Royal Agio Cigars has been in the cigar business for over a century. In four generations it’s built a prosperous and premium business, ranking 4th globally and is continuing to evolve.
But tobacco is a sector with limited growth opportunities, and the family who run Royal Agio has faced up to that challenge and used the most advanced modern technology to find a way forward.
In this year’s PwC Global Family Business Survey, 54% of the respondents said they expect to be establishing new entrepreneurial ventures in the next five years. Royal Agio is a great example of how to do it. It started, as Jonas Wintermans explains, with a strategic review of all the possible options: “We are a very stable company with a solid balance sheet, so we had the resources to invest in diversification. My father and brother Boris, who is Agio’s CEO, started by looking at industries parallel to our own in fast-moving consumer goods. Chocolate, for example, or tea and coffee. The raw materials for those products come from the same countries as for cigars, and the sales and marketing channels are not that different. We looked at it in great depth but we realised the barriers to entry were relatively low, and competition fierce.”
But high-tech and in particular 3D printing is worlds away from cigars – it seems a very unlikely choice. “Actually, it’s not as incongruous as it seems,” says Jonas. “About 30 years ago we founded ATD Machinery, now market leader in machinery for the cigar industry. So we were already familiar with developing and making very technical machinery. That’s what led us eventually to move into high-tech by acquiring NTS-Group, a tier-one supplier to optical and mechatronic machine builders. In that same year Additive Industries was founded, together with a non-family member co-founder Daan Kersten. Additive Industries has developed a modular 3D printing system to make metal parts for industry. Both the ideas and the opportunities were there; my next task was to convince my father and brother.”
This is a challenge many next gens face, especially when the new idea is very different from the company’s previous activities. As Jonas says, “Differences in management style between generations can generate more ideas and it’s important for both generations to acknowledge each other’s style. For example, my father is somebody who thoroughly looks at new ideas from every angle, while I like discussing possibilities and brainstorming different options. So when I was developing the 3D printing proposal it was important for me to be well prepared before I talked to him about it. And when I showed him my idea, he asked a lot of questions, just as I expected, but I was well prepared and had all the answers ready. Then we looked each other in the eyes and he said: ‘if you can answer all these questions, it’s probably a good idea’.”
One of the phases in executing the plans was to secure the funding. “That was where being a family business was a real advantage – because the funds were there. Just like most other family businesses, we had reserves on the balance sheet for these type of opportunities. And that made it easier in the early stages of Additive Industries too – we had much less stress than the average startup company, who typically spend 40-50% if their time looking for funding. That meant we could focus on the business all the time. We also benefited from the credibility that our association with Royal Agio gave us – a ‘halo effect’, if you like.”
Three years on, and NTS-Group and Additive Industries are bringing a new value creation to the family firm, and giving Jonas the chance to grow a business of his own and make his mark. “The older I’ve got the more interested I’ve become in what my brother, my father, grandfather and great-grandfather have built. I wanted to find a way I could add something special of my own. I think I’ve found it.”
This feature forms part of the PwC Global Family Business Survey 2016. It has been reproduced with permission of PwC.