When cigar enthusiast Kurt Van Keppel set out to build a better cutter, little did he know his company's funky-looking, practically addictive device would breath fresh air into a stagnant category and emerge as a new career.
by Dale Scott
Since 1997, Kansas City-based Xikar, Inc., has swept the cigar cutter landscape like a prairie twister. Xikar (pronounced SY-kar) is the Mayan word for the large, dark cicada, from which cigars - supposedly resembling - first derived their name. But while the Xikar name harkens back in history, nearly every aspect of the company's innovative cutters are thoroughly modern - designed from the ground up, combining ergonomic functionality and contemporary aesthetics.
Xikar's 38-year-old president, Kurt Van Keppel, was first introduced to cigars courtesy of his father. "He bought one or two a week from Fred Diebel, the renowned Kansas City tobacconist, for decades," explains Van Keppel. He drew young Van Keppel to try them, but it was a few years before the bug truly bit. Then, in 1994, Van Keppel bought one of the best-known prestige cutters. Examining it, and looking at his credit card voucher, he thought, "I could make a better cutter at less cost than this!"
Building a Better Mousetrap
Van Keppel liked the authoritative leverage of a scissors cutter, with its pivot point. But he wanted to apply the principle to a pocket device. He envisioned a blade-opening spring, since the stirrups would be absent. He'd need a latch, to hold the blades closed until needed. A call to a friend, industrial designer Scott Almsberger, started a year of lunch time brain storming and napkin doodling.
"Scott's plastic prototype was perfect - it's unchanged to this day," explains Van Keppel. Almsberger, Xikar's vice president, continues to develop all new Xikar products.
Next came an engineering firm's drawings and specifications, and the patent pending papers. A machine tool shop made 200 sets of parts. In 1995, the partners and their spouses spent feverish evenings in Van Keppel's garage, assembling 150 cutters. Van Keppel sold the cutters to local smoke shops in Kansas City, and offered them to the 20 members of his cigar club; every member bought one. He advertised them on his new Web site. The market acceptance looked promising. "I sold them to the retailers for my cost - $75, and they sold them for $150. I knew the economics of large-scale production would slash pricing."
Units from this initial batch - laser-engraved with serial numbers - are probably collector's items today.
Van Keppel quit his job, and went to work in the sales department of Xerox. "I told them I had this business going, and might not stay," he says. "They smiled and said 'Oh, you'll like it so much here, you won't leave.'" Shortly, he realized large-scale production was 18 months off, so he sold his house and moved with his wife and two toddlers to his mother-in-law's home in Atlanta. Things weren't easy. In April, 1998, the first shipment of Xikars finally arrived, and by May, he had sold $10,000 in product. "The sales experience at Xerox was valuable," he says, "but I did leave, because I was market-ready."
Breaking Into the Market
|The creative team: Kurt Van Keppel, president of Xikar (at right), with Xikar's industrial designer, Scott Almsberger.
Van Keppel cites a number of good breaks that helped propel Xikar's entry into the accessory segment. One was Curt Diebel introducing him to veteran sales rep Gerry Edelman. Edelman was invaluable to Xikar's growth, both through his personal sales efforts, and by recommending Xikar to three other rep firms, all of whom signed on. Edelman also suggested that Van Keppel send a letter and sample to every member of the Tobacconist Association of America (TAA). "By RTDA Nashville's closing day, they all became accounts," Van Keppel reports. Eventually, Xikar had seven representatives covering the country, and over 1,000 shops selling his cutters.
Next came the Xi2, made in Germany by Wolfertz, who has been making cigar cutters since 1919. They are also Xikar's European distributor. The two models' blades are identical, being 440-grade stainless steel. According to Van Keppel, their Rockwell hardness of 50+ is the hardest of any cutter. The blades are precision ground and hand honed to razor sharpness. Both cutters bear the distinctive Xikar pear shape and come in a variety of metallic colors. The original Xikar has anodized aluminum and riveted frames, while the Xi2's body is a lightweight nylon composite. The Xikar retails for $59, the Xi2 for $39.
Xikar followed up with the Xi3, in 2000. This stainless steel-bodied model comes in two versions, and demand for both is frenetic. One Xi3 model has strikingly beautiful redwood handles.
The most advanced Xikar - if not overall cutter on the market - is the new Xi3 MIM Tech, referring to its metal injection-molded, one-piece stainless steel body. With its seamlessly molded-on nylon "rubberized" grips, it is truly sleek. This model retails for $79, and it sells faster than Xikar can make it.
Expanding the Line
Xikar also offers more traditional lines of cutters that still reflect the company's design ethos, like a Wolfertz-made punch cutter with a self-cleaning plunger, $35 retail ($64 in stainless). The Solingen, Germany-based firm also makes a Xikar traditional single-blade guillotine cutter for tobacconists' house cutters, the Model 314. This disposable cutter offers "a high-quality stainless steel blade in a plastic body," reports Van Keppel. "At 54¢ in lots of 25, it appeals to retailers who don't want to buy large quantities." The company will silk-screen a store's name on them for another 15¢, in lots of 250.
"We had a really, really good break with these cutters," says Van Keppel. "General and Consolidated were giving away their cutters, which was killing our sales. After the [FTC] tobacco settlement, they realized they'd have to print the tobacco warning on all their cutters, since they were tobacco suppliers. When they quit making them, this totally opened the market to Xikar for disposable cutters." Van Keppel says the company's sales for Model 314 cutters for the last year have were triple his forecast.
If you read the postings on Internet bulletin boards like www.cigarfamily.com, you'll know Xikar and Van Keppel are the darlings of consumers. Retailers, likewise, have voted with their pocketbooks for Van Keppel's business and sales philosophy.
"Xikar's design is perfect for cutting cigars," he states. "The ergonomics and aesthetics are excellent. Our choice of materials is unsurpassed. Lastly, the customer sees great value in what he pays for."
Van Keppel places even greater importance on service. "The retailer doesn't need Xikar," he admits. "Though we command maybe 20% of the cutter market, cutters overall only represent 3-4% of a shop's sales. So, our product is a vehicle to give even better service than retailers or consumers expect. We offer a rock-solid guarantee to both." Consumers get a 100% lifetime full-satisfaction guarantee; "we'll even sharpen his blades for free," Van Keppel adds, "though their hardness probably obviates the need. For the retailer, we'll repair or replace any cutter he - not we - determines needs to be."
If a retailer gives a customer a replacement cutter from his stock, Xikar will replace it immediately. "The customer didn't even need to buy the cutter at his store - we'll make all these replacements with a smile and without question," says Van Keppel. Xikar also has a published policy they'll return all phone calls within two hours, and all written communications within one business day.
Van Keppel shows equal favor to his employees. First, though, he makes sure they're up to his standards of performance, and provides them with thorough training in service and communications. His five full-time and two part-time workers are organized loosely - like a soccer team, rather than a highly-structured football team.
"Our people have job descriptions," he explains, "but, they all can handle other's responsibilities. That way, they have versatility and depth of knowledge. If someone is sick or tied up, others can fill in for them." Soon, Van Keppel will make his full-time employees owners in the company. "With employees who concern themselves with the profitability of Xikar, I consider this a good investment in loyalty, capability, and dedication," he says. "Nothing would please me more, off in the future, to walk away from the company, knowing I've left some rich people behind."
Beyond Cutters: Other Ideas for Tobacconists
|Good-Locking Family: The Xikar product line has grown to feature units of different materials targeted at several price points.
Van Keppel also has a new direction for Xikar. "We are a cutlery company," he says. "We found just where we want to go, beyond the cigar market. The cutlery industry, excluding razor blades, is a billion-dollar business, growing 4-6% annually. How many billion-dollar business are showing that growth? Among those sales, gentlemen's pocket knives [folders] account for $150 million, and their sales growth exceeds the 4-6% rate."
If Van Keppel sees great sales potential for gentlemen's pocket folders, he is even more confident smoke shops are the perfect stores for them. "Tobacconists are the last remaining haberdashers, where lots of men come and go, and where their women know they can find gifts for them," he says. "High-quality gentlemen's knives can replace the lost revenues from flagging cigar sales. There are 3,500 domestic smoke shops, and we already have 1,000 of them selling our cutters with confidence. Do you know how many knife shops there are? Two hundred."
The gentlemen's knives offer tobacconists an enticing alternative to the figurines, canes, pewter mugs, and home-decorator items they stock. Much of this merchandise is not only unrelated to tobacco products, it is unrelated to men in general.
Xikar introduced three lines of gentlemen's knives at RTDA, to enthusiastic reception. The company is authorized by the respected Columbia River Knife and Tool Company to sell their entire line in the tobacco market; these retail at $30-$70. Both companies, moreover, are excited about the special knife Columbia River is making exclusively for Xikar. The second line of knives is from Beretta, the world-renowned Italian firearms firm, and these knives retail for $50-$80. Xikar's top offering is collector-quality knives by William Henry. Retailing for $200 up, they are exquisite specimens.
"We'll provide attractive point-of-purchase displays to support retailers," adds Van Keppel. "This year, we're expanding our advertising outside of the cigar publications into general-population magazines and newspapers. I'm excited for the future of these knives in the tobacco marketplace."
Van Keppel says he has other exciting products and services, but that last year's rapid sales growth captured, at least for the time being, the company's time and attention. Considering Xikar's focused marketing strategy, product quality, and fair pricing, the company's success to date is certainly understandable.
SMOKESHOP - October/November 2000