The Business Year

Hendrik Kelner

Director General, Tabadom Holding

Javier Elmudesi

Factory Manager, Tabacalera de Garcí­a

What role does domestic and international demand play in your business activity? HENDRIK KELNER For Tabadom, the local market is not important. We only sell cigars to stores that have […]

What role does domestic and international demand play in your business activity?

HENDRIK KELNER For Tabadom, the local market is not important. We only sell cigars to stores that have the conditions to preserve their quality, which sometimes can be a problem because there are not many stores that meet our requirements. In the Dominican Republic, our biggest demand comes from tourists, but that is still a small market for us. Tabadom now has a distribution company that sells in the Dominican Republic; however, it is very limited. Our cigars are expensive, so not too many people in the Dominican Republic are able to afford them. There are a lot of other factories that produce less expensive cigars, and I think they play an important role in the industry.

JAVIER ELMUDESI Today, 97% of our production is exported, with the US and Europe our main markets. We are entering the Asian market, and I believe that our exports to this area will become important for our foreign activities in the near future. Every year we launch new products in our existing markets, because it is important to diversify the product portfolio and consolidate our presence in those markets.

What trends have you spotted in the cigar industry recently?

HK The strong cigar has a greater advertising appeal; people talk more about stronger cigars. However, the biggest sellers are not the strong cigars. Consumers are very loyal and they don’t often look for different experiences. In the US, it’s a less mature market. There are more people that like a strong cigar. Something that is clear in the market is that people prefer cigars with a bigger ring gauge and shorter length; this is because people don’t have time to smoke anymore and especially because in many countries it’s difficult to find a place to smoke.

What is the touristic potential of the cigar-making industry?

JE Over the years, we have come to understand the importance of our production infrastructure, the area we are based on, and the opportunities we have to show how cigars are made to many of the tourists that visit the Dominican Republic every year. For that reason, we offer limited tours around our production facilities, which has actually allowed many people to discover the wonderful cigar-making industry and the many people that it employs. In this regard, we are very proud of our history, culture, and tradition, and being able to show people how we work and how important the staff is provides us with unique feedback.

How will changes to the labor code and tax reforms affect the industry?

HK This will affect us in two ways. The first is the government proposes changes to free trade zone (FTZ) regulations. One is an increase in the sales tax on the local market. However, this is not so important for the tobacco industry. The other is that the government proposes a tax of 10% on dividends, which again is not too important because the majority of the industry doesn’t make a profit, meaning there are no dividends to tax. These are not important to us, but it is a change. When companies come to the Dominican Republic, it is because they analyze different countries and they decide to come here because of the conditions of the FTZs; however, if they change the rules, it could affect investment.

JE In the US we have seen an increased demand for more complex cigars in terms of flavor and aroma, prioritizing stronger varieties. In terms of packaging, it depends on the marketing strategy—we produce boxes of 10, 20, or 25 cigars. Behind the success of any company there is a good stock of tobacco, and Tabacalera de Garcí­a possesses one of the best tobacco inventories in the world, both in terms of quality and quantity. For example, we have at least two years’ worth of stock in order to address an unsatisfactory harvest year. The experience the company holds in the industry and its vast network of international ties and agreements sets it apart from the competition.

What is your forecast for the cigar industry over the next few years?

HK Because of the high price of handmade cigars, we will maintain our market share. However, machine-made cigars are in huge demand and that demand is growing every year. Santiago is the number-one producer of machine-made cigars, and that’s a product for the US market. This is good because it increases employment, and also because those types of cigars use the tobacco from poor farmers. For me, this is more important because today the industry is growing too fast; only 15% of the tobacco is Dominican. Much of the cheap tobacco comes from India, Pakistan, or Bangladesh. This is a big opportunity for the Dominican Republic, and this is where the future of tobacco is. While machine-made cigars are not our business, it is good for the country.

How significant is the company’s investment in workforce capacitation and training?

JE Training and capacitation are key elements of our industry, and we place heavy attention on the recruiting process. In fact, Tabacalera de Garcí­a has its own training school, and we only hire cigar-making professionals after a six-month period in which they are assigned experienced mentors that monitor their learning process. Therefore, we strongly invest in workforce capacity, putting a lot of emphasis on the cigar-making culture of the company. About 65% of our employees are women. Although we do not have any preference when hiring cigar-making professionals, most of the industry’s workers are women.



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