An Interview With Guillermo León
President, León Jimenes Cigars
(continued from page 1)
CA: And how many were exported?
León: Of those three million we exported about one million between the United States and Europe. Most of the cigars were exported to Miami, so when I say the United States, I am really talking about Miami, because that is where that cigar was known.
CA: Did the León Jimenes brand exist at that time?
León: In 1994? Yes.
CA: When did it start?
León: León Jimenes started in 1987, and it had a Cameroon wrapper. We used to produce a cigar called Imperiales. I still have a box of those put away. But we changed the name from that to León Jimenes. At about that time, the Cameroon wrapper supply became very difficult and small. We needed to make a choice between León Jimenes and Aurora to put Connecticut-shade wrapper on one of the cigars, because we didn't have enough supply of Cameroon to do both. Since Aurora had always been part of the company's tradition, and the older of the two brands, we decided to change León Jimenes to put the Connecticut-shade wrapper on it. People complained. They had liked the cigar the way it was, but there was nothing else that could be done. We had to do it.
CA: When did you change the wrapper?
León: That was in the early 1990s. I wasn't at the company yet, so by the time I got there, the León Jimenes cigar already had a Connecticut-shade wrapper.
CA: León Jimenes was produced for export, or for the local market, too?
León: For both.
CA: What was the production of León Jimenes when you arrived?
León: Between both Aurora and León Jimenes, we produced three million. When I arrived, production was more or less divided 50-50 between the two. That is still maintained, even though in Europe, the brand Aurora doesn't exist. It doesn't exist because we haven't had the production to ship there and maintain our U.S. market. And Europe has always been more inclined toward the lighter Connecticut wrapper. We just recently introduced the Aurora in certain European markets. The response has been favorable.
CA: Let's go year by year. In 1995, how many units were produced?
León: In 1995, three million; 1996, we doubled to six million; 1997 we doubled again to 12 million.
CA: Still divided 50-50 between the two brands.
León: More or less, with some production going to private-label brands, and it also includes some cigars made by machine. For 1998, we had projections to get to 15 million, with the prospect of opening up some new markets, because we still have large new markets in Europe where we believe our cigars will go. But the way things are going, we are only rising at about an 18 percent annual rate, so we may not even reach 14 million.
CA: For the first three months of 1998, you have seen increases of about 18 percent?
CA: In the current climate in the U.S. market, that is actually quite good, don't you think?
León: Yes, I think that the way things are going with all the new manufacturers, 18 percent is quite healthy. It's just not up to our projections.
CA: How many factories do you have now producing for you?
León: For us? Just one.
CA: How many people work there?
León: We just recently reduced the workforce because we had too much inventory. We were negotiating for a new distribution deal in Europe, but the deal fell through. We had increased our inventory in anticipation of that deal.
CA: What's your inventory level right now?
León: We have about five million units in inventory. Up to a few months ago, we had been selling everything that we were producing. But we have decided that we need to move the build-up in inventory, because we didn't want the cigars sitting here getting old. We dismissed about 120 rollers; we still have 200 working in the factory. We have also been cleaning up our workforce, because now is a very good time to be focused on quality. It's easier when things are a little slow to tighten up and make more demands for quality on the individual rollers. The individual who doesn't give us top quality, we let go. It used to be a problem for us because there was a shortage of rollers. Nowadays there are 100 to 200 good rollers looking for work. So if some don't tighten up on their quality, unfortunately they have to go. But as a result of our efforts, I believe that today the consumer is receiving 100 percent better quality than six months ago.
CA: Is it just the rollers affected by this new focus on quality?
León: No, it affects everything. I am saying you can see improvements in the quality of the tobacco, the quality of the cigar, in manufacturing, in everything, at least on our part. But it seems that all the producers are like that. When I speak to the traditional manufacturers who were in business before the boom, they are cleaning up their factories as well. Today, they are always dismissing people. One takes out 30, the other takes out 40, but they are always dismissing people. They're doing the same kinds of things we're doing.
For instance, we have improved our quality so much inside the factory because we have put in quality stations; they are like inspection stations that we didn't have before, because we couldn't really take the time, nor did we have the manpower. It's like the saying you have to stand up to see what you have. You then prepare your land again, and keep moving forward, knowing what you have. Right now, today, we can make 35 million cigars without any problems, because we have been preparing for two years to do just that. And, I believe we will have the opportunity to do it someday.
CA: In your view, how has the business climate for cigars changed in the Dominican Republic during the past four years since you joined the company? Please tell us about all the difficulties you encountered.
León: There weren't any problems in the beginning. I met people from ProCigar, and they were all very helpful. Henke Kelner at Davidoff, Wayne Suarez at Arturo Fuente--they all helped me very much. Even through 1995 and the beginning of 1996, everythingwas fine. We were producing and selling everything we could make.
CA: Were there plenty of raw materials at that point?
León: Absolutely. In 1995, I remember that there weren't really any problems. A lot of people rushed out to try to buy tobacco before it was ready, but I would say that the big companies did not. The harm didn't start until '96. I am going to tell you that all the factory owners that financed tobacco, which means they gave technical and financial assistance to the farmers who grow tobacco, got burned in 1996. The idea in the Dominican Republic had been that I give you, the farmer, the money, and I send a technician to supervise the crop, and when the crop is harvested, I get it from you at a prearranged price. The tobacco is mine. We expect things to go well in these situations and they normally do.
CA: How many tobacco growers do you have?
León: We had, in those days, about 200 tobacco growers. And, in 1995, the old system worked fine. But in 1996, suddenly, there were factories everywhere. Far too many small factories.
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