July 2000


Reaching out to retailers one store at a time

by Joseph Finora

It's no accident that Alliance Cigar, Inc., has the name that it has. The company was founded on the basic business principle that complementary partners can work together to build a thriving operation and so far, that's what it's been doing.

"We've formed strategic alliances with companies that can make a unique product or have unique technology and who need a marketing, sales, and distribution partner in the United States," says Thomas M. Sullivan, president of the Bethel, Connecticut-based firm. "Then we market these products with a one-to-one approach."

Alliance was founded in 1997 by Sullivan, a 22-year tobacco industry veteran, most notably with U.S. Tobacco (UST), Jeff Harris, a 20-year UST veteran, and Per Erik Lindquist a former USTI president and board member of Swedish Match. The team is supported by Sandra Bueno, vice president of marketing, and Joan Brown, vice president of sales and utilizes eight full-time, commissioned regional sales representatives plus warehouse and shipping personnel.

The company's brain trust believes heartily in the theory that "premium cigars are best sold by full-time tobacconists who are dedicated, knowledgeable professionals as opposed to unqualified, boom-year people looking for fast money," according to Sullivan, who himself smokes 4-5 cigars a day. While sales have been down for many cigar manufacturers, Sullivan feels "opportunities have grown tremendously" and Alliance is seeking to exploit those opportunities with its own "non-scientific" formula.

"Our ability to market revolves around our ability to get inside stores, and supply tastings and dinners with unique, small-batch, boutique cigars that people appreciate. Our sales reps work to create a partnership with the tobacconist," says Sullivan who admits that after spending the last 15 years of his career with one company he did not have a lot of non-UST relationships in the tobacco industry. He did, however, have experience developing overseas markets.

"We invest a lot of effort in getting our cigars tasted and getting on shelves and then aim for repeat business," notes Sullivan, who began cigar smoking during Friday night poker games as a business student at Fordham University. "Retailers need proprietary-type brands they can call their own. Customers want to learn about and experience cigars. These things can't come from a mail-order cigar. It's not scientific. It's not mass marketing. It's relationship marketing."

Alliance's relationship marketing works both ways. On one side, it works with retailers to develop a loyal customer base. On the other side, Alliance works with growers and manufacturers to bring quality cigars to market.

Moving quickly to find "well-established producers with a focus on cultivation," Alliance formed a joint venture in 1998 with the Reyes Factory of the Dominican Republic, one of the oldest growers of Cuban-seed tobacco. They also rely on Mexican, Honduran, Brazilian, and Costa Rican producers.

The wide-ranging Alliance portfolio consists of Cupido, La Perla Habana, Revolution, Habano Primero, Astral, Big Butt, Estevan Cruz, Biarritz, and Fittipaldi. Cupido was voted the "Boutique Cigar of 1999" by Smoke magazine.

Big Butt initially attracts attention because of its comical name but the underlying marketing strategy is to retain customers who learn after smoking it that it's a quality, reasonably priced, medium-bodied cigar. To help with the promotion, ashtrays, T-shirts, and baseball caps with the Big Butt logo are available for retailers.

Former international auto racing champion, businessman, and longtime cigar smoker Emerson Fittipaldi is also a part of the Alliance team. His signature appears on the label that bears his name. Retailers buying 12 boxes of Fittipaldi cigars can receive a free, limited edition leather jacket.

"We haven't teamed up with Emerson just because he's a celebrity. He's a business powerhouse with a wide range of interests - like orange plantations and an automotive after-market products business in Brazil," says Sullivan who acknowledges that other celebrity-endorsed cigars have gone the way of the silent movie.

The Fittipaldi premium line is hand-rolled from Dominican-grown, Cuban-seed tobacco with Cameroon wrappers. The bold red and gold label with the checkered racing flag differentiates the cigar in tobacconists' humidors. And building on the racing theme, Alliance sometimes offers race tickets as promotional items tied to Fittipaldi cigar sales. The Fittipaldi line contains seven models. Alliance's other cigars generally come with basic bonus plans for retailers, such as buy ten boxes and get one free.

Sullivan admits, however, that Alliance's marketing strategy has its flaws. "No plan is 100 percent perfect. We ask ourselves everyday 'Is this the way to go?' This is a long road to travel and we're not in a position to just throw money at a problem like some of our gigantic competitors. Our store-by-store approach can't turn on 1,500 retailers in a day. We can't reach every convenience store, but we're filling holes overlooked by larger companies."

Nevertheless, the strategy appears to be working. While figures are not disclosed, Sullivan says sales for the privately-financed company are growing at an overall annual rate of about 200%.

"During the cigar boom, traditional tobacconists were being pushed aside. There were too many 'me-too' products and retailers. We felt the traditional tobacconists would get the business back one day," recalls Sullivan. "At the same time we saw people growing tobacco in small batches that couldn't go to mass-market producers."

Building upon its one-to-one mandate, in the early days the Alliance team asked retailers for the names of good representatives to develop its sales force. They then got in touch with them to build a relationship. They also worked the RTDA shows, which led to other ventures.

While working at a 1998 trade show in New York, Sullivan met Steve LaFalce, the vice president of sales for the Wenger Company of Switzerland, a firm with over 100 years of high-quality manufacturing and marketing experience.

"Steve came over to buy a few cigars and we started talking. Wenger has a reasonably priced line of watches and Swiss Army knives that are of the highest quality. We talked some more and then talked to retailers."

The result was that Alliance began marketing Wenger knives and watches through tobacconists, and another relationship was born. Like the cigars Alliance sells, Wenger has a great tradition and reputation, crafting knives and watches for nearly every situation - including some designed for cigar lovers. Tobacconists saw the opportunity as well - quality cigar smokers appreciate quality and innovation in other products. Alliance brought them together.

"This plays well into our overall vision of being more than just cigars," says Sullivan. "The Wenger-Alliance relationship helps project us as distributors and marketers of innovative, high-quality, tobacco-related products."

On the cutting edge of the knife front, Wenger makes seven models for cigar smokers. Its basic cigar cutter is a large-blade knife with nine implements and 13 functions, including a cupped cigar cutter with double-honed edges. It also has a can opener, corkscrew, toothpick, tweezers, reamer-awl, cap lifter, patented locking screwdriver, nail file, and wire stripper. The Luxury Cigar Cutter and the Cigar Cutter with Scissors have 10 implements and 14 functions including springless, self-sharpening, serrated scissors. There are other models for golfers, mountain bikers, skiers, and, of course, gadget lovers. Models come in stainless, aluminum, and titanium. Some have carrying cases.

In addition to the sales force, the watches and knives are marketed with the help of glossy color brochures and national advertising. The high recognition level of the Swiss Army logo proves that the brand is one in which customers are confident, and it helps sell watches as well as knives. All the Wenger products are guaranteed for life - which also enables the retailer to feel comfortable selling a product outside of his normal line and makes for an impressive purchase on the part of the customer.

Stocking the Wenger products also increases a retailer's gift inventory. Alliance supplies a wide range of attractive displays for the knives and watches. Plus, the prices are reasonable, helping the customer feel he's found a good deal for the money. Knives range in price from $35-$50 while the watches retail for about $160. The image these items carry helps the retailer as well. Wenger has been supplying the famous knives to the Swiss Army since 1908, while its watches are also constructed with military needs in mind and have a serious look about them. They feature such items as 18K solid gold bezels, 27 jewel movement, solid stainless steel bracelets, and certified chronometers with turned gold counterweights.

"Customers see Swiss-made products at reasonable prices. Our research showed that customers would pay 15-20% higher than the manufacturer's suggested retail price. Plus, the merchandise displays help the retailer sell a wider selection of items than he normally would." In the face of drooping cigar sales this could be attractive, especially since retailers make a small financial commitment to handle a wide selection of knives and watches.

"Tobacconists need other viable products going into the future. Because this is a brand with a history, these products add value. It's better than just depending on cigar sales," urges Sullivan.

And how does Sullivan feel about being part of a smaller, up-and-coming cigar company? "I've yet to grow up. I still haven't hit my mid-life crisis."

Alliance Cigar, Inc., 137 Greenwood Ave., Bethel CT 06896, Tel.: (800) 328-1001 or (203) 748-8137, Fax: (203) 748-8264.

SMOKESHOP - June 2000