave us the
idea was when we did the Partagas 150 [Signature Series] and saw how
successful that was.
CA: The filler, binder and wrapper, it's all almost 20 years old?
Cullman: There's very little tobacco that old. I don't how many boxes
we're going to be making of it, but we will have about 50,000 cigars
of the 1978, 125,000 of the 1984, 400,000 of the 1988, and the new
vintage, the 1993, will be in excess of a million cigars over several
years.
CA: How do they taste?
Cullman: These are wonderful cigars.
CA: Let's talk about Partagas. I assume Partagas has enjoyed solid
growth for the last four years, so that now it is in the 6 to 8
million range of unit sales?
Cullman: That's right.
CA: Obviously the introduction of the Partagas 150 caused a lot of
interest on the part of consumers and the trade and was a very
successful introduction. How has it affected the awareness and the
positioning of Partagas for the future?
Cullman: I think it was a real teaser. I mean, it was a unique
package, it was as we said in the advertising, "Once they're gone,
they're gone," and so it was a real boost to the Partagas image--it
added a tremendous cachet to the brand.
CA: What is the strategy for Partagas in the future?
Cullman: We don't have any specific new direction for
Partagas. Partagas is unique, and is a different taste vehicle than
Macanudo. It proves the rule that the wrapper has a huge impact on the
taste of a cigar, because in essence, the binder and filler
combination, with some small differences, is the same with a Macanudo
and a Partagas. The big difference is the wrapper.
CA: In terms of the pricing of Macanudo and Partagas, how are they
positioned against each other in terms of pricing for the consumers?
Cullman: They're very close, it's only about a 10 percent
difference. Partagas is slightly higher. Early on--I mean this goes
way back in history, when we first started with Macanudo--Macanudo was
positioned as slightly less expensive than a Montecruz, and Macanudo
and Montecruz were the two major smokes out there in the premium
end. We introduced Partagas and we tried to make Partagas a little bit
more expensive than Montecruz. So that was the position that we took
and it sort of held.
CA: You have a number of other brands: Temple Hall, Bolivar, Cohiba,
Ramon Allones, Canaria d'Oro, and very recently you came out with the
Cifuentes brand, which must be playing off the life and history of
Ramon Cifuentes. Why are you launching a new brand instead of focusing
on some of the other brand names that have a richer tradition and
higher market awareness?
Cullman: The proliferation of brands in the marketplace has been
extraordinary. We are continually looking for tobaccos that will
provide unique tastes. Unique in every sense while also being very
good. We don't want to do something just for the sake of being
unique. But we are stymied at this point. What we've done is come out
with a Cifuentes that was an attempt to change some blends and use
some different style wrappers. We are not convinced that it is a
unique taste. It's a very good cigar, but it still is in the family of
a Macanudo style. So, if we had to take a look at all of the brands
that we have in our household, Cifuentes is probably the least well
known. And so what we did was try to use our Connecticut wrappers but
come out with something different.
CA: But, my understanding is that Cifuentes is never going to be a big
brand or a big priority, so it's just another brand.
Cullman: Right.
CA: One obvious question is Cohiba. What are you doing with that? You
own the American rights but you haven't done much with it. Why haven't
you taken the brand to market and made it a priority given the
awareness and the consumer demand for the brand?
Cullman: I think it's a very good question and the answer really lies
in the fact that we don't have a blend and a unique taste for that
cigar today that we would be happy with. We think it's such a
blockbuster brand name that we must come out with something that is
equal to the expectation of the brand. We're at a very difficult
position because all of our time and energies have been on developing
or creating the tobaccos for Macanudo and Partagas. We need to develop
a third leg, in essence, a taste for Cohiba. If we just came out with
something that was a variation of a Macanudo or a variation of a
Partagas, we don't think that would cut it.
CA: As experts in the field, with growers and blenders who have access
to an almost unlimited range of tobacco from all over the world, why
can't you do it? Other brand marketers have launched new brands of
very high quality, very successfully. If they can do it, then why
can't you do it? If you went out to sell the brand, you could make a
fortune.
Cullman: We're not interested in selling it. We want to develop it.
CA: But why is it that other people can launch new brands of very high
quality?
Cullman: I'll be very frank with you, Marvin--the number of unique
tastes that are out there today, are not that significant. Once you
get beyond a Dominican style cigar and I would say a
Honduras/Nicaraguan, there isn't that much. But Opus X is a very
interesting new cigar, even thought it's not available in any quantity
so that consumers can really taste it. But it really is the germ of
some very interesting new approaches to a new taste in the cigar
business. That's what we're looking for and we're working very hard as
the Fuentes [Tabacalera A. Fuente in the Dominican Republic] were
before us. Unfortunately, we didn't get going as fast as they did. But
we are very interested in developing new tastes. It will only come
from experimentation. You can only grow a crop of tobacco once a year.
CA: You mentioned Opus X. I was thinking of Opus X among a number of
brands from the Dominican Republic as well as Honduras. Are you doing
anything in terms of experimentation or growing wrapper tobacco in the
Dominican Republic?
Cullman: Yes. We've always grown wrapper tobacco in the Dominican
Republic. We still grow it. What we grow mostly is candela. Candela is
the green, fire-cured tobacco that is used as wrappers for many of our
Garcia y Vega cigars. It is not used on premium cigars very much, but
it is quite popular in the domestic [machine-made] end. We're doing a
lot of experimentation in terms of new seeds and variations of seeds
and taking variations of filler and binder tobaccos in the Dominican
Republic, in Mexico where we grow also, and in Connecticut.
CA: Are you today growing wrappers in areas within the Dominican
Republic that are conducive to the kind of quality wrapper that the
Fuentes is producing?
Cullman: Yes.
CA: Is the quality high enough to be destined for future General Cigar
products?
Cullman: Yes. Definitely. Absolutely. That's exactly what we're doing.
CA: Could you expand on it, I mean, where, how big, how soon?
Cullman: How soon is very hard to determine.
CA: Do you have any crops that you are now aging of wrapper tobacco
that are in the new style and with the quality of Opus X?
Cullman: Yes. But not enough to make an introduction.
CA: For many years there was an understanding that you could not grow
high-quality wrapper tobacco in the Dominican Republic, but Opus X has
demonstrated that the theory is not correct.
Cullman: Right. But what we don't know, and I don't know, is what
quantities they are able to produce. And at this point, until they
come out in the market, there is no point in speculating.
CA: Of course, they're on the market, but only in certain areas.
Cullman: Yes.
CA: And in very, very limited quantities.
Cullman: Right. And that's a problem because as a company that is in
the premium cigar business, producing a couple hundred thousand cigars
is almost meaningless for us. It's much more important for us to look
at any brand that would be many millions of cigars.
CA: But a launch of a couple hundred thousand on the way to many
millions, five, seven to 10 years later is OK, too.
Cullman: It is OK. But it doesn't feel right to me to launch at two
hundred thousand.
CA: I understand. But do you plan for new cigars, to be a factor in
the new niche that has been created by Opus X, and if so, with an
existing brand or a new brand or what?
Cullman: Yes, definitely. Cohiba is going to be our mark. There's no
question about it.
CA: And when would this be?
Cullman: I hope it would be sooner rather than later, as my father
would always like to say.
CA: Within the next two years?
Cullman: Yes.
CA: What I'm hearing, I just want to make sure, is that you plan to
come out with Cohiba in the next two years utilizing a wrapper,
similar in style to Opus X.
Cullman: That is our plan. It doesn't mean we will be successful.
CA: You are now farming enough of this wrapper for that project. But
it seems from the Opus X experience that that kind of wrapper needs a
lot more aging to enhance the flavors. It's not just something that
you can turn around quickly, is it?
Cullman: That's the problem. Not only does it take time to develop the
tobacco, but once you feel you have it and even in small quantities,
it takes time to age it. And then, once you have made the cigars, you
have to age it again. It is a very painstaking process.
CA: That's very interesting. Could you tell me how many acres of
wrapper tobacco you have under cultivation?
Cullman: In this area?
CA: Yes.
Cullman: It's probably less than 20 acres at this point.
CA: For wrappers, that can be a huge amount.
Cullman: It could be, but much of it is not usable. It is not a
commercial seed yet, so we're developing it.
CA: But even a few acres of wrapper tobacco would be a lot.
Cullman: Oh, it would be a lot if it were all good. The problem is
there is a lot of waste.
CA: What happens to all the waste?
Cullman: Well, most of it will be sold as binders or as unusable
tobacco. It's experimentation. We're taking various seeds that are
well known and seeing if we can develop them.
CA: Is your farm where you're experimenting on the wrapper at all near
where the Fuentes' farm is?
Cullman: No. It's about an hour outside of Santiago.
CA: Are your people convinced that you can grow commercially a wrapper
in a different location of similar quality to the Fuentes?
Cullman: We are not convinced that it necessarily will be in the
Dominican Republic. But over the years, we have developed seeds that
we grow both in the Dominican Republic and in Connecticut. This allows
us actually to have two crops per year because [the Connecticut
tobacco grows in] our summertime and the Dominican grows in our
wintertime, so we actually can get two crops.
CA: I'm a little confused. So, what I am hearing now is that the new
Cohiba will not necessarily have a Dominican wrapper?
Cullman: Exactly.
CA: Earlier, I think you said it would be.
Cullman: No, all I'm saying is that it will be a new wrapper. I don't
know whether it will come from the Dominican Republic or Connecticut.
CA: Backing off the premium brands for a second, you have machine-made
cigar businesses of approximately how many cigars?
Cullman: As I've said, we don't like to talk about numbers.
CA: You have brands like Garcia y Vega, White Owl,
Tiparillos. Obviously, 20 years ago the volume was higher.
Cullman: [Emphatically] Much more.
CA: Where was the volume at its peak, and has there been any
renaissance in those sales numbers?
Cullman: There were several peaks. The most recent peak for the entire
industry was at the end of the '60s when the U.S. cigar industry hit 9
billion units in 1969 and 1970.
CA: What was your volume in that period?
Cullman: It was 1.8 billion units. From 1969 until 1993, there was a
straight line decline in the industry from 9 billion to 2 billion or
2.1 billion, whatever it is. We probably suffered proportionately so,
a little more, a little less, depending upon the year. But we had a
very big business in 1969 in the small-cigar business. The Tiparillo
and Tijuana Smalls were very, very big at that time. And it was
because the first surgeon general's report on cigarette smoking came
out [in 1964], many of the cigarette smokers turned to cigars as an
alternative for a period of about four or five years. That created a
major resurgence in the cigar business. Again, the cigar industry
could not make enough cigars to fill the demand. That was short-lived,
however, because it was based upon a false premise. The premise was
the cigarette smokers could make a transition to cigars, and most of
them could not. There just is a different taste, there's a different
enjoyment level. I think the resurgence today has a very different
foundation.
CA: What's happened between '92 and '96?
Cullman: What's happened is we had a big surge in all of our
domestic-made cigars.
CA: Machine-made cigars?
Cullman: Machine-made cigars starting in early '94. So '94 and '95
were very big years across the board. What we're finding is things are
settling out a little differently now. And what we are still finding
is that our Garcia y Vega business has grown nicely, about 30 percent
this year.
CA: Is that your biggest brand?
Cullman: It's our biggest brand in terms of dollars, but it's not in
terms of units, because it's a higher-priced cigar.
CA: Without getting specif Return to the Cigar Stars page
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