We are in week five of the COVID-19 crisis in Europe, mid-April. Usually, we visit the protagonists of the cover story at their places of work to capture not only the hard facts but also personal details. Due to travel restrictions and limitations of contact, this time everything is different. Instead of a flying visit to the headquarters, opened in 2017, of the house of Davidoff in Basel, where usually around 160 employees further the international operations of the traditional company, we meet via video conference. But despite the 1,000 kilometers of fiber optic cables, routers and kinks in the Internet, it quickly becomes clear to me that, for three years now, the destinies of the Basel-based cigar company have been steered by a man who has an incredible passion for cigars, thinks strategically and analytically, has fun with numbers, and has an extremely robust capacity for resilience. “The crisis had already reached us in January through the situation in Asia,” explains Beat Hauenstein, “and back then we established a steering committee. We focused on guaranteeing our entire ‘Crop to Shop’ value chain, the availability of the products and the collaboration with our partners around the world.” What has meant laborious diligence behind the scenes for years is now paying off for the company. Despite the global crisis, Davidoff can seamlessly deliver all their products to customers. With its “Crop to Shop” mission, the enterprise took a clear strategic position years ago: to take control of many elements of the value chain itself in order to guarantee the maximum quality of products and services, from the cultivation of the raw materials to the innovation of blends and eventually the sales in the global network of 70 or so Davidoff flagship stores and over 700 appointed merchants.
FLEXIBLE, AGILE, AND COMPLIANT
When the 52-year-old took the helm at the firm, it had long been clear to him that, in addition to all the romance and passion that comes with enjoying a cigar, one thing above all else would count for the future.“One has to manage the complexity of the business, say be agile and profitable and compliant in as many markets as possible,” says Hauenstein, convinced. “The premium cigar business is not a significant growth market but a competitive one. What’s more, we are affected by many different regulations depending on the country,” he says, outlining the situation in the cigar industry. Davidoff has therefore invested in the flexibility and agility of the sup- ply chain and business processes for many years, which in the meantime – in addition to the production of the finest handmade premium cigars – is now one of the company’s core competencies.
“We have all the complexities of the entire value chain under control. Not only are our products available at the highest quality and at any time for any location, but we are also compliant with the rules everywhere.” This is why Oettinger Davidoff is also a sought-after distribution partner for boutique brands. “It is crucial that the partner complements our portfolio and offers a high-quality brand. It is thanks to all our investments in business excellence to meet the increasing challenges that we have become a much sought-after distribution partner,” the Swiss is pleased to report.
It is not only the distribution portfolio that is being expanded. There are also innovative expansions planned to the in-house product portfolio in the near future. In the fall, Davidoff is launching two new limited vintage cigars: the Davidoff «Special 53» (a Perfecto with a 53 ring gauge, a puro dominicano – exclusively manufactured from Dominican Republic tobacco) and the Davidoff Robusto Intenso with a Habano wrapper grown in Ecuador and filler leaves from the Dominican Republic. “Both novelties are re-interpretations of the legendary archive of blends the company has built over the past decades and will each be accompanied by a masterpiece humidor, of which there will only be eight and twelve available, respectively, worldwide,” the CEO discloses.
Since the Davidoff and Avo brands have already been enriched by series with Nicaragua tobacco, later this year, Camacho is also launching a Nicaragua line, available in the Robusto, Toro and Gran Churchill formats. In winter, the Chinese New Year will be heralded by the Year of the Ox. “As the name of the new year already suggests, this will not be a Lancero format,” laughs Hauenstein mischievously. “By the way, we are currently experiencing fantastic feedback with online tastings and seminars done by our Davidoff ambassadors for the cigar community. We will certainly maintain and even intensify this consumer engagement and educational approach.”
The company has been focusing on digital brand experience for many years. Sales via online shops are continuously growing; in March, due to the coronavirus crisis, with an increase of 154 percent. In addition to the United States, customers can also shop from Asia, Switzerland, and Germany via e-commerce platforms. “In e-commerce we’re seeing a distinct change of generations. People want reliable information on the products, and they want to be able to experience the brand at the same time. The trend towards online shopping is clearly coming from the customer. We have recognized this trend and are doing it justice,” explains the Davidoff boss. Nevertheless, the company is also continuing to invest in traditional retail: In January, in the spectacular Seminole Hard Rock Hotel & Casino in Hollywood, Florida, a new shop including a lounge and a large walk-in-humidor measuring 180 square meters (1,924 square feet) was opened. In Jinan, China, another “Davidoff of Geneva – since 1911” retail shop will also open its doors in the fall.
TWO WORLDS UNITE
Beat Hauenstein not only has to reconcile cigar romance and the reality of key operating figures. He is also confronted daily with the task of combining Swiss precision with Caribbean exuberance. “For me, this is a perfect complement, not a challenge,” he says. “Swiss precision in sales and marketing combined with Caribbean know-how in tobacco cultivation and cigar production is definitely one of our success factors. Bringing together the best things from two worlds makes us unique.”
When Hausenstein took office, he already had 15 years of experience in the company, during which time he was responsible for IT and, as chief operation officer, for the supply chain and production. From the very beginning, his goal was to develop a viable strategy and to set the company up for the future. “Standstill is a step backwards. But change also means insecurity because you have to let go of the existing and cherished things. That’s human nature. But you must have a meaningful plan and communicate openly, then those willing to adapt will accept the changes,” Hauenstein says, firmly convinced. “Our team is motivated and committed and wants to support and actively shape the long-term success of the company.” Since the Davidoff CEO not only loves the extreme sport of skydiving but is also a successful marathon runner in his free time, he has plenty of stamina for existing and upcoming upheavals – internal and external. He loves the challenge, is persistent and does not give up. “In everything, the head plays an important role. With large projects, where cultural, transformational aspects are also involved, success is often decided by perseverance from the second half onwards. But one should not confuse perseverance with stubbornness,” he confirms. In any case, Oettinger Davidoff is on the right track with Beat Hauenstein, his “Way Forward” strategy (see page 45 for explanation) and the “Crop to Shop” philosophy.
Despite a decline in sales, the company achieved its financial targets in 2019 and was able to grow in China as well as in Germany, the United Kingdom, Spain, Central/Eastern Europe, Russia, the Middle East, and Africa.To finish up, I want to know whether he has a guiding principle helping him in this current crisis. “Yes,” Beat Hauenstein confirms, “but it’s a motto that has been with me for a long time. It comes from Winston Churchill: ‘Success is not final, failure is not fatal: it is the courage to continue that counts.’”
Copyright Images: Oettinger Davidoff