An Interview With Dr. Reto Cina
President and Chief Executive Officer, Oettinger/Davidoff Group
Reto Cina is the guardian of one of the cigar world's most treasured and famous cigar brands -- Davidoff. As chief executive officer of the Oettinger/Davidoff Group of Basel, Switerland, the spry, slim, 57-year-old has shaken some of the dust of the notably conservative company during his six-year tenure, expanding its portfolio of cigar brands with full-flavored cigars, most notably the Davidoff Millennium Blend Series. Cina was instrumental in creating a joint venture combining the $2 billion company with a pair of hip partners to create one of the cigar world's most expensive offerings -- the $39 Zino Platinum Crown Series Stretch. Recently, Dr. Cina met with senior editor David Savona to speak about his plans for the Davidoff group.
David Savona: You joined Davidoff in 1997. How did that come about?
Dr. Reto Cina: I was running a discount chain called Pick Pay in Switzerland for ten years. Part of their assortment was cigarettes. Oettinger Imex was running the wholesale cigarette business of Pick Pay. So through this business relationship, I got to know these people, and in 1995, I got a phone call from the managing director of Oettinger Imex asking if I would be ready to join as CEO of the Oettinger/Davidoff Group. And I said yes, of course. We let quite a long time pass, almost one year after the first meeting, but I got to know all of the family members, because at that time, the Oettinger Imex Group was still owned by three families. This has now changed -- there is only one family owning the whole thing -- the Schneider family.
Q: Did you deal with Oettinger chairman Dr. [Ernst] Schneider in the negotiations to bring you into the company?
A: Directly with him. Formally speaking, it was the vote of the directors who gave the final OK, but as a matter of fact, it was he who said, 'I want to go with it.'
Q: I've heard that things tend to move kind of slowly at Davidoff, or with the Group. Did you think it was unusual for an entire year to go by between being hired and the meetings?
A: Certainly, it isn't unusual. But I wasn't under pressure at all because I had a good position. It may be a Group thing, that you let pass a little while to really get the feeling whether two characters may get along together or not. So I think it was a good idea. Obviously, it was the right decision for both sides.
Q: Let's talk a bit about the company in general, because I think all of our readers know about Davidoff, but very few know about Oettinger. Could you describe the company?
A: Actually, we are in four fields of activities. We are a producer, we have an import and export business, we are in the wholesale business and we are retailers. The company is divided into three divisions: tobacco products, accessories and confectionery, which includes cigars; diversification, which are all the other brands, such as cosmetics, leather goods, writing instruments, glasses, ties and Cognac; and, of course, cigarettes.
Q: How large a company, in terms of annual revenue, is the Oettinger/Davidoff group?
A: The tobacco products, accessories and confectionary division comes to 910 million Swiss francs ($717 million), cigarette licensing is 1.2 billion ($946 million), and diversification is 501 million ($395 million). The number of employees is 2,600. Outside of the Dominican Republic, most of them are in Germany, with more than 800.
Q: Where do you sell Davidoff cigarettes?
A: Only in Switzerland, plus we have some distributing rights for other cigarettes; for instance, we are the distributor of the American Spirit cigarette -- in Switzerland, in Belgium and in Holland -- but it's a tiny thing. In addition to that, we are the importer for Zippo lighters, for Savinelli pipes and so on. Having our sales force selling our own brand together with these imported products makes the portfolio much more attractive, and delivery costs come down with the percentage of the value of the order. By using our infrastructure to the utmost, signing the same customers and adding up other products, we are able to generate additional margins.
Q: What about your fragrances?
A: We have them made, but we are doing the whole thing: the advertising, the distribution and everything. For cosmetics, Lancaster is our licensee. For Cognac, it is Hennessy, and so on.
Q: What is the breakdown of stores that you own?
A: We started, years ago, buying tobacco retailers in Switzerland because we were aware that sooner or later we would have the situation that this retail business would no longer be attractive. We would have less retail shops and we had to have an outlet where we can promote our own brands. At the end of the day, the retail shop will be the only place where you can promote your products. Having the full vertical integration coming from production, wholesaling and also controlling the retail business, we have 100 percent control.
There are 48 Davidoff flagship, or pilot, stores worldwide. These are stores that carry the Davidoff logo on the storefront and feature the entire Davidoff product range, from cigars to fragrances to Cognac and other Davidoff products. Among them are the Madison Avenue store and the newly opened shop at Columbus Circle in New York, four in Las Vegas, seven others in North and South America, 18 in Europe, 16 in Asia and one in the Middle East. Of these flagship stores, Davidoff owns eight. The remaining 40 are franchised. In addition, we have 150 shops in Germany, 26 in Switzerland, two in Belgium and two in Holland. These carry a variety of Davidoff and other brands.
Q: How is the cigar business divided between countries?
A: First, the biggest market is still the U.S., with slightly more than 20 percent, followed by, changing from one year to the next, three countries: Germany, France and Spain. One year France is in the second position, the other year it is Germany, and so on. The fifth is Switzerland, followed by Turkey, then all the rest.
Q: Are there some cigar brands in your portfolio that maybe do great in one country, but aren't spectacular in others?
A: Yes. I mean, let's take Avo. It's a really big brand in the U.S. It's doing well in Germany and Switzerland and in other European countries, but honestly, in the Far East, where we are really successful with Davidoff, we have a hard time.
A: In Asian countries, people are looking for the big names. And it is much easier for us to get them buying a Davidoff cigar than an Avo. That is certainly a reason why it is so difficult to start new lines throughout the world. It's a hard thing.
Q: During your tenure as CEO of the Group, it seems as if Davidoff has become considerably more aggressive in coming out with new cigars. Is that accurate?