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The CA Interview: Austin McNamara

Austin McNamara has become a well-known figure in the cigar industry during the tremendous sales boom of the past five years. As president of General Cigar, he has led the company through the most significant period of growth in its history. But that's not why he took the job, leaving his position as group vice president and general manager of the prepared foods division of Chiquita. At the time, he was charged with bringing some of his marketing expertise to a company that had seen its market slowly declining and had been searching for ways to reverse that trend.

McNamara has shown his stuff over these past five years. He was involved in the successful campaign to launch and sell the one-time Partagas 150 series; he helped shape and bring to market the new Cohiba brand; and has been integral to the marketing campaigns of Partagas and Macanudo, seen by many in the cigar industry as standard setters.

The 43-year-old McNamara also is steeped in a background of corporate analysis and market research, and he has used that training to produce valuable information and insights into today's cigar-smoking trends. In a wide-ranging interview in November with Marvin R. Shanken, the editor and publisher of Cigar Aficionado, McNamara talked openly about the incredible ride of the past five years, and his optimism about the next five years in the cigar market.

Cigar Aficionado: Recent press reports have suggested the cigar boom is peaking. Given General Cigar's perspective on the market, what impact will that have on future cigar consumption in America?

McNamara: There is a shakeout going on. I think it's healthy for the cigar industry. I believe that the secondary brands and the third-tier brands are having a tough time selling. We've seen no slacking in the demand for our premium brands. In speaking to other premium manufacturers, they seem to have the same kind of demand that existed last year and continued on into this year. That's good.

The reason is because great tobacco is the source of great cigars. These new cigar brands are not doing as well, primarily based on the inferior tobacco that they are using. Most of the major manufacturers have held tight to their standards. They continue to produce high-quality cigars. The consumer and the retailer are coming back to quality. I think that bodes extremely well for General Cigar and our brands, because we produce a quality cigar and our consistency and quality are second to none. In many ways, we're perfectly positioned, even in a shakeout.

CA: What allowed so many new unknown brands to be successful? After all, the cigar market has always been brand-driven, which made it tough to launch new ones. How did that change?

McNamara: The new smoker coming into the marketplace explains it. They were experimenting with many different flavors from many different countries. Your publication has done an excellent job of educating them about various countries of origin, different brands and even highlighting those different brands. There's a whole ethos of experimentation with the new 25-to-40-year-old consumer. That's great.

CA: Wasn't it also a fact that major premium marketers such as yourself couldn't give the retailer enough product, so that they looked to other brands just to fill their shelves?

McNamara: Clearly, the retailers were in a tough spot. They could not get sufficient quantities of name brands or the top brands, the brands they really wanted to sell. So they had a choice: Do they go bare on the shelves or do they experiment with other brands? Some of them experimented with them. But the major brands have come back. We've significantly expanded our production. Last year we went up by 50 percent. This year [1997] we went up by 50 percent. Next year we plan to go up by 50 percent.

CA: Do you see any resistance in terms of supply and demand for your brands this year or next?

McNamara: No. We are so far behind the demand curve for our brands that we still have a lot of growth potential before us.

CA: Given the portfolio of brands that General Cigar already owns and the fact that some of those brands are yet to be developed in the marketplace, because of your focus on Macanudo and Partagas, what was the rationale behind the acquisition of Villazon?

McNamara: We are a brand-driven company. We believed that Villazon represented the largest group of very powerful brands in the industry. It was an acquisition that we had coveted for a long time. We have great relationships with [Villazon's former owners] Frank [Llaneza] and Danny [Blumenthal]. It built on our portfolio of brands. Now, we own U.S. rights for seven of the top 10 former Cuban brands and we've got two very powerful brands, Hoyo de Monterrey and Punch, which are in the top 10 in the country in terms of reputation and image, and we've got many brands, even those that you mentioned that weren't even being developed.

CA: Aren't you still putting virtually all of your energy and resources behind the larger-selling brands and giving some of the secondary brands less attention?

McNamara: I think to answer that question, you have to come back to the issue of tobacco. Tobacco availability is our number-one constraint. As we expand our tobacco inventory and capacity, we will be able to come on line with those incremental brands.

CA: Does that mean in 1998 and beyond, we'll see General Cigar begin to put more marketing muscle behind brands such as Ramon Allones, Temple Hall and Bolivar, or will they continue to take a back seat to Cohiba, Punch, Hoyo de Monterrey, Partagas and Macanudo?

McNamara: Because the demand is so great for Macanudo and Partagas and Punch and Hoyo de Monterrey, we still need to take care of those brands. They are very large. But we have also got very specific plans for many of the middle-tier brands--Bolivar, Sancho Panza, Ramon Allones--to market those brands as aggressively as we do the big brands.

CA: Just out of curiosity, the four brands you mentioned--Macanudo, Partagas, Hoyo and Punch--about what percentage of your total do those four brands represent?

McNamara: Of the total premium side of the company's business, about 75 percent.

CA: How large is your premium cigar business?

McNamara: You mean in units?

CA: Yes.

McNamara: We don't give out units.

CA: I'm not asking for individual brands.

McNamara: In terms of branded product, I think it's 60 percent. And, I believe that in 1997, in total, we were one of the largest premium cigar producers in the world.

CA: How large?

McNamara: We don't quote that.

CA: I see. Let's deal with brands for a second. Of the lesser four, will any of those brands receive increased amounts of attention from you in 1998? Which and in what way?

McNamara: Each one of the brands will continue to be marketed separately. We'll probably develop new promotional activities. We have a couple of new product launches on line extensions, new sizes. So I think that most of the top seven brands that we have will receive incremental focus.

CA: Is there anything in the new product area that you can talk about?

McNamara: Not right now. We are still finalizing those plans. We launched three new products in 1997. The Macanudo line launched the multiyear vintage product. We launched Cohiba, which is the biggest thing we've done in 15 years. And we introduced Cifuentes. Cifuentes would be viewed as a smaller niche brand.

CA: Is Cifuentes a limited distribution product?

McNamara: Yes. Very small.

CA: Is it too soon to talk about the degree of success with the Cohiba launch, which took place in February 1997?

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