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Cigar Industry

The Dominican Cigar Explosion

With 1996 Cigar Exports up 70.9 Percent to About 140 Million, Cigarmakers in the Dominican Republic Have Shifted into High Gear
By James Suckling | From Claudia Schiffer, Jul/Aug 97

I wish I could help you," says Hendrik Kelner, the owner of several cigar factories in the Dominican Republic and producer of Davidoff, Avo and various other brands. The Spanish speaker on the telephone from Chicago wanted to buy 300,000 cigars from the Dominican cigar man. "We have our customers and we can't take on any new ones."

"I understand," says the slightly distressed voice on the telephone. "But surely you have a few extra cigars for sale."

"The structure in the market is very different now," answers Kelner. "We have more demand than we can produce cigars. However, there are many new factories now in the Dominican Republic and maybe one of those can help you."

"Can you recommend one?" asks the voice.

"I wish I could, but I really can't," replies Kelner. "I can say that most of these new factories have no tradition for making good cigars. They make everything from the very best to the very worst. Good luck."

Kelner puts down the phone and shakes his head. He says that he receives two or three calls like this every day. "It is unbelievable," he says. "The demand is crazy. Where are all the new people getting tobacco to make their cigars? Are they using palm tree leaves?"

The unprecedented demand for cigars from the Dominican Republic is nothing short of phenomenal. Dominican handmade cigar exports to the United States grew 70.9 percent in 1996, to 138.6 million sticks. To meet the demand, hundreds of acres of new tobacco are in production in the Yaque Valley, the country's premium cigar-tobacco-growing region, and about 60 factories--up from less than 10 five years ago--in and around Santiago are manufacturing hand-rolled cigars.

These days, there's a boom-or-bust atmosphere in Santiago, the largest city in the northern tobacco growing region of the island. Driving down the dusty streets, new office buildings, shopping centers and apartments are replacing run-down stores and houses. McDonald's, Burger King and Pizza Hut have replaced the dozens of street-side food vendors. Santiago even has its first cigar bar, El Tope, complete with private cigar lockers and the finest whiskeys, rums, brandies and Ports. This once-dreary town is undergoing a major facelift, and the cigar business is footing a lot of the bill.

"The situation today is like you are living in your neighborhood and somebody finds gold," says Litto Gomez, the maker of La Flor Dominicana cigars, who is finishing a new factory in Villa González. "The only problem is that everybody wants some of it."

There's a similar change in the countryside. Farmers were once reluctant to grow tobacco because of the low prices for their crop and the dwindling demand. Last February, the fertile lands that stretch from the outskirts of Santiago and continue northeast about 30 miles to the town of Esperance were packed with green fields of tobacco. Driving through the tobacco towns of the region such as Jacagua and Canela, it was difficult to find quality tobacco land left unplanted. Some farmers even had tobacco growing in their gardens.

"It is the best crop I have ever seen both in quantity and quality. The weather has been almost perfect," says Kelner. Farmers in the Dominican Republic planted 27,832 acres of premium tobacco for this year's crop, 53 percent more than the 1995-1996 crop. (Tobacco growers speak of harvests in split years, since the planting begins in late fall and finishes in late winter.) "There's going to be tobacco for everybody who wants to make a cigar," says Alvaro Quesada, president of the Association of Tobacco Exporters of the Dominican Republic.

A healthy Dominican tobacco crop is essential to the cigar industry. Not only is the Dominican Republic the leading producer of premium cigars for the United States, but cigarmakers around the world rely on Dominican tobacco for their blends. It is an essential part of cigars produced, for example, in Jamaica (Macanudo, 8-9-8 Collection), Honduras (Puros Indios, Gispert), Nicaragua (Don Juan) and Mexico (Excelsior).

The only major concern many cigar producers had with this year's crop, assuming no drastic changes in the weather, was whether there would be enough curing barns and warehouses to handle the huge volume of new tobacco. A portion of the 1995-1996 crop was lost due to difficulties in curing and processing. "If the weather stays the same, the tobacco will dry quickly. We shouldn't have a big problem," says Gomez. "But if it becomes wet, we will have a worse problem than in '95-'96, when we lost 30 percent of our crop."

Losing a part of the crop would be nothing short of a disaster. The demand for Dominican cigars has turned the tobacco market in the region into a free-for-all for many manufacturers. Large, established companies such as Tabacalera A. Fuente, General Cigar, Tabadom and others have fewer problems. They have long-term contracts with farmers and processors (packers, as the trade calls them) for good tobacco. But others have been left scrambling to find tobacco. "They basically use what they can get," says Eladio Diaz, the production manager for Tabadom, one of Kelner's cigar factories. "And it can be really bad quality. I have even seen some of these places using coriollo," an inferior type of tobacco usually reserved for cigarette production.

Benjamin Menendez, of General Cigar Co., producers of Macanudo and Partagas cigars, adds, "They will use anything and buy anything. I recently heard of a new factory rolling cigars and they hadn't even stripped the stems of the tobacco for the fillers. There're some really bad cigars out there."

The results of cigar evaluations in Cigar Aficionado underline some of these problems. More and more new cigars from the Dominican Republic and other countries are coming onto the market, and they are often mediocre, suggesting the use of inferior tobaccos. Moreover, Cigar Aficionado has noticed changes in some brands' blends, indicating they do not have the tobacco inventory to maintain their house style. "Many of these new factories have no inventories of either tobacco or cigars," says Wayne Suarez, a director with Tabacalera A. Fuente y Cia. "How can they produce quality cigars without inventories?"

Another problem for many newcomers is finding the rollers to make the cigars. Many new factories have lured rollers and other tobacco workers away from established firms. Some employees received incentives to change jobs, including small loans, housing or even transportation, but others have moved because they prefer to work near their homes in the country, rather than commuting to downtown Santiago, which can involve hours on a bus each day. "When I took rollers, I never thought of the consequences," says Abraham Shafir of Tamboril Cigars, which opened last year in the town of Tamboril, a move heavily criticized by established cigar firms. "I have never gone to a roller's house and asked them to work for me. I have never paid one to leave a factory and come work for me. They come on their own."

Some other new factories claim the rollers are coming because they are fed up with working for established firms. "We treat them like brothers, like human beings," says Orlando Alvarez, who runs a small factory with a couple of dozen rollers in a tiny building in Villa González called Tabacos M. Cellurales S.A.

Alvarez may be treating his employees like family, but the work conditions at his factory are some of the worst encountered in the Dominican tobacco business. The work rooms are humid, poorly lighted and musty. It is more like a cellar than a small cigar factory. Even the tobacco used is second-rate, resembling cigarette tobacco more than quality cigar leaf. And the odor of ammonia almost takes your breath away.

Whatever their reasons, rollers are certainly changing jobs, often at the expense of the longtime manufacturers who trained them. Fuente and Tabadom each lost more than 100 rollers last year, which angers Kelner and others. "People who pay rollers to come and work at their factory, they are not getting rollers. They are getting prostitutes," says Kelner. "They don't have a factory. They have a bordello." The departing workers included some of his most experienced people.

The largest hit was felt at Tabacalera A. Fuente, in the room where all Fuente Fuente Opus X cigars are made. "We lost about 30 percent of the Fuente Fuente Opus X makers; that's nine to 10 people," says company president Carlos Fuente Jr. "Our production is way down." Fuente estimates that the loss of rollers would mean 25 percent less shipments of Fuente Fuente Opus X over the first half of 1997.

Fuente plans to open factories in the towns where he's losing the most rollers, including a 40,000-square-foot factory in Villa Gon-zález. Next year he may open a factory in Tamboril. Fuente says the factories will be his "Guantánamo Bays" to head off the competitors. "I hate to do it," he says, "but if you have a herd of cattle and there's a pack of wolves nipping at them, you have to bring out the cowboys with Winchesters."

Some cigar rollers don't even bother leaving factories; they simply work two jobs. "What can I do about it?" says Jean Clement, the owner of Tabacos Quisqueyanas S.A., producers of Juan Clemente cigars. "I already lost my best roller. If they finish their work and do a good job, what can I say about it? But sometimes they come in late or they are tired from their other job."

Something is being done about it. Most of the major factories are training hundreds of new rollers; some estimates place the total number of new rollers between 1,000 and 2,000. "I want to train more and more people," says Kelner. "Then I won't care if we lose people, because the people who go are the wrong sort of people to have anyway."

Many of the new rollers, and those in training, have come from the region's strong textile trade. The cigar boom has brought higher wages to the tobacco sector, and many textile workers see tobacco as better employment. Now it's hard for some textile companies to find workers. "The quality of the new rollers we are getting is fantastic," says Ernesto Perez-Carrillo, the owner of El Credito Cigars, which runs factories in Miami and Villa González. "I never thought that they could learn so fast and roll so well. It's amazing."

It's not only workers from the textiles industry who are seizing the opportunities created by the cigar boom. From tobacco sorter to factory manager, the cigar trade is providing a viable occupational alternative for many Dominicans. "It wasn't possible before to work in tobacco," says Marco Antuna, an industrial engineer with Puros de Villa González S.A., a large tobacco processor that recently began making cigars. "I still have a business in computers, but I am so interested in tobacco and the pay is better now, that I decided to get into the business."

Everybody here seems to be getting into the cigar business. "There are many positive things that have been here in Santiago since the cigar boom, but there are negative things, too," says Manuel Quesada (Alvaro Quesada's brother), who owns Matasa, maker of Fonseca and Romeo y Julieta cigars. "If the foundation is not solid, if it is not based around quality, it could all come crumbling down in a few years. That is what I am afraid of."

Manuel Quesada echoes the views of most established cigar producers in the Dominican Republic. While they are extremely happy with the increase in business and the improvements on the island, the downside is that the business has become a cash grab for many. "The problem is that a lot of people in the business now are in it just for the money," says Kelner. "They don't care about tobacco. They are not really interested in cigars."

David Savona, senior editor of Marvin Shanken's Cigar Insider, a monthly newsletter by the publisher of Cigar Aficionado, contributed to this report.

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