You go into a humidor and pick out your favorite cigar. Do you ever stop to wonder who grew the tobacco, or who was responsible for its blending and manufacture? Do you automatically assume that the brand name printed on the cigar was the company that did all the work? In some cases, that’s true. But for lots of other cigars, that’s not the case. Sometimes, there are quite a few more hands involved. For those of you with an insatiable curiosity and the desire to learn more about the cigar manufacturing process, let’s break it down a bit talk about all of the various players involved.
It all begins in the earth. The first person in the chain is the farmer, but not just any farmer. You’re talking about a farmer with expertise growing tobacco in a particular region. In some cases, the farmer may even have expertise in growing just one unique variety of tobacco in a given region. Like other specialty businesses anywhere, tobacco growers range in size and scale and location. While each relationship between farmer, broker, and manufacturer may look slightly different, here’s a look at the typical trajectory of the tobacco leaf, starting in the earth and ending up on the tip of your lips.
Once the tobacco has been grown and harvested, the next link in the chain is the tobacco brokers.
Tobacco brokers often buy the tobacco from the farmer right after the fermentation process begins. They complete the fermentation process and re-classify the tobacco. Then they put the tobacco into bails (breathable bags) of approximately 100 pounds and start aging the tobacco leaves. At this point, the broker starts looking for a buyer. Naturally, there’s a significant holding cost for the broker, but as demand continues to increase, so does the price of the tobacco. Ultimately, the tobacco is sold by the broker to a manufacturer at a slight profit (cost of tobacco + holding cost + profit).
A cigar manufacturer buys tobacco from the tobacco broker for use in the production of the final product, the cigar itself. Sometimes, tobacco manufacturers commit to buying the same tobacco every year in order to maintain consistency in their product. Larger manufacturers sometimes even finance the farmer to help ensure they get a consistent flow at equivalent quality. Smaller manufacturers frequently rely on brokers to help secure the supply of tobacco leaves.
What is Vertical Integration?
You may have heard the term “vertically integrated” tossed around in the cigar world. Sometimes, this term can get a bit overused, and it’s not always self-explanatory. Vertical integration simply means that the cigar company owns and controls the entire process, from seed to store. While some would argue that having someone with domain expertise in each of the steps results in a better end product, others would say that being vertically integrated is the only way to guarantee quality.
Here are a few words from Nick Perdomo of Perdomo Cigars as he describes the importance of this in his family’s business.
“Vertical integration means everything to us. It allows us to control every single aspect of premium cigar manufacturing. In turn our quality goes thru the roof. Simply because it's under the eyes of our family and our most trusted specialists. This will be our 22nd year. From seed development, meteorological systems to drones just to name a few. It has been paramount in our growth and the quality of the product. I feel very confident in our cigars and the positive outcome for our retailers and consumers. What else is there? That is why we are vertically integrated.”