Edgar Cullman Jr.

CEO, General Cigar Company

(continued from page 3)

CA: Within the next two years?

Cullman: Yes.

CA: What I'm hearing, I just want to make sure, is that you plan to come out with Cohiba in the next two years utilizing a wrapper, similar in style to Opus X.

Cullman: That is our plan. It doesn't mean we will be successful.

CA: You are now farming enough of this wrapper for that project. But it seems from the Opus X experience that that kind of wrapper needs a lot more aging to enhance the flavors. It's not just something that you can turn around quickly, is it?

Cullman: That's the problem. Not only does it take time to develop the tobacco, but once you feel you have it and even in small quantities, it takes time to age it. And then, once you have made the cigars, you have to age it again. It is a very painstaking process.

CA: That's very interesting. Could you tell me how many acres of wrapper tobacco you have under cultivation?

Cullman: In this area?

CA: Yes.

Cullman: It's probably less than 20 acres at this point.

CA: For wrappers, that can be a huge amount.

Cullman: It could be, but much of it is not usable. It is not a commercial seed yet, so we're developing it.

CA: But even a few acres of wrapper tobacco would be a lot.

Cullman: Oh, it would be a lot if it were all good. The problem is there is a lot of waste.

CA: What happens to all the waste?

Cullman: Well, most of it will be sold as binders or as unusable tobacco. It's experimentation. We're taking various seeds that are well known and seeing if we can develop them.

CA: Is your farm where you're experimenting on the wrapper at all near where the Fuentes' farm is?

Cullman: No. It's about an hour outside of Santiago.

CA: Are your people convinced that you can grow commercially a wrapper in a different location of similar quality to the Fuentes?

Cullman: We are not convinced that it necessarily will be in the Dominican Republic. But over the years, we have developed seeds that we grow both in the Dominican Republic and in Connecticut. This allows us actually to have two crops per year because [the Connecticut tobacco grows in] our summertime and the Dominican grows in our wintertime, so we actually can get two crops.

CA: I'm a little confused. So, what I am hearing now is that the new Cohiba will not necessarily have a Dominican wrapper?

Cullman: Exactly.

CA: Earlier, I think you said it would be.

Cullman: No, all I'm saying is that it will be a new wrapper. I don't know whether it will come from the Dominican Republic or Connecticut.

CA: Backing off the premium brands for a second, you have machine-made cigar businesses of approximately how many cigars?

Cullman: As I've said, we don't like to talk about numbers.

CA: You have brands like Garcia y Vega, White Owl, Tiparillos. Obviously, 20 years ago the volume was higher.

Cullman: [Emphatically] Much more.

CA: Where was the volume at its peak, and has there been any renaissance in those sales numbers?

Cullman: There were several peaks. The most recent peak for the entire industry was at the end of the '60s when the U.S. cigar industry hit 9 billion units in 1969 and 1970.

CA: What was your volume in that period?

Cullman: It was 1.8 billion units. From 1969 until 1993, there was a straight line decline in the industry from 9 billion to 2 billion or 2.1 billion, whatever it is. We probably suffered proportionately so, a little more, a little less, depending upon the year. But we had a very big business in 1969 in the small-cigar business. The Tiparillo and Tijuana Smalls were very, very big at that time. And it was because the first surgeon general's report on cigarette smoking came out [in 1964], many of the cigarette smokers turned to cigars as an alternative for a period of about four or five years. That created a major resurgence in the cigar business. Again, the cigar industry could not make enough cigars to fill the demand. That was short-lived, however, because it was based upon a false premise. The premise was the cigarette smokers could make a transition to cigars, and most of them could not. There just is a different taste, there's a different enjoyment level. I think the resurgence today has a very different foundation.

CA: What's happened between '92 and '96?

Cullman: What's happened is we had a big surge in all of our domestic-made cigars.

CA: Machine-made cigars?

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