Tobacco Business
Staying Ahead of the Game
Tabacalera Perdomo’s vice president, Arthur Kemper, explains the company’s strategy of incorporating innovation in the traditional premium cigar business.
By Stephen A. Ross
While the art of cigarmaking has been largely unchanged for centuries, savvy cigar companies have always been watchful for breakthroughs in agricultural techniques, production methods, or merchandizing and marketing products in order to increase their tobacco yields, produce better cigars or raise awareness of their brands in the marketplace.
One company that has been a leader in adopting emerging technologies is Tabacalera Perdomo. Since founding the company in 1992, Nick Perdomo Jr. has been ever-watchful for new technologies that can be used to improve agricultural techniques and cigar manufacturing to make better cigars. In its first year, Nick’s Cigar Co., as the company was then known, had total sales that barely surpassed 9,000 cigars. Since then, Perdomo has steered his company’s growth into a behemoth that easily produces more than 15 million cigars a year on a 14-acre factory complex in Esteli, Nicaragua, that includes its own innovative box factory, as well as multiple two-story warehouse buildings where large amounts of tobacco can be fermented and aged.
Likewise, Perdomo’s agricultural arm has grown apace. In the mid-1990s, Perdomo celebrated the first time he bought an entire bale of tobacco. More than 20 years later, Tabacalera Perdomo grows tobacco on more than 1,000 acres in Nicaragua, producing millions of pounds of the valuable leaf annually. Complete vertical integration allows Tabacalera Perdomo to stockpile ample tobacco reserves to ensure the quality and consistency of its cigars while avoiding back orders, and it also allows the company to have complete control over the costs associated with being a cigarmaker.
Arthur Kemper, Tabacalera Perdomo’s vice president, has been a driving force in shaping Tabacalera Perdomo’s growth. Kemper started in the premium cigar industry in 1995 when he accepted a job working at The Humidor in San Antonio, Texas, where some of the store’s best-selling brands included cigars by Perdomo. Kemper appreciated them for their unique, full-flavored Nicaraguan taste profile and often recommended the Perdomo brands to his customers. At the 2000 Retail Tobacco Dealers of America trade show in San Antonio, Kemper met Perdomo and was struck by the personal touch he used while selling cigars. Later in the year, Perdomo offered Kemper a job as an in-house salesperson. In 2003, after Kemper was promoted to national sales director, he was instrumental in building a top-notch team of factory direct sales representatives. Promoted to his current role as vice president four years later, Kemper now works with Perdomo to develop new brands, creating new blends and packaging designs and implementing the marketing and merchandizing strategies to support them.
“We sell a lot of cigars, and it’s because of the quality and consistency of our cigars and also the programs we’ve implemented over the years to build our brands,” Kemper explains. “You’re only as good as your last cigar, and we work hard to stay ahead of the game to ensure that our cigars are among the best in the world. That’s always been the Perdomo way.”
From growing tobacco to making cigars to servicing premium cigar retailers in the United States and abroad, Tabacalera Perdomo has invested tens of millions of dollars throughout the years to implement programs at all levels of the cultivation, production and selling processes. The company constantly searches for technological advances to make better cigars and has adopted best practices from other industries to improve its sales and marketing strategies.
“When it comes to making our cigars as perfect as they can be, we’re a little OCD,” Kemper says half-jokingly. “It’s a privilege for us whenever anyone chooses a Perdomo cigar to smoke, so we do anything and everything we can to make sure that they’re going to have a great smoking experience.”
From Farm to Factory
Producing perfect cigars begins with growing perfect tobacco. Variables such as climate and soil conditions, foliar diseases and insect invasions can all have a serious effect on tobacco growing. Tabacalera Perdomo has its own team of agronomists who work at each farm to reduce the impact these variables can have on the tobacco crops it grows annually. It invests heavily in building seed beds at each farm to ensure that only the strongest plants are hand selected and transplanted into the fields. At each of the company’s farms, Tabacalera Perdomo has invested more than $1 million in state-of-the-art computerized irrigation systems. Using GPS-based applications for precision farming, planning, field mapping, soil sampling, variable rate applications and yield mapping, Tabacalera Perdomo agronomists divide every farm into lots so the irrigation system can be programmed to deliver the right amounts of water and fertilizer to produce the optimum tobacco yields.
“You’re working with gold, so to speak, when you’re growing tobacco,” Kemper explains. “Every step is important. The water is purified through a filtration system. The soil on the farms vary, and we control the exact amount of water and fertilizer that each plant needs. We know every leaf we grow by its region, farm, lot and priming. This level of quality control helps us maintain the consistency of each of our blends, year after year.”
The attention to detail employed by the workers at each farm is just part of the process. Anyone visiting Tabacalera Perdomo’s massive factory complex can witness the computerized controls that follow the handmade production processes in real time. This allows the company to manage its tobacco and cigar inventories so that it always has years of well-aged tobaccos, as well as finished cigars, resting in its aging rooms. Likewise, visitors are welcome to tour the rolling room, where inspectors are constantly monitoring the approximately 150 teams bunching and rolling cigars and where every cigar is draw-tested to ensure the perfect draw. In all, there are 17 quality-control checks that every Perdomo cigar undergoes before it’s deemed ready for distribution.
“We have 3,054 steps in our process of cigarmaking, from the tobacco seed to the finished product,” Kemper explains. “It’s not as if our competitors don’t make great cigars; it’s just that these are the steps we do to make our cigars the Perdomo way. Our processes are comprehensive and have been in place for years. They’ve enabled us to grow as a company and keep our cigars’ consistency while we have expanded. That’s been the biggest key to our success—you don’t want to lose quality when you add more production. Intangibles directly affect the end result, and we’ve invested in training all our employees at the factory on how we want our cigars to be made. Through a lot of hard work, we’ve grown steadily, and we’ve kept control over the quality and consistency of our products. Quality, consistency and passion have been the keys to our success.”
On the Store Front
Staying ahead of the game requires more than just adopting the best agricultural and production techniques; it also means looking at ways that Tabacalera Perdomo can improve its ability to service its retail customers and create partnerships with them that maximize profitability. Educating and training Tabacalera Perdomo’s factory direct sales representatives has been a key element in the company’s overall success. Kemper has been instrumental in implementing the educational training regimen, which includes yearly sales training and visits to the Nicaraguan factory and farms. The company also leverages real-time sales analytics to help Tabacalera Perdomo sales representatives become valuable assets to the retailers in their territories.
“Our factory-direct sales representatives are the best in the business,” Kemper says. “We have trained our sales team to be ‘business partners’ with our retailers. We want to make sure that our retailers are spending their money wisely because we’re not about the quick sale or stuffing our cigars into a store—we view every account as a partnership. We use real-time reporting with each retailer to go over their sales and show them what products are turning for them and make recommendations based on those facts. Every account is different, and we ask our sales team to have meaningful conversations with their customers, analyze the sales data and come up with a game plan for each account. We expect our team to sell our products the right way and to go beyond just writing orders, doing deals and hosting events. We pride ourselves on providing exceptional customer service.”
Tabacalera Perdomo has also looked outside the premium cigar industry for inspiration, especially regarding how it merchandises its cigars. Coca-Cola, Kimberly-Clark and Procter & Gamble have each taught Perdomo and Kemper important lessons about shelf presentations in retail stores. These are lessons that the two have used to create Tabacalera Perdomo’s merchandising strategies, which include custom planograms to help retailers properly place Tabacalera Perdomo products in their store humidors.
“We started studying this about six years ago, and we have fine-tuned it to what it is today,” Kemper explains. “We’ve developed custom planograms for our products that we really believe strengthen our retailers’ profitability. It’s not about taking over their humidors but presenting them with the right products for the demographics of their stores and helping them maximize the profitability of those products.”
Tabacalera Perdomo began by implementing its merchandising plans at its top retail accounts. Using evidence of those stores’ success with the program, the company then presented it to all of its other retailers. With proven success, more Tabacalera Perdomo retailers have bought into the program and the average Tabacalera Perdomo retailer now carries approximately 36 facings of the company’s products, according to Kemper.
“We have 3,054 steps in our process of cigar-making, from the tobacco seed to the finished product.”
“It’s not about just writing an order today; it’s all about turns,” he explains. “Our approach is not about loading retailers up with products; it’s about properly merchandising the product and thoroughly training the retailer’s staff, which helps turn the product consistently in their stores. It’s all about understanding what will work in each store, and selling a retailer the right way. For us, our sales, marketing, merchandising and training strategies are about building long-term success for our business partners, and it’s the right way to do business.”
Doing business the right way by treating its retailers and consumers with respect and fighting for their best interests has been a hallmark of Tabacalera Perdomo since its earliest days. Borrowing ideas from other industries and adapting new technologies to old traditions has created a culture that Perdomo and Kemper have labeled “The Perdomo Way.” It’s a philosophy that has allowed the company to become a trendsetter—staying ahead of the game—for 26 years, and it’s a philosophy that promises bright returns well into the future.