Category: Also in TR

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Homework Due

Photo courtesy of the ECLT Foundation
Indonesia commits to eliminating all forms of child labor by 2022.
By Stefanie Rossel
Child labor affected an estimated 152 million children globally in 2018. It’s also present in Indonesia, which in 2002 committed to eliminating all forms of child labor by 2022 to fulfill global development pledges. Over the past four decades, the island state has developed from one of the world’s poorest countries into a low-to-middle income nation with a poverty rate in the single digits. Progress has also been made in the elimination of child labor. According to the United Nations, the number of child workers declined from more than 4 million in 2009 to 2.9 million in 2018. Today, 7.4 percent of Indonesian children are working, mostly in agriculture. Perhaps unsurprisingly, considering the size of the tobacco sector in Indonesia, an estimated 60 percent of them labor in the tobacco sector.
In a recent report, the U.S. Department of Labor (DoL) attested Indonesia had made “moderate advancement” in 2019 in its efforts to eradicate the worst forms of child labor, which include commercial sexual exploitation and performing dangerous tasks in plantation agriculture. In addition to publishing a report with the most recent data on child labor, Indonesia’s government had increased its labor inspectorate funding from $10.2 million in 2018 to $16.7 million in 2019, with specific funds allocated to enforcing child labor regulations, according to the DoL. The country’s Ministry of Manpower, however, still lacked the financial and staff resources to fully enforce child labor laws throughout the country, the DoL study found, and there was no information available on the number of investigations conducted, violations found, prosecutions initiated and convictions secured.
Although Indonesia has ratified the key international conventions concerning child labor, 3.7 percent of the country’s 10-year-olds to 14-year-olds are working, the DoL report said. The majority (61.6 percent) work in agriculture where they fulfill tasks such as harvesting kernels for palm oil or applying fertilizer to tobacco. Many of them work long hours in extreme heat, a condition also considered hazardous for children. The minimum age for work in Indonesia is 15 years and that for hazardous work is 18.
Several institutions have been established to enforce child labor laws. The Ministry of Manpower, for example, provides legal information to employers and works with law enforcement officials to investigate and address instances of child labor. The Ministry of Women Empowerment and Child Protection coordinates the provision of social services to children, including those involved in child labor. Labor inspectors are regularly trained; they are authorized to conduct unannounced inspections and assess penalties. To coordinate its efforts down to the local level, the government has established regional action committees and task forces at provincial and district levels. A National Plan of Action (NPA) provides a framework for the elimination of child labor, whereas a roadmap toward a child labor-free Indonesia in 2022 supports implementation of the NPA for the elimination of the worst forms of child labor. Social programs provide block grants for schools and cash transfer programs.
Difficult mission
Karina Jabulatova
Despite increased efforts, eradicating child labor within the next two years will be a tall order, in part due to the country’s demographic and geographical particularities. With 267 million people, Indonesia is the world’s fourth most populous country. Its 17,508 islands make it the largest archipelago in the world. Half of the population lives in Java. Agriculture employs roughly one-third of the workforce.
The country is also the world’s second-largest cigarette market, after China, and ranks fifth among global top tobacco producers. Six million Indonesians are involved in the tobacco industry. Smoking prevalence is high, standing at 29 percent among people aged 15 and older. Indonesia also struggles with significant child smoking. In 2018, the Health Ministry reported 0.7 percent of children between the ages of 10 and 14 were smokers.
“There are many challenges, the most recent one being the Covid-19 pandemic. We are supporting the government in the implementation of child labor-free policies, and maintaining this positive relationship with the government is always a priority for us,” says Karima Jambulatova, executive director of the Eliminating Child Labor in Tobacco-Growing (ECLT) Foundation, which is present in the country as a founding member of the Partnership for Action Against Child Labor (PAACLA) and its Kesempatan project.
The latter project was initiated in 2019 in five districts in East Java Province and West Nusa Tenggara Province—Indonesia’s largest tobacco planting areas—to reduce the prevalence of child labor in the agriculture sector. At the subnational level, the program advocates child-friendly villages through engagement with local institutions, information dissemination for members of the village community, including farmers and farm workers, and activities for children. The PAACLA partnership works toward eliminating all forms of child labor by 2025 in line with the UN Sustainable Development Goals and is coordinated by the government. According to the ECLT, this cross-sector initiative promotes shared accountability and strong commitments necessary to mitigate the risk of child labor and promote sustainable change.
Stephanie Garde
To support the government’s efforts, ECLT closely cooperates with various stakeholders and helps by providing models and best practices. “Our project in Indonesia focuses on prevention of child labor, on protecting children’s needs and rights and on increased commitment in the villages,” says Stephanie Garde, ECLT’s program manager. “The child-friendly village approach modeled from the namesake government program and implemented by the project includes activity centers where children get support doing their homework or do sports and other educational activities instead of hanging around the fields.”
Child labor in Indonesia usually occurs in informal settings, whereas laws and conventions are better placed to cover formal employment, Jambulatova explains. “The problem with child labor on smallholder farms, where income-generating crops like tobacco are grown alongside food crops, is that the whole family often goes to work to meet their needs,” she says. “Obviously, there is no employment contract between children and their parents. ECLT’s programs are designed to not simply remove children from child labor in one supply chain but to adopt a more systemic response focusing on cross-sector collaboration and multistakeholder engagement, which support government efforts to make sure no child is left behind.”
When talking about child labor, it is necessary to understand its nature. “The causes of child labor are far-reaching and complex, including poverty and lack of access to quality education and infrastructure,” says Jambulatova. “As with anything that affects the way people live, these issues become part of cultural practices as well, meaning that encouraging change also requires investment in awareness-raising to shift mindsets. To bring long-lasting change for children and their families, we need to understand the root causes of child labor and how they relate to each other in a wider system.”
A question of awareness
Eradicating child lavor is made more challenging due to farmers’ heavy dependence on the tobacco. There is less government support available to diversify their incomes with complementary crops than in other countries. What’s more, most farmers in Indonesia also don’t own the land they cultivate. During the harvesting season, it is common that neighbors come with their children and help.
Elimination of child labor is further complicated by the structure of the Indonesian tobacco market. While leading multinational manufacturers and leaf merchants are members of the ECLT and PAACLA and have committed themselves to keep their farms free of child labor, some of the domestic companies still have work to do. Moreover, a large number of “free” tobacco farmers sell their tobacco to traders and middlemen, which makes tracing within supply chains more difficult. Many small-scale farmers prefer selling their tobacco to these middlemen as they can sometimes offer higher prices than those fixed at the beginning of a season through contract farming.
ECLT member companies represent only approximately 35 percent of the tobacco sector in Indonesia. There is, however, progress among domestic manufacturers. “Some national companies are moving to vertical integration, with suppliers to these companies also opening up to this,” says Jambulatova. “PAACLA presents a unique opportunity for national companies to form a part of a partnership for the elimination of child labor specifically in Indonesia to step up to the challenge and close the gaps for sustainable change.”
As in many countries, tobacco in Indonesia is grown only during a short period of the year. During the remaining months, the farmers cultivate other crops, such as rice. “This is why we can’t limit our support to farmers to the tobacco supply chain only,” says Jambulatova. “It’s not a supply chain issue but an agricultural issue. Until there are collaboration and investment to address root causes and fight child labor across crops, we risk simply pushing children out of tobacco fields and into another crop down the road or during another season.
“The fact that this is a global issue across regions and industries shows that no one actor can solve this alone. Our long-term strategic vision is to engage across crops and levels building commitments and coordination that support economic growth for thriving farming communities free of child labor. We invite the government, companies and other industries to renew and deepen commitments so that we can reach this necessary goal as fast as the UN Sustainable Development Goals demand.”
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.

February 1, 2021
Recon Reconsidered

Photos: Hauni
Garbuio has developed a new process for making reconstituted leaf tobacco.
By Stefanie Rossel
With the advent of heated-tobacco products (HTPs), reconstituted tobacco leaf (RTL) experienced a renaissance. The consumables of HTPs require a dedicated form of recon, custom-made from carefully blended tobacco leaves. Invented in the 1950s to save the valuable raw material by combining remnants of virgin tobacco during production, recon is today used in the tobacco blend to reduce the filling cost for cigarettes, cigars or of pipe and smoking tobacco blends. It also plays an essential role in cigarette blend design. Enriched with cloves for kretek cigarettes or containing hemp components, RTL even allows for the creation of completely new products.
There are several methods to produce reconstituted tobacco. Next to the paper-making technique, there is the nano fiber technology and a process called band cast, which is also known as slurry-type recon. All recon types can be used in HTP consumables. Paper recon and slurry recon are currently the most widely used forms but require much space and energy to produce, while taste, drying and tensile strength can present challenges.
Now Garbuio, an Italian specialist in primary machinery and part of the Hauni Group, has developed an alternative technology. The company has designed a recon plant that works with what it calls the tobacco dust amalgamation (TDA) process, an evolution of the slurry technology. The raw material, which can be tobacco, hemp or clove, is first ground to a powder. Moist components, including glycerin, water and binder, are then added to produce a dough, and cellulose microfibers are added to stabilize the tobacco foil.

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Alexander Dzingel
The latter ingredient is not used in the slurry process. Instead of spreading the thick mass on a metal belt conveyor as would happen during slurry making, it is taken into an extruder where it is pressed into pellets that are transferred into a rolling mill. Under high pressure, rollers flatten it into an even paste before it is dried. “Through this process, we get a tobacco foil with uniform and controlled thickness, which cannot be achieved with the slurry method,” explains Alexander Dzingel, product consultant HTP at Hauni. “Roller spacing can be adjusted exactly. In the future, the main application of recon will be in HTP, for which the accuracy and constancy of material thickness will be decisive. This guarantees consistency in downstream processes and helps to ensure that important product specifications, such as nicotine content, are always within the specified range.”
If used for HTP or wrapping cigars, the rolled recon sheet is wound on a bobbin. Optionally it can be cut into flakes if intended as an add-back for the primary.

Garbuio’s tobacco dust amalgamation technology retains more flavor and uses less water.
Pilot plant for testing
There are a number of other advantages to the TDA process: In contrast to the paper-making and slurry technologies, in which the raw material has a water content of up to 95 percent and 60 percent to 70 percent, respectively, the TDA technology needs little water. The dough contains only 20 percent to 40 percent moisture. As a consequence, the drying process of the mass is significantly reduced—Garbuio’s recon plant works with a dryer instead of a long drying line; preheating processes are unnecessary. Water and energy consumption are hence considerably lower than in other recon technologies, and the plant has a much smaller footprint.
“As the paste dries much faster, there is a much better retention of nicotine and flavor in the material,” says Dzingel. “In other, more water-consuming processes, flavors that one would actually prefer to keep in the recon are partly lost during the long drying phase. Besides, the TDA process uses fewer binders, which reduces their unpleasant influence on flavor during combustion.”
The TDA process provides manufacturers with the option to produce recon in-house instead of buying it from specialized suppliers.
Garbuio has set up a TDA pilot plant at Hauni’s Hamburg-Bergedorf site, which customers can use to try out new products from various starting materials and manufacture mini-batches for test markets. “Our clients are very interested in the plant—we have had a lot of testing by leading cigarette manufacturers since the line was installed in late 2019,” says Dzingel. “In November, we sold a pilot plant to a customer who sees a lot of potential in producing recon in-house with substantially reduced energy consumption.”

The new plant has a much smaller footprint than that of previous facilities.
Specializing in HTP equipment
Allowing for a material width of up to 300 mm and an output of up to 40 kg per hour, the pilot has been designed for small production volumes (the typical industrial bandwidth would be around 1,000 mm). Capacity, however, can be expanded at any time and adapted to the needs of the location, the company says, so manufacturers can react quickly to changes in the market. Investment and production costs per kg, complexity and energy consumption as well as plant size remain low compared to the paper or cast sheet processes, Hauni claims, whereas filling power is medium to high and flavor excellent.
To further process the tobacco foil produced with TDA technology, Garbuio recommends a special cutting and rod making process, such as in Hauni’s Strip Cut Maker (SCM). It takes the recon sheet off the bobbin and cuts it into long, identical narrow strips with a width of 1 mm at a speed of 200 m per minute and turns it into rods for further combining of the final product.
“This is important for the construction of the HTP device,” says Dzingel. “The different models come with their own challenges. Some systems heat the consumable from the outside, which makes insertion or removal of the consumable easier and cleaner, since the tobacco does not need to be pushed onto a heating element. However, the tobacco needs to be heated through the paper, the smoldering temperature of which lies under the vaporization temperature of nicotine.
“Other systems use an element that heats the tobacco from the center of the rod. Inserting or removing this heating element can be difficult if the base rods are made purely from unstructured, cut tobacco. “The SCM provides manufacturers with a solution for making stable base rods without loose end. It creates a parallel arrangement of thin recon strips in the base rod segment. This makes it easier to insert and remove the heating element.”

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Hauni is also working on a cross-cut process for its TDA recon, meaning the narrow strips are cut in shorter segments. “By cross-cutting the tobacco foil, you can influence the orientation of the fibers so that they are as parallel as necessary but still a bit more randomly oriented so that they have more filling power,” says Dzingel. The shorter strips can be processed in a way that has more similarity with cigarette making.
The TDA recon plant is only one element in a full range of equipment the company has developed for HTP, ranging from the primary for recon tobacco to base rod making, optional pre-combining, final combining and special logistics. “In short, everything you need for a powerful and efficient THP production plant.”
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.

February 1, 2021
Wake-Up Call

Derek Yach
To speed up the demise of combustible cigarettes, the Framework Convention on Tobacco Control needs serious modifications, says Derek Yach.
By Stefanie Rossel
The World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC) made headlines on its 15th anniversary in 2020. Unfortunately, the news was not that it was an overwhelming success but that progress toward getting rid of combustible tobacco was slow. Over the past two decades, overall global tobacco use has fallen, from 1.397 billion in 2000 to 1.337 billion in 2018, or by approximately 60 million people, according to the WHO. Eight million people still die every year from tobacco-related diseases. Critics warn that if the FCTC doesn’t modernize, a smoke-free world will remain a distant goal.
“The FCTC remains essentially frozen in time,” says global health expert and anti-smoking advocate Derek Yach, founder and president of the Foundation for a Smoke-Free World (FSFW). As a cabinet director and executive director of the WHO, Yach was instrumental in the development of the FCTC. “With the FCTC, which is a fairly ambitious document, we achieved our first goal to put tobacco use on a much higher footing within global health—and it has had its impact,” he continues. “In the late 1990s, global health meant infectious disease control to most people, and now it includes noninfectious diseases as well, such as heart disease, diabetes, cancer and mental health. Smoking prevalence has started to decline slowly in some parts of the world, although there are still countries where smoking rates are extremely high and rising.”
Eighty percent of the world’s smokers live in low-income and middle-income countries (LMICs). Applying the FCTC to these regions is the biggest challenge of the treaty, Yach says. “When looking at the single most impactful component of the framework convention—increased excise taxes—most LMICs have yet to even partially meet FCTC targets.
“I suspect this has to do with the universal problems of treaties. It’s nice to sit in Geneva and think about what laws will work in developing countries. If you take your examples from advanced industrialized countries instead of understanding the harsh realities of adapting regulations in poor countries where enforcement potential is low and political priorities are very different, things are a lot easier. In countries such as India or Indonesia or certain parts of Africa, we have not seen success, mainly because there’s weak legal enforcement on the tax side, a lot of corruption in the system and no political will or capacity to put smoke-free public policies in place. Some of the marketing bans have worked, but the tobacco industry continues to interfere with legislation in many countries, and this undermines anti-smoking laws.” Yach predicted that, even if the full range of FCTC recommendations was implemented, annual smoking-related deaths would still increase to 10 million by 2030.

Framework deficiencies
One challenge is that 17 of the FCTC’s signatories own significant shares in tobacco companies. These companies account for almost 50 percent of the global tobacco industry (see “The Contortionists,” Tobacco Reporter, January 2021). They tend to have a real conflict between their revenue and tax-raising needs, and a need to reduce the health effects of tobacco. Other shortcomings include the FCTC’s neglect of adult tobacco consumers who are trying to quit, which contributes to smoking rates staying high. “If you only focus on children not taking up smoking, you will see health benefits 50 years from now, but we want that impact in 15 [years] to 20 years,” Yach says. “For that to occur, better cessation strategies and the global rollout of harm reduction products are critical.”
FCTC recommendations that weakly impact tobacco use, such as health warnings on cigarette packs, have been widely introduced. Cessation assistance has not been promoted, and there is only slow implementation of the FCTC’s Articles 17 and 18, which stipulate the need to develop alternative livelihoods for tobacco farmers. Governments have also not been willing to hold the tobacco industry accountable for its actions, which is specified by the FCTC’s article 19.
Finally, promoting tobacco harm reduction (THR) products, which was part of tobacco control efforts in 2003 when the FCTC was drafted, remains undeveloped and currently only includes nicotine-replacement therapy (NRT). One reason for this is that governments remain deeply suspicious of tobacco industry claims that their new products will cut death and disease. Governments are also unwilling to seriously consider industry research, which they think is self-serving.
However, an examination of scientific output and patent filings shows that current research, regardless of the sponsor, is leading to new technologies capable of transforming the industry. “When we drafted the FCTC, we never anticipated this and as a result neglected the role of intellectual property rights,” says Yach. “At the time, we did not think something innovative and lifesaving could come out of tobacco companies, so why bother about intellectual property? How wrong we were!”
Filling the gaps
A nonprofit organization established in 2017, the FSFW aims to accelerate progress. The FSFW focuses on identifying and filling gaps in FCTC implementation and transforming the tobacco industry. It has developed a three-year strategic plan around three pillars—health, science and technology; agriculture and livelihoods; and industry transformation.
The FSFW’s approach and philosophy differ substantially from other philanthropies that support the FCTC. Yach pointed out that Bloomberg and the Gates Foundation support selected elements of the FCTC but actively back campaigns against THR products. “We’ve been very clear that we support provisions that children should never vape or smoke. However, our main objective is to help adult smokers quit by making cessation aids accessible and to support adult smokers switching to approved harm reduction products. These include snus, e-cigarettes, heated-tobacco products and nicotine pouches,” says Yach. “In the long term, tackling cessation together with harm reduction is the only way to bring smoking rates down relatively soon. If today’s adult smokers quit or switch, even into their fifties or sixties, they will see improvements in their quality of life.”
The FSFW strongly believes in investing in building research capacity in the nations in which it is doing research. No other major funders do this. “The health of a whole country improves when it has strong national scientific research capacity,” says Yach. “The scientists in a country become advocates for good policy in time, whereas keeping the money in the U.S., or doing all the work there and flying the experts in, undermines the development of tailored solutions that actually work.”
As the FSFW’s first strategic plan comes to an end, Yach says the Foundation is pretty much on target. “We have created a network of outstanding grantees who are producing work and scientific research that did not exist before, such as the second issue of the Global State of Tobacco Harm Reduction (GSTHR), which was released in November 2020.” (See “Uphill Struggle,” Tobacco Reporter, December 2020.)
In polls, the FSFW has tried to assess how important people’s perceptions of risk are to ending smoking. “We found out that knowledge of the risks of smoking is good in most countries but not in countries such as India or South Africa,” says Yach. “The intention to quit is often very high, but the resources available to [smokers] to do so successfully is often low. Access to NRT and reduced-risk products (RRPs) is almost zero in LMICs, yet we know that the countries doing best, such as the U.K. or Japan, are not just providing good cessation services and high-quality harm reduction alternatives, they are also helping smokers get access to these products, which is a big missing element in other countries. Our polls, however, show that more people now believe that nicotine causes cancer than they did two years ago. It does not. That view impedes smokers switching to reduced-risk tobacco products.”
Tools to drive change
The FSFW is supporting three institutions to drive change: the Center of Excellence for the Acceleration of Harm Reduction at the University of Catania in Italy; the Center of Research Excellence: Indigenous Sovereignty & Smoking in Auckland, New Zealand; and the Rose Research Center in North Carolina in the United States. Led by Jed Rose, co-inventor of the nicotine skin patch, the Rose Center is working on novel compounds and innovative treatments to improve the efficacy of smoking cessation therapy and harm reduction products.
The publication of the first Tobacco Transformation Index (see “Incentivizing Transformation,” Tobacco Reporter, April 2020) was another milestone. The index will help investors get a good idea of what tobacco companies are actually doing to address the health impacts of tobacco use, which will guide their investment policies. “For the investor, the question is where do I place my money to maximize my return and also maximize my impact on the environment and health,” says Yach. “We think the Tobacco Transformation Index is helpful guidance for them.”
The FSFW also has a hands-on approach to the FCTC goal of creating alternative livelihoods for tobacco farmers. It has set up the Center for Agricultural Transformation in Malawi, one of the most tobacco-dependent countries in the world. According to trendeconomy.com, unmanufactured tobacco accounted for $498 million, or 54 percent percent, of Malawi’s merchandise exports in 2019.
“Malawi has had a change in government, and the new administration is deeply committed to reducing dependence on tobacco,” Yach says. “We have signed a memorandum of understanding with the government and the National Planning Committee on accelerating alternatives and have created and supported the first National Policy Center that brings together government, industry, NGOs and academics. We support entrepreneurial agriculturalists, smallholder farmers and women. As a result, there have been new vegetable and dairy production projects as part of a broader portfolio. We see an upward movement, not only in agriculture, but in the economy.” The foundation is currently building a campus at Malawi’s major national agricultural university.
Challenging the COP9
The Foundation has many new research projects in the pipeline and will focus even more intensely on how change can be fast-tracked, how to counter misinformation on THR products and how to connect with doctors and health professionals in 2021, Yach says. Certainly the most important event this year is the Ninth Session of the Conference of the Parties to the FCTC (COP9), which had to be postponed until November of 2021 because of the Covid-19 pandemic. Article 28 of the FCTC addresses amendments to the convention. In a 2020 article published in Drugs and Alcohol Today, Yach provided a detailed agenda on how COP9 could modernize the FCTC, principally by a change in philosophy.
“I hope that the FCTC will align its policy to where the science is going, which would mean creating policies and actions that support harm reduction,” says Yach. “In addition, we seek progress on smoking cessation. It is long overdue that the COP discuss the pricing and availability of THR products in LMICs. I suspect many governments are likely to reverse their initial reactions to THR products based on emerging science and in response to the U.S. Food and Drug Administration’s decisions related to snus and IQOS. Historically, U.S. FDA decisions have been regarded as the gold standard of norm setting. That should be as true for THR products as it is for pharmaceuticals, vaccines and food.”
Yach is confident that even FCTC article 5.3, which excludes the tobacco industry and those it funds from the dialogue, might be overcome. The FSFW was immediately boycotted by the WHO because, even though the organization is independent, it receives funding from Philip Morris International Global Services.
“The voices [against dialogue with the tobacco industry] are loudest from a very small group of people who grew up in tobacco control decades ago and got stuck in their careers with a very strong view,” says Yach. “However, there’s a new generation coming out of new areas of science and IT. They look at science in a different way than we did. They believe in private partnerships. They seek real change and not endless rhetoric. They are less interested in what the tobacco industry did decades ago than in what it can do today to save their mother or father.”
Because there is no internationally accepted research agenda on smoking reduction, there are significant research gaps in many countries and scientific fields, and most of them center around THR products. Yach thinks these products must be incorporated into the FCTC, and he indicated that the foundation is leading efforts to define research that could improve tobacco harm reduction in any way and guide and accelerate the end of smoking. Addressing these gaps will involve people in academia, regulatory bodies and industry. The list should be completed later this year.
“My view is that there will be an inevitable rise in the use of THR products and a decline in the use of combustible cigarettes. My hope is that we can speed that process up. If we do that, 3 million to 4 million tobacco-related deaths could be avoided every year over the next four decades. It’s worth pushing hard to achieve that goal.”
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.

February 1, 2021
Promoting Inclusiveness

Photo: Tobacco Reporter archive
Turkey instructs cigarette makers to use more local leaf
By George Gay
According to the Local Tobacco Inclusion in Tobacco Products law that came into force in October, tobacco manufacturers in Turkey will have to achieve, within four years, a 30 percent inclusion rate of locally produced leaf tobacco within their Turkish market cigarettes.
Currently, the manufacturing industry is estimated to use about 12 percent local leaf, mostly made up of classical oriental tobaccos (COTs) such as Izmir, Samsun and Basma. But while the increases in inclusion rates—17 percent this year, 21 percent in 2022, 25 percent in 2023 and 30 percent in 2023—might at first glance appear to be an opportunity for the COT industry, in reality, the limitations imposed by cost and blend-composition factors will mean that very little, if any, of the increased local demand will be made up of COTs. Additionally, the increased local demand is expected to be met in part by the diversion of tobacco previously earmarked for overseas production centers.
In any case, the requirement to increase local content is expected to see a rise in the inclusion in local cigarettes of sun-cured Virginia tobacco, of which Turkey currently grows about 1,500 tons to 2,000 tons annually but which, under the new requirements, could be expanded to an annual crop of about 15,000 tons. While this type of tobacco does not attract the sorts of prices paid for COTs, manufacturers are likely to meet both blend and cost challenges in including it, partly because an established local illicit cut-rag manufacturing industry uses this type (along with some COTs and imported tobacco) and, without the inconvenience of having to pay taxes, is in a good position to compete for the volumes available.

Meanwhile, producing a bigger sun-cured Virginia crop that is of the required quality and that can be sold for a reasonable price will require dealers and manufacturers to invest in processing and agronomy. The tobacco traditionally grown in the east and southeast of the country was originally cultivated from Virginia seed that, because of the way it was cultivated, adapted to local conditions and produced what became known as a semi-oriental tobacco. The risk of this happening in the future is said to be high unless new seed is introduced and growers are supported in, and compensated for, introducing good agronomic practices. Historically, it is said, growers had little interest in producing quality leaf, preferring instead to concentrate on yields since, for political reasons, they were well compensated for doing so.
Whatever is the extent of the increase in demand that is generated by the new law, it comes at an interesting time because there are supply-side challenges that have been raised by labor issues and the difficulties encountered in introducing mechanization on COT farms—difficulties to do with, on the one hand, the need to overcome farm terrain obstacles and, on the other, the need to finance the necessary investments. Not unreasonably, farmers are not willing to continue growing tobacco unless the returns are, in their eyes, sufficient.
For the time being and the near future, such issues will not be overwhelming because the devaluation of the Turkish lira—down by 40 percent against the U.S. dollar in 2020—will take some of the pressure off grower returns. Additionally, an official inflation rate of 15 percent might allow grower premiums to be paid. But relying on the devaluation of the lira as a long-term strategy would be fraught.

Turning away from local supply issues to those to do with international demand, one factor in the future success or otherwise of Turkish COTs can be examined through the lens of the consumption of American-blend (AB) cigarettes worldwide. Looking at TMA cigarette consumption data, I found 36 countries where, in 2019, AB cigarettes accounted for 50 percent or more of their overall cigarette consumption. Of those 36 countries, 31 countries recorded decreases in the consumption of AB cigarettes between 2015 and 2019, a period that saw falls in the total (all blends) consumption of cigarettes in 28 countries. And looking at the 10 top countries for AB cigarette volume consumption in 2019, the average decline in such consumption between 2015 and 2019 was 10.8 percent compared with 9.6 percent in the case of all types of cigarette consumption in those 10 countries.
On the face of it, this does not look good for the future of Turkish and, indeed, other COTs. But care has to be taken here. Although the above figures give a snapshot of what is going on, it would take a lot of delving to obtain an accurate picture. For one thing, the term “AB cigarette” is used by the tobacco industry fairly loosely, and the inclusion rates of COTs differ widely—down, in fact, to zero—from region to region, country to country and brand to brand within countries.
Given all of the above, it is probably no surprise that Turkey’s estimated volumes of 2020-grown COTs are expected to meet the firm local demand and the less-than-firm overseas demand. The country is thought to have produced about 40,000 tons of Izmir; 4,350 tons of Basma; and 3,500 tons of Samsun along with 10,500 tons of Izmir East (Adiyaman); 3,000 tons of sun-cured Virginia; and 3,000 tons of other types. Overall, Turkey’s crops are thought to be average to above average in quality—slightly better than those of 2019.

But let me digress for a moment. In examining the demand for AB cigarettes, I went looking for those countries with markets with relatively high levels of AB cigarettes to discover whether AB cigarette consumption had declined between 2015 and 2019, but one of the most interesting aspects of the exercise turned out to concern one of the countries where such consumption had risen: Turkey.
According to the TMA figures, Turkey’s American-blend cigarette consumption rose by 0.5 percent between 2015 and 2019. Such an increase will not have set the COT industry alight, but there is something interesting here because Turkey is often in the news for its anti-smoking policies. And yet, it is one of only five countries within my sample of 36 countries where AB cigarette sales rose. In fact, it gets more odd. Turkey’s all blends cigarette consumption between 2015 and 2019 increased by 15.2 percent.
And it gets more odd still. A story on May 31 on the online news site, Ahval, mentioned how the country’s president, Recep Tayyip Erdogan, was a fierce opponent of tobacco smoking and had “long waged anti-smoking campaigns in Turkey.” But despite the fact that the main thrust of the story concerned how Turkey had recorded its highest-ever cigarette consumption in 2019, 119.7 billion, there was no pause to consider whether the anti-smoking strategy might need revisiting, revising and reinvigorating. —G.G.

The author would like to thank Frederick de Cramer, doyen on the Turkish tobacco industry, for his input into the leaf tobacco information and data included in this piece.
Expanding Latakia tobacco production and marketing
Frederick de Cramer, who for many years has been heavily involved in the Turkish oriental tobacco business, has, through his consultancy, Cramer Tobacco, linked with ASTAB in a joint venture (JV) partnership, which aims, among other things, to expand ASTAB’s Latakia tobacco production and marketing.
The JV is using high-quality Izmir leaf and curing it in the traditional Latakia way in barns filled with smoke from burning shrubs that are found only in Turkey and some neighboring countries, a process that gives the tobacco its distinctive aroma.
De Cramer told Tobacco Reporter that this tobacco was highly sought after, especially for inclusion in pipe tobacco blends but also in some other product types.
To satisfy the demand from existing customers, who are mainly based in Scandinavia and the U.S., the JV is planning to increase capacity, in part by investing in new barns. But it is focusing, too, on new customers that have been unable to source Latakia tobacco and have been using mainly artificial flavorings instead.
ASTAB, which was founded in 2007 in Izmir by Haldun Babacan and Selcuk karagozler, was successful in automating the oriental tobacco curing system known as the Vento system and, in doing so, expanded the Izmir crop by more than 10,000 tons in the East Adiyaman area.
De Cramer and ASTAB’s Latakia operations will be the subject of a report in Tobacco Reporter’s February 2021 issue. —G.G.
George Gay is Tobacco Reporter’s European editor, but his territory spans the globe. Based in London, George has covered the tobacco industry since 1982, initially for a U.K.-based publication and since 2004 for Tobacco Reporter. George’s understanding of industry issues, combined with his keen sense of observation and dry wit, have earned him a loyal following among Tobacco Reporter’s readers.

January 1, 2021
Rolling With the Punches

Photos courtesy of Kavex, Silversun, NewCo and Leaf Only
Independent leaf merchants have managed to adapt to this year’s unprecedented conditions.
By Stefanie Rossel
Although analysts have rated the tobacco industry “resilient” and “recession-proof” many times, the sector couldn’t avoid being affected by the Covid-19 pandemic. The leaf-growing segment, especially, saw disruptions, with auctions being suspended or interrupted in key markets. Travel restrictions led to shortages of agricultural inputs and seasonal workers. Growers were not allowed to be present during the sales process while international leaf dealers couldn’t attend the auctions. For many independent leaf merchants, the unparalleled situation brought about new challenges. Nonetheless, they managed to find positives in the experience.
With the 2020 Chinese New Year falling at the end of January, Kohltrade of Brazil had scheduled its business travel to start in mid-February. “Then the pandemic began, and in March, we started working from home with the factory closed for three weeks,” relates Kohltrade General Manager Hardy Kohl Jr. “During this period, we had a lot of uncertainty and insecurity about what the rest of the year would be like; how long would it take,” he continues. “After these eight months, we tried to adapt. Business trips and trade shows did not happen; we did not have buyers visiting us. We focused and invested more in remote contacts, business intelligence, video conferencing, and at the end, we will finish the year with a performance a little higher than 2019. What we think is almost good!”
Rainer Busch, managing director and owner of NewCo Global, says that despite the circumstances, business has gone well for his company. “We are fortunate to have our colleagues in the origins to be in touch with the source and factories,” he says. NewCo is present in 16 tobacco origins through marketing agreements with nonmultinational factories. “With no one able to travel to the origins and customers, I felt we were not being punished and disadvantaged,” says Busch. “There was more time for follow-up and brainstorming new ideas. For the future, I take with me that travel can be reduced. We have also invested in better virtual communication, which is very useful and saves some travel.”

Dora Gleoudis
Business also continued smoothly for Nicos Gleoudis Kavex, which focuses on Greek oriental tobacco varieties, and JEB International Tobacco of Danville, Virginia, USA, which specializes in selecting, shipping, processing and storing all tobacco varieties and runs a 2,000-acre farm in North Carolina. For Austrian leaf dealer Silver Sun, which is active mostly in Bulgaria, only personal interactions remained an issue. “Our business is very much person-related, and many things cannot be communicated just over the telephone or by video conference,” says Franz Szoncsitz, director at Silver Sun. Holding a sizeable stock of tobaccos from South America, Africa, the Far East and Europe in its Bulgarian warehouses for its European customers, his company has been unaffected by the long-term storage problems that analysts had identified as a potential concern during the Covid-19 crisis. “Although we had to stay in a so-called home office for a certain time, logistics worked, and we did not face any difficulties from this side,” says Szoncsitz.
Obviously, ample storage space is helpful when vessels were delayed or rerouted. Nevertheless, logistics remain an issue. Border restrictions, along with shortages of trucks and containers, result in unpredictable freight rates, according to Busch. “Obviously, this is a serious problem for companies working with small margins as an increase in transportation costs could easily cut margins by 50 percent,” he says.
Kohl notes his company’s main problems were logistics, expensive freight and sending samples for customer evaluation. “We also had difficulties in finding space on vessels, port congestion and shipping delays,” he says. The company is working to minimize the impact on customers of such disruptions by absorbing increased costs and anticipating shipments to avoid delivery delays, among other measures. “Advance planning is essential,” he says.

Franz Szoncsitz
Focus on the customer
Rainer Busch
Global tobacco leaf production experienced a significant decrease in 2020, declining from 5.13 billion kg of green leaf in 2019 to an estimated 4.91 billion kg in 2020. The drop impacted all tobacco varieties except dark air-cured. Analysts are slightly optimistic that production will pick up again in 2021, forecasting a crop of 4.95 billion kg of green leaf amid further challenges.
“I fully expect larger crops from all major supply origins in 2021,” says Jay Barker, founder of JEB International Tobacco. “With that said, I personally think global supply/demand is in good shape.”
According to Busch, certain types of tobacco remain in oversupply. “This year, we definitely have a surplus of high-nicotine tobacco. As a result, we lack medium-[quality] to high-quality nicotine tobacco products.” However, a shortage of tobacco could benefit companies such as NewCo, according to Busch. With access to a broad global portfolio, Newco can help customers find the right tobacco for their needs, he says.
“Due to weather conditions and labor shortages, tobaccos produced in Greece—Basma, Katerini, FCV [flue-cured Virginia] and burley—are shorter in quantity but better in quality compared to the 2019 crop,” observes Dora Gleoudis, managing director of Nicos Gleoudis Kavex. “Prilep of North Macedonia is about the same as 2019 crop quantity-wise but lower in quality. It is too early to make any prediction for the 2021 crop, but a further small decline of the tobacco production in the Balkan area is possible.”
To increase sales, suppliers should focus on the market rather than on production, according to Kohl “Our focus is to meet our customers’ demand—and, believe me, they have very different demands,” he says. “What some love, others hate, and we need to be on top of this. The major challenge in the pandemic situation is how to be close to them without the eye-to-eye contact.” Kohl expects 2021 to be even more difficult than 2020. “On the one hand, the quality seems to be better than 2020, but I expect that the worldwide economy will be in a more difficult situation,” he says. “The market in general seems to me unbalanced between supply and demand.”
Because tobacco is an agricultural product grown under natural atmospheric conditions, it is difficult to predict both the final production volume and quality at the time of transplanting, according to Szoncsitz. That means supply and demand seldom match.
“Comparing the figures some 40 years ago with the ones of the last couple of years, the amplitudes got smaller and smaller, which is a good sign in getting more stability for everybody in the chain,” he says. After losing market share to international companies, SilverSun stopped contracting with farmers. “As a small dealer, the global decrease or increase of leaf production does not significantly affect us,” says Szoncsitz.

Uncertain times
More detrimental than the tobacco surplus has been the continuing decline in cigarette consumption. For leaf merchants, it can be difficult to discern the annual requirements of their customers. “On the other hand, dealers are signing early each year cultivation contracts with their farmers,” says Gleoudis. “We feel it is unfair what happens lately: customers undertaking commitments toward their dealers much later—i.e., at a time when dealers have already undertaken their obligations towards their growers. This policy can create uncommitted stocks as well as financial difficulties to the dealers.”
“In my opinion, the biggest issues we are facing as leaf dealers are the cigarette consumption decline and the consolidation of manufacturers,” says Barker. “It’s a double whammy that directly affects a leaf dealers’ bottom line. The only way to survive is [to] tighten your belt and deliver superior product and customer service.”
Given the developments in the tobacco landscape in recent years and the long-term economic effects of the Covid-19 pandemic, the future remains uncertain.
The key, according to Kohl, is knowing how to deal with competition, the restrictions on face-to-face contacts and reduced margins. “There was euphoria in 2020 after the end of the lockdowns to meet the repressed demands and logistic difficulties of this period,” he says. “Now we see that we have second, third and who knows how many waves of infection coming. Governments will have to pay the bill for emergency support, and this bill will come due in 2021. How long will it take to get a vaccine? How efficient will it be? What will the world unemployment numbers be at the end of this? Those questions are still open.”
Busch is more confident. “Consumption is likely to increase during the pandemic, which is a positive aspect,” he says. “Consumption may change from normal cigarettes to making or rolling your own products; the home office will have its effect. Less tourism means fewer cigarette purchases in duty-free shops and fewer takeaways from tourist countries where cigarettes are cheaper. Thankfully, our industry in general is one of the industries less affected and damaged by the pandemic.”
Unforeseen opportunity
Could a pandemic also have a positive side? John Wallace, principal at Leaf Only, would say so. Established in 2009 and based in Connecticut, USA, his company has chosen a different business model of supplying raw tobacco: The company caters to both the wholesale and retail leaf market, supplying a large variety of tobacco leaves, including cigar wrappers, binders and fillers as well as unprocessed cigarette tobacco and pipe and hookah tobacco.
“It was really strange, actually,” says Wallace, referring to when the coronavirus broke out. “In April, May, June and July, we saw record sales—even to the point where we could not fulfill orders due to lack of staff. It was as if our business nearly doubled in a matter of a few weeks. Since then, it has leveled off, and we are almost back to normal, but it was definitely a wild ride! If I had to guess, I think people might have been panic buying for whatever reason. Thinking things would be harder to obtain or that prices would go up dramatically? Not too sure.”

Importing leaf from certain countries had been challenging, however. “In some cases, it still is,” says Wallace. “We’ve been waiting on a container from India since June, for example. It is finally supposed to arrive in the next couple of weeks, but it should never take so long. As far as I know, most of the delay was due to Covid-19 restrictions and issues with various countries and shipping agencies. Sourcing here in the USA has remained unphased, which is really great for us since that is most of what we sell.”
For 2021, he forecasts a return to a more steady and predictable business. “I think it now more depends on the growing season, leaf quality and the overall market economics rather than outside factors such as Covid-19. Hopefully, it ends up being a good year.” —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, 2021
More than a Cigarette

Setti Coscarella
(Photos courtesy of Taat Lifestyle and Wellness)
Taat products offer smokers their familiar ritual without the disadvantages of nicotine and tobacco.
By Marissa Dean
In recent years, we’ve seen the tobacco and vapor industry change dramatically—focus has been shifted to less-risky products, including heat-not-burn and low-nicotine products. Now, enter hemp.
In 2018, U.S. Congress passed the Farm Bill, legalizing hemp with less than 0.3 percent THC, the psychoactive component in cannabis, in all 50 states. Since then, some tobacco farmers have either shifted to growing hemp or added it to their repertoire as an additional income source. In the November 2020 election, some states voted on cannabis legislation, deciding whether to legalize medical and/or recreational cannabis.
This poses the question of how the hemp and cannabis industry may interact with or change the tobacco and vapor industry. Some major tobacco companies have taken a stake in the hemp industry as it has grown while others are hesitant to go that route due to regulations and legality questions across states. Taat Lifestyle & Wellness seems to be bridging the gap between the two industries—its products will offer smokers a direct, comparable alternative to traditional combustible tobacco cigarettes.
Taat Lifestyle & Wellness is a publicly traded company based in Vancouver, British Columbia, Canada. According to its website, it is an early stage life sciences company. The firm says it aims to provide smokers with a better overall experience than smoking traditional cigarettes. Taat CEO Setti Coscarella notes that Taat is not your traditional cigarette. In fact, he classifies it as a completely new product.
“Nicotine is a problem,” said Coscarella, who was previously a lead strategist at Philip Morris International where he worked on the IQOS heated-tobacco product and studied smokers. “None of the tobacco companies or vape companies can wrap their mind around selling something that isn’t addictive. … [O]ur product is nonaddictive. So it has hemp, yes; it has CBD, but I’m not positioning it as a hemp cigarette with CBD because it doesn’t have the same experience as a hemp cigarette.”
Taat has created this new product using its proprietary Beyond Tobacco filler, a hemp-based filler that is processed to smell, taste and look like traditional tobacco but without the nicotine. “Nicotine as a drug is a very useless drug,” Coscarella said. “It does nothing other than keep you addicted to doing the thing that you need in order to consume that drug.”
The company’s goal with Taat cigarettes is to offer users another alternative to traditional tobacco products that will not become addictive. “I want to give smokers the freedom to choose; if they want to smoke, they can smoke; if they don’t, then they don’t have to. I think that is a very important freedom we want to give back to smokers. That’s ultimately why we exist.”

Taat cigarettes are designed to offer users an alternative to traditional tobacco products that will not become addictive.
Coscarella hopes Taat’s new products will allow smokers to make a choice—continue smoking traditional cigarettes or using vapor products, all with some level of nicotine in them, or switch to Taat, which offers the ritual of traditional cigarettes but does not contain any addictive drugs. Coscarella believes that choice is important. “I don’t think nicotine is the main reason people smoke; if it were, then for everybody who wants to quit, the [nicotine] patch would work. … If it were, then the vapes and the heat-not-burn products would have a higher long-term efficacy rate with actual smokers because I’m just giving you nicotine. But they don’t. [Smokers] go back [to smoking traditional combustible cigarettes] because there’s a certain ritualistic component on the other side that none of these other things have. I think it’s important to try to match that ritual where I think the low-nicotine products obviously would have something from that standpoint, but you still have a physiological piece that needs to counterbalance somehow.”
Low-nicotine products are attempting to “fix” the smoking problem—the idea behind these products is that smokers can switch to low-nicotine cigarettes and then eventually stop smoking. However, Coscarella does not think they will work very well. “You haven’t replaced it [nicotine] with anything. You’re just giving your consumers less of something.” Taat, however, aims to avoid that issue by replacing the nicotine with CBD in the products. Many people erroneously think that cigarettes calm them down, according to Coscarella, when in reality they feel calm after smoking only because they were experiencing nicotine withdrawal. Smoking provides the nicotine your body was craving. Taat products can give consumers that calming feeling to counteract the feeling generated from nicotine withdrawal, thanks to the CBD in the Beyond Tobacco filler.

Taat products will soon be on the market; on Dec. 11, products will be shipping to Ohio distributors for sale. Each pack will retail for $3.99—allowing users of any cigarette brand to afford Taat—and will be available for purchase by those aged 21 or older. Taat will have online age verification for purchases through its website and much like tobacco, will work with retailers to ensure their customers are of legal age as well. “We’ll have a self-declaration online, so someone should be over the age of 21. And then from a retailer standpoint, they should endeavor to police this as they do any combustible cigarette product that they would otherwise sell,” said Coscarella.
Currently, hemp is not regulated in the same ways that tobacco and vapor products are. Outside of the Farm Bill, regulations vary from state to state, and hemp products are not under the oversight of the U.S. Food and Drug Administration (FDA) or subject to anti-smoking bills or certain federal, state or municipal excise taxes. “That being said,” said Coscarella, “it’s imperative that we’re able to communicate what the value of this product is from a societal standpoint,” in much the same way that the premarket tobacco product application (PMTA) process aims to do with tobacco products.
Coscarella believes the FDA will eventually get involved with hemp. “If cannabis were to be legalized—depending on how the election pans out—it’s likely that it will require regulation, and if that happens, I don’t think they’ll carve out hemp. No different than how it was done in Canada. When they passed the Cannabis Act—the Cannabis Act encompasses both cannabis and hemp.” So while Taat isn’t currently faced with major restrictions, that could change.
Much like the rest of the world, the Covid-19 pandemic has affected the launch and marketing of Taat. While in-person events would help with building the buzz, Coscarella said, the company’s marketing plan will be heavily online-based. “I think you get a better return on investment from a digital ad that can be served to somebody when they’re in the time to see it.”
Taat cigarettes will be an interesting addition to the ever-changing smoking industry. As the company prepares to roll out this initial product, Coscarella is already looking ahead. “I think there are other areas within the tobacco space that would be interesting for us to look at, whether it be through different delivery mechanisms or different formats. … But initially, I think the exercise is to go after the biggest category and build a family of brands that can help capture some of those ancillary areas.”
Marissa Dean joined Tobacco Reporter in the summer of 2018 as a copy editor.Since that time, she has taken on additional responsibilities, including feature writing.Her skills span the publishing industry from layout and design to copy editing to content creation.

January 1, 2021
Reinforcing Resilience

Photo: Taco Tuinstra
During its general meeting, ITGA debated tobacco growers’ challenges in the wake of the Covid-19 pandemic and a deepening economic crisis.
By Stefanie Rossel
Antonio Abrunhosa
Superlatives were close at hand when describing 2020. Speaking at the International Tobacco Growers Association’s (ITGA) “issues day” on Nov. 24, ITGA Chief Executive Antonio Abrunhosa called it the worst year since World War II. Robin Lowe, Malawi’s minister of agriculture, spoke of “the worst economic crisis in a hundred years.”
Covid-19 presented new challenges to tobacco farmers, who before the pandemic were already juggling issues such as good agricultural practices (GAP), proper use of agrochemicals, child labor prevention and the struggle against deforestation.
As tobacco farmers’ only global voice, ITGA’s mission is to defend leaf growers worldwide. The organization makes sure that there are markets for leaf tobacco and that they work. It supports growers in negotiations with buyers and protects farmers against overregulation.
More challenges loom already. For example, the World Health Organization Framework Convention on Tobacco Control’s (FCTC) next Conference of the Parties, COP9, which will take place in November 2021, is likely to look closely at the environmental impact of tobacco production.

Global tobacco production declined steeply in 2020
(Photo: Silversun)
Volatile market
Ivan Genov
Global tobacco production experienced a steep decline in 2020. Farmers harvested an estimated 4.91 billion kg of green leaf this year compared to 5.13 billion kg of green leaf in 2019, according to Ivan Genov, tobacco industry expert at ITGA. Flue-cured Virginia (FCV), which accounts for 80 percent or 3.49 billion green leaf kg (2020 estimate), was the main driver of the decrease, with most impact coming from Africa and the Middle East. However, production of all other tobacco types declined too. Combined with the rising cost of inputs, the pandemic created a volatile situation, Genov said. Volumes are expected to recover slightly, to 4.95 billion kg of green leaf in 2021.
China, which accounts for around 50 percent of global FVC production, has stabilized its production since 2018, a trend expected to continue during 2020 and 2021. Production in these two years is expected to reach 1.74 billion kg. Brazil turned out to be the main beneficiary of the trade war between the U.S. and China, whereas many U.S. growers filed bankruptcy.
Unlike for FCV, where average leaf prices were lower in 2020 than in the previous year, prices for burley remained relatively stable. Production in 2020 amounted to an estimated 483 million green leaf kg, down from 548 million green leaf kg in 2019. Oriental production reached an estimated 157 million green leaf kg last year as opposed to 164 million green leaf kg in 2019. Dark-air-cured tobacco was the only variety to see a rise in production, up from 122 million green leaf kg in 2019 to an estimated 126 million green leaf kg in 2020.
Brazil earns the most from leaf tobacco, generating $2.05 billion from tobacco leaf exports in 2019. At the other end of the scale, Tanzania earned $67 million from its tobacco sales. With the difference between costs and revenue razor-thin, profiting from FCV or burley cultivation is a difficult task, Genov noted.
Covid-19-related travel restrictions created shortages of tobacco-farming inputs and migrant laborers, who often also struggled to secure visas, Genov said in a joint presentation with Shane MacGuill, senior head of tobacco research at Euromonitor International. In many countries, including Argentina, Brazil, India, Malawi, Zambia and Zimbabwe, the marketing season was delayed, briefly interrupted or it began with additional protective measures. Growers were prohibited from attending sales and many international leaf dealers were unable to visit auctions. The industry also struggled with a lack of long-term leaf storage facilities. What’s more, lower tobacco consumption caused demand for leaf to decrease. Countries that did not deem tobacco an essential business often closed sales points, leading to an abrupt decline in demand for legal cigarettes and a flourishing illicit trade. Manufacturing facilities in some markets were forced to close, decreasing production and inventories.

Some cigarette markets remained surprisingly robust during the pandemic.
(Photo: JTI)
Impact on generations
Shane Macguill
“Covid-19 is a multigenerational financial crisis,” MacGuill said. “We saw a 5 percent loss in the gross domestic product (GDP) globally this year and expect downtrading in tobacco products over the next years.” The pandemic could also drive additional restrictions on tobacco as Covid-19 has broadened support for large-scale coordinated actions on health issues. In many markets, governments will likely increase tobacco taxes to help pay for their responses to Covid-19. MacGuill anticipates this trend to extend to vapor products in some markets.
While there was downward pressure on cigarette volumes during the pandemic, some markets remained surprisingly robust, according to Euromonitor. Consumers bought 5.06 trillion cigarettes in 2020; excluding China, they purchased 2.75 trillion units, representing a decline of 3.7 percent compared to 2019 (-5.6 percent excluding China). The global cigarette market value stood at $692 billion in 2020, a decline of 0.1 percent over 2019, or 0.3 percent excluding China. Illicit cigarette trade stood at 12 percent outside of China in 2020, according to Euromonitor. It is anticipated to rise to almost 16 percent by 2024.
While combustible cigarette volume and value will likely decline further in the next five years, Euromonitor predicts a rise in vapor products value, especially for closed systems and heated-tobacco products. Modern oral products, by contrast, are expected to gain momentum as people spend more time in private settings. The category was worth $800 million globally in 2020, MacGuill said, and is forecast to grow by 8 percent to 2025.
MacGuill expects demand for new substances and natural actives to increase. Global cannabis sales, which stood at $35 billion in 2020, will reach $95 billion by 2025, according to Euromonitor.
Hemp as the savior?
William Snell
William Snell, co-director of the Kentucky Agricultural leadership program, investigated the potential of hemp as an alternative for tobacco growers to help offset declines in demand for their original crop. The value of tobacco production in Kentucky fell from $980 million in 1992 to $230 million in 2020. For tobacco farmers, the switch to hemp should be a relatively smooth one as they have experience with a similar production model, an established infrastructure and are familiar with producing a labor-intensive crop subject to strict government oversight.
The 2018 U.S. Farm Bill approved commercial hemp production nationwide. Total returns above variable costs per acre for hemp production amounted to $20,283, which was higher than that for tobacco cultivation. Farmers in Kentucky and other states substantially increased their hemp crops, which resulted in overproduction by 2019. Growers faced processing challenges, investors exited the business or went bankrupt and prices fell by around 75 percent.
The prospects for 2021 are bleak as the industry still struggles with unsold stocks and adjusts to regulatory changes. Going forward, Snell expects hemp growers to face challenges similar to those in tobacco, including regulatory uncertainty, a trend toward contracting and consolidation.

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Making farming more efficient
Lea Scott, vice president of agronomy services at Universal Leaf, called for tobacco growers to diversify to sustain their operations. Diversification, he said, could even include nonfarming activities, such as opening a Bed and Breakfast. Before diversifying, however, growers should carefully examine environmental conditions, skills and resource requirements, among other factors.
To enhance tobacco farmers’ livelihoods, British American Tobacco (BAT) has set up its “Thrive” program, which includes 250,000 growers and covers more than 80 percent of the company’s leaf purchases. In addition to focusing on natural resources, the program aims to protect human rights in optimizing farm profitability and ensure farmers’ health and safety. In 2019, BAT commissioned independent climate change impact assessments in ten countries to support its farmers in increasing their resilience to climate change.
Gary Foote, head of global sustainability at Alliance One, advised participants in the conference on the correct use of crop-protective agents, and Rodrigo Tessera, head of business at Kilimo, presented his company’s project on irrigation efficiency. By 2030, half of the world population will live in regions with severe water scarcity, and two-thirds of the world population could be under stress conditions.
Average global irrigation efficiency currently stands at 59 percent, wasting 20 trillion liters of water each year. Kilimo has developed a tool that can measure, reduce and exchange the potable water used in the field on a global scale with the help of small satellites and weather stations. Through its “irrigation academy,” the company has trained more than 5,000 smallholder farmers online. In 2019, it helped save more than 19 billion liters of water.
The future of agriculture is digital, and it can save farmers a lot of money, believes e-agriculture company Agrivi. CEO Matija Zulj explained how its software solutions for the agricultural value chain can contribute to managing the supply chain more efficiently and sustainably.

The tobacco industry remains strongly committed to preventing child labor in its supply chains.
(Photo: TacoTuinstra)
Eliminating child labor
As became clear during the issues day, the tobacco industry remains strongly committed to the fight against child labor. Regulators, too, are cracking down. In early 2021, the European Union (EU) will present a legislative proposal on mandatory human rights and environmental due diligence in supply chains, which is expected to be implemented in mid-2021 to late 2021 and will also apply to non-EU companies conducting business in the EU.
Supply chain due diligence is an ongoing improvement and risk management process. In the past decades, there has been an increasing global focus on human rights and the environment, which reached its tipping point with the U.N. Guiding Principles on Business and Human Rights in 2011.
In 2015, the United Nations introduced its Sustainable Development Goals (SDG), which must be met by 2030. Meanwhile, many countries, such as Germany, France and the Netherlands, have implemented national laws to make sure processes are in place. Companies must demonstrate that a certain degree of due diligence has been implemented, for example. Tobacco companies cannot import cigarettes into, for example, the Netherlands, if there are underage workers in their supply chains.
Established in 2000, the Eliminating Child Labor in Tobacco Foundation (ECLT) is a platform for coordinated action, uniting the main players in the industry to accelerate progress against child labor in areas where tobacco is grown. Led by Karima Jambulatova, ECLT’s executive director, the organization has been extending its reach to other crops to prevent child labor displacement between crops and sectors. The goal is to eliminate child labor not only in tobacco but in all agriculture.

Photo: Silversun
Challenges to tobacco growing
During its issues day, ITGA also provided an overview of the situation in various leaf-growing regions. Mayiwepi Jiti, president of the Zimbabwe Integrated Commercial Farmers Union (ICFU), described the most pressing issues for her country. Zimbabwe has committed itself to the UN SDG to end child labor, respect the rights of workers and ensure workplace health and safety. Compliance with these practices, however, also increases growers’ cost.
The requirements hit an agricultural economy with mostly small-scale farmers who already face a decline in the production area from last year’s growing season. The Tobacco Marketing and Industry Board (TIMB) expects farmers to plant 150,000 ha of tobacco in the 2020–2021 season.
While school is compulsory, it is not cost-free. Many small-scale farmers cannot afford hiring labor and often rely on family instead. Underfunding leads to labor issues, while there is a lack of care for the farming communities. Profits for farmers are slim, whereas corruption is widespread. While Covid-19 has given Zimbabwe’s tobacco industry some insights on keeping children from auction floors, Jiti said, clean water and proper housing for growers should be made mandatory.
Heliodoro Campos Castillo, manager of the National Tobacco Fund in Colombia (Fedetabaco), related a tale of tobacco growers’ resilience in his country. Tobacco cultivation in Colombia decreased from 9,589 ha in 2011 to 3,550 ha in 2019.
Previously, the Colombian industry comprised small companies with established links to local communities. After multinationals started entering the market in 2006, many farmers had trouble adapting to the new systems and left the sector. Between 2011 and 2019, Fedetabaco initiated programs to improve housing conditions, food safety and the supply chain. Investments were financed by municipalities, the tobacco industry and institutions. In 2019, Philip Morris International (PMI) left the country; BAT will follow in 2021. PMI’s exit meant that 1,340 families lost the ability to cultivate tobacco, leading to an economic impact of $4 million. With support of the Department of Agriculture, famers were encouraged to diversify into crops such as lemons, manioc and corn.
The EU is home to 250,000 tobacco growers, families and seasonal workers, most of whom are in economically less-developed regions, explained Parszem Noworyta, secretary general of UNITAB, the international union of tobacco producers, explained. Tobacco cultivation secures farmers’ income as the regions where it is grown are often unsuitable for other crop or nonagricultural activities.
Throughout the EU, leaf tobacco production decreased significantly between 2009 and 2019. Reasons included higher production costs compared to countries outside Europe, the pressure on the tobacco industry and changes in multinationals’ purchasing policies, which involved reducing orders for European tobacco.
According to Noworyta, there are additional threats ahead, including illicit trade, regulation and EU resistance to financial support for tobacco growers. Meanwhile, the parties to the FCTC are talking about nicotine levels, alternatives to tobacco growing, and sustainability, among other topics, without involving the sector in the discussions.
Stabilizing tobacco cultivation and stopping the downward trend hence remains a struggle, according to Noworyta. Growers need to adapt to the market. One opportunity is seen in smokeless tobacco products. For UNITAB, Noworyta concluded, being a proactive force playing an important part in the debates of international and European organizations is vital to secure the future of European tobacco cultivation.

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, 2021
The Oriental Express

Photos courtesy of Nikos Tzoumas
Years of hard work and investment are rewarded with a new oriental tobacco harvester.
By George Gay
Historically, classical oriental tobacco (COT) production has been associated with tradition, which, looked at from one viewpoint, was epitomized by the often-exquisite packaging of the relatively tiny leaves of the highest quality tobaccos while, looked at from another direction, it was personified by the huge amount of labor that went into forming such presentations—such works of art.
Of course, while such traditions encompassed values that transcended the field of economic activities, many of them could not survive the shifts in business priorities that gathered pace, especially during the final quarter of the 20th century. Consequently, changes were gradually introduced to the way that COTs were produced so as to conform to new marketplace and social realities while safeguarding the essentials: the unique tastes and aromas that these tobaccos imparted to the smoker.
But even with such changes having gathered pace during the past 10 years or so, it is somewhat surprising to learn that two major developments in the field of COTs came to fruition in 2020, a year that most businesses and industries, including the tobacco industry, were glad to see the back of.
Nikos Tzoumas, managing director of Missirian and president of the Hellenic Inter-professional Organization, told me in November that, after nine years of hard work and substantial investments by his company, VIT SA, and Philip Morris International (PMI), a second model of the HMO-2020-2R oriental tobacco harvesting machine was ready for the market.
The new harvester had been tested and trialed during the summer of 2020 when it was used to harvest crops in four stalk positions, Tzoumas said. With only two people, the machine proved capable of harvesting eight hectares of oriental tobacco during a season—up to 12 tons of cured oriental tobacco, which is a far cry from traditional harvesting in which teams of hired labor and family members have to undertake back-breaking work in high temperatures to bring in the tobacco by hand. Little wonder, then, that Tzoumas said farmers, especially younger ones, were eager to embrace such new technology.

Meanwhile, the curing of the leaves, which, with the advent of mechanical harvesting, caused a bottleneck in the process, has been sped up with the use of a system initiated and supported by PMI over a number of years. The harvested tobacco is placed by hand in long gauze “socks” through which the air can pass and which can be hung in the shade in an otherwise traditional way. Apart from the speed of the new process, it has the advantage of doing away with the strings on which the tobacco was previously threaded and hung and which could end up as nontobacco-related material, a bane of the manufacturing process.
Gauze curing
Another 2020 marker saw the arrival of a new pure line of Basma seed, the fruition of a project initiated by Missirian in 2013 and co-financed by PMI. Tzoumas said the aim of the project had been to develop a new Basma variety that could provide higher yields than were obtainable with existing varieties while retaining the stable, desirable agronomic and quality characteristics of Basma.
The project was undertaken by the Centre for Research & Technology Hellas at the Institute of Applied Biosciences in Thessaloniki under professors Panagiotis Madesis and Eirini Nianiou-Obeidat. They used conventional plant breeding techniques and molecular markers but without producing genetically modified plants. And, after eight years of work, the project was concluded with the researchers having developed the F10 lines with the requested specifications. The new seed is expected to deliver a 20 percent increase in farmers’ yields with quality maintained.
An application has been made to the Greek Ministry of Agriculture for registration of the new genotypes.

Turning to more immediate matters, the marketing of 2020-grown oriental tobaccos started in November and is due to end next month or in March. From what could be estimated at the end of November, Greece had produced 8,500 tons of Basma, down 20 percent from the 10,600 tons grown during 2019, along with 4,500 tons of Katerini, down 12 percent from 2019’s 5,100 tons. North Macedonia was estimated to have grown 27,000 tons of Prilep, up 3 percent from the 26,200 grown the previous year; and Bulgaria was estimated to have produced 5,000 tons of Krumovgrad, the same amount as was grown last year, 500 tons of Katerini, down 38 percent from the 800 tons of 2019, and 600 tons of Basma, up 50 percent from the 400 tons of 2019.
Farmer yields were described as favorable in all growing areas, and estimated production is generally in line with contracted quantities, except in North Macedonia, where 2020’s estimate of 27,000 tons was 17 percent above the contracted 23,000 tons. The quality of the 2020 crops was described as medium, with Basma quality better than that of the 2019 crop, Katerini quality being about the same, and the quality of the Prilep and Krumovgrad crops being lower.
Demand seems to be weaker than it was last year, especially for A grades.
George Gay is Tobacco Reporter’s European editor, but his territory spans the globe. Based in London, George has covered the tobacco industry since 1982, initially for a U.K.-based publication and since 2004 for Tobacco Reporter. George’s understanding of industry issues, combined with his keen sense of observation and dry wit, have earned him a loyal following among Tobacco Reporter’s readers.

January 1, 2021
Trump Sends Covid Relief Bill Back to Congress

Photo: Stevanovicigor | Dreamstime
U.S. President Donald Trump has sent back to Congress a Covid-19 relief bill that included language to ban the U.S. Post Office (USPO) from mailing vapor products. Deriding the bill as a “disgrace,” Trump called on Congress to increase stimulus payments from $600 to $2,000 and to get rid of “wasteful and unnecessary items.”
It was not immediately clear whether the president regards the USPO provision as wasteful or unnecessary.
Trump’s position could threaten to torpedo the carefully drafted bill—a move that could lead to a government shutdown and send the economy into a tailspin if he carried through with a veto. However, few observers expect the president’s message to prompt a renegotiation of the measure, which passed with big veto-proof majorities.
In addition to prohibiting USPO shipments, the Congress bill subjects e-cigarettes to other rules that currently govern online cigarette sales. Among other things, online retailers will be required to use private shipping services that collect an adult signature at the point of delivery, collect all applicable local and state taxes, and send each taxing state’s tax administrator a list of all transactions with customers in their state.
Critics said the legislation would place a considerable burden on vapor companies.
December 23, 2020
The Next Chapter
Photo: David Mark from Pixabay
What might the new U.S. administration have in store for the vapor industry?
By Patricia Kovacevic
At the time of writing, the results of the U.S. elections are still contested by the presidential incumbent, a Republican, via various vote recount requests and litigation; however, it is a virtual certainty that the U.S. will have a new president, representing the Democratic Party, as of Jan. 20, 2021.
The heads of departments, including the head of the Department of Health and Human Services (HHS), are appointed by the president, subject to confirmation by the Senate, and typically change with the administration. In turn, the Food and Drug Administration (FDA), which is the agency within the HHS with primary jurisdiction over tobacco products (including electronic nicotine-delivery systems, or ENDS) as well as drugs, foods and other products, will be led in the new administration by a new commissioner.
Given the Covid-19 crisis, the new president will be under immense pressure to appoint a new FDA commissioner immediately. Interestingly and somewhat surprisingly, a former FDA commissioner, David Kessler, was recently named co-chair of the new administration’s Covid-19 task force, although Kessler resigned his commissioner role in November 1996 amid controversy for overbilling his travel expenses during his tenure.
Also during Kessler’s tenure, the FDA attempted to regulate tobacco products as “delivery devices for the drug nicotine” to bring tobacco products under FDA jurisdiction. Tobacco companies challenged the rules all the way to the Supreme Court and won (FDA v. Brown and Williamson Tobacco Corp.). The Supreme Court ruled that “Congress has clearly precluded the FDA from asserting jurisdiction to regulate tobacco products. Such authority is inconsistent with the intent that Congress has expressed in the FDCA’s [Food, Drug and Cosmetic Act] overall regulatory scheme and in the tobacco-specific legislation that it has enacted subsequent to the FDCA. In light of this clear intent, the FDA’s assertion of jurisdiction is impermissible.”
Kessler’s wish to see tobacco regulated by the FDA was eventually granted by Congress in June 2009 through the bipartisan passage of the Family Smoking Prevention and Tobacco Control Act. While some speculate that Kessler may be on the short list for HHS commissioner, it is likely that the administration will bring forward new faces. Still, Kessler’s life-long anti-tobacco stance and past working relationship with the current head of the Center for Tobacco Products might give an indication of the increased scrutiny of the tobacco sector in the years to come.
The ENDS industry status quo, from a legislation point of view, while far from ideal, is by now familiar to the ENDS industry. The recent premarket tobacco product application (PMTA) filing deadline has come and gone, and, as expected, we have not seen a flurry of warning letters post-September 2020 ordering certain vapor manufacturers to stop selling their products because they did not submit a PMTA.
The FDA is, however, expected to start enforcing this legislation sooner or later. For any dramatic change to occur, the governing legislation, the Food, Drug and Cosmetic Act, would have to be amended, which is not likely to be top of the list for the upcoming Congress given the priorities the new administration announced during the election campaign. Still, the House of Representatives, one of the chambers of the U.S. legislature, remains dominated by the Democrats, the same party whose representatives initiated several tobacco-related bills and called for confrontational hearings on vapor products. The most recent one, in February 2020, was relatively tame compared with the tone of the July 2019 Juul hearing and even with the June 2014 Senate hearing.
Senate races in Georgia will require runoff elections on Jan. 5, 2021. If Democrats gain both Senate seats in Georgia in January, there would be a 50-50 tie in the Senate, and the vice president would have the tie-breaking vote in case the Senate is deadlocked on a piece of legislation. When the House, Senate and White House are controlled by the same party, the chances of the current administration to pass laws in support of its agenda are greatly increased, though divisions exist within each party, and surprises always happen. Furthermore, 34 out of the 100 Senate seats are up for regular election in two years as well as all 435 House seats; these will be a trying two years for Americans in an economic crisis, and the public sentiment can swing in the other direction. Thus, the new president may have only two years, if even that long, to pass a flurry of laws, and there may be more urgent matters than revisiting the Tobacco Control Act, which, for better or for worse, has worked so far.
The FDA already has broad powers to expand requirements and restrictions involving ENDS products, including the authority to impose product standards through notice-and-comment rulemaking. Ingredient caps and bans are among the standards the FDA has the authority to promulgate via regulation.
The latest unified agenda of regulatory and deregulatory actions
As of spring 2020, active regulatory actions include four potential future regulatory actions by the FDA, rolled over from previous agendas, with no clear deadline for publication of a proposed rule:
Requirements for Tobacco Product Manufacturing Practice (colloquially referred to as “Good Manufacturing Practices”)
Tobacco Product Standard for Characterizing Flavors in Cigars (follow-up to the 2018 Advance Notice of Proposed Rulemaking); this is unlikely to move into the final rule stage on account of recent courtroom successes by the cigar industry.
Modified-risk tobacco product applications; this future proposed rule would establish content and format requirements to ensure that modified-risk tobacco product applications contain sufficient information for the FDA to determine whether it should permit the marketing of a modified-risk tobacco product. Additionally, the proposed rule would set forth the basic procedures for modified-risk tobacco product application review and require applicants receiving authorization to market a modified-risk tobacco product to establish and maintain records, conduct post-market surveillance and studies, and submit annual reports to the FDA.
Premarket tobacco product applications and recordkeeping requirements, a 2019 proposed rule, which would have as a next step at some point in the future, likely in 2020, a final rule.
Notably, ingredient bans and nicotine caps are not on the regulatory agenda. A first step toward an ingredient ban would likely be an Advance Notice of Proposed Rulemaking (ANPRM), although the FDA can in theory skip this step and move directly to a proposed rule, open a docket for comment, collect comments and consider whether it has sufficient information to finalize the rule. Given the complexity of the issue and the current research focusing on flavor ingredients in ENDS, if the FDA determines that an exploration of a flavor ban is desirable, the FDA will probably go through the ANPRM step.
One would have to wonder, though, why engage in rulemaking when the FDA already reviews all relevant information about every ENDS product on the U.S. market, present and future, through the PMTA process—thus allowing the agency to make a case-by-case determination—and the FDA will no doubt pay considerable attention to certain flavored products. In the author’s personal opinion, the PMTA process is the FDA’s preferred avenue to make decisions on individual products rather than issuing rules on product categories, which can also be challenged—and the current Supreme Court might entertain challenges to the FDA’s behavior if it came to it down the road.
Meanwhile, the majority of states by number still lean conservative, which likely means fewer developments in taxation, some scrutiny of ENDS but not necessary priority placed on shrinking the lawful ENDS market as there is no immediately quantifiable health benefit from doing so, and many potential harms. Of note are the California litigation and the potential referendum in California to overturn SB 793 (the flavor ban legislation). By the time this you read this article, we should know whether the bill opponents succeeded at collecting the necessary signatures to place the referendum on the November 2022 California elections ballot and suspend the application of the California flavor ban until then and pending the referendum’s outcome.
The question we must also ask, given the political, public health and economic crisis context is whether ENDS are a threat to anyone and why any administration would, at this juncture, prioritize overregulating a harm reduction asset over the important, systemic changes Americans expect from the administration and drastically mitigating the Covid impact. The industry is likely to consolidate and survive.
A global legal and compliance nicotine industry expert, Patricia I. Kovacevic has experience that includes general counsel and chief compliance officer roles at Nicopure Labs as well as leading senior legal and regulatory positions at Philip Morris International and Lorillard. Kovacevic served on the board of directors of the Vapor Technology Association and on the advisory board of the Global Tobacco & Nicotine Forum. She is the founder of RegulationStrategy, a global legal and compliance FDA-regulated industry consultancy.
December 10, 2020