Beat Hauenstein, CEO of Oettinger Davidoff, talks to finews.asia about two excellent business years, the increased presence in New York, and the importance of Singapore and Hong Kong for the company. He also reveals new products that cigar enthusiasts can look forward to.
When Beat Hauenstein took over management at Oettinger Davidoff in September 2017, the company was considered in need of restructuring. For 2023, it has now presented a record result: the Swiss company produced 48,8 million cigars in the Dominican Republic and Nicaragua, roughly the same number as the entire Cuban industry. Revenue amounted to 546 million swiss francs, an increase of 10,5 percent compared to the previous year.
Mr. Hauenstein, how is business at Oettinger Davidoff?
In terms of revenue, 2023, like 2022, was a record year, the second in a row in our nearly 150-year history since 1875. We are proud that we were able to grow significantly with our own brands—by 18,2 percent. Our production capacities are being expanded. With our «Crop-to-Shop» philosophy, we are evidently doing a lot right. But we can always keep learning.
How did 2024 start?
At the highest level, we observe certain cooling tendencies, partly in terms of volume, but also downtrading to cheaper products.
With your premium brand «Davidoff,» you recorded a 50 percent increase in unit sales in 2023 compared to 2019, before Covid. What is the reason for this?
Since 2017, we have done everything to lay the foundation for such success, including in marketing. In my view, it is outdated to select and target specific groups. You need to have the best offer. Then customers choose you, creating momentum.
What else have you done?
We synchronized and standardized consumer engagement in our 130 markets, speaking globally with one voice. At the same time, I have ensured that we regularly challenge our self-satisfaction or conviction.
We do this through «Digital Social Listening.» We listen to what is really being said about us online and try to interpret these desires into our products. It is important to stay hungry for success and not become complacent.
You are announcing a massive expansion of your boutique on Madison Avenue in New York: doubling the retail space and expanding the lounge. The city is not exactly known as a mecca for cigar smokers.
More and more providers are withdrawing from places in New York where people can eat and smoke, such as the «Grand Havana Room,». The new owner of the establishment no longer wants anything to do with smoking. However, our current lounge is more than fully booked. If we offer a legal and appealing service in this environment of prohibitive tendencies and do it right, we will succeed.
You mentioned a certain cooling for 2024. What are the causes?
We got off to a very good start in the top segment with our core brand «Davidoff». The slowdown is taking place in the mid-price segment, with the non-«Davidoff» own brands «Camacho» and «AVO». This is particularly true in the USA, where a ruinous price war is taking place via discounts.
And on a massive scale. There are adverts from competitors: «We have an overcapacity of 7 million units; everything must go by the end of the week.» Retailers are stocked to the brim with goods and must sell them before they can reorder. Additionally, we feel significant margin pressure in the USA and Europe due to inflation.
And this hurts you as a premium manufacturer?
The American demand is 80 percent below $10 dollar per unit. The philosophy is: as much enjoyment as possible for little money. The high-priced Cuban offer, which pushes the price point upwards, is missing due to the US embargo.
Are there other markets causing you concern?
Travel-duty-free is still fluctuating; passenger miles are not yet at 2019 levels. In Asia, business is particularly dependent on Chinese travelers, who have not yet returned fully.
This doesn’t surprise me. Three weeks ago, the Chinese government clearly stated that money should be spent more in China rather than abroad. We are feeling that.
All luxury goods are suffering from this trend: watches, expensive wines, exclusive fashion... Do you see the cause clearly in Chinese politics?
It is the result of a political strategy aimed at maximizing the country's own capabilities in all aspects.
Have you ever smoked a good premium cigar made from Chinese tobacco?
Yes. They grow quite good tobaccos, especially on the island of Hainan off the coast of Vietnam. They have good climatic conditions there.
The bottom line: will you have another record year in 2024 or will it be an uphill battle?
We will certainly have to fight. Two consecutive record years in terms of earnings within 150 years, ie. purely operational and organic. Topping that becomes increasingly difficult. But I am confident we can maintain this level.
What product innovations can «Davidoff» lovers look forward to by the end of the year?
The new «Davidoff Maduro» has just been launched – a matured cigar with a 16-month fermentation process. This results in a very special taste experience.
The fourth «Limited Edition» will be launched at the beginning of July as part of the «Difference Campaign» under the «Cigar History Rolled» label: Iconic cigars that are not about volume, but are highly appreciated by connoisseurs and which we take up again and again in different rhythms.
The «Grand Cru Line» is followed by the «Grand Cru Diademas Finas Limited Edition», whose filler has been matured in Grand Cru Classé red wine barrels. This will be a particularly great cigar.
Is there a historical rhyme to the earlier Château lines of «Davidoff» from Cuba, before moving to the Dominican Republic in the early 1990s?
No, we have long since moved away from that.
Which new product do you personally like best?
I really like the «Maduro,» and I find the «Grand Cru Diademas Finas» truly fantastic.
Hauensteins «coup de cœur»: the new Davidoff «Grand Cru Diademas Finas». (Image zVg)
What can we expect from the other in-house brands Zino, AVO, and Camacho?
There is a new «Limited Edition» in the «AVO Expressions» series. We recently launched the «Short Purito» for Zino. Of course, most brands will have more innovations by the end of the year, which I unfortunately cannot reveal in detail yet.
And in accessories?
I would particularly like to mention our «Monolith» humidor, which was a risk but has already been a great success. It is made from a single piece of sandstone and offers 150 cigars a wonderful, elegant home.
Our readership in Asia is concentrated in Singapore and Hong Kong. How are these markets for Oettinger Davidoff?
They are very, very important, especially Hong Kong. It is the base for our entire Asia operations. In Singapore, we have our own company-owned and operated shops, for example, in Marina Bay Sands. Asia is leading in the premium and top-premium cigar segment.
Next year, Oettinger Davidoff celebrates its 150th anniversary. What are your plans?
We are proud to still be able to celebrate this anniversary as a family business. On this occasion, we want to give something back to everyone who made this possible: the city of Basel, the employees, the consumers.
It is a company anniversary and not a birthday of the «Davidoff» brand. But of course, we will still have a special «Davidoff» cigar ready.
You are currently undertaking a very ambitious expansion of your factory in the Dominican Republic, from 45 million to nearly 60 million units per year. Do you still feel comfortable with this investment given the current market trends?
Absolutely. It is the right investment at the right time in our core business. In the medium term, we will utilize these capacities. You mentioned the figure earlier – plus 50 percent for the «Davidoff» brand compared to 2019. By next year, we would have reached a limit. Yes, it is a competitive market, but with the right answers, the right products, the right forecasting ability, and a well-set-up machine deck, we can continue to gain market share.
The big topic in the Swiss cigar industry is the reorganization of the supply chain by your Cuban competitors, who largely operate in the top-premium segment (finews.asia reported).
I respect the Cubans. They make excellent cigars. But my focus is on Davidoff.
The Cubans want to integrate the value chain more by fully owning the exclusive importers in the future. It is moving towards your own «Crop-to-Shop» strategy. Is this an opportunity or a threat to your company?
I don't see enough of the strategic considerations behind it. It is a battle. In the end, the customer decides, not the management of Oettinger Davidoff or other companies. I work on ensuring that our hopefully correct decisions lead the customer to choose us.
Beat Hauenstein took over the leadership of the family business Oettinger Davidoff in Basel in August 2017. He had already been with the company for about 14 years, initially as Head of IT, later as Chief Operations Officer. His professional career began in business informatics, with an MBA from the University of St. Gallen (HSG), at Coop and Helvetia Insurance. Since 2017, he has chaired the Employers’ Association of the Basel Region. Around the time of the death of longtime President Dr. Ernst Schneider in 2009, the company went through turbulent times, marked by the sale of the entire business outside of premium cigars, namely perfumes, cigarettes, cigarillos, other brand rights in the luxury goods sector. In the core business of hand-rolled cigars, Oettinger Davidoff then went through a phase of self-discovery, drawing attention with spectacular marketing and certain product innovations. Hauenstein has led the company back to profitability.
