A retailer’s manufacturer
By Robert Nason
Some people just have it—that natural instinct for seizing opportunity. Some see danger and play it safe; others see possibilities and take the risk. This natural instinct is within every entrepreneur, to varying degrees, and it would not be a stretch to say tobacconists have a particular abundance of that risk-taking gene. And there’s no better example of this within the premium tobacco industry than Nat Sherman—a man that saw opportunity even within the depths of the greatest financial crisis in history.
For nearly 90 years, Nat Sherman has survived, prospered and grown, but it didn’t happen by accident. There’s a clear philosophy behind every cigar.
“Nat Sherman has a very unique perspective,” explains Michael Herklots, vice president of retail and brand development. “We are proud of the flagship store we maintain in Manhattan, and we’re equally proud of the robust network of partner retailers who sell our products throughout the United States. Our philosophy is rooted in the same commitment to excellence around service and our products. We are thoughtful and deliberate about the decisions we make. We think long term about how our portfolio fits within the industry, and we make sure that the products we have on the market today are as great as they were the day they were released. With 88 years in the cigar business, we maintain a relevance and agility that many companies cannot, and we try our hardest to express our gratitude to those who support us.”
In the beginning
To briefly paint the picture, by 1932, at the height of the Great Depression, unemployment in New York City was 25 percent, half of the city’s manufacturing plants had closed, and nearly 2 million people were receiving some form of humanitarian aid. But within this environment was a dynamic and charismatic son of Hungarian immigrants ready to make his mark. Starting from humble beginnings as a street peddler, Nat Sherman began climbing the ladder of success, opening a pool hall and then eventually opening his tobacconist shop in the heart of New York City’s old garment center at 1400 Broadway.
As Larry Sherman, executive vice president of the company and grandson of Nat Sherman, described it in a Gotham magazine interview in 2011, Nat Sherman loaned money to his friend who was constructing the building at 1400 Broadway, and to repay the favor, the friend offered Sherman the store on the first floor. “My grandfather said, ‘Why don’t we start selling cigars?’” Larry Sherman recalls.
It didn’t take long for Nat Sherman’s store to become the place to be for the rich, the famous and the infamous (a few gangsters were known to frequent the store). Around the same time, Sherman also partnered with Charles Baer, owner of Epoca Cigar Company, becoming part-owner of the cigar brand. In 1947, Sherman introduced the first Nat Sherman cigar, the Private Label. Produced in Tampa, Florida, it contained a blend of American and Cuban tobaccos. Sherman also started making a line of cigar-taste cigarettes, the Havana Ovals, after a longtime customer complained to Sherman that airlines were no longer allowing cigar smoking on planes.
In 1976, Sherman moved the flagship store to 711 Fifth Ave., on the corner of 55th Street. Then from 1990 to 2007 its home was on 42nd Street and 50th Avenue before it moved again to its current location with the debut of the Nat Sherman Townhouse at 12 E. 42nd St. in Manhattan.
As the decades progressed, Nat Sherman continued to slowly expand its premium cigar portfolio. While some might say Nat Sherman has had a conservative approach in debuting new products, Herklots says that Nat Sherman’s strategy is more in line with their philosophy from the start.
“I think ‘thoughtful’ is a better word,” he says. “Our commitment is to our retail partners and our consumers, and we bring products to market when there is a clear opportunity to do so. And then we work tirelessly to maintain those products year after year. Our Metropolitan selection, for example, has been on the market since 1994 and continues to grow year over year.
“Joel Sherman, our family patriarch, would often say to me, ‘There are 88 keys on a piano, but there’s a lot of space within those keys.’ That’s been the focus. We introduced the Dominican-made Timeless in traditional vitolas when 60 ring gauges were all the rage. We introduced the Nicaraguan-made Timeless without using a single leaf of ligero in the blend, despite the industry trend that fuller was better. We released our super-premium Sterling in elegant formats and flavor when everything released that year was big and bold. We’re thoughtful.
“But we’re also thoughtful about the pressures our retailers face, especially since we’re a retailer too. And we don’t have a section of empty shelves in our humidor that says ‘coming soon, next IPCPR.’ Neither does any other retailer. If we select a product to bring into our store, it’s because there is a clear place for it. And we make sure that there is a place for every product we bring to market, to ensure it will succeed in our humidor at the Nat Sherman Townhouse and the humidors of our partner retailers throughout the U.S.”
Since joining Nat Sherman in 2011, Herklots was involved in perhaps the company’s biggest change, when Altria acquired it in 2017. Altria, already a massive player in the tobacco business, added Nat Sherman to its Fortune 200 portfolio, with the premium cigar and cigarette company joining a list of other businesses, including Philip Morris USA; U.S. Smokeless Tobacco Company, the maker of Copenhagen and Skoal; John Middleton Company, the maker of Black & Mild cigars; Ste. Michelle Wine Estates; and Nu Mark, an e-vapor company, to name a few.
Herklots says that in the beginning there were a lot of folks jumping to conclusions about what the acquisition meant for the company, “but there was a clear integration plan in place prior to the acquisition thanks to the Sherman family and the leaders at Altria, and we’ve been able to maintain that plan over the last 12 months to ensure that we remain focused on growing our business.”
“We said we would move quickly during the acquisition, and we have,” adds Steven Callahan, spokesperson for Altria. “Since the acquisition was announced last January, we’ve successfully integrated Nat Sherman as a stand-alone operating company, including expanding its cigarette production capabilities, integrating it with Altria’s distribution system and focusing on complying with regulations. Also, the great folks that made up Nat Sherman pre-acquisition are in large part the same people who make up Nat Sherman today.”
Indeed, a year after the acquisition, Herklots sees the advantages to having such a solid foundation for its premium cigar brand. “Nat Sherman’s cigar business was a founding pillar of the company, and it continues to be a very important piece of the Nat Sherman story. We put a tremendous amount of time and effort into re-establishing our premium cigar business in 2011, and year after year we grow our business thanks to the tremendous support of our retailers and, of course, our adult consumers.
“But it’s no secret that the premium cigar business is much different today than just a few years ago, due in large part to the increase in regulation at the federal, state and local levels. The acquisition has provided a solid foundation to continue to build our business. Our sales representatives are in stores every day working with our partners to make sure they have the best product mix for their business, and supporting them at events and programs that ensure continued growth. The acquisition also ensured seamless transition with our partner manufacturers, who continue to provide us with high-quality and incredibly consistent premium cigars.”
As to the future, Herklots remains optimistic, seeing the company’s goals as a marathon, not a sprint. “Nat Sherman takes the premium cigar business very seriously. It’s a very special piece of the tobacco industry, unlike any other. We will continue to be what we have always been—a great company with a comprehensive portfolio of premium cigar blends for every taste and occasion. We’ll continue to grow our business thoughtfully and for the long term, and will remain committed to our partners and our adult consumers. And in five years? I’ll likely answer the same way. When you’ve been in the cigar business as long as we have, we look in increments of 10.”