Marking a milestone

Tobacco Associates looks to the future with a new president

Kirk Wayne announced his retirement from Tobacco Associates during the group’s 70th annual meeting in Wilson, North Carolina, USA, on March 1. He was at the organization for 47 years, including 38 as president,

The board of directors has elected Hank Mozingo, currently vice president of Tobacco Associates, to replace him.

“When I began working with Tobacco Associates in June 1970 it never entered my mind that I would be retiring from the same organization,” Wayne marveled. “It has been a challenging and remarkable career.”

Wayne’s job required extensive international travel, and during the meeting he thanked his wife, Linda, for her support.

He recalled returning from a business trip to Eastern Europe—still behind the Iron Curtain in those days—just in time for their wedding. The couple married; had a short honeymoon and then went directly to a Bright Belt Warehouse meeting, where they were teased mercilessly about Wayne’s “girlfriends” around the world.

Just one week later, he embarked on another four-week trip abroad.

“And so it was for the next 30-plus years, with me traveling six months of each year and always away on Linda’s birthday,” said Wayne.

But the marriage endured and Tobacco Associates thrived under Wayne’s leadership, promoting U.S. flue-cured Virginia (FCV) leaf abroad on behalf of its farmer members.

Focus on quality

As the U.S. tobacco market declined over the years, Tobacco Associates’ mission became even more important. According to Wayne, the only opportunity for growth in U.S. tobacco today is in the international market.

So the company’s representatives travel the world, educating prospective buyers on the virtues of American leaf and helping interested manufacturers incorporate the product into their blends. Each year, Tobacco Associates organizes countless seminars; its annual two-week U.S. Tobacco Leaf Study & Training Mission is renowned worldwide, attracting numerous students from around the globe.

Chairman Allen Wooten, Treasurer Robert Spiers and Mozingo highlighted some of the organization’s 2016 initiatives, including trade servicing missions throughout Southeast Asia and a seminar on tobacco practices in Bali, Indonesia, organized in cooperation with Star Tobacco International.

Agricultural marketing specialist Bobby Wellons was recognized for his many contributions to such courses.

Confirming the value of Tobacco Associates’ work, Jie He, vice president of China Tobacco International (CTI) — North America, expressed her appreciation of U.S. tobacco. The Chinese cigarette market is dominated by straight Virginia leaf, but American-blend cigarettes have been gaining popularity. CTI started operating in the U.S. in 2013. Initially, the company bought only from the traditional leaf suppliers, but now it also contracts directly with U.S. growers.

In turn, Richard Reich, assistant commissioner of the North Carolina Department of Agriculture & Consumer Services, conveyed his gratitude for CTI’s interest in American leaf. “Thank you, Ms. He, for buying our tobacco,” he said.

While U.S. tobacco is more expensive than that from other origins, Spiers pointed out that the additional upfront cost can be offset by greater sales, due to the high quality of the product.

For example, Tobacco Associates helped the Saigon Tobacco Co. (STC) in Vietnam develop two cigarette brands, using U.S. tobacco. The investment paid off, with sales of the brands reportedly exceeding STC’s expectations by a factor of three.

Persevering

Successes such as these as welcome, as U.S. tobacco farmers are challenged on many fronts. The 2016 growing season was characterized by “excessive moisture and excessive heat,” according to Reich. In addition, farmers faced a strong U.S. dollar (making their leaf expensive abroad) and a large crop in Brazil, America’s biggest competitor in the FCV arena.

But the industry has weathered tough seasons before, noted Reich. “Perseverance is the backbone of the farmer,” he said.

The impact of federal regulations featured prominently during the event. Darryl Jayson, chief operating officer of TMA, highlighted the high cost to manufacturers of compliance with the Food and Drug Administration’s deeming regulations.

George Scott, vice president—leaf at Universal Leaf North America lamented excessive smoking restrictions. “Disney World still has smoking areas—but they are harder to find than Mickey Mouse,” he said, recalling a recent family outing.

Jayson was encouraged by the Trump administration’s intention to review, and possibly roll back, existing regulations.

In the meantime, growers should change their thinking on regulation, advised A. Blake Brown, professor and extension economist, agricultural and resource economics, at North Carolina State University. “View it as a competitive advantage,” he said, pointing out that U.S. growers are better positioned to comply with the onerous requirements than are some of their foreign counterparts.

The speakers also examined the impact on U.S. leaf volumes of next-generation products. Despite its rapid expansion, the vapor product segment is a long way from overtaking combustible cigarettes. Recently, the growth of the category has flattened, as consumers move from disposable products to e-liquids, according to Jayson.

Today, all eyes are on heat-not-burn products, particularly Philip Morris International’s iQOS, which has been described as a “game changer.” Launched in 2014, the device has taken the world by storm and is currently available in 20 countries. In just three years, it has captured 5 percent of the tobacco market in Japan.

Jayson attributed the success of iQOS to its design. Whereas combustible cigarettes deliver a spike of nicotine, vapor products tend to supply nicotine more gradually—a characteristic that leaves some smokers unsatisfied. Using real tobacco, IQOS better mimics the traditional cigarette in this respect.

The good news about iQOS, from the farmer’s point of view, is that it contains real tobacco—albeit in lower volumes than combustibles do. The tobacco used, however, must meet exacting standards, which suggests an opportunity for U.S. growers.

“You can do this,” said Brown to the gathered farmers.

As U.S. tobacco sales continue to decline, the work of Tobacco Associates will only gain in importance—but to carry out is mission, it will need support. In his retirement speech, Wayne urged the industry to keep funding the organization. He compared Tobacco Associates with a state-of-the-art piece of farming equipment. “Its benefits to you are no greater than the amount of fuel you are willing to put into it.”