Interview: Frank Llaneza of Villazon
A discussion with the president of Villazon & Co., makers of Hoyo de Monterrey and Punch.
From the Print Edition:
John Travolta, Jan/Feb 99
Frank Llaneza's love affair with cigars began more than 60 years ago. The president of Villazon & Co., a subsidiary of General Cigar Holdings Inc. since 1996, Llaneza earned his credentials by starting in his father's factory in Ybor City, Florida, sweeping the floors and learning the business from the ground up. Though his fortunes have changed dramatically, Llaneza himself hasn't changed much since those humble beginnings. He continues to travel to Central America to check on the company's factories firsthand, factories that he helped build in the 1960s after the American embargo of Cuba shut off access to the island. Today, after reaping millions of dollars from the sale of his company to General in 1996, Llaneza still goes to work every day and still sits in the office that he shares with his partner, Tino Gonzalez, just as he has for decades. The office is in the same turn-of-the-century factory that was once part of Tampa, Florida's booming cigar manufacturing sector, which is now one of the older sections of the city. The only concession to his fortune is a Mercedes-Benz station wagon.
Like many cigarmakers of his generation, Llaneza lived through several cycles of boom and bust. His reputation, however, surpasses that of many of his peers. He could easily be called the godfather of Honduran cigars, although he swears that the industry there was under development when he first visited in 1960, two years before the trade embargo on Cuba was imposed. And, there's the story about how he and his former partner, Danny Blumenthal, snapped up Cuban tobacco by the thousands of bales immediately before the embargo, and afterwards from companies that were jettisoning their Cuban stocks in favor of tobacco from other places. They bought enough to keep blending Cuban tobacco into their cigars well past 1965. Now, in his late 70s, Llaneza is making the transition to being a member of a big corporation. While he admits to not being used to the paperwork, he is excited by plans to launch some new brands as well as build on the marketing of his current stable of brands, which include Punch and Hoyo de Monterrey.
In a recent wide-ranging conversation with Gordon Mott, managing editor of Cigar Aficionado, Llaneza discussed his 60 years in the cigar business and his take on the future of the industry.
CA: Tell us how you got started in the cigar industry.
Llaneza: I started fairly young, at about the age of 15. I was still in high school and my father was superintendent of Schwab Davis, which was one of the big factories here in Tampa. He also had an interest in Villazon & Co., where he was partners with Mr. José Villazon and Mr. José Arango, and two or three other people. He would work on Sundays there. I used to go after school to Schwab Davis and work in the packing room, punching holes in the heads of cigars, and just being in the factory.
When I graduated from Tampa Jesuit High School, I managed to get a partial scholarship to Georgetown University. But that was during the Depression. There were doctors working in shoe stores. Architects had menial jobs. My father talked to José Suarez, who at that time was one of the key tobacco processors in Cuba. My father asked him to take me to Cuba to learn about the growing and the fermentation of tobacco and everything having to do with tobacco, so that I could maybe come in and run Villazon. That was in his mind. I didn't want to do it. I wanted to go to school. But I took my father's advice and I went into Villazon.
CA: What year did you go to Cuba?
Llaneza: That was about 1939. I kept going back and forth. I was in Cuba when Fidel Castro came down from the mountains into Havana. But we traveled to Cuba because we were making cigars out of Cuban leaf. That's what most of the factories in Tampa did at the time.
CA: What did you first do when you joined Villazon?
Llaneza: Well, I worked there; I had no financial participation in Villazon other than being the son of one of the partners. But I went to Cuba to learn from Mr. Suarez how to be a selector. My dad wanted me to have two years as an apprentice selector, to learn that trade.
CA: Selecting tobacco leaves?
Llaneza: Selecting wrappers. Selecting wrappers in a barrel. At that time we used to take the tobacco and select the leaves for the various sizes, based mostly on color. It was one of the key positions in the factory, and usually the selectors became foremen over the cigarmakers. I went from the selecting to working with a foreman around the factory. I learned about tobacco blends in cigars.
CA: How many rollers were in the Tampa factory at the time?
Llaneza: We used to maybe have 45, 50. Basically we made cigars for Faber, Coe & Gregg in New York and for the private clubs in the city, like the New York Athletic Club, and clubs in other cities.
CA: Were they private-label or were they brands?
Llaneza: Private-label. They were sold in their boxes. The biggest club we had was the Detroit Athletic Club, which supplied General Motors and all the other big industry that was around Detroit. I remember that the members would give Christmas gift orders that totaled three or four hundred thousand handmade cigars.
CA: Were they long filler?
Llaneza: Yes, they were all long filler, handmade cigars. From that modest start we kept growing. We got the Villa de Cuba brand and we also were making a few Villazon brand cigars. Then, the war came along and I spent four and a half years outside the factory in the service. When I came back from the service, I went right back into the factory, and that was when I really took charge of running it. Right away, I invested my savings into the factory and took a share in the company. It ended up that it was my father, my brother and myself. My brother ran the front office and I ran the factory. My father's trade was being a picker and packer in the packing room. He'd come in Saturday and Sunday and work for free, selecting and packing most of the production. He could do it by himself because he was very fast.
The company just kept on growing. Things were a little distressed after the war, and I started making some cheap cigars from scrap because the machines that we had ordered during the war, when we had a lot of business, came in after the war, when we had no business. So I started making a cheap cigar. It became fairly popular and from that I got into the bigger sizes. Other factories started faltering, and thanks to my father's good credit rating and good judgment, we were able to take over a lot of other brands, too. Jose Arango & Co. was one of the first ones we took over and then, Bustillo and Diaz. Then, we took over Preferred Havana and we took over the Cuesta factory of the Antonio Co. And then we were able through Danny Blumenthal, who was very friendly with the Palicios [owners of a major cigar factory in Havana before the revolution], to get their brands after they were unable to do business with Cuba. But those brands didn't come into our company until the 1960s.
CA: Were those cigars that you made in the 1940s all clear Havanas [cigars made outside of Cuba with all-Cuban tobacco]?
Llaneza: Yes, we made two blends. We made clear Havana cigars and we made the Villazon and the Villa de Cuba brands, which were Havana filler, Wisconsin binder and Connecticut-shade wrapper.
CA: Were these all candela [green] wrappers?
Llaneza: No, these were all-natural. All-natural cigars. Joseph Cullman, Edgar's father, used to come in to sell us a few bales of Connecticut-shade wrapper for those cigars.
CA: How often did you go to Cuba during that period?
Llaneza: I might make three or four trips to Cuba in a year.
CA: Were you buying tobacco?
Llaneza: Yes, we were mostly visiting the people who grew the tobacco. At the time there were good-sized farms in the Vuelta Abajo. We had a degree of friendliness with the farmers there. We visited them frequently. In fact, I was on one of the farms once with my wife, and some small planes flew over. There were a lot of Fidel Castro's people [at the farm], and they thought they were being attacked. I will never forget that.
CA: Were you buying the tobacco directly from the farms?
Llaneza: No, we weren't. But we went to the farm and saw the tobacco. We weren't big enough to buy the production directly. Angel Oliva bought the tobacco and he had stripping plants and processing plants in Cuba. He would set aside what we figured we needed. And then we bought from other leaf people, too.
CA: Were you buying specific production?
Llaneza: Well, most of the major manufacturers, like Corral and Perfecto Garcia, bought the tobacco directly and warehoused it. But we had limited resources so we bought the tobacco through Mr. Oliva, and we told him what we could use and he would hold it for us. He helped us an awful lot.
CA: You're talking about Angel Oliva Sr., whose sons run the Oliva Tobacco company today?
Llaneza: Yes, he was my teacher, my mentor.
CA: Yours and a lot of other people's.
Llaneza: Yes. He helped a lot of people in the cigar business, because he was a fellow who started from scratch. But we kept working with him as other factories in Tampa began to slow down their production. We were able to keep increasing our production.
CA: How large was your production in the early 1950s?
Llaneza: We were making only about 10,000 or 15,000 cigars a day, and we built it up to about 25,000. That was a big production at that time.
CA: How much of that was handmade?
Llaneza: I would say two-thirds of the production was handmade. And the rest was short filler. So it wasn't that many cigars. But then we started moving on up and making more cigars. We got different customers. The selling trends changed. The major manufacturers had jobbers [small wholesalers] at that time. It was very difficult for a small factory to add volume or to even compete with these big jobbers. Our only solution was to go to the clubs and have direct sales to the retailers. That turned out to be a blessing to us because the majority of the jobbers eventually went out of business. The retailers became strong enough where they could buy big amounts of cigars and warehouse them in their own humidors. The retailers became more powerful.
CA: At that time, in the early 1950s, were any of the brands that you owned what you would call national brands?
Llaneza: The only brands that we had in the early 1950s were Villazon and Villa de Cuba. And we had the Bustillo and Jose Arango brands, too, because we had taken over those companies. Just before the embargo started, we also acquired Preferred Havana, through which we got Bances and Eden, which was a big brand back then. Bances was almost dead, but we developed it.
CA: How did you acquire Bances?
Llaneza: It came with the Preferred Havana purchase. They had Bances, Eden, Calixto Lopez and Flor de Allones.
CA: What year did you buy Preferred Havana?
Llaneza: We bought it around 1956.
CA: How soon after that did you then begin to develop Bances?
Llaneza: Danny Blumenthal already had his store on Broadway in New York. We started the brand with him. He had an exclusive distribution deal for Bances in New York. But he was doing sub-jobbing on Bances out of his store, too. That's how it became bigger.
CA: Was it a hand-rolled, long-filler, natural-wrappered cigar?
Llaneza: Yes. But made in Tampa. That's how the company existed until we finally got the Palicio brands in the 1960s.
CA: When did you meet Danny?
Llaneza: During a period when I was making Benson & Hedges cigars for Philip Morris in the 1950s, I used to have to go to New York twice a year to speak with then vice president Joe Cullman and the people at Philip Morris. I was there one year and we just couldn't do any business there. But somebody told me to go see Danny. So, I went to see him and we got together then. We were both pretty hungry.
CA: Do you remember what year that was?
Llaneza: I was married already. It had to be about '56 or '57, right in there.
CA: Was he involved in the Preferred Havana purchase with you?
Llaneza: No. The Bances deal with Danny came after we had purchased Preferred Havana, and he helped us to develop the Bances brand after the purchase. But his business was called Danby. When my brother José retired in the mid-1950s and stepped out, we rejuggled the company. Danny was in charge of Danby, and then, Danny became a major partner with me in Villazon.
CA: Was that 1958?
Llaneza: Yeah, right around there.
CA: So your involvement with Danny began before the Cuban revolution?
Llaneza: Yes. Danny was buying a lot of Cuban cigars at that time and had contacts with a lot of Cuban manufacturers. He was selling the Cuban cigars through his store in New York. When the embargo came, we were already working together. Danny had helped us build Bances up to a pretty good production level. Philip Morris had left the cigar business by that point, and the slack in our factory was taken over by Bances. It became a major factor in our production. That was our premium cigar.
CA: When did the Palicio business become part of your company?
Llaneza: Fernando Palicio didn't want to sell to us right after the Cuban embargo was imposed. He figured the embargo wasn't going to last too long. He just kept saying that he didn't want to sell his Hoyo de Monterrey, Belinda and Punch brands. But he said, "Let's make Flor de Palicio." We had an inventory of Havana tobacco, so we brought out the brand and we made all the cigars out of Havana tobacco, and we sold them all to Dunhill. That was how we started with Palicio, and we paid a royalty to him. But as the embargo kept going, he finally sold us the rest of his labels. So we bought the rest of the brands because he had them all registered in the United States.
CA: You said you were in Havana in 1959. What were you thinking at that point?
Llaneza: I thought that this was the greatest thing that ever happened.
Llaneza: I thought this Fidel Castro was a hero. I was just like
the other dummies. Here comes a guy, and everybody's crying, everybody's bringing him flowers. There were kids directing traffic. There were no policemen, and everybody was laughing and joyous. I thought he was great. Then when I came back to the United States, my uncle, who was working at the Villazon factory, said, "Son, you're just naive. That's communism." I said, "What in the hell is that?" Then, just like my uncle said, Castro declares himself a Communist.
I remember that the people from El Corojo [one of the top wrapper farms in Cuba's Vuelta Abajo], including Daniel Rodriguez, were tremendously pro-Castro. He collected money from most of the cigar manufacturers here in Tampa to support Fidel. Then, Rodriguez was one of the first ones that Fidel Castro took all his cattle from. A lot of people lost their factories and had everything taken. It was a catastrophe. But the majority of these people were really pro-Castro before the confiscations started. I mean, they wanted to get rid of Fulgencio Batista, because they figured he was a tyrant. But then they found out the other one was worse.
CA: How many times did you go back to Cuba after 1959? When did you stop going to Cuba?
Llaneza: The last time I was in Cuba was just about a week or 10 days before the embargo in 1962.
CA: So you continued to go back through 1960 and 1961?
Llaneza: During that period before the embargo, we were still getting tobacco in Cuba. In fact, we bought all the Cuban tobacco we could possibly buy. There were many manufacturers that got desperate because of the political situation, and they started to make cigars with different blends from different places. And they sold their Cuban inventory. We bought it.
CA: Did you suspect at the time that the embargo might be coming, and that's why you bought so much tobacco?
Llaneza: Yes. A lot of the people that I had met in Cuba were getting their properties confiscated, so the signs were there. But a lot of tobacco people whom I knew also knew where their tobacco was being kept in Havana. They told me to buy it from the communists, from the people who had taken it over. And so when I bought it, I bought it cheaper, and I gave the rightful owners the differential in price. There were people also bringing any Havana tobacco they could find that was already in the United States to me. I was stockpiling it. I was able to stretch out putting Havana tobacco in Bances for years.
CA: Do you have any recollection of how much Cuban tobacco you bought during that period?
Llaneza: I remember that I bought American Tobacco Co.'s entire inventory of Cuban tobacco. If I remember correctly, it must have been about 1,000 bales just from them alone.
CA: Was Mr. Blumenthal part of that decision, too?
Llaneza: Oh yes, sure. That allowed us to drag out mixing in Cuban tobaccos until we had tobaccos in Nicaragua and Honduras.
CA: How long did you blend Cuban tobacco into Bances?
Llaneza: It must have been at least until 1965, about three years after the embargo.
CA: When did you start working on tobacco growing in other countries? And, when did you realize after the revolution that you were going to need those tobaccos for your cigars?
Llaneza: Angel Oliva and I took the first Cuban-seed tobaccos to Jalapa in Nicaragua in 1954. And, by the end of the 1950s, he took some of the tobacco from Nicaragua back to Cuba to some of the farmers there so they could make cigars with it and smoke it just to see the possibilities of tobacco from Nicaragua. It was primitive in Jalapa back in those days. You couldn't get there. There was no road. You had to cross two rivers and there were no bridges. But after that, Mr. Oliva bought farms all over that area and built barns. We were finally able to use that tobacco as we needed it after we ran out of Cuban tobacco. At the time, there wasn't anything that even resembled Cuban tobacco anywhere else in the world.
CA: Why Jalapa?
Llaneza: Because the soil is so fertile there. And we just looked at the burley [a variety of cigarette tobacco] growing there wild and we could see the tremendous size of the leaf and the quality of the leaf. We figured that Cuban-seed tobacco would do well there, and it did. We had some beautiful tobacco there. The reason that happened was it got support from the Anatasio Somoza government. The government agency, INFONAC [an agency charged with tobacco cultivation], started taking over all these farms soon after the American embargo of Cuba and started growing wrapper and filler. They had a big inventory of tobacco but they had no customers.
CA: As far as you know, is that the first time that cigar tobacco was grown in Central America?
Llaneza: No, cigar tobacco was already being grown, but it was for crude cigars. In Honduras, they had copaneco, a wild tobacco that they grew there and were making cigars out of it. They were very poor cigars. But they had never grown any Cuban seed.
CA: Was that the first time you were involved with the Olivas in Central America?
Llaneza: Yes. But the Olivas also started working farms later on that had been developed by the INFONAC. They made a tremendous amount of investment.
CA: Was it around this time that you began to focus on your operations in Honduras?
Llaneza: That's right.
CA: When did you realize you would need a place to make cigars?
Llaneza: In 1960.
CA: Tell me about the decision to focus more on Honduras than Nicaragua.
Llaneza: Honduras had a head start on Nicaragua. Nicaragua was just an experiment. The development of Honduras came first because the government there had a program to plant more tobacco.
CA: Was that in San Pedro Sula?
Llaneza: No, that was out of Tegucigalpa, out in the Jamastran area. And the area up around Santa Rosa de Copán was also part of the Olivas' operations.
CA: Was that Cuban-seed tobacco?
Llaneza: Yes. They were natural Cuban-seed wrappers under shade, and filler tobacco, too.
CA: This was in the 1950s?
Llaneza: Yes. Oliva was making fire-cured wrappers [shade tobacco that's heated immediately after picking to retain the green color in the leaves] for the American Tobacco Co. That was actually the stimulus that brought Oliva to Honduras. It worked out beautifully, because American Tobacco was interested in fire-cured wrappers and I was interested in natural tobacco and the Olivas were able to supply both.
CA: When did the industry as we know it today really begin to evolve in Honduras? When did you form Honduras-American Tobacco S.A.?
Llaneza: HATSA was formed about 1964. I started it in Danlí.
CA: The original factory was in Danlí, Honduras?
Llaneza: Yes. I started it with a fellow named Enrique Rivera; he was my partner. But he had problems and left, so then I had to take it over. Then I brought people in and I started making a few cigars. We were the only factory there. We started making 10,000, 15,000 cigars a day.
CA: Were you the first cigar factory in Danlí?
Llaneza: No. I think the factory started by Jimmy Corral with Julio Eiroa was the first one. They were partners but they didn't run it for very long. They were not successful at all, and the cigars didn't sell. Then I started. After that, others came along.
CA: Which brands did you start making then?
Llaneza: We were making a lot of Bances, all handmade. And we started making Hoyo de Monterrey and Punch.
CA: What year did you get Hoyo and Punch from Palicio?
Llaneza: It was two or three years after the embargo, about 1965.
CA: Did you ever make Hoyo and Punch in Tampa?
Llaneza: No, we were already rolling in Honduras when we got those brands. At the time, we were bringing the cigars in cedar chests by sizes. We brought them here to Tampa and we packed them, banded them, cellophaned them and put them in boxes. We didn't have a box factory in Honduras. We didn't have anything down there. It was still crude. It was only the beginning of an industry in that country. They had no prior experience in the cigar business, so we were bringing them new jobs and money. But it took some time to get it up and running.
It was wonderful back here in those days. You'd go into a humidor and you'd open those cedar cases, and man, the aroma was really excellent. Then, we could keep cigars in those cases for a long time because there wasn't the craziness that we've had in the last five years. They were properly aged before they were released.
CA: When did you shift all your hand-rolling operations from Tampa to Central America? When was the last time you made hand-rolled cigars in Tampa?
Llaneza: We kept making cigars here that were special sizes for Red Auerbach, the coach of the Boston Celtics, and Art Rooney of the Pittsburgh Steelers, and his son and some of the football players. Art Rooney took every one of those cigars that we made. And they were a ring gauge like a robusto but long, shaped like a baseball bat. The two rollers that made them finally got old and died. Before they died, one of them went to New York and made cigars on the old David Letterman show. He must have been 86, 87 years old. But when they both passed away 10 years ago, that ended the size and the company's hand-rolling operations in Tampa. We just started making it now in Honduras again on a very limited basis. It's not an easy size to make because it's so big, a 6-inch, 50-ring pyramid. It's called an Aristocrat.
CA: What was happening in the U.S. market 25, 30 years ago, when you shifted most of your production to Central America?
Llaneza: We were still in a normal market, in the pre-Cigar Aficionado period. Everybody was out there scratching. But we were selling more and more cigars and we started getting more and more customers. Garcia y Vega was moving from Tampa to Alabama, and Bayuk, the manufacturer, sold me this factory in Tampa. And, with it, I bought all their handmade cigars. Bayuk president Morris Wurman told me to take all the handmade cigars that they had made.
I think that was one of the turning points in Villazon's business when I got the Tampa building. I got more machines. A lot of the factories were going under in the United States. I bought all the machines from the Regina Cigar Co. in Pennsylvania and brought them down. And we were getting bigger in the mail-order side of the business by giving customers quality short-filled cigars in big sizes. At the time, the sizes that were sold were much smaller. But we got 10 or 12 machines making seven-and-a-quarter-inch cigars on short fillers.
We did a real good business with those cigars that put us up there with Thompson Cigar Co. Thompson had became a major player in the mail-order industry. But we were big players in it, too. And we made a lot of cigars for Lew Rothman.
CA: Is there a point that you can look back and say, "That's when our non-Cuban cigars really began to be accepted by American consumers"?
Llaneza: If you look at the statistics, the largest production year that Cuba had in the United States market was 21 million cigars in 1961. They were not all cigars that sold for a dollar, a dollar and a half. There were cigars that you could buy for three for 50 cents. But that was the largest year with Cuba. That showed that there were not a lot of smokers out there that wanted a full-bodied cigar. The majority of the population wanted mild cigars and everybody in the cigar business thought that by producing mild cigars you could start more cigarette smokers to start smoking cigars. And that was the logic.
But we were making a heavier, fuller-bodied cigar. We didn't notice that robust taste in our cigars until Cigar Aficionado started telling people about it. A lot of people who preferred stronger cigars were still smoking Cuban cigars when they could get them. I think a lot of those smokers, because of the rising prices and because of the deteriorating quality in Cuba, started smoking our cigars. And that is when we started seeing a big jump in the sales.
CA: But wasn't there a time when Hoyo de Monterrey Excalibur was considered the best non-Cuban cigar?
Llaneza: No, I don't think so. I think there were a lot of cigars that were considered very, very good cigars. Punch had always been considered the strongest cigar we made. When I went to Honduras last time, I took Cuban cigars for the workers to smoke, just so they could see the comparison. But Cuba's reputation of having good, seasoned tobaccos isn't there anymore. Today, the uniformity isn't there. Sometimes you can pick up a Cuban cigar and you think that you're in heaven. Other times, it's not that good. I've told that to the Cubans. If you smoke one of our cigars, people say this cigar has a remembrance of Cuba. We get a lot of smokers that way. We're really not competing with the cigars made in the Dominican Republic. Because the people that smoke our cigars for the first time, sometimes can't smoke the second one.
CA: Is that because they're too strong?
Llaneza: Yes, because they're strong. There's another guy smoking a cigar from the Dominican Republic, and he says, "Man, what's this made out of? Straw?" You know? The taste is there in our cigars. But today, look at how many different blends there are, and different people making cigars that never knew what the hell a good cigar was. And they are selling them. There are a lot of different tastes in the market today. When you say that a cigar has a spicy, nut molasses taste, that's your taste. Someone else may not taste it.
As a result, we have been very fortunate because we were in the right place at the right time. If you look at us as a piece of the General Cigar Co., it makes them more rounded out. They have now a cigar for smokers who want a Cuban taste and they also have cigars for every other kind of smoker. We should be advertising it that way: cigars for all tastes.
CA: Let's keep going over the history a little bit here. Your business was first affected by the revolution in Cuba, but then you were also heavily invested in Nicaragua in the late 1970s, when the Sandinista revolution ousted Somoza. What did you do then?
Llaneza: I didn't have a real financial investment in Nicaragua but I was heavily dependent on Nicaraguan tobacco that the Olivas were growing there. When the Sandinistas took over, we had to immediately find a substitute because we had no wrappers. At that time, we were getting all our wrappers from farms in areas north of Estelí [Nicaragua].
CA: Cuban-seed wrappers?
CA: What did you do?
Llaneza: Mr. Oliva brought me tobacco from three farms that were growing tobacco in Ecuador. He also had his own farm that he had purchased from a former employee of the American Tobacco Co. They were losing money, and it was going to be closed up. But Mr. Oliva bought it. He started making fire-cured wrapper there. We had already tested the natural wrappers, but he had one farm that had a distinctive taste and had the flavor that we needed.
CA: Was it Connecticut-seed wrapper or was it Cuban-seed wrapper?
Llaneza: No, it was Sumatran.
CA: Wasn't it a big change for your cigars?
Llaneza: A big change.
CA: When did that change take place?
Llaneza: Almost immediately. I would say 1980-'81. We had to make that transformation because we didn't have that kind of inventory of Nicaraguan wrappers.
CA: In the late '70s, I remember, the Nicaraguan wrappers were just like great Cuban wrappers. They were brick-red and smooth.
Llaneza: Yeah, a brick color, like this [Holds up a sample cigar].
CA: Yes, just like that.
Llaneza: It's from Nicaragua.
CA: I'll ask you about that wrapper in a minute. But in 1980-'81, the cigar that you had developed and evolved for 15 years, you had to change. How did the market react to that?
Llaneza: Well, I think, it was amazing how favorably they reacted. Because we didn't give them such a drastic change. It was sun-grown Sumatran tobacco that had some taste to it. I don't think people really reacted negatively at all. Some really refined smokers would say, hey, they changed the wrapper. But it was absorbed into the marketplace, and we sold many more cigars after we went from the Cuban-seed to the Sumatra. If that tells you something, it's because of the cigar's combustion. If the combustion is good and it tastes good, people will smoke a cigar and enjoy it.
CA: How many cigars total are you making today?
Llaneza: We are making about 125,000 cigars a day, all handmade in Honduras, in Cofradia and Danlí.
CA: So that works out to 30 million to 40 million a year.
Llaneza: Yeah, 32 or 33 million a year.
CA: Does that include the production for Lew Rothman at J.R. Tobacco?
CA: What's the combined production of your two major brands, Punch and Hoyo, and should we include Bances in there, too?
Llaneza: We're not making many Bances now. We're gonna revive it.
CA: Are you going to put that Nicaraguan wrapper on it that you showed me earlier?
Llaneza: We've got too many wise people here [laughter].
CA: I guess that's an answer. So, what's the combined production of Hoyo and Punch?
Llaneza: They are about evenly divided, with maybe a slight increase in favor of Punch.
CA: OK. Then the total for the two is about 25 million?
Llaneza: Yes. Easy.
CA: Do you have plans to bring Bances back to market in a big way?
Llaneza: Yes, I don't know how big. My recommendation would be to basically bring it back in a slow way. There're so many changes that are coming about now. If you look in the catalogues, you see a lot of manufacturers that are making a million private brands and making bundles. So, it's important to launch it in the right way.
CA: There is a gap in the market for a high-grade, Nicaraguan-wrapper cigar. Padrón makes one, and it's a great cigar. Do you envision Bances becoming that kind of cigar?
Llaneza: We're going to try. If it's not Bances, it may be another brand. We're not shy about bringing Cuban brand names to the market. We have Flor de Allones, Ramon Allones, Rafael Gonzalez and we have Jose Gener. We have one after another. All kinds of brand names that we have owned since the Palicio deal. And General has more labels, too--all the Cifuentes labels, and they've already come out with Cohiba and Bolivar. They're doing what has to be done today to grow their business. There is such a variety of tastes today. A fellow who likes one of these, he doesn't like somebody's else's.
CA: Isn't it true that at the peak of the Nicaraguan cigar tobacco industry in the 1970s, the colorado, or red-brown, wrapper was as close to a great Cuban "Corojo" wrapper as any other in the world?
Llaneza: I'll tell you that the most beautiful wrapper that I have ever seen in my years in the cigar business were the ones that we had from Nicaragua.
CA: And those farms are starting to come back into production, right?
Llaneza: I hope so. They don't have barns on them yet. But yes, that is in the future. Of course, the stability of the country is an issue, too. We think that President Arnoldo Alemán is trying to do a good job. A lot of people criticize him, and others think he is doing great. But you know, the promises that a politician gives you, and the promises he can fulfill once he gets in office, are always different, and he's no different than any other politician. He's got a Congress that's a very powerful Sandinista Congress.
The Sandinistas, with all their disasters, couldn't destroy the soil. I can still see it in the beautiful valleys around Jalapa; everything grows like crazy there. It's great to see it back in production where it has been a disaster for so many years. I kept going there during the Sandinista years. My wife is Nicaraguan, and we still had family in Nicaragua. And we never stopped using tobacco from Nicaragua. But we made the decision that there was no way we could use the wrappers that they were producing. We bought the fillers.
CA: Wasn't there a period, too, when you couldn't even use Nicaraguan tobacco, during the Reagan Administration embargo?
Llaneza: Yes, but it was short. The people kept growing tobacco. There were a lot of people growing sun-grown tobacco. They still are. I'll bet there are 15,000 to 20,000 bales of filler tobacco being grown right now. And there will be wrapper soon. We'll see what comes of that. The possibility is there. The Padróns, for instance--they've been there all through this rough period. The cigars they've been able to keep making are the result of it being a small production. Their tobaccos are real pure, and Nicaraguan tobacco is so wonderful when you have the time to age it properly. That's the similarity it has with Cuban tobacco, and that's why I went to Nicaragua. You couldn't take tobacco from Cuba's San Juan y Martinez and San Luis and strip it and send it to the factory. You couldn't smoke it. Now, the aging of tobacco is getting back to normal in Nicaragua.
CA: Is there any target for when this new Nicaraguan-wrapper cigar might make it to the U.S. market?
Llaneza: Right now, it would be difficult for me to tell you. I myself don't know. I know about the components, but I can't tell you about the brand or anything because I have no idea.
CA: Can we say within the next couple of years it will be out?
Llaneza: Oh, yes.
CA: From your point of view, what happened in 1992?
Llaneza: In the beginning, Cigar Aficionado and Marvin Shanken got all kinds of criticism. He was telling you in the magazine that the only cigar to smoke was a Cuban cigar. But I've always said that he was doing us a big favor. He was telling people that Cuban cigars were good. I've always said that ours was the only one that was fairly close to a Cuban cigar. That helped us tremendously.
CA: What were your thoughts as the shift in attitudes towards cigars happened?
Llaneza: I never thought it would happen. I never thought we'd ever see any improvements, because the government was so involved in the nonsmoking movement. You couldn't go to a bar or a stadium; you couldn't go anywhere where you could smoke. The creation of cigar smoking as a chic situation, which was created by the magazine, was a total surprise. But it created something that the industry needed. We never had the Arnold Schwarzeneggers or the other stars that everybody admired. We just had people telling the world that if you smoke cigars, it will kill you. We were forced to put stickers on cigar boxes telling you it was dangerous. [California law requires warning labels to be placed on cigar boxes sold in that state, so many cigar manufacturers include them on all of their boxes to save on the cost of singling out production destined for that state.] You know what it is to give a man a box of cigars worth a couple hundred dollars, and for him to see on the box something like, "If you smoke this it will kill you"? But we were still selling them. It's unbelievable.
I was one of the ones who thought having to put that warning on our boxes was going to be the kiss of death. But the opponents of the antismoking movement were a lot stronger than I imagined. After all, somebody's smoking these cigars. Now, I still can't go into a federal courthouse, I can't go downtown and I can't walk into the mall here in Tampa and smoke a cigar. I might even be sitting in a smoking area, and some nut will come over waving his arms in front of his face. But we've overcome all this opposition. I think it is amazing. Maybe it's just backlash. It's like telling someone they can't drink a Scotch or a wine, because it's illegal or you can't get it. There's not enough of it, and everybody wants it. That's what the magazine created.
CA: What was it like from the business side, where suddenly you had more orders than you could fill?
Llaneza: Well, it wasn't bad, I can tell you that. It was something that I didn't expect in my lifetime. The cigar business was good to me and my family, and I love it. You can see it. I don't need to be here anymore. Me and Tino [his partner], we come over here every day, because we start thinking, "What would we do if we didn't have a factory to come to?". We'd have to be home cutting the yard. I'm very happy about it.
CA: In 1992, when it started, you were making how many cigars?
Llaneza: We were making 60,000 cigars a day then, and it's more than doubled. That doesn't mean we might be making just 60,000 cigars a day again next year. If the big inventory that's sitting in warehouses today bounces out on the market, we might have to cut back. It's impossible to keep a person from buying a pretty-looking cigar that he can buy for almost nothing, next to a cigar that has a higher price. We don't know how that's going to affect our production. I'm seeing it now in the industry statistics. There is a drop now. And there is an increase in the cigars at the $2 category. It means there will be pressure on the big-name brands. There's no way to curb it. The only way would be if one of these warehouses caught fire.
CA: But don't you think people will stop buying those $2 cigars if they're not good?
Llaneza: I guess they will. But it's still tougher in the market today.
I don't want to mention names, but there is one company that is in its second go-round with their cigars being discounted on the market. What I've noticed is that the retailers and jobbers have humidors filled with branded cigars, and they have a lot of other cigars. How do they work it? Do they just say, "Let's get rid of these cigars," so they can get back to customers coming in and seeing only products that are competitive, high-quality products? It will get back to that.
But it's going to be tough. No one can make cigars as cheaply today as they used to because the cost of raw materials and labor has gone up. The standard of living in Honduras where we're at has quadrupled because of the industry boom. I don't think you're going to reverse that. The only possibility is some reduced or nominal prices on the tobacco itself so you can be competitive.
CA: Has the boom changed the industry in bad ways?
Llaneza: Don't be foolish. That's like telling me, when I first started, that I wouldn't know what to do with four machines in Ybor City, and Mr. Oliva said, "Make a nickel cigar." People were telling my father that his son was going to ruin the factory: "You're going to go down the tubes, you won't even be making those 3,000 or 4,000 handmade cigars anymore." But Mr. Oliva was right, and I said, Get me the tobacco and I'll start making those cigars. Hell, I was young then. I had to be the mechanic, put the scrap in the machines, working them day and night. Before you knew it, you wouldn't believe how many customers we had. It kept me in business. And that's what happened in the last few years.
CA: So, it's been good.
Llaneza: Yes, man. I can go fishing now. I can fly on General Cigar's private plane.
CA: Let's talk about that. What's happened here since General Cigar bought Villazon?
Llaneza: It was at the RTDA [Retail Tobacco Dealers of America] convention in Cincinnati in 1996. Edgar Cullman Sr. came over there, and he was gracious in his offer. He's lived up to his word. He's let us do this like we wanted to do.
CA: Could you believe it when he made the offer? For that matter, were you ready to sell?
Llaneza: I tell you, it was difficult for me. But once there was the discussion of the numbers and they kept adding up, I said, what the hell. I started looking at my age, and what might happen in the industry. I decided it was time to sell because the numbers got so high.
CA: What was the sale price?
Llaneza: The sale price was $91 million. Danny [Blumenthal] was ready. And we decided to do it.
CA: If Danny had not been involved, would you have sold?
Llaneza: I don't think so. I would have suffered like hell, and he would have said, "Look at that fool down there." But we're happy today. And as long as we're here, we're making the best of it.
CA: What's different about it? You had what amounted to a family company, and now you're part of a corporation. How is that different?
Llaneza: There're a lot of pluses and minuses. I won't go into all of it. We always ran a very conservative and as low-cost a company as we possibly could. We had to do that so we could watch over the growth of the company. We were very fortunate that we had people with me who always let me run it my way. They might have not liked it sometimes, but I went my way. I always thought that a company should have retained earnings sufficient to have enough capital so as not to use the banks. That's a heck of an attitude if you want to grow real big. But that's the attitude I always had. And it worked out fine. I kept Honduras-American Tobacco as a separate company, not showing any dividends until it had all the capital that it needed. Then, we started paying dividends. That was one of the reasons that we were able to stay in business. We didn't go to a bank to borrow any money.
Maybe that's a result of being from the old school. Today, you look at the mentality that's out there, it's different from ours. Ours was: the value of a dollar is the value of a dollar. Back years ago, you thought about spending five dollars. Today, you throw five dollars as a tip.
I would have never thought that cigar companies like Hollco-Rohr, makers of Dominican Romeo y Julietas, would sell for $50 million, and that was just a label, not even really a business. I've had people tell me, "Man you're crazy, you sold too soon." I said, Yeah, maybe I did. At the time the business was still escalating. But I think we did right. We're trying still to give input into how the business is run. Now, it's up to them to take the advice.
CA: But at this point, do you feel they want to grow your company?
Llaneza: Oh, yes. And, they want to run it separately. That's one of the things that has destroyed most of these big corporations. They come in and they take a company, and before you know it, it all becomes the same company. That's just buying market share, and you start closing installations and put people out of work. General Cigar hasn't done that. They bought this building in Tampa. I think they'll keep making cigars here, and they will surely keep making cigars in Honduras. They're doing a great thing over there for the country, and the people. Giving them a good place to work, and they put in a school. They've done a lot of good things. They are in the cigar business to stay. I don't think it's like the other big corporations, where people sit on the board and say, "Wait a minute. That thing's not making that much money. Let's sell it or spin it off, or do something with it." They are dedicated cigar people. They smoke cigars. They get all
enthusiastic when they see something pretty.
CA: And it sounds as if they are pursuing new projects with Villazon to make it bigger.
Llaneza: Yes. They want to make the best product they can. I'm convinced of that. That's one of the reasons I'm with General Cigar. I've had that opinion of Edgar Cullman Sr. for a long time. I had offers for more money. But I knew the Cullmans. I knew what Edgar had done in Connecticut. I knew his focus on the quality of his cigars; no one can surpass the quality of Macanudo.
But I'm happy where we are. Right now, I don't need anything else, except that my daughter [Villazon vice president Carol Jean Llaneza] become one of the big successes in the cigar business.
CA: What has it been like to spend 60 years in the cigar business, your entire adult life?
Llaneza: When they told me as a kid that I was going into the cigar industry, I think I cried for two days because I hated it. I didn't smoke. I was going to go to a fairly good school. All my friends were going to go to college. I was very resentful. The first thing my father did was not to bring me in as a pretty boy to sit in an office; he threw me in with bulking tobacco and like a dog I sweated, working day and night in the blending room, casing tobacco, sweeping the floors. I had to do the janitor work after people left. It was a small factory. I had all that to go through. My friends would drive up in their cars--Manuel Corral and the Arango boys--saying, "Hey, Frank!" and there was Frank with a broom. That's the honest truth. But looking back, I think it was great that I stayed. I've been happy. I love it. I enjoy more being in the tobacco end of things. The headaches here all go to Tino. That's the personnel side of it. If I'm in tobacco doing something with it, I can make my wishes known, I can see what we should do. That's what I enjoy. And I'd miss it tremendously if I couldn't do it.
We're having a bit of a hard time since the cigar boom has subsided because it's getting now that you have to go out and sell your product. Before, the salesmen were sitting around with their fax machines and here come the orders, and they sent the orders out. That was their work. Now, they have to get up and see the customers and see that the cigars are displayed, and go back closer to what it was. But we've got much more of a chance because there are more smokers out there. I go to some of these stores. I was in Philadelphia, and I went to Robbie Levin's store, Holt's, and I was so happy to see people going in there and picking up cigars. Everybody was talking about the cigars. They have a lot of knowledge that they didn't have before. Cigar smoking before was: light the thing, and if it lit all right, OK; if it didn't, throw it away.
Today, customers come in and they want to know everything. They are knowledgeable. At Jim Bloom's Cigar Co. in Pittsburgh they had people from all walks of life, professionals and athletes, and all of them telling you what they found wrong with your cigar, or what they loved about it. It's a completely different atmosphere. Manufacturers have to respond to that and service it, and nurture the spirit that's out there. If we do, I'm hopeful that there will still be an industry 100 years from now as strong as it today.
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