Press - JM Tobacco

Tobacconist Cover 2008

Tobacconist Magazine is the Official Publication of the Retail Tobacco Dealers' Association.

Tobacco Business Outlet May/June 2007

Cigar Corner: Puffing on Great Profit Theres no question the cigar category produces good profit for tobacco outlet retrailers, but there's the potential to go from good to great. By Renee M. Covino

"I was on vacation with my wife and we were staying at a very nice hotel," begins Anto Mahroukian, president of JM Tobacco, Inc. "After dinner one night, we decided to go to the bar upstairs. When we got there, they had a humidor filled with my JM's Dominicans. I couldn't believe it--my inexpensive, value premiums at this fine hotel; I expected to see Davidoffs. Even more unbelievable was the price. A box of JM's Dominican Churchills wholesales for about $50 for a box of 50 cigars--they were selling them for $15 per cigar!"

To say this hotel was making a nice cigar profit would be an understatement. But if a tobacco retailer set up a scenario like that, it would probably be out of business. Great profit is one thing, ripping off loyal customers is another. And yet, cigar retailers should strive to maximize their margins in this prime profit segment.

In the case of the JM's Dominican line--"because it is an inexpensive cigar that smokes great, our customers are able to maximize their profits," maintains Mahroukian. "The profit margin on the JM's Dominican ranges from 100 percent to 250 percent," he adds.

Tobacconist Cover 2007

Tobacconist Magazine is the Official Publication of the Retail Tobacco Dealers' Association.

Tobacco Outlet Business 2006 Top to Top Interview

Vying for Value A conversation with Anto Mahroukian of JM Tobacco

TOB: Can you tell us a little bit about JM Tobacco’s history? How did you get into the cigar business?

Mahroukian: My father founded the company in 1996. I bought him a cigar for his birthday and he really enjoyed it. He asked me how much I paid, and when I told him $15 or $20, he said, “That’s ridiculous.” He had a jewelry company at the time, so he bought a box of those cigars, sent it to his manager at the jewelry factory in the Dominican Republic, and asked him to do some research on the product. He found a manufacturer and within a month or two we were in business. That was during the big cigar craze when everyone was buying any type of cigar they could get.

He was interested in cigars so he thought it would be a side business, and if it turned out to be nothing he would at least have access to cigars cheaply. That was when I was just graduating high school.

Our first order was 10,000 cigars and that was gone before we even got them made, so we placed another order. The local vendors in California really liked them and, since we were local, they supported us. At first, we survived by working with the local guys. California was our No. 1 market and it continues to be today. Back then it was strictly premium cigars, as much as you could get for them because people were paying anything at that time. So we got spoiled really quickly in the beginning. Shipments arrived already sold out.

TOB: You’ve outlasted the cigar boom. What gives your company staying power?

Mahroukian: We were getting income from the jewelry business so this was side project that was really taking off. At one point, I talked to my Dad about closing down the jewelry business. We eventually three years ago closed it down, but he stuck with it for a while. That was because the whole cigar industry just tanked, and having the jewelry business helped us survive.

We didn’t put all our eggs in one basket. But we also didn’t want to be [flash-in-the-pan] people who came in and put out a ridiculously expensive product where the quality was horrible. My Dad really liked cigars and liked the industry. We wanted to be the company that would be in for the long-term. So beyond the jewelry business, our staying power was also definitely due to our customer service, the quality of our product, and the fact that we shifted gears during the tank or bust of the cigar boom.

TOB: What does strong service mean in practice?

Mahroukian: Well, right off the bat you want to speak to a real live person. I try to have a friendly relationship with all retailers who call in. They like consistency—to speak to the same person who handled the previous order. When they call, they don’t get an answering machine or have to press one for orders and so on, they get a real interaction. We try to do same-day deliveries, and to always keep stuff in stock. And if there are damaged boxes, we don’t hassle customers about returns. We just make the transaction really comfortable.

We have about 10 salesmen nationwide; three of those are in California. Our biggest market is California, because it is the biggest market in the country, it has 20 percent of tobacco industry outlets and retail stores. Our California customers get the cheapest prices in the country, because when I ship out of state they have to slap on state taxes.

TOB: How did you shift gears?

Mahroukian: In 1999, we had a customer come to us and say can you make me a low-end, handmade cigar—a big cigar for under $2. I was making my long filler premium cigars, Espanola, which was our first cigar. When we made those we would cut off the ends and we had collected so many of these ends over the years that we started making a short filler cigar, which is a cigar with pieces of tobacco inside rather than whole leaves.

In the beginning we were able to drop our prices tremendously because we had so much inventory of tobacco. So we were able to sell to him for 75 cents, which enabled him to sell them for $2 with taxes. He said, “Give me 100,000 cigars.” I gave them to him in empty boxes and without any bands and I put JM Tobacco on it. That’s how JM Dominican came into being.

I said, “Why don’t we start making these in a box with bands at this same price?” It is a bundled cigar, but it comes in a premium box with a premium band. Word of mouth started to spread around California about this cigar retailers could make money on. You could buy them for less than $1 and sell them for $2, which is 100 percent profit. So these retailers saw the dollar signs and that the cigar actually tasted pretty good. And that’s what drove the brand. We put them in an eye-catching yellow box and people caught on. “I can take two and spend less than $5.” And the daily smoker became our target market. That’s how we switched from super premiums to value premiums, without killing the super premium, which eventually phased out on its own. JM Dominicans are now 80 percent of our total sales and the volume is increasing by 15 percent a year.

TOB: What did you do when your inventory of cigar ends ran out?

Mahroukian: We went to other manufacturers and said, “Do you have loose tobacco?” They were in the business of selling their loose tobacco. Then, eventually we found a scrap guy who takes tobacco that is broken during shipping is not a full leaf, processes them, and makes them into scrap tobacco and he became our supplier.

TOB: What are your other most popular products suitable for tobacco outlets?

Mahroukian: We have now come up with new premium, JM Dominican Classic. This classic cigar has what we call it a touch of Old Havana. It’s a medium full-bodied cigar. During the cigar boom everyone made mild cigars because you had a lot of newbies, people who had just started smoking and like a mild cigar. Now we are back to the true cigar smoker, who likes a kick. It is premium cigar but priced a little lower, we stay under the $5 retail line.

We are introducing a line extension of the JM Dominican Classics, a cigar with a Cameroon wrapper vs. the Connecticut wrapper. The original one we released last year is the Connecticut shade wrapper; the Cameroon is stronger and darker in color.

TOB: How do you ensure a quality product?

Mahroukian: We make an effort to keep employees, managers, and vendors happy and comfortable. We also do random quality control checks. Our factory has quality control practices. They ship out boxes sealed ready to go. One of the elementary things is to keep them all the same color from the same box. Once the cigars come here, we randomly open boxes to ensure quality. We check the color and whether the bands are straight. But probably the most important thing we do is surprise visits to the factory. We walk in when we’re not expected once a quarter. It keeps them on their toes. We’ve never found any unpleasant surprises though, just some loose cigars lying around unaccounted for.

TOB: What trends or preferences have you observed in cigar sales?

Mahroukian: Value premiums are on the rise. We have seen a lot of competitors come up with value premiums, even the ones who are strictly super premium companies.

Tobacconist Cover 2006

Tobacconist Magazine is the Official Publication of the Retail Tobacco Dealers' Association.

Tobacconist Cover 2005

Tobacconist Magazine is the Official Publication of the Retail Tobacco Dealers' Association.

SmokeShop August 2005 Company Profile

From its Los Angeles headquarters to its Dominican Republic factory, this family-run cigar maker, importer, wholesaler and distributor has proudly found success catering to the daily cigar smoker. By Bob Ashley

A fortuitous birthday gift from a 17 year old to his father, California jeweler John Mahroukian, led to the creation of Los Angeles-based manufacturer JM Tobacco Co., which this year is marketing its 10th anniversary, having survived not only the turbulent mid-1990s cigar boom, but also the subsequent bust that drove many new cigar makers out of business.

And the boy, Anto Mahroukian, now 27 and president of JM tobacco Company, delights in recounting the story.

"It was my dad's borthday in 1994," Mahroukian recalls. "I bought him an expensive cigar. I don't even remember what it was, but it cost about $18. He smoked it and he liked it. He asked how much I paid for it, and when i told him, he was shocked."

John Mahroukian - the "JM" in the company's name and on its cigar bands - saw an opportunity with cigars selling for such a premium. The elder Mahroukian owned a jewelry factory in the Dominican Republic and told his factory foreman to check out the local cigar factories and ship him some samples.

"He found a factory that would make private label cigars for us and my dad ordered 10,000 cigars at about a buck each," Anto recounts.

Still, John Mahroukian wasn't quite sure about his pending business venture. "We had a bunch of cigars, but no name and no band," Anto says. "And dad was a daily cigar smoker. That's why he'd say after he ordered the cigars that if we didn't even sell one stick, he had enough cigars for the rest of his life at a dollar apiece."

The name the Mahroukians gave their new cigar was Espanola, which initially wholsaled for about $6 each. And that brought the younger Mahroukian to the cigar industry.

"I jumped right into the business out of high school. Originally, I went from store to store and dropped off samples," Anto says. "As soon as I'd give it to one guy, the next guy wanted to have it. Nobody could keep it on stock."

Things have changed some in 10 years, given the vagaries inherent in cigar manufacturing.

Today Espanola is available only in limited quantities, although Mahroukian says the cigar is in the process of being repackaged and relabeled. In the value-priced category, JM Tobacco manufactures and markets hand-rolled, mixed-filler Cuban sandwich brands such as JM's Dominican, JM Dominican Classic, and flavored Island Delights and Alma Sweets.

Mahroukian chortles at the irony of his early days in the cigar business. "I couldn't smoke one, but i was raving about the Espanola - telling retailers that is was the best. We had 10 accounts in less than two months., and we had to reorder. This time we doubled up."

Within a year the company had sales representatives in Colorado, Texas, Ohio, New York, Illinois, and Northern California. But at about the same time, JM began to suffer the same fate as other manufacturers new and old during the boom years as the damand for premium, hand-rolled cigars began to far outstrip the supply.

"We were getting frustrated," he says. "People wanted our cigars, but we couldn't get them fast enough. And as time went on, we realized the quality of the cigars was going down, and we were getting shorted a number of sizes. For a while, the factory in the Dominican Republic was sending us sizes that we didn't even order."

Changing Gears... and Focus

In 1997, JM Tobacco Co. bought its own factory in Tamboril, hired rollers, and bought its own tobacco so that production could be more closely controlled.

That proved problematic because the cigar boom essentially was over, although cigar production was still at record highs in the Dominican Republic and manufacturers were still competing for competent rollers. Those shortages corrected as cigar sales returned to normal proportions and the end of the cigar boom worked its way back through the production chain.

But that led to another problem - an oversupply of cigars. "After the boom came the bust, and we ended up in a bind," Anto says. "We had a lot of tobacco and enough rollers to make cigars, but we couldn't compete with the prices that a lot of companies were charging."

As Anto enrolled in 2000 at the University of Southern California's Marshall Business School to study marketing, JM Tobacco's future looked bleak. "At about that time i found myself at my desk practically doing nothing - no phone calls and hardly any sales," Anto recalls, "we had an inventory of 100,000 cigars and we needed to generate some cash."

After the opportunity to sell 50,000 cigars in inventory to a single customer who wanted to establish his own private label, father and son made a decision - rather than close up shop, they would change their focus.

"We realized we could sell cigars on a mass scale," Mahroukian said. "We realized that the more cigars we made, the better the margins we would make. The idea was to come up with a less expensive cigar that wouldn't kill the customer if they were buying three or four at a time. The daily cigar smoker became our target market.

"We decided to market a punch-cut, bundle-type cigar with a band in a box, and to get into different markets - convenience stores and other locations instead of just the traditional smokeshop, which had been where we were focused.

"It was a risk. Everybody else was closing and selling inventory, and we bought more uncured tobacco, got a warehouse, and to reduce cost, started curing it ourselves."

JM Tobacco also closed its original factory in Tamboril, D.R., and opened another three times as large in the Duty Free Zone in Licey, which helped reduce costs.

The strategy worked and the company has grown steadily since, occasionally introducing new varieties of cigars - a maduro version of JM's Dominican debuted last January - for their 1,500 to 2,000 active accounts. JM Tobacco distributes directly from its warehouse in Los Angeles, while Crossline Distributors and Lil' Brown Smoke Shack - both located in Washington state - also distribute JM Tobacco's brands.

Tobacconist Cover 2004

Tobacconist Magazine is the Official Publication of the Retail Tobacco Dealers' Association.

Tobacconist 2004 Q & A

From Cigar Novice to Cigar Master: JM Tobacco Continues to Build Its Business... By Travis Edwards

Webster's dictionary defines manufacturing as the process of making something from raw materials by hand or by machinery. With two factories - one in Los Angeles and the other in Dominican Republic - JM Tobacco (JMT) produces handmade products in the form of premium and flavored cigars, and machine-made products in the form of cigar accessories and fine jewelry, and it makes manufacturing an art. Tobacconist has followed JM Tobacco's cigar development program for maore than nine years. Our first report to the trade appeared in the April 2001 issue. We are an industry heavily composed of family-run companies going back several generations. JMT joins the multi-generational club with the installation of Anto Mahroukian as JMT's new president.

Tobacconist recently visited Anto Mahroukian at the Los Angeles factory to learn more about the company's tobacco lines and plans for the future.

How did JM Tobacco get its startin the cigar industry?

My father, John, has been a ciagr smoker for more than 20 years. He grew up in manufacturing, mainly jewelry. About 10 years ago, his creativity led him to introduce to introduce JMT's first cigar, Espanola. We are a completely family-oriented business. It's my job to meld the best of my father's ideas with my own, consistent with the needs of the market, and bring those ideas to life. We still produce the Espanola, and have since added Alma Sweets (a honey-dipped cigar), JM Outdoorsman (a bundles cigar), Island Delights and JM's Dominicans.

How is the industry different today than it was 10 years ago?

We put a considerable amount of work into marketing our products. Five years ago, the product almost sold itself. To continue the success of earlier years, we have developed a more extensive advertising campaign for our JM's Dominican line. We now offer six sizes with two different wrappers.

How successful has the JM's Dominicans line been for JMT?

Patterson's Beverage Journal July 2004

Beverage Retailers Are Taking...The Tobacco Road By Meridith May

When Anto Mahroukian graduated from high school nine years ago, he was given the opportunity to step right into a business that has created a growing market for the beverage retailer.

The now 26 year old entrepreneur is President of JM Tobacco, a Los Angeles based family run cigar manufacturer, wholesaler, importer and distributor with roots in the Dominican Republic.

To increase his business acumen, Mahroukian juggled work with school and recently graduated from USC with a Marketing degree in Business.

"The cigar business is on the upswing and I am optimistic about its future. Whoever survived the rough times in the late 90s is probably in it for the long run."

A Fathers Insight

"Ten years ago, i bought my dad a cigar for his birthday," recalls Anto, whose father, John Mahroukian, owned and operated a jewelry factory in the Dominican Republic with a warehouse and manufacturing office in Los Angeles.

"Before he even lit it up, he asked me pointedly how much i paid for the cigar. My answer was 'dad, it was $15, I bought you the best!' He exclaimed that it was crazy to spend so much."

The next day, John called the Manager of his Dominican jewelry factory and asked him to send a few cigar samples over to the states. A few weeks later, a shipment of ten thousand Espanola cigars arrived at John's business and JM Tobacco was born. "Even if I can't sell one," said John, "I'll have enough cigars for the rest of my life."

But the cigars did sell. Designing their own label and boxes, Anto and his father created a bold yellow and black logo that made the JM brand instantly recognizable.

Where There's Smoke, There's JM

The first JM cigar was the premium Espanola, which today is exclusively sold at tobacconists. With the cigar boom of the mid-90s, sales were phenomenal and Anto experienced a virtual turn-key operation of order, sell, order, sell.

When the cigar craze was going towards burn-out, from 1998-2000, Anto had to reach into his talented resources to come up with an idea to increase the dwindling sales. "Even if it meant just a few pennies more in sales it was fine, as long as we kept the factory busy."

The Mahroukians bought a factory and began growing their own tobacco in the Dominican Republic. "We took all the steps to cut costs but still kept quality control and expand the line."

By offering a competitively priced cigar, Anto breathed new life into the business and also broadened a retail base that didn't limit cigar sales to the exclusive tobacco shops.

JM's Dominican

The flagship cigar for JM Tobacco is the Dominican, a value-priced that has been swept up by the off-premise trade. With a suggested retail of under $2, the JM Dominican is pre-cut, an excellent advantage for the customer who wishes to buy a handful of cigars on the run. "While the tobacco shops are all about customer service - providing a cozy leather couch, offering a cup of espresso or a snifter of cognac, and cutting and lighting the cigar - the pre-cut cigar eliminates the steps of going through the song-and-dance for the smoker on a schedule," notes Anto. It also eliminates the overhead, a luxury that the wine and liqour store owner may not have time or personnel to offer.

Strict quality control and delivery on promises made are factors that have augmented the growth of JM Tobacco and its Dominican line. The cigars, packed in boxes of 50, are available in seven different sizes in two wrappers - the mild and light-colored Connecticut Shade and the bolder, darker-colored Sumatran.

Retail Partner

As a manufacturer and importer doing business in California, JM Tobacco prepays the tobacco tax, a convenience and hassle-free transaction for the retailer.

"The off-premise beverage retailer is one of our fastest-growing industries," stated Anto, who has connected as such prestigious brick-and-mortar high-profile shops as Mission Tobacco (& Liquor), Red Carpet Wine & Spirits, the Vendome locations and Cigar Warehouse in Sherman Oaks.

Last year's cigar sales exceed the 1.5 million mark for the company, which proved that JM Tobacco cigars fill a niche in the market.