Category: Print Edition

The Man Behind the Plan

Anxious Jongwe Masuka
(Photo: Taco Tuinstra)
Zimbabwe’s minister of Agriculture, Anxious Jongwe Masuka, explains how the country will build a $5 billion tobacco industry by 2025.
By Taco Tuinstra
Following the resignation of Zimbabwe’s longtime president, Robert Mugabe, in late 2017, the new government invited private citizens to provide ideas on how to improve agriculture. Drawing on his extensive background in agriculture, policy and strategy, Anxious Jongwe Masuka wrote a letter in which he detailed the steps that he believed would help the nation achieve a prosperous, sustainable and competitive agricultural sector.
One of the issues he mentioned was tobacco, the country’s most important agricultural export by a wide margin. Zimbabwe has the potential to generate and retain much more value from its tobacco industry than it is getting now, Masuka argued in his missive, unaware that he would soon be put in charge of the sector.
“Then, when I was appointed a minister, President Emmerson Mnangagwa handed me back my letter and said, ‘I fully agree with what you have written here, and now please go ahead and implement it,’” recalls Masuka.
Tobacco Reporter caught up with Masuka at the Ministry of Agriculture in Harare to discuss the details of what is now known as the Tobacco Value Chain Transformation Plan.
Tobacco Reporter: Please briefly sketch the economic significance of tobacco to Zimbabwe. How much of the value created is retained domestically, and why does it fall short of its potential?
Anxious Jongwe Masuka: The context of the tobacco industry in Zimbabwe is exciting, since the first tobaccos were grown by missionary priests and presented at a show in 1895. Tobacco is one of [the] great successes for the country. By 1998, 1,500 large-scale white farmers produced a record 239 million kg. At the time, only a handful of small-scale Black farmers, less than 1,000, produced the crop. Following the land reform program from 2000 onward, the demography has dramatically shifted. A new record 260 million kg was produced in the 2019/2020 season, predominantly by smallholder farmers who constitute over 85 percent of the growers.
The tobacco crop annually supports up to 160,000 households, accounts for more than 50 percent of agricultural exports and contributes 25 percent to agriculture GDP.
Tobacco production is now a catalyst for accelerated rural development. Tobacco is grown predominantly by smallholder farmers, who constitute 85 percent of producers. Tobacco supports, directly and indirectly, 10 percent of Zimbabwe’s population (1.5 million).
Some 98 percent of tobacco is exported in a semi-processed form. However, according to the Reserve Bank of Zimbabwe, only 12.5 percent of total exports is the net benefit after payment of external loan obligations by tobacco merchants.
Zimbabwe produces 6 percent of the world’s tobacco. The global tobacco market is estimated at US$850 billion, and 6 percent of the value translates to $51 billion of the global market value of tobacco. In 2020, Zimbabwe produced and exported over 200 million kg of tobacco worth only $991 million, so clearly there is scope for massive value retention in the country.
This is the basis for the Tobacco Transformation Plan, an idea I floated to the president in 2018 when I was still in the private sector and before being appointed minister in August 2020.
What are the Tobacco Transformation Plan’s main objectives?
From the mentioned statistics, it is clear that the industry must transform for value preservation and for sustainability. The Tobacco Value Chain Transformation Plan seeks to increase tobacco production to 300 million kg by 2025 and transform the value chain into a $5 billion industry through exports of tobacco value-added products. The broad objectives of the plan are to accelerate localization of tobacco funding; increase tobacco productivity and production from 210 million kg to 300 million kg; increase production of alternative crops and increase their contribution to farmers’ incomes; increase the level of tobacco value addition and beneficiation into cut rag and cigarettes; and ensure sustainability and traceability in the production of the crop.
Why is such a large share of cultivation currently funded by contractors? And how does the Tobacco Transformation Plan seek to remedy this situation?
Collateral, title deed-based financing collapsed in 2000, when all agricultural land became state land. By 2004, tobacco production had plummeted to 48 million kg from a high of 239 million kg. A dual marketing system was then introduced by government—a contract system was allowed, operating alongside the established auction system. Over the years, the contract system was refined to provide agronomic and farm infrastructure and equipment support in addition to inputs and working capital. Resultantly, and cumulatively, over 95 percent of production is currently funded through contract farming. This contract production financing model of tobacco requires that tobacco be prefinanced by offshore funding.
Local lending by local financial institutions for farming purposes is limited, particularly for small-scale farmers who do not meet the collateral requirements following the collapse of title-based lending in 2000.
The localization plan will involve government availing $60 million as seed finance to establish a revolving facility. The plan will operate alongside contract production of the crop. This will anchor the growth to 300 million kg.
How do you view the role of tobacco buyers in the future? Will they still be funding tobacco cultivation after the Tobacco Transformation Plan has been carried out?
Zimbabwe envisages growing the tobacco industry to a 300 million kg crop by 2025—an additional 90 million kg from the current average production of 210 million kg—so there is room for both contractors and local financing. The government is not replacing anyone in the current system, especially contractors and buyers. In fact, the exact opposite—we require more contractors and more localization of financing. We envisage that contractors can operate in both systems, whether the source of financing is offshore or is local, a contractor will be required alongside some direct lending to farmers.
According to some economists, one of the reasons smallholder tobacco growers have struggled to access funding in the past was lack of titles to their lands. What is the current situation in terms of property rights? Does the Tobacco Transformation Plan deal with this issue?
Those economists are misguided. Tobacco production has reached an all-time high in the current tenure system, post-land reform. All agricultural land is vested in the state, and for the right reasons, following the land reform program. Farmers got offer letters, and now securitized A1 and A2 permits and thereafter 99-year leases. It is in this context that tobacco production has grown through strong value chain or contract-growing support.
Government is currently seized with the legal reviews to make permits and leases more attractive to financiers, so issues of collateralization, transferability and valorization are being discussed.
It is also important, for emphasis, to highlight that the Tobacco Transformation Plan is an agronomic plan, not a land reform plan.
Are you confident that Zimbabwe can sell a 300 million kg crop even as global cigarette consumption stagnates?
Zimbabwe will achieve 300 million kg of production by 2025 through increased yields and reduced post-harvest losses. Zimbabwe produces flavor-style tobacco, currently marketed to 60 countries. This style of tobacco will continue to be in demand for the foreseeable future in these countries and beyond. We are also exploring new markets to replace lost markets. Tobacco smoking is by choice, and we think many will continue to choose to smoke Zimbabwean tobacco.
Tobacco cultivation has environmental impacts, such as deforestation. What measures are in place to protect the environment as the tobacco industry expands?
The targeted increase in volume to 300 million kg is not from area increase but from post-harvest loss reduction and yield increase. There is, therefore, no envisaged additional deforestation from the increased production. However, the government has created a law for tobacco farmers, so there is an afforestation levy administered by the Ministry of Environment, Climate, Tourism and Hospitality to reverse deforestation caused by the tobacco sector. The industry has a sustainable forestry association, which plants tens of thousands of eucalyptus trees annually.
Alongside this, research and development has also led to more efficient curing systems, reducing wood and coal usage from 10 kg [of tobacco] to 1 kg [of] tobacco and 6 kg [of tobacco] to 1 kg [of] tobacco, respectively, to almost 1 to 1 for coal to tobacco in current continuous curing systems. Biofuels are also promising fuel alternatives to curtail deforestation.
All contractors have now signed the sustainability code, and traceability has been heightened to ensure farmers use alternative curing fuel. Growers are also encouraged to plant 1 hectare of trees for every 7 hectares of tobacco, and seedlings are readily available.
This cocktail of measures will reduce the industry’s environmental footprint.
Please comment on the Tobacco Transformation Plan’s goal to promote alternative crops. What crops are you targeting, and how do they compare to tobacco in terms of earnings for the farmers and economic contributions to the country?
Tobacco is already grown in rotation with various crops, for example, maize, and there is also livestock grazing on rotation grass. We need to enhance these and look for alternative crops, for example, industrial hemp and cannabis. The objective is to complement tobacco, not to replace it.
In 2018, Zimbabwe legalized cannabis for medical and industrial use, with some predicting earnings on par with those of gold. How has the cannabis industry developed since 2018? What have been the major lessons of Zimbabwe’s experience with this crop to date, and what are your expectations for its future?
Zimbabwe has just legalized the production of cannabis and has issued licenses to 60 growing units. This industry is at a developmental stage, and we expect rapid growth.

The Tobacco Transformation Plan seeks the beneficiation of tobacco by encouraging value-added production. What progress has been made in this area to date? Please comment on the reports about local cigarette factories planned by Cut Rag Processors and Iranian Tobacco Co.
The environment for investment has seen much improvement, and we expect investors to take advantage of this, including Cut Rag Processors, the Iranians and many others.
What do you consider to be the greatest challenges to achieving the objectives of the Tobacco Transformation Plan? And how are you addressing those challenges?
By far the greatest threat is from the World Health Organization Framework Convention on Tobacco Control, which seeks to eliminate tobacco smoking. This will have tragic consequences for tobacco-dependent African countries such as Malawi, Tanzania, Zambia, Mozambique and Zimbabwe.
Then there are issues of adherence to sustainability and traceability and ensuring growers’ viability.
More discerning markets want their tobacco to be produced ethically and sustainably. These are legitimate concerns. We are taking this on board and going to every length to show we are producing this tobacco in a sustainable manner, eliminating child labor, traceability, harmful substances, etc.
Ultimately, growth in this industry will depend on grower viability. Due to the war between Russia and Ukraine—two major sources of raw materials for fertilizer production—and disruptions to the global supply chain, among other factors, the cost of production for tobacco [has] increased by 30 [percent] to 40 percent. Without a corresponding increase in the price, this means that farmers are squeezed and will therefore have to produce the crop more efficiently.
We must highlight also that success of the Tobacco Transformation Plan depends on a whole-of-industry approach. The government has created a tobacco working group involving all stakeholders. Every quarter, representatives of tobacco growers, labor unions, buyers, bankers and regulators meet to discuss progress of the Tobacco Transformation Plan, and we look forward to accelerating its implementation.
Have the various stakeholders generally been receptive to the Tobacco Transformation Plan?
They have been extremely receptive. The Tobacco Transformation Plan was long overdue.
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, 2023
The Pharmacology of Nicotine

Photo: Richard Villalon
The fascinating workings of a widely misunderstood chemical
By Grant Churchill
In this article, I will describe the pharmacology of nicotine. I will guide you along nicotine’s journey, starting with how it gets into a person, explain what it does once inside by interacting with specific receptors and finally, how it is inactivated and leaves.
Due to its chemical properties, nicotine can exist in two forms, depending on acidity, which controls its ability to be absorbed and, in turn, the effectiveness of delivery by different routes of administration. For example, certain forms of smoked tobacco must be inhaled to absorb nicotine, such as cigarettes, whereas others, such as cigar and pipe tobacco, are not inhaled but nicotine is still absorbed.
It might be useful for the reader to know where I’m coming from in writing this article. I’ve got a professional interest in how drugs work as I do research and teach in this area and find the pharmacology of nicotine fascinating and convey this to medical students. I’ve also got a personal interest as both my parents smoked and died from cancer. So, I wonder if vapes were available 40 years ago, would my parents still be alive? And now, should I be concerned that my adult son is vaping?
Routes and Rates
I’ll now describe in more detail how nicotine gets into the body and then the brain. This depends on the fascinating interplay between the route of administration and the chemical formulation, for example, free base or salt of nicotine. Regarding the route of administration, one can have an intuitive and qualitative understanding by considering the number of barriers and distance from the site of application to the brain.
When inhaled, nicotine has a short journey with few barriers as it is absorbed into the oxygenated arterial blood and goes from the heart to the brain within 10 seconds.
When swallowed, nicotine has a much longer journey with several barriers as it has to make its way through the stomach on to the small intestine before it can be absorbed into the bloodstream. Then it is in the deoxygenated venous blood that goes to the liver, then through veins to the heart, then through the lungs, where it finally meets the starting point for the inhaled nicotine. Importantly, the liver acts as a paper shredder for drugs and metabolizes them before they are delivered to the rest of the body.
When applied by a patch, the skin provides an additional barrier before nicotine can enter the bloodstream. Surprisingly, an intravenous injection of nicotine results in a slower route to the brain than inhalation.
For the intuitive understanding of the routes and rates, one can think about the physiological role of each system. The job of the lungs is to absorb large amounts of oxygen and quickly deliver it to the brain, the importance of which is driven home by considering that consciousness is lost within tens of seconds if inhibited. In contrast, the job of the gastrointestinal tract is to absorb food for energy, which is not needed at the pace of oxygen. Moreover, the job of the liver has evolved to protect us from the remarkably diverse and potentially harmful chemicals we consume in our diets, and in this regard, a drug is just another nonfood or non-nutrient to be inactivated and removed.
The uptake of nicotine can be more precisely studied quantitatively by monitoring nicotine in the blood and graphing this over time. This reveals an initial increase, a peak and then a tapering off, and numbers can be put to the time and concentration at the peak and the area under the curve. The hit comes from a combination of the speed of the peak and the maximum concentration, and the craving comes from when the concentration falls below a critical activity threshold. The different routes of administration show characteristic concentration over time profiles, with inhaled nicotine showing a fast peak within minutes whereas a patch-delivered nicotine shows a slow increase, taking an hour to peak. This has implications in the user experience and the success of nicotine-replacement therapies for tobacco harm reduction. The rate of decrease in nicotine concentration is similar for all routes of administration due to the same elimination mechanisms: a combination of metabolism by the liver and excretion by the kidney into the urine.
Crossing Barriers
The chemical formulation of nicotine as a salt or free base has a major impact on its uptake into the body as only the latter gets in. The chemical basis of this can be understood by considering a vinaigrette, which forms two layers, with the oil floating on a layer of vinegar and table salt (sodium chloride) dissolving only in the vinegar. This demonstrates that molecules can be watery or oily and only mix with their own kind, as summed up by the adage that oil and water don’t mix. Bringing this back to biology, the barriers to uptake of nicotine are cells that form layers like brick walls to separate the contents of our gastrointestinal tract from blood and blood from the organs. The cell’s barrier is its surface membrane called a bilayer, which is an inside out soap bubble with a watery surface and an oily interior forming the barrier. A water-loving nicotine salt cannot cross the oily interior whereas the oily free base of nicotine easily crosses.
The ability of nicotine free base to easily cross cell membranes is the mechanistic explanation of why nicotine can be absorbed from pipe and cigar smoke held in the mouth whereas cigarette smoke must be inhaled. The processing of the tobacco alters the chemical composition and acidity, resulting in cigarette flue-cured tobacco being acidic with nicotine salt whereas air-cured pipe tobacco is alkaline with nicotine free base. For a fuller explanation, we must again consider how chemistry interacts with biology. Smoke from acidic tobacco (nicotine salt) is less harsh and irritating and can be inhaled deeply into the lungs, where the large surface area (approximately the size of a tennis court) compensates for the inability of the salt to cross membranes.
Nicotine is always present in both forms, and the acidity controls the relative amounts of salt to free base with only a tenth of a percent in cigarette smoke being the free base compared to 50 percent in pipe smoke.
The trade-offs between the amount of nicotine that is bioavailable and how deeply it can be inhaled to take advantage of the large surface area of the lungs can also explain the nicotine salt craze in vapes. Nicotine salt formed by adding benzoic acid leads to a “smooth” taste, enabling deep inhalation of higher concentrations of nicotine.
How it Works Inside
Now that nicotine is in the body, I’ll describe its effects and how it is active. Nicotine affects cognition, body function and mood. The effects of nicotine on cognition relate to attention and memory and it has been suggested to be a “work” drug as opposed to what most of society would think of as a recreational or “fun” drug. The effects of nicotine on body function mostly relate to heart rate and blood pressure. The effects of nicotine on mood are relaxation and euphoria, arguably two of its major effects as nicotine stimulates a reward pathway in our brains the causes one brain region to stimulate other regions involved in emotion by releasing the neurotransmitter dopamine. Neurotransmitters are chemical messengers that enable communication between the brain cells termed neurons. Very generally, dopamine signals reward or the anticipation of reward—think sex, drugs and rock ’n’ roll, and these days, smartphones—which leads to pleasure and risk of dependence. Nicotine itself acts by mimicking the neurotransmitter acetylcholine, which is involved in learning, memory and attention, which fits with its subjective effects mentioned above.
Remarkably, all the diverse actions of nicotine arise from it acting on the same pharmacological target: the nicotinic acetylcholine receptor. This receptor spans the surface membrane of a cell and acts as a gated pore that allows ions such as sodium to flow through and trigger a wave of voltage change that sweeps from one end of the cell to the other. The binding of acetylcholine, or nicotine, results in opening and turning on the signal—but with prolonged presence, the gate on the pore jams shut in what is termed “desensitization.”
So, nicotine has time-dependent effects: Over a period of minutes, the nicotinic acetylcholine receptors open and release dopamine, but after several hours in the presence of nicotine, many of the receptors desensitize, dopamine levels fall, and more nicotine is required to return to the higher level of dopamine. Over a period of weeks, the neuron responds by increasing the number of nicotinic acetylcholine receptors, but most are desensitized, and if nicotine is no longer present, dopamine levels fall, giving rise to physiological withdrawal and addiction. Addiction at the molecular level is related to the structure of the nicotinic acetylcholine receptor, which is made up of five cylindrical subunits arranged side by side in a circle to form the pore. Each subunit is given a Greek letter designation, and in a mouse model, addiction relates to the presence or absence of the beta subunit.
Chemical Inactivation
The pharmacological effects of nicotine wear off with time, not from the above desensitization mechanisms but through chemical inactivation and excretion. Nicotine in the blood has a half-life, the time for a given concentration to be reduced by half, of about two hours. Nicotine declines over time through processes common to all drugs in which the underlying principle is to convert a drug from an oily compound to one that is watery. Water is watery due to it being composed of hydrogen and oxygen, therefore introducing oxygen into nicotine makes it watery.
This chemical transformation occurs in the liver by the enzyme (a molecular machine) cytochrome P450, which forms the major metabolite cotinine. As cotinine has a half-life of about a day, it can be used to examine past nicotine exposure, often by health insurance companies. Cytochrome P450 is a family of enzymes, and different forms are more or less active in converting nicotine to cotinine; the specific form varies between individuals, and certain forms are more frequent in a given ethnic group. For example, a less active form of the enzyme is more prevalent in individuals with Black or Asian heritage. Cotinine or its metabolites are finally removed from the body through the action of the kidneys and excreted into the urine. Again, the effect of acidity on nicotine can be employed by acidifying the urine to increase the fraction of salt, which cannot be reabsorbed back by the body, which thereby increases nicotine excretion.
Addressing Misunderstandings
Lastly, there are many controversies surrounding nicotine based on misunderstanding, half-truths and myths. The major health consequences of smoking are due to chemicals other than nicotine produced during combustion of tobacco, so other methods of nicotine delivery provide for tobacco harm reduction. For example, the relative health harms are such that vaping is a method for smoking cessation endorsed by the National Health Service in the U.K. and promoted as such by the government based on the best current scientific evidence.
Nicotine was used as a pesticide and can be toxic, but as Paracelsus famously stated, the dose makes the poison; any chemical can be toxic, including seemingly innocuous water, or an exceptionally toxic substance such as Botox can be used safely at a lowered concentration. Nicotine may have bona fide therapeutic use beyond smoking cessation in Alzheimer’s disease, Parkinson’s disease, schizophrenia and obesity. Intriguing evidence has been published regarding all these disorders, but the studies were small, leading to equivocal results.
Larger studies are needed, but the demonization of the tobacco industry for past wrongs is tainting and hampering the ability of scientists and physicians to obtain funding and conduct large, definitive trials. Given that psychedelic drugs, which were made illegal and vilified in the 1960s, are experiencing a renaissance to treat depression and post-traumatic stress disorder, there is hope that nicotine can be separated from smoked tobacco and used or not based on the evidence.
Grant Churchill is a professor of chemical pharmacology at the University of Oxford.

May 1, 2023
The Scientific Approach

The Tobacco Research Board in Harare | Photos: Taco Tuinstra
Boosting Production Through Innovation
By Taco Tuinstra
The tobacco transformation plan aims to boost production without expanding the farmer base or laying claim to significantly more farmland (see interview with Minister of Agriculture Anxious Masuka). To help the government achieve its objectives, the Tobacco Research Board (Kutsaga) (TRB) is developing improved seed varieties, innovating to reduce post-harvest losses and creating education programs for tobacco growers.
According to TRB CEO Frank Magama, the key to sustainable growth is improving yields. Just recently, the TRB released four new flue-cured tobacco varieties developed for marginal growing areas in the south of Zimbabwe, which is dryer than the rest of the country. With traditional tobacco varieties, farmers in that region have been getting yields of about 1,100 per hectare. Magama hopes the new varieties will boost that number to 2,500 kg per hectare.
The varieties have been issued on a so-called limited-release protocol. “We allow 20 farmers to grow one hectare each so we can get more data and learn whether the new varieties are suitable,” says Magama. If, in consultation with the growers, the breeders are satisfied with the results, they will move to the next stage of the trials. In the second season of evaluation, the TRB will distribute seed for these varieties among a larger number of farmers for further testing. In addition, tobacco merchants will test-smoke cigarettes manufactured with tobacco from the new varieties to make sure they deliver the desired flavor. Altogether it will take between three years and four years from the start of the trials until the new varieties will be available to all growers in the targeted areas.

Recently, the TRB released four new flue-cured tobacco varieties developed for marginal growing areas in the south of Zimbabwe, which is dryer than the rest of the country.
Reducing Losses
The TRB is also looking at reducing post-harvest losses. According to Magama, smallholder farmers may lose up to 50 percent of their crops due to inadequate handling. “If you look in the field, it may be a 3 ton crop,” he says. “But what goes to auction is perhaps 1.5 tons.”
The problem starts before the tobacco even leaves the farm. After curing, the leaf is very brittle, and to prevent breakage while moving the leaf from the curing barn to the shed, it must be conditioned. Ideally, this is done with a misting system, but this requires piping and electricity, which are often unavailable in the rural areas. So small-scale farmers may just use boiling water, which doesn’t generate the proper mist. As a result, a needlessly high share of good tobacco ends up as scrap that may sell for perhaps $0.10 per kg—or, more likely, end up as compost.
“It’s an issue of infrastructure,” says Magama. In partnership with a tobacco equipment manufacturing company, the TRB evaluated a portable firewood steam boiler for tobacco conditioning. This portable unit can be moved from barn to barn and also to grading facilities with ease and without a need for extension pipes. “If we solve that aspects of losses, we can significantly boost yields.”

We hope that eventually hemp can be grown on tobacco farms, either as a rotation crop with tobacco or eventually as an alternative to tobacco.
Frank Magama, CEO, Tobacco Research Board
At the same time, Kutsaga is working to reduce the amount of wood required for tobacco curing and other farm activities. The shift from commercial growing (which uses mostly coal as a curing fuel) to smallholder production has put considerable pressure on Zimbabwe’s forest cover. Innovations such as the rocket barn and Kutsaga’s counter-current barn use up to 50 percent less wood than conventional barns. And while the rocket barn is comparatively expensive, Magama believes farmers can significantly reduce its cost through materials substitution, by making their own bricks, for example.
The TRB has also been distributing eucalyptus tree seedlings to farmers but with mixed success. Tobacco growers are not always keen to plant trees on land that could be used for other crops. So the board is also working with schools in rural areas. “We donate seedlings and presented it as an educational and commercial opportunity,” says Magama. Tending to the trees is light work—you will need to protect them against termites, for example—and within three years to four years, the schools will have timber that they can sell to tobacco farmers and other users. “The initiative with the schools has gotten a lot more traction than working directly with tobacco growers,” says Magama.

The TRB is building a model farm at its Kutsaga Station to teach tobacco growers good agricultural practices
Model Farm
Another way to improve tobacco yields is through education and training. This is extensively done through what Kutsaga terms tobacco improved productivity sites (TIPS), where training is done on farms in selected tobacco-growing areas. Farmers from the area are provided with all the necessary inputs and then trained year-round on these sites. The TRB is currently also building a 6 ha model farm at its Kutsaga Station to teach tobacco growers good agricultural practices: How do you properly rotate tobacco and food crops, and what else can you cultivate on your farm? “We are also doing this to prepare growers for a future with less smoking,” says Magama. Upon completion of construction of the facility, the TRB will select a grower to live and work full time on the farm with his family. Supported by the best agronomic advice, this farmer will then become a visual model for other growers to emulate.
Meanwhile, the TRB itself is adjusting to a changing market with declining cigarette consumption. Following the legalization of industrial hemp and cannabis for medicinal use in Zimbabwe in 2019, the board has set up three stations for hemp research. According to Magama, it would be relatively easy for tobacco farmers to get into hemp. “We hope that eventually hemp can be grown on tobacco farms, either as a rotation crop with tobacco or eventually as an alternative to tobacco,” he says. Kutsaga is also investigating crops such as stevia and chia.
Looking further ahead, Magama would like the TRB to venture into biopharming, using tobacco to develop compounds of value, such as pharmaceuticals or vaccines. He hopes some of the board’s current innovations will help generate money to fund the modern labs required for such endeavors. For the time being, it remains a dream only. If it becomes reality, however, it will provide an unrivaled boost to Zimbabwe’s effort to extract more value from its tobacco business.
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, 2023
The Trade’s Perceptive
The Trade’s Perspective: Leaf Merchants Urge Sustainable Growth
By Taco Tuinstra
Stakeholders in Zimbabwe’s tobacco business have generally been receptive to the Tobacco Value Chain Transformation Plan (TVCTP), which among other things aims to boost leaf production and move up the value chain (see interview with Minister of Agriculture Anxious Masuka). “The plan has some sound fundamentals,” says Mark Mason, managing director of Zimbabwe Leaf Tobacco Co., a subsidiary of Universal. “It sensibly talks about vertical growth—boosting tobacco production by improving yields and cutting losses rather than expanding hectarage or increasing the number of farmers. Those are admirable objectives.”
At the same time, the industry is counseling caution and realistic expectations. In recent years, some entrepreneurs have moved beyond Zimbabwe’s mainstay of flue-cured Virginia (FCV) production. Several companies, including Mosi Oa Tunya Cigars (see “The Smoke that Thunders,” Tobacco Reporter, June 2021), are now manufacturing cigars with locally grown tobacco. Cavendish Lloyd is experimenting with low-nicotine FCV for shisha products (see “Great Expectations,” Tobacco Reporter, May 2022). There are also several companies producing cigarettes for the local market. In October 2022, Cut Rag Processors announced it would build an $80 million cigarette factory in Harare. Iranian Tobacco Co. has expressed interest as well, though the discussions are only at an exploratory stage.

The plan sensibly talks about vertical growth—boosting tobacco production by improving yields and cutting losses rather than expanding hectarage or increasing the number of farmers.
Mark Mason, magaging director, Zimbabwe Leaf Tobacco
But while BAT and some of its smaller competitors have been happy to manufacture limited amounts of cigarettes in Zimbabwe, it’s doubtful that big players such as Philip Morris International and Japan Tobacco International will build factories in Zimbabwe. Serving global markets and headquartered in Western capitals, the multinationals are guided by purely commercial considerations and generally seek to establish their manufacturing operations in countries with smooth roads, reliable power and business-friendly legislation—areas in which Zimbabwe faces strong competition. For these and other reasons, significant local cigarette production for exports by the majors may remain a bit “pie in the sky,” according to one tobacco veteran.
The merchants, in turn, are content with their current position in the value chain, which ends after the transformation of green leaf into unmanufactured tobacco. Currently, there are three tobacco processing factories in Harare—ZLT, Mashonaland Tobacco Co. (MTC) and Tobacco Processors Zimbabwe, which is managed by Northern Tobacco. “We have no investments beyond processing,” says Rob Holmes, executive officer of the Tobacco Leaf Exporters Association of Zimbabwe (TLEAZ), which represents nine leaf dealers with lamina exports of at least 1 million kg each and accounts for 85 percent of the contracted crop. According to Holmes, moving into cigarette manufacturing would put the merchants in direct competition with their customers—a situation they are obviously keen to avoid. “So, monetary-wise, the value addition described in the plan would take place very much after our stage of the chain,” he says.

Merchants warn that, in the current market, Zimbabwe may struggle to sell 300 miillion kg.
(Photos: Taco Tuinstra)
Contracting with tens of thousands of farmers, the merchants are better positioned to help grow the crop. But here, too, they are urging caution. “In the current world market, we would struggle to sell 300 million kg,” says Holmes. “There has been a bit of an increase in the demand for our leaf from China [which purchases 40 percent of Zimbabwean volumes] but not to the extent that you can soak that up.” According to Holmes, the styles that normally go into China are unique to that market and relatively expensive. “Where do you find customers for the excess volumes of those styles?” he asks.
The demand for Zimbabwe’s prized flavor grade tobacco, too, is limited. “International customers require only so much of that style,” says Holmes. “Otherwise, you’d be getting into more filler grade tobaccos, and then you are competing purely on price whilst you’ve got cost-of-production issues.” Supply chain disruptions in the wake of Covid and the war in Ukraine have driven up the cost of inputs such as fertilizer and fuel considerably during the most recent growing season. In addition to such global factors, the Zimbabwean industry has had to cope with local cost pressures this season, such as erratic supplies of electricity and exchange rate rules that force businesses to buy Zimbabwean dollars at official rates while paying significantly higher parallel-market rates for their supplies.

Leaf merchants also want to make sure the targeted volume increases are achieved sustainably.
Leaf merchants also want to make sure the tobacco transformation targeted volume increases are achieved sustainably. “We support the government’s goals, but we need to make sure that they are aligned with customer expectations,” says Alex Tait, managing director of MTC, a subsidiary of Alliance One International. Leading cigarette manufacturers these days expect their tobacco to be produced in line with strict environmental, social and governance (ESG) criteria, which means keeping close track of agricultural practices, labor conditions and environmental impacts, among other issues.
The shift from commercial tobacco production to smallholder cultivation has put tremendous pressure on Zimbabwe’s forests. Before the land reforms at the start of the century, the bulk of Zimbabwe’s crop was produced by about 1,500 commercial farmers, who at their peak in the late 1990s brought some 239 million kg to market. Today, similar volumes are cultivated by nearly 160,000 growers, the vast majority (85 percent) of them smallholder farmers. But whereas the commercial farmers use primarily coal to cure their tobacco, the smallholders rely mostly on wood, creating a voracious demand for timber.
In a presentation to industry stakeholders, including the ministry of agriculture, which drew up the TVCTP, the tobacco industry stressed the importance of meeting ESG objectives, noting that there is no point in growing additional volumes if you cannot sell them. Failing to fulfill ESG requirements, the industry cautioned, will prompt customers to source their leaf elsewhere, leaving the Zimbabwean tobacco grower impoverished.

The trade insists the tobacco value chain transformation plan’s objectives must be consistent with customers’ ESG expectations.
To ensure sustainable growth, tobacco merchants have been developing renewable sources of curing fuel by establishing woodlots and providing farmers with seedlings. Financed by a voluntary leaf dealer contribution, the industry’s Sustainable Afforestation Association has been planting trees since 2013 and is preparing for its first harvest next season. Despite its considerable efforts, the organization still does not have enough renewable wood to cure the current crop, let alone the additional volumes described in the transformation plan.
One of the constraints, according to industry representatives, is access to land close to the tobacco growing areas, which has been mostly in state hands since the land reform program. The prime lands for timber production are in the east of the country, which means added cost for transportation. The government meanwhile collects levies from growers to invest in reforestation, although critics say it is unclear how the money is being invested.
In addition to increasing its supply of sustainable wood, the industry is working to reduce its consumption by helping farmers adopt more efficient curing systems. Innovative designs, such as the rocket barn, allow growers to reduce their wood consumption by up to 50 percent, although costs are a hurdle. At $2,000 per unit, the rocket barn is out of reach for the typical smallholder tobacco grower. The industry is also researching alternative energy sources, such as gas, biomass and briquettes, to curtail deforestation.

The opportunity for Zimbabwe to extract more value from its tobacco industry begins and ends with the ability of the farmer to make a living income.
Meanwhile, the trade is contributing to vertical growth by helping small-scale growers increase their yields. Benefiting from tailored inputs and agronomic extension services, contracted growers have in recent years increased their productivity to an average of 1,700 kg per hectare, a figure the industry hopes to drive up to 2,200 kg per hectare in the future. The national average, which includes independent growers selling at auction, is estimated at only 800 kg per hectare, however, suggesting considerable opportunity for growth.
“In well-managed contract schemes, with the right service levels, the right inputs and the right advice, you can get very good yields,” says Mason. “That needs to roll out throughout the industry. There is definitely opportunity for the newer contractors or the smaller contractors to push through better programs.”
Zimbabwe’s regulator, the Tobacco Industry and Marketing Board, is in the process of implementing a minimum input standards package recommended by the TLEAZ—not only to increase the crop size and benefit the national economy but also to improve the profitability and livelihoods of individual growers. As all stakeholders interviewed for this article acknowledged, the latter will be crucial for the success of the tobacco transformation plan. After all, the opportunity for Zimbabwe to extract more value from its tobacco industry begins and ends with the ability of the farmer to make a living income.
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, 2023
‘Not Really a Gamble’
Leaf Dealers Look Forward to Receiving a Good Quality Crop
By Taco Tuinstra
While the Tobacco Industry and Marketing Board had yet to release official figures at the time of Tobacco Reporter’s visit to Zimbabwe in early April, traders were expecting farmers to bring 230 million kg to market in the 2023 selling season. That compares with 212 million kg in 2022, which in turn was up from the two years prior.
The increase was due in part to good climate conditions despite the influence of an El Nino. The periodically recurring atmospheric phenomenon typically results in wetter than normal conditions in southern Africa from December to February. But in the event, it wasn’t all that wet.
“The crop was planted on time, and weather patterns were generally favorable,” says Alex Tait, managing director of Mashonaland Tobacco Co., a subsidiary of Alliance One International. As is the case throughout Africa, curing space proved a constraint in Zimbabwe this year. Fast ripening in some areas created some quality challenges toward the tail-end of the season, but nothing pointing to disaster. “It was a normal season,” says Tait.

Traders at the Tobacco Sales Floors in Harare
(Photos and video: Taco Tuinstra)
Zimbabwean volumes have largely recovered from the disruption that followed the government’s land reform program, which shifted the emphasis from commercial growing to small-scale farming during the 2000s and at one point saw the crop plummet to 50 million kg.
The quality produced by smallholders has also been steadily improving, thanks in part to contractors’ extensive support of their growers. This season, overall quality is fair to good, according to Mark Mason, managing director of Zimbabwe Leaf Tobacco Co. (ZLT), which is associated with Universal. “Despite the majority being smallholder, the Zimbabwean tobacco grower is a good farmer,” he says. “If they are serviced well, they produce a very acceptable crop.” In fact, Zimbabwe’s combination of climate, soils and skills means tobacco merchants have come to expect a decent crop, observes Mason. “It’s not really a gamble for us—unless the weather gets very poor,” he says.
Volumes this year were further boosted by good pricing in the 2022 marketing season, which spurred growers’ interest. What’s more, the payment modalities have recently improved, with growers receiving a higher share of their earnings in U.S. dollars as opposed to the less valuable local currency.

Meanwhile, pricing has become quite competitive in the contracting arena. “We have a situation in which more contractors are chasing fewer growers,” says Mason. “If you want to expand in this market, you have to coax a grower to come and join you. You have to argue your case, explain why he should leave X and join Y. The pricing this year will take into account some of those costs.”
Mason expects an increase of about 9 percent in the average per-kilo tobacco price this year, also as a result of the rising cost of production. The price of fertilizer, in particular, spiked in the run-up to this growing season, mostly due to the war in Ukraine, which traditionally supplied many of the raw materials needed for fertilizer production.
At the same time, erratic power supply in Zimbabwe forced commercial growers, who need electricity to operate their curing barns, to use diesel generators, which is more expensive than pulling power from the grid. The shortages were driven by low water levels in Lake Kariba, which houses a major hydroelectric power dam and is crucial to regional energy security, and maintenance at the Hwange power station. Power supply will likely remain a concern going forward, but Tait is cautiously optimistic that recent rains in the catchment areas along with progress at Hwange will help ease the shortages next season.

Despite the anticipated price hikes, exporters expect demand for Zimbabwean leaf to be firm again this season. Tait believes part of that is due to the lingering impact of Covid. “People thought that smoking would go down during the pandemic, but it actually went up,” he says. So the global crop size dipped over the past two years even as cigarette consumption increased. “Of course, there is a question about how long that situation will last,” says Tait. “Zimbabwe’s crop has gone up, as has Brazil’s, so we may see demand level out next year.”
The switch to smallholder growing has radically changed the leaf merchants’ business models. “In the past you used to go and buy what you liked and sell it; now you get a crop throw and you have to figure out how to market that effectively,” says Mason. With contracting accounting for 90 percent of Zimbabwean volumes, dealers these days operate extensive agronomic departments. ZLT alone has well over 100 on-the-ground field staff along with countless cars and motorbikes to service its growers in the countryside. The merchants have also (reluctantly) assumed the role of financiers because the new growers have no collateral with which to secure bank loans. Post land reform, all agricultural land belongs to the state in Zimbabwe.
While dealing directly with thousands of smallholders is a herculean logistical exercise with a huge impact on cost, the shift has also had an unexpected advantage for the tobacco merchants. “In a way, it’s what has allowed us to tick the right boxes because now everything is traceable,” says Tait. “The manner in which ESG [environmental, social and governance] requirements have evolved in recent years is working out for us because we are right down to the farm level to make sure that what the grower is doing is compliant.”
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, 2023
Betting on Weed

Photo: contentdealer
BAT has further increased its investments in the cannabis industry.
By Stefanie Rossel
In its endeavor to transform its business, initiated in 2020 under the slogan “A better tomorrow,” BAT is increasingly focusing on the cannabis sector to diversify beyond tobacco and nicotine. Two years after its first venture into the hemp market, the group currently has partial stakes in 13 cannabis startups, more than any other tobacco company, according to Seeking Alpha, a financial services provider.
BAT’s most recent move in this direction is a joint venture with Denver, Colorado-based cannabidiol (CBD) producer Charlotte’s Web Holdings in early April. BAT’s subsidiary AJNA Bio Sciences, a botanical drug development company focused on mental health and neurological disorders, has teamed up with Charlotte’s Web and is contributing $10 million as the joint venture’s initial investor. AJNA was co-founded and is partially owned by its president, Joel Stanley, the former CEO and chairman of Charlotte’s Web, together with other founding members of Charlotte’s Web.
The aim of the cooperation is to develop from propriety Charlotte’s Web hemp genetics a botanical drug targeting a neurological condition and pursue approval by the U.S. Food and Drug Administration. While the joint venture did not disclose the neurological condition, observers suspect that the drug is aimed at the treatment of seizure disorders. Charlotte’s Web is also the name of a hemp strain from which an oil can be made that can be used to treat Dravet syndrome and other epilepsy diseases.
The strain, which contains 17 percent CBD and 0.5 percent of the psychoactive ingredient tetrahydrocannabinol, was bred in 2011 by the Stanley brothers to treat a young girl suffering from a severe form of pediatric epilepsy that did not respond to commonly used anti-epileptic drugs. Encouraged by the patient’s positive response to their CBD oil, the brothers established a nonprofit organization to give seizure patients access to high-quality cannabis with a high CBD content. With their advocacy, they helped change laws and public perceptions relating to plant-based solutions. Nevertheless, their product did not become the first treatment derived from cannabis plants to receive FDA authorization. That honor fell to Epidiolex, which contains only CBD and was approved by the agency in 2018.
The joint venture, in which BAT holds a 20 percent stake and Charlotte’s Web and AJNA have a 40 percent stake each, will be led by representatives of all three companies. Its clinical and regulatory strategy will be led by Orrin Devinsky, who was a principal investor in the FDA approval of Epidiolex. Apart from being AJNA’s chief medical advisor, he is also the director of New York City University Langone’s Comprehensive Epilepsy Center. The joint venture wants to file an investigational new drug application and commence phase I clinical development in 2023.
In November 2022, BAT paid £48.2 million ($60.36 million) for a 19.9 percent stake in Charlotte’s Web, a leading company in hemp extract products and the only publicly traded CBD B Corp-certified company. According to its latest financial reports, Charlotte’s Web generated revenues of $74.13 million in 2022.
In mid-March, a major shareholder urged BAT to move its primary stock market listing from London to New York. About 60 percent of BAT’s profits come from the U.S. while only 1 percent is generated in the U.K. With a move to the U.S., analysts argued, the FTSE 100-listed company would not only gain an investor base with greater appreciation of reduced-risk products but also be better equipped if it wanted to venture into the cannabis markets. U.K. law prohibits a company from listing if its profits are sourced from recreational cannabis, even if they are earned in a jurisdiction where marijuana is legal. Although similar restrictions currently exist in the U.S., analysts expect these issues to be addressed in the near future.
With its recent investments, BAT continues its exploration of the cannabis business, which started in March 2021, when it acquired a minority stake in Organigram Holdings of Canada for CAD221 million ($175 million at the time). Canada legalized cannabis in October 2018. Through a number of acquisitions and organic growth, Organigram has since become the second-largest licensed cannabis producer in Canada.
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.

May 1, 2023
Incentivizing Innovation

How the EU’s ambition to overhaul its packaging legislation might impact the tobacco industry.
By George Gay
As I understand things, a human body can be composted, in those places where this practice is legal, within about 30 days. On the other hand, my experience is that some starched-based “fully compostable” packaging can take more than 600 days to break down completely. Such a difference in composting times gives pause, I think, and I have long felt that the messaging around compostable packaging could do with some fine-tuning.

So I was encouraged, at least on behalf of those living in the EU and countries that follow EU packaging rules, to see that the EU Commission, as part of its proposed overhaul of its packaging legislation, is seeking to clear up the confusion around bio-based, biodegradable and compostable plastics.

In an end-of-November press note titled “European Green Deal: Putting an end to wasteful packaging, boosting reuse and recycling,” the commission announced its proposed revision (see https://bit.ly/3F6PRfp) of the EU’s legislation on packaging and packaging waste, saying that while the production and use of bio-based, biodegradable and compostable plastics had been increasing, a number of conditions had to be met for these plastics to have positive environmental impacts rather than exacerbating plastic pollution, climate change and biodiversity loss. “The commission’s new framework clarifies in what way these plastics can be part of a sustainable future,” it added.

In my view, it is important that the proposals, which must now be considered by the European Parliament and Council, are successful in their aims. The commission says a circular economy of packaging will help decouple economic development from the use of natural resources, contribute to achieving climate neutrality by 2050 and halting biodiversity loss, and reduce the EU economy’s dependency on many materials. Specifically, it estimates that by 2030 its proposed measures would bring greenhouse gas emissions from packaging down to 43 million tons compared to 66 million tons if the legislation is not changed. (Detailed impact assessment documents can be accessed at https://bit.ly/42cYEXd.)
Impacting Industry
These proposals, which are said to be aimed at creating a level playing field of packaging that is not more trade restrictive than necessary to fulfill the environmental objectives, will impact all companies working within the EU and those selling into the region, including those working within the tobacco and nicotine industries, though some exemptions apply to small companies. The use of packaging is universal, and the materials covered by the proposals include aluminium, cardboard, ceramics, glass, metal, paper, plastic, porcelain, stoneware, textiles and wood.
But, just to be certain where the tobacco industry would stand, I wrote to the commission asking if I would be correct in assuming that all the proposals finally accepted by the parliament and council would apply to the tobacco industry, in respect of both its leaf tobacco and its product (including new-generation products) packaging.
Interestingly, the commission chose to answer a different but related question by saying, “The tobacco industry would certainly [my emphasis] not be exempt from these rules according to our proposals.” I thought this answer, apart from being a little sniffy, was interesting because it seemed to assume that, despite a history of disadvantages being heaped on tobacco industry packaging, I had been wondering whether the industry could, suddenly and miraculously, expect to be advantaged by being exempted from some of the proposed rules.
In fact, my thoughts had been going in another direction. I had been wondering whether the tobacco industry and its much put-upon consumers might be well served by being treated equally with other industries for once. As I understand it, the commission proposals, in part, are about incentivizing innovation, something the industry might want to examine.
Buying in Bulk
If the proposals applied across the board, the tobacco products industry might, for instance, be encouraged to participate in refillable initiatives, which are mentioned in the proposals as a way of reducing the use of packaging materials. It could be imagined that, under such a scheme, cigarette consumers might buy from their local store cigarettes obtained from bulk packs and taken away in reusable containers. Clearly, with the exception of the bulk packs, which would be seen only by a limited number of people, possibly mainly nonsmokers, this would put paid to the grotesque health warnings that smokers, unlike alcohol drinkers, have to endure.
I cannot imagine the tobacco industry being allowed to apply such a system given that it has in the past been dissuaded, both by external or, rather more shockingly, internal forces, from introducing environmental incentives into its packaging because of the idea that, in the mind of consumers, environmental claims equal health claims. This idea, I suspect, would be impossible to defend, but it persists.
But why should the industry not be allowed to apply such a system? Where is the moral line to be drawn here? Is it right for the commission, despite what it says, to apply exemptions to the tobacco industry? Is it defensible for the commission to hang onto these health warnings, which have dubious moral or practical underpinnings, in an attempt to dissuade smokers from continuing with their habit? Remember, to disallow such a tobacco industry initiative would, in the commission’s view, discourage the use of more environmentally friendly packaging and thereby make the world a riskier place for everybody.
Certainly, if it does decide to disadvantage the tobacco industry, it should do the same with any number of other industries, such as the automotive industry, which destroys lives in much the same way (and other ways) as the tobacco industry is said to destroy lives. Sections of the automotive industry, too, have been deceptive about the risks caused by the use of their products and, in their case, about the extent to which such use endangers the public at large rather than just the users of their products.
Action Needed
Having said that, while I do not work in packaging and cannot speak for the practicality or efficaciousness of individual proposals, it is clear to me that action needs to be taken in respect of the three stated objectives of the proposed revisions. Firstly, to prevent the generation of packaging waste by reducing it in quantity, restricting unnecessary packaging and promoting reusable and refillable packaging.
Secondly, to boost high-quality (“closed loop”) recycling by making all packaging on the EU market recyclable in an economically viable way by 2030. And thirdly, to reduce the need for primary natural resources by creating a well-functioning market for secondary raw materials and increasing the use of recycled plastics in packaging through mandatory targets.
I like the emphasis on preventing wherever possible the generation of packaging, though it is important to note the commission makes clear that packaging plays a vital role in protecting and preserving products.
I also like the commission’s emphasis on having clear and consistent labeling on every piece of packaging to indicate what it is made of and to what waste stream it should go. This is not the case currently. The commission, in its proposals, makes the point that regulatory approaches differ from one member state to another, which means that, for instance, labeling requirements differ.
One concern has to be whether the new rules can be made to work, because previous rules haven’t, at least not satisfactorily. The commission says that its directive on packaging and packaging waste (94/62/EC – PPWD), which, under the latest proposals, is due to be repealed, was a regulatory failure that cannot be remedied simply by better enforcement of the current rules. Moreover, the commission added, the available data hinted that neither measures undertaken by the member states based on the current PPWD nor those based on the ORD [2020 Own Resource Decision] or SUPD [2019 Single-Use Plastic Directive], both of which would be amended under the proposals, were sufficient to ensure that they met all the specific targets for the recycling rates set out in the PPWD.
In trying to make the proposed rules more effective, the commission is aiming for them to be bound up in a regulation rather than in a directive, which seems to be a step in the right direction. Regulations are binding legal acts that must be applied in their entirety throughout every member state whereas directives are legislative acts that set goals that all states must achieve but that allow room for individual states to devise their own laws for achieving those goals.
Finally, the press note included a couple of comments, and in part, Virginijus Sinkevicius, the EU commissioner for Environment, Oceans and Fisheries, made the point that we had all at one time or another received products that, ordered online, had arrived in excessively large boxes. I’m sure there is a lesson to be learned from this claim, but I hope that such knowledge does not lead only to the examination of packaging, which is merely a symptom of a social problem. Tracking back to the cause will show, I think, that we need to examine, too, our buying habits. For those of us lucky enough to be able to do so, we should surely try to buy less stuff and only from shops to which we can walk or cycle carrying reusable containers—including elegant cigarette cases.
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.

May 1, 2023
To Boldly Go

Photo: sharafmaksumov
Tobacco veteran Murray Prince is setting up tobacco operations in the Democratic Republic of the Congo.
By George Gay
Shortly after I had been asked to write a piece about leaf tobacco operations in Uganda and the Democratic Republic of the Congo (DRC), my daily newspaper carried, on the same page, a story on each of these countries. The stories focused on conflicts of various kinds and therefore appeared generally negative, which is not unusual for the coverage many British people would see of these two countries and, in fact, of many other African nations. There is no doubt that, seen from the outside by the person in the street, and, for some marginalized citizens, seen from the inside, the DRC and Uganda have their problems—some of them grievous and seemingly self-imposed.
But, with a few obvious exceptions, businesspeople tend to see things differently. Countries, wherever they are in the world, are seen basically as producers or markets that are more or less attractive than other countries. Conflicts comprise a negative factor when appraising a country, but they are not seen as barriers, providing those conflicts do not impinge directly and oppressively on business interests.
Such an approach can seem to be unethical, but, in one way at least, it can be seen to be the exact opposite. Shifting the focus back to Africa, businesses working within the leaf tobacco industry have been generally good at taking a practical approach and building operations, including, importantly, livelihoods, in places where others might fear to tread.
And so it is that Murray Prince, an experienced Africa-tobacco hand, is in the process of setting up and registering Market Link Services, through which he aims to coordinate various leaf operations in East Africa and the DRC, where he is working with Idi Taban, a businessman based in Kampala, Uganda, whose interests include a tobacco procurement and trading operation in the DRC: GGLC. Taban’s Uganda-based company, KKT, has interests, too, in transport, property and regional trading, and the plan, still being finalized, would see Taban retain overall control of his tobacco business in the DRC while handing over operational control and the day-to-day running of it to Prince.
In this role, Prince would manage all stages of GGLC’s DRC tobacco operations, including leaf production and procurement; he would oversee operations in Uganda, where the DRC tobacco would be processed and packed before being exported; and he would be responsible for marketing, sales and communications.
The Formula

Businesses in the leaf tobacco industry have been generally good at building operations and livelihoods in places where others might fear to tread. | Photo: Francesca Volpi
The systems necessary to make all this transparent and workable have been put in place during the past 12 months, but, even still, Prince has no illusions about the challenges involved in operating in the DRC and, indeed, readily admits that his previous time there as a trader involved in production and procurement, from 2009 to 2012, was not easy and ultimately ended in failure. Nevertheless, failure is a form of experience that can be turned around, and he is up for the challenge, telling me that part of his role would require him to anticipate the risks and disruptions that, without early interventions, could cause operational challenges.
On the positive side, he has long experience in various African countries, which means, he says, that he is familiar with the strengths, weaknesses and sensitivities of these markets and that he has a “formula” for what needs to be done—by all participating parties—to make a success of the entire operation. His expertise, however, is in two broad areas, one of which encompasses sales, marketing and exports while the other comprises the skills, including those in specialized project development, management and supporting roles, required to set up new projects.
Originally from Zimbabwe, Prince started in the leaf trade in Malawi with Limbe Leaf, which later became part of Universal, before returning to Zimbabwe to work with Standard Commercial and, later, Zimbabwe Tobacco Brokers. He was then involved in or instrumental in three startups: Tobacco Handlers Zimbabwe, which also operated in Malawi, Leaf Buyers Zimbabwe and Southern Leaf Brokers. Since 2013, he has lived in the U.K. from where he has operated a tobacco consultancy and become involved in other trade-related interests.
Building Relationships
So, what are GGLC’s aims? Well, Prince says the first aim is to maintain the stable and sustainable production and procurement system and infrastructure that, for the past 15 years, have operated to the advantage of the company, its employees and the regional community, including tobacco farmers, their employees and families, who have also benefited from additional support services. And using that production and procurement system as a base, the next aim is to establish GGLC as the reliable leaf exporting company operating in the DRC, building long-term, trusted and mutually beneficial relations with international players that recognize the potential of the country’s niche market.
That’s it in a nutshell, but the devil will be in the details. Maintaining the production and procurement system will require ensuring the smooth operation of farmer registrations, agronomy support, input availability, storage and dispersal; and leaf buying, grading and baling. Then, Prince says, to avoid disruption as the tobacco is moved to Uganda for processing, close attention will be paid to logistics, compliance and documentation appropriate for meeting obligations for both the DRC and Uganda as well as internationally.
The plan, he says, is to have, as now, the DRC tobacco processed ahead of export at a facility in Jinja, Uganda, which is run by the Nilus Group, a partnership between Premium Tobacco and Uganda Tobacco Services that between them promote Ugandan Burley and dark-fired tobacco. Once processed, the tobacco will be moved for shipping from Jinja to Mombasa, Kenya, by an independent logistics group, Agrivest Shipping.
Straightening the Hassles
To the layman, this can start to look like a lot of effort for possibly not enough reward. So why do it? After all, even the GGLC DRC target of 10 million kg green weight is a drop in the ocean set against what can be grown in Zimbabwe, where, because of the importance of the tobacco crop, the infrastructure and systems, albeit probably not perfect, have been in place and functioning for years.
So let me see if I can get this right. It is worth the effort if the tobacco fits well into a final buyer’s cigarette blend in respect of both sensory factors and cost. Therefore, once a tobacco has been found to be a right fit, and the generally flavorful tobaccos produced in Africa have been highly prized by manufacturers for decades, it all comes down to price. But there are two prices in play here: the dollar price and the hassle price. Some big players have tried their hands in the DRC and Uganda and left, some having found that the hassle price was too high. The idea is that a smaller, more flexible player with experience in negotiating the inevitable business, industry and political chicanes can straighten out those hassles, which, as mentioned above, is why Prince is getting on board.
Much of what can be said about the DRC also applies to Uganda, where tobacco has been grown since at least the 1920s when BAT was active there but where, since the departure of that company’s stabilizing influence, flue-cured operations are currently said to lack a stable and balanced market. But therein lies an opportunity. Although BAT is no longer directly involved in the Ugandan leaf tobacco market, vestiges of the production expertise it left behind are still present, and so Taban and Prince believe the time is right to grasp the opportunity of entering the market for flue-cured tobacco. Prince told me there was a circularity, almost a natural rhythm to the way that smaller producers came into and went out of operation and that he believed the time was right in the region to take advantage of the moment and engage with grower communities and government departments that were now well disposed to such an initiative.
This seems as though it could be a good assessment of the situation. According to an October 2021 story by Gilbert Mwijuke that was published in the East African newspaper, leaf tobacco production in Uganda peaked at 18 million kg in 2013, when more than 75,000 farmers were said to be engaged in the industry. Since then, however, things have fallen apart somewhat, and by 2020, less than 10 million kg was produced, apparently at least partly because of grower prices. Geoffrey Ozuma, a crop scientist at the National Agricultural Research Organization in Hoima and a former tobacco farmer, was quoted in the story as saying that many farmers had been discouraged by declining prices. When certain companies came into the market, he said, prices dropped because those companies started providing farmers with inputs but then set low prices for leaf tobacco produced with it. “That uncertainty, coupled with rising costs of production due to increasing scarcity of essential inputs such as firewood, forced many farmers to give up,” he said.
How accurate these figures are is not known, and Prince treats most of the figures available with some skepticism. FAO figures tend to suggest that—presumably total—tobacco production in Uganda has been remarkably constant in recent years: 31.688 million kg in 2017, 32.762 million kg in 2018, 31.992 million kg in 2019, 32.277 million kg in 2020 and 32.563 million kg in 2021. Meanwhile, FAO figures for the DRC have been similarly constant: 3.774 million kg in 2017, 3.655 million kg in 2018, 3.562 million kg in 2019, 3.694 million kg in 2020 and 3.667 million kg in 2021.
But I guess that historical data is perhaps not important, providing as it is only a guide to what was possible in the past under the conditions and in the environment that then pertained. What is possible in the future will depend on any number of factors that are not necessarily easy to identify at present. That’s probably why it’s necessary to have people such as Prince and Taban in place. They’ve been there before and seen the changes wrought by business, industry and political upheavals.
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.

May 1, 2023
Seeking Substitutes

Dholakia Tobacco is offering Indian smokeless tobacco products that are less hazardous than the country’s most commonly used varieties. Photos: Dholakia Tobacco
Modern oral nicotine products could help Indian consumers abandon deadly local smokeless tobacco products.
By Stefanie Rossel
When it comes to tobacco, India holds several records: It is the world’s second-largest consumer, third-largest producer and fifth-largest exporter. Its consumption pattern is also remarkable. According to the 2016–2017 Global Adult Tobacco Survey, 266.8 million adult Indians—28.6 percent of the country’s population—use tobacco in some form.
However, with 199.4 million consumers, the most used tobacco product is smokeless (SLT). Only 99.5 million Indians consume tobacco by smoking it. Of these, only 37.5 million smoke cigarettes. Most smokers prefer bidis—cheap, unfiltered cigarettes made of tobacco flakes wrapped in a tendu or temburni leaf that are even more hazardous to health than factory-made cigarettes.
India has the world’s largest number of SLT users. Unfortunately, the type of SLT that prevails here does not reside on the low end of the risk continuum like other smokeless products such as Swedish snus do. A pasteurized oral tobacco with limited negative health effects, snus has helped Sweden achieve the world’s lowest smoking prevalence. Indian SLTs, by contrasts, are considered “uniquely deadly” by experts.
Indian SLTs come in a large variety. The most commonly used variants are khaini, a mixture of tobacco and lime, and gutkha, which comprises tobacco, slaked lime, paraffin wax as well as catechu, an extract of acacia trees and crushed areca (betel) nut. Other local forms of SLTs contain mixtures of betel quid or paan masala. All are highly addictive and full of carcinogens. In addition to the typical ingredients, they can be laced with thousands of chemicals. Available for a few rupees, these SLTs are affordable for low-income groups. Like bidis, they are predominantly consumed in rural areas, where almost 70 percent of the country’s population lives. SLTs are responsible for an estimated 350,000 premature deaths annually in India.
In line with its national health policy, India aims to reduce the number of tobacco users by 30 percent by 2025. The country closely adheres to the World Health Organization’s abolitionist guidelines, but its tobacco control measures are often contradictory. Attempts to curb tobacco use have remained limited to tax hikes on cigarettes rather than bidis and a ban on e-cigarettes and heated-tobacco products. In 2012, all states banned the manufacture, sale and distribution—but not the public use—of pre-packaged gutkha under laws that defined the product as a food. Some states extended this ban to other oral tobacco products, such as paan masala. Enforcement of these bans has been weak, however.
In an interview with The Free Press Journal, Kiran Melkote of AHER, a harm reduction group, outlined the reasons for India’s ineffective tobacco control policy. “Many arms of the government work at cross purposes and implement policies that even on paper are in direct conflict with the WHO Framework Convention on Tobacco Control. The health ministry tries to implement awareness campaigns and maintain zero industry contact norms for its employees while the commerce ministry provides loans and support for tobacco cultivation and the finance ministry bans e-cigarettes and incentivizes bidi manufacturers. All of them generally ignore oral tobacco. The answer therefore lies in understanding that the strategies used in the developed world where the predominant form of tobacco is the cigarette may not really impact tobacco use in India. Here we have a larger population with different problems and an admitted inability to implement existing laws.”

The success of modern oral products in Pakistan is welcome proof that they can replace the deadlier local oral tobacco.
Samrat Chowdhery, director of the Council for Harm Reduced Alternatives
Potential Solution
Perhaps a look across the border might be useful. India’s neighbor Pakistan has a tobacco consumption profile similar to that of India. An estimated 10 million people use SLT, which represents more than 40 percent of the country’s total tobacco market. Recently, Pakistan has seen a remarkable development: In December, BAT announced that its modern oral nicotine brand Velo had achieved a monthly volume of more than 40 million pouches in the country, making it BAT’s third-largest market for nicotine pouches. Modern oral nicotine products consist of pre-portioned bags comprising nicotine applied to a carrier material. They are considered to be a more advanced, cleaner version of Swedish snus.
Could Pakistan’s experience in substituting hazardous SLT products with less harmful varieties serve as a blueprint for India? “The tobacco use patterns in both nations are similar,” says Samrat Chowdhery, director of the Council for Harm Reduced Alternatives, referring to the high share of oral tobacco use. “Nicotine pouches have not been sold on scale before in the South Asian region, hence their substitution potential for the region’s tobacco users, especially the SLT users, was not known. Their success in Pakistan is welcome proof that they can replace the deadlier local oral tobacco—though whether that is indeed happening needs to be better understood.”
Nihar Dholakia, director of next-generation products at Dholakia Tobacco, an SLT company based in Gujarat, India, has been closely monitoring the rise of the modern oral category in Pakistan. “Given that both Pakistan and India have a similar culture of using SLT products, we believe that the success of nicotine pouches in Pakistan could be replicated in India but on a much larger scale.”
In light of the Indian government’s abolitionist strategy and the competitive structure of the local SLT segment, in which two leading companies jointly hold around 40 percent of the market, less hazardous oral products in India could encounter major hurdles, according to Chowdhery. “Nicotine pouches and snus could face opposition from the SLT lobby unless they can be made to see the business potential,” he says. “It would be a major setback if the government banned safer oral nicotine products too.”
Issues are also likely to come up in terms of cultural heritage and consumer education. “Tobacco use, especially oral, has long been part of India’s cultural milieu, just like alcohol is in western nations,” says Chowdhery. “SLT is also available for cheap, and varieties vary across regions. While the social stigma around smoking is beginning to develop, none exists for oral products as there is no secondary harm. Educating users can be challenging given the number of users, with different cultural norms and languages such that it is difficult to design communications.”
“In India, the avenues available for broadly educating consumers about THR and more specifically finessing that message to SLT users may be very limited,” says Dholakia. “The process seems to be largely organic, with consumers themselves becoming aware of the harmful effects and seeking alternatives. This often involved researching THR and exploring a range of reduced-risk products available. Online resources and word of mouth play a significant role in the education process. However, to make a more substantial impact, we require greater consumer advocacy as well as government initiatives to generally raise awareness.”

We believe that the success of nicotine pouches in Pakistan could be replicated in India—but on a much larger scale.
Nihar Dholakia, director of next-generation products at Dholakia Tobacco
Treading New Paths
Despite the government’s reluctance to admit safer substitutes, not all is lost for THR in India. Dholakia and other manufacturers are beginning to look at snus and nicotine pouches. With the Paz brand, his business recently launched the first Swedish-style tobacco snus brands in India. “In fact, we operate India’s first online platform for snus,” says Dholakia. “However, we face regulatory challenges, such as the requirements of an 85 percent pictorial warning of product packaging, high taxes and restrictions on advertisement and promotion. Nevertheless, despite these obstacles, we have observed a growing trend among consumers who are actively seeking reduced-risk products as a better alternative.”
Dholakia Tobacco caters primarily to the premium SLT category. “However, considering the fact that India has over 220 million smokeless tobacco users who lack access to harm-reduced alternatives, we aspire to make our products more accessible and available to any SLT user. Therefore, we are determined to expand our reach to a broader audience in the domestic market as well through the right forms of direct-to-consumer education and word-of-mouth product awareness.”
Indian consumers have responded positively to Dholakia’s snus products, particularly after switching from traditional chewing tobacco, cigarettes or khaini. “Many customers have reported experiencing a positive change firsthand, indicating their acceptance and awareness of the harm-reduced properties of snus products,” says Dholakia. “These are some of our future ambassadors for risk-reduced products, who will quite naturally be out there to talk with other consumers about their experiences with these new products.”
The company also manufactures a filtered khaini brand, which has become popular in many Indian states recently. Filtered khaini is a modern version of khaini chewing tobacco that resembles western-style, portion pouch-packed snus but has a significantly different toxicological profile. “Traditional filter khaini available on the market is not less harmful than regular khaini,” clarifies Dholakia. “In fact, it can be thought of as a pulverized moist version of khaini packed in an oral pouch.”
Dholakia’s filtered khaini brand is not the same, he insists. “The filter tobacco products we offer are different in composition when compared to traditional filter khaini and commercially available products in India currently. It can be said it is less harmful than other filter products due to the use of low-impact base ingredients, the type of quality tobacco and the novel processes as well as our advanced approach to product integrity and testing infrastructure. As far as affordability and availability is concerned, these filter products are comparable to regular chewing tobacco and khaini products. They are available in a few states and are perceived by khaini consumers as a more sophisticated version of a mainstay khaini product.”
Dholakia Tobacco has also ventured into modern oral nicotine pouches. It was the first company in India to venture into this category. “As pioneers of modern oral nicotine pouches from India, our products are currently available only in the global markets we cater to and have not yet been launched domestically,” Dholakia says.
“However, we are considering and working toward introducing them in India as we firmly believe that they can have a positive impact on public health in the country. We are confident that Indian consumers are ready for such a product. Accessibility, awareness, the right information, a fair regulatory framework and quality control are key factors that need to be addressed for the category. Given that India is in dire need of multiple harm-reduced products, we are committed to making them available in India.”
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.

May 1, 2023
Safety Valve

Photo: Tobacco Reporter archive
Within a sensible tax regime, fine-cut tobacco works as a fender between factory-made cigarettes and the black tobacco market.
By Stefanie Rossel
In the nicotine ecosystem, fine-cut tobacco (FCT) fulfils an important function: More affordable than higher taxed factory-made cigarettes (FMC), it serves as a buffer between the latter and illicit smokes. For the past decade, however, sales of FCT have declined in line with those of FMC.
Across the European Union, home to some of the world’s leading markets for roll-your-own and make-your-own products, FCT consumption stood at 78,638 tons in 2021, down from 80,986 tons in 2020, according to the EU Commission. Germany led the European FCT market with a volume of 25,727 tons in 2021 compared with 26,328 tons in the previous year. Other major markets in 2021 were France (7,288 tons), Spain (6,219 tons), Italy (5,303 tons) and Belgium (5,036 tons). Each of them witnessed declines compared to 2020.
Due to the heterogeneous nature of the EU hand-rolling tobacco market, it is difficult to identify a unionwide FCT trend, according to Peter van der Mark, secretary general of the European Smoking Tobacco Association (ESTA). “The fine-cut tobacco market in Europe is characterized by a variety of very different markets, each with its specificities and level of maturity,” he told Tobacco Reporter in a recent conversation. “If one should, however, try and capture a general trend, I believe best is to say that FCT has been unstable with more ups and downs since we last talked than during the past 10 years during which the trend was a slow but steady decline.”
The ESTA observed that in mature FCT markets, such as the Netherlands, Germany, Belgium or France, the decline was sharper than elsewhere. Although recent economic conditions may have temporarily slowed down this decline, there is reason to believe the accelerated downward trend will continue in those markets, according to the trade group.
Van der Mark doubts that recent developments, such as the introduction of novel products such as nicotine pouches, has significantly changed the tobacco market in Europe. Meanwhile, the impact of Covid and the sanitary or economic measures to counter the pandemic depended heavily on the price levels of tobacco products.
“For example, we witnessed in many markets that FCT fully fulfilled its buffer function, especially following border closures,” says van der Mark. “In France, for instance, consumers could no longer access cheaper cross-border cigarettes or illicit ones. As a result, FCT sales went up significantly during that period, capturing consumers that otherwise do not source their tobacco on the French legal market. This, however, was very conjunctural as sales immediately reverted to ‘normal’ levels when travel restrictions were lifted. It was also not a phenomenon occurring in all member states but one linked to where an extensive parallel market existed—the higher [the typical sales in the parallel market], the more sudden was the shift toward FCT.”
Observations also confirm the buffer function of FCT in the economic crisis brought about by Russia’s invasion of Ukraine, according to van der Mark. “The downturn and inflationary period already put—and continues doing so—consumers’ disposable incomes under pressure to varying extents from one country to another,” he says. “When faced with higher budgetary constraints—and provided that FCT is taxed appropriately—consumers are more likely to switch to FCT. The alternative is that outpriced consumers source their tobacco outside of the legal domestic market. Our forecast therefore is that FCT sales will continue to slightly grow in countries where FCT taxation is not prohibitively high in comparison to cigarettes and that in other cases, consumption of nonduty-paid cigarettes will rise.”
Unintended Consequences
France provided a case study of what happens when the buffer of fine-cut tobacco is removed. A major tax hike in 2020 caused the fiscal burden on FCT to rise far more than that of cigarettes, providing a significant boost to the country’s illicit cigarette market. According to KPMG, France remains the EU’s largest illicit cigarette market, with illegal sales of 15.1 billion sticks, or 29 percent of total domestic consumption, in 2021.
“The differential is not large enough anymore to ensure FCT can be seen as a valuable legal alternative for outpriced consumers, hence the ‘new heights’ in illicit trade,” says van der Mark. “As a result, French authorities have been grappling recently with illicit factories producing cigarettes on the French territory whilst this phenomenon was initially limited to eastern and central Europe. Last year, it was reported that about 100 illicit factories were dismantled throughout the union in 2021 alone, with most of their production, cigarettes, being destined to markets such as France or the U.K.”
Encouragingly, there are signs that French authorities are starting to appreciate how their fiscal policy is impacting revenues and disrupting health objectives. “After the experience of Covid, the French Assembly made a report on the size of the parallel market,” says van der Mark. “Interestingly, the report describes nothing else but the FCT buffer function, but it has a hard time acknowledging it.”
Van der Mark expects to see a similar rise of illicit cigarettes in the U.K. The country, which is no longer an EU member, remains an important market for fine-cut tobacco. Under the cost-of-living crisis the U.K. is currently experiencing, RYO products have come to account for 46 percent of the country’s tobacco market. In mid-March 2023, the U.K. raised cigarette taxes by 10.1 percent in line with the retail price index plus an additional 2 percent, bumping the price of a pack of 20 cigarettes to more than £14 ($17.39). Duty on hand-rolling tobacco was increased by 10.1 percent plus an additional 6 percent.
“It is not the first time that U.K. authorities establish an ‘escalator’ policy like this, each time leading to increased illicit trade and increased tax gaps and usually leading to authorities halting that policy after a few years,” observes van der Mark, citing a study by London Economics commissioned by the ESTA. The country has some of the highest FCT duties in Europe. In 2004–2005, these contributed to FCT illicit trade levels of up to 62 percent, according to the report. Following increased enforcement activities and more moderate duty increases, the illicit trade in FCT dropped to 28 percent—a record low—in 2016–2017. “There is no reason to believe that this policy being a mistake in the past will not be another one now,” says van der Mark.
By contrast, Germany’s tax model has reduced smoking prevalence while containing demand for illicit products, according to van der Mark. In January 2022, the country’s Tobacco Tax Modernization Act entered into force. It includes a four-stage tax increase between 2022 and 2026. Excise on fine-cut tobacco will increase between €0.13 and €0.16 per year whereas the average tax hike for a pack of 20 factory-made cigarettes will be €0.08. According to the German Federal Office of Statistics, the volume of duty-paid FCT rose by 0.9 percent in 2022 despite the tax hike compared to the previous year while sales of FMCs decreased by 6 billion units, or 8.3 percent, during the same period.
“If we compare the tax increase on a 1 gram versus 1 stick basis, which is the approach enshrined in the excise directive, the tax differential is essentially maintained throughout the period, specifically to allow FCT to fulfill its buffer function,” says Van der Mark.

FCT sales will continue to slightly grow in countries where fine-cut tobacco taxation is not prohibitively high in comparison to cigarettes. In other cases, consumption of nonduty-paid cigarettes will rise.
Peter van der Mark, secretary general of the European Smoking Tobacco Association
A Hurdle for Exports
It remains unclear how the EU will tax FCT in the future. The European Commission failed to propose an expected update to the 2011 EU tobacco tax directive in December. Instead, leaked documents gave some indications of the commission’s intentions (see “A Blunt Tool,” Tobacco Reporter, February 2023).
Rumors suggest that the commission’s proposal sought to align the FCT minimum tax rate with that of cigarettes and that these minimum rates would be adapted to each member state’s level of affordability. “Obviously, we believe such a proposal would have severely impacted the FCT markets considering it would have forced a number of countries to ignore a tax differential above the minimum rates, leading to increases of illicit trade as was experienced in the countries that adopted such an approach, such as France, the U.K., Netherlands, Greece or Ireland,” says van der Mark.
Taxation aside, the FCT sector is still struggling with another issue: In line with the EU Tobacco Products Directive’s track-and-trace requirements, EU-made tobacco products must now carry an EU code regardless of the regulations and labeling obligations in the destination market. “If the destination market has a different and noninteroperable traceability system, this heavily disrupts production, increases cost, creates distribution hassles and as a result significantly disadvantages EU companies,” says van der Mark.
“As of May 2024, the scope of the EU traceability regime will be extended to other (niche) tobacco products. Some of them, such as pipe tobacco products, are typically manufactured in Europe and exported all over the world. At the same time, the World Health Organization Framework Convention on Tobacco Control and anti-illicit trade protocol require all parties to adopt a traceability regime but does nothing to ensure these systems are interoperable. Therefore, we do expect this issue to become more and more prominent,” says van der Mark.
In March 2023, the EU Commission published an implementation regulation amending the previous one for the functioning of the EU system. “This was obviously the opportunity to provide export products with more flexibility, but the commission refused to do so,” says van der Mark. “As you can imagine, this amended Implementing Act was developed by the commission without conducting a single evaluation before and without allowing for a discussion with the relevant stakeholders.
“Interestingly, whilst the commission always claimed that track and trace was about stopping illicit trade, the commissioner recently replied to a parliamentary question by stating that ‘the system does not provide any information on the illicit trade of these products.’ To us, this shows that the system was adopted and designed based on the assumption that the industry itself was organizing illicit trade—that policy choices were made with complete disregard for the impacts on smaller companies.”
The commission’s recent insistence that the system is not about illicit trade, says van der Mark, suggests it has realized its initial assumptions were wrong.
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.

May 1, 2023