Blog - Tobacco Reporter

New Zealand: Smoking Down More Than Usual

Smoking rates have decreased more than usual, reports NZ Herald, citing a recent government health survey.

In 2020–2021, smoking rates decreased across all ethnic groups. For Maori adults, smoking was down 6.4 percent to 22.3 percent compared to 28.7 percent in 2019/2020.

Deborah Hart, director of Action on Smoking and Health (ASH), says that the decline is due to the smoke-free initiatives put in place, including plain packaging and taxes on cigarettes.

Vaping rates have increased by 3.5 percent compared to 0.9 percent in 2015/2016. A study by ASH and the University of Auckland showed that daily use of e-cigarettes is occurring overwhelmingly in existing smokers.

“What we’re seeing is people transition from very harmful cigarette smoking to a much less harmful product in e-cigarettes or vaping, and that’s been going on for a few years, and we’re going to continue to see that, I would think,” Hart said.

Youth smoking is down 8.1 percent from 12.9 percent the previous year, according to the study.

January 5, 2022

South Africa: Treasury Outlines Vapor Taxation Proposal

South Africa’s National Treasury has outlined a proposal on the taxation of electronic nicotine-delivery systems (ENDS), reports BusinessTech.

Among other measures, the agency is considering taxes on hardware and e-liquids, with higher nicotine products attracting higher levies than low-nicotine varieties.

While the market for ENDS is still in its infancy in South Africa, the National Treasury expects it to grow. The agency says it wants to learn from the experience of other countries where growth of ENDS has raised concerns about underage consumption. The agency said it is also aware of concerns about the potential of ENDS to undermine global tobacco control efforts and public health.

Vaping products are covered neither by South Africa’s Tobacco Products Control Act nor by the country’s Medicines Act. The government has proposed the Control of Tobacco Products and Electronic Nicotine-Delivery Systems Bill in which it hopes to regulate vapor products in a similar way as cigarettes.

The bill was introduced for public comment in 2018 but remains in a draft form.

According to a 2021 study commissioned by the Vapor Products Association of SA, the vapor industry in 2019 contributed ZAR2.49 billion to South Africa’s GDP while paying ZAR710 million in taxes. More than 350,000 South Africans use vapor products.

January 4, 2022

Momentum Building in U.S. for Regulating Synthetic Nicotine

Momentum appears to be building for the regulation of synthetic nicotine in the United States.

On Dec. 15, U.S. Representative Mikie Sherrill introduced a bill designed to give the U.S. Food and Drug Administration the authority to regulate synthetic nicotine products just as it regulates nicotine products made or derived from tobacco.

“This bill will ensure all tobacco products, including products made with synthetic nicotine, are regulated by the FDA in order to protect kids in our communities and those who may seek to use these products,” Sherrill said in a statement.

The Federal Food, Drug and Cosmetic Act (FDCA) currently defines “tobacco product” as “any product made or derived from tobacco that is intended for human consumption, including any component, part or accessory of a tobacco product.”

In November, FDA Center for Tobacco Products Director Mitch Zeller suggested synthetic nicotine could be considered a component of e-cigarettes, which would allow the agency to regulate it.

The FDA could also seek to regulate synthetic nicotine as a drug. The FDCA defines drugs, among other things, as “articles (other than food) intended to affect the structure or any function of the body.”

In the 1990s, the FDA tried to regulate nicotine as a drug and cigarettes and smokeless tobacco as “drug delivery devices.” In FDA v. Brown & Williamson Tobacco Corp., the U.S. Supreme Court found that the FDA lacked such authority.

The 2009 Family Smoking Prevention and Tobacco Control Act gave the FDA the authority to regulate tobacco products. Should the FDA regulate synthetic nicotine as a drug today, it could point to recent legislation from Congress giving the FDA a role in this space more broadly. So far, however, the FDA has not taken this approach.

Following a flurry of marketing denial orders in which the FDA forced many products containing tobacco-derived nicotine off the market, several manufacturers have switched to synthetic nicotine to avoid the agency’s rigorous and costly premarket review process.

In response to such moves, lawmakers have initiated investigations and called for regulation of the category. On Nov. 16, nine senators sent a letter to the FDA imploring the agency to regulate synthetic nicotine products. The authors expressed concerns that e-cigarette manufacturers like Puff Bar are switching to synthetic nicotine to skirt FDA oversight and premarket review requirements to continue selling their products—including flavored products—that they assert appeal to youth.

That same day, the North Carolina attorney general launched an investigation into Puff Bar. On Nov. 8, he sent letters to e-cigarette manufacturers Puff Bar and Next Generation Labs requesting extensive records pertaining to the production and marketing of the companies’ synthetic nicotine products.

January 4, 2022

Duterte Urged to Sign Vape Bill into Law

Tobacco harm reduction proponents are urging Philippine President Rodrigo Duterte to sign into law a bill that makes it easier for smokers to switch from cigarettes to less harmful nicotine products, reports The Manila Bulletin.

In a letter addressed to Duterte, consumers and harm reduction advocacy groups said the passage of the Vape Bill can save the lives of millions of Filipino smokers, “because legitimate alternative products will be allowed to be sold to smokers who want to stop smoking.”

The letter was signed by Vapers PH, Vaper Ako, Smoke Free Conversation PH, Nicotine Consumers Union of the Philippines, Philippine E-cigarette Industry Association, Quit For Good, Heated Equipment as Alternative to Traditional Smoking Philippines, PROVAPE, Philippine Tobacco Harm Reduction Advocates and Consumer Choice Philippines.

The groups said that by passing the Vape Bill, the Philippines will join the growing list of progressive countries that believe in providing less harmful alternatives to their smoker population who don’t want to stop smoking.

“Our country will join the ranks of the European Union, the United Kingdom, the United States, New Zealand, Italy, Bulgaria, Cyprus, Norway, Greece, Portugal, Switzerland, Egypt and Uruguay, among many others that believe in providing smokers with alternative products to save their lives,” the activists wrote.

The group noted that the bill bans sales of vapor products to minors and has provisions to prevent the sale of unregulated products.

The legislation bans the sale to and use by minors of vape products, along with the sale, advertising and promotion of vape products within 100 meters of school perimeter and playground. Use of flavor descriptors that unduly appeal to minors in vape products and the display of vape products immediately next to products of particular interest to minors are prohibited.

The activists stressed that with the “growing positive scientific evidence coupled with our life-changing experiences, our resolve is stronger that vaping saves lives.”

January 3, 2022

Turkey Raises Special Consumption Tax on Tobacco

Turkey has increased the special consumption tax on tobacco by 47.4 percent to TRY14.39 ($1.10) per pack, reports Bianet.

The special consumption tax is based on the domestic producer price index. It is calculated both as a minimum fixed tax and a fixed tax. Each of these has been increased from TRY0.48 to TRY0.7 lira for a pack of cigarettes.

The minimum price of a pack of cigarettes will be TRY22.85.

January 3, 2022

Armenia Bans Tobacco Product Displays

Retailers in Armenia are no longer allowed to show their customers tobacco products, reports Public Radio of Armenia.

A new tobacco law, passed in February 2020, prohibits the public display of any tobacco product, including traditional cigarettes, e-cigarettes and electronic nicotine delivery devices at trade centers or in public catering establishments.

The public display of empty boxes, blocks, trademarks or symbols is also prohibited.

“The full application of these provisions over time will significantly reduce tobacco use in the country, which will significantly improve the health of the population and the development of the country’s economy,” said says then-Minister of Health Arsen Torosyan after the law passed.

In March, Armenia will also ban smoking in cafés and restaurants.

January 3, 2022

Sri Lanka Plans Annual Tobacco Tax Hikes

Sri Lanka’s National Authority on Tobacco and Alcohol (NATA) wants to change taxes so that cigarette prices increase by 6 percent each year, reports The Island.

The proposed tax formula comprises six components––cigarette tax percentage, proposed price for next year, inflation, present price, GDP and the “externality factor” of 4 percent.

“The 4 percent is added to ensure that the price of a cigarette is increased every year even if inflation drops to zero,” said Samadhi Rajapaksa, Chairman, NATA.

Rajapaksa noted that Sri Lankan depends less on tobacco tax revenue than many people believe. “Our tax revenue from these sources is about 11 percent only,” he said.

Earlier, Rajapaksa said that the NATA would increase the minimum age for sale, purchase and promotion of tobacco products from 21 to 24 in 2022.

Rajapaksa told the media that NATA had decided to amend the National Authority on Tobacco and Alcohol Act this year.

The increase of the minimum age for sale, purchase and promotion of tobacco products was one of the proposed amendments to the Act, he said.

“Already advertising, promotion and sponsorship of tobacco is prohibited. We want to stop the cross border advertising of tobacco products, too,” he said.

January 3, 2022

Cigarette Taxes up in the Philippines

Cigarette excise taxes in the Philippines increased from PHP55 ($1.08)) to PHP55 per pack on Jan. 1, reports The Philippine Daily Inquirer. Under the tobacco tax law of 2019, they will continue rising by PHP5 per pack annually until they reach PHP60 per pack in 2023.

Meanwhile, the excise tax rate on conventional freebase or classic nicotine vaping products increased to PHP55 per 10 ml from PHP50 last year. The rate for nicotine salt vapes rose to PHP47 per ml from last year’s PHP42 per ml.

Despite the coronavirus pandemic-induced recession in 2020, “sin” tax collections from cigarette and alcohol products rose to PHP227.6 billion from PHP224.6 billion in 2019. Actual 2020 collections exceeded the conservative PHP201.5-billion target, as lockdowns dampened sales and limited distribution of tobacco and alcohol products due to movement restrictions on non-essential goods.

Market leader Philip Morris Fortune Tobacco Co. estimates that illicit cigarettes increased their market share to 8.6 percent in 2021 from about 5 percent in 2020.

The Bureaus of Internal Revenue estimates that the 2.5 million illicit cigarette packs it confiscated last year deprived the government of about PHP123.3 million in tax revenues.

As of November 2021, law enforcement had apprehended 102 illicit cigarette traders and to seized 38,827 master cases of illicit cigarettes worth PHP1.3-billion.

January 3, 2022

Greening the Golden Leaf

Independent leaf merchants are working to improve the sustainability of tobacco cultivation.

By Stefanie Rossel

With only eight more years to go until most of the United Nations (U.N.) Sustainable Development Goals (SDGs) are to be achieved, sustainability is becoming ever more critical in the tobacco sector.

“In recent years, we have seen sustainability grow in importance to a point where it is addressed in almost all key internal and external engagements,” notes Mat Wilde, head of group sustainability at Contraf-Nicotex-Tobacco (CNT), a Germany-based company involved in the worldwide growing, sourcing, developing, processing, extracting and producing of leaf tobacco, nicotine and natural ingredients, among other agriculturally derived products.

Set up in 2015 by the U.N. General Assembly, the SDGs comprise 17 goals designed to be a “blueprint to achieve a better and more sustainable future for all.” Goals include the elimination of poverty and hunger, quality education, health and well-being, gender equality, clean water and sanitation as well as the reduction of inequality, responsible consumption and climate action.

While the leading international tobacco manufacturers in 2016 launched the Sustainable Tobacco Program (STP), an initiative that operates in more than 52 countries and gathers data on more than 180 suppliers of tobacco across 5 million smallholders, independent leaf merchants have also intensified their endeavors to support tobacco growers in their work toward more sustainable production.

“I have always supported the growers,” says Rick Smith, founder of Wilson, North Carolina, USA-based Independent Leaf Tobacco Co. “They must be made whole for the industry to thrive. I have stepped up my efforts recently, certainly on types in short supply.”

CNT works directly with its stakeholders on its sustainability efforts and supports its farmers in implementing best practices. “At the core of our approach with our farmers is our training program, where we aim to train growers on both the ‘why’ and the ‘how’ of sustainability topics,” says Wilde. “Understanding the context in each local operation, the root cause of prioritized issues and ensuring farmer financial sustainability is embedded within our programs. All are vital in working with our farmers to meet our common goals. Integrating key stakeholders, including farmers, farmer organizations, community, nongovernmental organizations and experts, within our projects and programs increases the impact and level of success.”

Creating Awareness

In a world characterized by declining smoking rates, sustainability includes ensuring financial viability for tobacco growers. For this reason, Norton Leaf Tobacco (NLT) of Zimbabwe educates its farmers on the need for diversification. “The government of Zimbabwe has introduced initiatives such as pfumvudza, a farming approach designed to maximize efficiency of labor and input resources,” explains NLT General Manager Alice Mukome Chiwanza. “NLT has field staff trained in the practice that ensures its farmers are able to increase both hectarage and yield of grains. Thus our officers are now training farmers to employ this method to encourage food security at [the] household level while assisting with the growing of the tobacco crop.”

While NewCo Global Tobacco Trade and Service does not interact directly with farmers (it buys from partners and other leaf merchants), sustainability plays a key role in all of the German company’s activities. In September 2021, the company established NewCo Pro Services and Trade to handle the group’s diversification efforts and nontobacco activities.

“This company’s main focus is to provide a proactive approach to global, social and environmental challenges as well as partner with entrepreneurs that have innovative solutions for a better future,” says Jose Maria Costa, senior executive advisor with NewCo Tobacco Services. “Through NewCo Pro Services and Trade, we are committed to doing our best efforts to make the United Nations Sustainable Development Goals a reality. As such, we are in the process to market Sydney 905 water filters globally. These filters have proved to be one of the most efficient ways to get safe water regardless of water source. By providing access to safe water, we eliminate the need to use charcoal, which in many parts of the world is used to boil the unsafe water.”

NewCo has also started replacing the plastic bags that are still used in the tobacco industry for tobacco samples with more environmentally friendly alternatives. “Most of the plastic bags that are used today for storing and shipping tobacco samples are not biodegradable and therefore they are not environmentally friendly. After several months of research and testing, we have placed our first order for the new bags, which are made out of potato starch and are 100 percent compostable and food-certified. Our plan is to contact all our suppliers, vendors and customers and offer them the possibility to make the same change NewCo has made and contribute to a world that is more sustainable.”

New EU Anti-Deforestation Law

Worldwide, regulatory pressure on tobacco and tobacco products continues to increase, also in terms of sustainability issues. On Nov. 17, 2021, the European Commission announced a plan to ban the sale of agricultural products raised on deforested and degraded lands. The move is an attempt to ensure forests around the world remain intact and continue to absorb carbon dioxide as they grow. According to the U.N., the world has lost 420 million hectares of forest in the past 30 years—an area larger than the EU. During the recent U.N. Climate Change Conference, more than 100 states pledged to end deforestation and land degradation by 2030. For the time being, the European Commission’s list targets soy, beef, palm oil, coffee, cocoa and wood; while tobacco is not part of the commodities mentioned, the draft leaves room for future amendments.

In a 2017 report on the environmental impact of tobacco, the World Health Organization expressed concern about the impact that leaf cultivation has had on forests since the mid-1970s. The health body estimates that 11.4 million tons of wood are required annually for tobacco curing. After processing, additional wood is needed for the production of cigarette and rolling papers as well as for packaging. As tobacco requires lots of nutrients, with soils being leached after two years to three years, land extension leads to further forest depletion.

Smith notes that regulation should strike a balance. “Any laws restricting free trade affect us all and are usually detrimental to the people they are intended to help,” he says.

“The tobacco industry needs to act responsibly to ensure that sustainability is at the center of all its activities,” Costa says. “From the farmers to the cigarette manufacturers, the entire value chain needs to protect all natural resources, including the forest.”

Comprehensive Measures

NLT is a member of the Sustainable Afforestation Association (SAA), a Zimbabwean nonprofit organization funded by tobacco merchants that was established in 2013 (also see “Taking Root“). “NLT has been a member since we started operations in 2018,” says Chiwanza.

The SAA aims to retain and grow existing indigenous commercial forests. One of the ways in which it has sought to do this is by entering into joint ventures with farmers in tobacco growing areas to set up eucalyptus plantations. Eucalyptus not only grows quickly but also provides good firewood.

“The bulk of Zimbabwe’s tobacco is grown by small-scale farmers who use wood-fired barns to cure their tobacco,” Chiwanza says. NLT also holds field days and workshops, encouraging farmers to grow trees and offering advice on best practices. SAA’s activities should help Zimbabwe remain compliant with anti-deforestation laws, such as the one pending in the EU.

Fighting deforestation has been a priority at CNT for years, Wilde emphasizes, primarily for flue-cured tobacco in origins that use fuel wood but also for other tobacco types—with deforestation linked to curing fuel, barn construction material and land clearance. “Addressing deforestation has been a focus prior to external regulation, with necessity of ensuring continuity of the industry in some locations being a key driver for change, along with meeting communities’ expectations of the business and ensuring our ‘social license to operate.’ Having a robust traceability system in place, connecting tobacco to its growing source, farmers and the activities carried out on farm is key for transparency and meeting increasing supply chain legislation—both for human rights and the environment.”

The company has identified high-risk origins within its supply chain and implemented systems aimed at mitigating deforestation. “The EU draft law on supply chain deforestation highlights the priority of this topic and reinforces the urgency of addressing these issues in high-risk origins, both as a company and as an industry,” says Wilde.

CNT’s reforestation efforts comprise education and awareness programs for its farmers, community and stakeholders. “Training farmers on legal requirements, conservation and reforestation practices, and listening to our stakeholders on localized issues helps to address deforestation and reforestation,” Wilde points out. “Training is supported by farmer monitoring by Extension staff, the results of which are analyzed to feed back into response projects and training cycles. We run various reforestation and carbon projects within our origins. Tailoring reforestation and conservation response programs to the local context and working with expert partners in addressing the local hurdles to success is core in our sustainability strategy.”

Spying Opportunity: Norton Has Great Expectations of Zimbabwe’s Tobacco Transformation Plan

In September 2021, Zimbabwe’s government approved the tobacco value chain transformation plan, which aims to transform the sector, currently valued at $1.2 billion, into a $5 billion industry by 2025. Launched by the Tobacco Industry and Marketing Board (TIMB), the initiative aims to turn the economy around through agriculture, boosting national income and foreign exchange to the levels from before Zimbabwe’s land reform program, which turned the industry from one dominated by large-scale commercial tobacco plantations to one characterized by smallholder production.

The plan calls for an increase of annual tobacco production from 200 million kg to 300 million kg, the exploration of alternative crops in anticipation of lower smoking rates and an increase in value addition and beneficiation from 1 percent of the tobacco crop to 30 percent.

Farmers have welcomed the initiative. “I believe this to be a great idea,” says Alice Mukome Chiwanza, general manager of Norton Leaf Tobacco (NLT), a local tobacco merchant. “Under the TIMB, Zimbabwe only exports at the very least semi-processed tobacco. Further beneficiation can be understood to mean [anything from] increasing the local production of regular—combustible—cigarettes to producing vaping devices. This will do wonders for the tobacco industry as it will mean employment, investments in the form of infrastructure, such as processing plants, and greater revenue as we will be exporting end products as opposed to raw materials that still need further processing.”

According to Chiwanza, this would also present a welcome opportunity for NLT to grow its sales to supply products, such as cut rag, to local cigarette manufacturers while eliminating shipping costs that have been a large deterrent in exporting. “It may also create the option of partnerships allowing companies such as ours to venture into new technology and therefore [new] markets. The ministry’s plans also include localization of tobacco financing, which should significantly reduce borrowing costs for companies such as NLT. Being a wholly Zimbabwean company, NLT is poised to grab any plans encouraging increased local involvement in the tobacco industry.” – S. R.

Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.

January 1, 2022

Taking Freight

The Covid-19 pandemic continues to disrupt tobacco shipments and storage.

By Stefanie Rossel

While the tobacco industry, famed for its resilience, has fared comparatively well during the Covid-19 pandemic, an essential part of the business continues to face challenges: the segment specialized in the shipment and storage of leaf tobacco.

The outbreak of the coronavirus severely disrupted the global supply chain, leading to a persistent worldwide shortage of containers. As the pandemic spread from Asia, many countries enacted lockdowns, thereby halting economic movements and production. Temporary factory closures caused large numbers of containers to pile up at ports. Carriers reduced the number of vessels to control costs and avoid the erosion of shipping rates. Such moves strangled import and exports. Consequently, empty containers were no longer picked.

This problem especially affected Asian traders who couldn’t retrieve containers from North America. When Asia’s economy started recovering and China resumed exports even as other countries were still dealing with restrictions, a reduced workforce and minimal production, almost all remaining containers in Asia headed out to Europe and North America, but they failed to return quickly enough for the next shipments.

In the U.S., which is also struggling with labor shortages and more complicated customs procedures due to stricter border controls, containers began to pile up. According to Hillebrand Freight Forwarding, out of every 100 containers that arrive in the U.S., only 40 are returning to Asia, with the remainder accumulating in ports and storage facilities.

A global slowdown in container production due to the Covid-19 pandemic as well as raw material shortages have added to the crisis, as have Covid-19-related port closures. In July 2021, only 36 percent of ships arrived on time, according to Invest Monitor. Unsurprisingly, the costs of transporting goods by container ship have gone through the roof over the past two years.

Limited Availability, Exploding Rates

For logistics and storage providers, the situation remains serious. “Our biggest challenge has been obtaining suitable equipment for packing and shipping,” says Guy Harvey, CEO of Transcom Sharaf Group, which is headquartered in Beira, Mozambique. “With reduced vessel callings caused by congestion, slower container turnarounds and reduced imports, it has been a struggle to find enough containers. Some shipping lines prioritized the evacuation of containers to Asia to take advantage of the inflated ocean freight charges and high demand. The increased demand for empty containers also meant empty container free days were drastically reduced and detention charges increased. The reduced vessel callings have made it extremely difficult not to incur demurrage and detention by the time the vessels arrive and sail.”

Susceptible to pests and diseases, leaf tobacco is a demanding good to transport and store. “The lack of containers has also meant we have had to lower the high standards we set for tobacco grade containers and have had to heavily invest and incur cost upgrading containers ourselves and in partnership with the lines,” Harvey continues. “With fewer vessel callings, shipping has been slower; we have gone from four or eight vessels a month to two at best. Two of the bigger lines have had limited or zero space availability at all to Europe for most of the season due to congestion at their transshipment hubs and overbooking on their European routes. This has meant more pressure has been placed on one shipping line to export the tobacco and reduced competition that affects service delivery and pricing. We have seen transit times to destination more than double as well and often extended dwell times in less-than-satisfactory ports where cross-infestation of tobacco beetle is highly prevalent from past experiences.”

Kyle Kok, account executive for tobacco at Andromeda Forwarding and Logistics of Rotterdam, Netherlands, hopes that space will free up on vessels by the end of January or in February when the crunch in cargo from the holiday season is out of the way.

“However, please note that shipowners will not reduce their rates any time soon. What we also have noticed during this pandemic is that many shipowners have their personnel work from home, which does not result into a better productivity, getting answers or even making quick bookings.”

Lisa Rautenbach, Andromeda’s manager of the tobacco department, estimates that since the beginning of 2020, shipping rates have increased by a factor of five to seven. “But this also differs from which route is being undertaken. For example, cargo to the USA has increased by 530 percent since the beginning of this year.”

Harvey has seen the cost go up 10-fold on certain routes and in response has reduced orders for shipments to certain destinations. “The limited options and flexibility to some destinations being monopolized by one shipping line has caused costs to spiral,” he says.

Increased Need for Storage

Transcom Sharaf and Andromeda Forwarding have been looking for ways to avoid the chaos that currently plagues global supply chains. “We have seen a lot of traditional routes, such as Durban, move back to Beira in some cases and vice versa, where often the decision is based purely on container availability at any given time,” notes Harvey. “Due to the lack of containers in the hinterland, there has been a huge increase in break bulk tobacco to the ports for containerization, which has also led to a bigger and longer storage requirement. We are fortunate that tobacco is a high-value commodity for the region, and as such, we can get some sort of priority on vessel space allocation, but again, it is dependent on container availability.”

“Vessels remains fully booked as the shortage of containers remains,” observes Andromeda’s director, Bart Brouwerens. “We are looking for all and any options, not only via the regular lines but also via outsiders with smaller vessels, which also want to take part in this market with these high freight rates! Furthermore, Andromeda tries to look at every shipment from every angle, truck/barge/rail connections, etc.”

To handle the bottlenecks in ports and longer-than-usual storage periods, Andromeda has secured some guaranteed space at certain lines and for certain vessels, Rautenbach explains. But this comes at a price. If forwarders and their clients are unwilling to pay such premiums, shippers may very well delay the shipment or roll the cargo onto another vessel in favor of more profitable cargo.

Harvey says that Transcom Sharaf has sufficient storage capacity. “But we also had lower-than-average production in the region this year—at the right time for us, fortunately. There have been some tense moments, though; we have had to re-look at the one-third to two-thirds split on container storage space versus warehouse space and will put this into our future development plans now that we have seen how fragile the supply chain can be. We are fortunate to work so closely with our clients and plan openly and accurately on all our movements and timings—without these relationships and the communication lines, the season would have been extremely problematic. We have to forecast months in advance in order to position sufficient empty containers in time.”

Uncertain Future

Just-in-time delivery is virtually impossible nowadays, or available only at premium rates, according to Brouwerens. Andromeda advises its clients to have loading schedules ready as soon as possible in order to reserve space well ahead of the shipping date. “At this stage, we are being forced into a situation that we offer cheap warehousing space in, among other [locations], Antwerp and Dubai and in any city requested via our vast agency network,” he says. “This [is] only because of the unreliability of the services the major shipping lines offer.”

Brouwerens adds that, regretfully, Andromeda must uphold its credit agreements with its clients strictly as rates are rising considerably. “Shipping lines demand payment either directly or after 14 days,” he says. “If we pay late, shipping lines will cancel the aforesaid 14 days immediately and will fine you with an additional percentage. This all has taken a part of the joy of good communication with lines away, but we, therefore, enjoy extra the good relation we have with our clients and will do so for many years to come.”

Despite disrupted leaf tobacco deliveries, Harvey expects the big tobacco companies to avoid the experience of the automotive industry, which has been struggling with a shortage of semi-conductors. “Despite the challenges, we have managed to meet our scheduled deliveries fairly well under the circumstances,” he says.

“I do not see the bigger players being affected or lacking leaf from this region during the current season. However, smaller buyers may definitely face challenges similar to [those of] the automotive industry. Those sourcing from other origins may also be negatively impacted where other commodities may be prioritized above tobacco. Should the situation deteriorate further, there will be an impact on all our customers. If production volumes increase substantially next year, this would also create further disruptions in the current supply chain.”

Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.

January 1, 2022