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An Interview with General Cigar

An interview with The Cullmans of General Cigar holdings Inc. and Lennart Sunden, president and CEO of Swedish match
From the Print Edition:
Gene Hackman, Sep/Oct 00

(continued from page 1)

CA: Would you not say that the existing situation puts you at a disadvantage compared to where Altadis is today?
No, I don't think so. It's highly speculative, what is going to happen. And the ownership of the Cuban brands is highly dependent on the kind of development that will take place in Cuba. If it would be like the German [reunification]--the former owners would get the rights back. Then, it's basically the people that we are partners with, General Cigar, which has acquired the brand rights [from the original Cuban owners]. So then you know where the right is for the worldwide brands. If Cuba evolves in a different way than Germany did, of course nobody knows what will happen. In any scenario, the situation goes back basically to a discussion of which base year should you look at: [Cuba's] prerevolutionary years or some period in-between? Who owns the brands today? There is a debate depending on the kind of viewpoint you take.
Cullman Jr.:
From our point of view, we've always believed that Cuban cigars are not the be-all and the end-all. In other words, I think [Cuban cigars are] obviously very competitive outside the United States. Non-Cuban cigars are just beginning to scratch the surface there. But I believe that the incredibly explosive interest in cigars in the United States occurred partially because there was such a variety of product available. A Dominican cigar is completely different than a Honduran cigar. For instance, who had ever heard of Costa Rica as a place to make cigars? And they're darned good cigars that are coming from there. The international market does not have access to all these cigars. The only cigars they have are Cuban cigars, which, you know, are good or not good, depending upon your point of view. Our objective is to show the world that there are wonderful cigars made in different parts of the world. Just like the wine industry, you don't only have to have a French wine to enjoy drinking wine; you shouldn't only have to have a Cuban cigar to enjoy a good premium cigar.

CA: I'd like to go back to La Gloria Cubana for a minute. How do you view the brand in context of the portfolio that you have? Sunden: It's a very valuable part of the total number of brands where we are involved, meaning General Cigar's brands and the brands of El Credito Company: La Gloria Cubana, La Hoja Selecta and El Rico Habano. They are major assets that we are working with Ernesto on.

CA: That includes more marketing plans? Will we see La Gloria Cubana and [La Hoja] being a bigger brand presence in the marketplace?
Sunden: Yes, there will be new products coming out.

CA: Mr. Perez-Carrillo has a reputation as being a very good tobacco man. Will he be involved in any way in the overall brand development for the whole portfolio?
Cullman Jr.:
You mean for the portfolio of brands at El Credito or General Cigar?

CA: Outside of El Credito.
All the people from the various cigar companies that now come together here already are working together, and Mr. Perez-Carrillo is an important member of that group. How we are going to do that in the future is a topic for internal discussions. But we certainly all appreciate his cigars. And they are a valuable asset. I cannot really comment any further right now. He knows how to make a good cigar.

CA: One of the most attractive elements in this partnership must be the worldwide marketing expertise that Swedish Match can bring to bear on Macanudo. How do you see that brand expanding over the next few years?
I believe we will be able to put more effort behind that and put more resources behind it, because Swedish Match has an international cigar presence that is more widespread and has larger sales than General Cigar had on its own. We will put resources behind that. For instance, we are going to put in place as president of General Cigar International, one of the senior people from Swedish Match. He will come here and work in that position.
Cullman Jr.:
This is a very senior executive at Swedish Match who is very willing to take some risks because he's moving from a much larger position to one that needs to be developed. But from a strategic point of view from both Swedish Match and General Cigar, this is where we see our greatest opportunity, and that's in the international market. With a seasoned executive, with somebody with his experience and great knowledge of the Swedish Match organization, we hope to take full advantage of that from a premium cigar point of view. He is well respected within the Swedish Match organization, well respected within the European cigar community. He's not as well known in the United States; but this is an amazing part of the things that have occurred between the two companies. His name is Frans [Vogels]. We liked him a lot before they even made the determination that he is the right guy for the job. I hope it really will put a supercharge under our abilities in this sphere.
Our intention is, of course, to have General Cigar be the leading vehicle for the development of the cigar business worldwide. And, therefore, we put a very skilled person together with General Cigar, reporting to us.

CA: At this point, do you have any initial analysis of where General Cigar International might find the most potential? Sunden: That is only in the preliminary stages. We know most of the markets in the world. I think there is room for growth for an international brand, actually the world's largest premium brand, Macanudo. There is room to grow in Europe. There is room to grow in Asia-Pacific. And in some other parts of the world as well. In many cases, it is already a well-known brand. For all people who like cigars who go to the U.S., they see the brand here and it's a very strong asset.

CA: In Europe you've always done quite well. Is that right?
Cullman Jr.:
With the exception of France and Spain. That's a real opportunity. Those are big consumption areas, big countries for premium cigars and for Cuban cigars. For us, it's just really beginning in other countries. It represents less than 5 percent of our total business. The opportunity is everywhere. We know Macanudo has a much larger name recognition than sales.
People know it's a great brand in the U.S., even if it's not sold [in Europe] very much. It's not being marketed that much in some areas. It's a very interesting opportunity.

CA: How long have you been in the cigar business and how long have you worked for Swedish Match?
I joined Swedish Match two years ago. Before that, I was not in the cigar business. I've always been in consumer products. I worked 20 years for [Swedish vacuum cleaner manufacturer] Electrolux. I ran a vacuum cleaning business for five years before I came here. They are, you can say, fast-moving consumers, durables. They are like fast-moving consumer products, high in advertising, quick moves, fairly high activity on the market.

CA: And what brought you to the cigar business?
Well, basically, I saw great opportunities to further develop Swedish Match from where it was, and lead it into the direction in which we are going now, into a niche tobacco product company with the leading global position in that category. You know, we went through a number of changes. We sold our cigarette business for $600 million, and that has given us the opportunity to further develop our position in other tobacco product categories where we already had a relatively strong position. But now we're going into products where we can be the No. 1 or No. 2.

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