Dan Blumenthal, the chairman of Villazon and Co.—manufacturer of Hoyo de Monterrey and Punch cigars in Honduras--has been in the cigar business most of his life. He started working in his father's retail cigar stores in 1939 in New York City when he was 14 years old. By the 1950s, he had his own cigar shop in Manhattan and had already begun to sell and distribute cigars that were made exclusively for him. He was a major purchaser of Cuban tobacco that went into Clear Havana cigars--cigars made in the United States with Cuban tobacco.
In the months before the Cuban embargo was imposed, Blumenthal and his business associate, Frank Llaneza, bought as much Cuban tobacco as they could find on the market. They continued to blend it into their brands until the mid-1970s. The two men also entered into a partnership to make cigars in Honduras, the first cigar makers to set up shop in that Central American country. In 1965, Blumenthal bought the rights to the Cuban trademarks Punch and Hoyo de Monterrey, manufacturing those cigars for the U.S. market. Today, Villazon produces nearly 26 million handmade cigars a year, plus another 45 to 55 million machine-made cigars manufactured in Tampa.
In a wide-ranging interview with Marvin R. Shanken, editor and publisher of Cigar Aficionado magazine, Blumenthal discussed his thoughts on the many changes he has seen, including his strategy when the Cuban trade embargo was imposed in 1962, and the current market for cigars.
Cigar Aficionado: I've been told you purchased as much Cuban tobacco as you could find in the months before the Cuban trade embargo was signed by President John F. Kennedy. Can you tell us the story?
Blumenthal: One of my hobbies is history. There had been this back and forth about the embargo between Eisenhower and Kennedy and Castro. And that's when talk about an embargo became widespread. I said to myself 'They're going to put on an embargo,' even though everyone else was pooh-poohing the idea. But I was even more sure after going to Cuba in 1960. I had an interview with the then minister of export. He told me in a fairly hostile way all that they were going to do to the United States. When I left Cuba, I went to Tampa to see Frank Llaneza, who was making the Francisco G. Bances cigar for me, and said I thought there was going to be an embargo. He went to Angel Oliva [a big tobacco grower], and he started buying tobacco for us.
At the time, we were already making a heavier style Cuban cigar--the Bances--that was selling well before the embargo. But when the embargo came, it was the only Cuban-style cigar on the market. People were buying it and saving their Cuban cigars. Of course, I also had three million Cuban cigars in my humidor that I bought from every refugee that came off the plane. I had a man down in Miami buying cigars.
CA: You were buying boxed cigars?
Blumenthal: Yes. Every brand. I started to sell them wholesale. I could hold three million cigars in my warehouse in those days, but it was a cash deal. In those days that was a lot of money. But once the embargo came along, Bances really took off too.
I also was very friendly with Fernando Palicio, who had been the owner of the Belinda and Hoyo de Monterrey factory in Havana. He came to see me about making a cigar that he could sell to his former customers here like Dunhill, Glazer Brothers, Faber. So we made a cigar called Flor de Palicio, which was all-Havana tobacco but machine-made. We sold it to Dunhill first.
CA: It was manufactured in Tampa?
Blumenthal: In Tampa.
CA: I take it you had bought many bales of tobacco?
Blumenthal: Yes, we had a lot of Cuban tobacco. We made Flor de Palicio for Dunhill, but it didn't go over very well. Then Palicio came to see me about making Belinda. Somebody had made him an offer for the Belinda label. But he came to me because I had done him some favors. I told him that I would buy the Belinda label, but I couldn't pay him on the spot. I'd pay him a royalty of so much per thousand. He agreed to that, so we started to make Belinda. We sold it to quite a few stores. It started to sell well, but it wasn't great.
The next thing that happened was that Palicio discovered he was dying. He was a lovely man, and he was worried about his wife and his children. Up to that point, he hadn't wanted to sell Hoyo de Monterrey because every day he had thought they were going back to Cuba tomorrow. But he called me, and I went down to see him in Hialeah where we made a deal on Hoyo and Punch. He got out of his bed to sign the deal. We started to make Hoyo De Monterrey and Punch in 1965. Hoyo de Monterrey took off right away.
CA: Did you make the cigars initially in Tampa?
Blumenthal: We had a handmade factory in Tampa, and we had cigar makers making the cigars in Tampa. But the rollers were pretty old. Since we had been working with Angel Oliva to supply our tobacco, and since Frank [Llaneza] happens to be one of the greatest experts about tobacco in the business, we started talking about other places. We thought about opening a factory in Honduras. At the time, there were no big factories in Honduras.
CA: What made you decide to go to Honduras?
Blumenthal: Our cigar makers were dying out.
CA: Weren't there were other options, however, like the Canary Islands and Jamaica?
Blumenthal: The Canary Islands were impossible. The cost of making cigars there was very expensive at that time. They were made by machine and Tabacalera controlled everything there. On top of that, it was too far away.
Blumenthal: Jamaica, we tried Jamaica. We had a small investment in a factory there, but we couldn't get anywhere.
CA: The Dominican Republic?
Blumenthal: The Dominican Republic was nothing at that time. It was really nothing.
CA: Did you decide later to try to put up a factory in the Dominican Republic?
Blumenthal: About 10 years ago, we were planning to put a factory up in the Dominican Republic. But we decided against it.
Blumenthal: That's a good question. Why didn't we do it? Frank decided he didn't want it.
CA: Going back to the '60s then, you didn't have a lot of other options?
Blumenthal: We were growing tobacco in Honduras and Nicaragua with the Olivas. That's the tobacco we were using, so logically we felt that that was the place to make the cigars. There was no sense transporting the tobacco from Honduras and Nicaragua to some other place, so, we started a factory there. But we still had to teach everybody to make cigars. We had some of our cigar makers and ex-Cuban cigar makers go down there to teach the people, and it worked.
CA: Did you spend a lot of time down in Honduras?
Blumenthal: No, no. I don't speak the language.
CA: Did Frank go down there a lot?
Blumenthal: Frank still goes down there. But at that time, Frank and I were not partners. In the 1960s, Danby-Palicio was a separate company. Villazon was a separate company. I had an option to buy 25 percent of Villazon and Co. So sometime around 1970 we decided to put the whole thing together. There were three of us: Frank's brother, Joe, myself and Frank. Each of us owned a third of the factory. We just combined the whole thing. For some reason, which I still don't know today, the combined business just opened up and boomed.
And even though in Honduras we had to teach everyone how to make cigars, it worked. It was funny at first, because we actually started the factory in Honduras. While we were teaching people, we didn't know what to do with the cigars. We put them in bundles. We were the first ones to put cigars in bundles. These were the cigars made by the students. They were our learner cigars, and we sold them very cheaply. They sold well.
CA: When did you start producing the Hoyo and the Punch in Honduras?
Blumenthal: Around 1969.
CA: But you continued to put Cuban tobacco into those cigars long after you started making them in Honduras. Was that tobacco still part of the original acquisition of Cuban leaf you made before the embargo was imposed?
Blumenthal: As I told you, I had played my hunch that there was going to be an embargo, and Angel Oliva got the Cuban tobacco for us. The last shipment that came before the embargo was primarily for us. And later, we bought Cuban tobacco from the Garcia y Vega company, which had decided it didn't have enough inventory of Cuban leaf to continue making them. They had not built up a huge inventory because before the embargo, the price was already high, and they hadn't bought any more. In 1965 or '66, the American Cigar Company had decided to get rid of all of its Cuban tobacco. They were going to add a new blend, and they sold us all their Cuban tobacco. That was a lot.
CA: So from the time that you guessed the embargo was coming until after the embargo was imposed, how many cigars worth of tobacco did you accumulate?
Blumenthal: Oh, I couldn't tell you that.
CA: In the millions?
Blumenthal: Many millions.
CA: So even after the embargo, you kept making cigars with Cuban tobacco?
Blumenthal: We used Cuban tobacco up until 1975 in our cigars.
CA: Were you in effect blending, stretching, so you could say that it had Cuban tobacco in it?
Blumenthal: Right. Our boxes all said Havana on them until the early part of the '70s, when the government decided we couldn't use the word Havana. We had to take Havana off, so we used the slogan, "For the man who misses his Havana." But by that point, we had found that Honduras and Nicaragua tobacco was similar to Havana anyway.
CA: Was Villazon largely responsible for establishing that good cigars could be made outside of Cuba?
Blumenthal: We were the first ones in Honduras. And, we were the first ones that made a strong, full-flavored cigar outside of Cuba.
CA: Would you say that outside of Cuba and Honduras, good cigars were not being made at that time?
Blumenthal: The cigars that we were getting from the Canary Islands, for instance, some were machine-made. The only ones who made a good cigar there were the Menendez Garcia people. Most were made with the European type of tobacco, which I call Sumatra or Indonesian filler. It had an entirely different taste than Americans were used to. But you have to remember that almost every cigar in the United States that was made before the embargo was either made out of Havana tobacco or had some Havana tobacco in it. Even the cheaper cigars. You could buy Havana cigars for a nickel.
CA: So when you start coming out with these Honduran cigars, how did you get consumers to understand that you were producing a Havana-equivalent cigar from Honduras? Was there a lot of consumer resistance in the beginning?
Blumenthal: No. When I started with Bances, which was a Cuban-style cigar, there were still Cuban cigars on the market. But people liked the cigar and they bought it. As time went on, the straight Cuban cigars disappeared. Suddenly after the embargo, there were a lot of new cigars on the market, a lot of cigars made in Miami in what we call buckeye shops. There were some other cigar factories that opened up in Costa Rica. From the Dominican Republic, the only one on the market at that time was La Aurora, which was named after the dictator Trujillo's daughter. Jamaica had a history of cigars; Royal Jamaica was made there along with Macanudo. But with Cuban cigars gone from the market, there was a need for good, full-flavored cigars. The Bances filled a bill for people who remembered Havana. That's the only way I can look at it.
CA: So people knew to look for your cigar, and they liked it? Did it have more taste? Was it stronger?
Blumenthal: I wouldn't say it was stronger, but it had more flavor, the aroma was better because most Sumatra cigars have a very acrid and a very metallic taste. Our taste was closer to Cuba, and the aroma, the bouquet of the cigar, was closer to Cuba.
CA: Could you explain the current corporate structure of your cigar-related companies?
Blumenthal: Villazon and Co. is owned by Frank and myself.
CA: That's the parent company?
Blumenthal: That's the parent company. And Tito Gonzalez, the general manager, is a minority stockholder. In Honduras, Frank and I own approximately half of the factory today. Johnny Oliva has 18 or 19 percent. The balance is owned by the people who are working down there--the manager, the assistant manager. We gave them the stock because we felt that that was the way to keep them there, and it worked. James B. Russell, which is another company we have, is an importer and is now owned by Villazon and Co.
CA: Vilco Imports?
Blumenthal: Vilco Imports, that was an import company that imported cigars from Jamaica, Mexico and the Philippines. We represented the Tabacalera here in the United States. But that's now just part of Villazon.
CA: How many Hoyo de Monterrey do you expect to sell in 1995?
Blumenthal: About eight million.
CA: Versus what in '94?
Blumenthal: Last year we sold about the same number. I don't think I can produce any more.
CA: Of the eight million, what percent would be Excalibur?
Blumenthal: About half.
CA: And Punch in 1995?
Blumenthal: Punch in 1995, we think we'll sell about the same.
CA: Eight million? And is that 50/50 with the Grand Cru?
Blumenthal: No, no we don't have enough Grand Cru. I would say that 20 percent is Grand Cru and 80 percent the regular Punch.
CA: And Bances?
Blumenthal: Bances, we'll sell about three million.
CA: You will be selling about 19 million of those three brands in 1995. How much have your sales for those brands increased in the last three years?
Blumenthal: We've increased our business 40 percent. The problem right now is not so much the cigars as it is the boxes. We make our own boxes out of cedar. But we can only make so many boxes.
CA: How did you increase your box population?
Blumenthal: That's what we're trying to do. We bought all new equipment for our box factory. We're just going to have to work a little faster and a little longer.
CA: So it isn't a question of wood supply?
Blumenthal: There is a shortage of cedar, but we managed to buy as much as we needed. At the moment we're pretty well-stocked with wood, but the problem is making the boxes fast enough.
CA: So, these 19 million cigars are boxed cigars, not bundles or anything?
Blumenthal: No, that's for our boxed brands.
CA: In 1996, how many hand-rolled cigars do you hope to produce?
Blumenthal: Including all the brands we make, I hope to produce 30 million. Of our three major brands--Hoyo, Punch and Bances, I hope we produce 22 million.
CA: What other cigars brands do you produce?
Blumenthal: The J.R. Ultimate and El Rey del Mundo, among others.
CA: Can you tell us the approximate volume of those brands in 1995?
Blumenthal: The J.R. Ultimate runs a couple of million.
CA: What's the total number of handmade cigars you expect to make in 1995?
Blumenthal: We hope to make 26 million. That doesn't include the machine-made cigars.
CA: And how many machine-made cigars will you make?
Blumenthal: About 45 to 55 million in Tampa.
CA: What are the brand names of the machine-made cigars?
Blumenthal: Lord Beaconsfield, Villa de Cuba, Pedro Iglesias, Villazon Deluxe, Top Stone and Eden. But a lot of our production goes to mail-order houses. We make some other brands for some other manufacturers, which I don't want to divulge.
CA: What about exports? Which is your biggest brand in the international market?
Blumenthal: Excalibur is the only brand we have in an international market, except brands that we make for someone else. Because we can't use Hoyo de Monterrey, we developed a brand called Excalibur, which we sell in Germany and England. And we sell the Flor del Caribe in Europe too.
CA: So how big is your export business?
Blumenthal: It's a little over a million cigars, a million two, a million three...
CA: And it's growing?
Blumenthal: Yeah. We also make cigars for Hunters & Frankau, La Invicta and Don Ramos, and we make San Pedro Sula for the Germans.
CA: In the United States, Excalibur is a line extension for Hoyo de Monterrey. What made you decide to come up with a line extension for it and the Punch Grand Cru?
Blumenthal: We had some special tobacco and special wrappers that were more expensive, and we decided to make an upmarket cigar. I felt there was a need. From the marketing angle because of the better tobacco, we had to get more money for the cigar. What we really do is use special wrappers and special tobacco with great care in making these cigars. And obviously people like them. We can't produce them fast enough.
CA: How would you describe the difference in blend or style or taste between Hoyo and Punch?
Blumenthal: I think that Punch is a little heavier cigar than the Hoyo. There's a little more flavor, to me, than in the Hoyo de Monterrey. There is a difference. The blends are made by Frank Llaneza.
CA: You've been in the cigar business your entire life. From your perspective, having been both a retailer as well as an importer-distributor, did you ever dream or expect there would be a renaissance in the cigar market such as the one occurring today?
Blumenthal: No. From the day I started in the cigar business the only thing I heard was that it was dying. People said that before World War I most men smoked cigars, and they didn't smoke cigarettes. The situation changed, and cigarettes took over. I think the renaissance in cigars is largely due to the magazine. I think it has promoted interest with people who read it, and then they try cigars.
Young people are afraid to smoke cigarettes. They actually believe that cigarettes will do all these things to them that they say, but there hasn't been that much adverse publicity about cigars. They don't have to inhale the cigars. Cigars have a distinct taste where cigarettes don't. And [young people] are into the good life. They're into wine, they're into brandy, they're into fancy food, French cooking--everything that people didn't do in the past, unless they were very wealthy. So cigars are part of that lifestyle. And the young people today are emulating their superiors.
CA: Do you see this as a short-term increase in popularity or do you see this continuing for many years to come?
Blumenthal: I hope it'll continue for many years to come. I think that it'll peak at one point, but at what point I don't know. Right now, we have a lot of young smokers. As they grow older they'll probably continue to smoke. Now we need the next generation to come along.
CA: What are these young people looking for in terms of brand names, in terms of flavor, in terms of strength? Is the industry giving them what they want?
Blumenthal: I think the industry is giving them what they want. I think that they're getting better cigars than have ever been made before because, for one thing, prices have gone up considerably, so the cigar manufacturers can afford to make a better cigar and take more time with it.
CA: What kind of cigar are they looking for--a mild cigar, a strong cigar, more flavorful?
Blumenthal: I don't know. That's something that if I knew, I would be much more successful than I am. I started smoking when I was 16 years old. I started to smoke cigarettes, and my father told me he couldn't stop me from smoking. After all, he was in the cigar business. But he says that if you gotta smoke, smoke a pipe or smoke cigars. He called cigarettes 'coffin nails.' That was the expression they had when he was young.
I started with a very light cigar, a panetela. In fact, I remember there was a brand called Something Special that was a very big brand in New York City. It was made with a Sumatra wrapper. Then I graduated to Havana cigars. When I say Havana I mean Havana cigars made here. As the years progressed and I progressed, I started to smoke Cuban cigars. So I started very light. Then, I wanted something with a bit more taste and finally something stronger, so I moved up to Cubans. That's what's going to happen to everyone. They're going to smoke the very light cigars and find that eventually they want something a little more meaty. The manufacturer is going have to make a more meaty cigar.
CA: Could you give us more details about your history in the cigar industry?
Blumenthal: Well, my father was in the cigar business. He had retail stores in New York City, and I started as most kids do, helping out after school. I delivered boxes for him, or I filled in at his store when I was a teenager.
CA: Where was his store?
Blumenthal: He had one at 88th and Broadway, one on Christopher Street in the Village and one at 49th Street and Broadway.
CA: Which store did you work in?
Blumenthal: All of them. Then I worked as a salesman, after school, selling a cigar called Gonzales & Sanchez and Cuesta-Rey, which was from the original Cuesta-Rey people. I worked for the representative in New York for about two years.
CA: How old were you when you first started working, helping your dad?
Blumenthal: Thirteen or 14. [A few years later] I went into the service in World War II. I was in the service for three years, from 1942 to 1945, in the Air Force. When I came out, I worked as a salesman on the road, selling pipes and cigars for a fella by the name of Harry Goldfogle, the owner of Schilty Cigar stores. I worked there for a few years. Then I had an opportunity to open a store. I knew the landlord of the building at 86th Street and Broadway. My father in the meantime got sick. So I helped him out at his stores.
Finally, I opened my store at 86th and Broadway. In those days, I smoked dark cigars. You couldn't buy a dark cigar in the city of New York, except at Dunhill, which had Montecristo. But no one made an actual cigar, everything was candela wrapped. When I opened a store I said there must be a lot of people like me who want dark and natural cigars. So I opened a store about 1950, or '51.
CA: That was your first store?
Blumenthal: That was my only store, and it was called Daniel Cigars. I featured dark cigars. I went to Cuba in 1954. The first time I went to Cuba I imported a brand, El Rey del Mundo. The Cuesta-Rey people and I were very friendly at that time. They owned the El Rey del Mundo factory. I got the exclusive agency for the United States for El Rey del Mundo and for Ramon Allones. Then I started to import the cigars. I also had the exclusive agency on Quintero and Cano, which were not the best. They were not the normal import brands. But they were brands that were sold in Spain and were very fine cigars.
CA: So you became the licensed importer for those cigars?
Blumenthal: Yes, I had the agency for the United States. They had no one up to that point. I started bringing in anywhere from 700,000 to a million cigars a year. Meanwhile, I was wrapped up in the wholesale business because I didn't like doing retail business. That's a seven-day-a-week job, you know, from seven in the morning to midnight. I found that I liked the wholesale business better, so I put my efforts into it.
Before that happened, a writer by the name of Bernard Wolf came to see me. He was originally Trotsky's secretary in Mexico. He was writing an article for True magazine. Anyway, the article somehow wound up in Esquire. It was about the Greens versus the Browns. He mentioned my store and what I said about dark or natural wrapper cigars. The next day, I was in the mail-order business. Sacks of mail came in with checks. Actors also used to come in. Ernie Kovacs was there, he used to buy his cigars from me. There was the play Cat on a Hot Tin Roof. I supplied the cigars to Burl Ives that he smoked on the Broadway show. Zero Mostel used to buy his cigars from me. Ira Gershwin I used to sell cigars to. Arthur Freed, a movie producer, I used to sell him cigars. Walter Matthau and the fella, the other actor that he pals around with?
CA: Jack Lemmon.
Blumenthal: Jack Lemmon.
CA: Today, you have an interest in Tinder Box, America's largest retail cigar store chain. What role does it play in the Villazon operation?
Blumenthal: It has nothing to do with Villazon. But I'm a major shareholder.
CA: And how many Tinder Boxes are there in the United States?
Blumenthal: 108 locations.
CA: Are the stores franchises?
Blumenthal: All the stores are franchised.
CA: What made you get into that business, and do you see that as a growth part of your business?
Blumenthal: I bought Tinder Box along with three other investors who, incidentally, sold out their shares to Fred Adler of Adler & Finck. It's run by my nephew Gary Blumenthal, who is the president and CEO. We had a lot of problems with Tinder Box. We went into Chapter 11. We've been out of Chapter 11 for almost two years. We're now expanding again. We're opening up five new stores in the next couple of months. We also have coffee stands that we're opening up. We're opening up coffee stands in the Philadelphia airport. We're starting to rebuild the company.
CA: Since you were in the retail business in the early part of your career, and over the last 40 years, having seen nothing but a decline in the number of stores, what's your reaction to seeing new stores opening up?
Blumenthal: Thirty or 40 years ago, there were new stores opening up somewhere all the time. There were thousands of outlets of tobacco in New York City alone--not cigar stores, but that sold tobacco. There were thousands of cigar stores. Today, there's nothing.
CA: What advice would you give to someone wanting to open a new store?
Blumenthal: Call Tinder Box. [Laughter.] First of all, you have to remember you are in the retail business. Some people don't know what they're doing. It used to be you could open a store with very little money, where today you need a lot of money. So, I don't know what advice I could tell them.
CA: We recently went to a new store opening in Philadelphia that was quite the opposite of the traditional store. It was large. It had an enormous selling area, not only for boxes that were stacked but also displays for accessories and so forth. In the back it had a lounge area with lockers. Is that the store of the future?
Blumenthal: We're opening a store very similar to that. It should be open in the next couple of months. That could be the future. We'll find out if these stores pay off. If they do, yes, that could be the future. I'm afraid, though, that I don't see this type of store doing what the owners expect it to do. They expect people to come in and sit down and smoke a cigar and make a sort of a club room out of it. They may get some people, but the average man is not going to do that. He's not gonna make a cigar store his hangout. Cigar stores used to be the place where people hung out. There were always people standing in the front of the store, and that's where men used to go. I don't know if these stores will work. I hope they'll work. We are trying now with Tinder Box to see if we could also do something like that.
CA: You go home tonight and have a nice dinner, cup of coffee, maybe a Cognac, cigar, you go to sleep. Tomorrow in The New York Times, you open the front page and it says: Clinton Signs Bill to End Cuban Trade Embargo. I can't think of an industry that will be more turned upside down than the cigar industry by that action. What do you see happening?
Blumenthal: We've all thought of this. It's always in the back of our minds. But I feel the price of Cuban cigars today is too high. Cuba also has the same problem that we all have. They don't have enough cigar makers. They haven't been training people to be cigar makers. They've been training people to be lawyers, doctors, et cetera. And they haven't been producing enough tobacco to fill their own demands. So even if they start to sell cigars here, they'll be expensive, and there won't be enough. After all, the biggest year of Cuban cigars in this country was 15 million in the '50s.
What we are really interested in is the tobacco. As I said, before the embargo all cigars were either made of all-Cuban tobacco or contained some Cuban tobacco. So while there may be an initial surge of people trying to get Cuban cigars, I don't know if there will be that many available, and I think that for a lot of the people who smoke them, either the price will be sky high or they'll realize that they could get just as good a cigar made with Cuban tobacco.
CA: So you would buy raw Cuban tobacco immediately?
Blumenthal: Right. We have to wait three years, too.
CA: Will you make the cigars in Tampa or Honduras?
Blumenthal: We will have them made in Honduras.
CA: So, you ship the Cuban tobacco to Honduras, you age it, and then you come out with...
Blumenthal: We'll blend it with what we have. I mean, after all, we can't all go into Cuba and start a factory.
CA: Do you have plans someday to go to Cuba and start a factory?
Blumenthal: If it's viable.
CA: In the meantime, if you owned the Hoyo brand in the United States, legally, will they be able to sell the Hoyo Cuban brand here? Or will they have to make a deal with you?
Blumenthal: They will have to sell it to me, like they'd have to sell their brands to all the other companies that own the rights here.
CA: Isn't that a very difficult situation?
Blumenthal: Who knows what's gonna happen? We hope that the embargo will end, but both of us will gain from it. We should gain, and they should gain.
CA: Having been in the business all your life, is it more fun today?
Blumenthal: Right now, I find it a lot of fun and a lot of pleasure. I have a business that's booming. There's a demand for my merchandise, and my business is growing. I don't feel any different than I felt 40 years ago, except when I look in the mirror.