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April/
May 2000

We rolled the dice back in 1987, when we selected Plasencia to produce all our handmade cigars. He had fled Nicaragua’s Sandinista unpleasantness, and was rebuilding from scratch. He and his people have more than met our expectations.
- Abbosh, Swisher International

Southern Honduras
Survival of the
Fittest
by
Dale Scott

In our Danlí Journal, Part Two, we continue our look at the state of post-boom manufacturing in Honduras’s cigar-making capital, where the dust continues to settle from a massive expansion-consolidation cycle.

As the prop-jet whirs across the countryside from the Pacific coastline of El Salvador to the Honduran capital of Tegucigalpa, I am struck with the bleakness of the terrain below - symbol of the people themselves. The lush, tropical countryside of Costa Rica - my point of departure, with its rolling hills, deep valleys, and volcanic mountains - had disappeared earlier. Instead, as far as I can see, the ground below is a dry and dusty tan. Only an occasional craggy mountain breaks the visual boredom of the flat topography. Even the billowy, majestic cloud formations had thinned into a meager deck at ten thousand feet.

Jule Abbosh, the new director of offshore operations for Swisher International, Inc., met me upon arrival, having graciously waited for two hours to provide a valuable ride to our destination. The trip to Danlí was not without its beauty. The countryside sometimes looks like New Mexico, with rocky peaks and pines; in other places, like west Texas, with scrubby brush and stunted trees. After an hour of rocketing along, bouncing from one pothole to the next, and just cutting back into our lane before hitting oncoming vehicles, Swisher’s driver arrives at the outskirts of Danlí, about twenty miles north of the Nicaraguan border.

Entering the city of about 30,000 residents, Abbosh points out Centro Agronomico de Investigacion y Ensenanza. Considered by many to be the world’s leading agricultural university, it houses one of the largest agronomical libraries anywhere and. Appropriately enough, it’s tobacco section alone could provide a lifetime of research.

Swisher International
Swisher’s wholly-owned 100,000 sq.-ft. factory is dedicated solely to handmade cigars. Built in 1997, the modern factory offers clean, bright, airy working conditions for the largely female work force. Of these 1,000 employees, 540 are bunchers and rollers. As Central America’s largest cigar factory, it encompasses all phases of cigar production: leaf storage and preparation, rolling, aging, and packaging operations. Except for the building and fixtures, as well as Abbosh’s capable right-hand lady and Swisher employee - Patrona - Nestor Plasencia provides all staff and production.

Swisher, Plasencia’s first customer, is still his largest and most important. "We rolled the dice back in 1987, when we selected Plasencia to produce all our handmade cigars," says Abbosh. "He had fled Nicaragua’s Sandinista unpleasantness, and was rebuilding from scratch. He and his people have more than met our expectations."

Conrado Plasencia, Nestor’s cousin, is the key liaison and overseer of Swisher’s facility, as well as two other Plasencia factories. Abbosh, who visits the plant every three weeks from Swisher’s headquarters in Jacksonville, Florida, says they’ve "had no production problems whatsoever. Conrado handles everything beautifully."

"Swisher weathered the boom and slump with no hitch in production or personnel," points out Abbosh, with satisfaction. "Our present output is 150-200,000 a day, and we have capacity to double that." Abbosh expects upcoming products to swell the output by 30 to 40%. Swisher’s flagship is the Bering line, the fourth largest selling handmade in the U.S. The company also produces Primadora bundles here, and is now devoting considerable space to the new Outlaw cheroot, with its strong mass market following. "Swisher’s forte is value-priced premiums," says Abbosh, "and they have served us well. The price-to-performance of the Bering line is probably why Swisher never felt any of last year’s sales slump."

Tabacos San Andrés, Consolidated Cigar’s Danlí factory, produces a number of well known private label brands in addition to its own, including Las Cabrillas.
Tabacos San Andrés
Now under ownership of Altadis S.A. through its U.S. holding Consolidated Cigar Corp., Tabacos San Andrés was founded twenty years ago by Indalecio Rodriguez, a Nicaraguan cigar master. Consolidated, a unit of the former French firm Seita S.A. prior to its December merger with Tabacalera S.A., bought the factory in the and kept Rodriguez on as general manager.

Tabacos San Andrés buys tobacco from several sources and countries, and carries out all facets of production, storage, and shipping, including box-making. Consolidated’s Las Cabrillas and El Dorado brands are rolled at the facility, as well as a couple dozen private labels - nationally and internationally recognizable marquees that dot the company’s product list including Dunhill, Don Mateo, Hugo Cassar, Big Butt, and Quetzal.

During the 1997 boom, production reached 1.4 million cigars per month, according to Rodriguez. Today’s output is 40% of that, at 560,000 monthly. Employment has settled in at 400 worker today, with 97 teams of rollers and bunchers, down from 1,000 workers in 1997.

Rodriguez is encouraged by a recent upturn in production quotas by Consolidated, and believes that the company is positioned to be a key player among the remaining Caribbean Basin producers, which could number as few as 20 he estimates, when the shakeouts have stabilized.

"We have several strengths which I think will bring us success," emphasizes Rodriguez, "First, the recognition of our leading brands, which smokers associate with quality. We have availability of fine leaf. Fausto Goledno, our master blender and production manager, is one of the best, with over thirty-five years of experience." Trimming factory staff means the company now has access to the most capable workers, Rodriquez notes.

The effects of the mega-merger of Seita and Tabacalera last December for the respective company’s two Danlí-based factories - now under common ownership of Altadis S.A. - remains to be seen. While Altadis has already taken steps to restructure its vast network of European cigarette and machine-made cigar manufacturing facilities, there has been no official indication of what specific plans lie ahead for its premium cigar factories, either in Danlí or elsewhere in the Caribbean basin.

"We do not yet know, as negotiations are still under way," says Rodriguez.

Possibly Tabacalera will fold the factory permanently and move production either to Consolidated’s Danlí operation, or to a plant that is under-construction in Nicaragua. Latin Cigars of Honduras At the Hotel Granada - Danlí’s defacto hangout for cigar guys - Carlos Toraño detailed his new venture.

"Plasencia made Toraño cigars for years, then production moved to Tabacalera when they bought out Plasencia’s factory," Toraño explained. "In early 1998, Tabacalera surprised me with price increases that would have destroyed my profit. I had to change manufacturers. I knew Fidel Olivas from the mid-Seventies, when Olivas managed the Joyo de Nicaragua factory."

Olivas was Nestor Plasencia’s key man in Nicaragua in the 1990s, and went to Tabacalera when the Plasencia facility was sold, but left in 1998 to form Latin Cigars. "When Fidel called to ask if he could work with me, I told him I had been awaiting his call," says Toraño.

Latin’s factory is small, super space-efficient, and bustling with the positive energy of a company on the rise. Olivas and his nephew Alan Olivas oversee production of Toraño’s flagship line, the Reserva Selecta, which has shown considerable growth since its October 1999 launch.

"We’ve added over 400 new retailers since then," says Toraño, "and volume has grown to 35,000-42,000 a month since October." Latin also produces San Martin premiums for Villiger, as well as bundled long-filler cigars for the Newman catalog and Eckard’s national drug chain.

At present, 500,000 cigars are aging in every available corner in the factory. Production averages 16,000 a day, and is expected to reach 20,000 by May. Olivas employs 154 in this full-spectrum factory, with 32 rolling/bunching teams.

Phil Salvatore, on the manufacturing frontline at Nestor Plasencia’s new Danlí factory, where all Indian cigars are made under his watchful eye.
Indian Tabac Cigar Co.
Philip Salvatore of Indian Tabac Cigars provided one of the most stimulating visits. The slump hasn’t seemed to touch this boutique line, the efforts of Indian’s marketing staff no doubt deserving much of the credit. But a successful line rests on the underpinnings of a good cigar, nonetheless, and that foundation is Salvatore.

He fills a unique mold in cigardom. Grandson of the patron of the Indian motorcycle, Salvatore is the founder and secretary of Indian Tabac. Functionally, he manages all of Indian’s production operations, having been the company’s full-time man in Danlí for eight years now. At a mere 27, Salvatore has been making cigars since he was eighteen, when he had them made so he could give them out to friends.

If many can claim a passion for making top-quality cigars - it could be said that Salvatore is possessed. He has, in fact, established a unique coup, becoming the only outsider to run the Plasencia factory in which 24 Plasencia workers make his line. Salvatore oversees the entire operation, down to the selection of the paper used for Indian’s stunning box labels - "All classic Indian motorcycle colors," he states. Two Honduran supervisors working directly for Indian keep a sharp eye on the handiwork.

"I have first pick of tobacco from Nestor’s entire inventory," Salvatore says as he gallops through a warehouse of 22,000 bales of leaf, stopping at the supervisor of the leaf selection department. "When I bring the tobacco of my choice to her, she goes through it again and picks the best of the best for me. Who else gets such treatment?" he asks.

"It took me a year to convert Nestor’s production people - who were trained for high volume. These rollers turned out 800 cigars a day. I slowed them to 400, so they’d make cigars up to Indian standards."

Every box of cigars bears Salvatore’s inked signature.

Despite three factory changes over the past several years - from U.S. Tobacco to Honduran Cuban Tobacco, and now Plasencia’s newest factory - Indian has grown steadily from 10,000-15,000 cigars a month to 50,000-80,000 cigars a month. "We could do 100,000, but I won’t sacrifice quality," says Salvatore. "We’re the only company I know of - in Danlí or anywhere - that’s backordered."

The Padron dynasty is alive and well in Honduras, under the watchful direction of HATSA’s Estello Padron.
Honduras-American Tobacco S.A.
Villazon & Co., a subsidiary of General Cigar since 1996, operates two of the oldest Honduran cigar factories, the Danlí and Cofradia plants of Honduras-American Tobacco S.A. (HATSA).

The original plant, located in Danlí, dates back to about 1964, and was started by Villazon’s Frank Llaneza. Cuban-born Estelo Padron manages both the Danlí and Cofradia locations. Padron, who left Cuba in the 1960s and started Tabacos Cubanica S.A. in Nicaragua with brother Jose Orlando Padron, came to Honduras in 1974 to work with Villazon, eventually becoming one of several partners sharing ownership in the factories.

HATSA produces Villazon’s Punch and Hoyo de Monterrey, two well-established, full-strength brands, originally of Cuban origin. The Danlí facility focuses on rolling, with leaf storage and preparation handled at HATSA’s much larger Cofradia site, located clear across Honduras just outside the port city of San Pedro Sula.

Tabacos Rancho Jamastrán
Christian Eiroa of Tabacos Rancho Jamastrán, speaking during a recent stay in Miami with his father and company founder, Julio, says that total production in their Danlí factory totals 950,000 cigars a month - much of it for private labels.

Baccarat, imported and marketed by Caribe Imported Cigars, Inc., Miami - a division of Tabacos Rancho Jamastran - is the factory’s top brand, and Baccarat "The Game" Havana Selection accounts for 500,000 units per month.

In addition, the factory produces six other company-owned brands - La Fontana, Valencia, Camacho, Monte Carlo, Repeaters, and National Brand Bundles - as well as a number of private label cigars.

A privately-held, vertically-integrated business, the company has extensive farming activities in the nearby Jamastrán Valley, as well as leaf curing and box making facilities. Julio, a second-generation Cuban tobacco grower, has been a fixture in the Danlí cigar industry since the 1970s.

One of Latin Cigar’s proud products: Reserva Selecta, which has grown into Carlos Toraño’s flagship line.
Other Emerging Markets
Almost all of the factories in Danlí cite the burgeoning market in Europe as a portent for a business upturn, and estimate about a five-year lag behind the United States. Thomas Mohr of Villiger is in town to discuss orders with Plasencia, Toraño, and Salvatore. San Andrés’ Rodriguez sees Europe "opening up strong demand for premium cigars now, and the strength and worldwide reputation of our parent company, Altadis, will be of great importance."

Carlos Toraño expresses pleasure at the business Villiger is doing for his company, and says the British Empire is also buying his cigars worldwide.

"Germans are the leaders in setting trends in Europe, because they are sticklers," notes Salvatore. "What they buy, the rest of Europe will, too." He cited Villiger’s efforts as essential to Indian’s success, crediting European sales for 30% of Indian’s orders.

The future of cigars is crucial to Danlí. Coffee prices have tumbled, sugar is likewise depressed, and now the cigar industry has discarded many of the workers. Hurricane Mitch added more deprivation to an impoverished people. The economic contributions of the cigar industry are more important than ever. Consider a recent request from Abbosh to management at Swisher, asking if the company could do anything for the community. The school needed desks.

"For only $1,000 in materials, we made a bunch of them," says Abbosh. "A week later, the townspeople, complete with banners and band, marched to the plant in the heat of day in suits, dresses, and high heels. They presented me with a plaque amidst speeches of appreciation. What little we did meant so much to them, I wanted to cry."


SMOKESHOP - April 2000