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The Survivors

A decade ago scores of new cigar brands went on sale. Most are gone, but the few that remain have built a comfortable niche in the industry

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Oliva Cigar Co. seems poised to step up into the ranks of the more established cigarmakers. The company has been making cigars for only 10 years, but the family (which is not related to Tampa's Olivas, who grow and broker tobacco leaf) has been growing tobacco for decades.
The Oliva Cigar Co. began modestly, with Gilberto Oliva Sr. making cigars inside one of the Honduran cigar factories owned by Nestor Plasencia. He debuted the Gilberto Oliva brand in 1995. It was made with a typical blend of the boom years: Dominican and Nicaraguan fillers, Dominican binder and Connecticut-seed wrapper grown in Ecuador. A year later, the family opened its first Nicaraguan factory, and shortened its brand name to Oliva.
The cigars didn't catch fire in the 1990s, and Oliva soon found itself making a little-known brand in the midst of an industry-wide cigar shakeout. With money scarce and the family unwilling to go into debt, the Olivas turned to Gilberto Sr.'s stocks of Nicaraguan tobacco.
"My father, as a grower, had a good amount of tobacco aging," says Jose Oliva, vice president of the company. "For one-and-a-half years, he carried us with his inventory of tobacco."
The Olivas were forced to make Nicaraguan puros, which improved the product. Impressed by the change, the family "never again" imported filler tobacco. It still imports some wrapper leaf, which is sometimes used as binder.
Oliva's puros—even its less expensive smokes—have done very well in Cigar Aficionado taste tests. The company's Flor de Oliva 10th Anniversary brand retails for less than $3. The Oliva O Classic Ole, which recently scored 92 points, sells for just under $6.
Jose Oliva, 32, shows a visitor around his headquarters, located in a quiet neighborhood in Miami Lakes, Florida. He lights an Oliva Master Blend and sits down in the smoking room, a luxe, spacious area with leather couches and a selection of his company's cigars. (Some of them are private label brands Oliva makes for retailers, giving them a special touch by printing colorful bands, posters and other promotional materials.)
The room is a comfortable oasis, and comes in very handy in Florida, but soon it will be dusty from construction. Oliva is expanding, here and in Nicaragua. The company needs more room in Miami Lakes to store cigars, and is adding 3,600 square feet, most of it dedicated to cigar storage. Oliva also hopes to finish construction of a second cigar factory in Nicaragua, this one in the tobacco town of Jalapa, which will be half the size of its factory in Estelí, which replaced a smaller factory in the same town.
Oliva says his company will make more than six million cigars in 2005.
"Even though we are a 10-year-old company, our heritage goes way back," he says. "We have a much longer history." His grandfather also grew tobacco, and now the company grows in Estelí, Condega, Jalapa and Sommoto, Nicaragua.
Kaizad Hansotia, a man everyone calls Kaiser, built his Gurkha brand by concentrating on what he knows best—packaging. "I have no pedigree in this business," he says with refreshing candor. On a trip to Goa, India, in the late 1980s, he discovered a cigar called Gurkha for the Nepalese warriors who famously fought for the British, brandishing thick knives shaped like boomerangs. Taken with the name, he bought the inventory and the struggling brand for a pittance: $143. "I didn't know anything about the company," he says. "I wanted to give cigars as corporate gifts."
When cigar sales began to rise, Hansotia struck a deal with Miami Cigar & Co. to bring Gurkhas to the U.S. It was 1995. "It just didn't do well, " he says. "There were so many brands out there."
Realizing he needed to do something different to garner attention, Hansotia decided to go his own route. He had cigars made for him, and packaged them with skills he picked up in his family's watch business. He realized a box could be a problem. "No one wanted a cigar in a box," he says. "They didn't have enough room." Undeterred, he came out with a line of flavored cigars in tubes with a standup countertop display that didn't take up valuable humidor space.
The small brand built an audience, and Hansotia is selling the cigars for quite high prices. One of Hansotia's latest creations, the Gurkha Titan, comes in a heavy, brushed-aluminum box with four hinged doors and black engravings. The cigars inside are made by the Toraños and cost $20 each. "We needed a cigar for a unique smoking experience," says Hansotia. The packaging is impossible to ignore.
Gurkhas feature some of the cigar world's best packaging. The elaborate bands are heavy on the gold and silver. At the center is a large image of a Gurkha warrior in a rare moment of calm, testing the edge of his oversized knife with a finger, a wry smile appearing from beneath his mustache.
Drew Estate was created in 1995 by fraternity brothers Jonathan Sann (aka Jonathan Drew) and Marvin Samel. Their first cigar was made in New York City, at Manhattan's La Rosa Cigars. It was a truly modest start. The duo's first trade show was in Orlando, in the summer of 1997, and Sann and Samel packed cigars and the company's trade show booth in a van and drove from New York to Florida.
The company soon outgrew the chinchalle in Manhattan, and turned to Nick Perdomo in Estelí to make a band called La Vieja Habana. Perdomo, who was in a smaller factory at the time, let Sann use some of his space. As both grew, Sann later set up shop in his own factory, and later still moved into Perdomo's old digs when Perdomo moved on to larger quarters.
Unlike many newcomers, and even some established cigarmakers, Sann took the bold step of spending most of his time in Nicaragua, where he has lived for nine or more months a year since the late 1990s. "At first, the tobacco growers didn't trust me because the boom had just ended and they saw me as just another gringo out to make a quick buck. When they saw that I was living inside the factory and I was relentlessly working hard every day, I began to earn their respect."
Sann had begun to make cigars with various flavorings, including rose petals and coffee. At the 1999 trade show, Drew Estate created an eye-grabbing booth with a chain link fence, colorful art and racing motorcycles, where it debuted the first cigar it made for itself, called ACID. (The brand isn't named for the hallucinogenic drug, but for the studio of a designer friend named Scott Chester, who owns Arielle Chester Industrial Design in New York.) The cigars, flavored with herbs and botanicals and with jazzy names such as Nasty and Kong Cameroon, were a hit. ACID soon established Drew Estate as the leader in the flavored cigar category.
Not that the company likes the term. "We don't use the "F" word," says Sann, who prefers the term "infused." Sann looks quite unlike nearly every other cigarmaker. At a cigar convention in early 2005, he sat in a crowded conference room wearing shorts, sandals and a white T-shirt. A large tattoo was quite visible on his calf. He was smoking one of his cigars, listening to someone in a polo shirt speak about taxation and its effect on the cigar industry.
Despite his appearance, Sann is a respected industry force. "He's probably one of the most creative guys in the industry," says Jose Blanco, marketing manager for La Aurora cigars. "He was way ahead of his time. Along with C.A.O., I think he's the biggest marketing genius in the industry."
Sann now makes the Kahlua cigar for distribution by General Cigar, as well as the coffee-flavored Java for Rocky Patel and the tequila-flavored Sauza. He also makes more traditional blends, without flavorings or infusions, such as Natural and La Vieja Habana.
Mike Chiusano was a Boston financial executive who liked to celebrate his big deals with his brother at Two Guys Smoke Shop. In 1995, he took a trip to the Dominican Republic, where he was handed an unbanded local smoke. He liked it so much he ordered 100 more. Using sheets of letterhead from his investment company, he fashioned a simple band, then proudly handed one to David Garafalo, one of the owners of Two Guys. The gift turned into the start of a business, and soon Chiusano had an order for 10,000 smokes. He registered a Spanish-sounding version of his last name, Cusano Hermanos, and he was in the cigar business.
"It was like a mistake. It just happened," says the 44-year-old Chiusano, a small, athletic man with off-the-charts energy. "Slowly but surely the cigar business just sort of took over, so I wound up spending all my time doing cigars. We got really serious about it when the numbers started getting bigger."
Getting serious also meant improving the source of his cigars, which were made by three cigar companies at one point. Chiusano used his charms on Katherine Kelner, the daughter of Hendrik Kelner, to wrangle a meeting at the 1997 trade show. "I gave him a Cusano Hermanos Connecticut, asked him if he would smoke it and asked him if he could make it. And he smiled and said 'I can make it better.'" Kelner now makes all of Chiusano's non-flavored cigars.
Landing Kelner as a cigarmaker meant that Chiusano needn't spend half his time in the Dominican Republic doing quality control on the sundry cigars. "At that time you couldn't trust what factories put in boxes," he says. Working with Kelner gave him consistent quality, even if he ridiculed Chiusano's early orders. "Our first order was for 20,000 cigars," says Chiusano. Henke laughed. He said, 'I'm looking for customers that can do two million cigars, not 20,000, but I like the underdog,' " says Chiusano.
The underdog proved creative, and part of the success of Chiusano's cigar brand—which is now called Cusano—is untraditional thinking. Chiusano was probably the first to put bar codes over the cellophane on his cigars, improving retailer inventory. At a recent show, his busy booth had plastic shopping baskets with the Cusano logo for retailers ordering enough of his product. It evoked images of happy cigar smokers, loading a basketful of smokes rather than tiptoeing to a retail counter and trying not to drop fistfuls of singles.
After four years without profits, the cigar business began to succeed. The brothers Chiusano spent less and less time on investments, letting the business "whittle away." They did their last deal in 2000 or 2001.
"We like to be a small cigar company. Volume wise, we're getting up there. We're not an Ashton or anything, but we're getting to the point where it's becoming sizeable." He says he'll sell close to 5 million cigars in 2005.
The perceived demographic of the cigar market, Chiusano says, is "the male, age 35 to 55, makes $100,000 a year, college educated, owns his own home and smokes three cigars a week. We target the guy who smokes three cigars a day. 'Cause that's who we are."
After the lean years of the late 1990s and early 2000s, survivors like Chiusano are profiting from today's handmade cigar market, which grew more than 9 percent in 2004 and was poised for an equally strong 2005 as this issue went to press.
Some in the industry have even used the word "boom" to describe the market conditions. New cigars are entering the market at a pace not seen since the 1990s. Recent arrivals include Tabacalera Las Vegas Co., run by Gabriel Miranda, formerly with El Credito Cigars; Dona Flor, a new brand from Brazil made by Felix Menendez, which tested the waters with a $10-plus smoke at this summer's Retail Tobacco Dealers of America trade show; and Los Blancos Cigars, run by U.S. Army veteran David Blanco.
Some newcomers have even created some buzz. Ernesto Padilla, who once worked for Tabacalera Perdomo, has taken high scores with his Padilla 8&11 Miami Blend, which is rolled at El Rey de Los Habanos, a tiny factory owned by Pepin Garcia. The same factory is home to the Tatuaje brand, owned by the Grand Havana Room's Pete Johnson, a longtime cigar retailer who created a full-bodied blend of his own in 2003. Rocky Patel, who entered the cigar business in 1996 with a partner on the Indian Tabac brand, has found fame and high ratings making cigars in Honduras under his own name. (See the February 2005 story "Rocky II".)
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