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Betting On Talanga

UST has been in the cigar business for nearly 30 years, but success has been elusive. The answer might lie in the Talanga Valley of Honduras
David Savona
From the Print Edition:
The Best Places to Gamble, Sep/Oct 02

Larry Palombo is standing in a dark, gloomy aging-room in Danlí, Honduras, as a battery of fans pump humidified air from high above. The room feels as cold as a meat locker. But everything's relative. The 69 degrees only feels chilly when compared to the rest of the cigar factory, where the mercury hovers at around 80. Palombo has a cigar jammed in his mouth, its head the worse for wear from a long, close encounter with his teeth. The room has an earthy, leathery smell, the perfume of rich cigars getting better with age. Palombo is happy, not with what is in the room, but with what is missing: thousands and thousands of cigars.

Palombo, the president of U.S. Cigar Sales Inc., the much-maligned cigar-making unit of smokeless tobacco powerhouse UST Inc., the maker of Skoal, Copenhagen and Rooster, is trying to turn around the unprofitable cigar division. The last time he showed this room to a visitor it was brimming with cigars that the company was struggling to sell. Now, three years later, the room is about half empty. Some products are even out of stock.

Things are starting to look up for the Tampa, Florida, company, which makes Don Tomás and Astral cigars. Part of the reason is the company's tobacco farm in the Talanga Valley of Honduras, about a one-and-a-half-hour drive from the capital of Tegucigalpa, and more than two hours from Danlí.

UST created its cigar unit in 1974, planting tobacco seed five years later. For years it concentrated on light wrapper varieties, such as green candela and golden-brown Connecticut seed. In 1998, the company made a dramatic change, planting a blue-mold-resistant Cuban hybrid under the shade that turned brick red in the curing barns and nearly black after fermentation and aging. Called Talanga Shade, the wrapper has become U.S. Cigar Sales's main weapon to attract those who enjoy stronger cigars. The company uses the corona leaves, the top primings, on Astral Talanga Valley Selection and the fourth and fifth primings on Don Tomás Dominican Selection.

The company's goal is to use more tobacco from the farm. It's using some of the lighter leaves for brands it makes under contract, but it has no plans to sell its tobacco to other cigarmakers, at least not yet. "We want to have enough for ourselves first," says Palombo.

The leaf is only one part of the UST cigar revival. The other component is the one-two punch of Palombo and his second-in-command, vice president of sales and marketing Daniel H. Elrod.

Palombo and Elrod are a study in opposites. Bronx, New York-born Palombo, a 54-year-old with thin, round glasses and a passing resemblance to Paul Simon, is quiet and compact, belying his considerable talents on the tennis court. He owns a library of cookbooks and laments the poor bread he gets in Tampa, as well as its frequent stormy weather. The front pocket of his shirt is always stuffed with cigars. Palombo, a cigar industry lifer, spent 21 years with General Cigar Co. before joining UST in 1995. In May 2001 he was promoted from vice president of tobacco to president, replacing Pepe Gutierrez.

Elrod, a 17-year veteran of UST, knew little about cigars when he was transferred from the company's U.S. Smokeless Tobacco unit in the hope that the star salesman would bring some of the Copenhagen magic to the cigar side. The 40-year-old Elrod is a Georgia boy, a lefty who threw sidearm as a quarterback in his youth; nowadays, golf's his game, which he is teaching to his daughters. He's also a former rodeo cowboy, and looks the part, tall and turbo-charged with an eternal pinch of snuff in his cheek.

Elrod, who seems to be able to chew more tobacco than any man alive, defers to Palombo's knowledge of the industry and admits to being a step behind Palombo's gargantuan capacity to smoke cigars. "Larry will come into the office at seven and hand me about ten cigars he wants me to test," says Elrod. "Then he'll come by at nine looking for my answer."

The two play off each other's strengths. Palombo has a superior knowledge of tobacco; Elrod excels at sales.

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