An Interview With Manuel Quesada
The head of Manufactura de Tabacos S.A. (Matasa), makers of Fonseca, Cubita and other cigars.
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Q: Talk about your leaf brokerage business, if that's the correct way to describe it.
A: No, it's not really a brokerage, because we buy our tobacco and then we sell it. So we become the owners of the tobacco. We used to
supply farmers with all the know-how and the money. We'd buy the tobacco, then grade it, pack it and sell it as filler for either short-fill cigars or cigarettes. And long-filler as well, because Tampa would buy a lot of long-filler. The Canary Islands would buy some long-filler. And the Dominican Republic was starting to use it more.
Q: Is that also Matasa?
A: No, that's a separate company, called Manipuladora de Tabaccos CxA.
Q: Which is a bigger business, the leaf or the cigar?
A: It used to be the leaf. But the leaf has run into a number of
problems throughout the years. The Dominican Republic has had a policy of taxing exports, which is a very unusual situation, and at a time, we ran eight years with a 35 percent export tax and that took a lot of markets away. We became expensive in comparison to Colombia, to Brazil, to Paraguay, Argentina, which are the countries that compete with us.
Q: Today, is Matasa bigger than Manipuladora?
A: We're about the same, I'd say.
Q: Lets turn the clock back for a moment. Tell me what was tougher: those early years when you were struggling for business, or later when you were dealing with all the craziness during the cigar boom?
A: It was different. At the beginning, you knew more or less what your volume was. You knew more or less what your expenses were. You could program yourself. And the competition, of course, was very well established. And it wasn't an extremely lucrative business, but it was a business that you could handle. And you could program yourself and you could at least work your way into making a cigar. It was not a demanding time, because cigar smokers smoked a 4 1/2 inch by 43 ring, whatever brand, and smoked that every single day till they died. In the ,80s, cigar smokers were smoking one size and one brand because their map of preference was very narrow. That changed completely with the advent of Cigar Aficionado. In the ,90s, especially after the cigar boom, cigar smokers made their map wider by smoking more than one size and more than one brand. Of course, it flipped over the business completely.
Q: Were there introductions of new products before Cigar Aficionado?
A: Very little. Very little. You would introduce a new size, but nothing like it is today where you go to an RTDA [Retail Tobacco Dealers of America trade show] and the first sign on the door is New. Everything has to be new nowadays.
Q: In one of our earlier conversations, you told me that you're not certain the proliferation of new brands is a good thing. Could you please elaborate on that comment?
A: I don't believe it is. I don't disagree that the smoker needs a little excitement, the smoker needs a little more choice. But I think we're overdoing the choices. And in cigars, there are so many permutations and there are so many ways of blending that you can do without going into the extremes. And some of the extremes have proven successful. While there are products that I don't cotton to at all, apparently there are some smokers that want this type of choice. But if you look at the brands today, any brand has at least four or five extensions of that brand. So, it becomes diluted. Now, you're either cannibalizing your own brand or you're confusing the smoker. It's a game that we're playing that I really don't feel is sane or healthy for the industry.
Q: I'm smoking one of your regular Fonsecas: mild, medium, creamy, elegant. You have some others that have a very different flavor altogether now, right?
A: Indeed. Well, that's one of the things that, of course, [resulted from] Cigar Aficionado waking up the smokers [by saying,] "Hey, there may be more to cigar smoking than just a mild cigar," which was the standard of the industry back in the ,80s and early ,90s, until Cigar Aficionado started on the verge of kicking up the taste of cigars. And of course, all the brands have had to accommodate themselves to that. So Fonseca, in particular, has now come up with three or four extensions of different tastes and different strength levels to cater precisely to the smokers.
Q: Is Fonseca your biggest brand?
A: Yes, it is. The regular Fonseca is still the biggest seller. I still think that the average smoker out there is a middle-of-the-road smoker. It's like saying, "I will have a lobster diablo twice a day for the whole week." You can't do this. Smoking a very strong cigar that satisfies you completely cannot be a four-cigar-a-day habit. You can't do this. I can't do it, anyway.
Q: Let's talk about some of the new things you're doing. Let's actually talk about the brands that you make.
A: The factory is divided into two major divisions. One is where
we make our own brands and the other one is where we make brands under contract. And under contract we make Casa Blanca for JR, we make Licenciados for Mike's Cigars, we make Nat Shermans—some parts of the Nat Sherman brand—and we make smaller brands for small distributors. We make some cigars for Europe, as well.
The other part of the factory is where we make the brands that we sell ourselves: Cubita, Fonseca, which are the two main brands, and then we have other, smaller regional brands, which are national, but they sell more in particular pockets of the United States. We make some bundles, as well.
Q: Did you get phone calls during the cigar boom with people saying: "I need this many cigars?"
A: Oh, we had people come in with suitcases full of money, open it up and then, "Here, take it. I need cigars." At the height of the boom in ,95, all the people that were coming into the Dominican Republic were stealing from cigarmakers right and left by offering all kinds of stupid wages and offering incentives and giving loans, and it was just crazy.
So we had a meeting at Pro Cigar [the association of Dominican cigarmakers] and we said, "Guys, we either take the high road or we take the low road." Now, if we're in business for the boom, let's
take the low road and retire at the end of the boom. But if we're going to be here after the boom, we have to be very conscious of what our situation is. Because, when all of this clears, the ones
left behind are going to inherit whatever craziness was done during the boom.
If you go back to the boom and you do a study of pricing, the cheapest cigars during the boom were the Fonsecas, the Macanudos, the H. Upmanns, the Montecristos. We were selling cigars at between $5 and $7 when people were getting $12, $13, $18, $20 a cigar. Again, we had to make a choice, and we made the choice. Because we weren't there for the moment. We're here for the long run. Now, whether that's smart or dumb, I don't know.
Q: When did you realize that the craze was starting to come to an end?
A: The RTDA of ,97—I forget where it was—but we noticed that the new guys that were coming with all this, "My great-grandfather was a barber, but he lived in a place that had tobacco…," they weren't
getting all the excitement that they were getting in ,95 and ,94 and ,96. In ,98, it just stopped.
Q: So, you had some bad years after that?
A: Well, ,98 and ,99 were not happy years at all. And 2000, for that matter. Two thousand and one started to get a little better, but, then, some manufacturers continued making cheap cigars. And today that's still the case.