A Conversation With Oliva Cigar Co. Owner: Fred Vandermarliere
It’s difficult to not smile while speaking with Frederik Vandermarliere, the third-generation owner of J. Cortès Cigars N.V., a private, family-owned business based in Zwevegem, Belgium, that specializes in machine-made cigars. Affable and intelligent with a charming Belgian accent and boundless energy, Vandermarliere oversees the 94-year-old company that was started in an attic by his grandfather, Maurits.
Frederik’s father, Guido, expanded the business exponentially during his time as chief, but it was Frederik who brought the family into handmade cigars, the driving force behind the company’s acquisition of Oliva Cigar Co. in 2016.
Earlier this year, senior editor Andrew Nagy spoke with Vandermarliere during a visit to the newly improved Tabolisa 1 cigar factory in Estelí, Nicaragua.
Nagy: Where did you grow up?
Vandermarliere: In Belgium. Born and raised there in a tiny village. I grew up very local and it’s only later on that I went to Katholieke Universiteit Leuven.
Q: J. Cortès has been around since 1926. What was it like growing up in a cigar family?
A: Tobacco and cigars, they always have been around in our life. Every party, dinner, whatever you have, there’s always smoke.
Q: I saw on the J. Cortès website that you were nicknamed ‘Cigar Boy’ because you passed smokes around at parties. Is that right?
A: [Laughs] Yes. It was so funny because when you’re six years old, you don’t know what you do. You just go around and say ‘You wanna have a cigar?’ I would speak to everybody. But I think that you start to love the product, because you have to often explain what cigars are, even at a young age. When I got older, I was also the guy always having some cigars in my pocket.
Q: Did you understand the family business when you were younger?
A: No. I think the first time that I really understood the business was the moment that I got the loan to pay for the shares of my sisters. That’s really when you get to understand the business as a whole: When you have to pay [laughs].
Q: So you bought out your sisters’ shares? They didn’t want to be involved with the business?
A: I was the youngest one of three, and my father was the youngest one of eight. They had a system that if you weren’t in the company, you have to sell your shares to the other shareholders. One sister was working in another business of the family, so she was not all that active in the cigar business. Another sister went working somewhere else.
Q: Did you always want to be a part of the business?
A: No, not at first. It’s not like you’re a kid and you say ‘I want to be the leader of’ or ‘I want to be CEO of . . .’ I think it was all very natural in a sense that I lived the periods of my life in the way that I had to. When I was a youngster I went out. And then you drink beers and you do a lot of sports and you have fun and you explore and study. And that’s a bit how you get to learn about yourself.
When I finished university, I first toured around for a couple of months in Asia, with a backpack, and in South America, backpacking as well. And then I wanted to work outside of the business. I didn’t do it because there was an occasion where my dad said, ‘Fred, we have a position available but it’s for a certain period and it’s one project. If the project doesn’t succeed, I will have to fire that guy. So I will hire you. I mean it’s easier to fire you than to fire somebody else.’ I said ‘OK, thank you. That’s nice motivation.’ So that’s how I entered.
Q: Where did the name J. Cortès come from?
A: It’s a brand that we acquired in the ’70s.
Q: Because the company originally was called . . .
Q: When did the name change happen?
A: The ’90s.
Q: So you took on the name because it was a popular brand?
A: It was a very popular brand and I have to say there’s a little tweak in the story. At a certain moment we wanted to hire people. So you put in newspapers something like ‘We are J. Cortès’ or ‘We’re Vandermarliere, owner of J. Cortès.’ Because if people see brands, they are more attracted to work for you than when they don’t know the company. And when we did that, the Ministry of Health’s anti-tobacco people saw this as publicity. There is a rule that you cannot put [tobacco] publicity in newspapers. So then we said ‘Let’s just name the company J. Cortès.’
Q: The original cigars from the 1920s, were those handrolled or machine-made?
A: They were semi-handrolled. The type of cigar always has been smaller cigars. So cigarillo type of cigars. It was short cigars from the beginning onward, because in our region these types of cigars were more popular because of the cold weather and the availability.
Q: How many machine-made cigars do you produce in a year?
A: Approximately 500 million. Between 450 and 500 million.
Q: How many markets do you sell those cigars in?
Q: Including the U.S.?
A: Including the U.S. with the Neos brand, yes. But we’re well aware that the machine-mades we make are not all comparable to the machine-mades that you find in the U.S. market. They are different products. They are much more old-fashioned in the way that we make them. They’re much closer to a cigar than to a cigarette.
Q: And you have three factories making these machine-mades, correct? One in Sri Lanka . . .
A: Yup, and two in Belgium.
Q: Let’s skip to 2016. J. Cortès has been making machine-made cigars for a long time. What was the impetus to acquire Oliva Cigar Co. and get into the premium cigar business?
A: It was a dream come true. My father launched a Cortès handmade in the early days, made in the Dominican Republic in the ’90s, that was not a success. When I looked through our portfolio, the tendency of the market was not confirming our vision that people who look for small cigars and cigarillos look specifically for high-end quality. We are making cigarillos with the love and the care of tobacco that is something like in the old days. If you try to sell these products in the market, you’re always more expensive than the rest. So it gets very difficult to compete. Then you have two choices: you go along in that direction, or you really lower your quality levels. So that’s why for us, the tendency was more to go higher up. When you go higher up in machine-made segments, there are real limits. It all started with a visit to the Caribbean. I traveled over to Nicaragua, Honduras, Dominican Republic and Cuba.
Q: When was that?
A: That was in 2012, and that was a fantastic trip that gave me a lot of energy. I met plenty of families as well who were active in this business, among others, the Olivas. Talking to them opened my mind and confirmed my basic feeling that I really want to be closer to tobacco than to just ‘sticks you sell.’
Q: Did you have a relationship with the Olivas before 2012?
A: Before 2012 there was no real contact that we had with the family or with the company, and with the U.S. either. We discussed with the Olivas, and with other families, too, how I wanted to make a cigar together. At a certain moment during these discussions, the Olivas said they maybe couldn’t continue as a family in the business anymore. And that’s the moment that my idea switched to instead of making a cigar together, can we maybe partner up or maybe we acquire your company. They said that if you want to, you can try, but you’re not the only one [laughs]. At the end of the day, we came to an agreement.
Q: So you have Oliva, a successful company on its own. What was the first thing that you said needed to change?
A: Ninety-eight percent of the things that they were doing did not have to change, so it was fantastic. The more I discussed with the Oliva family and afterwards with people working there, the more I felt that their values were really very similar to ours. The way that they look into how to sell products, how to make products, the way they care for tobacco. That means you come in and say, ‘My God, I can learn more than they can learn from me.’ If one thing came out, it was [that] there are too many stock gaps.
Q: You’re talking about a guy who walks into a cigar shop and says ‘I want an Oliva Serie V,’ and they aren’t on that shelf?
A: Yeah, because they ran out. A retailer is not stupid. He will order a new box if he sells his last one. A retailer wants to be able to give his client that cigar. It’s basic economics. Not having that product on the shelf was a crucial thing that, in my opinion, limited the growing possibilities of Oliva as a company.
Q: So you improved product distribution efficiency?
A: Efficiency is a word that I don’t like to use a lot in our world.
Q: Why’s that?
A: Because it sounds too industrial and our products are not industrial. For me it has a negative connotation. Call it workflow. There were some investments like a box factory that the Olivas already planned to do. They already had a plot of land and a plan to do it, so we executed their plans. And make sure you invest in the place that makes your cigars; make sure that your aging room is filled with cigars so that you have the luxury to choose the cigars that are really ready to smoke. That’s the kind of thing that we invested in. The quality of the product has to stay at the optimal level.
Q: Is the goal to help the workers better do what they were hired to do, whether they be a roller or a box maker?
A: I think that when you’re focused on a certain job you do it better. So when you roll cigars and you can really focus on making good cigars and you’re not distracted about things, you will make better cigars and you will be as a person also more happy at the end of the day.
Q: Is the main theme of your managerial style then focus?
A: I try to have an aligned vision with everybody to work together, and then give people a cultural freedom. I believe very much in the strength of people. And then, having strong people in the key positions that you keep balanced. We have monthly calls and I try to visit here in Nicaragua as much as possible and travel to the U.S. as much as possible. But also, I trust [my managers].
Q: You also added a doctor’s clinic, better break rooms and just a better atmosphere to the factory, right?
A: It’s tradition, people and quality. We want to keep the tradition, we want to keep the story of the Olivas and the basic values where they started everything from. It’s very important that people feel happy and good around here. Our task is not only to be here in Nicaragua, make cigars and sell them all over the world and say ‘Nicaragua is fantastic.’ If we can help a little bit to make Nicaragua a better place, we will surely not hesitate to do so.
Q: Does Oliva still grow tobacco?
A: When we acquired the company in 2016, it was already a big jump for us to go into premium cigarmaking and marketing. I was very happy that the Olivas were willing to continue tobacco growing. But when [Gilberto F. Oliva Sr.] passed away, the Olivas said they will not continue growing tobacco. So the next phase will be announced next week. [Note: Shortly after this interview, J. Cortès announced that it had bought the Oliva family’s tobacco operations in Nicaragua as well as three other Nicaraguan tobacco farms.]
Q: So you’re going to be expanding the tobacco operation then?
A: Yeah, that’s expanding. I think it’s important in the long run to have your own fields. So we did quite a huge investment in the north of Nicaragua and bought some beautiful farms that will secure our supply and our growth even more.
Q: Can you tell me how much money you invested?
A: No [laughs].
Q: So let’s go through the Oliva brands. There’s Serie V, Serie V Melanio, Serie O and G, Master Blends 3, Gilberto Oliva, Flor de Oliva, Connecticut Reserve and the Nub brand of cigars. All of these being rolled in the renovated Tabolisa I and the new Tabolisa II cigar factories?
Q: How many cigars in total are you rolling now in a year?
A: Enough [laughs]. Twenty-million plus.
Q: What is the best-selling brand?
A: You have volume and you have value, but our Serie V is our number one brand.
Q: What would you say you guys are missing from the Oliva portfolio as far as flavor profile or sizes?
A: I think Nub can grow, because everybody is talking about Oliva. The smart thing that José [Oliva Jr., former CEO] did in terms of brand building was having these two worlds still be separate. Nub is not really Oliva, it’s Studio Tobac. Oliva is more like the traditional world, whereas Nub is heading to a more urban type of lifestyle.
Q: How important is the European market to Oliva? Or is it not just Europe?
A: We’re talking the rest of the world. We have to be honest, it’s clear that the U.S. is a key market for us. It is for every handmade cigar manufacturer. The U.S. market is three times the size of the rest of the world. Europe, Asia, everything included.
Q: Do you mean in terms of premium cigar sales?
A: Yes. So it’s logical that the real market to go after is the U.S. Oliva was already in a lot of shops, so they already did a good job internationally. But we could put a rocket behind that to make sure that we could increase the number of countries. So now Oliva is for sale in approximately 80 countries, whereas before it was a bastion that was impossible to break in. It was very difficult in a Cuban smoking area like France, where 90 percent of cigars are Cuban, to start selling non-Cuban cigars. And during 20 years a lot of people through a lot of efforts convinced them that there were cigars other than Cubans.
Q: What are some of the obstacles with a market that’s been dominated by Cuban cigars?
A: People having the openness to even try them. Because if you can convince people to try it, it’s amazing what a positive reaction you have. For me, it’s fantastic that Nicaraguan cigars are viewed as great and people are open to try them.
Q: Who’s the typical Oliva consumer and do they differ in the U.S. and Europe?
A: I don’t know if they are really different. The consumer for Oliva looks for a traditional, high-quality product at an affordable price. Serie V is our biggest brand, but you have G, O and other products and the Flor de Oliva that is still selling very well. To really have good cigars at all price points is something that is special.
Q: Getting to the FDA. How are you guys addressing the issues?
A: The FDA is the police, you know, in a certain way. Unfortunately, when they invent a new rule at a certain point in time, you have to follow it, but before you really have to follow it, we will do everything we can [to fight it]. To everyone, the regulation that now affects premium cigars is exaggerated. It’s over-regulated everywhere. It does not make sense. Everything they ask really doesn’t make sense and we have to keep on fighting and making clear to all governments everywhere in the world that it does not make sense. In Europe I’m very active as a member of the European Cigar Manufacturers Association. I’m a board member; my father was a founding member. We have always been on top of lobbying for our product.
Q: Is it easier to bring a new cigar product to market in Europe than it is in the U.S.?
A: Yes. Because of the [FDA’s] ingredient listing, grandfathering, substantial equivalent and other things. On the other hand, it’s not so much easier [in Europe]. We have to pay a lot per SKU we launch. So really, limitadas or things like that are almost impossible to sell because you have to pay so much to just have it registered that it almost doesn’t make sense.
Q: Where do you personally want to see the company in five years?
A: I’m very happy where we are. Growth is not an obsession, so bigger is not specifically better. But I still believe that there are plenty of people who never smoked an Oliva. So in that sense, I want to make sure that everyone who smokes cigars has at least the possibility to try an Oliva.