Welcome To The Perdomo Podcast

SPEAKER_00 0:00

Welcome to the world of Perdomo Cigars. We deliver the most authentic in-depth cigar education to you, the cigar enthusiast. Recorded at the Perdomo Studio in Miami, Florida, brought to you by third and fourth generation Master Cigar Makers. This is the Perdomo Podcast. Your hosts, Nick and Nicholas Perdomo. Dad, welcome to the show.

SPEAKER_02 0:28

Glad to be back. And I'm loving it. I am too, Dad. We got a lot more to go. We got a lot more to go to go. So today's a very it's another controversial subject, but it's something I'm excited to talk

Why Cigar Brands Fail

SPEAKER_02 0:42

about. And it's about the cigar business. And specifically why brands fail and why brands succeed. And so every year there's always new cigar brands coming out. And unfortunately, most brands don't make it. You know, it's one of those things where a brand can't make it just out of luck or hype. And it's all about really just the execution. And today we're going to talk about what makes cigar brands successful.

Vertical Integration And Control

SPEAKER_02 1:06

And Dad, for us specifically here at Perdomo, I think it starts number one, step number one is manufacturing. And you had a dream over 30 years ago about being vertically integrated. And you've done that plus more. And if you can, can you give our audience just a little bit behind about a little bit about this?

SPEAKER_01 1:26

Well, the first thing is I wanted to be in control of my own destiny. That was the first thing. So I've made every cigar I've ever produced. Our company has, whether we worked out of a garage or our cigar factories in Miami and Tampa or in Nicaragua, which we've done in the last almost 30 years now. There's an old Italian saying that says, I don't want to buy the clam. You buy the clam and you end up getting the can. Right. I'll explain to that in a second. And I think I'm proud of what we've done being vertically integrated, where we do everything from seed to box. So when I started, even out of my garage, I was the boutique of boutique cigar makers. But I made every cigar today, and I'm not saying this by everybody, but not to be controversial either. But a lot of these boutique brands are people that come to Nicaragua, the Dominican Republic and Honduras. I see it every day when I'm down in a factory and they're knocking on your door, asking, do you have anything you want to get rid of, or so on? And what these guys do is they put bands on, slap them on, come up with some limited editions, so many boxes, depending how many cigars they can purchase, and come out with these cigars at $20. And I find that to be very disingenuous, not only to the retailer, but also to the consumer, especially. And I have a big problem with that. And I'm going to tell you what my problem is. My problem is if you're a boutique maker, a small maker, a large maker, the word maker means something. It means you made it, right? So I'm proud to say that not only we're completely vertically integrated with great quality, but we've actually made every cigar we ever made since the start of your mother and I when we worked out of our garage.

SPEAKER_02 3:01

Yeah. And, you know, I think because of that, and becoming a vertically integrated company and putting the sacrifice and really just the a lot of money to be vertically integrated between the farms, the factories, and so forth, we've created consistency. And that's what we're known for today. And that's a blessing. And that's due to you making us a vertically integrated company. And consistency from brand to brand, you know, it it gives us the ability to change when we need to make changes and pivot. You know, we're not dependent on outside suppliers. I mean, you had your days when you first started, you were living bail to bail. Thank God we don't need to live like that anymore. And and you have to buy tobacco and, you know, or contract, and people contract factories to make brands for them. That's something, and they're always looking to trace the chase the trends, but that's something that it's the hardest way to be consistent. And I'm just so grateful that we don't have to worry about that.

SPEAKER_01 3:56

It's a great

Growing Tobacco For Consistency

SPEAKER_01 3:57

point. And you know, I brought up earlier you buy the clam to get the can. What I meant by saying that is in the old days, and this is what really turned me off, I would buy tobacco and it'd be overhumidified, it'd be molded, it wasn't cured correctly, it wasn't fermented properly, it wasn't aged properly. And I had to control my own destiny. I that was the most important thing because I said if I depend on some of these guys, I'm gonna go out of business. Sure. And everybody wants a quality product, and I did, most especially. And what happened was in the latter part of the 90s, I decided to grow tobacco. It was the greatest decision I ever made. But it took a while. It took me three years to be able to build stocks. And really, I only had great well-aged tobacco starting in 2000, not including the stocks of tobacco I bought. But the tobacco I tried to produce was better and better and better. And we did that. And today, 26 years later, we have a tremendous amount of stocks of tobacco, well-aged tobacco with numerous years, and that's been a blessing for us.

SPEAKER_02 4:56

Yeah, Dad. And and that's consistency is everything. I agree. You know, consistency, and I think our customers, the number one expectation for cigar smokers, they want to smoke the same exact cigar of the last cigar that they smoked, right? And I think they want to have the sit from the same flavor profiles, construction, they want that cigar each and every time.

SPEAKER_01 5:18

I agree. You know, consistently, consistency does one thing, it builds trust, and people trust us, whether it be our retailers or our consumers around the world, and that's extremely important to me. And trust is what builds a brand. We're not a commodity, we're a brand. We're a family-run company that builds a brand for generations to come. And these brands that we have have been around for decades for a reason because of its consistency, and that's why a lot of people think we're one of the best in the industry today, and I'm very proud of that.

SPEAKER_02 5:51

Yeah, I'm proud of it too, Dad. And I think between the consistency, the trust, I mean, we've earned that, you know, and that starts and that goes all the way back to your decision of I want to be a vertically integrated company. And today's cigar market is very different, it's very difficult. And you gave some some stuff prior to the point. You made some points of the of prior to the points that I'm about to make right now.

Core Brands Versus Limited Releases

SPEAKER_02 6:15

But it seems like the cigar industry today is divided between core brands and limited edition brands. And after 22 years, we are going to be coming out with our second limited edition brand, which is going to be Perdomo Legacy Father and Son. But really, it falls under the umbrella of Perdomo Legacy. So even after the allotment that we release of Prodomo Legacy Father and Son, and when it runs out, for example, for this year's launch, it will be back and we'll continuously have it every year. But you still have Perdomo Legacy to smoke. So that's that's part of our strategy with it. We're giving you, you know, giving 10, 15-year-age tobaccos and father and son, we're giving cigars that are really just the tobaccos we've never used before. So it's something really special, limited. It's truly is limited. So, but if you could talk to our audience a little bit about why we focus on core brands.

SPEAKER_01 7:08

Well, I'm very proud of our core brands. If you take brands like Perdomo 10th Anniversary, Perdomo Habano, Perdomo Lotte 23, Perdomo Fresco, these brands have one thing in common. Their core brands have been out for over two decades. And if you take Perdomo 20th anniversary, it's one of our youngest brands, and it's been out for 16 years and it's still selling incredibly. We strategize a lot, we work a lot with the tobaccos because we're vertically integrated, but it does take us two to three years to come out with a brand. And I'm proud of that. And when a smoker enjoys a product, they always want to buy it. And if you brought up a great point, it's all about consistency, and we're not in a business for one-hit wonders. I've never been wanting to do that. And a lot of times we've retired brands because of table time, not because the brands didn't sell well, because people love our consistency, and you brought up another great point. It's trust. And we're here to build brands that last for decades, and we've been doing it, and I have a responsibility as your father, too. I have a responsibility to teach you the correct things in life and also in the cigar industry, but it's also about delivering consistency for generations to come for you to build things for generations to come. To me, that's paramount.

SPEAKER_02 8:42

Yeah, 100%, Dad. And you know, it's the consistent model that we've created has built that loyalty. It's built trust from the retailers to our consumers. And I know that our retailers can confidently place orders in for Perdomo Cigars, knowing that we're going to deliver, and consumers can find our products anytime. And you build a model that has created loyalty, and for this we're grateful, but we're grateful for the trust that our consumers have given us and our retail partners. 100%.

In Stock Position Wins Customers

SPEAKER_02 9:11

And yeah, it's I agree with you. And I'm sorry, not to cut you off, but you know, another big thing that we're well known we're well known for is our in-stock position. And on the distribution side of Perdomo Cigars, you always taught me that in stock positions everything. If you don't have a brand or brands in stock, you can't sell cigars. And so if you could, if you can give our audience your opinion and really the mindset behind of always of you always having the mentality of always having our brands in stock.

SPEAKER_01 9:44

Strong inventories, of course, are paramount, but strong inventories are equally important, not only for the manufacturer, but also for the retailer. A lot of times, if you go into a retail store and they're out of stock of our product, it's because they didn't order or they've been waiting to order. And you have to have strong inventories. David Garoflo brought up a great point in a previous episode that we had talking about how important it was to be an in-stock position. And part of his success was he was always in in-stock position, and we're the same way, and we're afforded that luxury because we have a tremendous inventory of well-aged tobaccos, and we can be able to ship consistently to the product, to our retailers. Reliable delivery and supporting our retailers is what I deeply care about. And at the end, the win goes to the manufacturer, which would be us, to the retailer, and most notably to the consumer. And that's what we strive for.

SPEAKER_02 10:39

Yeah. And our accountants don't like it, but they don't get it. And you know, it's it's everything. In stock position is everything. And I hate that when we're out of a skew for a couple of days, but we're always there to deliver. And so that's something that you've created in terms of mentality and culture within the company. Everything's about in-stock position, Dan.

SPEAKER_01 10:57

Hey, Nicholas, we ship 99.48% complete. We do. I think we're the best in the industry. I'm very proud of that. And I've never made a dollar on a back order, nor has a retailer, but I'll tell you what, it's tested the patience of many consumers because I talk to them all the time when I travel around the country. And one thing they don't like is going into a store and not being able to buy the cigar they want, and we work really hard to combat that. 100%, Dad.

SPEAKER_02 11:22

100%.

Packaging That Sells Quietly

SPEAKER_02 11:23

And you know, going into it now, talking about products, but specifically, I want to talk about packaging. We are known for our beautiful packaging, and we've spent a tremendous amount of money for our packaging. We use the best printers and we do everything from the foils to the golds, everything that we do, the colors. And we do it, it's for great reason. And why is packaging so important to you?

SPEAKER_01 11:47

Well, to me, packaging is not only a silent salesman, it's the look and the final, the final dress of the product per se. I've always thought that our cigars were much better in our packaging. And I wanted to level that up, and we worked really hard together. I think Arthur Kemper did a phenomenal job getting our packaging right. And we didn't we didn't charge people a penny extra for that, by the way. No. But I think our packaging is the best in the industry. I think a visually appealing brand is going to bring brand clarity. I think people know when they go into the Prodomo section, they can see it vividly. That's extremely important to me. And we most importantly, I want to make it easy for the retailer and the consumer to be able to distinguish our brands from others. And also the ease of shopping. I want our consumers to be able to buy our products at a quick clip because they don't have time to be looking around trying to find things. And I think our packaging is so distinguished that it really stands out and it makes it easy for the retailer and the consumer, especially to purchase.

SPEAKER_02 12:52

Well, I'm proud of the way we package our cigars, Dad, because I think we pay honor to our family, your dad, your great, your grandfather, and the ones before us. You know, we're multiple we're multiple generations in this business. And unfortunately, I don't like a lot of the packaging today. And we're a premium cigar, and it's all about paying tradition, paying honor to the ones before you, the tradition, and I think the elegance. And I think elegance is something that we hold strong and we keep in within our industry today. So I'm proud of your vision and I'm proud that we continue to pay tribute to the ones who came before us and honor them in the tradition of premium cigar making.

SPEAKER_01 13:30

Well, I got to give you kudos. Look at Perdomo Legacy, Father and Son, where you pick those colors, that green, which is it jumps off. I mean, it's just beautiful, and we're getting a lot of people asking for it. You saw what happened in New Orleans at our trade show. People absolutely loved it. It's been incredible. So I think we have a culture where not only do we develop the greatest cigars in the world, in our opinions, and many opinions around the world, but we also want to produce the greatest packaging.

SPEAKER_02 13:59

When we stay on brand and we stay on Perdomo and we stay on the culture, we keep ourselves in the culture, we keep ourselves in the family. So whenever we do something new, it's always on brand. And that's something that I'm proud of because a lot of people try to find that trend. And that's where you go wrong. And so we we are the trend, and I'm proud of that, Dad.

Pricing Built On Small Margins

SPEAKER_02 14:18

And one of the other things, too, going from packaging, and is we're known for the best pricing. And that's incredible. I mean, you know, you look at the packaging, the amount of money we we invest, being vertically integrated is definitely not cheap, but we control our own destiny. And so I'm proud of that because we've created this trust and this loyalty. But we're known for our sharp pricing structure, and our pricing really is second to none. And really, what has always been your philosophy on price points?

SPEAKER_01 14:44

Well, the first thing where prices sell every day. Yep. My father always said that hogs get slaughtered, and people will find out sooner or later, and they'll get tired of it. And the second thing he always said is, I'll guarantee you one thing, small margins guarantee you stay in business. And I always took my father's word, and he was usually always right. One of the things we've done is we've been able to control our cost in Nicaragua by being vertically integrated and being able to pass that savings on to the consumer, yet give them an incredible product that's consistent. And that trust factor came in, like you said earlier. We're not depending on discounting because we're not a commodity brand. We're a family brand that sells every single day with the utmost of quality. And considering our retailers and our consumers, which is extremely important, and our retailers' confidence in us and our consumers' confidence in us, they trust us. And at the end, everybody wins, whether it be the retailer and especially the consumer, and even us as the manufacturer. And I'm extremely content with that.

SPEAKER_02 15:46

Yeah, dad, 100%, and you know, consistency going from packaging to price point, all these things.

Merchandising And Clean Retail Displays

SPEAKER_02 15:53

We took a we went outside the industry back in probably about 2014, going on 12 years. We went outside the industry and we decided we wanted to emulate the greatest company in the world, Coca-Cola. And we wanted to follow their marketing strategy and just in terms of how they place their products. And one of the big emphasis for us is merchandising. We're known for our beautiful, you know, prodomo walls. And you know, I think one of the things, and and there's always more for us to grab, right? And there's more that we are going to continue to grab in retail stores. And it's a big emphasis. It's been a big emphasis for us. But if you can, talk about the importance of this the displays that we have in retail stores across the world.

SPEAKER_01 16:35

Well, what we want to do is we want to we think it helps the retailer move the product more quickly. We also believe it helps the consumer with the ease of shopping to be able to find our products at a much quicker clip because of the beautiful colors and that Perdomo Mystique and finesse that our packaging has. I think it's extremely important that in majority of the retailers, the best retailers around the world, that we have eye-level placement that's extremely important for our consumers and for us. And clean clean displays, in my personal opinion, help consumers buy with ease. And that's where I bring back the ease of shopping. And I'm proud that every Perdoma wall is always clean. And I'm proud of our not only our sales team around the country who really looks at every single detail, whether a shelf talkers folded, but all the beautiful planograms our guys do in Miami to assist our sales team and to assist our our retailers. And at the end, you know who wins? The consumer. And that's who we're fighting for every day.

SPEAKER_02 17:34

100% that but you talk about ease and really the ease of you know, even retailers when we talk to them, they feel an ease. They tell me, man, you know, ever since I merchandised and ever since I placed your product this way, even control my inventory, just being able to refill boxes, because I know where everything's at, everything's perfectly aligned, perfectly set, and I'm able to I'm able to fill up my backstock easier. I'm able to show and and sell my you know my customers because I know where everything's at and everything's so organized. So ease is really a big word. And you know, vertically, and you know, everything's about been about vertical. And you know, dad, being vertically integrated is everything. It is a sacrifice, you sacrificed, and I can tell you personally from a personal level as a kid, there were a lot of days you were gone because you were beating the shoe leather in the road, trying to sell our cigars in order to become vertical. And you spent weeks on end with my grandfather in Nicaragua building facilities, purchasing farms and things like that. So it wasn't just, hey, I took a loan and I I bought I bought some farms, no way. And you you really there was so much that went into it. And you know, it builds vertically integrate being vertically integrated is everything. You know, it builds loyalty, it builds trust, and that's where we have that's due to us being consistent, but we focus on the core brands, proper selling, the best price points, packaging, merchandising. And this is our pronomal formula, and that's really and it's something we're really proud of.

SPEAKER_01 19:06

Yeah, it's a tremendous

Earning Shelf Space The Hard Way

SPEAKER_01 19:07

amount of work. Someone had brought a letter saying that they had seen someone saying that new brands should be given the best placement, and brands like ours and a couple other famous big brands should be on the floor because our brands sell. And I had to laugh at the ignorant comment because when I started selling cigars, I wish I was on the floor. Back in those days in the early 90s, when you had all these massive companies controlling all the the humidors, deservingly so, because they worked hard at it, and I had to respect that work and I had to earn it. Okay, that's that's a big point, earning it. I was lucky if I was on the floor. I was usually put in the backstock or behind the humidor till there was a placement where I could get a box of my cigars. If I could get a box of my cigars on the floor, I was really happy. You get what you deserve with the amount of work, and I want to thank every one of you out there, the consumers and the retailers who've supported us, but you guys all know the amount of work our family did for decades to build our brands. It was done through quality, it was done through trust, but it was done through a lot of hard work.

SPEAKER_02 20:12

You mean you weren't given it?

SPEAKER_01 20:13

No, I wasn't given it. It was a lot of hard work, and I never said you should give me the best shelf space, and all these brands that did a great job at their time should be put on the floor. No, it to me it's insulting. You get what you deserve, and it goes through a lot of hard work. And for us, you know, I look at it as it's all about the fundamentals at Perdoma Cigars, about doing the things right, producing consistent, great cigars each and every time with incredible packaging, and really thinking about the consumer and the retailers' need. And it's how we build brands that have lasted for decades, and my hope, and with the help of God for generations to come. Yeah, don't worry, Dad.

SPEAKER_02 20:55

We'll take care of it. I trust you wholeheartedly. I appreciate it, Dad.

Thanks And Where To Follow

SPEAKER_02 20:59

Well, Dad, this was a great show. I'd like to thank our audience. I really appreciate the support. We have a lot more to go, and this was a great conversation. Dad, thanks again. Thank you guys, and thank you guys very much. If you enjoyed this, please like and subscribe and hit the notification button on our Perdomo YouTube page. Also follow us at Perdomo Cigars on Instagram and Facebook. We will see you very soon. Thank you so much. Thank you guys. We'll see you soon.