When I think of cigars, I think of endless tobacco fields and warehouses where the leaves dry. I think of open-air factories where dozens of “rollers” hand-make the cigars under the soft rotation of overhead fans while “lectors” – readers – help workers pass the time by reading aloud from newspapers and books.
I think of wood-paneled, clubby tobacco shops such as New York’s Nat Sherman, W. Curtis Draper in Washington and Georgetown Tobacco, lined with glass cases full of boxes packed with stogies. I think of walk-in humidors rich with the aroma of tobacco.
Omar de Frias has none of that.
What he does have is a successful cigar brand. His Springfield, Virginia-based Fratello Cigars is on track this year to sell $2 million worth from Chicago to Amsterdam. That comes to almost 250,000 smokes and around $1 million in gross revenue.
The former NASA project analyst walked away from a $200,000 (benefits included) job last fall to pursue an enterprise whose biggest assets are his smarts and persistence.
“I liked the culture,” said de Frias, who was drawn to the tobacco business’s nostalgic vibe.
“I am a driven guy,” said the 6-foot-9 former professional basketball player, who was on his way to his umpteenth cigar show when we chatted last week. “Work ethic is everything. It drives our products, business practices and customer relations. I just wish there were more hours in a day.”
The three-employee business – which includes his office manager wife, Ivonne – is run out of his head, out of his home and out of a small Springfield warehouse where he stores his three lines of Nicaraguan- and Dominican-made premium cigars. They fetch between $8 and $10 each.
There’s no secret to what is going on here. Just persistence. Hustle. Endless travel to cigar shows and Central American factories. Weekends on the road, cold-calling tobacco retail shops. The same drudgery that drives most small businesses. The same thing that took him from a $41,000-a-year NASA salary to several times that by the time he left.
“The harder and smarter I would work at NASA, the more notice I would receive from senior management,” he said. “The harder I work at selling my cigars, the greater profit I generate. It’s that simple. I get up in the morning trying to outsmart and outwork everybody else.”
Like most things retail, it’s a tricky business. The key is keeping manufacturing costs low. The cost of making a cigar can range from 30 cents using low-quality tobacco to $5 with the best wrapper and superior rollers, the highly skilled people who hand-make them.
Cigars are like wine. It’s all about age, quality, richness, alchemy. Those all go into the profit margin on each cigar, which de Frias declined to detail. The outside wrapper on each cigar is a key ingredient – and the most expensive – because it is what the customer sees.
Also like wine, tobacco is subject to the unpredictable nature of dealing with an agriculture product whose supply and demand have rocked his bottom line. Over the past five years, he said, tobacco prices have increased over 20 percent, eating into his profit.
Like most things sold at retail stores, the markup on cigars can run 75 to 100 percent. So a cigar that a consumer buys for $10 at a store is double the price the store paid the manufacturer.
Fratello, which is Italian for “brother,” sells three brands of cigars, from mild to full-bodied: Fratello Body Habano, Fratello Bianco, Fratello Oro. Later this year, he’ll introduce the Fratello Navetta.
De Frias was born in Puerto Rico and grew up in the Dominican Republic, where his father, now 69, is an electrical engineer.
“I grew up seeing my dad work 12- to 14-hour days and telling me that the result of your work is only as good as your efforts,” he said.
He earned degrees in business management from a joint program shared by a Dominican Republic university and the Rochester Institute of Technology in 2002. He later earned a master’s in finance from the University of Puerto Rico at Mayaguez in 2004.
De Frias was hired by NASA in 2004 and moved to the Washington area. He cultivated mentors who helped him prosper in the NASA bureaucracy.
Ten years later, he had advanced as far as he could and began looking for his next challenge.
A friend forwarded him a speech by Apple founder Steve Jobs: “The only way to do great work is to love what you do.”
With encouragement from his wife, de Frias explored cigars as a business, reading about the industry and visiting factories in Nicaragua, Honduras and the Dominican Republic.
As he put it: “I wanted to identify the structure of the industry and where I would fit. Retail? Manufacturing? Branding? Management?”
He decided on an asset-light approach of creating a brand, which would allow him to keep the security of his job at NASA while pursuing his project and keeping costs low.
“I needed to be cognizant of the risk,” de Frias said.
He borrowed $50,000 from his federal Thrift Savings Plan, the civil service version of the 401(k), and pulled twice that from savings to cover start-up costs. He invested more than $5,000 in branding and upfront marketing costs related to his band. It angles around the cigar, making the brand recognizable and unique.
Developing the cigar blend and profile was more complicated. He scoured Central America for the right partners, making presentations to factory owners, meeting industry experts and delivering his business plan. He was searching for a medium-body cigar using tobaccos from various countries to differentiate himself from the competition.
He settled on Joya de Nicaragua in Esteli. It’s the oldest cigar factory in Nicaragua.
Once he had his cigar recipe, he zeroed in on finding a manufacturer. It roughly goes like this: “If you are interested in creating your own brand in the USA, you can go research which cigar factories in Nicaragua and the Dominican Republic could work with you to develop your ideal blend. They will take the recipe, put a band on it, box it and deliver it to you.”
In July 2013, he took a chunk of his initial production of 50,000 cigars to the International Premium Cigar and Pipe Retailers trade show in Las Vegas, where he rented a booth for more than $10,000.
The show was a tipping point. De Frias caught the attention of three high-profile retailers: Draper’s in the District, Old Virginia Tobacco with its seven stores across Virginia, and Nat Sherman, the cigar smokers’ mecca off Fifth Avenue in New York City.
His brand took off.
Within 18 months, de Frias had repaid his loan from his retirement account and had broken even from his initial investment. In the three-plus years since, he has worked 90-hour weeks growing his cigar business into a profitable enterprise that earns him and his wife comfortable incomes.
Comfortable enough that he was able to quit his government job in October. He’s now a full-time cigar mogul – which pays more than those rocket scientists at NASA.