This NASA an­a­lyst left a $200,000 job to sell cigars

The Washington Post Sunday - - BUSINESS - VALUE ADDED thomas.heath@wash­post.com

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 the District 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, Va.-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.

The 38-year-old busi­ness­man grew up next to a to­bacco store in Santo Domingo, in the Do­mini­can Repub­lic, where he was en­thralled by the swag­ger­ing ci­gar smok­ers in their big cars and wavy brimmed hats. “I have been smok­ing cigars for 20 years and have al­ways been fas­ci­nated by the in­dus­try,” he said. “I liked how I would see my grand­fa­ther smok­ing a ci­gar. It was such a fine thing to do. It seemed classy.”

De Frias may be drawn by the ro­mance, but his un­sen­ti­men­tal ap­proach to busi­ness is all about the bot­tom line.

“I am a driven guy,” said the 6foot-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 90hour 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 full­time ci­gar mogul — which pays more than those rocket sci­en­tists at NASA.

Value Added THOMAS HEATH

BILL O'LEARY/THE WASH­ING­TON POST

Omar de Frias, owner of Fratello Cigars, quit his job at NASA to run his own busi­ness. “I have been smok­ing cigars for 20 years and have al­ways been fas­ci­nated by the in­dus­try,” he says.

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