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Quarter 4, 2008

Cusano Cigars:
Taking it to
the Next Level

By E. Edward Hoyt III

This month, Cusano Cigars is opening its own factory and will start producing some of its own cigars for the first time ever. Bolder blends, and more, lie ahead.

For years, Michael Chiusano and his business partner and brother Joe have methodically, consistently built their portfolio of cigars with targeted releases and a strong emphasis on high value and reasonable prices. It’s a temperament and sense of patience that has served him well in the often ego-charged world of cigar making.

As an Italian-American raised in Brooklyn, there was little point in being anybody but himself, and that meant simply a passionate cigar smoker making solid business decisions, making great cigars, and selling them at great prices so everyone can enjoy them.

Chiusano was working as an investment manager in Boston when he had a small batch of cigars rolled in the Dominican Republic in 1995, following a trip there. He labeled them with the phonetic spelling of his name, and gave one to his local cigar shop, who promptly ordered as many as he could supply. Chiusano may not have realized it right away, but he had just started down the path to cigar entrepreneur. He ultimately left his investment job and went on to develop unique but well-balanced blends that were ahead of the curve of other cigar makers. To ensure quality, he eventually consolidated all production with Dominican Republic cigar maker Hendrik “Henke” Kelner, who oversees all factory operations and blending for Oettinger Davidoff Group. “We really think he’s the best in the world,” says Chiusano.

That point was driven home last year, having rolled the dice on a different contract manufacturer for his new Cuvée introductions but coming up completely dissatisfied. The lines were pulled and reblended, and he renewed his vow about making cigars. “If Henke’s not making them, nobody else can,” he concluded. Which inevitably pointed to the next step that would open several new doors for the growing company.

“It has to be me, because I’ve been to other factories, I’ve trained people,” Chiusano says of his decision to take 14 years of learning experiences and tutelage and take his biggest step yet: opening a factory of his own in the Dominican Republic, where Cusano will slowly roll out several new cigars.

“We’ve stayed under the radar for a lot of years,” Chiusano says, viewing this latest development as a “coming of age.” At the same time, he assures that his existing relationship with Kelner - who he considers both a mentor and great friend - is entirely intact. Kelner will continue produce all of Cusano’s existing brands.

The benefits of establishing the factory - called D.R. Global S.A. and located in the free zone in Santiago - are numerous. Cusano can now develop the foreign markets for its premium cigars which, to date, have been hindered by the high cost and long delays of shipping product first to Miami, then oversees. The company currently sells in Mexico, Canada, Portugal, Denmark, Finland, Norway, Sweden, Germany, Austria, Taiwan, and Romania, but in fairly limited quantities; it will be able to dramatically expand oversees business by distributing directly from the Dominican Republic.

It will also be able to streamline the export flow of its machine-made products, which are sourced from several producers in the Dominican Republic. “We needed a consolidation point,” says Chiusano. “We ship those in containers every three or four weeks; we need to fill them.”

In fact, the flow of all product will benefit. “We needed to have a facility to store finished goods, to shorten our supply chain, to keep it pre-tax in the Dominican Republic, and then ship it out,” Chiusano continues. “So I can either increase space at $13/sq. foot in the U.S. and do hand work with U.S. workers, or I can do it in the Dominican Republic at a fraction of that price. It’s better to have the finished goods down there, it opens up the ability to ship to every other country…right from the free zone.”

But perhaps the most important benefit of all is the control over the manufacturing process and handling of leaf. With Cusano now releasing its fullest-bodied blends ever, it’s a point of differentiation from the previous workflow. “The tobacco is a different level of strength that needs to be inventoried, and I need to inventory it myself,” Chiusano explains.

“There are things that I would like to continue to do that I think are going to be very important in the future, but I can’t do it in sombody else’s factory,” Chiusano says coyly. “It’s an investment that I can’t make for them. It’s an extension of the direction that the factory is going in.”

The Cuvée line debuted in 2006, led first by the Cuvée Grande, an annual, numbered, limited production release in a single lancero shape featuring a new blend each year. Then last year, the Cuvée Blanc, Cuvée Rouge, and Cuvée 151 were announced. However, only the realtively mild-bodied Blanc, which are produced by Kelner, reached full distribution. The others, produced by another contract manufacturer, faced several serious production problems - precisely the types of issues Chiusano seeks to avoid with his own facility.

Chiusano says he “loves to be underestimated,” and is extremely confident in the team of people that have been tapped to run D.R. Global. Even before rolling began, the facility had 57 employees on board. Cusano says he shipped about 4.6 million cigars in 2007, and estimates that will reach 5–5.8 million for 2008 with the additional capacity of the new factory. The first cigars to come from D.R. Global will include the re-release of the Cuvée Rouge - now featuring a red-hued hybrid Ecuador wrapper - and the previously announced Cuvée 151, which was also reblended, now shipping with an extremely dark, naturally maduro Brazilian wrapper. It promises to be the strongest of the Cuvée offerings.

Then, there are two entirely new Cusano cigars from D.R. Global. Cusano Habano LXI featuring an Ecuadoran Habano wrapper and the year of Chiusano’s birth in Roman numerals in its name. The other cigar, Cusano 59, is likewise named after Joe Chiusano’s birthyear and has a Cameroon wrapper. Both new Cusanos also feature similarly styled cigar rings that are noticeably more ornate than previous Cusano rings.

A Widening Product Portfolio
With D.R. Global S.A. now online and the release of its first four cigars underway, Cusano is completing its brand portfolio, extending into more fuller-bodied blends, complementing the existing blends in the range.

“We have expanded the depth and breadth of what we do and we’re starting to show off a little bit with some stronger stuff that’s really shocking people,” says Chiusano. “All four of the new brands start where the rest of the portfolio left off, complemented into a wide spectrum.”

Chiusano looks at it as entering a new era where the company can show “quite a bit more diversity in our ability to blend, our ability to make new products, create taste profiles, and at the same time not loose touch with what got us here, which is cigars that are incredibly reliable - perfect draw, perfect burn, everytime. You never have to worry about them. And, reasonably priced.”

Who’s the target consumer for these new cigars? “The widest spectrum of cigar smokers, daily cigar smokers. Not the ‘weekend warriors’ so much but the daily cigar smoker. The guy who wants a great cigar for a great price. Price is what you pay, value is what you get.”

At the opposite end of the brand portfolio is Perfect Cut, natural leaf machine-made cigars that are pre-clipped with a cat’s-eye v-cut, requiring no humidification sealed in shatter-proof tubes (corona) or tins (cigarillos). They are distributed exclusively through a separate company that was established specifically for the sales and distribution needs of cigarette-tobacco stores - CTS Concepts, headed by former Elli Wit executive Bill Holloway. The company also shares sales of the Agio lines, Panter, and Meeharis, with DomRey, which handles all of the premium cigar products.

In between can be found the C10 Limited Edition Tenth Anniversary Series; Cusano 18 Double Connecticut; Cusano 18 Paired Maduro; Cusano Corojo 1997; M1, P1, MC, and CC bundles ranging from mild to full-bodied; and Dominican Sweets flavored cigars in vanilla, cognac, honey, and rum. “Agio is the only outside brand we’ve ever sold,” notes Chiusano.

“We’re a complete package now,” Chiusano concludes. “We have a good team. Good tobacco. We’ve got the best of the best.”

For more information, go to www.cusanocigars.com.

Tobacco Products International - Quarter 4, 2008
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