Interview with Jon Huber of Crowned Heads – Transcript

Crowned Heads Company

What is your typical workday like?
There is never a typical work day, and that’s one of the things I love about what we do. Every day, whether you have an agenda or not, there’s always going to be twists and turns and different tangents you get pulled off into. Usually, I’ll get in the office between 9 and 9:30. The only thing that’s definite is that I try to leave here by 5:30 just to get home and spend some time with my wife and turn the phone off and be a family guy. That’s about the only thing that’s for sure every day. Right now, for instance, we’ve been working diligently on JD Howard Reserve, which is the new forthcoming brand.

What was the first year of Crowned Heads like?
We started the company in January 2011, and I say that the first year was like an R&D year because you have to setup where you are going to work. You have to setup your philosophy of how everything is going to line up. Then you go out, and you go meet with manufacturers, factories and try to figure out who’s going to be the best fit to line up with your philosophy. Then, once you come to that conclusion, which we did with Ernie (Ernesto Perez-Carrillo), there’s the point of “OK now lets get to work on the cigars”.

So we started in January. We traveled and did all the visits and sampling for probably two or three months. We decided we were going to go with Ernie around April. From that point, we started right away on Four Kicks. The first thing I knew for certain was I wanted to use Habano Ecuador wrapper. Ernie didn’t want to use Habano Ecuador. To this day it’s kind of a joke because he said, “Why do you wanna use that wrapper? Everybody is using Habano Ecuador.”

If you go back to the last CAO release that I was involved with, the La Traviata, since working on that project I fell in love with that wrapper. I just liked the look. I liked the taste. I liked the way it performed on a cigar. I really felt like in my gut we need to use Habano Ecuador in the first release and then we can explore whatever because Ernie is a big Sumatra guy. He loves Sumatra for a wrapper. So he says, “Alright, I got seven or eight bales in the factory that we can use to get us through the first shipment.” That yield was about 30,000 cigars. That tobacco had already been there. He wasn’t doing anything with it so it worked out well.

Our first shipment of Four Kicks, which we started shipping in November 9th, 2011, that first shipment was 30,000 cigars and they sold out immediately. Then we found ourselves in December 2011, January ‘12, February ‘12 completely sold out. So we had to go in October 2011 down to Nicaragua to purchase wrapper leaf. [We had] to purchase all the tobaccos for production that would start back in February of the next year. Then you start shipping again end of March/beginning of April.

Are the labels designed in house?
Everything that we’ve ever done has always been in house. We don’t really outsource anything. Right now we’re working with one graphics designer; a local guy who has a full time job doing graphics. Great guy, talented young man. We’re working with him, got him on a retainer. So, for fun, he kind of does our stuff. Mike and I art direct everything in terms of, “We see it looking like this”. Really, the challenge becomes getting what’s in your head onto the paper and using somebody to be the median to do that. That’s where the challenge comes in. It’s important to work with somebody you have a good rapport with or a good vibe and they kind of get it where you go, “I want this to look like the sash on the pope. I want that color.” You know, that kind of thing where it has to be royal or regal. Somebody that gets that language is important. Steven, the guy that we’re working with, does.

Are you pretty excited about being in Cigar Aficionado Top 25?
Yeah it doesn’t hurt. It’s always nice to be recognized like that. To be honest with you I pay just as much attention to blogs like what you guys do. I look at all of the blogs; BOTL, the news on Halfwheel, Stogies on the Rocks, Cigar Weekly, Stogie Guys. To me, that’s the regular guys smoking the cigar. That’s the opinion that, to me, matters on a day to day. At the end of the year making that top 25 is like Oscar season for the cigar industry. You’re always interested to see how many best of the year lists you make.

How did you find out?
The day that it happened, I was constantly refreshing my screen to try to see. And I thought, going into it, well we got a chance of getting one of the cigars in the top because what they do is they take all the 90 and above ratings from Cigar Aficionado and Cigar Insider. However many hundreds of cigars. [If] they rate 900 or 1000 cigars; how many of those get 90. Then, they take those and rate them again and try to narrow that down to 25. I thought that [since] we obviously had 90 and above on Four Kicks and Headley Grange, I said well we’ll get one of those brands in there but they’re not going to give us two because we’re so small. They’re not going to say, “ OK both Four Kicks and Headley.”  I thought Headley fit their flavor profile a little more; stronger cigars. So I thought we’d get in there. I would have liked to be a little higher but just getting in there is fine. For a young company like ourselves, to get there that quickly, we felt pretty happy about it.

Would Crowned Heads exist if CAO never left Nashville?
Hmm, that’s a good question. [long pause] Yes, definitely. If you had rephrased that question and said, “If CAO had never been acquired by a larger company, would Crowned Heads exist?” That question I would have a little harder time answering. The whole time I was at CAO I felt a real loyalty to the Ozgener family. Cano gave me my start. Together, there was a small team of us that went from the garage to the globe. We went from getting cigars from his house on a pickup truck and shipping them out by hand every day to basically building this building and to making 20 million cigars a year within 10 years. But then when big corporate America gets hold of it, or corporate Europe in this case, it changed the game completely.

CAO was acquired by Henry Wintermans initially. I think ‘06/’07, something like that. The first year, like anything else, it was, “Oh no, no, no…we want you to keep doing what you’re doing and if it’s not broken don’t fix it.” So we felt confident about it. Then slowly but gradually, once Henry Wintermans got acquired by Scandinavian Tobacco, which ST then merged with General Cigars, then it just got ugly. Then the days went from doing what I’m doing now, which is product development, marketing, PR stuff. We went from doing that to,  “OK we need to do this five year projection, the P&L report.”  It just became very, very corporate. It sucked. I couldn’t wait to get it over with. I wanted to stay until the very end. I knew exactly that as soon as the doors shuts, I was like “next.”  Mike and I, my partner, he and I left CAO. The last day was December 17th, 2010. December 21st, 2010 we had our first meeting. I was ready to hit the ground running.

Did you think you’d end up back in this building?
No, not at all. I had no idea we’d end up back here in this building. In fact, it was like, “well where are we going to go?” We were looking for office space all over Nashville and ended up in Cummins Station. Two years later, our lease was expiring. It turned out by destiny that we ended up back here. Still a smoking building, we had these three offices that were available. So we moved back. This building? No. Fortunately, Cano retained ownership to the building and the land.

Will Crowned Heads do more limited editions like the Mule Kick?
There is definitely at least one we will do this year. I already sketched it out with Ernie when I saw him in February. When I was walking around looking at tobacco I said, “OK take this and put it away.” Yeah, there will be another limited edition 2013 probably around September/October is what we’re shooting for.

You guys do a lot with social media but I haven’t seen any advertisements for Crowned Heads. What is your advertising strategy?
The whole business model of Crowned Heads was going to be very different than the masses. We haven’t used any brokers or any outside sales guys up until about a week ago we hired an outside sales guy. Well, we call Wes basically our brand ambassador, our liaison to retailers because I never wanted a sales guy. You say “sales guy” and it reminds of these guys who walk through the airport with the rolling luggage and the sunglasses on their head and the polo shirts and that wasn’t our style. We got to know Wes over a year and a half and I just felt like he got it. I thought he would be a good extension of the brand which is why we hired him. But we never really try to go out and create ad campaigns. We don’t sit here and thumb through demographics. It’s all very instinctual at this point for us. And the only way we’ve built the brand is through social media. I always thought if you had a good product people will find it. Word of mouth is the best advertising as far as I’m concerned. We went from November ‘11 we started with 66 different doors across the country and today we’re in about 335 doors across the country. We did all that with no advertising, no sales people. Just word of mouth and getting the product out there.

I look back at an experience I had with Tatuaje. Pete [Johnson] and I have been friends since 1996. I’ve always admired what he has done with Tatuaje. I remember in 2003 I saw Pete at the trade show and every time I’d ask, “What’s good out there? What should I smoke?” Pete has a great palate. He came up with two boxes of these unbanded cigars and he says, “Try this.” He goes, “This is my cigar”, and I said, “What is it?” He says “Tatuaje.” That was 2003. As soon as I smoked it, I was like, “That’s how you do it! That’s amazing. That’s a game changer.” That was what became the Brown Label. Here we are, ten years later, and look what he has done. He’s probably the number 1 boutique brand at two million cigars a year. He started with that and if you look at how Tatuaje was launched, he broke every rule he could break. He had a cigar that was made in Miami so the cost to produce it was very high – so it had to be a highly priced cigar. Right away it was an expensive cigar with a name that was almost impossible to pronounce – very subdued packaging and with no advertising. But the moral of the story is that if it’s a good cigar, people will find it and they’ll seek it out. All of a sudden people started trying and slowly but surely he was in this many stores [puts hands apart]. The second year he was in this many stores[hands further apart]. It caught on. That’s always how I wanted Crowned Heads to be. I wanted to make great cigars that would find homes and find people that were enthusiastic about the brand. I like to think that in the first year and a half we’re on our way.

Would you consider Pete/Tatuaje a direct competitor?
I would be flattered if we were considered a competitor of Tatuaje. I don’t put ourselves in that league just yet. I would love to aspire to do what Pete has accomplished in our own way. But he’s doing two million cigars a year. He’s built that brand into, more than volume, it’s more about quality and prestige of the brand. It’s asked for in every store.

How many cigars did Crowned Heads ship in 2012?
About 230-250,000 somewhere around there.

Where do you see Crowned Heads in 5 years?
I always said when we started this that I don’t want to come out with something new just for the sake of coming out with something new. I didn’t want to fall into that trap.

When we were at CAO it was so seasonal. You knew at a certain time of the year you had to start working on new stuff for the trade show. What happens was after doing that for several years, you find yourself forgetting about what you started with. It’s like you have a bunch of sticks with plates spinning and you’re spinning this one but you forgot about that one and it falls and it breaks. So we would launch, for instance the CAO Criollo, which was a great blend to this day I thought. But you got so focused on the Brazilia, Mx2, Lx2 all this stuff and we forgot about the Criollo so that dies by the wayside. I never wanted to get into that trap of just coming out with something new for the sake of it. If there is the opportunity to create something unique to our portfolio and now in its infancy there’s plenty of opportunity for that and we’ll continue down that path.

One thing I wouldn’t consider doing is…I had a retailer tell me, “why don’t you make a Four Kicks Maduro?” I was like “why?” “Just slap a Maduro wrapper on that and then market that and sell it.” Sometimes people don’t realize that’s an idea, but a lot of time the wrapper will clash with the binder, filler. Just sticking a different wrapper on that doesn’t necessarily make it a great cigar. Sometimes it works, sometimes it doesn’t. For instance, with Headley Grange, we got to certain point in the process where I told Ernie, “Ok I’m really happy with the binder filler”, and we had the Sumatra Ecuador on it. I said, just for my amusement, do the same thing with the Habano Ecuador wrapper because the wrapper on Habano Ecuador is much more appealing to the eyes. Usually it’s got a little more oil. It’s darker, richer, nicer in color. Sumatra Ecuador is a little bit more rustic looking but that thing has a different flavor so I thought that would have worked and it completely clashed. It destroyed the blend. I was like, “this is terrible”. I kept those same cigars that I’m talking about as a reminder. I still have that box in Mike’s office. Just don’t take the shortcut and say, “OK put a different wrapper on it.” Sometimes it works and sometimes it doesn’t.

The posters on the wall are awesome. Do you have a merchandising retail outlet?
We take a lot of pride in every extension of the brand — not just the cigars. If we do a poster or a hat, it should all be an extension of the brand. We take a lot of pride in the merchandising aspect and we don’t sell it. We give it away.

I constantly get stuff on twitter like “Where can I buy that hat?” You can’t! I enjoy just hooking people up and giving them stuff — seeing them wear it.

Did you have outside investors helping to launch Crowned Heads?
We had investors. To get something like this off the ground is very financially taxing. Even if I mortgaged my house, there is no way we could have afforded to do it. We had enough of a track record that we had some people that believed in us. You don’t just go down and say “make this cigar” and then you make money. It’s not like we pay Ernie by the cigar he makes. You have to buy the materials, invest in the tobacco. That then becomes an asset of sorts — a stockpile of tobacco. There is a definite financial investment there.

Was Cano [founder of CAO] involved?
No. He had a non-compete coming out of CAO. There was no way he could get involved with us right out of the gate.

Why doesn’t Cigars International carry your brands?
CI isn’t the right fit. That, to me, is too mass production for what we’re doing. I like to support the smaller B&M guys. The last Cigar Fest I did…it just got so big. There were like 5000 people in one day and there was a feeding frenzy of people grabbing cigars hand over fist. There was no time to stop and enjoy the moment. To me that’s a good analogy of what companies like that are all about, this mass sale of just MUAHHHH. To me, cigars are more gentlemanly, subtle, simple quiet thing. That’s why I like the viable boutique brand more than CI.

We don’t want to be in every single store. We rather not over saturate an area. We give [the B&M] the chance to get behind the brand and if you show enough support, you’ll have the exclusivity. We are in 335 stores. There are some tobacconists that have an online presence as well. We haven’t gone with any online exclusive retailers at this point. I’m not saying that’s a bad thing — the reality of our business is that you need some of those online guys for the volume to pay the bills. It’s hard to make something financially viable when someone is ordering 8 boxes of cigars every 6 weeks. You have to pay your bills. You have to buy tobacco. You have to pay salaries. There will come a time when we’ll have to do that, I’m sure.

We were contacted really early on in the game by CI. We politely declined. We had a real belief in what we were about to do. Felt like, you know, let’s give it some time… let us get some legs. That’s not to say a year down the road we wouldn’t sell to CI. I’ve asked other people in the business that are friends: What’s your opinion on this? What do you guys do? “We sell to them but we watch them and make sure they don’t discount too much.” There is also a school of thought that it’s better to do business with them or they’ll get your cigars on the gray market. And you know there is a huge gray market for cigars. I found our stuff on a few websites that we don’t even sell to. Where’d they get it?

What’s the process for designing the packaging?
You don’t want to make the bands too gimmicky or too flashy. I’ve always been a big believer that if you make something too flashy it’s almost like you’re being sold a bill of goods. It’s like when you see a movie being heavily promoted or it’s being tied into a product and the trailer is constantly going over the top to get you to go to see the movie — the movie doesn’t usually have a lot of longevity. It’s those little underground movies that are around at the Oscars. That’s how we look at packaging. Just enough to present it well, but not like.. here’s a treasure chest with wood from a sunken ship with bands that light up. I like just a professional clean presentation, but that doesn’t say, “hey — part of what you’re paying for in this cigar is going to cover my packaging cost.” If you make packaging too expensive then it, to me as a consumer, it’s a clear red flag that they’re trying to trick me into smoking this cigar. Ya know, Pete’s [Pete Johnson of Tatuaje] stuff is all really understated. You don’t need to have a lot of flash to make a nice presentation.

Will you make a lighter, Connecticut shade cigar?
Our palates tend to gravitate towards heavier cigars. I don’t see us making a Connecticut shade cigar. Simply because I don’t particularly enjoy that cigar enough to have a full line. I still try them from time to time…

I blend cigars based on what I want to smoke. If I am not going to smoke it, why would I expect someone else to enjoy it? I remember reading an interview with Pete [Johnson] right when he started with Tatuaje. He said, “Really, this started off as making cigars that I liked. If nobody else liked them, then at least I have enough cigars to smoke for the next five years.” I feel the same way. I would smoke Headley anytime or Four Kicks… JD Howard… If I don’t like it, no point in making it.

How do you see 2013 shaping up for Crowned Heads?
This will be a good year. I have a good feeling about this year. We decided already, around September or October, a limited edition…. We have an idea for that.

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