J. Thomas Ryan is president and CEO of Swisher International Inc., the country's largest cigar exporter.
The company’s operations are based in the Springfield area north of Downtown Jacksonville. Plant employees roll, pack, label and distribute up to 14 million products a day.
Swisher sells a third of the nation's cigars, and traces its history back to 1861 in Ohio, where merchant David Swisher received a small cigar factory as a debt settlement.
In 1924, his grandson, Carl Swisher, moved it to Jacksonville, where it makes Swisher Sweets, the No. 1 brand of cigars in the country.
The company is more than 150 years old and has operated in Jacksonville for almost 90 years.
Swisher is known historically for its famous King Edward cigars. It has grown its product lines through acquisition and invention.
Like many companies and industries, Swisher has had to adjust its production and workforce over the years because of the economy, mechanization, regulations and customer trends.
While it recently announced it would lay off 150 mechanics and production staff, it still employs 800 people.
The Daily Record interviewed Ryan for “First Coast Success,” a regular segment on the award-winning 89.9 FM flagship First Coast Connect program, hosted by Melissa Ross.
The interview is scheduled for broadcast this morning and the replay will be at 8 p.m. on the WJCT Arts Channel or online at www.wjctondemand.org.
These are edited excerpts from the full transcript.
Swisher International is 150 years old and has been in Jacksonville for 88 years. Tell us about the genesis of the company and why was Jacksonville chosen for the plant?
The plant moved here in 1924 and the Swisher family was involved in the business at the time. They had the plant in Toledo, Ohio. The story is that Carl Swisher came to Jacksonville because a lot of the tobacco that we were using in some of our products came from Florida.
The story goes that the mayor was driving down the street and he (Swisher) was interested in talking to him. He jumped on his running board and was able to get an audience with the mayor and they hit it off pretty good.
I think that was the genesis for the decision to put another factory in Jacksonville, which they did, and it succeeded. They continued to expand the business down here and they eventually closed the operation in Ohio.
The factory, which is along East 16th Street, is large. What all do you make there?
The factory is close to 700,000 square feet. We have about 150,000 square feet of a finished-goods warehouse operation, where we ship all the products out, near the airport.
We make our mass market cigars. We also make premium cigars, but it's a very small portion of our business, and those products are made by a third party down in the Dominican Republic and Honduras.
We make smokeless tobacco products in a facility we have in Wheeling, West Virginia.
In Jacksonville, we make about eight different shapes of cigars and we do the packaging.
We run a three-shift operation. The third shift is really a cleanup crew, because there's a lot of glue and adhesive involved in manufacturing cigars, so you have to clean the machines out fairly regularly.
What's your biggest seller?
Swisher Sweets, by far. The Swisher Sweets brand is about 85 percent of our unit sales. That brand comes in about six or eight different shapes.
In touring the plant, there is a detectable scent of grape on the factory floor. Grape is one of at least 10 product flavors that you have now, in addition to the original blends. How do you develop the new flavors?
The entire market has used flavors as a component in the filler of cigar products for years. It probably goes back 50-60 years when they started using cherry and vanilla in cigar products. It's primarily used to mellow the taste a little.
We do have a variety of different flavors that are popular in other types of consumer products.
We have a chocolate flavor, we have a blueberry flavor, we have a grape flavor, we have cherry and a number of different flavors. The flavored products represent 25 percent of our overall volume.
How do you determine what flavor to try?
I can't say that it's a huge amount of market research. I think it's what generally people like in flavors in other products. Sometimes, we'll follow what a competitor does, but most of the time, it's flavors that we come up with ourselves.
Are there any flavors that didn't make it?
A lot of times when you have some of those flavored products, they're very popular for a while, and then you'll come out with another one that takes the business away from the one you developed previously. We had a tequila product and a cinnamon product that we thought would both do very well, and they didn't.
How has the economy affected the company and the industry?
From 1993 to 2009, we had year after year of consecutive record sales and record earnings, both in dollar volume and unit volume. In 2009, the economy started turning south, if you will.
Swisher recently announced that it would lay off 150 employees, but would still have 800 here. Your human resources director said the layoffs were in response to demands and competition, and that some products would be imported from the Dominican Republic. Would you comment on that decision?
We have had to make the decision to move the production of one of our shapes, the cigarillo shapes, partially to the Dominican Republic. That process began actually in the middle of last year, when we shipped cigars down to the Dominican Republic and had them packaged down there.
At the beginning of this year, we provided that contract packager with some machinery so that he could make and package the cigar.
Part of that is because the federal government imposed a new federal excise tax on some of our large cigar products in April 2009, and that tax dramatically increased the price of the product.
It was a product mix situation that caused us to have to reconfigure some of the packaging of our product because of the price point, due to the new federal excise tax.
It was not economical anymore for consumers buying a five-pack, or buying a large quantity in some of the packages that we were making at the time.
The industry, not just Swisher, started marketing a lot of products in individual sales, two-packs and three-packs, and we didn't have the mechanization for being able to pack that product. A lot of it required hand-packing.
So we had to go to a country where the labor rates are a little bit less than what it is here. Again, because of those price points, that category of product continued to grow and it's grown for the last year. We've had to add to the equipment that we provided to that country and we are getting some of the products in from the Dominican Republic now.
Swisher continues to work with the unions on placement with the employees in the company. What's the status of that?
That is going to be somewhat of a long process, probably take two or three months. Obviously our union contracts require that we follow certain procedures, which we'll be doing, and we're going to try to work with the union to try to find additional employment for the people that we're having to terminate.
It's never a comfortable situation. We've got relationships with a lot of people and a lot of families. We certainly don't ever like to have to go through one of these cutbacks, but the economy and everything else requires that we do that from time to time.
You continue to have the plant in Jacksonville and it continues to be rolling out the products, correct?
This is our prime manufacturing facility, there's no question about it, and we've got a great affiliation with the community and a great affiliation with our employees.
A lot of the people that work for us, they're second- and third-generation.
Our company and myself, we're on the board of a couple of trade associations. One of them is the First Coast Manufacturers Association and the other is the Manufacturers Association of Florida.
When I go to one of those meetings, the biggest concerns that people seem to be having today in the manufacturing world is finding qualified workers that are willing to put in a full day's work for a full day's pay. But also, with the technology and equipment and the advancement in manufacturing, it's changed that environment dramatically, so you have to have people that are well-educated and really understand the manufacturing process to be effective.
We've never really had that problem. So many people are interested and want a job with our company. Part of that is because of the reputation in the community, part of it is because we have had people that have worked for us for a long time, and finally their sons or daughters or nieces and nephews end up joining the company as well.
We've been very blessed.
Do you have any advice for small manufacturers who might want to get started or grow?
Florida's a great state for that. I think the Southeast is good. You hear a lot in this community about the ports and about the growth of the ports, but not only in Jacksonville and South Florida and Tampa and so forth, but we have access to international markets, much more than some places around the United States.
Do you use the port quite a bit?
We have been the last couple of years, with the growth of our Honduras operation. I can't say that we use the Jacksonville port (for) most of our shipments because the bulk of the South American ports, the Dominican and Honduras, go out of Miami. We use the Miami port more than the Jacksonville port.
What is the ownership structure of Swisher?
Swisher is a private company, owned by the Ziegler family. Bill Ziegler is the chairman of the company. He has a home in Florida and he also has a home in Connecticut. We have a corporate office in Darien, Connecticut, which is where the family is originally from. We love being a private company versus a public company.
The tobacco industry has a lot of challenges. You have taxes, you have other challenges and you also have the health concerns. What's Swisher's response to that?
We are in the tobacco business and the business is challenged frequently, at all levels of government, at the federal level and the state level.
Going back to the question about the economy, at the state level with the economy being as bad as it's been for the last couple of years, and with the states having revenue issues, a lot of times they look to increasing taxes on tobacco products, because, as we like to say, we're low-hanging fruit.
We don't have a big constituent to support our position very often, so we've seen fairly dramatic increases in the state as well as the federal level.
We try our best to defend ourselves. We try to provide information to legislators. We have two lobbyists that represent us in Washington at the federal level, and there are about 28 states where we have lobbyists representing us at the state level.
Plus we're members of a trade association out of Washington called the Cigar Association of America, and they do the same thing. They have lobbyists in 50 states and also in Washington, so we're doing what we can to communicate our position on some of the issues that we have to deal with.
Including the health issues?
The health issues on cigars are not anything like the issues on cigarette products. But we are a tobacco product and it does have nicotine in it, and we acknowledge that.
We’ve never marketed our products to young people, and that's a criticism the tobacco industry has had over the years. Cigars tend to be used by older people, and they tend to be a casual product.
People don't smoke 20 cigars a day, or 30 cigars a day, and generally, people don't inhale cigars.
It's totally different dynamics compared to cigarette products, but we do have warning labels on (packages).
We are now regulated by the FDA. The FDA has regulatory authority over cigars. They haven't implemented that yet, but they have the authority to do that.
What's next for Swisher?
We're going to continue to do what we've done and try to continue to do it better. Ninety-five percent of our business is in the United States. We have a big sales force — about 65 percent of our sales are done in convenience stores.
We try to market effectively in all those classes of trade, we sell in over 3,000 retail outlets in the United States, and we've just got to get better day by day at what we do and continue to try to come up with products that are attractive to the consumer.
Any insight about what some new products might be?
We're always coming out with new products. We've got a new product called Swisher Black, which has a black wrapper on it. We introduced a product last year called BLK, which is a pipe tobacco cigar with a plastic tip. We’re coming out with new products all the time, that's the nature of the consumer products company. You have to do that.
Anything else you would like to share?
I'm very delighted to have spent the career that I have spent with Swisher. It's a great company and a great community with some wonderful employees. We’re delighted to continue to be part of this Jacksonville community.
We're real happy with the position we have in the marketplace, and we continue to try to make changes that are necessary to try to keep our volume up and to keep the employment as well as it can be in this facility here in Jacksonville, in this location.
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