An Interview With Carlos Toraño
President, Central American Tobacco Corp.
(continued from page 1)
A: At that time I was working with Litton Industries in Miami, selling new computer systems. My Uncle Jaime died in 1974 and my cousins took over, but my cousin Jimmy also had a heart attack and suffered cancer. So he said the family should all get together again, be one company. [He said,] "I need your help." I was very close to my cousins, so I said yes. And that's how I got involved in May of 1974, and it was basically in the growing area. So we went to the Dominican Republic, we went to Costa Rica and we got involved very closely in Mexico and then in Ecuador.
Q: That explains your tobacco-growing business, but today you're involved in making cigars. Can you tell me about the creation of your company, Central America Tobacco Corp.?
A: In the beginning it was Toraño & Co. Due to legal situations and economic situations, in 1980, '81, it changed to A.S.P. Enterprises Inc.
Q: Central America Tobacco was part of A.S.P.?
A: Actually, Central America Tobacco really was a creation of Alfredo Perez [the founder of A.S.P.]. And the original members of Central America were Alfredo Perez, Silvio Perez, myself and my two cousins. During the 1980s, the two cousins leave the company, so we divide Central America from A.S.P. and we eventually went our separate ways. Central America Tobacco was really, really small.
Q: So Central America Tobacco is a tobacco broker, and A.S.P. is a tobacco grower?
A: Yes. But the people that are working with Universal Leaf want to get involved with the A.S.P. operation in Mexico. We became partners, but that created a new problem for this little company that we had. Central America Tobacco was now involved also in cigar brokering. And we were selling to Consolidated, we were selling to General, we were selling to other people who were in the cigar business, and Universal never wanted to be involved in the cigar business whatsoever. It became very complicated. How do you explain to some of the people who are buying the leaf that we are also involved in competing against them in cigars? So in 1991 we have to separate the company. Nobody wants to buy, so I buy Central America, which already has a little history.
Q: So this is an amicable split?
A: Oh sure.ery friendly.
Q: So in 1991 Central America Tobacco, the cigar broker, becomes your company?
A: And beginning in 1992 the market begins to grow. The timing was perfect. [Laughs.] The timing was excellent.
Q: Now describe your business as a cigar broker in 1991.
A: At this point I didn't own any factories. I begin to work with three or four companies that I know well, so I know I can depend on them.
Q: At this time there's no Carlos Toraño cigar, right?
Q: So tell me what happens next. All of a sudden, in 1991, you have a company that brokers cigars—it's a hell of a time for this to happen, seeing as it's just before the beginning of the cigar boom.
A: We grew magnificently well. We decided in 1994 we were going to begin our distribution of our own brands. And the first one was Carlos Toraño Dominican cigars.
Q: Why didn't you want to own a factory at this point?
A: It was very comfortable to be in the middle. You buy, you sell, you collect, your dollar multiplies very rapidly now. You turn around that dollar maybe 12, 15 times a year. Much nicer to be in the middle, out of your own factory. But you really don't control your own destiny. You don't control the quality. We realized in this business [that the] middleman will disappear. The communication is getting better, computers are getting better, now the Internet—everything is coming in. Little by little we realized we have to have our own factory, and the first factory we really owned was in April of 1998.
Q: And which one is that?
A: That is Honduras. [By] then we had a Toraño [cigar] in the Dominican Republic. We had seven or eight brands [overall].
Q: So in the boom you came out with a bunch of brands.
A: And in 1998 many of our brands disappeared.
Q: How many brands?
A: Five or six. Seven or eight. [Laughs.] Suddenly the whole thing stopped. So we realized, if we want to stay in this business in the end, you don't have anything unless you have your own brands. So we begin to decide that we have to very seriously make the Toraño brand, under our own name exclusively, and these other brands will have to disappear. The idea is if we were going to put our name on it and if you smoke a Toraño cigar from our factories, it is going to be the finest that we know how to make. There's no more excuses that it came from John or from Peter or from whomever, [or] they didn't have tobacco, or they did this other brand. We're going to make sure that if it becomes a brand, it's going to be consistent, and let us just build it from scratch little by little. The quality is the No. 1 thing.
Q: You couldn't get consistency not owning the factories?
A: Absolutely. You've gotta have control. We basically sat down and we gave ourselves 10 years, because to make the brand takes a long time. Of course, we have a lot of money or whatever it is in the bank, but in 10 years we'll lose our shirt. If we sold 18 million cigars in '97, we sold 2 million in '98.
Q: Did you really go from 18 million to 2 million?
A: And even though we're now back to 14 to 15 million, we're doing very good cigars.
Q: What's it like dealing with a drop like that?
A: Scary. [Laughs.] But again, we made a commitment that we're gonna do it, that we were doing it for 20 years, this is what the family had done, this is now our name that we're gonna build.
The other thing that we realized is, yes, we are very much involved in tobacco, yes, I bought a lot of cigars, yes, I can recognize a good cigar, [but] I don't know really how to manufacture cigars, so I need somebody that I trust implicitly, completely, who can become my partner. And this is where Fidel Olivas comes into play. I know Fidel for 20 years. He was Nestor Plasencia's right-hand man. He's a very good manufacturer of cigars. He worked over there in Nicaragua in the 1980s, and I knew him when he became associated with Tabacalera. And Fidel calls me one day and says, "I'm not happy with the Spaniards. I quit." I said, "Fidel, you just called at the right time. [Laughs.] Let's get together." And we became partners on the manufacturing side.
Q: You make cigars for other companies. Tell me about that.
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