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Dec.99/
Jan.00

Counterfeit Merchandise:
Marketing
Tall Tales
by
Dale Scott

Ever smoke an OctOpus? Here - try one of mine. Hold onto your seat as we begin our sojourn into the land of make-believe, where the line between marketing ingeniuity and fraudulent counterfieting is being redrawn.

A year or so ago, a well-known retailer and wholesaler was on one of his frequent buying trips to the Dominican Republic. One evening, he was relaxing at his hotel bar with a few industry cronies. A nearby local overheard their conversation and introduced himself. He said he owned a factory that made several second-tier cigars, including a well-known celebrity cigar - back when celebrities were still buying into the cigar game. This cabaret caballero boasted he made a cigar that was indistinguishable from the Fuentes’ OpusX, and asked my friend if he’d like to buy a few thousand boxes.

"No, thanks, amigo," said my friend, having heard such talk before, "but could you make some, uhhh - Octopus cigars instead?" Of course, he was joking. The very next day, though, he was greeted by the tavern tabacalero, who proudly handed him a box of Octopus cigars! On the next trip down to the Dominican Republic, my friend was again approached by the guy - who had ambitiously learned of his arrival through the tobacco-vine - and approached him with a second box. This time, it was a high-quality Spanish cedar box bearing the heat-branded Octopus frontmark, an inside-the-lid multicolored label, a matching sticker holding the tissue closed over the cigars, and a ribbon emblazoned with a little octopus in silhouette. "This guy went to some real trouble and expense to lay this sample on me," says my friend, who took a few boxes for laughs. I believed his anecdote, but he sent me a box for proof, anyway. They were well-made maduro robustos, flavored with a hint of vanilla. I’m not a fan of flavored cigars, but I smoked one, and it wasn’t bad at all. Though the Octopus is a mere excursion into fancy, the Fuentes have had their share of problems with real counterfeiters. Two years ago, they circulated a letter around the industry and posted it on the Fuente/Newman Web site, to announce a reward of a few kilobucks for anyone who provided information on counterfeiters that led to conviction. I never heard if it netted any miscreants, but it was good PR, nonetheless. With OpusX retailing as high as $65 each at one Dallas cigar club, the temptation is too irresistible for unscrupulous operators to offer cheap knock-offs of this and other high-demand cigars.

We’ve seen fake Cubans by the millions, of course, but now the counterfeiting is spreading even further. With warehouses awash in orphaned cigars, the desperation level for those who want to unload their cigars must be at redline.

Beyond the Industry Giants
The major manufacturers have long had problems, but now the pretenders are nettling the second-tier manufacturers. Cupido Cigars, a well-respected boutique maker of Nicaraguan cigars, was one of the latest targets. A New York City-based company called NY Cigar briefly attempted to market what it claimed were Cupido cigars, purportedly stranded at an Esteli, Nicaragua factory which no longer made the brand and was unable to market them under the Cupido name. The offer was originally made on an Internet cigar chat room, outraging Yossi Kviatkovsky, one of the owners of Cupido Cigar, and his partner Dixi Monaco. A week later at the 1999 RTDA Trade Show in Las Vegas, tempers flared when Kviatkovsky angrily confronted NY Cigars’ owner, who had briefly attempted to market the cigars at the show. A cease and desist letter was sent by Cupido’s attorney with promises of further legal action to come, if called for. Yet, on July 29, another posting appeared on the same bulletin board, this time cleverly offering "Cupids."

According to Kviatkovsky, significant differences exist between legitimate Cupidos and the counterfeits:

• Fake Cupidos and ‘Cupids’ come in bundles, with no bands or brand name. Genuine Cupido cigars are banded and packed in limited edition, signed and numbered boxes only.

• Cupido has never produced Coronas or standard Robustos. The company introduced the "Toro Negro" a week after the e-mail message, so the Toros advertised on the site are bogus. Four genuine Cupido shapes are available: Churchill (7 x 47), box-pressed Robusto (51/2 x 50), "Torpito" figurado (41/2 x 54), and the new "Toro Negro" (51/2 x 52).

• Legitimate Cupido cigars are sold only through reputable tobacconists, not at garage-sale prices from low-budget e-mail sites.

Says Yossi, "The ‘V&B/Cupido Cigar Factory’ is a fiction - I was in Esteli this September, and it doesn’t exist. Victor Valdivia is a tobacco farmer, not a manufacturer. We bought tobacco from his 1995 crop to make our original 66,000 boxes of Cupido Churchills. Cupido rolled those cigars in a factory in Esteli - not affiliated with Valdivia whatsoever.

"We did move to our present factory, but we took all our own employees and our master roller with us." Yossi believes the counterfeit Cupidos were actually failed brands, which sold on a series of unsuccessful distributors. NY Cigar claimed ignorance of the counterfeit status of the Cupido/Cupids, according to Kviatkovsky, claiming to have been duped by Valdivia.

Bogus Boutiques Less Risky
Mark Ginzo, Chairman of Brown Leaf Tobacco, Guntersville, Alabama, thinks the recent trend toward counterfeiting second-tier cigars may be due to the con-men’s fear that the major brands have too much legal muscle.

"It seems the counterfeiters are picking out brands that are top-quality but less popular than the majors, and they also tend to limit their activities to local markets. They may think that by doing so, they will not attract as much attention."

Brown Leaf has seen its exclusively imported Yumuri brand appear in bogus form in a nationally-distributed mail order catalog recently. Not surprisingly, it came on the heels of a string of favorable ratings that made Yumuri cigars desirable. The cigars earned a "highly recommended" evaluation in SMOKE magazine, back-to-back "Excellent" ratings in Cigar Aficionado, and glowing reports in Wine & Dine magazine and the Wall Street Journal.

Says Ginzo, "Our company’s president, Chris McBroom, was told by two tobacconists that they had purchased the cigars from a national distributor in the Southeast." Ginzo immediately called the company’s president, because Brown Leaf had not previously sold them Yumuri cigars. He told Ginzo that he had been approached by someone with a list of about a dozen brands of cigar closeouts. He said he recognized only the Yumuri brand, of which there were 600 to 800 boxes, and purchased what he thought were genuine Yumuri cigars at a bargain price of $16 a box.

"He was very cooperative," reports Ginzo, "and asserted he had nothing to do with the counterfeiting. I feel he was duped." Moreover, the quality of the cigars was not a dead giveaway. "He said the cigars had sold quite well - after two weeks, he only had abut 50 of the 200 boxes left," Ginzo says.

The United States Attorney for the Southern District of Florida is investigating the matter. Also, the National Chief of Police in the Dominican Republic has contacted the owner of the factory that produced the cigars. "I called the factory’s owner myself," says Ginzo, "who said a Frank Lorenzo, of Miami, Florida, had contacted him to make the (fake) Yumuris." The whole truth may never be known, because the trail went cold when authorities learned Lorenzo had died several months ago.

Ginzo noted three ways for tobacco retailers to spot the fake Yumuris. "The counterfeit cigars come in only two shapes: a 6 x 54 robusto and a 6 x 46 corona," Ginzo reports, "neither of which we have ever made. More obvious is the logo burned into the top of the box. The genuine Yumuri box has the name ‘Yumuri’ superimposed on a tobacco leaf. On the Lorenzo cigars, the ‘Yumuri’ is superimposed on what is either a tropical hut or a tobacco barn. Another tipoff is the name ‘Reyes y Cia.’ or ‘Capas Nacionales’ on the government revenue stamp on each box - the genuine article bears the name ‘Cuevas y Hermanos.’"

As Glut Recedes, Problems May Lessen
It is almost understandable to see how Caribbean and Latin manufacturers might engage in selling counterfeit cigars. Consider the plight of the many factory owners who have learned that the American companies for whom they rolled cigars are now out of business. They may be sitting on thousands of unpaid cigars, boxes, and labels. What are they to do with them - throw them in the trash? Most of them, having seen boom plummet to bust, are in a desperation mode, and they will go to any extreme to sell their stock.

Clearly, even innocent players can be caught off guard and unknowingly caught in the middle. But the industry cannot condone the violation of trademarks or ethical considerations of such disservice to trusting consumers. Retailers, distributors, or importers who knowingly deal in such merchandise should be prepared to face the legal consequences, and ire of colleagues.

On a lighter note, another reported "counterfeiting" turned out to have a slightly different twist upon investigation. I had heard of the appearance of fakes of a popular second-tier cigar in the New York-New Jersey market not long ago. Just coincidentally, I mentioned this to a major distributor. It turns out he was the very person who had bought the cigars from the factory. But his explanation was that the owner of the trademark owed money on the cigars and the bank was siphoning off the payments to the manufacturer. Since the factory had cigars, labels, and boxes, they looked elsewhere for distribution outlets.

In this troubled market time, with surplus cigars everywhere, you may find them popping up in unlikely places, and more often than not, with unlikely prices. Some retailers, eager for extra profits, will be willingly duped - they don’t know, and don’t want to know, the origin of questionable merchandise. There is danger, though, in dipping into this well. Legal action can bear unpleasant civil penalties, and when attorneys general get involved, the going can get extra nasty.


SMOKESHOP - December 1999