Ron Perelman, one of the wealthiest men in America, sits down for his first ever Q&A.
Marvin R. Shanken
From the Print Edition:
Ron Perelman, Spring 95
(continued from page 3)
Shanken: But are you concerned about owning a business in an industry that has so much negative pressure and restrictions from government? It's not cigarettes, but cigars still suffer from the same smoking restrictions.
Perelman: It's less pressure from government than it is social pressure as to where cigar smoking is permitted and socially acceptable. But I think even that is changing a bit. I think restaurants that previously would not allow cigar smoking are now becoming more lenient. If they allow cigarettes, they'll allow cigars in the same smoking section. And I think that gradually the public is getting more used to and more accepting of cigar smoking in public restaurants and other facilities. We are very optimistic on cigar usage and consumption.
Shanken: Earlier, you said you like companies with stable cash flows that don't need a lot of additional investment on the part of the buyer. But you bought a company that today, due to sharply increased sales,has a very significant back-order situation: it is not able to produce and ship enough cigars to meet retail orders or the demand in the marketplace. Do you have plans to expand your facilities and your manufacturing personnel? What has your directive been to Consolidated to handle this happy problem?
Perelman: We are looking at expanding our facilities both in physical size and capacity vis-à-vis the workforce. But that is a slower process because skilled hand laborers are required, and it is not something that can be taught overnight. But, clearly, we are committed to filling the demand as it continues, we hope, to increase. The managers will do whatever they think is necessary to run the business efficiently. If it means counting a higher level of income to support a higher level of sales, they would just do that routinely.
Shanken: Have you discussed with Consolidated's management new brands, new approaches, new marketing? Consolidated is the largest producer of cigars in America, both in the midprice, as well as...
Perelman: Mass market.
Shanken: Right. And you have a number of different brands . Has there been a reexamination of investment for advertising or for marketing? So far, you've concentrated on only a few of your brands. Are there any plans at this point to become more aggressive given the strong U.S. market for cigars?
Perelman: I don't think so. I think we've got brands that have been established for many years, particularly the old Cuba brands. On the mass-market and premium-mass level, we are coming out with some new products; but on the premium level, we're just going to be consistent supporters of our existing brands, and unless an acquisition of an existing brand comes along, we're just going to support our existing brands.
Shanken: What are the sales of Consolidated?
Perelman: Around $130 million. In 1994, premium cigar units [from the Dominican Republic, Honduras and Mexico] sold were 40 million and mass-market cigar units were 900 million.
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