Fading cigar craze causes Fader's to sell 4 of six stores

2 top investors each keep a store, while others are bought by ex-workers

August 02, 2002|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Premium cigar sales, which burned fiercely in the mid-1990s, have tapered off significantly in recent years, leading the two top investors who bought the venerable A. Fader & Son Inc. cigar and pipe chain in 1998 to sell four of its six stores in recent months.

Each investor wound up owning a store, while former Fader's employees now own the rest.

The chain's flagship downtown location at 12 S. Calvert St. will remain in the hands of one of the investors, Stephen L. Gurba, who said he's dedicated to keeping open.

"I'm in it for the long haul; it's a fun business," said Gurba, a partner in the group that bought the six-store chain in 1998 from Ira B. "Bill" Fader Jr., whose grandfather started the business in Baltimore in 1891.

"I really enjoy it, and I think that it'll be good. The good news is that all the stores are still out there," Gurba said.

Gurba and two other investors bought the business at a time when cigar sales were still lighting up the industry. Cigar bars were sprouting everywhere as entrepreneurs rushed to open up their own cigar-making operations in places such as the Dominican Republic.

"I bought the cigar-store business at its peak," said Gurba, who also owns and heads Bulova Technologies LLC, a $100-million-a-year electronics manufacturing company in Lancaster, Pa. "Since then, the market has fallen off 25 or 30 percent."

According to the Cigar Association of America, sales of premium cigars peaked at 417.8 million in 1997, up from 100.3 million in 1994.

Sales declined to 251 million last year. The association defines a premium cigar as one that consists of all-natural tobacco, is wrapped by hand and sells for more than $1.

"When you talk about Fader's, you talk about premium cigars," said Norman Sharp, president of the Cigar Association of America.

Gurba and a partner sold four stores - in Bel Air, Catonsville, Owings Mills and Towson - to people who've worked at Fader's for years.

The partner, Gary Shapiro, kept the Annapolis store, while Gurba kept the downtown Baltimore location. The six-store chain had combined sales of about $4.5 million in 2001, Gurba said.

But the famous Fader name will continue to headline most of the stores, new owners said.

Don Bennett, who worked at Fader's for 20 years, is now a co-owner of three stores and plans to keep doing business under the Fader name.

"It's out of respect for Mr. Fader and what his family has built up and maintained," said Bennett. "It deserves to be called Fader's."

Leaving the business

Bill Fader was getting out of the cigar and pipe business just as many entrepreneurs were still clamoring to get in. He had three daughters who weren't interested in running the company and he was ready to sell, he said.

Fader, now the executive director of the Retail Tobacco Dealers of America, said the chain over the years was a "very, very profitable company."

But the recent sale of the stores disappointed him. He had hoped the chain would remain intact.

"It's got my name on the door, I didn't retain any rights," he said. "They bought the name, they bought the company, they bought the goodwill."

The overall cigar industry is still very sound, Fader said.

"There's a lot going on in the industry today, on the premium end of the industry as opposed to the mass market. People enjoy a quality product. If they want a quality product, for many, many years now, [tobacco retailers] have been able to supply them with that product."

The cigar fad began to burn itself out in late 1990s at a time when many states, including Maryland, began imposing or raising excise taxes on them.

Health risks

The health risks of cigars and other tobacco products had come to dominate public debate, and cigarette companies were facing multibillion-dollar lawsuits.

"There's no doubt there was a strong negative reaction from the anti-tobacco movement; it couldn't help but have had some impact on industry sales," Sharp said.

Despite the decline from the mid-1990s, cigar sales overall are far from being stubbed out. Total cigar sales have grown from $1.6 billion in 1998 to $1.8 billion in 2000, the latest figures available from the Cigar Association of America.

Though Bill Fader left the business at just the right time, the cigar and pipe business is far from dead, his former associates said.

"What's important to remember was the growth was just extraordinary from 1993 to 1998," said Tony Mirarchi, who has worked at Fader's since 1991 and is now part-owner of the Bel Air store. "But there's still a good living to be made.

"We're a hobby market and, to some extent, a luxury market, so Sept. 11 certainly impacted our business, and the stock market certainly impacts our business."

Bennett, co-owner of the Catonsville, Owings Mills, and Towson stores, agreed.

"It's something you've got to love and be intimately involved with, rather than just as an investment," Bennett said. "Nobody's going to get rich quick working in a tobacco shop. I mean, I have no illusions of grandeur of becoming a multimillionaire."

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