Mittelstand

German cigarmaker, founded in 1817, seeks new life in old traditions

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Smoke 'em if you got 'em! Source: Arnold André

The floor is carpeted in dark green velvet and an ornate humidor stands next to the door of the Arnold André cigar company. Smoke wafts through the dimly lit conference room. Managing Director Rainer Göhner is almost invisible in the haze. He and a co-worker sit at a solid-wood table, smoking cigars and coughing into the silence.

Owner Axel-Georg André and Mr. Göhner face a fundamental problem. The family-owned company has been in business for seven generations, and although the market for cigars and cigarillos is stable, the industry is under attack because of its health risks.

Cigar maker Arnold André has a two-pronged strategy to keep the flame burning brightly. First, Mr. Göhner wants the company to focus more on premium products from its plant in the Dominican Republic. Second, the cigar maker wants to benefit from a trend toward pleasure. Mr. André is convinced that this isn’t a contradiction. “All these anti-smoking campaigns are for cigarettes only. Unfortunately, the cigar suffers from guilt-by-association. But cigars are a completely different matter, because the focus is on enjoyment,” says the owner.

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The helicopter view. Source: PR

Arnold André has successfully held its own against competitors since 1817 and now hopes to have found new niche markets for its products. Mr. Göhner manages the 200-year-old company, allowing owner Axel-Georg André to take a hands-off approach and advise from the supervisory board. The company’s 850 employees produce 440 million cigarillos and cigars annually. But, according to the German Federal Gazette, sales fell from €91.8 million in 2015 to €90.5 million in 2016.

The tabacco industry is challenging. Mandatory information labels necessitated an investment in the tens of millions for the proper equipment and a decision by Mr. André to buy back a 40-percent stake it sold to Swedish Match in 1988 is a financial risk, though it grants the company flexibility. Mr. Göhner thinks the move was correct and sends the right statement to the company.

But Mr. André is often not on the premises. He lives on Tegernsee lake, paying a visit to the “cigar town” and production facility in Königslutter every few weeks. He visits the other two sites, in the Dominican Republic and France, a few times a year. “I need the helicopter perspective to inject new ideas into the development of the company,” he explains. “That’s why I don’t work on the operational end. But I do consult with management and the management team on a regular basis.”

The view from above has led to Mr. André’s dual strategy of premium and pleasure trends. The cigar manufacturer is currently well-positioned in the mainstream cigarillo segment, so he first wants to expand his company’s range of super-high-quality products. The production facility in the Dominican Republic is key.

“It always feels like a cliché,” Mr. Göhner says. “We sit in old armchairs with our master blender Carlos, trying different types of tobacco and smoking so much that we can no longer see each other.” As soon as the right tobacco is found, they visit the tobacco farmers. “Our owner often travels with us to the suppliers, is involved in the purchase of this high-quality raw material and then the tobacco goes directly to Carlos’ factory,” says Mr. Göhner.

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Field of smoky dreams. Source: Arnold André

In addition to the premium products, Mr. André is focusing on the trend toward luxurious products that provide timeless pleasure. “We can definitely capitalize on this. Pleasure and hand-crafted natural products are more popular than ever before. Cigars also fit into this,” explains the owner, drawing a clear line between cigars and cigarettes.

In Bünde, Mr. Göhner ashes his cigar into an ashtray. “Of course, those who say that tobacco is not harmful to health are on the wrong track,” says Mr. Göhner. “That’s why you only enjoy cigars in moderation and don’t inhale the smoke like you do with a cigarette.” He likens it to drinking a glass of wine in the evening. The focus is on enjoyment, and on the notion that a small amount is not harmful.

Katrin Schaller from the WHO Collaborating Centre for Tobacco Control has often heard these arguments from cigar manufacturers, but she believes they are wrong. She cites a 2017 study that examined the cancer risk of cigar or pipe smoking in men. “It showed that there is an increased risk of head and neck cancer, lung cancer and liver cancer.” She doesn’t see how one can align smoking and health.

In spite of health risks, futurologist Philipp Hofstätter sees some value in Mr. André’s strategy. He has mainly considered the background of health and pleasure trends that Mr. André wants to emphasize in the future, explaining that the focus is on preventive health and conscious enjoyment. “Nevertheless, it’s not that we’re all becoming nothing but apostles of health. Health is and remains a megatrend. The symbolism is moving away from drinking yourself into a coma and toward whisky tastings.” Nothing should stand in the way of someone enjoying a cigar on special occasions. “However, I don’t think we will see a renaissance of cigar-smoking CEOs.”

Cigar culture has never disappeared from Bünde, whereas the health trend seems to be perceived only as a market niche. Mr. Göhner himself lives for pleasure. “There’s nothing better than sitting at home after work and smoking a cigar,” he says, putting out his cigar and putting on his long coat.

Hannah Steinharter is an intern with Handelsblatt in Düsseldorf. To contact the author: gastautor@handelsblatt.com

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