The Survivors (Excerpt)

A decade ago scores of new cigar brands went on sale. Most are gone, but the few that remain have built a comfortable niche in the industry

Posted: Wednesday, February 01, 2006
By David Savona

Today's cigar industry goes beyond the giants Altadis and Swedish Match, the iconic Padr�n and Fuente families, and hardy boutique cigarmakers such as C.A.O. and La Flor Dominicana. A number of companies survived the post-cigar-boom fallout through persistence, creativity and sacrifice. The following survivors have each crafted a niche in the cigar market.

CUSANO

Mike Chiusano was a Boston financial executive who liked to celebrate his big deals with his brother at Two Guys Smoke Shop. In 1995, he took a trip to the Dominican Republic, where he was handed an unbanded local smoke. He liked it so much he ordered 100 more. Using sheets of letterhead from his investment company, he fashioned a simple band, then proudly handed one to David Garafalo, one of the owners of Two Guys. The gift turned into the start of a business, and soon Chiusano had an order for 10,000 smokes. He registered a Spanish-sounding version of his last name, Cusano Hermanos, and he was in the cigar business.

"It was like a mistake. It just happened," says the 44-year-old Chiusano, a small, athletic man with off-the-charts energy. "Slowly but surely the cigar business just sort of took over, so I wound up spending all my time doing cigars. We got really serious about it when the numbers started getting bigger."

Getting serious also meant improving the source of his cigars, which were made by three cigar companies at one point. Chiusano used his charms on Katherine Kelner, the daughter of Hendrik Kelner, to wrangle a meeting at the 1997 trade show. "I gave him a Cusano Hermanos Connecticut, asked him if he would smoke it and asked him if he could make it. And he smiled and said 'I can make it better.'" Kelner now makes all of Chiusano's non-flavored cigars.

Landing Kelner as a cigarmaker meant that Chiusano needn't spend half his time in the Dominican Republic doing quality control on the sundry cigars. "At that time you couldn't trust what factories put in boxes," he says. Working with Kelner gave him consistent quality, even if he ridiculed Chiusano's early orders. "Our first order was for 20,000 cigars," says Chiusano. Henke laughed. He said, 'I'm looking for customers that can do two million cigars, not 20,000, but I like the underdog,' " says Chiusano.

The underdog proved creative, and part of the success of Chiusano's cigar brand�which is now called Cusano�is untraditional thinking. Chiusano was probably the first to put bar codes over the cellophane on his cigars, improving retailer inventory. At a recent show, his busy booth had plastic shopping baskets with the Cusano logo for retailers ordering enough of his product. It evoked images of happy cigar smokers, loading a basketful of smokes rather than tiptoeing to a retail counter and trying not to drop fistfuls of singles.

After four years without profits, the cigar business began to succeed. The brothers Chiusano spent less and less time on investments, letting the business "whittle away." They did their last deal in 2000 or 2001.

"We like to be a small cigar company. Volume wise, we're getting up there. We're not an Ashton or anything, but we're getting to the point where it's becoming sizeable." He says he'll sell close to 5 million cigars in 2005.

The perceived demographic of the cigar market, Chiusano says, is "the male, age 35 to 55, makes $100,000 a year, college educated, owns his own home and smokes three cigars a week. We target the guy who smokes three cigars a day. 'Cause that's who we are."

After the lean years of the late 1990s and early 2000s, survivors like Chiusano are profiting from today's handmade cigar market, which grew more than 9 percent in 2004 and was poised for an equally strong 2005 as this issue went to press.

Some in the industry have even used the word "boom" to describe the market conditions. New cigars are entering the market at a pace not seen since the 1990s. Recent arrivals include Tabacalera Las Vegas Co., run by Gabriel Miranda, formerly with El Credito Cigars; Dona Flor, a new brand from Brazil made by Felix Menendez, which tested the waters with a $10-plus smoke at this summer's Retail Tobacco Dealers of America trade show; and Los Blancos Cigars, run by U.S. Army veteran David Blanco.

Some newcomers have even created some buzz. Ernesto Padilla, who once worked for Tabacalera Perdomo, has taken high scores with his Padilla 8&11 Miami Blend, which is rolled at El Rey de Los Habanos, a tiny factory owned by Pepin Garcia. The same factory is home to the Tatuaje brand, owned by the Grand Havana Room's Pete Johnson, a longtime cigar retailer who created a full-bodied blend of his own in 2003. Rocky Patel, who entered the cigar business in 1996 with a partner on the Indian Tabac brand, has found fame and high ratings making cigars in Honduras under his own name. (See the February 2005 story "Rocky II".)

The ultimate boom survivor has to be La Flor Dominicana. Cigarmaker Litto Gomez entered the cigar market in 1994 and, in the short span of 11 years, has completely transformed himself from a maker of simple, mild cigars to an acclaimed tobacco grower with a library of brands including some of the world's most creative and full-flavored smokes. Examples are his groundbreaking and strong-selling La Flor Dominicana Double Ligero Chisel.

Some of the brands that disappeared during the post-boom malaise have even tried to stage a comeback, such as Oliveros, Tamboril and Fittipaldi, a cigar named after the legendary race car driver.

Each of these newcomers is trying to achieve what the survivors already have: doing enough to get noticed by cigar smokers and set themselves apart from the rest of the pack. Each hopes to become the next Cusano, Drew Estate or perhaps even a La Flor.

Looking back at the boom, Chiusano is proud to be one of the companies that made it through the boom. "Two hundred brands started, and multiple people did IPOs. We kind of bootstrapped it, made what we liked and charged what we thought was reasonable," he says, simply summing up his business strategy. "We're really cigar consumers. We just happen to also make them."

Photos by Eileen Escarda

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