Edgar Cullman Jr.

CEO, General Cigar Company

(continued from page 2)

Cullman: We don't have any specific new direction for Partagas. Partagas is unique, and is a different taste vehicle than Macanudo. It proves the rule that the wrapper has a huge impact on the taste of a cigar, because in essence, the binder and filler combination, with some small differences, is the same with a Macanudo and a Partagas. The big difference is the wrapper.

CA: In terms of the pricing of Macanudo and Partagas, how are they positioned against each other in terms of pricing for the consumers?

Cullman: They're very close, it's only about a 10 percent difference. Partagas is slightly higher. Early on--I mean this goes way back in history, when we first started with Macanudo--Macanudo was positioned as slightly less expensive than a Montecruz, and Macanudo and Montecruz were the two major smokes out there in the premium end. We introduced Partagas and we tried to make Partagas a little bit more expensive than Montecruz. So that was the position that we took and it sort of held.

CA: You have a number of other brands: Temple Hall, Bolivar, Cohiba, Ramon Allones, Canaria d'Oro, and very recently you came out with the Cifuentes brand, which must be playing off the life and history of Ramon Cifuentes. Why are you launching a new brand instead of focusing on some of the other brand names that have a richer tradition and higher market awareness?

Cullman: The proliferation of brands in the marketplace has been extraordinary. We are continually looking for tobaccos that will provide unique tastes. Unique in every sense while also being very good. We don't want to do something just for the sake of being unique. But we are stymied at this point. What we've done is come out with a Cifuentes that was an attempt to change some blends and use some different style wrappers. We are not convinced that it is a unique taste. It's a very good cigar, but it still is in the family of a Macanudo style. So, if we had to take a look at all of the brands that we have in our household, Cifuentes is probably the least well known. And so what we did was try to use our Connecticut wrappers but come out with something different.

CA: But, my understanding is that Cifuentes is never going to be a big brand or a big priority, so it's just another brand.

Cullman: Right.

CA: One obvious question is Cohiba. What are you doing with that? You own the American rights but you haven't done much with it. Why haven't you taken the brand to market and made it a priority given the awareness and the consumer demand for the brand?

Cullman: I think it's a very good question and the answer really lies in the fact that we don't have a blend and a unique taste for that cigar today that we would be happy with. We think it's such a blockbuster brand name that we must come out with something that is equal to the expectation of the brand. We're at a very difficult position because all of our time and energies have been on developing or creating the tobaccos for Macanudo and Partagas. We need to develop a third leg, in essence, a taste for Cohiba. If we just came out with something that was a variation of a Macanudo or a variation of a Partagas, we don't think that would cut it.

CA: As experts in the field, with growers and blenders who have access to an almost unlimited range of tobacco from all over the world, why can't you do it? Other brand marketers have launched new brands of very high quality, very successfully. If they can do it, then why can't you do it? If you went out to sell the brand, you could make a fortune.

Cullman: We're not interested in selling it. We want to develop it.

CA: But why is it that other people can launch new brands of very high quality?

Cullman: I'll be very frank with you, Marvin--the number of unique tastes that are out there today, are not that significant. Once you get beyond a Dominican style cigar and I would say a Honduras/Nicaraguan, there isn't that much. But Opus X is a very interesting new cigar, even thought it's not available in any quantity so that consumers can really taste it. But it really is the germ of some very interesting new approaches to a new taste in the cigar business. That's what we're looking for and we're working very hard as the Fuentes [Tabacalera A. Fuente in the Dominican Republic] were before us. Unfortunately, we didn't get going as fast as they did. But we are very interested in developing new tastes. It will only come from experimentation. You can only grow a crop of tobacco once a year.

CA: You mentioned Opus X. I was thinking of Opus X among a number of brands from the Dominican Republic as well as Honduras. Are you doing anything in terms of experimentation or growing wrapper tobacco in the Dominican Republic?

Cullman: Yes. We've always grown wrapper tobacco in the Dominican Republic. We still grow it. What we grow mostly is candela. Candela is the green, fire-cured tobacco that is used as wrappers for many of our Garcia y Vega cigars. It is not used on premium cigars very much, but it is quite popular in the domestic [machine-made] end. We're doing a lot of experimentation in terms of new seeds and variations of seeds and taking variations of filler and binder tobaccos in the Dominican Republic, in Mexico where we grow also, and in Connecticut.

CA: Are you today growing wrappers in areas within the Dominican Republic that are conducive to the kind of quality wrapper that the Fuentes is producing?

Cullman: Yes.

CA: Is the quality high enough to be destined for future General Cigar products?

Cullman: Yes. Definitely. Absolutely. That's exactly what we're doing.

CA: Could you expand on it, I mean, where, how big, how soon?

Cullman: How soon is very hard to determine.

CA: Do you have any crops that you are now aging of wrapper tobacco that are in the new style and with the quality of Opus X?

Cullman: Yes. But not enough to make an introduction.

CA: For many years there was an understanding that you could not grow high-quality wrapper tobacco in the Dominican Republic, but Opus X has demonstrated that the theory is not correct.

Cullman: Right. But what we don't know, and I don't know, is what quantities they are able to produce. And at this point, until they come out in the market, there is no point in speculating.

CA: Of course, they're on the market, but only in certain areas.

Cullman: Yes.

CA: And in very, very limited quantities.

Cullman: Right. And that's a problem because as a company that is in the premium cigar business, producing a couple hundred thousand cigars is almost meaningless for us. It's much more important for us to look at any brand that would be many millions of cigars.

CA: But a launch of a couple hundred thousand on the way to many millions, five, seven to 10 years later is OK, too.

Cullman: It is OK. But it doesn't feel right to me to launch at two hundred thousand.

CA: I understand. But do you plan for new cigars, to be a factor in the new niche that has been created by Opus X, and if so, with an existing brand or a new brand or what?

Cullman: Yes, definitely. Cohiba is going to be our mark. There's no question about it.

CA: And when would this be?

Cullman: I hope it would be sooner rather than later, as my father would always like to say.

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