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Swisher International Group Inc. Switches Gears

With three factories in two countries and a growing roster of brands, Swisher's investment in handmade cigars definitely isn't too little. But is it too late?
Brendan Vaughan
From the Print Edition:
Gina Gershon, Sep/Oct 98

(continued from page 3)

In 1958 Swisher introduced Swisher Sweets and in 1966, the cigarmaker was acquired by American Maize-Products Co., a public company controlled by the William Ziegler III family. The company name was changed to Swisher International Inc. in 1992. In 1995, the Ziegler family sold American Maize, but immediately bought Swisher back. Under the leadership of Ziegler, still chief executive officer, the company went public as Swisher International Group Inc. in December 1996.

Today, Swisher is one of the most diverse operations in the cigar industry, with products spanning the price scale, from King Edward (23 to 26 cents a cigar) to Santiago Silk ($5.65 to $7.40). Though Swisher's diversity can be viewed as a strength in that each niche is a hedge against the others, the company wants more of the premium market. That won't be easy.

Ask any cigar industry executive about introducing a new brand in today's market, and you get a variation on one answer: No matter who you are, it's tough. Retailers have too much product on their hands. Ask Tabacalera S.A., the Spanish tobacco giant that's trying to crack the U.S. market. Ask U.S. Tobacco, the smokeless tobacco powerhouse (Skoal, Copenhagen), which cautiously launched its new Habano Primero cigar in April.

And ask Swisher. Confident as its executives are in their sales force and marketing muscle, they seem attuned to the challenges. "Retailers are backed up with inventory and they're rather reluctant to take on new product," Ryan admits. "How many will choose to stock our brands is a hard thing to forecast."

Indeed, that inventory bulge has contributed to a couple of rough quarters for Swisher in 1998. In the first quarter, earnings fell short of analysts' expectations, and in a news release issued in late May, the company predicted that second-quarter earnings would meet the same fate. Swisher admitted disappointment, but forecast "improvements in sales and earnings in the months ahead."

Mann likes to talk about the "Don Nobodies" who entered the market at the height of the cigar boom and have since disappeared. He likes to talk about how the market is morphing back to its pre-boom state--that of dueling giants. "And we welcome that kind of share battle," he says with characteristic scrappiness.

Swisher is an American company with a working man's ethic. Its premium cigars, especially the bargain-priced Bering, are inexpensive compared to the rest of the premium market. Unlike its biggest U.S. competitors, General Cigar and Consolidated Cigar Corp., Swisher doesn't own the U.S. rights to any Cuban brands. In conversations with Swisher executives, you don't hear much about "passion" or "family" or any of the other romantic buzzwords that other cigar companies proclaim.

What Swisher executives do speak about is offering the customer a quality smoke for a fair price. After all, as Mann declares in perhaps the most succinct synopsis of the Swisher philosophy, "There are only two kinds of cigars in the world: those that sell and those that don't."

Brendan Vaughan is manager of new media content for M. Shanken Communications Inc.

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