Category: News This Week

GPI Leader Honored for CSR Contributions

From left to right: India’s vice president, Jagdeep Dhankhar, and Bina Modi, along with the lawyers Jyoti Sagar and Lalit Bhasin (Photo: Business Wire)
Bina Modi, the chairperson and managing director of Godfrey Phillips India (GPI) has been recognized for her contributions to corporate social responsibility (CSR). The honor was bestowed by the India’s vice president, Jagdeep Dhankhar, during a recent event in New Delhi.
“I am honored to receive this recognition, which reflects the dedication and hard work of every member of the KK Modi Group family,” said Modi in a statement. “Our ‘people-first’ philosophy, which encompasses all stakeholders of our group companies, remains central to our mission of nation-building and giving back to society. Our CSR initiatives predate their legal mandate in India and are strategically aligned with the global sustainable development goals.”
Driven by Modi’s vision, GPI’s key CSR initiatives have focused on access to safe drinking water, soil and water conservation, plantation and biodiversity, eliminating child labor, improving community health and empowering marginalized tobacco farmers in southern India. In alignment with the commitment of GPI’s partner, Philip Morris International, to good agricultural practices, GPI aims to enhance livelihoods while preserving the environment. GPI’s CSR initiatives were also given a special mention by Control Union, a globally renowned testing, inspection and certification organization.
Modi emphasized the symbiotic relationship between environmental sustainability and community welfare. “We’ve taken proactive steps to establish biodiversity parks, safeguarding and revitalizing native flora and fauna,” she said.
“I am also deeply committed to a bold initiative of large-scale plantation in a semi-arid region of Andhra Pradesh, a state in southern India. We implement check-dams, farm ponds and regular pond de-siltation to promote water conservation in the rain-starved region, enabling farmers to access a secondary water source for cultivating additional crops. By nurturing our environment, we not only preserve natural resources but also create resilient communities capable of thriving in the face of challenges.”
In addition to her dedication to farmer communities, Modi is passionate about the education and empowerment of young girls and women. Through the Khushi project, she aims to sponsor the education and vocational aspirations of rural girls nationwide.
Modi’s recent honor follows earlier recognitions such as Women Empowerment in Leadership and Outstanding Businesswoman of the Year.
May 3, 2024
KT&G Provides Water Filters to Uganda

Photo: KT&G
KT&G is providing 400 environmentally friendly water purification devices worth KRW110 million ($81,406) to 94 primary schools in Uganda. Park Hyeon-seok, KT&G’s Tanzania materials branch manager, attended a distribution ceremony on April 30 in Hoima City, at the heart of Uganda’s tobacco-growing area.
Out of approximately 49.9 million nationals, 9.2 million lack access to safe drinking water, according to According to Uganda’s Water Environment Authority. This contributes to the spread of waterborne diseases such as cholera, and typhoid fever, leading to high infant mortality rates and social issues.
The gravity-fed filtration devices supplied by KT&G will not only address Uganda’s drinking water hygiene issues but also replace the traditional water purification methods that involve boiling water using wood and charcoal, thereby saving the equivalent of up to 3,500 tons annually in carbon emissions.
Exporting to more than 130 countries, KT&G says its tries to help solve various social issues in countries where it operates, especially in developing nations. In 2021, KT&G also supported a Tanzanian primary school by providing 1,300 water purification units. Additionally, the company has implemented CSR activities tailored to the specific conditions of various countries. These initiatives include supporting vocational training centers in Indonesia, establishing agroforestry education centers in Mongolia, and constructing schools in Laos.
“We hope that this water purification support will help improve the sanitary conditions in Uganda,” said Shim Young-Ah, director of KT&G’s ESG management office, in a statement. “As a global corporate citizen, we will continue to focus on and fulfill our social responsibilities to countries in need.”
May 3, 2024
Suppliers to Prioritize Compliance: Zhao

Photo: chaylek
Compliance is the bottom line of business, according to Everest Zhao, co-founder and CEO of the ICCPP group, a leading vaping product supplier in China.
In a conversation with U.K. Vaping Industry Association (UKVIA) Director General John Dunne, reported on the UKVIA’s website, Zhao said that compliance represents a risk when mishandled but an opportunity when taken seriously.
China’s e-cigarette exports reached $11 billion in 2023, with exports increasing by 12.5 percent annually, according to customs statistics cited by the UKVIA. However, data disclosed in the annual reports of listed companies, suggests that this growth rate may not be sustainable and the industry may face more intense challenges and uncertainties in the future.
Everest said technology and innovation would continue to drive the industry as they bring together knowledge from diverse fields such as industrial design, thermodynamics and chemistry.
“Only by further improving technology, increasing basic research, and enhancing innovation can companies’ product and brand power keep pace with market demand,” he said.
As the industry faces increasingly demanding and diverse consumers, along with stricter regulations aimed at protecting public health and the environment, business operators will have to put compliance at forefront of all considerations, according to Zhao.
“By complying with regulations, companies can avoid unfair competition and market monopoly and promote the healthy development of the entire industry. Compliance operations require companies to continuously develop and produce products that comply with regulations, which helps promote technological innovation and development.
“Compliance operations require companies to strengthen the protection of minors, ensure that products do not contain elements that attract minors, strengthen supervision of product sales and actively protect the health and future of the next generation.”
May 3, 2024
Real Brands Acquires Vapor Shark Assets
Real Brands has signed a letter of intent (LOI) to acquire Vapor Shark’s assets.
Since 2010, Vapor Shark has been a pioneer in the online B2B and B2C business, developing sales channels and e-commerce back-end pick and ship capabilities able to manage regulated product distribution. It also maintains recognizable service brand reputation in the vapor markets.
“The Vapor Shark transaction brings an established brand in the vapor consumer and retail markets to Real Brands,” said Real Brands President and CEO Thom Kidrin in a statement.
“This deal will bring new distribution channels to Real Brands that would enlarge Real Brands’ existing distribution channels. This outstanding opportunity should enable Real Brands to capture market share of the tobacco and hemp vapor industry, which is expected to grow to $29.3 billion by 2029.”
Real Brands is the result of a 2020 merger with Canadian American Standard Hemp that brought together industrial scale hemp CBD oil/isolate extraction and processing, wholesaling of CBD oils and isolate, and production and sales of numerous hemp-derived CBD consumer brands of smokable, edible and topical products.

Photo: Tobacco Reporter archive
May 3, 2024
‘Quebec Lobby Groups Blind to Illicit Trade’

Photo: Thorsten
Imperial Tobacco Canada is taking anti-tobacco groups to task for their silence about the boom in illicit sales following Quebec’s ban on flavored e-cigarettes.
“You cannot claim ‘Mission Accomplished’ by simply passing regulations,” said Eric Gagnon, vice president of corporate and regulatory affairs for Imperial Tobacco Canada, in a statement. “The regulations must work. And these ones don’t. Flavored vapor products are still being sold in Quebec. The problem is that they are now being sold illegally.”
Quebec banned flavored vapes Oct. 31, 2023, following years of pressure by anti-tobacco groups. According to Imperial Tobacco Cananda, the same groups refuse to acknowledge that there is a problem with the regulations and will not call on the government to fully enforce the regulations.
“It’s time that the Coalition Quebecoise pour le controle du tabac and other so-called health groups acknowledge that there is a problem with the regulations and push to fix it,” Gagnon said. “If the real objective of the regulations was to ban flavors, where are these health groups now that flavored vapor products are being sold illegally?”
Imperial Tobacco Canada noted that some of the lobby groups have ties to the provincial government and receive funding from them.
“It is time for the public to see the real intentions behind these anti-tobacco lobby groups,” said Gagnon. “They hide behind the virtue of public health, but their recent silence demonstrates that their only real objective is going after tobacco companies, even if this means pushing consumers to illegal products.”
“It is astonishing to see that Quebec’s anti-tobacco lobbyists prefer turning a blind eye to illegal flavored vaping products rather than recognizing that this is a failed policy and working with us to demand concrete enforcement measures to Minister Dube,” said Gagnon. “This says a lot about the real intention behind the individuals leading these organizations.”
May 2, 2024
Sales Down, Profit up at Turning Point Brands
Turning Point Brands announced financial results for the first quarter ended March 31, 2024.
For the first quarter of 2024, total consolidated net sales decreased 3.9 percent to $97.1 million compared to the first quarter of 2023.
Zig-Zag products net sales increased by 11.5 percent compared to the previous year. Stoker’s products net sales increased by 8 percent compared to 2023.
Creative Distribution Solutions net sales decreased by 44.9 percent compared to the same period the previous year.
Gross profit increased 6.8 percent to $51.9 million compared to the previous year period. Net income increased 58.1 percent to $12 million. Adjusted net income increased 29.8 percent to $15.4 million. Adjusted EBITDA increased 21.6 percent to $25.3 million.
“We are encouraged by our first-quarter results,” said President and CEO Graham Purdy in a statement “We believe the execution of our strategy has Zig-Zag back on a sustainable growth trajectory; Stoker’s continued to grow and improved its market share; and the national launch of our FRE Modern Oral product is off to a good start.”
“We were encouraged by the outsized performance of the alternative channel in the quarter,” said Purdy. “Our ongoing efforts continue to demonstrate progress toward sustainably growing the Zig-Zag brand.”
The company is maintaining its previous expectation of full-year 2024 adjusted EBITDA of $95 million to $100 million.
May 2, 2024
Vector Reports Results

Photo: tippapatt I
Vector Group has reported its first-quarter 2024 results, noting that it has had continued strong earnings growth in the tobacco segment.
In the first quarter, consolidated revenues were $324.6 million, down 2.9 percent compared to the prior-year period. Tobacco segment revenues were $324.6 million, down 2.9 percent compared to the prior year.
Tobacco segment wholesale market share declined to 5.6 percent from 5.7 percent in the prior-year period, and retail market share remained at 5.8 percent, unchanged from the prior-year period.
Montego wholesale market share increased to 3.9 percent from 3.3 percent in the prior-year period, and retail market share increased to 4 percent from 3.4 percent in the prior-year period.
Reported operating income was $77.8 million, up 4.7 percent, or $3.5 million, compared to the prior-year period.
Tobacco segment operating income was $83 million, up 5.6 percent, or $4.4 million, compared to the prior-year period, primarily attributable to the continued transition of the Montego brand strategy from volume-based to income-based.
Adjusted EBITDA was $82.8 million, up 6 percent, or $4.7 million, compared to the prior year. Tobacco adjusted EBITDA was $84.4 million, up 5.5 percent, or $4.4 million, compared to the previous year.
“Vector Group delivered strong performance in the first quarter, driven by continued growth of our Montego brand,” said Howard M. Lorber, president and CEO of Vector Group, in a statement. “Our proven ability to increase Montego’s market share and profitability underscores the effectiveness of our brand strategy, market analysis, broad-based distribution and excellent retail execution. We remain confident in our ability to continue driving sustainable growth and creating long-term value for our stockholders.”
May 2, 2024
White House Asked to Reclassify Marijuana
Vapor Voice Archives
The U.S. Drug Enforcement Administration plans to reclassify marijuana as a less dangerous drug, which could have far-reaching implications for American drug policy.
The proposed measure, which is yet to be reviewed by the White House Office of Management and Budget, aims to acknowledge the medical benefits of using cannabis and recognize the fact that it is less prone to abuse in comparison to some of the most dangerous drugs in the country and reclassify cannabis as a Schedule III drug.
However, it does not seek to legalize marijuana for recreational purposes.
Five people familiar with the matter who spoke on the condition of anonymity to discuss the sensitive regulatory review confirmed the agency’s move to the AP on Tuesday. The move clears the last significant regulatory hurdle before the agency’s biggest policy change in more than 50 years can take effect.
According to the DEA, the following are examples of Schedule I drugs:

Heroin
Lysergic acid diethylamide (LSD)
Cannabis
Methamphetamine
Methaqualone (Quaalude)
Peyote
According to the National Institute for Health, California became the first State to make it illegal to possess cannabis. In the 1930s, the then U.S. Federal Bureau of Narcotics warned of the increasing abuse of cannabis, and by 1937, 23 States had criminalized possession.
By 1970, the Controlled Substances Act passed, and the Federal government categorized marijuana as a Schedule I substance.
The planned DEA rule change followed an August 2023 recommendation from the Department of Health and Human Services (HHS) that DEA reschedule marijuana from Schedule I to Schedule III. Any change to the status of marijuana via the DEA rulemaking process would not take effect immediately.
May 2, 2024

The Great Scramble

Buyers have been paying record prices to secure their shares of Brazil’s smaller-than-expected tobacco crop.

By Taco Tuinstra

On March 21, a ferocious storm tore through Brazil’s southernmost state, Rio Grande do Sul. The wind flattened numerous outdoor pavilions at the Expoagro exhibition in Rio Pardo, forcing its organizer, tobacco growers’ association Afubra, to close the event for a day and repair the damaged stands. In a more welcome development, the tempest brought relief from the heat wave that had been making life tough for those toiling in the region’s numerous fields and leaf processing facilities.

But while Expoagro reopened to large crowds and the temperature dropped to more tolerable levels in the wake of the storm, other pressures on the industry continued unabated throughout the selling season. Alliance One Brazil Leaf Production Director Samuel Streck, who has worked in the business for two decades, described this year’s crop as the most challenging in his career, and his view was echoed by many other industry veterans throughout the Brazilian tobacco sector during Tobacco Reporter’s visit to the region in March.

A significantly smaller-than-expected crop, acute labor shortages and record-high prices, along with heightened scrutiny of tobacco farming in the wake of the 10th Conference of the Parties (COP10) to the Framework Convention on Tobacco Control (FCTC), have kept the Brazilian leaf sector on its toes this year.

Low Yields, High Quality

It wasn’t supposed to be that way. When planting for the 2023-2024 crop started in May last year, the industry predicted a volume increase of about 10 percent over the previous season, when the country’s growers harvested some 605.7 million kg of all tobacco types, according to Afubra.

At first, the weather conditions appeared to validate that assessment, but then El Nino hit. The recurring weather phenomenon, which typically boosts precipitation in South America, had been anticipated but turned out much more intense than normal. From mid-July until the end of November, El Nino dumped unprecedented volumes of rain on southern Brazil, leading to flooding in lower lying areas. Accompanied by many sunless days, the wet conditions depressed yields not only in Rio Grande do Sul but also in Santa Catarina and Parana, the three southern states that together account for 98 percent of Brazil’s tobacco production. (The remaining volumes grow primarily in Bahia and are used to make cigars.)

Crop	Hectares planted	Production (million kg)	Leaf export earnings
2023	261,740	605.7	$2.66 billion
2022	246,590	560.18	$2.24 billion
2021	273,356	628.49	$1.31 billion
2020	290,397	633.02	$1.47 billion
2019	297,310	664.36	$1.99 billion
2018	297,460	685.98	$1.85 billion
2017	298,530	705.93	$1.96 billion
2016	271,070	525.22	$2.01 billion
2015	308,260	697.65	$2.06 billion
2014	323,700	731.39	$2.35 billion
2013	313,575	712.75	$3.09 billion
Sources: Afubra/SindiTabaco

Instead of a 10 percent boost, the industry was now looking at a 20 percent drop in volume from 2023. By late March, Afubra was expecting about 470 million kg of flue-cured Virginia (FCV) and roughly 40 million kg of burley.

But even as the excessive rainfall slashed yields, it worked wonders for leaf quality. Brazil’s 2024 crop boasts good color, uniformity and smoking properties, according to buyers. High oil levels give this year’s leaf a better visual appearance than in 2023. What in the previous year was predominantly light orange to orange is this year orange to deep orange, observed Kohltrade in a recent crop report. “It’s perfect, in my opinion,” said Kohltrade Account Executive Simone Velasques.

And it’s not just looks that set this crop apart; the tobacco smokes exceptionally well, according to Eduardo Renner, president and CEO of CTA-Continental. “That’s also the feedback we are getting from customers,” he said. On the flipside, the rain also suppressed nicotine levels in this year’s tobacco. According to Jay Barker of YTL, the excess rainfall has resulted in below-average chemistries across the board. Because the wet season followed three consecutive dry ones, the gap in nicotine levels between the current crop and the previous one is greater than normal, which may challenge some customers in creating their desired blends.

Chasing Tobacco

The combination of low volume and high quality, along with a persisting post-Covid-19 tobacco shortage at the global level, sparked a scramble among tobacco companies in Brazil to secure their requirements. As a producer of sought-after flavor tobacco, Brazil has only two true competitors on the world market—Zimbabwe and the United States. Zimbabwe, where El Nino brought drought instead of rain, is also looking at a smaller crop this year (albeit from a record volume in 2023), according to that country’s Tobacco Industry and Marketing Board. United States FCV production, meanwhile, has been stable for three years at just below 140 million kg, TMA figures suggest.

The shortage has been aggravated by the fact that last year some customers didn’t buy everything they needed because they were expecting cheaper tobacco this year. Coming out of the pandemic, many customers adopted a wait-and-see approach, carefully managing their stocks to avoid buying at high prices. Now, with inventories running out, those who didn’t buy last year had to buy this year.

According to local traders, Brazil’s leading tobacco buyers alone needed more leaf than the entire volume that was expected to come to the country’s market in 2024. Throughout the season, the vertically integrated companies—BAT, Philip Morris International, Japan Tobacco International and China Tobacco—were buying far above list prices, paying top rates for all grades and leaving independent traders with no choice but to follow their lead.

The result has been an unprecedented escalation of leaf prices and an acceleration of deliveries. In mid-March, farmers were receiving up to $5.50 per kilogram of green tobacco, according to Kohltrade. For processed leaf, customers were paying up to $9.50 for grades that cost perhaps $5 only three years ago. “Prices are up, up, up,” observed Afubra President Marcilio Drescher.

Daison A. Kohl, who grows 2.7 hectares of tobacco in Vale do Sol, said he has never in his time on the farm witnessed such high prices and such fierce competition. Unlike many of his neighbors, Kohl contracts only with one buyer. Yet throughout the buying season, his phone rang nearly daily with representatives from other companies asking him to sell his leaf to them instead.

Kohl had to disappoint them all. “It doesn’t matter how much they offer; the tobacco is just not there,” he said. Merchants have been telling their customers a similar story. Whereas in a more typical year, they may exaggerate and say, “there is no tobacco” as a price negotiation tactic, this season it is simply a statement of fact.

The scramble for tobacco has also greatly accelerated the purchasing process, leaving some receiving stations struggling to keep up with the influx of leaf. At the time of Tobacco Reporter’s visit, leaf merchants were expecting farmers to run out of tobacco by the end of April—two months earlier than in 2023. “Customers who come late to Brazil may not find what they are looking for,” warned Velasques.

Labor Scarcity

For the growers, the 2024 marketing season has been a mixed bag. Even with record per-kilo prices, the additional income may not make up for the reduced weight that they are bringing to market, according to Afubra. Kohl, who suffered a 26 percent drop in yield from last year, said that as long as the companies continue paying above list prices, his operation will remain profitable this year. “But if they resort to paying list prices, it will be a problem,” he said.

While the cost of inputs such as fertilizer have been coming down from their Covid-19-induced and Ukraine war-induced spikes, a long-running shortage of labor has worsened in recent years, impacting both farmers and tobacco factories. But whereas tobacco buyers can mechanize operations such as rack loading and stripping, farmers have fewer options. With an average property size of 10.5 ha and an average area devoted to tobacco of only 3.29 ha, according to Afubra, the typical tobacco farm in southern Brazil is simply too small to justify the investment in equipment. What’s more, many of the tobacco growing activities lend themselves poorly to mechanization. There are no machines for delicate tasks such as sucker control and topping, for example.

Meanwhile, aware of their growing scarcity, farmhands have started driving harder bargains. In Vale do Sol, they have organized themselves in collectives, forcing farmers to negotiate with groups instead of individuals, according to Kohl. To guarantee a group’s labor throughout the growing season, he must pay a premium on top of the already inflated salaries.

Determined to control their cost of production, Kohl and his wife, Solange, carry out many of the tobacco farm activities, including land preparation, themselves. They hire labor for the first, second and third reapings, when the leaves are still thin and easily damaged and speed is of the essence. “If we don’t harvest quickly during that time, we will lose quality,” said Kohl. From the fourth reaping onward, the tobacco is thicker and less fragile, allowing the Kohls to harvest by themselves and save money on labor.

Their workload has been lightened a bit by a recent switch from bundles to loose leaf. In the past, growers in Brazil would classify their tobacco according to quality and color and then tie the leaf into bundles—a laborious process that could take up to two months. As demand increased, some buyers told farmers to skip this step and deliver the tobacco in loose form instead. The practice spread rapidly and has now been adopted by all merchants. After drying the tobacco, the farmer can take his tobacco directly from the barn to the bale and put it on a truck, not only saving time and labor but also greatly accelerating the speed of delivery.

While some buyers at first worried about how the new practice would impact processing, those concerns turned out to be manageable. “Loose leaf is not necessarily the best way to receive tobacco in terms of the feeding table and the presentation of each grade, but we quickly realized it’s possible,” said Streck. According to Renner, the process remains the same. “You can still tip and thresh the leaf because it is straight laid.”

Farmer Succession

The Kohls are happy with the change to loose leaf, as it allows them to focus on other farm activities. As they work their fields, they are occasionally joined by their oldest son of 34, who has no interest in farming but feels a duty to help on some evenings after he’s done with his day job. Their middle son (25) by contrast “does not even want to see the tobacco,” according to Kohl, while their youngest (8) is too little to work on the farm. (Brazilian law requires tobacco workers to be at least 18 years of age, and following intense industry-led awareness campaigns, the country’s sector today is considered a role model in in eradicating child labor.)

The Kohls’ family dynamics hint at another challenge facing Brazil’s tobacco business: farmer succession. Like their counterparts around the world, many rural youngsters in Brazil aspire to work in the city, which has led to an exodus of skills and talent from the countryside. “Keiner will die Finger mehr dreckig machen”—nobody wants to soil their fingers anymore—observes Solange, who, like many people in southern Brazil, is more conversant in German than English as a foreign language.

A 2023 survey conducted by the Federal University of Rio Grande do Sul at the request of the Interstate Tobacco Industry Union (SindiTabaco), revealed that with an average monthly income of BRL11,755.30 ($2,234.75), tobacco farming families in southern Brazil are relatively well off, earning considerably more than the average Brazilian family. The Kohls, for example, live in a spacious, well-built home equipped with plenty of conveniences and some luxuries, including a small swimming pool. Within agriculture, too, the golden leaf continues to generate the best returns, according to industry sources, contradicting the narrative pushed by certain nongovernmental organizations that tobacco leaves growers in poverty.

But while the earnings from tobacco farming exceed those of other crops, the golden leaf is also more demanding. Unlike some other agricultural products, the farmer cannot just plant it and watch it grow. A good tobacco farmer, notes Kohl, must constantly keep an eye on the plants. “The weather can change things very quickly,” he said. “If rain comes, it puts the leaves on the plants and—boom—they become big overnight. And if you don’t go in and take the flowers off and the wind comes, it can topple the plants.”

With no one lined up to take over the farm, the Kohls’ tobacco volumes will disappear from Afubra’s production statistics after they retire. “We have another 10 years, and then we’ll be gone,” said Kohl. Unfortunately for tobacco buyers, their situation is not exceptional. According to the University of Rio Grande do Sul study, 27 percent of the growers in southern Brazil have no succession plan.

Acutely aware of the demographic drain, the tobacco industry has been looking for ways to keep young adults in the countryside. Originally set up by SindiTabaco and its associate companies to help combat child labor in rural Brazil, the Growing Up Right Institute (also see “Alternatives for Adolescents,” Tobacco Reporter, April 2021) now also runs programs educating young people on the verge of adulthood about the opportunities on the farm. By teaching youngsters how to optimize farm operations through technology and professional management, the institute hopes to convince them that they can live good lives in the countryside.

According to program manager Nadia Fengler Solf, the initiative has had some success. Upon graduation from the program, she said, many students have a completely new perspective on the possibilities in the countryside. Some decide to develop their family properties, investing in new technologies and diversifying their business, while others elect to pursue degrees in agriculture.

COP Fallout

But even as the industry is working to keep farmers interested in tobacco, others are campaigning to steer them away. At COP10 in Panama, delegates vowed to step up action on Articles 17 and 18 of the treaty, which call for the promotion of economic alternatives for tobacco workers and the protection of the environment and health of tobacco workers, respectively. According to a speaker at this year’s Americas Regional meeting of International Tobacco Growers’ Association in Santa Cruz do Sol, the Panama COP could be the first to have a direct impact on the farm.

SindiTabaco President Iro Schunke dismisses the talk about alternative crops in Southern Brazil as unrealistic. “If we had another crop that generates the same income, farmers would have switched long ago on their own accord,” he said. Part of the problem, he explains, is the small average size of farm properties. “To replace the money from one hectare of tobacco, you need to grow 7 hectares of soybeans or 10 hectares of maize.” The pressure for diversification, meanwhile, is unnecessary, according to Schunke. “Tobacco farmers in Brazil are diversified already,” he said. While generating between 60 percent and 70 percent of the average grower’s income, tobacco claims only 20 percent of their property, according to SindiTabaco. Part of the money earned from tobacco is used to plant supplemental crops.

“If we had another crop that generates the same Income, farmers would have swItched long ago on theIr own accord.”
Iro Schunke, president, SindiTabaco

Brazil was one of the most vocal proponents of stricter tobacco controls at COP10, a position that Schunke considers odd, given that leaf tobacco accounts for 11 percent of Rio Grande do Sul’s exports, employs more than half a million farmworkers and earned Brazil an average of more than $2 billion annually through exports over the past 10 years (see chart). Schunke attributes the government’s tough stand to pressure from nongovernmental organizations and the exclusion of tobacco stakeholders from health policy debates along with an ideological aversion to capitalism.

Some suspect the government’s position is driven partially by ignorance, with bureaucrats in faraway Brasilia unaware of how much rural communities in the south of the country depend on the golden leaf. “Although hostility against tobacco from agencies all over the globe is the new status quo and the path of least resistance, the fact is, the economic impact to the communities where tobacco is prevalent is very significant,” says Barker.

Santa Cruz do Sul Mayor Helena Hermany believes that Brazil’s national health surveillance agency, Anvisa, grossly underestimates and misrepresents the industry’s economic significance. More than 50 percent of the city’s revenue comes from tobacco, she told participants in the ITGA Americas meeting. “If tobacco does well, we all do well,” she said.

If tobacco does well, we all do well.
Helena Hermany, mayor of Santa Cruz do Sul, Rio Grande do Sul, Brazil

It terms of sustainability, the tobacco industry is also performing much better than it is given credit for. “We are doing quite well in terms of soil protection, reforestation and the prevention of child labor,” said Drescher. For example, Brazilian farmers are self-sufficient in curing energy, sourcing wood from dedicated plantations rather than indigenous trees.

According to Renner, sustainability is already an integrated part of everything the tobacco industry does. “Whatever we supply must cover these three capital letters,” he said, referring to the environmental, social and governance considerations that the abbreviation stands for. “What we do for our people, our clients, in our operations and in the communities we work with … our suppliers need to do for us.”

As they prepare for next season in the wake of this year’s short crop, industry stakeholders are keen to avoid a wild swing in the other direction. Emboldened by the high prices and keen to recover their lost volumes, many growers are likely to increase their plantings for the 2024–2025 season. Kohl, by contrast, is cautious, worrying that a surplus next year will depress prices, and he plans to plant the same hectarage as last year.

Others predict that the era of cheap Brazilian tobacco is over, not only due to demand-and-supply factors but also as a result of the considerable investments the local industry has made in sustainability. These investments should serve Brazil well as it moves into the new era, giving the country a competitive advantage against origins with less robust practices. At the same time, leaf merchants insist that the effort should be supported throughout the supply chain. ESG initiatives, after all, come at a cost that should be reflected in leaf prices. “It must be sustainable for all parties,” insisted Renner.

Taco Tuinstra is Tobacco Reporter’s editorial director.Based in Raleigh, North Carolina, USA, he coordinates the work of staff writers and contributors.On his watch, Tobacco Reporter has won several awards for editorial excellence.Since joining the magazine in 1997, Taco has visited more than 75 countries to meet industry representatives in their markets and to report tobacco news firsthand.

May 1, 2024

Japan Tobacco to Keep Russian Business

Masamichi Terabatake (Photo: JTI)
Japan Tobacco CEO Masamichi Terabatake said the company will keep its Russian business to satisfy investors following a supply chain reshape to comply with sanctions, reports the Financial Times.
According to the paper, JT is routing some business through Turkiye and has moved key personnel to Hong Kong. JT had originally said it would consider selling its Russian business following Russia’s invasion of Ukraine in 2022. Russia accounted for 20 percent of JT’s overall profits, according to Terabatake.
“If I said, for example, that we are going to quit the business, investors may face the risk of losses,” said Terabatake. “If worse comes to worst, there is even the risk of a shareholder lawsuit if we were to discontinue a business that we are able to continue.”
JT has more than 4,000 employees and four factories in Russia, one of the largest foreign companies left in the country. In 2023, JT’s overall profits were ¥482 billion ($3 billion).
“There are various things we need to be careful of from sanctions—what kind of people can be involved or not in decisionmaking, excluding people from unfriendly countries for Russia’s management … to putting people unrelated to sanctions in places such as Hong Kong,” said Terabatake on JT’s new structure following wide-ranging sanctions on Russia. “But otherwise, it’s business as usual.”
“We are making various efforts to ensure a sort of a ringfence by sending things from Turkiye, for example, since there are countries that cannot do trade with Russia,” he said.
Following the sanctions, many companies and investors left Russia. However, some have opted to stay, including Philip Morris International.
Japan has also implemented sanctions on Russia.
“It’s true that initially there was a question about reputation in regard to continuing our business, but more recently, it’s less of an issue,” said Terabatake. “There are fewer occasions where people are demanding to know why JT is continuing its business [in Russia].”
JT has not yet answered investors about how profits will get out of Russia and back to shareholders; to date, no dividends have been paid by the Russian entity from its 2022 and 2023 financial results.
Terabatake said he remains prepared to split off or sell the Russian unit “in the worst-case scenario,” but he does not believe it will be necessary under the current sanctions regime.
May 1, 2024