Tabacalera Perdomo:
Esteli's Rising Powerhouse

For cigar companies born in the 1990s, merely surviving the decade was a formidable achievement. The Perdomos did even better, steadily creating a successful brand portfolio, a thriving private label business, and even building a massive manufacturing compound.

by Dale Scott

I am as surprised as anyone at the success of Tabacalera Perdomo. Today, it is one of the few luminaries of our industry, a phoenix that has risen from the ashes of the Great Cigar Meltdown.

Before the cigar boom, the little storefront cigar factories on Miami's Calle Ocho (Eighth Street) and in other Cuban neighborhoods numbered in the dozens. Today, there are only five Calle Ocho survivors, and a couple are on wobbly knees. One, according to its joking competitors, must have hired blind rollers, because the electric company shut its lights off for six months for nonpayment of its bill.

Miami-based Tabacalera Perdomo, formerly Nick's Cigar Company, bore the desolation of the cigar bust of the late 90s. It had enjoyed a couple of years of the heyday, then the bottom dropped out.

Michael Argenti, brother-in-law to Nick Perdomo, Jr., and vice president responsible for national sales, describes the bleak days at Nick's Cigar Company: "For two years, whether we stayed in business on any day depended on what we sold that day."

Nick, Jr., adds, "We're a family business. I can't tell you how I felt looking across the dinner table to see my brother, wife, uncle, and kids. I knew they were all depending on us for their very livelihood. It was an awesome responsibility."

"Companies with twenty times our finances and resources folded," Michael adds. "But Nick and I fed off each other, determined never to quit. Not ever." There was little reason for enthusiasm, though. At the time the premium cigar business was on its slide, their Miami gallery of workers translated to direct labor costs of $40,000 per week alone. And that excluded raw materials and overhead.

Nick remembers when he walked into the Cincinnati RTDA in 1996, Nick's Cigar had exactly thirteen dollars in the bank. "A friend in another booth offered me a bottle of perfume for my wife. I told him I didn't have enough money to buy it." But ten minutes before the show opened the first day, events resembling a Hollywood script unfolded. Says Nick, "Sid Gottlieb of Cigar Club International walks into the booth - in a tuxedo, if you can believe that! - and says, 'I want to place a $110,000 order.' He had sent out sampler packs of our cigars to his club members and they placed extensive follow-up orders."

The Perdomo family knew they were making darned good cigars, and Gottlieb's was only the first of an increasing torrent of orders that turned the almost-down-for-the-count Nick's Cigar into the today's monster of a company, Tabacalera Perdomo.

Says Michael, "We get our validation, not from the ratings - which are consistently among the best - but from knowing we make the best cigars in the world and conducting ourselves in a professional manner. When I do cigar promotions on the road, I didn't lounge around in some smoke shop for a couple of hours and sign autographs. That's symbolism over substance. I'm there from store opening to store closing, in most cases. I educate the consumers and tobacconists about our lines and about cigar manufacturing in general. It's not unusual to set shop sales records at these events."

Argenti is the ideal counterpoint to Nick, the balance it takes to make for a successful company. For cigar tycoons, they both come from non-traditional backgrounds: Nick is a former air traffic controller; Michael was an engineering project manager for the Aegis combat system. Nick is a larger version of his barrel-like father, Nick, Sr. Both Perdomos are the archetypal production management men - the broadsword type. Michael, on the other hand, is the rapier - very quick, with the smooth communication skills. The creativity in his ideas for new products, packaging design, and marketing show he's a right-brain type.

"We aren't a corporate structure, with offices on some top floor in New York," says Nick. Our feet are planted in the cigar business, and that's what we know. We don't have our heads in the sky, because we've been through some of the toughest times, and we know it can all disappear tomorrow."

Rather than disappearing, Tabacalera Perdomo has grown to true empire status, along with the likes of Fuente. I visited their new facility in Esteli, Nicaragua, recently, and it's magnificent - well, as magnificent as a one-story concrete block building can be. At a time when major manufacturers like Altadis were closing down huge factories throughout Central America, Perdomo was building its biggest facility ever. The cigar side of the factory, which opened last year, occupies 102,000 square feet; the adjacent box factory covers another 20,000. All told, that approaches three football fields worth of space. The building's fresh color scheme and cheerful lighting contrast with the tomb-like interiors predominant throughout the industry. The floors are swept spotless continually. Five hundred tobacco workers keep things humming, while another sixty turn trees into cigar boxes.

The facility was two years in the making. Nick, Sr., a former contractor, made certain it would stand the ravages of weather. Having witnessed Hurricanes Andrew (Miami) and Mitch (Central America) firsthand, they located it on solid rock, 48Ð52 inches above grade, to prevent flooding. The building is solid concrete block, with a reinforced metal roof, to withstand high winds. The flow of goods, from raw materials to the shipping department, is organized in a sensible flow pattern for efficiency.

At present, production is at 75 percent capacity, with comfortable elbow-room for the workers. The output - which Nick and Michael insist is limited to ensure superior quality, not high volume - is still 40,000 cigars a day. Michael anticipates calendar year 2001 production to be 12-14 million cigars, (that equates to 7 percent of the total 2000 premium cigar importation into the U.S., or 57 percent of Nicaragua's premium cigar output last year). With almost 2.9 million cigars sold in the notoriously bad first quarter of this year, Tabacalera Perdomo looks like it's on track to meet the annual goal.

The Perdomos are pleased to be providing employment for many Nicaraguans, which helps to fuel the growth in employment in Esteli. As an example of the ripple effect of their growth, Nick points out a Nicaraguan gentleman talking to the plant manager during my visit. "He's our mold maker, and was one of the largest mold makers in Honduras, before moving to Nicaragua. Now he's the biggest in Nicaragua, and he works exclusively on contract to Tabacalera Perdomo. We've kept him busy forty hours a week for two-and-a-half years, making thousands of traditional laminated ash, mahogany, and cedar molds. He also builds our humidors, benches, shelves, etc."

Off the main gallery, storage rooms totaling 10,000 square feet each hold enough tobacco for 41 months of future work, and more rooms are under construction. Other vaults hold finished, aging cigars by the ton. Except for the occasional plant-wide fumigation to knock down errant pests, all tobacco is systematically frozen down to -30¼F for three days, a much less toxic treatment.

My tour of the factory eventually takes me to a small room, where two computer-driven laser machines busily hum away, etching the Perdomo logo in 18K gold on the tops of Perdomo Estate Seleccion boxes. "These two machines, plus another in Miami, cost us $114,000," says Nick. "But, they add just the touch of class we wanted our top-of-the-line cigar to enjoy." The company also has a special machine to automatically drive the strip-fed hinges and clasps into the wood of the boxes. Each piece of hardware has a tiny "Perdomo" stamped in it. "This discourages counterfeiting," Nick says. "Who would go to the trouble of matching this detail?" He shows me the quality of the wood and the construction of the boxes - substantial and ornately executed, they could almost be jewelry chests. Each box gets three coats of varnish, not just one, like most cigar makers do. Perdomo cigars are unequaled in their presentation, with an attention to detail and opulence in the boxes rarely seen. They even unbox all their cigars for a second sorting, just prior to shipment.

In the box factory, Nick points out they are completing a vacuum system that exhausts into a wet-spray environment, which will greatly reduce the sawdust problem for the workers. Out back, we clamber over a huge pile of hewn logs from the coast. "We use a native Nicaraguan cedar for our boxes," Nick explains, "which we think is superior to Honduran cedar." I am awed by the amount of lumber this factory devours daily.

"Instead of buying tobacco on the open market," Nick says, "we co-op with several farmers. We front them money for seed, fertilizer, and additional items, and commit to purchasing a predetermined amount of tobacco, provided it meets our standards." Perdomo is unwavering in its demand for only the creme-de-la-creme in tobacco - the consistent high ratings by the cigar press bears this out. "We've had twelve 'Perfect' scores over the last eighteen months by European Cigar Cult Journal," Nick reports. "That's unprecedented. We consistently earn 4.5s and ratings in the 80s and 90s. Out of hundreds of cigars rated, we've recently had five of the top 25 cigars rated in the world."

Michael Argenti, Nick Perdomo, Sr., Nick Perdomo, Jr., and Tony Perdomo.
As he shows me some of the bales of incoming tobacco, I take the opportunity to broach a question about Perdomo's rosado wrappers. "Nick," I ask, "how do you achieve the burgundy cast on some Perdomo cigars? Are the wrappers conditioned with some coloring agent?" I know the question has irritated him, but his response is straightforward: "Let's look at leaves from some of the bales coming from the farmer today," he says. Nick points out some high-priming, Ecuadorian sun-grown Sumatran bales that hold the wrapper in question. Sure enough, it has a distinctively reddish color. Seeing this firsthand, I am convinced they do not artificially color wrapper leaf for Perdomo cigars.

In addition to its own hot brands - led by the Estate Seleccion, Perdomo Reserve, and the Perdomo2 - Perdomo makes the C.A.O. El Anniversaire, Odyssey, and C.A.O. Millennium cigars, which have enjoyed a string of astronomical ratings. All told, cumulative scores for the C.A.O. El Anniversaire line have averaged in the 90s, which is a considerable achievement.

Though relatively new to the Tabacalera Perdomo portfolio, the company is private-labeling a new line of cigars for Lew Rothman that is proving to be a monster. "Macanudo is the top selling cigar in the U.S.," laughs Michael, "but you'll probably find more of another kind of cigar in American smokers' humidors - counterfeit Cubans!

Rothman has seized upon this idea, essentially telling his customers, 'Don't pay $400-500 a box for fake Cubans. I'll sell you consistently better-quality cigars for $50-75 a box of 25.' So, we're making his Genuine Counterfeit Cuban Cigar line for him. This original box-pressed Counterfeit Cuban cigars line totals eight frontmarks. The cigar is being sold primarily through the JR stores and catalog, but is also available to all retailers through the company's wholesale distribution arm, Cigars by Santa Clara. During recent promotional events at JR stores to launch the cigars, Michael set sales records at every JR location he visited. "This cigar isn't just a knock-off," he advises, "but a wake-up call to deluded smokers." Michael shows me the artwork for the box, including a very authentic-looking, but counterfeit, Cuban government guarantee seal.

Rothman will be introducing his new non-box-pressed line in July, "Genuine Pre-Embargo Counterfeit Cuban Cigars," in boxes of 50. Vrijdag of Holland, the top cigar-band maker who supplies Perdomo with all their art, does the guarantee seal as well as the bands for the "Genuine Counterfeits." A wide, white linen tie wraps around the one-half wheel of cigars. Made exclusively for Perdomo by a large textile mill in India, it is luxurious.

The new maduro Pre-Embargo Genuine Counterfeit Cuban Cigars total eight frontmarks. They are stronger than the original blend, making them very full-bodied. Michael sees 250,000 to 500,000 of these cigars being sold by the end of 2001. You can see where Rothman will make his next billion, with this wizard marketing idea, great cigar value, and opulent packaging.

In addition to C.A.O. and Cigars by Santa Clara, Perdomo produces cigars for other well-established accounts. "Thompson Cigar Company has been a long-time account of ours," says Nick. "We have been making their Magellan and Quo Vadis cigars, and we owe our very existence to Thompson." For Corona Cigar Co. of Ococee, Fla., Perdomo rolls an exclusive churchill size of its Perdomo Reserve - the Perdomo Reserve "C." It also produces the newly-launched Cielo line, which features an Ecuadorian sun-grown wrapper.

Michael says Perdomo will introduce thirteen new frontmarks of their own, with a total of nineteen new facings, at this year's RTDA. Among them are the new Cuban Parejo, The Cigar, Perdomo Reserve, Moments, and Casamontez, which will be exclusive to T.A.A. retailers. Retailers can see all of the new cigars, as well as the company's existing lines, at the Tabacalera Perdomo booths, #1120-1133, at the RTDA trade show in Tampa.

Meanwhile, after 10 years based on Flagler Street in Miami, Tabacalera Perdomo has outgrown it headquarters and moved to a new state-of-the art corporate office facility located in nearby Miami Lakes, Fla.

"Our retail customers truly deserve a location like the one we are opening in Miami Lakes," says Billy Perdomo, Nick's brother who serves as director of marketing for Tabacalera Perdomo. The facility is designed with the walk-in retail customer in mind. "Our customers canÉselect their cigars from our huge, walk-in humidorÉ" says Billy "Égo to the private smoking room and watch their favorite show on our 48-inch screen TV, or store their cigars in their own personalized cigar lockers." The new facility and retail shop is just another sign of Tabacalera Perdomo's rise to the forefront.

Tabacalera Perdomo, 5150 NW 167th Street, Miami Lakes, Florida 33144, Toll-free: (888) 642-5797, Tel: (305) 266-9907, Fax: (305) 266-2951, Web: www.perdomocigars.net

SMOKESHOP - August/September 2001