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A Conversation With Javier Estades

General Manager/Premium Cigars U.S.A., Altadis U.S.A.
Gordon Mott
From the Print Edition:
Jeff Bridges, July/August 2013

(continued from page 1)

This is a fuller-bodied Saint Luis Rey. The traditional Saint Luis Rey was medium-bodied, so this newer Saint Luis Rey is fuller bodied, a completely different blend, but with the same brand identity to play off those same sweet spots. This is the kind of initiatives we are doing with these other brands too. If you want to be successful, you have to leverage the brands that we have in our portfolio and make sense of it.

Q: Altadis brought some brands to market in the last five years or so. Are you going to continue supporting those, or will you be dropping any brands in the portfolio?
A: Some brands will rationalized because we need to make choices. We cannot invest in and sustain all our portfolio. Some brands are being studied right now and some products will be rationalized.

Q: Does rationalized mean dropped?
A: Yes. Dropped. But not only brands. We are constantly evaluating our portfolio because if we put new things in the market we also need to take out some of them. This is a constant process. That will even be true with some front marks within a line. It may be a certain size that we don’t have or there’s a certain size that isn’t relevant anymore. It’s an ongoing process.

Q: I’m looking at the humidor here. I don’t see any Warlock. I don’t see any Mi Dominicana. I don’t see any Por Larrañaga. I mean that’s a great Cuban brand name. Are those things that you haven’t addressed yet?
A: Some of those brands, like Warlock, we will continue to put in the market. Some others are being evaluated. The future depends on sales. If sales continue, we will decide if we want to continue with them. Or maybe we could revitalize the brand.
And it has only been two years, you know. Give us time.

Q: We haven’t talked about Trinidad yet, which I think is a great brand name for the country.
A: Trinidad is interesting because it’s one of those brands that we think has some potential. With Trinidad we wanted to be more creative and to think outside the box. We came up with something that I would say is quite radical for us. The cigar is very distinctive, especially the taste profile. We use some Criollo, Corojo, some various different tobaccos from Nicaragua, and it’s a little fuller bodied. As you can see it’s box-pressed. This has had a nice following so far. We tried to take a step forward with Trinidad. The consumers will tell us if we are right or not.

I have also encouraged small production, or limited-edition short runs, like the Sumum in the VegaFina line. That was very popular on the market. We did one with the Montecristo Epic, that iconic No. 2 size. Because we have these secret stashes of tobacco we can do some short runs that are exciting and really creative. The consumer will tell us if it is going to be for the long run or what things will not work. But we are doing different things, to be more creative more innovative, to adapt to the latest trends. In the market that we’re in, we know that the U.S. consumer is very loyal. But we also know that the American consumer wants to try things. And they’re very demanding. So we want to try to honor that, to try to do some things that are relevant and see if they are successful.

Q: How do Montecristo lounges fit into that strategy? How many do you have at this point? Is that a program you think you’ll grow in the future?
A: Point of sale is pretty critical, because we want to make sure that we help our retail customer maximize opportunities. How do you do that? It’s very important to reinforce the premium experience, so every time that a consumer goes to buy a cigar, it’s not just a cigar. It’s everything around that. Just by walking in one of these beautiful humidors, and seeing all the cigars, and getting all the advice and the recommendation of the brick-and-mortar people is very important to maximize that experience.

We definitely want to and will have more programs in order to reinforce these premium experiences. The Montecristo lounge program is very important for us, so we are also working to see how we can expand and give value to that program.

Q: How many lounges are there at this point?
A: Twenty. Some are bigger than others. But it is one of the things we’ve been working on developing. We have better tools, better information that we can share with the retail customers. We try to also give them better materials, to have a more professional approach, and basically at the end the key is to work as a partnership with those people. This market is about relationships. So while we are also trying to honor that trust from these guys, there are some things that require time. But we want to be a reliable manufacturer, and we’re here to work with them and to have a win-win approach.

Q: But how do you balance the demands of your retail tobacconists with the catalog business? Isn’t that a source of some suspicion with the brick-and-mortar outlets. How do you counter that?
A: We try to come up with initiatives for each channel. I think that both channels have different dynamics and have different consumers. So what we wanted to make sure is that if we put something in brick and mortar, it’s for the brick and mortar.

Q: What percentage of your sales are in brick-and-mortar tobacconists versus catalog?
A: Regarding the weight of the sales, we don’t disclose that information. But I can tell you that both are relevant in the U.S. market, not only to us, but to the whole industry. But we are working with the brick-and-mortar side. For instance the new Romeo was exclusive to brick-and-mortar tobacconists. Other programs are open to everybody, including catalogs. We are trying to make sure both channels have the right tools to be competitive. In our case, we have a balanced business. But fortunately we have a good portfolio so that we can offer interesting initiatives for both customers. They are both important for us.

Q: What about new brands? Will you be considering that? Is that something that down the road you see as an option?
A: We have a very complete portfolio, so it’s not a priority to deliver new brands. However, we have a lot of opportunities to do things with existing brands that we have. And you will see more in the future. I cannot tell you about our plans at this moment.

What we want is to develop and to put all our efforts in those brands that we think have the highest potential. And I think that we already made that choice in terms of the brands. But again I think that this is one of the assets that we have, which is having such a portfolio. I think that we have more brands that we increase their value in the market.

Q: On the production side, what’s going on at Tabacalera de Garcia? Is it still the largest premium hand-rolled cigar factory in the world? What kind of changes have you implemented there?
A: I don’t know about in the world but it’s certainly in the Dominican Republic or Honduras. We do have more than 2,800 people working in both factories, and we are producing up to 50 million cigars a year.

But I’m glad you brought up the factory. Let’s go back to the process that we follow now to launch new cigars. The main change is that we are working closer with the real experts. Under this new approach, our marketing department talks with the real expert in each of the different steps that we have to follow.

All these experts are under a common roof. It’s not only two people deciding, like it used to be. We are bringing all that knowledge in the company because that knowledge is unbelievable. They have been there for decades. What we are trying to do is talk with the real experts in blending, in the leaf department, with the packaging guys. That’s how we are coming out with these more powerful concepts.

For instance, every week in the factory there is a tasting panel, a blind test where you try new things. But also we compare with what we have in the U.S. market, so that’s an important element. We are also developing a Grupo de Maestros (a master’s group), which is a group of people who are more senior and who play a more experienced role in our cigars. They are focusing in those projects that are at the higher end. For instance, the Grupo de Maestros is actually part of the Montecristo Epic program. Every box is signed by the Grupos de Maestros, the special group of rollers that create the cigar. They sign every box and sign off on it.

This is something new, not just bringing the best rollers together, but recognizing them as the best rollers. We are getting them to buy into that and getting their commitment and their excitement and their engagement.

Q: These are people who actually work on the factory floor?
A: Absolutely. We are also working to share experience between both the factories, in Honduras and the Dominican Republic. We are also strengthening the links we have with the Turrents in Mexico and with our manufacturing partnerships, we are trying to maximize the flow of information and get the best practices in place. Those are big changes.

These guys all need to know what is our strategy, and what are our future products, because that will determine the tobacco that they will buy, or the things they have to do. By sharing that information and to really work as a team, we are anticipating things that are helping us to come up with better cigars in the U.S. market. So I think that for me this is one of the key assets that we have as a company, to use all that knowledge and to make sure that everybody works in the same direction.

Q: Are the leaf people spending more time in the farms and telling people what they want and how to grow?
A: Leaf people are critical, because they need to understand what it is we want to do in the U.S. market and the purchases they make. One of the positive initiatives that we have in Altadis is that, because we are big, we can have access to the best tobaccos in the market. If we see that one year that specific crop of tobacco was good, we can decide to buy more, so we can properly age that tobacco. So working with the leaf personnel is critical. And this is why they need to know in advance what projects we are working on.

Making a premium cigar is something that’s very artisanal and that needs time. So you cannot produce something that’s really good overnight. You need time and you need some planning. So that’s something that we’re working closer on with these guys. And these guys, they are really experts. And we are getting them involved in the idea generation process, their input is very valuable because they can tell us what’s going on outside the factories.

Q: That’s a new process for you, right?
A: That’s the point. The more people that have the information, the more ideas are being generated. We now talk to the leaf people all the time. They can now anticipate and say, “Hey, that could be something down the road that’s interesting.” And, because we’re closer on our side to adult consumers, we need also to provide those technical experts with that information, so they know what’s happening in the U.S. market. And that for me is the key, the ability to have that communication.

Q: Would you call that a strategic shift?
A: For me, it is about the team. The most important asset that we have in Altadis is the people. And I’m very clear about that. So I think that my job is basically to let those people do their job. We need to have a clarity about the direction of the business, and to transmit what we want to do. But our ability to use all that knowledge, and to transform that knowledge into specific and concrete things for the consumer is what is going to bring success.

Q: What is your vision for Altadis U.S.A.?
A: Everything is about keeping the business growing. In order to do that, it’s challenging but I think that we are ready. Basically what we need to make sure is that we keep developing those brands with the highest potential, that we make choices about where we want to invest.

Secondly, we need to keep bringing innovation and credibility. We have to try to experience new things. We have great brands. We need to keep listening to our consumers and to our retail customers. That’s critical and we need to try to anticipate any potential trends or opportunities and at the key is being able to develop understanding of cigars. If we put a cigar in the market, we need to make sure that it responds to something, that it has a concept, that we’re appealing to a specific consumer, and have got a plan to support that. And by having that consistency, I think we can make that happen. And this is basically what we are working toward in the future.

Q: What are your concerns going forward?
A: It’s no surprise that the biggest concern we all have is the possible regulation of the premium cigars. We are working with the industry to show why the premium market is so special and so unique. At the end we are a very small part of the market.

But consumers are very knowledgeable and experienced. Buying a cigar requires an investment in terms of money. The premium cigar industry does not represent any threat. We are working with organizations and the industry to try and show the difference of the premium cigar market. So that’s the biggest threat that we have at this moment in the industry.

Q: Have things gone better than you expected for you here?
A: I don’t know what is going to happen in the future. I think nobody knows. For me, it’s very clear is that this project in the end is very interesting if we show growth. And this is what we are all committed to, to maximize the opportunities we have in the market. I’m very happy because I have one of the best teams in the industry. So I’m very confident that these guys can achieve whatever they want if we keep working and keep engaging our consumers and our customers. So now we are in a very good position. We keep bringing relevant things for this market to remain competitive. But I think this is a tough market and it requires… it’s very demanding. It’s been challenging, but if I look backwards and I see everything the team has done, I feel very proud about their output.


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Comments   1 comment(s)

Marne Jurgemeyer — Fort Morgan, CO, USA,  —  August 22, 2013 10:15pm ET

Great interview very informative on industry procedures and thoughts.


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