CHIP LAVIGNE: I've heard that Swisher International has a long and interesting history, dating back to the 1860s. How have innovations in manufacturing and sales processes contributed to the longevity of the company?

TOM RYAN: Like so many tobacco companies, Swisher does have a long history. The company was started in 1861 in Ohio and relocated to Jacksonville, Florida, in 1923. During the Depression we were one of only a few companies that was not only able to retain our employee base but actually continued to add to our staff. We were the first company to purchase rolling machines to automate the production process of making cigars. We were also the first company to wrap cigars in cellophane and we developed a simple device to remove the cellophane by pulling a tab on the cigar band. These early innovations allowed us to reduce the pricing of our King Edward brand from 5 cents a cigar to two for 5 cents. This led to King Edward becoming the world's largest selling cigar by the 1940s.

More recently we have been investing heavily in plant expansion and further automation. We are producing over 11 million cigars a day in this facility with the most advanced cigar making equipment in the world. We have automated our packaging line and now have a continuous flow where we can wrap a cigar in cellophane, apply the band, collate five cigars together, insert five cigars into packs, seal the pack, put 20 packs into a display, shrink wrap the display and load into a shipping case.

Can you give our readers a snapshot view of Swisher and its current position in the U.S. market and its presence in other countries?
Swisher is a privately held company owned by the Ziegler family of Darien, Connecticut. The main manufacturing facility for cigars is right here in Jacksonville. We also have a facility to produce our smokeless tobacco products in Wheeling, West Virginia. We make premium cigars in Honduras and Dominican Republic. We have a sales force that is calling on over 3,000 stores a day all over the United States, and we're selling our products in 80 countries. We have a broad base of distribution for all of our products and our brands represent about a third of all U.S. cigar sales.

How would you characterize the importance of the convenience and petroleum retailing industry to your company?
Simply stated, convenience stores are by far the most important trade class for our company. Other than our premium cigar sales, the convenience and petroleum retail accounts represent more than 65 percent of our cigar and smokeless product sales. The most recent NACS State of the Industry report had convenience stores on average representing over $32,000 of OTP sales per store per year. This makes OTP one of the top five sellers in this trade class.

What are you doing now in pursuit of that goal?
Swisher's goal is to represent more than 10 percent of all OTP sales in each store selling our products. We try to achieve this goal by making regular calls on the buyers responsible for the OTP category and offering recommendations on merchandising approaches, product selections, display fixtures and special features. We then follow through by making frequent calls on individual retail stores to ensure product distribution, product freshness and merchandising recommendation. We feel we offer value to the convenience industry and have a complete array of in-store display fixtures and racks. We guarantee all our products and our ability to frequently call on the retail stores ensures our products are fresh. Our manpower has allowed us to set over 9,000 stores so far this year to help improve the profitability of the category.

Can you give us any clues to the future innovations to products, packaging and how you go into the market?
Innovation in products and promotion is vital to any consumer product company and it's certainly vital to our business. Probably 25 percent of the business that we have today was not there five years ago. In the cigar market we've seen good growth coming from a new line extension of our Swisher Sweet brands and new flavors that have been introduced to the cigar market. That also applies to the smokeless market. Last year we introduced a four flavored line of Swisher Sweets extra large blunts in an upright plastic tube. It merchandises very nicely in a convenience store. It has very attractive packaging and looks good on the shelf. We also introduced a mini cigarillo under the Swisher Sweets brand. Smaller cigars have become a trend worldwide in the cigar market, primarily because of taxation and smoking restrictions. People are looking for opportunities to enjoy our products that take less time.

Selling is real important to the convenience store chain. How does Swisher service single store operators? Do you give them the proper racks?
Well, I should show you our sales guide that our sales force uses because it has examples of just about every type of rack that we can think of to accommodate just about every type of store from the big box stores that have huge displays to the smaller retailer who has limited shelf space to work with. We have trays that merchandise our cigars that are 16 inches, 20 inches, and 24 inches. We have wire racks that allow small number facings to be put on a counter or shelf or free standing floor displays to manage a complete OTP department. So I think we have the flexibility to be responsive to just about all the retailers' needs.

Everybody seems to want a piece of the smokeless tobacco pie these days. Do you perceive that trend as a threat?
We're excited about what is happening in the smokeless tobacco market. Smokeless tobacco is a unique business and it has certainly been receiving a lot of publicity lately with the larger cigarette companies entering the category. We feel that the category will continue to grow for a number of years and our experience in the market will allow us to participate in this growth.

NACS members are strongly committed to proper sales of age-restricted products. What can we do more of as an industry to help eliminate underage sales and how can manufacturers of tobacco products help?
Education is vital, and NACS is doing a good job with that. Training sales staff is key. We as a company, and I think our industry as well, take a very hard line in terms of enforcing company policy of preventing underage tobacco use. We as an industry have come a long way in reducing the number of underage sales at retail since the early 90s, when Congress passed the SAMHSA law. We feel the single most effective way to prevent illegal sales of tobacco products is to follow store policy and ask for and check the ID of anyone who appears under the age of 27.

Convenience stores have been criticized for selling flavored and low priced cigars because they're perceived as being marketed to kids for the use with illegal drugs. How do you respond to that criticism and how should retailers respond?
The use of flavorings in the manufacture of tobacco products has been a continuous practice for centuries. Their use compensates for the lack of uniformity in the raw tobacco and creates smooth, pleasant flavors and aromas. They also represent the widespread practice of line extensions of existing brands. Line extensions using flavors is a common practice in almost all consumer goods, such as soda, cereal, gum, ice cream, etcetera. Virtually all tobacco products sold in the U.S. are flavored with combinations of fruit juices, peel and concentrate, nuts, herbs and spices that make up the proprietary formulas of the manufacturers to distinguish their brands. With the exception of the premium cigar segment, the cigar industry does very limited consumer advertising. Without an advertising campaign, how can we be targeting underage consumers?

How do you feel about big box retailers getting into the retail convenience store segment?
As a manufacturer that emphases maximum distribution of our products with our sales force, we treat these accounts the same as we would other convenience stores. The frequency of calls and promotional offerings are no different between the two types of accounts.

Bringing the customers into the store from the gasoline pumps is of paramount importance to the retailers just as it is to you. What recommendations do you have for retailers to help drive traffic into the stores?
To begin with, the convenience store operator needs to focus on the basics. The store's got to be attractive and inviting to their customers at the pump so that they want to go inside. The store's got to be clean, the clerk's got to be friendly, they have to make sure they're offering a good selection and that the prices are right. An OTP customer will visit a convenience store about 13 times a month versus 6.4 visits from an average customer. The OTP customer's market basket, based on a recent study, is about $2 more than an average customer. So, to have that department well stocked, with fresh products and priced right will benefit the retailer.

What impact have anti-tobacco groups had on your business?
The anti-tobacco forces in the U.S. are well organized and they will continue to push for anti-tobacco legislation and regulation. These groups have a long list of regulations and restrictions they would like to see imposed on the industry from FDA [U.S. Food and Drug Administration] regulations to excise taxes to sales and marketing restrictions on the local, state and federal levels. We will continue to lobby and actively defend the right of our company to do business.

Do you believe that smoking in public is decreasing overall?
Smoking in public is certainly decreasing with all the new laws being passed. This has, quite honestly, not had a negative effect on the cigar market because cigars have been more restricted for quite some time. Most of our customers have been enjoying our products outside of their home or office for years.

You've been in your current role for more than a year and a half now. What do you know now that you wish you had known when you started?
I was the president of the Helme Tobacco Company when Swisher acquired it in 1985 and continued in that role until 1994 when Swisher and Helme merged. I became executive vice president at Swisher after the merger before becoming president in 2004. In this position, I had responsibility for all sales and marketing, government affairs and research and development and I worked very closely with manufacturing, tobacco procurement and our finance people. I don't think there were any big surprises when I assumed the responsibility as president.

What role prepared you best for the one you're in now?
I think having 40 years of experience in the tobacco industry prepared me the most. I have spent my entire career in the tobacco industry and I love the business. I've had the opportunity to work with a lot of very professional people and have had some great role models. I'm delighted with our company and to be able to work with the most professional staff in the industry.

If you could trade places with any CEO, who would it be and why?
I don't think there's any CEO out there that I would want to trade places with. The people that I work with, our employees, our customers and our suppliers are all dedicated to the success of the company. We have been fortunate to see the company grow by focusing on our customer's needs, our people and our product development. There are certainly problems that have to be confronted daily, but overcoming those challenges is what makes it exciting.

How would you describe your management philosophy? How and to what degree does it determine the culture at Swisher?
It's important for me to set the targets to be achieved and to make sure everybody understands those goals. Communication is vital, and good communicators involve speaking as well as listening to what your managers are saying to you. As I said earlier, Swisher is blessed with professional managers that have had years of experience in the industry. They work hard and are motivated to succeed. I try to support them by making sure they have the tools to succeed and provide encouragement for the accomplishment of the company's goals and strategies.

How do you think the success of a leader is best judged?
Leaders are defined in different ways. A leader in business has to be responsive to delivering value to a shareholder. A leader also has to be responsive to the employees to make sure the work environment is positive and that there are rewards for success. A leader needs to be aware that they have an obligation to be socially responsible and participate in the affairs of their community. They also have to set the tone for the organization and try to be an example to those around them.

What is the most important thing that you do?
Set the tone. Make sure that the goals are understood by everybody and then communicate those goals, and to set an example. I focus on making sure we are continuing to be responsive to customers, employees and suppliers. And since my background is in sales and marketing, I think about how to continue to offer our consumers products from Swisher that are superior in quality and design compared to the competition.

You are a big local employer. How does that influence your interaction with the community?
Years ago Swisher was the largest employer in Jacksonville, but with the considerable growth of the community and our automation, that is no longer the case. We are, however, still one of the largest employers in our community and have considerable involvement with the community. We support a number of local charities and are actively involved with the Chamber of Commerce, local and state manufacturing associations and workforce training and development.

When you have leisure time, what is important to you?
I have a wonderful family and in the last five years I have been fortunate to have seven grandchildren that we are really enjoying. When time permits, I try to work on my golf handicap and do a little fly-fishing.