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The Change at C.A.O.

Now among the hottest of cigar brands, Nashville's C.A.O. began life as a pipe maker
David Savona
From the Print Edition:
Andy Garcia, Mar/April 2004

(continued from page 3)

A waitress brings another round of beers to the big table at El Torito, the best restaurant in Danlí, Honduras. The churrasco steak dinner is a recent memory, and the men reach for dark cigars as they continue talking about tobacco. The snap of several lighters is heard, then cigar smoke begins to rise as raindrops sneak through the leaky roof, plopping to the green tablecloth.

The party includes three career tobacco men, two with decades of experience, but the star of the table is one of the youngest men at the dinner—34-year-old Tim Ozgener. The wide-eyed, energetic former comedian comes to life in the dark of the room, bringing some of the men to tears with his jokes.

Ozgener once called the comedy clubs of California his home, but today he spends increasing time in Central America as a vice president of C.A.O. International Inc., the Nashville, Tennessee, company that owns some of the hotter brands on the American cigar market. Once a sleepy company that made most of its money from pipes and humidors, C.A.O. has redefined itself over the past decade, abandoning the humidor industry, pushing pipes to the back burner and immersing itself in the cigar business. The reason was simple economics.

“We started out with pipes, but pipes are now two percent of our business. If we were just pipes, I wouldn’t be here. As my dad says,” Ozgener explains, slipping effortlessly into an exaggerated version of his father’s accented voice, “‘Humidors don’t burn. Cigars burn, and then you have to replace them.’”

Replacing them has kept the small, family-owned company busy. C.A.O. is privately held and doesn’t disclose sales figures, but Ozgener says cigar sales have quadrupled since 1998.

C.A.O. was created by Tim’s father, Cano (pronounced Johnno), an Armenian Turk with a penchant for smoking cigars and pipes. He favored meerschaums, the white pipes made from a claylike material called magnesium silicate. These porous pipes are often carved into shapes, some of them extremely ornate; the carvers of Ozgener’s native Turkey are particularly gifted at turning the pipes into works of art.

Cano, who emigrated to America in 1961, graduated from Columbia University as an engineering major and wished to stay in New York City, but that changed when he met Esen, his wife-to-be. “I love New York,” he says. “When you follow a woman in life, many strange things happen to you. She wanted to raise her family in a quiet place.”

That quiet place was the South. Ozgener moved to North Carolina in 1964, then to Nashville in 1968, working as an engineer at DuPont. A natural tinkerer, he began modifying the stems of pipes to improve their performance, sold a few to friends and tobacconists, and created a business in 1968. “My father basically started C.A.O. from the basement of his house,” says Tim. In 1977, he left his high-paying job at DuPont to form his own company, naming it after his initials.

C.A.O. made a first attempt at the cigar business, in 1980, with a brand called Casa de Manuel. “We learned everything not to do,” says Cano. Consistency problems compounded the difficulties of a dying market, and Cano retreated to pipes and the company’s fledgling humidor business. C.A.O.’s first humidors were antique boxes that the company retrofitted with humidification devices, and later it had humidors made specifically for C.A.O. by local Nashville artisans. The company even had its own humidification system. In 1995, C.A.O. began to sell cigars again, a Honduran smoke made by Nestor Plasencia called simply C.A.O.

The cigar boom was in full swing, and getting a consistent product wasn’t easy. The early C.A.O.s didn’t light the world on fire. Tim remembers being embarrassed during his visits to retailers. “The guys would say, ‘Tim, we like you, but look at this box of C.A.O. cigars.’ One would be chestnut-brown, the other would be yellow.”

A production problem on the original C.A.O. line—which now is available in limited form and is known as C.A.O. Black—led to the company’s first cigar success. “Our biggest hit was the maduro,” says Cano. “That was created in a snafu. We had a beautiful maduro, but it didn’t burn well, so we called it back. We had about 100,000 to 150,000 cigars we had to recall.”

The recall, along with product shortages, prompted the Ozgeners to look for an additional supplier of cigars. They eventually hooked up with Douglas Pueringer, owner of Tabacalera Tambor in Costa Rica, where Bahia cigars were made. Pueringer made the Ozgeners a spicy, black maduro, which they packaged with a red band that borrowed heavily from Cuba’s Partagas Serie D No. 4.

“That put us on the map,” says Aylin Ozgener, 31, Cano’s daughter, and the other vice president of the company. She’s a quiet woman with a surprisingly tough job—she hires and fires salespeople, and collects on accounts. “Our goal for sales is to get all our lines in the stores,” says Aylin. “To try to increase our shelf space.” That’s a decidedly tougher task than just a few years prior. C.A.O. has expanded its range of cigars dramatically. In eight years the company has gone from one cigar brand to seven major brands: Gold, Brazilia, Criollo, Double Maduro (or MX2) and three versions of L’Anniversaire: Maduro, Cameroon and eXtreme. The company also markets flavored cigars, plus has several specialty lines, including the reincarnated Black and a 65th Anniversary Cigar made to honor Cano’s 65th birthday.

None are made by Pueringer, who abruptly ended his business relationship with the Ozgeners by a breakup fax in 1999.  (He would later retire from the cigar business.) Pueringer’s move left C.A.O. in the lurch. “Seventy percent of our cigar sales were from the maduro at that point,” says Cano. But Pueringer’s surprise move turned into a boon for C.A.O., which found a replacement manufacturer in Nick Perdomo later that year. Perdomo began making the maduro blend, and soon after gave C.A.O. a Cameroon-wrapped cigar, which Cano had craved for years. The first samples barely made it to the industry trade show in 1999. “I brought 1,000 cigars in my luggage into Miami through the nothing-to-declare line,” says Tim with a smile.

C.A.O. added cigar brands through the years, and eventually expanded its coterie of cigar companies that made its brands: the Toraño family began making C.A.O. Brazilias in Honduras and La Aurora started creating the flavored cigars in the Dominican Republic.

In 2003, the Ozgeners made the shift from mere marketer to cigarmaker, buying two cigar factories in Central America, one in Estelí, Nicaragua, and one in Danlí, Honduras, to give it more control over the production of its cigars. (The term cigar factory is loosely applied here—each C.A.O. factory is inside a building that also contains a cigar factory owned by the Toraño family. In Nicaragua, the dividing line is invisible, about halfway through the rollers’ gallery. In Honduras, C.A.O. workers sit on one side of the building, Toraño workers on the other.)

The shift gave C.A.O. more control over its tobacco supply and quality control, as well as improving margins by cutting out a middleman. Soon after the move was made, C.A.O. switched production of its maduro brand from Tabacalera Perdomo to C.A.O. Fabricas de Tabacos in Nicaragua.

 The production of the C.A.O. and Toraño factories on both sides of the border is managed by Fidel Olivas, 49, and three of his six sons. Most cigar factory managers are Cuban; Olivas is Nicaraguan. “Fidel’s goal is to be known as one of the great Nicaraguan cigar men,” says Charlie Toraño, Tim’s counterpart from the Toraño family.  Olivas buys tobacco for Toraño and C.A.O., and the close working relationship between the midsized cigar companies allows them to get better prices on tobacco. “If we come across some great tobacco, we can buy it together,” says Tim. “It gives us more buying power.” His father seems slightly obsessed with establishing solid tobacco inventories. “You have to have a supply that can last you at least two years,” says Cano. Tim says he often catches Cano watching The Weather Channel, worrying about damage to planted crops. “ ‘Who cares about the Midwest?’ ” says Tim, doing another Cano impersonation. “ ‘What about Ecuador?’ ”

New brand launches are practically an annual event for the Ozgeners, but the lines tend to stick around. “A lot of cigar companies replace lines if they don’t work for them—that’s not our intention. We believe in each product,” says Tim. “The Gold—most companies would have just ceased that line. We worked hard to relaunch that line. When you come up with a great blend, our objective is not to abandon that blend. It’s really easy to sell what’s new and what’s hot, but you also have to remind people about a great blend.”

The Ozgeners are marketers, and seem unafraid to test the boundaries of normal cigar advertising. Early ads featured nude women smoking double coronas. The current ad campaign shows the three Ozgeners decked out in black. Tim looks like a club hopper, with his scruffy goatee, shaved pate and a cool scowl as he blows on the lit end of his cigar. His sister is goth chic, replete with black lipstick. Cano, wearing a suit, is looking on from the left, appearing somewhat bemused.

The tagline challenges the notion that Cuba makes the best cigars in the world with the statement: Cuban Shmooban. It’s copy that attracts some, angers others, but is hard to ignore.

Today, C.A.O. is experiencing growing pains. The company occupies cramped, charmingly dumpy headquarters in west Nashville. It’s a residential area, with cheap rent. Aylin shares an office with Cano; Tim shares an office with Mike Conder, a consultant who once worked for General Cigar Co. and La Flor Dominicana. They are the lucky ones. Most of the remaining staff sit in odd-shaped cubicles, which fill the space, which also serves as a warehouse. The company has no loading dock. Each shipment has to be broken down and hand-carried out the back and around the corner where trucks have access. It’s a smaller than expected operation, with 19 employees.

“We are very happy with the road we have made,” says Cano, 67. He’s philosophical, with an easy smile, an ever calm demeanor, and a self-deprecating wit he’s passed on to his son. His mood reflects the yoga he has practiced for the past two decades, and a recent scare with non-Hodgkin’s lymphoma—now in remission—has made him even more spiritual and reflective.

“We are performing through our cigars,” he says. “My daughter and my son have done a wonderful job. I compare it to the performance of a ballerina doing Swan Lake. There is the part of playing the notes and there is the part of feeling the notes…if they know how to combine the physical self with the spiritual self, they will be a better person overall.”

His children get the message. “We’re making a product that’s making a lot of people happy,” says Tim. Adds his sister: “We really enjoy what we do.” That much seems obvious.

Back in Danlí, the sun has set on another workday. The C.A.O. and Toraño workers file out toward the Pan-American highway as the rain begins to fall again, and the owners of the building settle into the back office. Tim Ozgener plops into one chair, Charlie Toraño another. The men are opposites, Ozgener short and bubbling with energy, Toraño tall and lanky and quiet. Bundles of unbanded cigars are spread across the table, ready for test smoking.

“This room I like. We discovered Brazilia here,” says Tim. Charlie nods: “Good karma.”

The men light cigars and settle into easy conversations about life, music, playing the guitar and raising families. They move from one cigar to the next, evaluating the blends of the day. Tim, a visual thinker, turns to his notebook, filled with sketches of tobacco leaves and cigar boxes.

Ozgener obsesses about the cigar: how it burns, how it looks, but overall, how it tastes.

“We want to have style,” he says, “but we don’t want to be just glamorous. We want to have substance, too.”

Photo by Bob Schatz/Getty Images

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