Richard L. DiMeola
Executive Vice President, Chief Operating Officer, Consolidated Cigar Corporation
From the Print Edition:
Arnold Schwarzenegger, Summer 96
(continued from page 1)
DiMeola: I don't know who they sold it to. When I joined the company, Theo was still trying to sell off some of the old cheesecloth, because Gulf & Western also had begun requiring that the company use sheet [fabricated] wrappers on the mass-market cigars. So when they converted to sheet, it obviated the need for all that Connecticut wrapper leaf. So La Romana was originally used for tobacco processing. Consolidated actually got into the premium cigar business when they bought the Moro Cigar Co. in 1966. That was the producer of Primo del Rey. The Junco family came out of Cuba. They were growers in Cuba until 1961, when they left the country. They used to supply Consolidated with a lot of filler tobacco, because in those days, the domestic brands made in Puerto Rico used 35 percent Cuban tobacco and 65 percent Puerto Rican tobacco.
CA: It was really grown in Puerto Rico?
DiMeola: Some tobacco was grown in Puerto Rico then. So Consolidated helped the Junco family get started in Miami and they started making Primo del Reys. That was in 1961-62. In '66 they bought the company, and they moved the production in '69 or '70 to the Dominican Republic. So those were the first cigars that they started making in the Dominican Republic--Primo del Reys. It was folded into the tobacco operation, and as a result Consolidated had a cigar operation in La Romana, and then in '82 when the labor costs went up in the Canary Islands, [Consolidated was] told by G&W to move all of those brands out of the Canary Islands and into the Dominican Republic. José Seijas, in fact, worked for the company in the Canary Islands. He and his colleagues wanted to take five years to make that move, but the company required them to do it in 18 months, and that's when they contracted with some other manufacturers in the Dominican Republic to make Montecruz. They lost a little bit of control there. The move caused the quality to decline. The business started to decline. The competition got more active, and by the time I joined them they had gone through this change with the product of the previous management; distribution problems and so forth. When I got there, I had no sales organization and poor quality to deal with. There was a slowdown.
CA: What brands have been added since you joined the company?
DiMeola: When I joined, we didn't have a single powerhouse brand. When I joined the company, we asked: Which one should we focus on? Should we try to take H. Upmann and make it a powerhouse going against competition that was firmly ensconced, just taking the gamble that it would work, or should we go with Don Diego? Or should we create something new? What we did was sort of a shotgun effect. We threw the mud against the wall to see what would stick. We started to introduce new sizes within each of the brands. We developed a new range within Montecruz. We created the Montecruz natural claro. As soon as I got over to Consolidated, I started to pitch Dunhill--to make a Dunhill cigar, because having been with the Dunhill organization that owned Lane, I knew they were interested in a Dunhill cigar. They brought one in from the Canary Islands, and I told them I would still be interested in making a Dominican Dunhill for them.
They agreed finally, and we came in with the Dunhill cigar for them. Then in 1986, Theo engineered the purchase of the American Cigar Co. That's when--in addition to Antonio y Cleopatra, which was the biggest brand--we also acquired the rights to the old Cuban trademarks that they owned. American Tobacco Co. had a subsidiary in Cuba prior to the embargo, called Tabacalera Cubana, that made La Coronas, Cabanas, La Meridiana and Santa Damiana. At the same time, they were also making La Corona Clear Havana in Trenton, New Jersey. They still held those trademarks, so that's when we got the rights to those brands, and some other clear Havana brands as well, such as Henry Clay.
CA: What does clear Havana mean?
DiMeola: It means made in the United States of Cuban tobacco.
CA: So, it's an American-made, 100 percent Cuban tobacco product?
CA: How big was the U.S. market in the years prior to the Cuban embargo?
DiMeola: The total U.S. market for premium cigars [prior to 1962] averaged 185 million. Of the total premium cigar market, about 14.6 million were Cuban cigars, or about 8 percent. And the rest were all clear Havana.
CA: Where were the bulk of the cigars manufactured?
DiMeola: There were cigars made in Tampa, Trenton, Miami, Key West and Pennsylvania, using 100 percent Havana tobacco. Those were the ones designated clear Havana cigars, and they comprised the bulk of the U.S. market.
CA: That means that all 185 million cigars used Cuban tobacco?
CA: Were cigars imported from other islands at this time?
DiMeola: Perhaps. But it was a minuscule amount.
CA: What were the major brands produced at that time?
DiMeola:. The major brands were Bering, Gold Label, La Corona and many others. The Bering Plaza was 26 cents. The Corona Corona was 35 cents. The biggest selling Cuban cigars of the day were the H. Upmann Majestic and the Ramon Allones Ramondo. [Consolidated] sold 1.2 million cigars of each size a year--100,000 cigars a month at 35 cents retail.
CA: After the acquisition of the American Cigar Co. in 1986, what was next for Consolidated?
DiMeola: We got the American Cigar Co. brands and we started to introduce the Henry Clay. We started to sell a few Cabanas. We played with La Corona, but we never really did very much with it.
CA: In terms of highlights, I assume Te-Amo is one of the bigger acquisitions?
DiMeola: Yes, but the next big thing that happened in the company was that Mr. Perelman wanted to sell it, and so six of us did [a leveraged buyout] and bought it. That was in 1988-89. And immediately after that we bought Royal Jamaica. In 1988, Hurricane Gilbert tore the roof off the Royal Jamaica factory in Kingston, Jamaica, and through my previous distribution association with Royal Jamaica [starting in 1983], I got to know the Gore brothers who owned it, and they called me and asked if I would make some Royal Jamaica cigars for them until they could repair the roof. We started to make cigars for them, but before we made the first shipment we bought the trademark.
CA: At its peak, how big did Royal Jamaica ever get?
DiMeola: It was about where it is today. It does a little over 3 million. I think it got up to about three and a half million. It went down and it's coming back up.
CA: How low did it get?
DiMeola: I don't know. Maybe about 2 million. It would be bigger now if we could have shipped all that we had on order. I think we have 650,000 of those things on back order.
CA: At the time, since you were a principal in the company that bought it back, what was the rationale that Ron Perelman gave as to why he'd want to sell it, inasmuch as he loved cigars?
DiMeola: Mr. Perelman loved cigars, that's true. He's very interested in the business, but he's also, as you know, a genius of a financial man, and it was a financial move.
CA: Did he lose confidence in the future of cigars?
DiMeola: I don't know. I can only tell you that I think it was a financial move. I know he didn't lose confidence in the management. I think he believes that Theo Folz is one of the best managers he has in all his empire, and my personal belief is that's one of the reasons why he bought us back.
DiMeola: We acquired Te-Amo in 1989 as well, after we did the LBO.
CA: How big was Te-Amo in 1989?
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