Back to Business In Southern Honduras

Back to
Business
In Southern Honduras

by
Raul Pantalones

For the initiated, it’s usually a simple enough affair getting from Estel’, Nicaragua to Danli, Honduras. Of course, a good dose of patience is always in order: The three-hour journey routinely involves pothole-strewn routes and $20 border bribes.

But even veterens of the trek would have bristled at one recent endeavor. Relying on a dubious tip from a cigar manufacturer, Smokeshop was informed that the direct route through the Los Manos border crossing was closed. “No big deal,” we thought. “Just take the La Entrada crossing.” The ensuing journey turned into a nine hour debacle with a detour through Tegucigalpa, the capital city two hours further north than our destination. When we finally arrived in Danli at two o’clock in the morning, cigar manufacturer Gabriel Lardizabal informed us the Los Manos border had been open all along. (Note to self: Ask at least 10 Nicaraguans for directions before traveling, combine randomly, and then follow your own advice). Logging this vital travel note for next time, we slept, and got ready to see what jewels lay underneath the dusty backwaters of this cigar country’s dubious gem, Danli.

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U.S. Marine-built bridges have paved the way in a rebuilt Honduras.

Just a few short years ago, Danli was a bustling cigar burg, practically bursting at the seams with small “factories” rolling Don This and Don That. Established companies like U.S. Cigar Sales (U.S.T.) and Plascencia were pumping out cigars. Local rolling talent migrated from factory to factory, looking for the highest bidder. The boom times were good to Danli, and the evening trade at the Hotel Granada was bustling with cigar men, old and new, winding down their day with a few Port Royals.

The story today has made a 180 degree turn. Ricardo “El Tigre Jr.” Aramendia’s former cigar factory is now a taco hangout, Nestor’s old tobacco warehouse is closed, Tabacalera is in town, and the crowd at the Granada has slimmed down considerably. According to locals, there have been about five bank robberies in recent months – a situation exacerbated by the high unemployment caused from cigar layoffs. Anyone with a gun carries it, and they’re not for show.

Strangely enough, all this adds up to good news for cigar retailers and consumers alike. The factories that have survived the boom times are mostly bursting with fine, aged tobacco, and the cigar rolling talent has increased five-fold, as only the most senior rollers can find work. It all adds up to a post-boom scenario in Danli that is dominated by three major cigar companies and a few smaller concerns that have a wealth of great tobacco and talented employees to mine from. Here is a look at Danli in the present…

Honduras-Cuban Tobaccos
Thankfully, one of Danli’s many boutique operations has survived the post-boom era’s sharp knife: Honduras-Cuban Tobaccos (HCT). The factory, run by Gabriel Lardizabal, has a history that parallels the vagaries of cigar making in the 1990s – an up-and-down journey strewn with the occasional employee theft, trademark litigation, sour leaf deals, and egomaniacal cigar pirates.

Gabriel Lardizabal, who oversees factory operations at Honduras-Cuban Tobaccos.

Throughout the boom times, Lardizabal has encountered every conceivable cigar manufacturing problem thrown his way, and managed to overcome most of them. The former manufacturer of many familiar brands of the 1990s is now content to manufacture Purofino and F.D. Grave cigars under contract. Both brands have prospered under the manufacturing agreement, and Purofino has garnered excellent reviews in both Cigar Aficionado and Smoke magazines. Working closely with Lardizabal since 1995, owner Roger “Dr. Puro” Ralphs has developed the Purofino Blue, Purofino Gold, and new Purofino Dom lines, while maintaining an annual production of about 200,000 every year since.

The new Dom line is especially notable. A “three-ligero” blend, the brand incorporates 50 percent San Victor Dominican tobacco and 50 percent Nicaraguan Jalapa filler with a Pennsylvania broadleaf binder and a beautiful Connecticut broadleaf wrapper. Ralphs’ initial 10,000 unit order was sold out within five days, and he’s eagerly awaiting the next shipment.

“I have a continuously growing relationship with Honduras-Cuban Tabacos,” remarks Dr. Puro. “The main thing is the consistency of the product. When you have a guy like Gabriel at the helm, you are guaranteed a high tobacco quality and consistency throughout the manufacturing process. Since the shakeout, things are better than ever.”

Purofino is on target to sell another 200,000 units in 1999 – a surprising feat, considering the declining sales of similarly marketed boutique offerings throughout the past several years.

HCT also manufactures premium long-filler cigars for F.D. Grave and Sons, run by Dorothy Grave Hoyt, as well as supplying Geoffery Ranck’s Domestic Tobacco Company, based in Pennsylvania. Lardizabal also maintains a private cigar club, Casa Habana, in the capital of Tegucigalpa, the only club of its kind in Central America.

Puros Indios

Rolando Reyes, Puros Indios.

Rolando Reyes’ Puros Indios factory is another boutique facility that continues to thrive despite the downturn in cigar manufacturing. The Puros Indios factory prospers behind a large, hard-core base of devotees of its Puros Indios, Roly, and the newly resurrected Cuba Aliados lines.

Since the company has moved from HCT back into its own manufacturing facilities located right next door, Rolando Reyes has expanded the facility, raising production levels on the Puros Indios line to roughly four million units per year. A limited production of Roly (250,000 units/year) continues to be manufactured at the plant, as well as the company’s popular seconds line, Roly Seconds, with an estimated production of approximately one million sticks per year. A new line expansion, slated for up to 800,000 units annually, is the Puros Indios box-pressed line, which will be available this month. Established accounts will get “first dibs” on the brand, according to President Carlos Diaz – grandson of Rolando Reyes, Sr.

The company has also entered a new phase since settling trademark disputes with cigar behemoth 800-JR-Cigars, which will now exclusively distribute the company’s Cuba Aliados brand. When Smokeshop visited, Reyes’ factory was humming at 10 o’clock in the evening, not unusual for the man known for his strange – and some say, obsessive – work habits. Under the JR Cigar regime, Reyes may be working around the clock from now on, with Cuba Aliados slated for a minimum of 50,000 units per month. Puros Indios will continue to be distributed in-house.

“We’re very excited about the future,” states Diaz, “Cuba Aliados hasn’t been available since 1995, and the Puros Indios box-pressed cigar will be our first line extension in some time.”

Tabacalera San Cristobal
Perhaps the most dramatic change in Danli came in 1997, when Nestor Plascencia sold his mammoth factory to Tabacalera de Espana, the former Spanish Tobacco monopoly. The veritable epicenter of private-label manufacturing throughout the cigar boom, this plant was responsible for some 80 percent of all private-label manufacturing in Central America. When Tabacalera took over on September 16, 1997, the combined production was a staggering 94,000 cigars per day, with almost 200 brands being manufactured there. Javier Plantada, Tabacalera’s man in Danli, has been the man riding the cigar roller coaster since the company’s takeover.

Juan Plantada at the Tabacalera San Cristobal factory.

Reporting to Benji Menendez, Tabacalera’s operations director for all of Central America and the Caribbean, Plantada is in charge of all things Nicaraguan and Honduran: production of 30,000 units a day split between the company’s Ocotal, Nicaragua and Danli plants. Most of the production revolves around Tabacalera’s VegaFina, San Luis Rey, and Quintero lines, although Plantada still oversees production for several private label brands inherited from the Plascencia deal.

The plant was fairly busy on the day of Smokeshop’s visit. The interior was barely recognizable from the days of early 1997 – a sort of organized chaos with 200 private label brands vying for production. “From the moment we arrived, we knew we were going to have to adapt the factory to the market concessions. It was like driving a car 80 miles-per-hour and trying to change the tires without losing speed,” remarks Plantada. “It was really heavy trying to keep up with the [private label] orders, which were all small orders, with different blend requirements, and at the same time trying to establish production for our own brands.” Currently the factory produces about 35 brands total.

“At the time we took over, the operation’s emphasis was based on quantity – being able to supply the high demand the market had. When we took over, Benji’s directive was to emphasize the actual cigar making. Quality, in other words – having the right raw materials to start with; being able to define blends; and being able to maintain those blends. Finishing the heads the correct way…proper bunch making…stretching the wrapper leaf properly…testing for draw. All of those things may seem like small concerns, but that was our goal.”

Plantada began by changing the actual physical layout of the plant to create an efficient work environment. A wrapper sorting area was moved to accommodate more rolling tables, which were configured back-to-back, with bunchers facing rollers rather than side-to-side. It was just one among a host of changes that were implemented. The second, and more important, goal was to build a two- to three-year supply of tobacco to achieve a consistency in blends.

Now that those goals have been accomplished (helped along by the timely death of over 100 private-label contracts), Tabacalera is firmly in control of its own destiny and free to dedicate the resources of the state-of-the-art facility to new projects. One of those involves the new Havana2000 wrapper, which Plantada has extensive experience with.

“I was fortunate enough to see the birth of this wrapper. I was exposed to this wrapper in Cuba in January 1994. The Havana2000 was in the final stage of the development process,” Plantada recalls. “The first time I saw this wonderful sun grown tobacco, I saw the reddish color of this tobacco, and it struck me as something particularly nice. It maintains most of the qualities of the Cuban wrapper, while being resistant to certain strains of disease such as black rot and blue mold. Now that it is being grown in Honduras [Jamastran and Polancho], Nicaragua [Esteli, Jalapa, and Leon], and Ecuador [trail growths], we are able to incorporate it into some blends with great success.” Tabacalera now uses the wrapper on San Luis Rey, whose open cedar box prominently displays the deep rosado wrapper.

Plantada is enthusiastic about the future of Danli in the cigar industry. The city’s proximity to some of the finest tobacco growing regions in the world; the easy availability of a highly trained workforce; and a newly revamped manufacturing facility all add up to continued quality and availability of San Luis Rey, VegaFina, and Quintero.

U.S. Cigar Sales, Inc.

Larry Polumbo – U.S. Cigar Sales (right).

Once upon a time, when you said “Honduran Cigar” you meant Don Tomas or Astral – the two leading Honduran cigars of their day. Now U.S. Cigar Company is engaged in a fight to regain its stature as a leading Honduran manufacturer. Under the guidance of former Consolidated chief Pepe Guttierez, manufacturing boss Larry Palumbo is leading the charge.

Smokeshop met with Palumbo at U.S. Cigar’s massive Danli-based facility for a report on the company’s current state of affairs. On board since the beginning, Palumbo has seen production range from five million cigars per year in 1995 to 20 million a year in 1997, and back down to pre-boom levels – an incredible roller coaster ride that isn’t over yet.

“If you go back to 1995, we were doing an incredible amount of private labels. That stopped in the second half of 1996, when the demand for our own products became too great. We phased out the private-label business by 1997, and concentrated on our own products,” Palumbo explains. “That year saw U.S. Cigar firmly in control of its own destiny on the manufacturing side, with 100% of the Danli-based plant’s production geared toward Don Tomas and Astral.” Then the effects of the boom took hold.

Palumbo says the cigar boom caught everybody off guard, and that there simply wasn’t enough tobacco leaf to meet the demand in 1997. “There was a situation were you had tons of new people who really didn’t know how to make cigars going out and paying crazy prices for the tobacco,” says Palumbo. “This caused massive chaos – a shortage, and prices that went through the roof.” U.S. Cigar’s own tobacco farms, along with solid relationships with leaf suppliers such as ASP, kept the company away from supply problems, although nobody was immune to the steady increase in prices – especially for wrapper leaf.

Other problems proved more difficult for U.S. Cigar to overcome, however. A once solid reputation with tobacco retailers became strained as distribution was handed over to a liquor distributor, Southern Wine and Spirits, whose own sales personnel couldn’t effectively connect with notoriously tobacco-savvy retailers.

Thankfully, that problem has been acknowledged and corrected. U.S. Cigar now boasts a cigar-savvy sales force whose primary directive is to service cigar retailers. The company has been highly responsive to retailer’s needs, and is manufacturing exclusively for the tobacconist segment of the market – a plan that aims to differentiate the company from other major manufactures. A return to the old distribution philosophy, the addition of several new brand offerings (Astral Vintage, Habano Primero 365), and an inventory of well-aged cigars that keep getting better, have all brought U.S. Cigar back to the forefront.

“I’m optimistic about the future of the cigar business. [It’s] much healthier and stronger than it was in 1991, for example. In terms of premium consumption, I think now we’re probably up to two- to three-hundred million units. That’s almost a three-fold increase in consumption,” exclaims Palumbo. “You also have a lot more people that smoke cigars now, even if it’s only on an occasional basis. That’s what’s made the difference. I’m optimistic that once the market rids itself of all these cheap cigars, we’re going to have stability in the marketplace. We’re much better off than we were five years ago.”

With a huge and highly select inventory of vintage tobacco, a renewed commitment to tobacconists, and hot new brands, US Cigar’s place in Danli – and the cigar world – will be secure for some time to come.

Danli Journal: Part Two will offer coverage of Swisher International, General Cigar Company, and Plascencia with additional reports on private label brands such as Indian Tabac Co. and a leaf report.

[This article appeared in Smokeshop Magazine, 09/1999]