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A Century Mark

With Their Cuesta-Rey Brand Booming, the Newman Family Celebrates 100 Years of Cigar Making
Gordon Mott
From the Print Edition:
Ron Perelman, Spring 95

(continued from page 2)

Dealing with his primary customer, the retailer, has become one of Bobby's biggest challenges and the most difficult problem for his staff of 20 regional sales managers because of the consistent shortages of cigars. "We have the best sales force in the country, and they're used to going around making placements. They are used to pounding the pavement. We're concerned they may lose their edge. They were welcome in smoke shops until six months ago, but now all they get are complaints [about shortages]. They are our first line of defense." Talking to retailers has occupied a major part of Bobby's time, too. "There will be a time when we can get more product, and the retailer is one of our biggest assets. What we've been trying to do is explain how the Fuentes work in the Dominican Republic, that they are in the factory until nine o'clock, three and four nights a week, trying to fill orders."

The Newmans have no plans to expand their sales staff because that would necessitate opening new accounts and providing more product. "It wouldn't be fair to our old accounts who supported us all these years. It's a good problem to have. If you ask the smoke-shop owners, they'll complain about the shortages, but they'd rather have [shortages] than an oversupply."

The shortage is, of course, one of the biggest question marks in the cigar industry. The Newmans and other manufacturers wonder whether many retailers aren't overordering in hopes of getting at least some product for their shelves. But the cigars are vanishing from stores as soon as they arrive. "A retailer may get 20 boxes, but he's got 20 customers waiting for [them]," says Bobby Newman. "And we're losing our displays--our billboards, in effect--because [the cigars are] not there. And with our product not there, new brands are getting the opportunity to find customers." But that kind of demand still prompts the question: How big is the shortage? "We know we need a lot more than 10 million handmade cigars a year," Bobby Newman states. "But we don't know what the limit is. Is it 30 million? Forty million? You don't know, when you're short a product, whether you are one day short or a week short. And it starts at the retail level. If a guy walks in and wants one box, but sees a supply, he may buy two boxes and hoard them. So no one in the industry knows how short the shortage really is." Or what exactly it means for the industry.

For Eric Newman, it means more work than he has time to accomplish. When asked about his typical day, he pulls out an electronic date book and begins scrolling through his "to do" list. "I often am putting out fires," he says, admitting that his organizational skills are not what they should be. Fifteen minutes later, he finally finishes the list, after a recitation punctuated by "oh, that's got to be done right away" and "I haven't had time to get to that yet." He admits that he still signs every invoice and probably gets involved in a level of detail that he shouldn't. But in fact, 20 or 30 of the items he has mentioned are indeed things that have to be done right away, and he is the person who has to do them. At one point, he checks on the back-order list. It is 1,000 pages long with up to three orders per page, many pages of Arturo Fuente brands but more than 400 pages of it just M & N brands. When Eric checks with the distribution manager, he finds that orders going out the door in early December had been received five weeks earlier; it has taken that long to get to them on the company's first-in-first-out delivery policy.

Eric isn't worried, however. "Our business is growing by leaps and bounds," he says, citing the advent of Cigar Aficionado as the driving force behind the surge. But, he says, the company commitment to quality is a formula that is working and that it is shifting the drugstore image of a brand like Cuesta-Rey into its current position as a premium hand-rolled product.

As in conversations with every other member of the Newman family, the ghost of J. C.'s commitment to quality appears. Eric Newman quotes his father, "if you pay too much for good tobacco, you only lose money. Pay too much for bad tobacco and you lose customers. My dad was always committed to buying the best tobacco" and making the best cigars. Eric also says there is a deep satisfaction in the business for him right now because "we are going back to the basics."

The present success and promising future of the company are sweet for Eric, just as they are for his father. He remembers the buyout from the family in 1986 as a decision "made with the heart, not the head." Given the debt load and the state of the cigar industry, business was extremely tough in the late 1980s. "At one time, I thought we hadn't used our heads at all. I used to wake in the middle of the night wondering. We did a lot of soul-searching. But [having] been dragged through the mud like we were for a couple of years, we feel [as if] we've earned our stripes. We'll never forget where we came from."

Eric isn't someone who believes that hard work is the only way to success. "In this business, timing is everything, and there's a lot of luck [involved]. Carlos Fuente says, rightly, that we caught the last train to imported cigarland for hand-rolled cigars." Eric also says timing has played a role in the mu-tual success of the Fuentes and the Newmans. "We are [his] biggest customer, and now we're selling his product. It could be tricky, but his demand exceeds supply so he's happy with the job we're doing for him." Mutual respect, Eric adds, is important to the entire enterprise.

The M & N formula, in fact, depends heavily on just that sort of mutual respect, both for their partners and for each member of the family. Eric explains that as a small, family-owned company, the principals can make quick decisions about matters that might take a bigger corporation weeks or days to resolve. "We often just run into each other in the hallway and start discussing a problem. If it needs a decision, we can do it right here." That level of coordination demands fundamental agreement, which, fortunately, exists among the Newmans. It's not uncommon to hear the same idea or business philosophy expressed by all three of the Newmans. Perhaps they each adopt a slightly different manner or choose different words, but they leave no doubt that they share a common vision and common goals for the future.

Both Bobby and Eric are quick to say how glad they are that Stanford has witnessed a resurgence in the cigar market. "He could have missed all this hoopla," Bobby says. "We thank God every day." It's a genuine sentiment that traces back to the brothers' true love of their business and their acknowledgement that their father has been not just a parent, but a mentor and teacher. Bobby says, "[Stanford] didn't ask my brother and me to come into the business. We asked to come into it. He didn't force us." Bobby hopes his son, who is 10 months old, will also want to come into the business. And Eric is already having a hard time keeping his 13-year-old son, Drew, out of the business. He shows off a picture from the Retail Tobacco Dealers' of America, Inc., trade show last August in Chicago: Drew is talking to a retailer, explaining the company's ci-gars. "He's already one of the best salesmen we've got," Eric, the proud daddy, says. "He wishes he could start working for us full-time right now. He thinks he is the reincarnation of J. C."

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