Cigar Hustler Special Episode with Steve Saka

Episode Summary

Recorded live in front of an audience after a steak dinner at a private lounge event, this special episode of A Cigar Hustler's Podcast features Steve Saka, founder of Dunbarton Tobacco & Trust and the former president/CEO of Drew Estate and executive consultant at JR Cigar. The conversation opens light — Saka's discomfort with being called a "legend," Bill Belichick's move to UNC, and decades of New England Patriots fandom — before turning into one of the most candid business-side discussions in the cigar space.

Saka argues that the romanticized factory floor is the least important part of cigar making: the actual roll takes three minutes, and great cigars are really made in the pre-industry — selection, sorting, bulking, fermentation, aging and building the decks for individual blends. He explains why the people running pre-industry are the most critical and least famous in the business, and how a factory's real job is simply not to ruin already-good tobacco. From there he walks through the brutal math facing small brand owners: a 500–700 box order is roughly 90 minutes of factory time at a plant making 120,000 cigars a day, so small brands are a rounding error; "small batch" sounds sexy but consistent daily production by the same rolling pair is what actually yields quality; and buying whole crops is impossible unless you can grade and place every part of it — his tomato and beef-cut analogies explain why there is no such thing as uniformly "great tobacco."

The economics get even more sobering. Saka reveals Dunbarton started at roughly 3% net profit and now runs close to 7% — about $7 on a $200 box — and that even a perfectly run cigar company tops out around 11–12%. He describes the industry's growth trap: profitability peaks around $14–15 million gross, and reaching the next tier requires 40–45,000 cigars a day and three to four painful years of investment just to get back to even, which is why he suspects Litto Gomez has chosen to stay put and why he himself may be content where he is. He talks about turning down acquisition approaches, why his son is no longer in the business, why nobody else in the company gets a vote on his blends (Sobremesa, Mi Querida and Sin Compromiso being the three litmus-test lines), and why Dunbarton is in only ~450 accounts with almost no sales force.

The episode closes with practical advice — work your region before going national, and go clerk in a cigar shop for a year before opening one — plus Saka's take on the PCA board (he wants a mix of social-media-forward retailers, internet grinders and bar-model shops, naming Abe Dababneh of Smoke Inn, Tim Swanson of Cigars Daily, Ammar of Small Batch Cigar and Neptune Cigar as examples), why he'd never serve on a board himself, his surprising nicotine panel results after decades of smoking 8–10 cigars a day, and why he's genuinely optimistic that handmade cigars — which force people to slow down and connect — are coming out of their culturally ugliest period.

In This Episode

1. 01
   The "Legend" Label, Belichick and Patriots Talk
   Saka jokes about the morbid connotations of being called a legend before breaking down Bill Belichick's move to UNC and the state of the Patriots under Drake Maye.
2. 02
   Why Great Cigars Are Made Before the Factory
   Saka explains that rolling is a three-minute process and the real craft lives in pre-industry: tobacco selection, sorting, bulking, fermentation, aging and blend decks.
3. 03
   Growers, Brokers and the Negotiation Dance
   How reciprocity with farmers works over good and bad crops, and why inexperienced buyers get taken advantage of without understanding yields, indexes and crop allocation.
4. 04
   Why Small Brands Get Squeezed at the Factory Level
   At 120,000 cigars a day, a small brand's order is 90 minutes of production — a rounding error — making "job cigars" a tough path without deep tobacco knowledge.
5. 05
   The Myth of Small Batch and Consistent Production
   Saka argues the best, most consistent cigars come from the same rolling pair making the same blend 200 days a year, not from stop-and-start batch runs.
6. 06
   The Real Margins: 7% Net and the $14 Million Trap
   Dunbarton's actual profitability, why even perfect operators cap around 11–12%, and the brutal growth curve required to move from $15 million to $50 million in sales.
7. 07
   Independence, Succession and Selling the Company
   Why Saka wanted no partners or bankers, how three acquisition approaches went, why his son left the business, and why every blend decision is his alone.
8. 08
   Retail Advice, the PCA Board and the Future of Cigars
   Work your region before going national, clerk in a shop before opening one, who belongs on the PCA board, and why Saka is optimistic about cultural acceptance of handmade cigars.

Brands & Cigars Discussed

Linked items are in our shop. Mentions without a link aren’t currently stocked or couldn’t be matched with confidence.

Transcript

One, two, three, four! you'll be good to go yeah all right so hey should i just open a cigar that isn't lit if it's in your hand and it's a motion it's shadow band really yep doesn't matter crazy right fucked up it's absolutely insane all right but hey we're about to get started here This year, we just finished our steak dinners at the private lounge event with the one and only, the legend, Saka Squash. Are we actually going to use this part that we're talking right now? I think so.

What do you think? I'll tell you what I find really weird about this. Alright. So, when I think of the people that are referred to as legends, that means the clock is ticking.

That means I basically have 10 to maybe 15 years max before I'm in the grave. How long have you been in this industry, man? I've been in it for a long time, but I gotta tell you, the term is a rather creepy term. There's not good connotation on the word legend.

It really isn't, because everybody that's called a legend ends up dead pretty soon. All right. So the legend, Steve Sako, is in the house. So, I want to talk about a couple simple things.

We're going to keep it short and sweet. I know you just had a hell of a dinner here. You've been hanging out with everybody. Oh, come on, I'm all liquored up.

You got me. I know. You should abuse the hell out of my brain. Okay.

Well, I'm going to keep it light to start. I know you're a Patriot guy, Bill Belichick, recently signed UNC. Yeah, good choice for him. I think it's a good move.

I think that, look, Belichick coming back to the NFL, how are you hoping to... You're never going to reaccomplish what you did while you were in the NFL, and I think him being such a, he loves to educate, he likes to teach, and I think him dealing with the next generation of NFL players, I think that, I think it's perfect for him, and honestly, I think any kid that's lucky enough to go to UNC, in fact, I think it's going to really change your recruiting at UNC, because think of how many kids are going to want to play there to be coached by Bill Belichick. I think it's a good move. Do you think he has something to prove still?

Is it the whole Brady controversy, Brady made him? No, no, no, no. I mean, come on. Look, you can't chase after something like that.

Look, I was a New England Patriots fan all the way back from like '82, '83. So I went through some really, really sucky years, almost a decade, right? More than a decade. Yeah, it was pretty bad.

And then we had that whole Belichick-Brady era, which was, yeah, well, Jets fans are just, that's masochism at a different level. You guys are very special. Jets fans are very special. So we had that amazing two decades, which are just unreal.

And then look, the team has been horrifically bad for the last five years. And look, here's the funny part. I think that, you know, outside view is that Patriots fans were obnoxious, and there are some obnoxious Patriots fans, but there's obnoxious fans anywhere, and let's get real, the Eagles fans have the clock on the most obnoxious fans, but I think that we were all very realistic, that we knew the time was coming. Right.

I have to admit, the last two previous seasons were really, really painful to watch, because look, when you're a fan of a team, even when you don't win, you want your team to play well. Of course. You want to see progress. You want to see something that gives you that glimpse of hope.

And two years prior to this season, there was nothing. He's of any redeeming value whatsoever. Now this year, it's an ugly year. Frontline's a mess.

Okay. Wide receivers aren't quite clicking still. Defense has been up and down, had flashes of brilliance and flashes of just stupidity. But Drake May, he's been very impressive.

He really has. For sure. And I think that we in New England as fans, I think we're feeling optimistic. I think it's realistic that we have a future to come back.

Now, are we going to have a repeat of 20 years of dominance, that's just so freaky that I don't think that that's a realistic expectation, but you want to be a playoff contention team, you want to have the hope of going, and I think under the current regime and what we currently are working with, I think another couple years we can be back in the mix. So, you know, I'm feeling pretty good today as a Patriots fan compared to where I was. I mean, they could suck for the next decade, you know. Oh, of course, absolutely.

It doesn't matter. Or if you're a Jets fan, you could suck for the next 40 years. And you're right. Right, I mean...

Yeah, I mean, yeah. Four, 40, what are we talking about, four? 40 years, come on. When was Nathan, what year was it?

69. Oh my God. Yeah. That's incredible, man.

Alright, let me get into some of the other questions I have for you. Alright, so I watched like your last three podcasts. Oh my God. Yeah.

Make me want to eat a gun. I mean, welcome to the cigar industry. I never watch any of those podcasts. Yeah?

Yeah, and I'll tell you why I don't watch them, because if you, first off, I obviously repeat myself a lot. Yeah. And the second thing is, you watch yourself on video, and you realize what a moron you are, and then it makes you kind of like, try to change the way you talk and the things that you say, And then you become very guarded, so a long time ago, I decided that I never, I never ever watch or listen to any podcasts I've ever been on. So I won't see this one either.

Well, listen, I think that, I think there are a lot of opportunities that you say things in these podcasts and people don't really pick up on it. And they just kind of mull it over and just kind of move on to the next thing. So one of the things that you were covering was when you're purchasing on a growing level, when you're going by tobacco, that the media and general consumers have a different take on that sort of, that side of things. And it was just kind of let go.

And I had no idea what exactly you meant by that. Do you think that people would give it a different light? I think part of it is, so obviously the factory portion is the part that's romanticized. Of course.

Right? But the reality is the actual manufacturer of a cigar is a three-minute process. Right. It's very short.

So actually, cigars are good before they ever get to the Bonchero. Okay? The factory is actually the place where they take perfectly good tobacco and just fuck it up. A hundred percent.

That's what they do. Okay? So I think the factory part that is so well-covered and so romanticized is actually nowhere near as We're as important as the selection of the materials, and the sorting, and the pre-industry where we're bulking and fermenting and then aging, and then the subsequent sort that comes after the fact, and then the way that we put together the decks for the individual blends, those are actually the most critical components and the factory portion is really very simplistic, it's really a standard of just having standards, having methods, having practices, and then And just enforcing those practices on a repeat basis, that really good cigars are made long before they get to the factory, and the factory is the part where they can ultimately just screw up the work, same way as when you think of a chef, you look at a restaurant, I mean, they can have perfect ingredients, but if they hammer the steak, they hammer the steak, and they can ruin the most beautiful piece of Wagyu beef in the world, right? So I think that's one of the things that I don't think is really covered very much, and part of that has to do with the fact that it isn't very sexy, it's rather tedious, and it's rather labor intensive, and the people that are involved in that end of the business, they're really not the focal point, so they don't get talked much about, right?

Like, how many people here can name one person that's in charge of a pre-industry? Right. Nobody can, right? But the reality is, those are actually the most critical people in the operation of making what I would consider to be great handmade cigars.

I think that's fair. I mean, you know, as a consumer, you go down, it's kind of the show me the baby, right? Like, bam, here's the baby. Now, when you were talking about this, they asked you about, specifically, growers screwing you over.

And you said that would never happen because you're looking to build, you know, your legacy. Yeah, it's a, it's a, it's a, it's a, it's a, it's a relationship that has reprocity in it, right? So, look, you, you have bad seasons, you have bad crops, and you can't really abandon your farmers in those situations, but at the same time, they can't take gross advantage of you when it's a good season because there will be a bad season. So it's one of these things where there has to be some equilibrium between the two of you that you help one and each other out whenever the tides are turned because the reality is they're always turning because in the end we both need one another but we need the materials and they need to sell the materials.

So you try to, you try to, there's anybody, it's like all good, it's not even a tobacco thing, it's just a general business thing. In order to have good business, everybody has to win. If there's somebody that's ultimately being taken gross advantage of on a continual basis, then that's not good business because it's unsustainable. Sure, but now in this industry, we know that there have been smaller brands that have gone to, not necessarily pre-industry level, But just the factory level, where they've kind of been taken, right?

Part of it is, but here's the dilemma that you have, and I feel really bad for most small brand owners, and even for some of the mid-sized guys, that if you don't actually understand what your factory is doing and why they're doing it, how do you actually ensure that you're getting a product at a fair price? Right. I think one of the things that most consumers don't realize that they could also be brand owners just as easily as many of the as the other brand owners, that there's almost there's always factories that are out there that are willing to make you what we call job cigars. Right.

Hey, we'd love to have your business. Come make cigars with us. The other thing, though, on the flip side is you have to understand where those cigars fit into the scheme of how a factory operates. So if you have a factory, let's say you're Drew Estate, for example, when I was at Drew Estate, I don't know where they are now, but when I was at Drew Estate, we were making 120,000 cigars a day.

Right. So when you have this small brand owner that wants you to basically make 100 boxes of this, 100 boxes of that, 100 boxes of that, let's say you're making 500 boxes, 700 boxes of their initial order, you're talking about 14,000 cigars, maybe? Right. The 14,000 cigars is about an hour and a half work on the factory floor on any given day, this concept that you're going to get special this and special that and blah, blah, blah, it's just not the reality of the situation because you're essentially a rounding error for those factories.

So it's so critical to not only pick the right factory partners, but it's even better if you actually understand what they're doing, why they're doing it, what the tobaccos are. The more knowledge you have, the better you are as a customer to the factory. And the reality is most brands don't have that, brand owners don't have that expertise to be able to even judge that. " And I'm not saying that you can't be successful at that, but the only way you can be successful is if you have a factory partner who is really looking out for your absolute best interests.

And the reality is, commercially they have no reason to do so, so it takes a very personal relationship in order to make that work, or you have to actually understand what they're doing and why they're doing it, and that's a real challenge, because there's very few people that really understand the materials, or understand how a factory operates, or understands all the particulars that are involved. So I, for small brand owners, the deck is really stacked against you, it's a, it's a, it's a really tough, tough road to hoe, and that's separate of the commercial issue of then selling and distributing the cigars, that's a, that's an entirely different conversation, but just getting a really high quality product made, it's, it's quite difficult to get it done consistently, and the other thing too is, when you're making things in batches, that's never good. It sounds sexy, small batch production, but the reality is the way you get the best cigars that are the most consistent is when you're making something continually all the time, where that pair that comes in and rolls whatever, Sobra, Mesa, Brule, Robusto, that that is their sole focus every day, 200 work days a year, that's all they do, and they end up ultimately making better cigars. But when you're a small brand, you can't make that type of commitment because what you're looking at is you're looking at that pair banging out 300, 350 a day, end of the week, they got 1500, you got it going into a 10 count box, you start doing the math, you got to move a lot of boxes to be able to get that type of consistent production.

But ultimately, it's that consistent production that actually makes a higher quality product. So even when you're working with someone really good, you have this, dilemma of where you have these gaps of stopping and going. Because I can tell you, whenever we start anything new, the first four weeks are not as good as they should be. Because it takes a little bit of time to kind of get them into the groove and to get them tuned up.

S. industry and distribution. But even at the factory But at the factory level, it's a tough gig. Right.

But now, we've kind of established that factories could screw over smaller brands. Right. I don't think they do it intentionally. It's just kind of the way it is.

It's just such a small part of the day. No matter how we get there, we get there, right? Now, on a growing level, obviously, you said that they wouldn't, you know, you're pretty reputable in this industry, right? But if you were a guy that was just kind of getting into it, and you didn't have the knowledge or the know-how, And if you wanted to start purchasing your own crops or purchasing your own tobacco, do you think that possibly some of those growers would take advantage of those people?

Absolutely. Right. Look, even the serious growers, look, everything that deals with tobacco is always a negotiation. Okay?

So always your grower or your broker, whether you're dealing directly with a farmer, whether you're dealing with an intermediary or a broker, It's always a bit of a, it's an ongoing, intentional dance, a bit of a battle that, you know, they're always going to say it's X, and you're going to say it's Y, but in order for you to even begin to have that conversation, you have to have a really firm understanding of how yields work, how indexes work, how you're going to ultimately cream that particular crop, how you're going to allocate it out to all of it, because there's no such thing as great tobacco. It doesn't exist. It's like any agricultural crop. Think of it like tomatoes.

When you go to the grocery store and you go into the veggie aisle, there's that absolutely beautiful pyramid of round, ripe tomatoes. The tomatoes don't all look that way. They don't all taste that way. In order for that pyramid of perfectly round, ripe tomatoes to exist, there's an entire aisle of ketchup and salsa and spaghetti sauce.

Those are not any different tomatoes than the ones that end up in the veggie aisle, but there's only so many that can end up in the veggie aisle, so you as a buyer of tobacco, you have to look at that crop and go, "Okay, how am I going to utilize this crop? How much of it is going to be worth this? How much of it's going to be worth that? Where am I going to put it?

" Which again, ends up as a real problem when you're a small manufacturer. You can't really get into crop purchases until you have the ability to actually segment out all those various grades of tobacco, because it's like a cow. There's only so much tenderloin in the cow, and there's only so much sirloin in the cow. And in the end, you get down to where you got rump roast, and you got to make hot dogs, and you got to do all these other things.

And so it becomes a real big challenge. And you can only cherry pick so much out of a factory where they're going to only give you a lot of money. They use so much of their great materials, because they also have their own brands, and they would rather use their great materials in their own brands than they would rather use them in your brands, so it's always a bit of a, it's a bit of a dance, it's a bit of a problem, and that's why I think it's really, really difficult for the small starting brand owner to really begin. I think it's a bit of an uphill challenge, and look, you see it, I mean, every year, we have 300 plus introductions into the marketplace, so look, we have pretty much had, since 2001, we've had somewhere between 300 to 500 introductions in the marketplace, pretty much every year, with one exception.

2009, I think it was like 275, right? So, when you think about that, think about it as you as a consumer, what do you actually find memorable from 2023? Because in 2023, there were over 500. Right.

So, of those 500 things that entered the marketplace, can you as a consumer even name 10 of them? Can you name 20 of them? Right. I'm in the business and I don't think I can name 20 of them off the top of my head.

No. But there was somebody that created it, somebody that branded it, somebody that put the effort into trying to market it and sell it for it to ultimately not go anywhere, and I think it's a real, real challenge. I mean, look, you have Postwani, right? Am I saying that correctly?

Postwania. Postwania, thank you. Yeah. I'm going to blame the Scotch.

That's fine. But I mean, you know what a grind it is. Oh, yeah, man. You know how difficult it is.

Of course. And I would argue that you're probably one of the better known of the smaller brands. I mean, there are literally, there's a hundred other people that are beneath where you're at, right, that like, can you name three or four, the average consumer, you might be, because you're looking at them as direct competitors, maybe, but the average consumer doesn't, and then you're trying to get retail space for that product, you're trying to get consumers interested in smoking that product. The whole way the deck is stacked is really towards the big companies with the legacy brands, the ones with the big budgets.

They are the ones that have the most hope. But even in their case, they've launched so many things that ultimately fail. Even having all the advantages on their side, they ultimately aren't successful. It's arguably one of the most competitive businesses out there, it really is, it's a very competitive business that's really, really difficult and that's why so few people, I mean, during the cigar boom, there were over 2,000 new companies.

Of the 2,000, who made it to the other side? Alec Bradley, Rocky Patel, Drew Estate, I mean, we can name maybe, like, Alito Gómez, we can name probably maybe 15, but there were 2,000 of them. Yeah, and they didn't blow up. They just kind of slowly faded away.

You just realized one day that they were gone. What ends up happening is brands die all the time. Consumers didn't even know they existed before they died because there's so many of them. It's like most of them just die a silent death.

Well, that kind of brings me to my next question, because, you know, Dunbarton Tobacco, obviously, you started with Drew Estate, you know, as far as being on that side of things. Yeah, I was in Drew. Right? " You know, like, that's kind of your line, right?

Yeah. It's the reality. I could tell you flat out. We make about a...

So, originally, we started making about a 3% net profit in the beginning. Today, we're pushing, like, right close to 7% net profit. So what that means is if you're a consumer and you buy a box for $200 and then I got my wholesale price on it, that means that basically I make $7 net profit at the end of the rainbow. The margins aren't as big as consumers assume they are.

For sure. They think the profits are much, much larger. And look, on some of the higher-priced products, they're better, but the reality is on the higher-priced products, you sell a very limited number of them. The number of them, so they don't really offset.

And in the end, in our industry, and look, I come from the big side, I come from being exec consultant at JR, and then, you know, president and CEO of Drew Estate. I'm telling you, even if you do everything perfect, you're going to get maybe 11, 12% net profit at the absolute most. I mean, that is ultimately what's going to end up happening, and then once you pay taxes on that and whatnot, you know, it's not the type of business that most people think it is, and I think that's one of the things that does a disservice for the small guys, is because they don't know that when they go into it, think, "Okay, I'm going to make this for whatever. 42?

Right. That's what you're going to make. And that's if the business is running like super good and super clean and you know what you're doing because there's a lot of things that you end up eating in business. And look, it's the same thing from separate of the brand side, but you think about it as a retailer, think of how many cigars you buy that ultimately don't turn.

And then you have to sell those cigars out at a deep discount, in order to move them along, and you're not making any money on that, you're just hoping to cash recover, and that's a hope that you cash recover, a lot of times you sell some stuff at a loss, that's what you have to do, and then you actually lose money on that thing, and I think that's the part where, I think that it becomes a very, it becomes a bit of a wake up call. " And that's very detrimental too when you're in that position of where you have to make that next sale or you're essentially out of business. And that's why most small companies, there's a wide reason, but the biggest reason why in the end they fail is just economically, it just isn't there. It's something that, it's really a game for the more experienced people.

It really, really is. And when you look at it in the end, very few brands ultimately end up surviving. And the other problem that you also have is when you're that small brand and you're in that niche and you're attracting that cigar geek consumer, there's only so many of them. And those cigar geek consumers, they're the most fickle of all the consumers because they're always going to find some girl with a better set on her that they're going to end up moving on to, that's something newer, that's something more shiny.

So the problem that you have is even when you're that hot, young, running brand, and it's the it thing, you can only be the it thing for so long, you have to figure out a way to, how do I get the average consumer that's never going to care about Dunbarton Tobacco & Trust, is never going to care about Steve Saka's pedigree, is never going to care about whatever dog and pony nonsense that I'm pitching, that they just like the cigar, and they buy the cigar, and they add it to their rotation. And that's a really, really hard leap for a company to make when they're that small company that doesn't really even have any comprehension of that consumer, how to attract that consumer, how to deal with the retailers to actually make that consumer work. It's a challenge, and that's why, look, I'm not going to name brands, but I think if we all sit here and we say, okay, what were like the super buzzy, super hot brands 10 years ago, I don't think any of them have made the leap. You know what I mean?

They almost always end up somewhat retracting. Right. Now, if you have a really good product and you can fight your way through it, then you have a potential to live longer. And there's a few companies that are in that category right now, but no, it's a brutal, brutal world, it's just, it's tough, tough business.

So you've been running Dunbarton Tobacco for over 10 years now, right? No, this will be our 10th year next summer. Okay, so you're going to be at a decade. Yep, a decade next summer.

Okay, so now if you can go back 10 years, now that you've kind of had the knowledge and the experience of seeing everything on this side, And like one of the big sayings as far as companies are concerned is, hey, listen, if I'm the number one guy, I'm not making as much money as the number two, right? Okay. So, shout out to David Lafferty, but if you could go back in time... He does actually get a bigger salary than...

Well, that's the saying, right? The number two guy always makes more money than the number one guy in any business. But that's true in any... In any successful business.

If you're running the business well, the idea is not to suck the business dry the cash, because the business needs the cash to grow. Right, exactly. So, now, but if you can go back 10 years, would you have tried to stay with a big company, or would you still take that leap? No, I would, look, the thing for me is, so I've been very blessed.

You know, I got bought out of my situation at the last two previous companies. So, that's a rather unique scenario. I wanted to do something that was wholly independent. I wanted to do something where I didn't have any partners.

I wanted to do something where I didn't have any bankers involved in my life. So, no, I would do what I'm doing. I mean, this is pain by choice. Okay.

So, for me, this is right. And even just the way we've operated the company, I mean, we're not in that many stores. We're not in that many stores. We're in maybe, Laffrey will correct me on this, but I think we're in maybe 450 total accounts.

Most of our territories, we don't have any sales representation in whatsoever. We don't really do a lot of active solicitation because, what am I going to say? My cigars are great and they sell well. 999% of the people.

So we've kind of done the field of dreams, build it, and they will come kind of thing, but I had enough personal capital to take that position and to be that way about it. And also, I don't have dreams of grandeur that I want to make this into a hundred million dollar a year company. So, that's significantly different too because, you know, at our stage you would really just pour a lot of gasoline on the fire, start spending a lot of money on the sales force, you would start spending a lot of money on marketing, you would start doing all of those things, but one of the ugly things about our business is there's this like really weird scenario where you get to about a certain number of units and it's really, really profitable. And it's the most profit you will ever make.

So to just put it in money terms, it's right around 14, 15 million dollars a year gross. When you're doing about 14, 15 million dollars a year gross, the profit never gets better than that. So to go to the next stage, you have to get to a point where you're pretty much producing and selling like 40 to 45,000 cigars a day. So, that period is really just brutally ugly, the amount of investment that you have to make, because now you're making products that aren't necessarily what you want to make, you're having to make them to utilize tobaccos that you wouldn't necessarily want to buy, because to get what you want to buy, you have to buy these other things, it becomes really, really ugly.

So what ends up happening is, it's a phase where you are basically going to go through this really ugly growth curve for a period of about three to four years, if everything goes well, to get back to the profit that you used to be at when you did 15 million. So you got to get to like 50, 52 million dollars a year to get back to where you were at 15, 16, 17 million a year. And the only reason why you go through the pain is because you want to get to that point so that you can then go to 75, 80, 110, 120, and start competing with the big companies, the Drew Estate slash Swishers, the Altiduses, the STGs, the, you know, the My Father, Papin Garcia people, those are the people that you want to compete at. And personally, I don't really want to go there.

And look, you look at a company like Lito Gomez, and as a retailer, one of the major complaints is I can't get what I need, I can't get the product I need, you know, I always have these back orders with Lito Gomez, yada, yada, yada, blah, blah, blah, if I had so much more of it, I could sell it. " Are we going to keep going this way, or are we going to say, okay, what we have is what we have, and we're going to be happy, and given my age, and given just my general, look, I'm a super fat dude, how many years am I going to live? Well, you're down some LBs though. Yeah, I appreciate that, but in the end, we're not close to healthy by any stretch, so, I mean, I'm starting to get to the point where, you know what, maybe I'm content.

Maybe this is, maybe this is where it's at. So, okay, so let's say hypothetically, like, you know that you're gonna, there's gonna be an ending period for you, but you don't know exactly what you want the shape of the company to look like. Is this, is the company something that you're looking to make generational? Or is it something that, you know, hey, listen, if the number comes along, the number is good enough, I'm done, I'm out.

Look, I'm, I am old enough to know to never say never. Okay. Um, I don't have a current interest in selling the company. I've been approached three times?

Yeah, three times. Two times legitimate, one time kind of like just sniffing the ass of a dog. Right. Um, so, um, I mean, the potential is there, but here's the problem.

If you sell the company, it then makes me instantly an employee. Right. For some other company. But what do you go and do the dog and pony for four years.

Right. What do you want? I mean, originally, your son was involved in the company. Now he's not.

Right, he's not. And the reason he's not involved anymore is just, look, it's a very challenging business, and you have to be extremely entrepreneurial. And he's not an entrepreneurial guy. And there's nothing wrong with that.

You know what I mean? But not everybody is cut out to be that kind of person. Some people like to have a good job and earn a good living and support their family and have their vacations. And not the misery.

And the thing is, particularly in my business, on the part that I'm in, it's very confrontational. Slightly. Because I'm not so much on the sales side of things, I'm on the operational tobacco side of things. So, I mean, you've got to be a little bit of a bull in a china shop in order to be effective.

And that's not a very easy thing for someone that grew up as an American to operate in the In that type of environment. Sure. So it's not normal. I think that, you know, best case scenario, I think probably, you know, grow the company to a certain point.

You know, you never want to not grow, but at the same time, not chase the growth, but make it to the point where maybe it doesn't require as much personal time and dedication, so that I can just kind of have a little bit more of a regular life. Like I was just looking at my phone earlier tonight. I haven't slept in my home bed this night, 250 odd years. Okay.

Days. Yeah. I mean, it's a lot. Yeah.

And, you know, and it's. That's crazy. It's crazy. And so maybe there's a way to find a way where the company can do well, So I can't generate cash without me constantly charging to the horizon and then I can enjoy just being the cigar tobacco guy and smile a little bit more and you know get a little bit of fun stuff here and there you know but not actually stop running the company because if the company can cast off so much a year in profit then that's enough profit.

Right. But let me bring you back to the question. Like, ideally, you, okay, so you launched this company, right? And you want, do you want to get your son involved and you want it to be a legacy thing that passes down from generation to generation?

Was that your original vision? Or was it, hey, I can build this, I can make some money? More of it wasn't so much I could make some money, but you have to understand that I have made a lot of people very wealthy using my skills and my talent. So it was more of a, hey, why am I doing this for other people?

I should do this for myself. And even if it didn't make me nearly as wealthy, because the reality is, look, we made a ton more money at Drew Estate. Not today. I'm doing better than I was then, but for many years, it took us, took me a good, you know, almost eight years to get back to where I was.

We've come a long way from you testing people to eat bugs for boxes. I mean, that was like, that was out of the gate, you know? So, I mean, but it's really more, more of a self thing, more of, let me do this for myself. Let me do this without, also, you know, man, no offense to my And having partners suck.

Yeah, partners can be difficult for sure. And I think that's true for anyone. So also having that liberty and having that flexibility to kind of do what you want to do is very rewarding. Your failures are entirely yours, your successes are entirely yours, your trials and tribulations are entirely yours.

And there's something that's very redeeming from a soulful perspective on that, and that was part of what I wanted to do, and I wanted to do things without having any outside influence. And that's the way, look, everything Dunbarton is me, if you, if you don't like our cigars, if you don't like, like, if you try Sobremesa, Mi Querida, Sin Compromiso, you don't like any of those three cigars, don't even bother smoking the rest because you're probably not going to like anything in the line, right? Okay. Now, those may not be your three favorites.

We have a lot of very different cigars, but look, everything is based on my palate, what I like, what I like tobacco wise, what I think makes a good cigar versus a great cigar. It's entirely me because nobody in the company gets an opinion. Nobody gets to test any test blends or sample blends. In the end, it ends up as a finished product in a box with a name, with a price.

Here it is. Let's see what it does in the marketplace. It's going to sink or it's going to swim. But in the end, when it sinks, it's entirely my fault.

And when it swims, it's because I was the eye guy that said this, I think, is going to swim. Got it. I like that. I like the fact that I don't have anyone else that can take credit, but I don't have anyone else to pass the blame on either.

It's all my fault. All accountable for you. So at the end of the day, the reason why you kind of got into it wasn't so much to have, you didn't have an endgame in mind when it comes to a legacy or it comes to the sale of the brand. " I'm going to show you how much of a badass I can be when I do this.

Yeah. You're hoping you can show that you're a badass. Yeah. Well, I mean, you're still here 10 years later.

Almost 10 years. There's a lot of people that have been around for 10 years that aren't doing particularly well. Sure. So being around 10 years is nothing.

Duration means nothing. Yeah. It doesn't add up to anything. Right.

Of course. I mean, you know, being in over 400 stores is definitely impressive. It's actually a very small number. 400 stores.

It's still impressive. Whether you like it or not. Yeah. I mean, look, but we've never been the company that went and really, we kind of the way we work I think it is, we kind of wait until a store asks us to come into their store, and the reality is most of our customers become our customers because they get tired of consumers asking for our cigars, so they kind of get badgered into it by their customers, and not because of actually us badgering them.

That's the right way to do it, right? I think it's the right way to do it, but that's a very long burn kind of scenario that I think a lot of companies don't have the luxury of doing. The problem is you get, I don't think that, like there's so many small brand owners that like, they think they get into Cigars International, or they think they get into a smoke-in, or they think they get into a Corona, or they get into wherever and think, oh my God, I've made it. And the reality is, those are sometimes the worst places you could possibly be, your product gets so lost in the mix, so like, it's no secret, I do a lot of business right now with Smoke In, he does a lot of promotion on my product, right?

Yeah. I'm gonna tell you flat out, my cigars didn't sell for shit at Smoke In for the first four years, like, they just didn't sell, they were literally like boat anchors on his shelf, I literally, he kept them on the shelf, Because I have a personal relationship with him, and he was doing me a favor, is what he was doing. But in the end, that product did not turn. I think that for a lot of small brand owners, they think that getting into these big accounts is gonna be like a win, and it's not a win at all.

You know, the thing that I always tell that small brand owner is, don't try to go national, work your region, do wherever you can. If you can't drive there in a day and not spend a night in a hotel room, start building those personal relationships, one-on-one, individual stores, get to know their consumers, do this, learn small, because the pain that you're going to go through, the amount of money you're going to burn trying to be successful at a national level is just mind-boggling. That's why ultimately so many fail. If you're going to learn what you're fucking up, because you're fucking up something all the time, learn it on a smaller scale.

" My first advice to anyone that wants to open a retail shop is go get a job working as a clerk in a local retail shop for a minimum of a year. " I'm like, dude, if you can't afford to work for $14 an hour, then you should not be opening a cigar store because you're not going to make $14 an hour for the first year, maybe two years that you got that store. So it's better that you go and deal day in, day out with consumers in a retail environment and learn the lessons that need to be learned on somebody else's dime because you doing it yourself is a huge mistake. So, if you're not willing to do that, then you should have no, you should not be thinking about opening a retail store.

Period. Absolutely. All right. I got one more question.

And then we're going to let you set you free and let you go amongst your people. And this one's an easy one. All right. So, PCA has four board members coming up for retail and two manufacturers.

I wasn't even aware of that. Who are the four retailers that you think off the top of your head that should be on the PCA board? I have no idea who's on the PCA board now. Alright, well just who do you think that should be there, regardless of who's on there now?

I mean, I could tell you who it is, you know, by looking at it, I have a photo of it. You're going to get me in trouble on this. Why? It doesn't matter.

Here's the funny part, I don't even know that I'm the right person to ask, because I'm so disconnected from our retailers. You got Emerson's on there, you got ZT Cigars, Metro Cigars in Wisconsin, Smoker Friendly, Ex Officio, obviously Jay Davis, Blue Smoke Dallas. The Cigar Shop in North Carolina, and Casa Grande, Arizona. Those are the ones that I see here.

I know that Just For Him was on there. I don't know if they're maybe they're one of the members that are about to expire. But who do you think? I mean, what do you think?

It should be like, here are the ones that just pop on my head. Again, I don't deal with the retail stores, so this is a laugh. But you know the people. No, I really don't.

You don't know the retailers? No, I don't. It's always been a blind spot for me. You have to understand that.

R. Cigar, didn't deal with retailers, I was president of Drew Estate, didn't deal with retailers, the way I dealt with retailers, somebody would whisper in my ear and say, "This is so and so from such and such and they do $100,000 worth this year, they're a good customer," and I say, "Oh, I really thank you for your business," so. Well, so you know some of those guys, right? So I'm not good there.

You know Ronnie, Secreto, I mean. Yeah, I know, I know, I know. You have, at this point. Let me tell you what I think.

I think that, so I'm gonna ask this in a more, I'm gonna answer this in a more general way. Okay. I think that you need someone that's on the forefront of the social media, internet side, interaction-wise. Okay.

So, off the top of my head, that's like an Abe DeBabna from Smokin', that's like a Tim Swanson from Cigars Daily, that's maybe an Ammar from Small Batch, I think someone that's really interesting. I think that Neptune has a very interesting approach in the way that they capture customers, so I mean, I think you need to look at the people that are like actively taking market share and growing, right? So that would be one segment. Then I think you also need to start looking at those in the trench kind of internet grinders.

I put you in that category, you're one of those guys that's kind of trying to do that hand-to-hand combat. You know what I mean? On the internet side, you mentioned Ronnie earlier, you know, trying to do hand to hand combat. I think that's like a totally different segment that those retailers are showing growth cycles.

And then you also need to kind of have that more traditional. So you kind of want to have more of a mix of the retailers on the board that represent kind of different segments. And look, I think it's foolish not to have someone that's really in that bar model, because the bar model has become so critical to how many of these smaller stores are successful, so I think you need to kind of have someone that's engaged in that more kind of bar model environment, because their needs are very different than what the average brick-and-mortar needs are. And the cigars that they want to stock are different than the cigars that, for example, that box selling kind of retailer is.

So I think you need to have like a better mix of retailers than what's currently in that current makeup. And, you know, so that's number one. But here's the problem, those guys are all busy. Sure.

You know what I mean? And they're really grinding really hard to grow their businesses. They are typically not the ones that want to be on boards, so it's kind of one of those weird things where the people that want to be on boards are almost always not the right people to be on boards, you know what I mean? I don't mean to say that in a negative way against people that are on the boards, but that is kind of the way this works.

Right, you need a more diverse approach. Because you're going to ask me the next question, I would never entertain being on a board with a PCA. Why not? Yeah.

I just feel like, why do I want to beat my head against the wall? I mean, you should have thought about that 10 years ago when you got in the cigar industry. Right? Yeah, but at least I'm beating the head against the wall of my choosing.

Yeah. I mean, I don't know. I think it's... But at the end of the day, like, we have an industry that's constantly under fire.

Right? As far as culturally unaccepted, right? Right? Demonized just because of the fact that we're launched into the tobacco category when it comes to e-cigs and all these other things.

We are very, very, very bad people. Right? We're, you know, 100% evil. However, I promise you, I mean, we can pull blood work right now, and mine's all good, right?

And I smoke every day. You know what's weird? I had, in my last blood work, I actually asked them to do a nicotine panel, because I was curious where my nicotine numbers would show up. Yeah?

They showed me as an occasional smoker. I believe that. And I've been smoking eight to ten handmade cigars for three decades. Isn't that interesting?

A day. Eight to ten for three decades. Right. And I show up as an occasional smoker by my dignity levels.

Every once in a while. Yeah, it's crazy. That's insane. Yeah.

So, you know, I mean, you see that these things that we're, you know, like, I hope to see within the next 10 years, cigars become more acceptable on a cultural level. I mean, like, there are guys that smoke cigars that, even friends of mine, like, Hey, why don't you come over to the house, and we're having a party or whatever. I said, okay, you want me to bring some cigars? Oh, no, no, no, no.

Why not? You like cigars? I like cigars? Cigar, right?

Like, oh, well, it's not that kind of party. You're like, what kind of party is it? You know? An unenjoyable one.

Yeah, so now we're going to just sit and stare at each other? I hope there's a college game on or football or something, you know? But we don't even get to enjoy that aspect of things because of how it appears with the perception. We go through these swings, right?

So I actually, and maybe this is part of weed becoming so much more acceptable. I think there's a little bit more of a libertarian kind of viewpoint that many people individually are adopting. So I think that, I think that we're probably going to fare better than we have in the past. Now, granted, in the short term, I mean, you just saw what some town in Massachusetts try to pass a generational ban, and maybe they have or they haven't.

I didn't read the article very closely. So, I mean, you're always going to have the anti-segment, but I don't know, I feel as though more and more people are getting much more like, live and let live. If it doesn't impact me, I don't really, it's really none of my business. And it feels like it's swinging a little more that way.

Maybe I'm just being a little Pollyanna-ish about this, but I don't know. I feel like it's better. It doesn't mean we're going to get to start smoking cigars in restaurants again or anything like that. But I think there's more cultural acceptance.

I think one of the interesting things for us in our business, I know that the more educated the consumer is, the more engaged they are on the product. So like, when I'm on a plane, and I tell somebody what I do for a living, and they actually engage with me in the conversation, and they start to understand the amount of time and labor and the effort and the process, they actually become really genuinely intrigued by it. It's fascinating. And I think that so I think that as the internet is making information so much more widely available, I think it's something that actually benefits us in the cigar industry, because I think that's one of these things that really captures the imagination of a lot of people that wouldn't typically be intrigued, and that once you start introducing them to what handmade cigars are and what The process is, it becomes something that's rather quite enchanting, and I think that that kind of opens things up.

And the other thing that I think is really important about the aspect of handmade cigars is, in our world that's so fast moving, and so not personal, cigars are very personal. Cigars make you slow down. Cigars make you pause. Cigars make you spend more time with your significant other on the back deck, even if your significant other doesn't smoke.

But the fact that you do, and it takes an hour, an hour and 15, 20 minutes, it provides an opportunity for you to talk. " I don't want to talk with anybody, I want blah, blah, blah, I'm getting this general sense that we as humans are beginning to say, wow, we're really missing out on this personal connection, and because cigars force you to slow down, they kind of force the personal connection to happen, and I think that's one of the things that's a really great benefit to us. So I'm actually quite optimistic about the future of that part of the industry. I'm a little bit more negative on the, where is the corporate industrial side of it going?

That's a totally different conversation, but as a consumer, more people being accepting of handmade cigar smoking, I actually think we're, I think we're actually, I think we're coming out of the ugliest part. I think it's going to actually get a little bit better. Well, I hope, I hope you're right. A hundred percent.

On that note, I think we're going to end this. Steve, thank you so much for coming out. I appreciate you for driving all the way over here, flying all the way out here, being a part of this experience. How do you do, guys?

What do you think? Yeah? All right. All right.

You've never done this before. No. A live audience before. This is the first time ever that we've done this, so I hope it recorded.

Why? I don't know. You know, it's just, you know, it's just something that we've just kind of naturally progressed over time, you know, um, we are all about customer service and customer experience here, right? So, you know, we started these last year, we've done a couple of them, like, okay, how do we make it better, right?

What can we do? How do we add more value to, you know, to make it a little more intimate, make it a little more personal? " I like this part, because it gives, it gives you a chance to have a dialogue. Yeah, absolutely.

Because one of the things I find when I go to like cigar events, consumers are like almost afraid to ask questions, and the reality is, that's the part that I'm the best at. Right. I'm not really good at this, the let me stand up and give you a dog and pony. I can't give the beautiful speech where I'm gonna have a tear coming out of my eye.

So for me, the Q&A part is actually the best part of it. So it always works out well for me personally when I'm in a group environment when somebody asks me a question because then I can give an answer whether that question be an industry question or whether it be a tobacco question or a cigar manufacturing question. So for me, I actually like it. You know what, now that I'm going to do events, I'm going to just bring you to everyone.

No problem. I'm going to do this whole Mike thing. Hey, listen, I can be your number two. We can put Dave down one.

You know, he'd be the number three. He's grossly overpaid. Yeah. Yeah.

Just cut me. Take me in, you know, give me half his pay, and then, you know, a little more, we'll be good to go. Perfect. I love that.

You're fired, Lafferty. Let's not get crazy. Let's just, you know, hey, you know, there's... He'll never watch this.

He won't even know. Let's make a pay cut or something. I mean, I could clip this and tag him if you want. Please do.

No problem. You're done, Dave. That's it. It's over.

It's over, buddy. You're out. All right, brother. Well, again, thank you so much for doing this, and we very appreciate you coming on, man.

Absolutely, my pleasure. Thank you. All right. Thanks, guys.

Thank you.

Show Notes

This week Mikey sits down for an intimate talk during a special in store experience event with Steve Saka