Cusano's Growth Plan
How former pension fund manager Michael Chiusano sequed into the cigar world and now plans to expand his 13-year-old Cusano cigar brand.
From the Print Edition:
Tiger Woods, May/June 2008
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Like dozens of other entrepreneurs in the mid-1990s, Chiusano had entered the cigar business. Thirteen years later, unlike nearly all of them, he's still around.
Cusano Hermanos begat many other Cusano cigars, including Cusano Corojos, Cusano 18s and Cusano Xclusivos. Some have received 90s in Cigar Aficionado. All have become known for their value—Cusano cigars provide a lot of bang for the buck. The Cusano 18 Double Connecticut Robusto, rated 89 points, is only $4.25, a steal for a handmade, fat, quality smoke. It's one of Cigar Aficionado's Best Buys of 2007.
"If you look at our very loyal fan base, it's the everyday smoker, not the weekend warrior," says Chiusano. "They say price is what you pay, value is what you get. You don't have to pay a lot to get great stuff."
Joe Chiusano, left, is a partner with his brother Michael in DomRey Cigar.
Chiusano slips back into his analyst mode often, and enjoys breaking down the cigar market into categories while making comparisons to other consumer products, such as cars. With pen and paper, he sketches the categories: such price-aggressive brands as Kia and Hyundai are near the bottom of the price spectrum; Toyota is in the price/value segment; Cadillac in the premium segment; and Lexus and Mercedes in the prestige segment. Cusano's handmade bundle cigars, which retail for $2.50 to $3.50 each, inhabit the price-aggressive segment, while his boxed handmades, at around $5 a pop, are the Toyotas of the cigar world. (Chiusano drives a Land Cruiser.) In cigar shops full of the tobacco versions of Lexus, Acura and the occasional Ferrari, his Toyota Cusano was sometimes a tough sell.
"A lot of stores didn't want to sell Cusano 18 because it's too good for the money," he says plainly. "Our [retailers] came to us and said, 'Make something more expensive—people who wear Rolex don't want to look at a Timex—they'll never find out how good you are.'"
Chiusano decided to broaden his product line and go after the prestige segment. In 2006, he launched the Cuvée line, priced at a greater premium compared with his regular boxed Cusano line. Reviews in Cigar Aficionado and Cigar Insider were mixed, ranging from 85 to 90 points. Chiusano is making changes, including reblending his Cuvée Rouge line and dropping a contract manufacturer who made one of the blends.
"The rollout of our Cuvée brands has been hindered because some things did not come out as intended. I realize that if Henke doesn't make the product, then it must be made by me. No one else will do," says Chiusano. "We are fortunate that we can wait until we are 100 percent satisfied with the finished product before full-scale release since we have only ourselves to answer to. Believe me, I'm not an easy one to please." The new Rouge and the Cuvée 151 line, which has never been sold, should hit store shelves when this issue goes to press.
Adding more upscale brands meant changing the sorting process of the tobacco his company buys—now the top 10 percent is reserved for the prestige Cuvée brands.
There are lower rungs on the ladder as well, and lesser leaves get kicked down for bundles or machine-made cigars. Having more price segments allows for greater economies of scale, and every leaf has a home. In October, DomRey picked up U.S. distribution of Panter and other dry-cured cigarillos from Royal Agio in the Netherlands. (The brands previously were distributed in the United States by Ashton.) The little cigars are made in Holland, Belgium and the Dominican Republic. Chiusano is looking at other machine-made cigars, and is testing the waters in the smokeless tobacco market. "Most guys throw out wrapper scrap—what do you think chewing tobacco has in it? Forty percent of our stores sell [dip]." By being smart with the bottom line, he's able to put out a handmade at a smart price.
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