Nicholas Freeman is the chairman of Hunters & Frankau, the sole importer of Cuban cigars into the United Kingdom. His family has been in the cigar business for five generations; it traces its involvement in cigars to a retail merchant in London in the early 1800s who rolled cigars.
The family sold its mass-market cigar business in 1947, which today is an American Brands subsidiary in Europe. The Freemans, however, later regained ownership of a small importing division of their company, J. Frankau. The division had operated throughout the Second World War, importing cigars from Jamaica because Cuban cigars were unavailable in Great Britain during that period due to currency controls. When Cuban cigars became available again in Great Britain, the Freemans sold the Jamaica operation and began focusing on Cuban cigars. The company evolved slowly over the next 35 years, but by the late 1980s, it controlled nearly 40 percent of the imported Cuban cigar market in the United Kingdom. In the early 1990s, Hunters & Frankau bought the remaining two importers of Cuban cigars and took sole control of the market.
In a wide-ranging interview in November with Marvin R. Shanken, editor and publisher of Cigar Aficionado magazine, Freeman discussed the future of Cuban cigars, the Cubans' ongoing problem with quality and the worldwide boom in cigar consumption.
CA: When I first met you, you represented a small portfolio of Cuban cigars brands. At the time, there were other companies that owned the balance. How did Hunters & Frankau end up as the sole agent for all Cuban cigar brands in the U.K.?
Freeman: I'll give you an update. In the late 1960s, when Hunters & Frankau, Ltd. was operating as a joint company--the two companies had merged--we had at that time 25 percent of the Cuban cigar business. By 1979, our share of the Cuban business had risen to about 40 percent. And that was entirely through commercial efforts in marketing and so on, at the expense of our competitors.
In 1990, we acquired Knight Brothers, which had the Romeo y Julieta agency, which was quite a small business. Then, in 1993, we acquired Joseph Samuel & Sons, who had always been one of the biggest Cuban cigar importers in the U.K. They had Punch, Bolivar and Hoyo de Monterrey which were their three big brands. And that gave us all the Cuban business. But in the process of doing that--when we acquired Knight Brothers--that's how we inherited outside shareholders in Hunters & Frankau, Ltd. That is to say, a Cuban investment company.
The Cubans earlier had acquired Knight Brothers. I gave the Cubans stock in Hunters & Frankau in return for their share in Knight Brothers.
CA: From our earlier conversations, I believe you told me that you owned 57 percent of Hunters & Frankau, Hambros [the British investment bank] had about 38 percent, with the rest belonging to David Baxter, a former Hunters & Frankau executive?
Freeman: That's the group, the holding company. Hunters & Frankau Group also has a controlling interest in Hunters & Frankau, Ltd., which is the trading company. This Cuban investment company has a large percentage of Hunters & Frankau, Ltd.
CA: Is it 50-50?
Freeman: It's not quite, but for all intents and purposes it is. The way to put it is that a Cuban investment company, in the course of our buying Knight Brothers, acquired a significant percentage of Hunters & Frankau, Ltd., our trading division. We're now in partnership, but we actually do have a voting share, which gives us that control.
CA: Is this the Cuban government, or an arm of the Cuban government, or an agency, or...
Freeman: All I can say is that it is Cuban...
CA: It's not Habanos?
Freeman: It's not Habanos. It's a Cuban investment company, which is an investment holding company which holds a very large number of Cuba's overseas investments, not just in tobacco but in nickel and everything.
CA: Today, Hunters & Frankau, Ltd., is the exclusive agent for Cuban cigars in the United Kingdom--all Cuban cigars. Is that right?
Freeman: Yes. Hunters & Frankau also has the exclusive right in the U.K. for Agio Dutch cigars, which is quite a big brand, and also for Villiger, the German cigar. This is the import part of our business. And we also import Dominican and Honduran cigars.
CA: Can you tell me, roughly, the size of Hunters & Frankau today?
Freeman: It has a turnover of £20 million [approximately $30 million].
CA: And how many cigars do you import annually?
Freeman: For Cuban cigars, in a normal year, about five million.
CA: And all others?
Freeman: All others would be about...between 15 and 20 million non-Cuban.
CA: Lately, it hasn't been a normal situation because of shortages of Cuban cigars. So, in 1995, how many Cuban cigars will you import?
Freeman: We will sell over four million.
CA: In terms of your business, 20 to 25 percent of your units are Cuban cigars. In terms of revenues, what would the percentage be?
Freeman: Sixty percent of our turnover.
CA: At its peak, 10 years ago or so, Cuba was exporting 100 million-plus cigars at a much lower price than today. Did you always have difficulty getting all the cigars that you wanted; or when they were making 100 million were you able to order and get what you wanted?
Freeman: When they were making 100 million it was not a problem to meet our demand quite comfortably. The lead time in ordering was always long, because that's historically how the business has been done. They don't carry any stocks in Cuba, as you know. It's like placing a print order.
CA: Three months, six months, a year?
Freeman: Lead time would be, always, at least six months to a year on every order.
CA: Was part of your business, then, building inventory so that you don't have the swings from the shipments?
Freeman: It's always been our policy to have an inventory of at least 12 months.
CA: So you would always have four or five million cigars on hand.
Freeman: That's right.
CA: Is four or five million cigars the maximum that you ever shipped in a given year?
Freeman: I think our peak year was in '79 when we were worried about the blue mold in Cuba and we bought everything we could. We probably bought about seven million then.
CA: How big is the U.K. market?
Freeman: Our population is 60 million.
CA: Knowing that a lot of it was not yours, what was the size of the U.K. Cuban cigar market at its peak?
Freeman: As we know the business now, the peak was before the [Second World] War and I think Cuban imports were approximately 15 million cigars. In 1850, there were 300 million. But it wasn't the same sort of cigar.
CA: In the last 10 years, has the Cuban cigar market been level, declining or growing?
Freeman: The Cuban cigar market in the United Kingdom in the last 10 years was probably slightly declining, steady to slightly declining units, until 1993, when it started to turn up. 1994 was up nicely and in 1995 the demand was up about 10 percent again on '94.
CA: Is there any way of knowing what percent of that four million cigars you imported in 1995 was domestic business versus Americans or other foreigners buying cigars?
Freeman: We obviously know that Americans, when they visit England, do buy quite a lot of Cuban cigars. But we have no knowledge of what that figure is, because it's our retail customers who do that business. What I can tell you is that in a normal year, over a million cigars will be sold in the duty-free. That's the area that's suffered from the shortage this year. We have not been able to ship enough cigars for duty-free markets.
CA: Is the duty-free market mainly a European buyer, or is that an American buyer?
Freeman: I would say it's something like 40 percent at Terminal 3, which mainly the U.S. airlines run out of. And 60 percent is all sorts of international buyers. Again, we don't know precisely who buys them.
CA: Has there been a change in the last five years in what brands and sizes of Cuban cigars are in greater demand?
Freeman: Yes, indeed. In terms of brands, Montecristo is still the largest brand in the U.K. and it still holds its very strong position. The brand that has grown rapidly since it was introduced has been the Cohiba brand. And in terms of value, as opposed to units, that is now almost a second brand. The second brand [in terms of units] is Romeo y Julieta, which is quite a long way behind Montecristo. And in value, Cohiba is about level with that now.
CA: There have been significant price increases for Cuban cigars in recent years, up to 15 to 20 percent a year, and there have already been some large increases planned for 1996. What do you see happening to Cuban cigar pricing in the United Kingdom in 1996?
Freeman: First of all, you have to take into account the taxes when you talk about 15 to 20 percent price increases a year. The actual factory prices from Cuba have not increased that dramatically at all. But what the Cubans are seeking to do at the moment, which is quite understandable, is to increase the prices of some of the larger sizes. And I think it's quite fair they should be doing that, because I think everyone's been getting a hell of a bargain with the larger cigar sizes over the years. The way they've done their costing, they've never really done them accurately on the larger sizes. And they are making adjustments within the pricing framework, which will probably mean price increases of between 5 and 10 percent in the larger cigar sizes such as double coronas...
CA: Five or 10 percent at the factory, or at the retail level?
Freeman: That's the Cuban government increase, which is effectively not so much a price increase as a probably correct adjustment within their range. And I think they are obviously under pressure to also try and achieve an overall price increase.
CA: How does that translate to the consumer?
Freeman: In the United Kingdom, we have a problem in that the British government was committed by the chancellor of the exchequer some three or four years ago to increase all tobacco taxation by the RPI (Retail Price Index) plus 3 percent each year. That's right, plus 3 percent for all tobacco products. I'm sure that that will happen again. So, every year we've had an increase in the price of cigars because of that government tax hike, which is automatic. If that happens today, and you've got these 10 or 5 percent increases from Cuba, it could translate into a retail price increase of about 7 to 11 percent.
CA: Has that caused any resistance at this point?
Freeman: We haven't put it on yet.
CA: When will it go on?
Freeman: Well, I think we're in discussion with the Cubans at the moment on this price leveling. The Cuban price increase will probably be from all shipments in 1996, beginning in January.
CA: Why would Canada be getting price increases starting now of between 25 to 40 percent?
Freeman: I've heard the same thing, and I don't know. I can't speak for Canada. But it may be that they traditionally had their price increases a bit sooner than we had. I mean, traditionally in the U.K., our Cuban price increases have always come on in January.
CA: Isn't it possible that the Cubans are becoming so expensive that they might price themselves out of the market, and open a huge opportunity for non-Cuban cigars?
Freeman: I think a big problem for people in the Cuban cigar business is that it's not only the pricing factor, but also the shortage of production, which is going to give a very big opportunity for the non-Cuban brands.
CA: Do you feel that you see a higher quality of Cuban cigar earmarked for the U.K., or is it the same quality for all markets around the world?
Freeman: Historically, there was a difference in quality for the U.K. There used to be a thing called English Market Selection, EMS, which a number of factories used to print on the boxes which were destined for the U.K. And I think it was always considered that we were the most sophisticated market. Officially, there's no difference between the cigars shipped to one country or another. But I think there is retained in the factories a tradition that still lingers there--that they know that the British market is more particular. I do believe that the factory managers, when they're making an order for British market, probably do tend to take a bit more care.
CA: The Cubans deny the practice takes place. But isn't it true that other markets have grown more sophisticated in recent years, and people in places like Hong Kong, Mexico City, Tokyo, have begun to focus on quality, and the larger-sized cigars, too? Does this mean there is a battle to get good cigars?
Freeman: I think that's very true. And I think the enormous growth in interest in Havana cigars has meant that the level of sophistication within the retail trade has grown enormously in other markets. Up until a few years ago, it was only really in London and Geneva that you could buy a very fine range of the best cigars in the large sizes. But now, as you say, you can buy good cigars in Hong Kong and the Middle East...
CA: But there are critics of Cuban cigars who say their quality today is nowhere near the quality it was 30 years ago. Others, of course, say the quality is every bit as good. You've been smoking and handling Cuban cigars your entire professional life; has there been, over time, a decline in their quality? Has there been consistency in the quality? Has the quality gotten better?
Freeman: My honest view on that is that a good Cuban cigar is as good as it's ever been, no question about that. Especially among the well-known larger sizes. I don't believe there's any difference between a Montecristo No. 2 today than when that size was first created in the late '30s.
What I do think is that there is a little bit of a problem at the moment because Cuba is not able to meet the demand. As a result, I think there is a slight element that one or two cigars are slipping through the quality net because they're under such pressure to produce the quantities people want. And that is why odd cigars are coming through, which is giving the Cuban cigar a bad name if someone is unfortunate enough to get one of those substandard products.
CA: Apparently, in the last two years, the export of Cuban cigars has been in the 55- to 60-million-unit range. But the Cubans say a strategy is in place to return production in the next three to five years back up to the 80, 90, 100 million cigar range. Is that your understanding?
Freeman: That's my understanding, and that's been made possible because all the distributors--including Tabacalera [Spain's tobacco conglomerate], which is the biggest distributor of Cuban cigars in the world--and ourselves and all the main distributors have made financial assistance available to Cuba in order to be able to improve the production of their quality leaf. And that is going to start to come through. Probably not until 1997, but the effect of that investment will start to come through.
CA: If 1995 production was roughly 60 million cigars, when do you see the increased production coming on line?
Freeman: Well, I don't see much change in '96. My guess is Cuba will ship something like 65 to 70 million cigars at the most in '96. And I would feel very good if they climbed over 70 million in '97.
CA: So we're really talking about maybe the turn of the century before we return to the 80, 90, 100 million level?
Freeman: I can't see them getting up to the 100 million mark much before the turn of the millennium, or century.
CA: The financial assistance you are providing, is it similar to what Tabacalera is doing?
Freeman: Yes, we're all doing the same thing.
CA: What's the dollar figure on your part?
Freeman: It's in line with the size of the market. We have advanced dollars to Cuba...
CA: Could you say what Hunters & Frankau's contribution is? After all, Tabacalera is giving something like $25 million, but they're taking half the production.
Freeman: But also they're financing leaf tobacco, which they are buying directly. Actually, I'd rather not give you the figure because you could calculate it. If you take Tabacalera and count the cigars they are taking, you can arrive at the figure.
CA: I think it was 50-50 or something like that.
Freeman: If you take our five million cigars against their 30 million, you'll get roughly...
CA: Two million, something like that.
Freeman: Right. I'd just like to say, by the way, in my opinion, world demand is actually about 75 to 80 million.
CA: The Cubans claim the world demand is 100 to 120 million.
Freeman: The way they look at it is that that's the orders they're getting from distributors. But the point is it's the same order going 'round and 'round. I've done quite a lot of work in trying to estimate what I think the real world demand is. I'd say it's 75 to 80 million.
CA: You're talking about the handmade cigars only, not the machine-made.
Freeman: Yes. And I'd say it's growing at over 5 percent per annum, easily.
CA: But it is possible that with price increases around the world, that some of that market may be lost to Cuban cigars because not everybody can afford $15, $20, $25 a cigar.
Freeman: I think this, of course...
CA: It's a potential problem. Do you have any issues in the U.K. regarding smuggling of Cuban cigars into the market? Or maybe not even smuggling, but there are countries where cigars cost less because the taxes are less.
Freeman: It is a very big problem for us, because we have, I think, one of the two or three highest rates of tobacco duty in the whole of Europe. Spain, as you know, has the lowest rate of duty. Our biggest problem is that nine million English people visit Spain every year. And, one percent of those people bring back their allowance of two boxes of cigars.
CA: So you see Spain as much more of a problem than you would, say, Switzerland. Don't they have a very low tax rate also?
Freeman: Yes, but Switzerland is not such a great problem because they're not part of the Common Market, so it's not so easy to bring cigars in from Switzerland. It's Spain and, to a lesser extent, France.
CA: Given the shortages and given the demand, would you agree that traditional marketing of Cuban cigars isn't justified anymore?
Freeman: No, I think it's totally justified. We, of all the distributors of Cuban cigars, probably invested more money in marketing and public relations and promotions over the years than probably anybody else.
CA: But is it still necessary in years like 1994 and 1995 when you don't have enough to meet demand?
Freeman: I've still maintained the budget. I've always budgeted on the basis of percentage of sales value. We are still investing, we still think it's right for the moment. And maybe particularly important at the moment, when we're seeing so many young people beginning to smoke cigars. We must make sure those young people appreciate Cuban cigars.
CA: Are these mainly print ads, in magazines?
Freeman: Print ads are difficult now because of [U.K.] health regulations and warnings and so on. So we don't do much print advertising. Most of our stuff is public relations areas, events, cigar dinners and that sort of thing. We always have spent a lot of money on on-license restaurant promotions.
CA: In conversations with the better retailers in London, they express the fear that if the U.S. embargo is lifted against Cuba, they will lose a big percentage of their American customers. After all, it's almost required for an American cigar smoker on a London visit to hit the internationally known cigar stores. And some retailers estimate that 30 to 40 percent of their business comes from Americans. How would the lifting of the U.S. embargo affect your business?
Freeman: Well, first of all, I think the 30 or 40 percent figure that the retailers have mentioned to you, or that you've estimated, is absolutely an exaggeration. And of course, it only applies to the retailers in central London.
But I think, if you assume that normal relationships are going to resume between the United States and Cuba in 1996, I would guess there would still be quite a long period of time before Cuban cigars will come into the United States. I think it's much more likely that in the first instance it will be Cuban leaf which will come in, because U.S. cigar manufacturers will want it for their own cigars. And I think there will be some arrangement made that Cuban leaf may come in first.
So there will be a period of maybe a year to two years when Americans will continue to have to buy overseas. What is interesting is that [subsequently] they may be allowed to buy overseas [and bring Cuban cigars back to the United States]. So, in fact, the purchases in markets like London and Geneva may actually increase in that period.
CA: Is Hunters & Frankau by law allowed to open your own retail shop, or is it prohibited?
Freeman: Not by law, but it would not be right for us to do so because I don't think we'd want to compete with our customers.
CA: I can understand. What I was really leading to was, would there ever be a day that I might walk up Madison Avenue in New York City and see a Hunters & Frankau shop in the United States?
Freeman: It's a very good idea.
CA: Initially, there will be a great curiosity about Cuban cigars in this country. But many people may find that the Cuban cigar is too strong, and that the milder cigars from the Dominican Republic and Honduras are really what they're more comfortable with. What do you think will happen?
Freeman: I think it's very interesting to see what will happen on the taste aspect of it. As I said earlier, I think the only example we have in the world is of the U.K., when [the U.K. was] deprived of Cuban cigars for 14 years, and the Jamaican cigar got the whole market. And it took a long time actually for people to stop smoking Jamaican cigars. They enjoyed the flavor of them. But the Cuban cigar took over again.
But the real issue in the United States when the embargo is lifted revolves around the trademarks--that's the big question.
CA: And nobody knows how the trademark issue will be resolved.
Freeman: That's right. Nobody knows how it's going to be resolved. But, for example, if it wasn't resolved and Cuba creates its special brands for the United States--which is possible as one scenario--Americans who wanted to buy a Montecristo would have to go to Europe to get it.
CA: In America, couldn't it be called a "Montehavana?"
Freeman: Or "Don Castro," whatever...exactly. But the point is there might still be a demand for Americans buying cigars in Europe because you could get traditional trademarks.
CA: Five years ago, in London, there was very limited availability of cigars from other countries such as the Dominican Republic, which as you know is the leading source of premium handmade cigars in the United States. And given the shortages and the price differential between a Cuban cigar and a Dominican cigar, is there a market today, or will there be a market in the future, for non-Cuban cigars from the Caribbean in the United Kingdom?
Freeman: There's no doubt about it; there is already a market in the U.K. I would say now it represents about 10 percent of Cuban volume.
CA: In dollar value or in units?
Freeman: In units.
CA: So, it's about half a million, four to five hundred thousand...
Freeman: Yes, over 500,000 cigars now coming in from Honduras and the Dominican Republic.
CA: What brands are the brands that are being distributed over there?
Freeman: At the moment, most of that market is Honduras cigars, and they tend to be private label or plain bundles. The only brand that has developed at all is a brand called Don Ramos from Honduras, which is actually, I think, more or less exclusive to the U.K. I mean, it's available in America, but we import it, and that probably has half of the Honduras business.
CA: Where does that come from?
Freeman: That's from Honduras, from Villazon.
CA: So, brands like Macanudo, which is not a Cuban brand by origin, and Arturo Fuente, which is not a Cuban brand by origin, really haven't found a market in the U.K.?
Freeman: Macanudo is just starting to be seriously introduced as a brand in the U.K. It's beginning to get some recognition there now. Otherwise no, it's very fragmented.
CA: Aren't Cuban cigars in the £10 to £12 range?
Freeman: No...I wouldn't say that exactly. Five to 12 [pounds] is the broader range.
CA: And, a Dominican or Honduran cigar goes for how much a stick?
Freeman: Roughly about 30 percent less a stick. That is largely because they do not pay a common customs tariff into Europe. We pay a 30 percent Common Market duty on Cuban cigars. In recent years, Dominican Republic cigars have come in at a zero customs rate. And under the  Andean [trade] agreement, Honduras now comes in at zero tax levels. So, they have a huge advantage in the tax structure.
CA: Do you see a significant opportunity for some of the better known, non-Cuban brands to carve a niche for themselves in the U.K.?
Freeman: I'm sure they will, but the first thing that has to happen is that we have to create more of an awareness among British smokers that there are alternatives. And that is beginning to happen now. It's much more a problem at the moment...in the generic sense. The generic job has got to be done first.
CA: You said that Cuban cigars in your business are four to five million, and there are 15 to 20 million non-Cuban cigars sold?
Freeman: But those are cheap cigars. And, they're all machine-made. If you want to go back, I'll break it down to about four to five million Cubans. We as a company probably do about 300,000 premium cigars, non-Cuban. But those other numbers I gave you included machine-made.
CA: OK. So, of the 300,000, one brand dominates?
Freeman: Don Ramos is our biggest brand, and that's 250,000.
CA: And that's Honduran?
Freeman: Yes. We just launched a cigar in the English market that we have some hopes for, which is [called] Santa Damiana. It's an old Cuban name, and it's being made by Consolidated Cigar. We've taken a lot of trouble to develop a blend which is a different blend than in the States. It's a slightly stronger cigar that's nearer the Cuban flavor. We just introduced that and so far the reaction has been extremely good.
CA: So you're the agent for that. Who is the agent for General Cigar cigars?
Freeman: Another company in the Hunters & Frankau group.
CA: They have the General Cigar brands?
Freeman: We have one company called DBI which represents all the export business for General Cigar worldwide, which includes Macanudo, Robert Burns, White Owls, etc.
CA: And who runs that division?
Freeman: David Baxter runs that now. And we have another company which has just changed its name to Premium Cigar Ltd., which in the domestic U.K. market sells the Macanudo and has the agency for the Davidoff products.
CA: You don't handle Fuente?
Freeman: We do have Fuente. We inherited it with Joseph Samuel when we bought that company.
CA: What about Excalibur?
Freeman: No, we don't have that.
CA: You mention Davidoff. They've always had a high-end price strategy. It's been five years since they stopped producing cigars in Cuba, and now, 100 percent of their cigars are made in the Dominican Republic, yet they've maintained the same pricing levels. How has Davidoff fared since they switched?
Freeman: Initially, the sales dropped to around 20 percent of their previous volume. But it has grown steadily since then and it is growing nicely now. Davidoff cigars are doing reasonably well in the U.K.
CA: What was their volume before they stopped?
Freeman: It never became a very big brand in volume terms. I would have said it was about 300,000 cigars.
CA: And in 1995?
Freeman: I'm not sure, I think over 100,000.
CA: Do the people who buy it know that it's not a Cuban cigar?
Freeman: I think all the people who buy from the serious merchants are fully aware that the cigar is not Cuban. Where people may not be aware is in the restaurants.
CA: How did the Freeman family get involved in Cuban cigars?
Freeman: In the late '20s, my grandfather, D.G. Freeman, bought a company called J. Frankau & Co., which owned the H. Upmann factory in Havana. J. Frankau had the world rights to the H. Upmann brand. This was my grandfather's way of going upmarket. And I think it was a bit of fun for him rather than a serious business exercise.
In 1935, he sold the Upmann factory to Menendez Garcia, who had just started up in business. Alonso Menendez was one of the biggest leaf brokers in Cuba at that time, and Freemans had always bought their leaf from him, so they knew him. Menendez was an entrepreneur really, and he wanted to set up on his own. Buying the Upmann business from us was his staff in life. He and his partner, Pepe Garcia, went on to create the Montecristo cigar.
CA: So do you recall what they paid for the factory in those days?
Freeman: They paid $250,000 for the factory in Havana, the business and the brand name. All we got from that were the rights for 80 years or something like that, to market H. Upmann in the United Kingdom. H. Upmann was a very big brand at that time. It was one of the top three brands.
When the company was sold to Gallaher's in 1947, J. Frankau was just an importer--a very small business--importing cigars into the U.K. Due to the war, no Havana cigars came into England from 1939 until 1953. We had our own sort of embargo. That was because Cuba was in a dollar currency, and we Brits weren't allowed to spend any dollars except on war materials. So we couldn't deal with Cuba. We weren't allowed to deal again with Cuba until 1953.
When the war hit, J. Frankau had no cigars to import, and no business. They did a joint venture with Menendez Garcia and set up a factory in Jamaica, which became one of the biggest factories in Jamaica and produced cigars right through the war--right through until...we sold out in about 1953.
CA: What brands were made in Jamaica?
Freeman: We had two basic brands. One was called El Trobador, which doesn't exist anymore. And the other was called Lar & Victor. But we weren't the only people; one other British importer did the same thing--a company called Melvin Hart, which had the rights to the Punch cigar in England.
They did exactly what we did; they set up a joint venture factory in Jamaica with Punch. They produced Macanudo. That's how Macanudo started. Macanudo was a complete look-alike to Punch. The box was exactly the same, except for the name Macanudo. It was just a temporary measure while they couldn't get Punch. That was the idea. And Macanudo became the most successful Jamaican brand in those days. They did better than we did with ours, actually.
We sold our factory to the management when Cuban cigars came back in '53. The interest in Jamaican cigars started to diminish immediately. I think it's a very interesting, if you like, case history of what might happen in the United States. The Jamaican cigars went on selling, but they just declined as Cubans came in. By the way, our factory doesn't exist anymore--the old J. Frankau factory.
But anyway, going back to the family situation. When Gallaher's bought J.R. Freeman, J. Frankau was included in that deal. My father went on the main board of Gallaher's as director of sales and marketing. He left the board in about 1953. And as compensation for loss of office, which would normally have been taxable in those days at 98 percent, they allowed him to buy J. Frankau for a very low price. That's how he got his compensation. So he acquired back that little part of our family business, which was J. Frankau. And he then acquired the business of Hunters, which was called John Hunter, Morris & Elkin, which then was the oldest Havana importer in the U.K.
CA: What year was that?
Freeman: That would have been in '54.
CA: So that's when the name was changed to Hunters & Frankau?
Freeman: No, it wasn't. He bought them, and he ran them as two totally separate companies. He kept the same management in Hunters and nothing changed at all
CA: What did Hunters have in its business?
Freeman: Hunters had Montecristo and Ramon Allones, and Frankau just had H. Upmann. Together, the two companies represented about 20 percent of the imports into the U.K. at that time.
It's awfully complicated. Those two companies went into partnership with a man called Roy Siemssen, who was quite a big leaf broker, mainly in the cigarette leaf business. And they put all their businesses together and went public in 1957. As Siemssen Hunter they became a public company, which incidentally was done for tax purposes because we were in the over 90 percent tax [bracket] in the U.K. in those days. But if you were in a public company, you paid less tax than if you were in a private company. A lot of people went public not to develop the business, but just to get a good tax break.
As a family, we had a share in Siemssen Hunter. My father gradually sold stock in it, and we ended up down to about 7 or 8 percent of Siemssen Hunter.
I went into the business; I had become a chartered accountant after five years of training. I went into J. Frankau. I actually did the merger of putting Frankau and Hunters together and creating Hunters & Frankau as a name, and everything. Hunters was the older company, that was 1790, so we did the "established 1790" bit using Hunters as the top company.
Then, in 1970, I managed to get myself made managing director of Siemssen Hunter, the public company. At that time, the whole tobacco industry was in the doldrums, and people were talking about the end of the tobacco industry. I decided to diversify this small public company. My father was in retirement, and I decided to go into the area which I thought was most opposite to cigars you could possibly find, which was educational publishing.
We built up quite a big educational publishing business, within this public company. And by 1973, we were something like 60 percent in publishing and 40 percent in tobacco. Our tobacco business was Hunters & Frankau, or the cigar business, and Siemssen, Threshy, the leaf tobacco broker business, which was mainly in Africa, and third, a company called William P. Solomon, which imported American cigarettes. We had the agency for Kent, for Lorillard, Liggett & Myers and for R.J. Reynolds in the U.K. And that was a very good little business as well at that time.
The publishing business was mainly educational publishing of various sorts. The chap who ran the educational publishing side of our business was somebody called John Selwyn Gummer. He's now minister of the environment in the U.K., but that's how I met him. He ran the publishing side.
In 1973/74, the [U.K.] stock market crashed after having been a real high flyer. From 1970 to '74, Siemssen Hunter was one of the real glamour stocks on the U.K. market. I was in that age group and all the guys were all doing the same game. We were called whiz kids. And I was one of the minor whiz kids. When I became managing director, the stock was 12 and a half P [pence]. By 1973, it was 124 P. We did pretty well.
But the '74 crash came, and there were all sorts of problems I had to solve. I determined at that time that I wanted not to be involved in public companies anymore. In 1979 I built the group up into a state where I was able to sell the group, which was mainly publishing by then. I sold it to another public company in the U.K. At the same time, which was very complicated then, and today you couldn't do it with the regulations, I was able to do a management buyout of the cigar division, which was Hunters & Frankau.
We sold the group, and I was the chief executive selling the group, and at the same time I was the chief executive who was buying out part of it. The people who backed me in doing that--who backed me in a financial sense--was a well-known U.K. investment bank called Hambros.
The result of that is that I controlled Hunters & Frankau. We formed a new holding company, Hunters & Frankau Group, Ltd., of which I have some 57 percent, and Hambros and one or two other people have the rest; basically that's the structure, and Hambros is still a shareholder in that operation. As far as I know, it was actually the first LBO [leveraged buyout] done in the U.K. That's it. And that's still the situation today. So that's how, in a sense, I got back into an established family tobacco business.