Chairman, Hunters & Frankau
Nicholas Freeman is the chairman of Hunters & Frankau, the sole importer of Cuban cigars into the United Kingdom. His family has been in the cigar business for five generations; it traces its involvement in cigars to a retail merchant in London in the early 1800s who rolled cigars.
The family sold its mass-market cigar business in 1947, which today is an American Brands subsidiary in Europe. The Freemans, however, later regained ownership of a small importing division of their company, J. Frankau. The division had operated throughout the Second World War, importing cigars from Jamaica because Cuban cigars were unavailable in Great Britain during that period due to currency controls. When Cuban cigars became available again in Great Britain, the Freemans sold the Jamaica operation and began focusing on Cuban cigars. The company evolved slowly over the next 35 years, but by the late 1980s, it controlled nearly 40 percent of the imported Cuban cigar market in the United Kingdom. In the early 1990s, Hunters & Frankau bought the remaining two importers of Cuban cigars and took sole control of the market.
In a wide-ranging interview in November with Marvin R. Shanken, editor and publisher of Cigar Aficionado magazine, Freeman discussed the future of Cuban cigars, the Cubans' ongoing problem with quality and the worldwide boom in cigar consumption.
CA: When I first met you, you represented a small portfolio of Cuban cigars brands. At the time, there were other companies that owned the balance. How did Hunters & Frankau end up as the sole agent for all Cuban cigar brands in the U.K.?
Freeman: I'll give you an update. In the late 1960s, when Hunters & Frankau, Ltd. was operating as a joint company--the two companies had merged--we had at that time 25 percent of the Cuban cigar business. By 1979, our share of the Cuban business had risen to about 40 percent. And that was entirely through commercial efforts in marketing and so on, at the expense of our competitors.
In 1990, we acquired Knight Brothers, which had the Romeo y Julieta agency, which was quite a small business. Then, in 1993, we acquired Joseph Samuel & Sons, who had always been one of the biggest Cuban cigar importers in the U.K. They had Punch, Bolivar and Hoyo de Monterrey which were their three big brands. And that gave us all the Cuban business. But in the process of doing that--when we acquired Knight Brothers--that's how we inherited outside shareholders in Hunters & Frankau, Ltd. That is to say, a Cuban investment company.
The Cubans earlier had acquired Knight Brothers. I gave the Cubans stock in Hunters & Frankau in return for their share in Knight Brothers.
CA: From our earlier conversations, I believe you told me that you owned 57 percent of Hunters & Frankau, Hambros [the British investment bank] had about 38 percent, with the rest belonging to David Baxter, a former Hunters & Frankau executive?
Freeman: That's the group, the holding company. Hunters & Frankau Group also has a controlling interest in Hunters & Frankau, Ltd., which is the trading company. This Cuban investment company has a large percentage of Hunters & Frankau, Ltd.
CA: Is it 50-50?
Freeman: It's not quite, but for all intents and purposes it is. The way to put it is that a Cuban investment company, in the course of our buying Knight Brothers, acquired a significant percentage of Hunters & Frankau, Ltd., our trading division. We're now in partnership, but we actually do have a voting share, which gives us that control.
CA: Is this the Cuban government, or an arm of the Cuban government, or an agency, or...
Freeman: All I can say is that it is Cuban...
CA: It's not Habanos?
Freeman: It's not Habanos. It's a Cuban investment company, which is an investment holding company which holds a very large number of Cuba's overseas investments, not just in tobacco but in nickel and everything.
CA: Today, Hunters & Frankau, Ltd., is the exclusive agent for Cuban cigars in the United Kingdom--all Cuban cigars. Is that right?
Freeman: Yes. Hunters & Frankau also has the exclusive right in the U.K. for Agio Dutch cigars, which is quite a big brand, and also for Villiger, the German cigar. This is the import part of our business. And we also import Dominican and Honduran cigars.
CA: Can you tell me, roughly, the size of Hunters & Frankau today?
Freeman: It has a turnover of £20 million [approximately $30 million].
CA: And how many cigars do you import annually?
Freeman: For Cuban cigars, in a normal year, about five million.
CA: And all others?
Freeman: All others would be about...between 15 and 20 million non-Cuban.
CA: Lately, it hasn't been a normal situation because of shortages of Cuban cigars. So, in 1995, how many Cuban cigars will you import?
Freeman: We will sell over four million.
CA: In terms of your business, 20 to 25 percent of your units are Cuban cigars. In terms of revenues, what would the percentage be?
Freeman: Sixty percent of our turnover.
CA: At its peak, 10 years ago or so, Cuba was exporting 100 million-plus cigars at a much lower price than today. Did you always have difficulty getting all the cigars that you wanted; or when they were making 100 million were you able to order and get what you wanted?
Freeman: When they were making 100 million it was not a problem to meet our demand quite comfortably. The lead time in ordering was always long, because that's historically how the business has been done. They don't carry any stocks in Cuba, as you know. It's like placing a print order.
CA: Three months, six months, a year?
Freeman: Lead time would be, always, at least six months to a year on every order.
CA: Was part of your business, then, building inventory so that you don't have the swings from the shipments?
Freeman: It's always been our policy to have an inventory of at least 12 months.
CA: So you would always have four or five million cigars on hand.
Freeman: That's right.