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Normalcy in the Dominican Republic

The gold rush days of the cigar boom are gone, and so are most of the quick-buck artists who flocked to the Dominican Republic
David Savona
From the Print Edition:
Susan Lucci, Sep/Oct 99

Manuel Quesada climbs up a small mountain of Indonesian tobacco packed in cardboard boxes. "I'm older than you, so if I can do this, so can you," he says, urging a visitor to climb with him. He stands 10 feet above the ground in his 35,000-square-foot warehouse in the Pisano free trade zone, just outside Santiago, Dominican Republic. Tobacco from around the world packed in 150-pound bales of various colors and designs lies beneath him, stretching out for what seems like a mile.   "The secret to this business is not making cigars; it's having the ingredients to make cigars," says Quesada. The 52-year-old owner of Manufactura de Tabacos S.A. (Matasa) has been making cigars in Santiago for 25 years. "We try to make the same, consistent blend and taste. And for that you need tobacco," says Quesada, whose brands include Fonseca and Cubita. "If you want to make 10-year-old tawny port, the first thing you need is 10 years. Today, you don't have it. And that's what happened to these newcomers--they wanted to make aged cigars with fresh, young tobacco."  

It seems like such a simple lesson, but few newcomers heeded it when they flocked to the Dominican Republic in droves in the mid-1990s. Throughout the decade, the Dominican Republic has supplied roughly half of the premium cigars smoked in America. In the early 1990s, the Dominican Republic shipped about 50 million annually to the United States. The number rose to 66.3 million in 1994, then to 81.1 million in '95 and 138.6 million in '96 before peaking at 268.4 million in 1997. Last year, the country shipped 200 million, or 25 percent fewer, premium cigars to the United States as the market struggled to digest an oversupply of cigars. The Dominican Republic's market share, however, increased slightly, from 51.7 percent to 52.9 percent.  

As cigar sales skyrocketed, newcomers flocked into the business. Some ended up in Central America, but most set up shop in the Dominican Republic. Today, most of them are gone, victims of choosy consumers and the effort of established cigarmakers to increase production of their best-selling brands.  

"There was a huge expansion of both tobacco growing and cigar making, which put a huge push on our relatively small industry. It's cooled off considerably," says Edgar M. Cullman Jr., the chief executive officer of General Cigar Holdings Inc., which makes Macanudo and Partagas cigars, among others, at its Santiago factory. Cullman welcomes the changing market, with some reservations. Having lost market share during the boom, General looks forward to reclaiming it now that the market is settling down.  

"There was a huge fight for experienced cigar rollers, and now you can get whatever you want," says Cullman. "There are many fewer manufacturers. We've tried to list all the cigar manufacturers that are no longer in business. It's tough. It's a huge list."  

It's hard to say for sure, but about 90 factories failed in the Dominican since 1997, perhaps 60 in the town of Tamboril alone.  

Quesada is driving around the Pisano free zone. Some of the inhabitants here are doing well, including Tabacalera El Credito S.A., where La Gloria Cubana cigars are made, and Tabacalera S.A., a factory run by Benjamin F. Menendez, Quesada's good friend and a regular adversary on the tennis court. Menendez recently began making Romeo y Julieta cigars here, a brand once made by Matasa.  

But Quesada's real reason for the drive is to point out the cigar casualties in this small area alone. Caribbean Cigar's factory is now a warehouse for Timberland boots. Professor Sila has shut its doors. V. M. Santana, says Quesada, is on its "last legs."   This scene is mirrored on a drive to Villa Gonzalez, another town outside Santiago. "There are no more cigar factories here," says Hendrik Kelner, the maker of Davidoff and Avo cigars. He estimates that seven or eight factories closed around this area.  

The 53-year-old Kelner more than survived the cigar boom--he prospered. The one-year-old, $1.7 million Cigars Davidoff factory, which he built with his partners at Davidoff of Geneva, could easily be mistaken for the corporate headquarters of an American Fortune 500 company. The building is sleek, polished and huge, and only resembles a cigar factory on the inside.   Kelner is sitting at a desk, squinting at a pile of graphs and arguing half-heartedly with one of his factory supervisors.   "I don't understand anything anymore," Kelner says with a smile. The Davidoff in his left hand is nearly a smoldering memory, two inches of cigar stub sticking out from between his thick fingers. "This new factory is a beautiful factory, but it's an efficient factory," says Kelner. Computers are everywhere--the production of each roller and each buncher is fed into the system, and with a press of a key supervisors can tell how many poor quality cigars a roller is creating. Kelner says the new setup is cutting down on rejects. The factory even has slots built into the rolling tables to collect different forms of tobacco scrap, and Kelner has a small army of women sorting out the leftover leaf in three separate piles, enabling him to charge $1 a pound for his scrap, more than other cigar factories.  

The Davidoff factory and the adjacent factory, OK Cigars, where Avos and other cigars are made, are busy, so there's plenty of scrap to sort. Piles of tobacco also age in his warehouses, as they do in many Dominican factories. Dominican tobacco farmers went into overdrive for the 1997-'98 growing season, planting 65,000 acres of premium cigar tobacco, nearly double that of the previous season. They cut back last season's crop to 28,500 acres, and plan to cut back again for the upcoming growing season, which begins in November.  

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