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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 3)

CA: You purchased Villazon nearly four years ago. Do you feel at this point that the integration of Villazon into the General Cigar structure is complete? Are you satisfied with that part of the business, too?
Cullman: It was a big challenge to us in terms of people, because, as I said, the premium cigar business is a personal business. Villazon was Dan Blumenthal and Frank Llaneza. What was very important to us was to try to maintain that integrity and to let them do what they do. It's over three and a half years now since we closed on the deal and Frank Llaneza is still with us. Danny Blumenthal is basically retired. But, we have maintained the integrity of Villazon. Our customers still understand what Villazon is and they order from Villazon, but the business is basically part of General Cigar. It isn't like somebody wanted somebody lost here. Hopefully, all of us won. We are taking the benefits of synergy, if there are any, as it relates to tobacco purchasing and all of that; but, from a consumer and customer point of view, we're still keeping them pretty separate.

CA: You've introduced Macanudo Robust and Macanudo Maduro in the past few years. They've been well received in the marketplace. Do you have plans for future line extensions? Is this it for Macanudo at this point?
Cullman Jr.: I would never rule out any other extensions. But they're not that obvious to us at this point. I think Robust and Maduro had a place in the marketplace. Robust is obviously a reaction to heavier, more full-bodied cigars and Maduro just was always there and why not take advantage of the interest in maduro cigars. As you know, we did Serie S--shaped cigars for Partagas. I don't know necessarily that a Serie S style line would go with Macanudo, although we've had some shapes within our [Macanudo] line. What I think may be interesting is to take that brand and see what else could be done outside of the United States. We're restricted, as you well know, to take some of our brands outside of the United States. Macanudo is one of the few brands that can be sold in almost every country in the world. So there may be opportunities to take Macanudo other places, maybe a Macanudo made in some other country, to another dimension outside the United States. Honduras, for example. But, there's nothing on the drawing boards at this point. That's still to be determined.
Cullman: We have a lot to do to develop Robust and Maduro. We're just starting. If people like it, we have to make sure they understand what it is.

CA: But isn't it a big advantage heading out into the international marketplace to have those three types?
Cullman:
Yes, it is. It makes a big difference. So we're looking forward to expanding Macanudo. I think a lot of people haven't smoked it; we want more people to smoke it. We need to find a way to do that.

CA: Just in general, with the slowdown in the cigar market, are your inventories built up to a point that you're comfortable with, both in terms of quality and quantity? And doesn't that speak well for the consumer at this point? Isn't the golden period of cigars coming?
Cullman:
I don't know what you mean by that. I mean we've always aged our cigars. Our inventory is now in balance. We have more tobacco than we might like to have, but tobacco doesn't deteriorate, it improves. What's happened over the years, in our opinion, is that Cuba started using tobacco [directly] from the field to [make] cigars. It can't work that way. If you smoke some of our cigars, ones that have been aged, they taste pretty damned good. That's what makes the difference. Aged tobacco. We're lucky we're in the position that we can hold that tobacco and use it as we need it.
Cullman Jr.:
I think that the challenge for the industry is to make good cigars. I think that during the renaissance of cigars, almost anything that you wrapped and claimed was a cigar could sell. It turned off a lot of people. And so, we don't have the same interest in cigars [from consumers as we had during the boom]. We've got to find a way to get that back and I think the best way to bring them back is with a good product so that they're rewarded when they come in and try it. We were talking about a lot of cigar smokers being on the periphery who wouldn't necessarily consider themselves cigar smokers today but are very interested in continuing to partake, especially at events of certain sorts. That's a great time for them to realize that, "Oh, you know, this tastes good. I'd forgotten how good this tastes. Maybe I should be smoking more of them." That's our challenge and the best way to meet that challenge is with good product.

CA: With the advent of the big cigar conglomerates, it's getting harder for boutique brands to survive. Larger companies with the better resources are going to have an advantage over the smaller guy. How do you keep the integrity of what creates a real cigar, a great cigar, which is that personal touch, the individual involvement?
Cullman: I think that's what we've been able to achieve in making the number of cigars that we do, to make sure we have that. There is an advantage to having a small cigar boutique. A man can then see what they're putting in the cigar, make sure it's coming out the way he wants it for every cigar. That's what we're trying to do with our cigars. As if we were a small company. We spend so much time to make sure the cigar looks right and tastes right.
Cullman Jr.:
I think the key will be in the development of new brands and it can be done even within a large company. I think we've got terrific people, and if Ernesto joins our team, he's going to be one of the people that develops new brands. I think he really likes to do that and there's always something new to be determined. Let's run the clock forward a few years. Cuban tobacco is now available. My view is that Cuba will keep its cigars. Cuban tobacco really will be much more accepted in a blended product than in a full-bodied Cuban cigar. And that to me is where, again, excitement can be rendered. If you've got more opportunity to blend with these kinds of tobaccos, you can develop new tastes and different brands. So that's what will keep this industry fresh.


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