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• Drinks
  The Burgundian Model
• Good Life Guide
  Xikar Xi3 Redwood Cutter
• Good Life Guide
  Run Silent, Run Deep
• News & Features
  The Fat Cigar Trend
• Cuba Report
  Quality Time
• More from this Issue

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

The unit is still unprofitable, and there has long been the perception in the industry that UST would dump the cigar business, which has always performed glaringly short of its parent's successful core business of making and marketing moist snuff. In 2001, UST earned $492 million on sales of $1.7 billion.

Cigar sales, both domestic and overseas, get lumped into the "other" category in the UST annual report, along with international sales of snuff. The "other" category had $30.7 million in sales in 2001, a tiny increase from $29.4 million the year before. The category had a loss of $8.9 million, compared to a $15.8 million loss in 2000, when UST took a loss from a write-down of cigar and leaf inventory. Cigar sales are on the rise, however, with units and revenue rising in both 2001 and in the first half of 2002.

While sales are climbing, the cigar unit is facing a legal challenge that could affect its bottom line this year. In early 2002, a judge ruled against UST, U.S. Cigar Sales and several other UST subsidiaries in a lawsuit filed by Miami Cigar & Co., which claimed that its contract to distribute cigars in 49 states had been breached. The judge awarded Miami Cigar $42.5 million in February, but at press time the case was being appealed.

Is the Palombo/Elrod run the last chance for the cigar unit? "It was never put to me that way," says Elrod, who doesn't like the industry comments about his company. "Hell yeah, I care. I have invested personally in this. We have a pretty aggressive plan in place, and we're right on plan."

New products intended to broaden UST's horizons from simply Astrals and Don Tom*ses are part of that plan. The latest idea is Helix, a milder cigar wrapped in Connecticut-shade tobacco with a nearly ridiculous price: no more than $3.50 a cigar, before taxes. It might be the least expensive Connecticut cigar on the market. Other ideas include Tercio, a high-powered smoke packaged in palm bark to signify how the tobacco is aged the old-fashioned way.

Growing tobacco and bringing new cigars to market is a painstaking process, one that often doesn't leave much time for relaxation. On a recent evening, however, Palombo, Elrod and several other members of the UST team find time to kick back a bit on the front porch of the UST house, adjacent to the Danl" factory. A light rain falls on the lawn, which can be heard in the darkness. Inside, a chicken stews in a pot, taking on the heady flavor of garlic. Rice and beans simmer to perfection on the next burner. The men sip a little rum, Scotch and Imperial beer as they wind down the day. Fresh cigars are lit, but Palombo, never one to let a good cigar go to waste, relights a mostly smoked test cigar that has sucked up the moisture from the rain and has been chewed half to death.

The mood is tranquil, but Palombo, Elrod and their men know that there's only a moment for relaxation. They still have a great deal to prove.

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