Gene Arganese, Arganese Cigars: The Italian Stallion of Cigars

Source from:  smokemag.com By Frank Seltzer. 05/29/2008

Three years ago, 40-year-old Gene Arganese was keeping his eye on real estate. A developer, Arganese was content running his projects and smoking cigars. But then circumstances overtook him when one of his most ambitious projects - an indoor NASCAR track in Connecticut - was killed. Tired of the politics in land development, he decided to go a new way, investing his time and a considerable amount of money into his lifelong passion: cigars. So was born Arganese Cigars. Frank Seltzer sat down with Arganese at his 7,000 sq-ft. home - Villa Arganese - Santiago, Dominican Republic. SMOKE: How did you go from developer to cigar maker? Arganese: It was really in a round about way. I grew up around cigars. My grandfather and uncle both smoked. I had been smoking cigars since I was teenager. I used to take cigars from my uncle and my grandfather's humidors. As I got older and was working with my dad, I would go to local stores to buy nice cigars. I would try all kinds. But I never really fell in love with one cigar. My choices were kind of limited since there weren't as many brands back then as they have now. This was in the years just before the boom. Every once in a while, I would find a cigar that I really liked to smoke, whether it was a Montecristo or Romeo y Julieta or another brand. Once I found a cigar I liked, six or seven months later it would change. It would taste totally different to me. I thought the store owner where I shopped was switching the bands. I figured he was selling me a 75 cent cigar but felt he had taken the bands off the expensive ones and put them on the 20 cent cigars. Not being educated about cigars, I didn't realize crops were different year to year and it often changed the flavor. Year after year, I still kept trying to find cigars I liked and wanted one I could smoke regularly. SMOKE: But you were busy doing land deals? Arganese: Yes, that was the focus of our company. Originally my father owned a bus company - the Chestnut Hill Bus Company - in Connecticut where I grew up. He had over 400 school buses and did some land development on the side. In 1986 he sold the company to Laidlaw and went into developing full time. By 1989 I had graduated from Suffolk University in Boston and joined my dad in the company putting together real estate deals - mostly commercial real estate or subdivisions. We did really well and I liked the creativity of seeing an empty piece of land and coming up with something new and different. SMOKE: Like an indoor NASCAR track? Arganese: In the northeast we tend to have a climate that is not the same as down south where NASCAR is big. I saw that NASCAR had become the largest spectator sport in the world. Knowing that and watching the interest in the sport growing over the years up in my area, I had an idea to bring NASCAR to Connecticut. The problem up there is you are very limited in terms of what you can do for any racing; the weather just kills you. In order to accomplish something the size of a NASCAR track in the northeast, I thought it had to be controlled where the weather wouldn't be a factor. I wanted a to build something for multi-functional use, NASCAR of course, but also other spectator events like concerts, or the circus. A couple of the tire manufacturers were even going to lease it to test their tires in a controlled climate. We had under option about 400 parcels that reached out to be about 1,000 acres. Everything was a go. We even figured out how to exchange the air so that during a race it would be cleaner than even sitting outside. But then there was an election and the other party took over and they were anti-raceway. Despite all the permits we had, they said "no." So we had to change our thinking. Now I am putting a shopping center on the land. You have to be flexible in development and think outside the box. SMOKE: Is that thinking outside the box what brought you to making cigars? Arganese: Yes. Almost four years ago, after my father died, I was running the whole company. I came down to Santiago on a mission. I had a goal of obtaining about 500 cigars a year for my own personal consumption. I wanted a certain blend and a certain flavor. I didn't care if it cost me 50 dollars or 100 dollars a stick, I just wanted something consistent that suited my taste. It was going to be a personal cigar for smoking at home or in my office. I experienced several factories and was really depressed. I was told, "Gene. what you are looking for went out about seven years ago." Cigar-making was becoming a marketer's game. That was not what I wanted to hear. I was there for my own personal consumption and I was still looking for that "cigar rolled on the thighs of a virgin." But I did meet some people who wanted to make this blend for me on the side. So I started getting my cigars. I really was enjoying having a cigar of my own. SMOKE: So how did you go from a personal blend to jumping in with both feet and starting a cigar company? Arganese: I really was minding my own business, smoking my cigars at work. Guests would come to my office where I smoked and I would offer a few to them. Before you knew it, I started getting phone calls from my business acquaintances. They would say things like "hey Gene, get me a bundle or 50 of your cigars. Get me some for my humidor. I loved them … where can I get them?" I would tell them it was my blend and they weren't for sale. But I started sending them out to friends and it was like Mrs. Fields and her cookies. The word spread from my friends to their friends and soon I was making more and more cigars. One day, the guys in the Dominican who were making my cigars called and said, "Gene, this was supposed to be part-time and we're not looking for a two jobs, but now it is getting ridiculous." I flew down to Santiago and we had a meeting. At the point I was not looking to be in the cigar business, but after talking to these guys, I saw their vision was the same as mine and we clicked. These guys were looking at doing something outside the box. They had years of experience and generations of knowledge in the industry. After talking to them I said, "If you guys are on the same page as me and want to do something outside the box in the cigar world and try unique things, we could start a business." I would give them a little piece and we would start off small and grow it and I'd allocate some funds for it. That was in 2005. SMOKE: But basically you were a customer without a lot of knowledge of the cigar business. Did that hurt? Arganese: Not really. Look, any good employer in any business is going to surround himself with the best in the industry. Like the president of G.E., if you asked him, he couldn't tell you how to make a dishwasher. But he would hire the best engineers and mechanics to design and build one. It is the same anywhere. I knew business, but not the cigar industry, so I surrounded myself with the best people who really knew cigars. Simon Bolivar is one of the best master blenders in the industry. Simon has 30 years of experience. He has worked at General, La Aurora, and with Jochi Blanco. Gustavo Pe?a is one of the best growers. He has generations of experience. His family still grows tobacco in Cuba. Cristobal Vasquez is the manager of the factory and he has a good head for business and can speak three or four languages. I knew I needed good people and gave my three key people special contracts that give them a vested interest in our success and helps us all do better. SMOKE: Did an expert team solve the challenges of being an outsider? Arganese: It still was not easy; there was resistance when we first opened. At first I was told, "we don't do things like that down here." As time has gone on, we began to gain trust of others here in the D.R. They knew we were the real deal and paid our bills. Their skepticism is natural, especially after the boom when lots of fly-by-nights opened and left. They came in like gangbusters, thinking they were going to come up with a product that no one else in the world is going to make, and do something differently. These guys here in Santiago have seen it all. So when they see someone new come in, they take it with a grain of salt. Because a lot of the guys come in and it is like Sinatra's song: "Flying high in April and shot down in May." We have invested a lot of money - well over a million dollars - and built an excellent team. Last year we outgrew our first factory so we moved into our current one which is four times larger. While we still have room for expansion where we are, we're already looking at a new site. We are in it for the long haul. SMOKE: Are you making money yet? Arganese: No, but I am not doing this primarily for the money. If I wanted to make money I could have invested in more land and then sat back and collected the checks. This is about the passion. Sure, eventually I want the company to make money and I would like to be able to give it to my six kids. But I also know it is a long process. We are following the business plan, which is to concentrate on making quality cigars. As you ramp up production, you have to work hard to keep the consistency. The first year we were in business we gave away more cigars than we sold. By 2006 we had opened about 130 accounts. Last year, we attended our first RTDA trade show and added another 70, bringing us up to 200 stores. We were making three primary lines, a Connecticut, a Maduro, and a Nicaraguan. Then we made each in three different strengths: a full bodied called Presidente, a medium bodied called the Chairman, and a mild blend called the Ambassador. That was a good idea, but also a mistake. SMOKE: How so? Arganese: We were trying to be all things and being too clever. Instead we had a lot of the customers getting confused. The problem was a store would take, for example, our white box Maduro cigar. It came in three strengths. The way you knew the difference was on the side of the box it would say Presidente, Chairman, or Ambassador for full, medium, and mild strengths respectively. A guy would go to Joe's Smoke Shop and buy a box of the Maduro Presidente blend. He'd like them. The trouble was down the road at Sal's smoke shop they would carry the Maduro but in the Chairman blend. The customer might stop there next time, see the white box and know it is Maduro and buy it. But when he smoked one he'd find it didn't taste the same. There were so many different blends that some of the stores didn't take all the blends. When the box was open on the shelf you didn't know which was which unless you really read the band. So having learned from that, we are simplifying the blends so now all the Connecticuts will always be the more mild cigar; Maduros will be medium; and the Nicaraguans full bodied. SMOKE: Are you adding anything back to the line? Arganese: Yes, we are introducing two new cigars - the ML3 and the CL3. We call them cigars to the third power. The ML3 is a very dark Brazilian Maduro with Dominican filler and binder. It is a triple ligero cigar, but without the heat. It is a nice medium cigar with full flavor. The new CL3 is a Cuban-seed Corojo wrapper, binder, and filler grown on our farms in the D.R. It is a full-bodied, full-flavored stick. And we are pricing them so they are within reach of most consumers, about $5 each depending on the tax in your state. We also have a double wrapped barber pole type of cigar using an Ecuadorian Connecticut and Brazilian Maduro wrapper with Sumatran binder and Dominican filler. It is a medium bodied cigar with lots of flavor for about $6–7. SMOKE: Is price important to you? Arganese: Very much so. I remember my days of being on the other side and buying cigars as a consumer. Part of my way I do business is to control everything from the farms, to the factory, to distribution. I always remember whatever business I am in, the consumer is your bread and butter. You make an honest day's pay for an honest day's work. And you never want to rob anyone, especially your customer. You want to give a great quality for a great fair price. We really appreciate our customers. Our mission statement is to make the world's finest cigars and to give a great cigar for a fair price. In the end, I think that's is how we will succeed. Enditem