Q&A: An Interview With Jorge Padrón

The president of Padrón Cigars Inc. speaks about his Nicaraguan cigar brand.

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Q: What type of reaction did you get to your product?
A: The initial reaction was that our cigars were too strong. Many people felt the types of cigars we were making were not what the marketplace was accustomed to at the time. At that first trade show we sold to 12 retailers. That was the extent of our business.
Q: Were you disappointed?
A: No. Actually, I thought we did well. We went in there not knowing what to expect. My main concern was to cover our expenses.
Q: They said your cigars were too strong—what were they like?
A: Our cigars, using sun-grown tobacco, were much darker in color than other cigars on the market. The mindset at the time was not what it is today.
Q: What were the retailers looking for? What were the big sellers?
A: To be honest with you, I was not that well informed as to what was going on in the marketplace. Our style has always been to make cigars that we like to smoke, and the rest we sell. So we've never really been preoccupied with what's going on outside our little world. We went in there, we felt confident that we had good products to sell, and I knew that all it took was for people to try them. At the time, our cigars ended up on the lower end of the price range. I think, at that time, many people felt that because of the price point, the quality was not there. And that, to a certain extent, was a problem for us at the beginning. I think a Padrón 2000 was priced at $2.75; many people felt at that price point there couldn't possibly be a quality product.
Q: How can you charge such reasonable prices for your cigars? Your core brand, Padrón, is still very inexpensive.
A: The most important thing for us is the vertical integration, the fact that we control all aspects of our business. We grow our tobacco, we do our own sorting, we do our own processing, we do our manufacturing, distribution, everything to the retailer. Over the years—many, many, many years—many people have commented on why our cigars are so inexpensive, and we've always felt that the important thing is to make the cigar as best as we can and charge a reasonable price. Long term, you establish a much more loyal customer base that way. If you look at the price points over the last 10 years, there really has not been much of an increase, relative to what happened in the industry. Our cigars are still priced, on the Padrón line, between $2 and $6, and then you have the Magnum, which is a much bigger cigar that is more expensive.
Q: Did you ever consider going with a distributor?
A: Never. Because our philosophy is not about quantity. With the amount of products that we make, it's a better concept for us to handle the distribution ourselves. It allows us to keep more control of our products and who sells them and who represents our lines. That's a very important issue for us, to get feedback from our retailers directly and from our customers, to let us know if there's something wrong. If there's a problem with our cigars, we want to know about it right away.
Q: Describe the creation of the Padrón Anniversary cigar.
A: The idea for the Anniversary came out to celebrate our 30th anniversary. We had to come out with a cigar that was aged longer, different composition, different blend, that we could offer as an alternative to the type of cigars that we were making. The difference was the tobacco that goes into it and the overall taste at the end. We also—and this was my father's idea—he wanted to create a box-pressed cigar that was similar to the type of cigars that he used to smoke in Cuba, in the '40s and '50s, so we came out with the box-pressed Anniversary. Not that we invented the box press, but at the time there weren't any box-pressed cigars in the market.
Q: Was the Anniversary a hit from day one?
A: It was a hit from the minute it came out.
Q: How did that make you feel?
A: Not to sound cocky, but we knew it was an excellent cigar coming out. We're not about to tarnish our image and our brand by coming out with a product we don't feel is up to par.
Q: When did you start to see the oversold situation on the Anniversary?
A: From day one. We've never had enough of that product.
Q: Your cigars are made of Cuban-seed tobacco, from the filler to the wrapper. When you introduced Padrón on a national level, were there other cigars with Cuban-seed wrappers on the market?
A: I don't think there were many. There were some. Our wrappers were different, especially [because of] the fact that our cigars were all made with sun-grown tobacco.
Q: You never use shade tobacco?
A: Never. Wrapper is always the challenge. We try to maximize the yield as best as possible, but sometimes, of course, we have to deal with the elements, and crops vary from year to year, so there are times when the wrapper yields will be better than others. But that's why we maintain an inventory of six years' worth of tobacco, to allow us to counterbalance the years that are bad.
Q: Is six years' inventory your comfort zone, where you want to be?
A: We can never have enough tobacco. If we can grow to eight years, we'll have eight years.
Q: Can you hold eight years' worth of tobacco?
A: Over the years we've built a lot of infrastructure here in Nicaragua to manage the amount of tobacco that we're growing. You need a lot of space in order to handle that much tobacco. Space is always an issue.
Q: Speaking of space, you've moved into this new space here in Nicaragua. Describe the reasons for the move, and what you can achieve by being here.
A: Before, we had the factory in the center of Estelí and then we had two warehouses adjacent to it across the street. And at this complex we're at now, we had all the processing and fermentation of tobacco, and all the deveining and all the sorting. And that posed, not a problem, but it was inefficient in that we had to be transporting tobacco from one place to the other, and it was just not as comfortable as we have now, where we're all in one place, and you can go from one department to the next just by walking. It produces a lot more efficiency.
Q: The factory is bigger than the other one; does that mean you will be increasing production?
A: Well, production eventually will be increased. At this point, we're staying where we are. But we have the capacity to increase if we feel we can increase. The idea is to stay where we are, but to increase eventually if needed, and if possible.
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