Scott McCulloch is Editor of Families in Business magazine.
Cigars may be back in vogue but that's of little concern to Villiger, the Swiss family business whose obsession with quality has elevated cigar production to an art form
Before Monica Lewinsky put the cigar on the world map, it was something favoured by older men and tough gangsters – the likes of Al Capone, Tony Montana and Winston Churchill invariably flourished smouldering stogies.
Cigars go beyond the Freudian theory of pacifiers – the cigarette has the patent over that. Cigars seem to signify style, power and authority. They speak of accomplishment and affluence, education and erudition, making an upper-crust statement all along.
Of course that's of little concern to Heinrich Villiger, the 74-year old chairman presiding over Villiger, the Swiss family-run cigar and tobacco concern. "Making a cigar is a precise craft and composing its flavour is an art," he says. "Both craft and art are our tradition."
The Villiger motto – "in love with tobacco" – may be at odds with ubiquitous crackdowns on public smoking but a visit to its remarkably detailed web portal quickly clarifies the company's position on the matter: cigars are for pleasure. "Browsing our web page," the company states, tongue firmly in cheek, "requires an advanced and mature brain of at least 18 years."
Advanced and mature indeed. It's that attitude that has contributed to the Villiger family firm, now in its fourth generation, being still around today. The company offers a full range of 150 products – from the mini cigar to large Corona format.
That's a far cry from the multinational's more humble origins in 1888. With the West in the throes of industrialisation, a canny Jean Villiger drew upon a surplus of skilled workers and set up shop in the sleepy village of Pfeffikon, some 20km north of Lucerne. To succeed the 28-year old Jean had to make a leap from neophyte businessman to entrepreneur and then to cigar expert. He rose to the task, learning about raw material procurement, tobacco fermentation and the finer manual skills of cigar production. When Jean died at 42 his wife Louise took over. In 1910 she set up a wholly-owned unit in Germany with a view to tapping the market there for its promising growth prospects. The strategy proved sound and in no time at all Villiger cigars became a byword for Swiss quality.
After the war years (1914–1918), Louise's sons Max and Hans managed to expand the company to become one of the leading cigar makers in Europe. Max had two boys, Heinrich and Kaspar. Both ran the business until 1989 when Kaspar left to pursue a career in politics. Heinrich stayed on, taking sole ownership of the group. Today Villiger employs 800 workers in production units in Switzerland, Germany, Ireland and Indonesia. Sales in 2003 were 475m units (sticks).
From 1985 until 2003 Villiger produced small cigars of the trademarks San Luis Rey and Romeo y Julieta under Cuban license. The Cubans now produce both formats in a fully automated plant in Havana. Meanwhile, Villiger maintains an interest in two import companies for Havanas in Switzerland and Germany. Both, says Heinrich, are successful.
Few family histories are richer. Villiger's story is arguably how inspired can innovation drive sales. The Rio 6, once popular with Swiss soldiers, was designed to fit ammunition belts. The Kiel, with its goose-quill mouthpiece, is worthy of a German luxury carmaker's wall of honour for simple, utilitarian 'engineering'. And for those who think cigars elitist – think again. Villiger's common touch is evident in the Export – a short, tissue-wrapped smoke that quickly became the 'Havana' to the common man. Today the Export is the cigar of choice when the Swiss spark up at home and is also hugely popular abroad.
Villiger's other products include the Krumme, a twisted cigar comprised of 'incomparable Virginia tobaccos'. For those who fancy themselves as Clint Eastwoods of the world there's Villiger's Americano – a slim, Virginia-style smoke worthy of any spaghetti western. But it's Villiger's premium range with its nine variants that include tobaccos from Java, Brazil, Cuba and beyond that the company dedicates to aficionados.
So what differentiates a good cigar from a great cigar? In a word: taste. "A great cigar is a cigar that tastes good, irrespective of origin, format and price," says Heinrich. "In the final analysis it's the consumer who decides what constitutes a good cigar and what is a great cigar."
Hip-hop artists are pictured with them – so are Hollywood starlets. Cigars, it seems, are fashionable again. A renaissance? Heinrich can't say for sure although market growth is evident. In volume terms, the world market is huge. Americans puff 6.5bn units a year, while in the EU (including Switzerland), sales in 2003 hit 8.7bn units – a bumper year not seen since 1980. It wasn't always so. US growth has been steady since 1995, but that followed a long period a stagnation. "The increase was triggered by the increasing popularity of the so-called hand-made premium cigars, from the Caribbean and Central America, and particularly from the Dominican Republic," says Heinrich. In price terms the trend has been mixed, with growth at the lower and upper end of products segments, while mid-priced smokes have drifted towards stagnation.
The popularity of cigars (large and small) has undeniably increased worldwide, and with that, consumer profiles have shifted. In key markets – USA and Europe – the cigar is no longer exclusive to specific age and purchasing power categories. Further afield in developing economies, growth prospects look promising, says Heinrich "We have a number of growth markets [such as] countries with large populations like China, India and Russia, where cigar consumption is slowly starting to develop in parallel with their economic development and the increase in purchasing power among the upper strata of the population." A switch from 'fast consumption' of cigarettes to the 'moderate pleasure' of smoking cigars is also emerging, he notes.
So what of the future? Villiger has been a family firm for more than three generations, with the fourth poised to step in to Heinrich's shoes. "My eldest daughter Corina, a doctor by profession, has already been a member of our board of directors for many years," he says. "One day she will take over responsibility for the business as my replacement. It is our firm intention not to change anything in this respect."