Monday, May 28, 2012


1.0 Executive Summary Martin Family of Cigars is a new business providing high-quality, full service distribution of premium cigars, super-premium cigars and cigar-related supplies to cigar retailers and lounges throughout the United States at resonable prices. The principal is María E. Martin, whose combined experience brings office management, high levels of customer service, and over 20 years in executive experience, distribution and sales management. At this time we are seeking a strategic equity relationship to complement and leverage our multiple market advantages and are seeking to arrange a complementary, vertically integrated structure. We have firm commitments to distribute multiple high-quality cigar products, and have relationships and commitments from major retailers throughout the United States market to carry any product with which we are affiliated. We plan to distribute any new products within 30-60 days of finalizing contractual arrangements. It takes at least three months to be approved for a TTB license which Martin already has available for immediate use, as well as also having a Florida Business License, IPCPR Membership, Occupancy License, and U.S. Customs Bond ($300,000). First year sales for Martin Family of Cigars are, annualized, at approximately $451,000, and projected to increase to approximately $2,558,000 in Year 2 and approximately $2,936,000 in Year 3. First year sales volume is a seasonally adjusted 67,000 units monthly. Year-over-year same-brand-sales ("Y2Y SBS") growth is 48% Furthermore, Martin has reached almost 250 retail accounts within its initial year, accomplished with a very restricted advertising budget. Distinguishing characteristics of this business are be the combination of management experience, sales and distribution experience, high-quality, innovative products and exceptional customer service. In particular, what really sets Martin Family of Cigars apart is the experience and connections already established in the US. In addition, Martin Family of Cigars has exclusive access to distribute any new product with immediate access to the majority of the potential customer base. 1.1 Objectives • To open and operate a successful premium cigar distributorship in the United States, employing three to five employees the first year uniting both companies into one. • To obtain a minimum of 700 regular customers in the United States market the first year of operation. • Achieve first year sales to the maximum output of both companies. • Maintain an average gross margin of 30 to 40 percent. • To produce a net profit by the end of the third year of operation. 1.2 Mission Martin Family of Cigars intends to become a recognized distributor of super-premium cigars and cigar-related supplies and services to cigar retailers and lounges throughout United States at a reasonable price. Martin Family of Cigars has strong relationships with key customers so we will be viewed as indispensable partners, rather than just another supplier. We will work closely with each customer to recommend product assortment unique for their retail base, appropriate stocking levels, pricing and display assortments, as well as promotional ideas and material to increase sales. Martin Family of Cigars will seek out and work with the manufacturers we represent to deliver the most innovative and exciting products possible to the customers we serve. We are not only selling product, we are selling service. 1.3 Keys to Success We know and anticipate trends because of our vast market and operational experience. • Innovative quality products. • Individualized customer service - providing our customers with what they want, when and how they want it. • Fully integrated programs to help customers increase sales through menu development, creative promotions, advertising, and custom marketing material. • Exclusive distribution rights to highly rated and legendary products not currently available in our market. • The combined experience of the principal owner and management bring upper office management skills, high levels of customer service, and over 25 years in distribution and sales management in the US market. 2.0 Company Summary Martin Family of Cigars, Inc. is a corporation business located in United States, Florida,and will be established based on the details of the following plan. 2.1 Company Location & Facilities Martin Family of Cigars will be located in the United States in the Miami metropolitan area. This is a prime location to service the United States and other markets. We have the experience in dealing with one of the best humidor builders in the US to build a custom humidification room for our cigars. 2.2 Company Ownership Martin Family of Cigars is a privately held corporation owned in total by its co-founders. Maria Martin has sole rights to direct the deployment of the company's assets, because she owns 80.1%. EIN Number: XXX-XXX-XXX (removed to protect confidentiality) 3.0 Products Martin Family of Cigars provides a first-class delivery service of quality premium cigars and related supplies. Our services will include invaluable trade resources, effective promotional programs, custom-designed marketing material, informative monthly updates, training and product demonstrations, as well as information on the latest market trends in the premium/super-premium cigar industry. The main segment of the market is generally based on products with retail prices in the range of $6-$8 per unit. Over the past year, Martin has proven that meaningfully complex flavor can be developed for at this segment in the product positioning matrix. In the next five years it is estimated there will be more than eighteen of products distributed by Martin Family of Cigars, Inc. The market potential for these products, which does not include the addition of the new products brought on board by Compañía, in these quantities – with a current retail price of $6 (on average) per unit – could reach approximately $8 million. In terms of product strength, Martin Family of Cigars, Inc. has several distinct advantages over the competition. First is its marked advancement in cigar blends with Grade A cigar tobacco. Other product strengths include distinct flavor profiles. 3.1 Product & Service Description PRODUCT DESCRIPTION Martin Family of Cigars will carry a variety of quality products that will enable us to provide full service delivery to lounges and cigar retailers. Our underlying philosophy in selecting products is to choose lines which will feature consistent quality, competitive prices, and product satisfaction to our customers. We have personally researched and sampled each of the following products that we offer to ensure the quality we guarantee. • Pedro Martin Gold • Pedro Martin Ruby • Pedro Martin Corojo • Pedro Martin Fiera • Pedro Martin Royal • Pedro Martin M • Martin Humidor Solution SERVICE DESCRIPTION An important component of our business is not just our products, but our service. In addition to our full service delivery, the following are other important service elements that we will offer to our customers: • Ideas to help our customers increase sales through selection development, creative promotions, advertising, and much more. • Custom designed marketing material such as printed banners, promotional posters, punch cards, pre-purchased cigar cards, reader boards, etc. • Feature a monthly newsletter featuring the latest premium cigars trends, new industry equipment, breaking trade news, promotional ideas, new creative recipes, and upcoming events. • Samples of the latest product releases - with eye-catching point-of-sale to advertise new items to the end consumer. • Constant Retailer and employee training. • Routine education and training. 3.2 Competitive Edge KEY COMPETITIVE STRENGTHS We are better positioned than our main competitors to take advantage of the increasing demands of premium cigars and super-premium cigar supplies because we focus exclusively on high-quality distribution and customer service. Working in synergy, there is much more power, given Martin's relationships and experiences in the US market. In addition to the variety of products we feature, Martin Family of Cigars has acquired exclusive distribution rights to other cigar-related products, such as the Martin Family Humidor solution, an all-organic mold preventing humidification additive that protects cigars and humidification equipment in an all-natural, cost-effective way. This product is exclusively available from Martin and not available in any market from any other suppliers. KEY COMPETITIVE CHALLENGES The top business primary challenges Martin faces are: Disruption in the supply of cigars ordered from contract manufacturers, in the required tobacco, and in the required packaging materials. Also, being a new business competing largely against established suppliers. To significantly build sales, we must not just find new customers - we must take space away from existing competitors. However, by offering a superior selection of products, new super-premium products to the market, and focusing on high-quality service and full service delivery, we believe will can quickly establish accounts and build strong relationships. Co-founder María Martin has had many discussions with owners of premium cigars and businesses that confirm this opinion. 3.3 Sales Literature Sales literature to be distributed to both current and potential customers will include brochures, fliers, newsletters, as well as other print media such as print advertisements. Our graphics team is highly skilled in graphic design and desktop publishing, and has quality design and printing equipment to publish professional pieces at a low cost. 3.4 Sourcing The proposed new joint entity will purchase product directly from your factory because this eliminates the broker or "middle man," this allows us to operate on a better profit margin, while providing our customers with competitive prices. 3.5 Technology To streamline the efficiency of our distribution methods, Martin Family of Cigars plans to use the latest in cutting edge technology in the trade. All of our sales representatives will be equipped with Thinque MSP handhelds and software. Thinque MSP applications will reduce field expenses, decrease day sales outstanding, and increase worker efficiency. Features can be used in or out of the office and include managing returns and collections; adjusting item price, profit or margin; applying promotional items to an account; streamlining orders; tracking inventory; reducing out-of-stocks; and providing sales history reports. All information recorded in the handheld is available in real time to be viewed by management in the office. Jose Garcia is crucial to implement this technology. 3.6 Future Products and Services Within the first year of business, Martin . We will also offer a showroom that will feature material, supplies, trade resources, and information on marketing services with examples of marketing and promotional material available to customers. With the addition of a product showroom, Martin Family of Cigars can offer clients regular product and training demonstrations that will be presented by trained cigar experts from the industry. Martin Family of Cigars also plans to attend all trade shows to support current and seek potential customers. These trade shows will allow customers the opportunity to sample products, talk to manufacturers, learn about new industry trends, review marketing material, and network with others in their market. 4.0 Market Analysis Summary Premium cigars are the second largest luxury market next to alcoholic beverages, and growth is expected to continue at a strong pace for the foreseeable future. The super-premium cigar industry is growing at an equally strong pace, with sales growth in some categories projected to grow at rates of X% per year. The premium cigar market is growing at a rapid rate. The market for these products amounted to $3.8 billion dollars in 2011. This represents an annualized 11% growth over the last three years. According to market research and industry sources, the overall premium cigar market for the U.S. market is projected to be $4.75 billion by the end of 2014. The area of greatest growth in the premium cigar market is in the area of super-premium cigars. Currently, the market is shared by multiple market participants, with Altadis considered the market leader. In the next eight years it is estimated there will be more than eighteen of products distributed by Martin Family of Cigars, Inc. The current market potential for these products in these quantities – with a current retail price of $7 (on average) per unit – is approximately $2.4 million. Naturally, given the synergies we envision as a result of this natural union, we fully expect even greater potential. This growth offers excellent opportunities for new companies to enter this market, and we are excited about the possibilities of what Martin Family of Cigars can accomplish in the United States and Canada market with both companies united. 4.1 Market Segmentation The premium cigars and super-premium cigar industry is divided into several segments. Consumers who enjoy these products purchase them at restaurants, cigar retailers, sports venues, clubs and lounges, and even inside other retail establishments that might feature an independent cigar stand. Within the United States market, there are currently 250 major retailers (which average sales of $500,000year) and a total of 3000 retailers, lounges, cigar clubs, independent "inner-retailers" and kiosks in locations such as sports venues, university campuses, and so forth. This gives the premium cigar industry a MLE Index of 83+.These figures are not including the number of restaurants, bars and cafes that also feature premium cigars. Key factors that have resulted in the present competitive position in this industry are consolidation of the smaller companies by industry leaders. In all comparisons, Martin Family of Cigars, Inc.'s products provide more complex flavor and have superior construction than do competitive products. In most cases, the level of differences is substantial. A complete comparison is available. Martin Family of Cigars, Inc.'s products fill a niche with virtually all cigar lovers. The ability to replicate pre-embargo Cuban blends with full access to the legendary Pedro Martin’s blending journal is unique to Martin Family of Cigars, Inc.'s products. The ability to craft blends to replicate classic Cuban flavor profiles is unique to this company, and our feedback indicates its construction is superior to anything else on the market today. 4.2 Target Market Segment Strategy While the market is already sizeable, this industry continues to grow. New outlets open their doors to the public on a monthly basis in our market, and it isn't uncommon to see numerous outlets within a one or two mile radius. According to an article published by a national premium cigars retail magazine, discusses our product's unique characteristics. The sales potential in this market is colossal. Martin's current target has the following demographic profile: Position: Management Education: Some Postgraduate Age: 35-55 Income: $65,000 - $90,000 Gender: Male Family: Married Occupation: Professional/Executive Our newest market segment, one which is growing exponentially, is women smokers in the US. Maria Martin co-founded the International Woman’s Cigar Society with some of the most influential women retail owners in the US. Martin Family of Cigars initially plans to target these retailers, as well as all inner-retail outlets within this designated market. It is this segment that is most in need of the services we are planning to offer. Essential needs include: quality products at competitive prices, first class service, and strong sales support. It is most often the small owner-operated businesses that are neglected by larger suppliers and are forced to service themselves. It is also these smaller businesses who could most greatly benefit from marketing services, sales support, and full service product delivery. Providing the same high-quality service Martin Family of Cigars plans to expand our target into formal cigar retailers and cafes, and as business grows and stabilizes, eventually evaluate the needs of potential customers in the restaurants and bar industry. 4.3 Market Growth Premium cigars have been a growing industry for the past several years. In the premium /super-premium cigar industry alone, the figures show an impressive rate of growth in the United States. 4.7 Competition & Buying Patterns While there are several premium cigars and super-premium cigar suppliers providing product in our market, there is still a great deal of room for new business. Most importantly, there is room for a new caliber of business that understands the need for high-quality service and sales support – in addition to product at competitive prices. Also being vertically integrated as Compañía is, in conjunction with Martin's knowledge of the US market makes this a perfect and powerful union. In this industry, customers choose their suppliers based on available product, price, and service - though most often, it is the service that suffers most. While one supplier may offer product at the right price, they do not provide the level of service that the customer demands. The next supplier may offer the right level of service, though their prices are too high. This results in leaving the customer with no service or support. By positioning ourselves in the market with in-demand, quality product at competitive prices, with a consistent high level of customer service - we are confident that we will see customers and their business continue to increase. 5.0 Sales and Marketing The unique aspects of our business include individual product selection, quality assurance, and high-quality full service distribution. Our strategy is to focus 100% of our efforts on the market for supplies in the United States and Canada area. By focusing all of our effort and energy on this particular area, we expect to quickly develop and maintain a leadership position. Martin Family of Cigars's key personnel will stay in contact with our customers, and will be able to respond to changes in this market much faster than our competitors. Martin Family of Cigars will offer the best, most highly personalized service in the marketplace. Being an agile, objective-operated company, we intend to use this to our advantage to be absolutely certain that every one of our customers receive excellent service. We will go out of our way to make sure that our customers know that they truly matter to us. Sales reps and in-office personnel who deal with customers will be carefully trained and given proper latitude for insuring that customers are always satisfied. Slowly we will build our own sales force which will give us a guaranteed return on our investment if correctly trained by Ms. Martin. We currently make one private label and are working on adding more. 5.1 Marketing Strategy Our basic marketing strategy is to work with customers on a one-to-one basis to ensure their supply needs are being met and help develop unique marketing programs for each of them. We intend to prioritize customer service and make it a key component of our marketing programs. We believe that providing our customers with what they want, when and how they want it, is the key to repeat business and positive word-of-mouth advertising. Because we want to develop close working relationships with our customers, we want to establish accounts in as personable a way as possible. It is for this reason that we will overwhelmingly emphasize in-person sales calls to build accounts. We will closely integrate all of our marketing and sales efforts to project a consistent image of our company and a consistent positioning of our products and services. We will build this image around our name "Martin Family of Cigars, Inc." and emphasize to customers the high-quality service that is behind this name. To support our marketing initiatives and product knowledge, we will attend as many area conventions and trade shows as possible to ensure we are offering the most up-to-date market trend information. 5.2 Promotion Strategy Relationships are the key to success in the distribution business. Personal selling will remain our most important means of promotion. Both María Martin and her handpicked staff will lead this effort - María Martin, with her skill and experience in sales & distribution, and in customer service and relations. In addition to personal contact, Martin Family of Cigars has identified several other means of advertising and publicity. Martin Family of Cigars has exclusive access to the Cisionpoint system, to send news releases to cigar media and press, as well as trade magazines to try to get product and company feature coverage in front of the eyes of our customers – as well as the end consumer. We will also produce a few press releases about the products we are distributing for our customers to use toward publicity coverage for their businesses in publications such as the Smoke, Cigar Aficionado and Tobacco News. Third, we shall have a website for current and potential customers. This will highlight new and current trends in the industry, upcoming events and shows, offer promotions and special deals, as well as provide new recipes, tips and other information to be used in business. We will also highlight not just our products, but also display ideas and success stories of other business in the industry. As a more straight-forward advertising effort, Martin Family of Cigars will feature advertisements in Cigar Aficionado, both in print and online, as well as participation in invitation-only industry media events to which we have already been invited too; in addition to the leveraging of personal contacts to obtain the ratings for cigars that is crucial to establishing and maintaining strong sales growth. 5.4 Sales Strategy Distribution sales are dependent on repeat business; therefore the sales strategy of Martin Family of Cigars is based on personal, consistent sales contact, with a high emphasis on customer service and relations. Because we are an experienced distributor, we understand we have to continually prove our worth to our customers in order to keep their respect and business. María Martin, will often make personal calls on potential customers to review our product line and services, give general information on our company, and discuss how we can help them succeed in their business. Martin Family of Cigars will begin operations with X in-house and Y out-sourced sales representatives, who will be responsible for providing full service and delivery to current customers, but also make sales calls for potential new business. These sales representatives will receive a base salary, with commission on qualified sales, as well as bonuses for new acquired business they will work out of the office. Customers will be scheduled for a pre-arranged delivery day once or twice a week, depending on the quantity and timeline of product needed. Product orders can be placed in a number of ways to help facilitate the process: • Phoned Orders: Customers can easily phone orders into our office, up until 3:30 p.m. of the afternoon prior to their desired shipment day. All orders will go out the same day they are placed providing excellent customer service. • Faxed Orders: Customers can fax in a completed product order sheet, with the same deadline as phoned orders. • E-Commerce: Customers may choose to have access to our online system for placing their order. • Eventually we can make it so customers can place their orders thru our website with a special code to get in only for retailers. We understand the hectic schedule of a small business, so if a customer fails to call, they will receive a courtesy call from our office to verify their situation. 5.5 Sales Forecast Our sales are forecasted to increase rapidly, with an annual growth rate of approximately 30% for the first 2 to 3 years after that approximately 8 to 10%. 6.0 Management Summary Martin Family of Cigars is owned and operated by its strategic partners, initially working with a core employee base that will cover sales and operations. Management and personnel plans are covered in more detail in the topics to follow. Martin eagerly welcomes any personnel Compañía may choose to bring work together with Martin in this new venture, in whatever capacity seems best. 6.1 Organizational Structure Martin Family of Cigars will be managed by the strategic partners, whose individual areas of expertise cover many of the functional aspects of the business. The organizational structure is very simple, to be responsible for routing, distribution management and delivery systems, for customer service, accounting, shipping and the general administration of the business. All strategic partners will be responsible for product selection and sales and marketing. The support staff at the office and warehouse, as well as the sales personnel will report to María Martin. Because María Martin will be spending a majority of his time in the trade, she will be able to support any day-to-day needs that the personnel may have. However even when María Martin is out of the office, she will be in constant contact via computer or phone, as will be Jose Garcia. The goal of Martin Family of Cigars is to have a team of committed associates who empower each other so that the customer's expectations can be exceeded. Our goal is to offer career opportunities, advancement opportunities and a level of income and benefits that is competitive within the region and job classification. It is our long-term goal to be the preferred employer within our niche of the cigar distribution industry. 6.2 Management Team María Martin María Martin has a long history of experience in sales and executive management, specifically in the cigar industry. As the sales and distribution manager for one the largest vertically integrated cigar enterprises in the United States, she managed 12 sales representatives, 16 cigar lines and all US territories. During this time as sales manager, she has helped increase market share over 200% of what it initially had before she came on board. Over the last twenty years, María Martin has successfully built and maintained relationships with buyers in the largest key accounts, and has strategically delivered sales growth and profitability throughout the industry. María Martin has many industry contacts and an in-depth knowledge of the market. Prior to this position, María Martin has held a variety of other inside business management and operations positions. María Martin's strengths and skills include strong management, excellent public relations and extensive presentation and reporting skills. Given her vast sales and operational experience, it is no surprise that she has a current MLE Throughput score of $25 million. Coupling that with her knowledge of halo branding, industry media expertise, direct customer intelligence, branding and market culture, she is an invaluable ally to any strategic venture in the cigar industry. Jose M. Garcia has spent 23 years in multiple situations as an executive and as a strategic consultant, successfully engaged in projects and ventures within the lifestyle market. He began his career in 1990 co-founding (along with ex-Arthur Andersen & Co. partners) GFC of Miami, Inc. where he helped develop multiple proprietary evaluation and development mechanisms. From 1998 through 2010, Jose was the COO for GFC of Miami, Inc., during which time he successfully completed over 40 specific assignments across a broad spectrum of industries, markets and disciplines for companies the average value of which rose by 47% as a direct result. In 1989, Jose began his career focusing on the food/cigar and wine/spirits sector, helping companies such as Young Farms, Inc., Tropical Tobacco, Inc., Vinos Zaldaña S.A., Vino di Sasso S.p.A., and Portela Rums achieve average annual earnings growth of 23%, and which he helped guide to acquisition by industry leaders. In 1998 within GFC to focus specifically on golf and golf-related enterprises, with clients such as Absolute Golf, Inc., Jim McClean Golf, and Heron Bay Development, Inc. where he worked closely with its Strategic Development Groups, evaluating and forging strategic alliances instrumental in catapulting these enterprises to prominence and an enhanced earnings level. 6.3 Personnel Plan PERSONNEL – GENERAL Initially we expect to be able to handle business needs with existing personnel. As business continues to grow, we intend to hire additional employees one at a time and pay premium, over market labor rates to attract and retain quality help. Not only will we train our employees to deliver excellent service, we will give them the flexibility to respond creatively to client requests. In addition, we will continually monitor our clients' level of satisfaction with our service through surveys and other convenient feedback opportunities. To ensure our personnel are meeting our expectations, we will hold a minimum of quarterly meetings with all employees so that results can be reviewed and future plans can be discussed. At least twice a year, a refresher course will be required on product knowledge and how to exceed our customer's expectations. SALES AND DELIVERY In order to deliver high quality, personalized service we will carefully select all employees - with extra attention given to sales reps and contact personnel who will deal directly with customers. We will carefully review references not just from past employers or manufacturers, but also from retailers whom these have served. We will also make sure each employee understands our way of delivering quality service to each customer. We will have immediate back-up support available by phone from our office for the more difficult service issues. We will also give employees enough latitude so they can respond immediately to almost any customer request. We already have 8 broker/sales person in key market areas. The annual salary of the team from Martin Family is something we should discuss in person. as we are confident they will not disappoint. There would be one employee for order taking and some marketing and sales assistance, one employee for data entry and accounting, and one warehouse person. Also on a temporary basis – to hire only in peak season before and after IPCPR – an employee with vast experience in sales and customers service in the office to supplement these efforts; this will be for approximately 3 months. 7.0 Proposal to Compañía Martin Family of Cigars proposes the following distribution arrangement: Compañía and Martin will jointly form a new distribution entity in the United States for the purposes of distribution in the United States. So as to not create any potential conflicts of interest, Compañía will absorb Martin and will acquire the Martin Family cigar brands and all other assets of Martin Family. In consideration, Compañía will 1) Provide Martin Family a minority equity percentage (to be discussed in person) of the new entity, 2) Will offer Maria Martin the position of Chief Sales Officer, o Annual salary to be discussed in person, with a benefits package of o 3 weeks vacation, o Automobile allowance to include associated expenses (fuel, insurance, etc.) o Mobile phone allowance, o Comprehensive health insurance, and o Performance bonus of a percentage to be discussed in person of sales if sales growth is in excess of 10%; 3) Compañía will offer JM Garcia the position of Chief Development Officer o Annual salary to be discussed in person, with a benefits package of o 3 weeks vacation, o Automobile allowance to include associated expenses (fuel, insurance, etc.) o Mobile phone allowance, o Comprehensive health insurance, and o Performance bonus to be discussed in person if profit growth is in excess of 10%. 7.1 Appendix Martin will make available to Compañía more detailed marketing plans upon successful personal discussions in Miami.


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