C.A.O. International Inc. has now been in business for 40 years, evolving from making pipes to producing cigars.
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David Savona: Let's start from the beginning, and talk about C.A.O. and its origins. Tim Ozgener: This is our 40th year. My father started the business in 1968 out of the basement of our home, and it was really just a hobby. It was his love of meerschaum pipes. We started shipping out of the garage of our home, and it was something that developed organically into a family affair.
Q: It started as a pipe business, and you and your sister, Aylin, would help your dad? A: Yeah. He is an Armenian who was born in Istanbul. He was trained as an engineer, and he didn't like the engineering of the pipes [that he smoked]. He improved the engineering, and he went to a retailer in North Carolina, and the guy said, "Where did you get that pipe?" And my dad said, "Well, I made it." The guy wanted to order some, and my dad said, "Listen, son, when you are Armenian, you never say no to an order. How many do you want?" [Laughs.] This retailer had some pull, and soon people started calling our house phone, and people wanted to order my dad's pipes. They wanted to make sure the pipe had the same improved stem, and he started putting his initials on the pipes, which are C.A.O. [for Cano A. Ozgener.] That's how the company started. He didn't have any employees, so when my sister and I were home, we would occasionally hear my dad say, "Are you done with your homework? Come downstairs." Downstairs, it would be a sea of pipes, and he would say, "This row of pipes—$45. Go." And he would hand us the pricing gun.
Q: So it was a very modest beginning. A: Oh yeah. Looking back on it now, there are some fantastic stories. He had a retailer that he would do barter deals with—pipes for green coffee beans, and he would cook the coffee beans in a pan. And I would wake up in the morning and I thought there was a brush fire in our house because there was a haze of smoke. I would say, "This smells horrible, Dad!" He said, "You do not know what the hell you are talking about. This is quality! I am roasting coffee—look how oily the beans are!" He was a mechanical engineer. He used to analyze microfibers, so he was into the specifics of everything.
Q: How did C.A.O. evolve from a company making pipes to a company that's best known for its cigars? A: When you're going to the trade show, it's basically pipes, cigars and humidors. And it's a small circle of people. My father got to know everybody, and he saw a trend of cigars having a resurgence, thanks in large part to Cigar Aficionado, and celebrities smoking again. So he said people need humidors. He was in London, found some beautiful antique boxes, bought 30 of them, shipped them here and lined them with Spanish cedar. They were all vintage pieces from the 1700s and they would sell out each time we went to the trade show. They would retail around $2,000, $3,000. So based on that demand, my father decided to make humidors that were more reasonable. And we were pretty proud of the fact that we were the first company to make humidors out of solid cherry, mahogany and walnut here in the United States. We found two woodworkers who were perfectionists like we were, I would help my dad put them in the back of his hatchback, and we shipped them from our home. Humidors quickly became a big part of our business—I remember at one point it was 60 percent of our business.
Q: It quickly overtook pipes? A: Meerschaum pipes were really a niche. It's not like briar pipes. Right around 1993, '94, there was an opportunity to get into cigars. That's when cigars were red-hot. Everybody wanted them, and demand superseded quality and supply. Most everybody told [my father] not to get into the cigar business, but there was one man who told him yes, the late Peter Stokkebye, who was buddies with my dad.
Q: The pipe guy. A: Yes, he and my dad had a very close personal relationship, Peter said, "Cano, go for it. Don't listen to anybody else. They don't want you in there anyway, you're just another competitor." So he went for it, and right around 1994, '95, my father hooked up with Carlos Toraño, who introduced him to Nestor Plasencia. And they made the first C.A.O. blend, which was C.A.O. Black.
Q: The C.A.O. Black came out during a crazy time for cigars. Was it a successful launch? A: There was a very specific blend and look that it was supposed to have. I remember going down to Honduras and seeing people I didn't know lined up outside of Nestor's door hoping to get him to make a blend. The factory was just crazy. One box would come in and [the cigars] would be chestnut brown—the shade that we had agreed upon. But another box would come in and it would be green. Another would be yellow. I was living in Los Angeles, and California was everybody's No. 1 market. I was visiting all the stores, and I'll be honest with you—it was easy to sell out there—retailers were buying anything.
Q: The inconsistencies didn't hurt? A: Initially, it didn't hurt it. People just needed a cigar to sell. But once things started slowing down, which took a couple of years, then people said, "Tim, I like you, but it's really hard to sell this product. Customers want something that's consistent."
Q: So when cigar sales started to normalize, you heard that there were some problems with these things. A: Humidors were still a bigger part of our business. Cigars were ancillary at that time, but nonetheless, we wanted to be successful with them. When you visit all these stores, I like to connect with people, and when I said, "Help me out, what will it take to be successful?" they said, "Try this, try that." You smoke a lot of cigars and you start developing a palate for what the consumer is asking for. That was an education for me. In 1998, we met with Douglas Pueringer at Tabacalera Tambor in Costa Rica. He wanted to diversify his business, he had some great wrappers in maduro, and that's when we came out with our L'Anniversaire Maduro. People smoked it and said, "This is a great cigar."
Q: That was a big deal for you—I remember when that cigar came out. What was the result at the trade show? A: The reaction was immediate, and we got very good ratings in Cigar Aficionado and Cigar Insider. That's what got us in the game. I also had made a friendship with Nick Perdomo, and later we decided to do L'Anniversaire Cameroon. That got even more accolades, and that just exploded. People are always looking for what's new, what's different. Look at the wine industry—look at how many new wines come out. Every year, we try to come up with [something new]. That's been our m.o. since 1998.
Q: There are definitely two schools of thought in the industry on this. Some say keep it the same, don't change, and then there are people who always want something new. You obviously believe in the latter. A: If you're not moving forward, you're moving backwards. If you're releasing new stuff every year, if you have some stuff that's not performing, what do you do?
Q: You have to whittle some things out. Have you ever dropped a full brand? A: Knock on wood, not that much. We've only phased out one full brand, C.A.O. eXtreme, and that's because there were inconsistencies in the product, and we couldn't tolerate it. That's just a decision we made on it. We did that in a very quiet manner.
Q: You've had some very bold product launches, and nontraditional ones. When you came out with C.A.O. Brazilia, C.A.O. Italia, Italian tobacco has been used in the industry, but you were the first to brag about it. What were your thoughts about those launches? A: Most everybody was going down the same path, playing it safe. Wooden boxes. If you stain them, it's chestnut brown or red. We had this blend that everybody put their heads together and came up with, which had a Brazilian wrapper. At the time the famous Brazilian wrapper was Mata Fina. This was Arapiraca. I had noticed that in the humidor, everything blended together. I said, why not roll the dice to have a box that pops. People told me, "You're crazy." Fortunately, it worked out for us. Another reason we went with that packaging, whenever I went down to Nicaragua and Honduras, there would be all these cigars ready to go, but the boxes weren't ready, for they had to be kiln dried. Then I would see boxes—even famous Cuban boxes—they're wood, and they're putting paper over them. What a waste. They're chopping down trees, and they're going to cover the inside and outside lid with paper. Why not get boxes that are very stiff and don't use wood?
Q: What's the Brazilia box made of? A: It was made from a very rigid, stiff cardboard, and now it's an MDF [medium density fiberboard]. Now we don't have to wait for the boxes, and we're not contributing to this wild deforestation. I don't want people to think when they're buying C.A.O., they're paying for the box. We can get boxes that are beautiful and the price is the same. For example, our Sopranos box. Beautiful box. That's basically sawdust that's been compressed. You're not paying for the box. We look at the cigar at the end of the day—but we want it presented in an elegant manner.
Q: Was C.A.O. Italia a bigger risk than Brazilia? Italian tobacco is obscure. I know people use it, but people don't talk about using it. Was that a more risky move? A: We're interested in improving the quality in whatever medium, but we're also interested in breaking down myths. We try to be fearless in that arena. Going back to L'Anniversaire Maduro, there was a strip of Italian ligero used in that blend, which we didn't publicly market.
Q: You never told me. [Laughs.] A: [Laughs.] It was kind of our secret—like a little dash of cayenne. When we didn't have it in there, it wasn't the same. And it was amazing, it was just a strip. So I remember my dad talking about how the Italian ligero is key. And I noticed that people in different factories have it—kind of an underdog kind of thing. Traditionally a lot of that Italian tobacco was ground up for cheap cigars. I spoke to leaf suppliers, and they said what Fidel [Olivas] and the guys were doing in the factory was magic. Taking compressed tobacco with a crusted look, moistening it—they're finding diamonds in the rough.
Q: So it took a lot of work? A: Yeah. It took a lot of work. And that's the talent of our organization at the factory level, and I have to give credit to Fidel Olivas and his sons. We used Italian tobacco in there and the marketing of it was a bit of a risk. We blended around it by adding some nice earthiness of Peruvian and some Jalapa [Nicaraguan] to give it some sweetness. That was a big learning curve for me on how much detail was spent on the preparation of the tobacco.
Q: What's your No. 1-selling cigar? A: Right now C.A.O. Gold is our No. 1 seller. It flip-flops between Brazilia and C.A.O. Gold.
Q: How many cigars do you make a year? A: Well, since we're not a public company, we don't get in the numbers that much. Our focus with the cigars is not quantity, but quality.
Q: But where do you fit in the cigar universe? You're not a small company anymore, you're not a giant, you're somewhere in the middle. Where do you think you fit in? A: Well, define production that would be big?
Q: Twenty million cigars a year. A: Then I would say your description is accurate: middle trending toward more. We've had double-digit growth every year since '98. The only year we didn't was the year we introduced Mx2, and that cigar was much more difficult than we anticipated in making. It has maduro as a binder, and maduro as a wrapper. It held more moisture and took a longer time to dry. Once the cigars were made, we found it had to spend three times at least as long in the drying room. The Mx2 had to sit there for 90 days, sometimes more. We had this supply issue with Mx2 for a good two and a half years, maybe even three years. But now we've figured it out—now the drying rooms are more ramped up for the Mx2.
Q: What's your goal when you make a cigar? A: We try to innovate in our blends, and also in our packaging, and we try to create a wide palate for people, no matter what they like to smoke. And we like to use Nicaragua as a base.
Q: Is Nicaraguan tobacco in all your cigars? A: Almost all our cigars.
Q: Can you rank your brands, from mildest to strongest? A: C.A.O. Gold would be the mildest we have, followed by C.A.O. Cameroon, followed by Cx2, followed by Criollo, which is more medium bodied, then I would say Sopranos, then I would say L'Anniversaire Maduro, which is more like a medium full, as well as Vision, Italia, America, same thing, Mx2, and then Brazilia.
Q: Brazilia is your fullest blend? A: Yes. Now, we want to push the envelope and get even fuller, and that's where Lx2 comes in.
Q: Let's talk about that—it's your newest creation, it has a lot of ligero. What inspired the cigar? A: After I left our trade show last year, I was looking at all of our products, what people were responding to. There's a niche of cigar lovers that gravitates toward cigars that are stronger. That was sort of a response to trying to create a cigar that delivered a real full-bodied experience, for that niche of smokers. But we don't want to do a cigar just for the strength of it—we want it to be complex and have rich flavor.
Q: How do you create new blends? How does it work? A: It's a very creative process. We had some Pueblo Nuevo [Nicaragua] ligero. If it's something I want to explore, and find out the true nature of that tobacco, then I'll smoke only that. I did a lot of improv comedy when I was in L.A., so it's an improvisational process, which is what makes it fun. I'm down there, these guys at the factory are busy, and they're not sure what I'm going to do. But I think they like that. I try to take them out of the comfort realm that they're used to being in. Most of our blends come from us trying to do a creative convergence of things. That's what drives it. We also like doing things in threes, which I picked up from my father—we did three country blends, Brazilia, Italia and America. We had Mx2, Cx2, now we have Lx2, which is a nice completion of the three. Actually, I wanted ligero wrapper, filler and binder. The factory said it won't burn. I said try it again—they said we can't give you a cigar that won't burn! [Laughs.]
Q: So the wrapper from Pueblo Nuevo? What's special about that farm? A: It has to do with flavor. When we were down there, smoking and trying these different cigar blends, I had all these cigars made that were 3 1/2 by 46 ring gauge. They were each made of one type of leaf from each region of the country. We use 41 different types of tobaccos from 21 different countries in all of our blends—that's some total. We looked at the materials that we thought were quality ones, and when it came down to Pueblo Nuevo ligero and Pueblo Nuevo viso, we found those to be outstanding—great flavor, great strength but great sweetness. It's like eating barbecue—great barbecue isn't just smoky. It has smoke but it also has sweetness. With cigars, if it's strong but doesn't have that sweetness, it's not satisfying. I tell all of our leaf suppliers—anything that's interesting, bring it and let's try it.
Q: Is that a standing order? A: Not order it, but get in a bale, let's try it out. I'm not saying all of our blends are to be a kaleidoscope of different countries—Lx2 is almost pure Nicaragua. But we're very open-minded, and that's part of our success.
Q: I was going to ask you that—what are the other secrets of C.A.O.'s success? A: Whatever you do, you want to improve the smoking pleasure. We did it with pipes, with better engineering. Humidors, same thing. We're doing the same thing with cigars. That means quality of the product—do we have to add more people to draw-test our cigars? How can we improve the manufacturing process? We're about to invest money to test the humidity level in each cigar. We've added Humidipaks. It also has to do with the quality of our customer service. And because I have a background in acting, the best actors listen and respond—so we try to listen and respond. Quality of the packaging. We want to be an exciting, innovative company. C.A.O. is a brand that is exciting, contemporary, innovative, yet still has its roots in what it means to make cigars. C.A.O. is a company that delivers quality, but is also fresh and innovative without losing touch with its roots. It all starts with the cigar.
Q: How have things changed since the acquisition by Henri Wintermans, and what does that mean for the future of the company? What's different now? A: As far as here, nothing has changed. They've been very hands-off with us. I'm excited about it—they're excited by the brand. They see us as this vibrant, creative company and they want to be a part of that same mojo. Wintermans is very much into inventory of tobacco, and they feel that inventory of tobacco will help deliver a consistent product. I see the future as very exciting. Wintermans, which is a division of ST Cigar Group, Scandinavian Tabak, just sold their cigarette division and now want to have more focus on the cigar industry. Hopefully, they will be investing more in the American market. For our consumers that means the quality will remain as excellent as it is now.
Q: Can you describe the relationship between C.A.O. and the Toraños? A: It started in the very beginning with my dad and Carlos Sr. We've known the Toraños for a very long time. Once the Toraños invested in a factory with the Olivas [family], based on our relationship we started getting more production from those factories. Then we saw that Charlie was stretched a bit thin. We said, "Why don't you turn your eye toward more day-to-day quality control?" When it comes to blending C.A.O., I do that, but we wanted Charlie to be focused on day-to-day quality control. Plus, once we selected a blend, he spearheads the relationship between the leaf growers and the leaf buyers and the factory. Making a cigar is not an easy thing. It's not just about making the cigars, but people trying them, getting them out there, distribution—those are big jobs in and of themselves. At C.A.O. I have to stress that we like to stress teamwork at C.A.O. We believe that the best team wins, so we try to give everybody something to focus on that's almost like a field of specialty.
Q: When did that deal take place? A: The beginning of 2008. As far as with the factory and how it's set up, there's a factory in Nicaragua and Honduras. Most of what they're producing in both factories, a large percentage is C.A.O. In Honduras, it's more tangible. One building is just C.A.O. and one is Toraño. In Nicaragua, it's one huge galleria.
Q: So they make the cigars and you sell them? Or is that too simple? A: We're very much involved in the whole process of blending. All of the blends that we come up with, we have a hand in. We're very detail oriented. The blends are taking us a longer and longer amount of time to do. It's like a concert, everybody getting together and working to deliver this blend. It's a teamwork process. We're very much into the team concept—we're inspired by that. I'm not motivated by money. I'm motivated by delivering something that brings pleasure to people. I used to do stand-up comedy because I like to hear laughter. I like making people happy. These are products that deliver moments of pleasure. That's the ultimate goal for me.
Q: Forty years ago your father started this business. Your father is retired now—you have two young sons. Do you ever look down the road and hope one day they'll follow you? A: I look upon it the same way my dad did—whatever their heart desires, whatever they want to do, I'm going to let them go down that road. I'm going to love them for whatever they want to pursue. To me, this is not work. This is fun, this is a pleasure. And that should be the same for them, whatever they desire to do. You spend most of your day doing your vocation. It should be something that you feel passionate about, and that you love. v
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