In part 2 of Tobacco Business‘ May/June 2020 cover story, Michael Herklots discusses his work and time at Nat Sherman International, including his efforts to help rebuild the brand and product development. He also reflects back on his 20 years working in the tobacco industry and shares his advice for finding fulfilling work. For part 1 of the story, click here.
Righting the Ship
Initially, the Sherman family tasked Herklots with helping to “right the ship” of Nat Sherman’s non-cigarette business. It was 2011, and the Nat Sherman Townhouse had been open at its current location for a few years. A third party developed and distributed Nat Sherman-branded cigars primarily through catalogs at significant discounts. Herklots worked alongside the Sherman family to develop a basic strategy to reinvigorate the Nat Sherman cigar brand with new releases. Herklots began working in June of 2011, and a substantial amount of progress had been made by the time the annual International Premium Cigar & Pipe Retailers Association (IPCPR) trade show was held in July. The new brand would be called Timeless, and samples were put together in time for the show.
Nat Sherman also planned for new artwork for the entire Nat Sherman cigar line. For the first time in a long time, the company had a new vision for its cigars.
Nat Sherman discontinued its third-party distribution agreement, and it stopped selling products for six months after discontinuing nearly all of its cigar lines. Nat Sherman made other moves that left some colleagues questioning the overall direction of the company, to which Herklots simply replied, “Just wait.” Nat Sherman price-corrected and price-protected its legacy products, becoming one of the first companies to regain control of its entire portfolio, to which it added new cigar lines. Nat Sherman had a new direction and a new long-term vision thanks to Herklots, the Sherman family and the company’s retailer advisory board, and Nat Sherman’s cigar business and team steadily grew and evolved.
Outside of products, Nat Sherman focused on improving the store experience, which became known as the Nat Sherman Townhouse after Herklots joined the company. This involved substantially increasing the store’s product offerings from other companies and reconfiguring the merchandising strategy to maximize the customer experience within the store. Herklots implemented a “cycle of service” to ensure a high level of consistent consumer engagement. There were suddenly more in-store events and educational sessions, as well as a new membership program. Considering the fact that the Nat Sherman brand is 90 years old, a lot of change has taken place in the relatively short time that Herklots has been a part of it.
In reflecting on his interactions and experiences with the Sherman family, Herklots confesses that the Shermans remind him a lot of his own family. Like his family, the Shermans taught him that nothing is more important than doing things honorably.
“I know many successful businesspeople who are willing to sacrifice honor for the growth of their business,” Herklots says. “That’s not the Shermans.”
In 2017, Altria Group acquired Sherman Group Holdings and its subsidiaries, including Nat Sherman. Out of that acquisition, Nat Sherman International was established to manage everything other than the Nat Sherman cigarette brands, including premium cigars, pipe tobacco and the Manhattan-based retail store, the Nat Sherman Townhouse. Now, Nat Sherman International is facing another potential transition, as Altria has announced that it is considering divesting itself from Nat Sherman International and its brands, and that it might consider selling the Nat Sherman Townhouse. Having been in the industry for as long as he has, Herklots doesn’t fear change because it’s a part of business and it’s inevitable. When news of the possible sale of Nat Sherman International made headlines in October 2019, Herklots’ response was simply, “Business as usual.”
“Changes are challenges. But change also gives the opportunity to grow, try new things, think differently and learn from new people,” he explains.
A Long-Term Perspective
Today, Herklots is the vice president at Nat Sherman International and oversees the retail business at the store in Manhattan, the company’s wholesale business and its sales team. He’s also involved with all of the marketing and creative, which is handled in-house; all of the product development and product maintenance; the brand’s relationships with its manufacturing partners in the Dominican Republic, Nicaragua, Honduras and Belgium; and the company’s pipe tobaccos and accessories. Also under Herklots’ watch are the company’s events and seminars, important aspects of the business that allow him and his team to share industry insight and knowledge with consumers to help them better understand the “hows” and “whys” of the premium cigar industry. Two aspects of Herklots’ day-to-day duties that may surprise some people are product development and maintenance, which account for the vast majority of his responsibilities at Nat Sherman International.
“My work time is really focused on product,” he says. “I’m proud of the blends I’ve been able to develop. Timeless Prestige was my first, followed by Supreme, Panamericana and Sterling, Epoca and Epoca Reserva, and Metropolitan Habano. Our limited editions have been a really fun opportunity to try things outside of the box. I certainly appreciate that it is not a likely assumption that a 39-year-old from northeast Connecticut who wears suits and lives in New York City blends tobacco. I get it. And frankly, it’s not important. What’s important is folks enjoy our products and love our brands, year after year after year.”
This year, Herklots is celebrating a milestone in his career: 20 years of working in the tobacco industry. From working in tobacco retail at 19 years old in Boston to overseeing Nat Sherman International’s continued evolution today, Herklots has changed with the times. He’s married, a father of two and owns a home in the suburbs—all of which has taken place in the past two decades, along with many professional developments. In addition to personally growing up in the past 20 years, he’s also grown up professionally. He’s changed how he works and the way he values relationships. He’s become more patient, disciplined and deliberate over the years, though he’s still very ambitious. While he understands the value of long-term strategy, he still gets enjoyment from the short-term activation of ideas. Even the way he defines success has changed during the course of the past 20 years.
“Business goals and economic goals are successfully measured, generally in their execution and their financial returns,” he says. “But personal goals, life goals, growth goals—those are all equally important, but success can be much more difficult to measure. Economic goals are generally measured mathematically—ending balance versus starting balance, selling price minus cost of goods, actual sales versus projected sales versus last year’s sales and so on. Personal goals are slightly different. If you can assign a value to the spiritual and emotional assets of your life, you can start to apply similar arithmetic. Am I more fulfilled this year than last year? Are the people in my life making me a better person? Are the people around me experiencing the same success and achievement as I am? I would say the sums of the personal goals are equally important to the sums of the professional goals on your life’s balance sheet.”
In music, tempo is the speed at which a song should be played. There are different types of tempos, and they can change depending on the type of music that’s being played as well as the musician’s interpretation of the song. From a young, musically inclined child growing up in Killingly, Connecticut, to becoming a skilled tobacconist running a premium tobacco brand in New York City, Herklots has found a tempo that works for him. After 20 years in the industry, there are more songs to be played, more cigars waiting to be blended, and more of Herklots’ journey and story still waiting to be composed.
This story first appeared in the May/June 2020 issue of Tobacco Business magazine. Members of the tobacco industry are eligible for a complimentary subscription to our magazine. Click here for details.
– Photos by Dustin Cohen. Story by Antoine Reid, senior editor and digital content director for Tobacco Business Magazine. You can follow him on Instagram @editor.reid.