Cigar Weekly

CW: How did the sale come about?

Eiroa:  Peter Oettinger - the president of Davidoff of Geneva -- and I have been friends for a long time.  He was kind of the matchmaker for this. He's been coming down for the Art Basel show in Miami Beach . [Art Basel is an international exhibition of contemporary art held every year in Basel , Switzerland since 1970-the hometown of the Oettinger-Davidoff Group.  In 2002, a sister show opened in Florida , Art Basil Miami Beach.] When he came to the show, we would get together for lunch.  We developed a pretty good friendship.  I don't remember exactly how it came about, but we started talking about the business.   He said he thought his parent company Oettinger-Davidoff was interested in making acquisitions.  I remember telling him that I might be interested in that.  At the time, we had 2 other suitors who were talking to us about buying the company.  This was in 2006, and it all went on for a year and a half.  I can't tell you who approached whom, but as Peter and I began to develop the friendship, and what I liked about Davidoff compared to the others that we were talking to, was that Oettinger-Davidoff did not want to change our structure. They wanted Camacho just as it is and they wanted to keep our people.  I was very clear with them that our company is made by our people.  They are the ones on the front line and fight for the brand every day and they are the ones who know the brand.  That is why my father said they will protect the legacy of Camacho, they understand what we have built and because they are a private company they are not just here to fill out a fourth quarter earnings report. What they want is to develop brands and since they are still family owned and they will protect our company and employees.  I can say it was not the largest offer but to us it was the best offer for all conditions.

CW: So no changes for Camacho?

Eiroa:  Camacho stays as it is.  That does not mean we will not explore synergies, freight, insurance and about a million other things that we can take advantage of.   Right now we have two sales forces that work well.  Both our companies are making money so maybe we will double up; merge both sales forces, instead of having 10 sales people, now we can have 25.  It will be promoting growth.

CW: And that growth will be strong international distribution for Camacho?

Eiroa: Are you kidding me?  22 percent of Davidoff's business is duty free.  That is just duty free.  Then they have more than 200 company-owned sales outlets and 56 of their flagship Davidoff stores.   Davidoff is available in every corner of the world, about 120 countries.  I have been to Davidoff stores in Tokyo and Hong Kong ; they have distribution companies all over the place.  We were recently talking about Dubai . Can you imagine our little thing, what we started, what we picked up from Simón Camacho, becoming a worldwide brand?  I mean we could become one of the top ten brands in the world.  That was what got me excited and that is our ultimate goal. It is going to be monstrous in terms of sales. If the plan we want to do comes into effect, it will be huge.  Put the numbers together.  We're going to be a big player with only Altadis and General are bigger than Davidoff in terms of premium cigars in the U.S.

How about that growth will you be able to accommodate it?

Eiroa:   Sure.  Now we have a different reserve structure.  What I mean by that is in the past when my father and I would sit down and I'd say, 'Dad I need to buy $8 million in tobacco,' you know that 8 million comes out of our pockets and my father would say, 'Christian maybe 3 or 4 million dollars might be better.' With the Davidoff backing we can accumulate this tobacco and we can increase production and get aggressive and not worry about some of the shortages we have had in the past. Now, we expect no more backorders.  You see the way risk is assessed up until now was between a 71-year old man, my father, and a 36 year old man, me.  My father was always for more security while I wanted growth.  Davidoff is focused on growth, they believe in this market and in our brands.  But Davidoff will not do it at the expense of our brands or our quality.

Camacho cigars is part of the Oettinger Davidoff Group.  We are not part Davidoff of Geneva, the U.S company. That is just a sister company now. We are owned out of Basel , Switzerland , and that group has 43 companies.  But we are a significant part of it because 50% of all premium cigar sales occur in the U.S.   Our goal is now to grow and now with us being together this way it puts us in a great position even in this economy.  With the extra sales force from Davidoff, it gives us a bigger market and lets us take much better care of our customers.   We have to make sure we can fulfill a lot of their needs by keeping our same mentality.   The customer, when all is said and done, is going to approve of this sale, if we can keep same kind of attention to detail and the customer's needs I am sure it is going to go a long way.

What about your father and his farms?

Eiroa:   My father is retiring from cigars, which is the bitter in the bittersweet.  But you have to understand; my father's passion is growing tobacco, so now he gets to do what he loves to do.  It was always understood the farms would not be part of our deal so my father continues to grow tobacco.   We also have a supply agreement where Davidoff has secured tobacco from our Jamastran farms.  As for my father, I rely on him for advice and I am guessing that he will still be helping out with the cigars as far as my going to him. He is someone I am going to turn to even more for advice because he knows more about tobacco than almost anyone in the business.  I will be spending more time in Honduras , which will take me off the road.  I will be in charge of the whole operation, the Camacho operation and of course everything starts at the cigar production level. Our main focus will be on a smooth transition. 

What attracted Davidoff to you?

Eiroa:  One thing that attracted them a lot is the way we run the company, as a family operation.  Davidoff is looking for its whole operation to begin to think like small family companies again.  That was what built them up.  As a result, hey want to make sure Camacho continues to operate the way we do now.  They are not changing they way we do business or and don't want us coming up with a bureaucracy or unnecessary spending.  Camacho continues to operate with our frugality and it is part of what we do. Ernesto Carrillo of La Gloria Cubana was a big help to me.  We met a lot of times and he kept telling me "you do not relinquish control of your brand because that is your love." I will still run the company as if I owned it to protect the legacy of Camacho

You kept this pretty secret.

Eiroa: It was such a shock to everybody.  We kept this thing quiet.  The news started leaking out last week. We just wanted to keep it quiet. My brother and sister only found out yesterday (Sunday October12th).  We had a family meeting and my father and I told the family before the press release went out.  We felt we had to protect our sales people from rumors.  Our sales people needed to be out selling and not answering rumors or being around people who were nervous.  We did tell the sales force at a meeting last week.

So for Camacho, pretty much no changes other than the growth?

Eiroa: Camacho has full autonomy and now we are in the integration process and I don't know how long that will take.  But we are extremely happy...we like the people of Oettinger Davidoff. I like them a lot.  We actually will have a good time.

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