Category: Leaf

Study Backs Tobacco Farming In Malawi
The Lilongwe tobacco auction during Tobacco Reporter’s visit in 2017
Despite the many challenges facing the industry, tobacco has a future in Malawi, reports The Nation, citing a study by the Comesa Business Council.
That is because tobacco contributes significantly to the attainment of at least eight Sustainable Development Goals (SDGs), including zero hunger, quality education, gender equality, decent work, economic growth responsible consumption and production and life on land.
Titled Tobacco Sustainability in Africa, the study found that tobacco production helps farmers get out of poverty, become more food secure send their children to school. It also ensures that both men and women participate in production and guarantees environmental conservation, among others benefits.
Tobacco production supports more than 1.7 Malawians, according to the authors. “The global drive against consumption of tobacco products has a significant impact on the sustainability of the tobacco industry,” the wrote. “This will ultimately affect the tobacco, farmers in tobacco growing countries.”
In a November 2020 statement, the Tobacco Commission, which regulates the tobacco industry, said the future of tobacco remains intact despite the challenges facing the industry.
“The country is yet to identify a competitive crop or another best alternative to tobacco,” the statement read. “Until we reach that stage where we shall have an alternative crop that will be raking in much foreign exchange as tobacco, we will still be relying on tobacco.”
Tobacco remains Malawi’s major foreign currency earner and contributes about 15 percent to the country’s gross domestic product.
The country earned $173.5 million from tobacco exports in 2020, down from $237 million in the previous season.
February 2, 2021
Tanzania Eyes New Tobacco Markets

Photo: Taco Tuinstra
The government of Tanzania wants to extend its tobacco market to the Middle East, Northern Africa and eastern Asia, reports All Africa.
The tobacco industry is the largest source of foreign currency in the country, and the minister for agriculture, Adolf Mkenda, has concerns about the current foreign buyers trying to monopolize the crop.
Mkenda stated that the government wanted to export its finest tobacco to China, Saudi Arabia, Indonesia, Algeria, Egypt and Sudan, among other countries. “The current system is not good,” he said. “Some buyers are skipping locally produced tobacco or demand to buy at a low price … they push farmers to sell their produce to Zambia. For no reason traders go to Zambia to buy the same crop they rejected in Tanzania and at a high price … this is unacceptable.”
Deputy Minister for Agriculture Hussein Bashe said global demand for tobacco declined by 5 percent. He noted, however, that tobacco production in Tanzania is expected to rise to 67,000 metric tons in 2020-2021 from 42,000 metric tons in 2019-2020. “This is due to the emergence of local buyers,” he said.
Of the cigarettes produced in Tanzania, 65 percent are exported to foreign countries.

January 27, 2021
Modi Asked to Withdraw Indian Tobacco Bill

Photo: Tobacco Reporter archive
A prominent Indian farmers group has asked Prime Minister Narendra Modi to withdraw a proposal to amend the law regarding cigarettes and other tobacco products, saying it will create hardship for tobacco growers, reports CNBC.
Proposed by the Ministry of Health, the Cigarettes and Other Tobacco Products Act (COTPA) Amendment Bill 2020 disallows retail sales of loose cigarettes, prohibits sales of tobacco products to persons below 21 years and restricts in-shop advertising and promotion, amongst other provisions.
The Federation of All India Farmer Associations (FAIFA), which represents farmers and farm workers of commercial crops across Andhra Pradesh, Telangana, Karnataka and Gujarat, said the bill will significantly boost the illicit cigarette business in India.
FAIFA President Javare Gowda said the amendments will ”terrorize retailers and traders and they would not want to engage in the sale of legal cigarettes. Criminal syndicates, he cautioned, will gain ground and flood the Indian market with illicit cigarettes.
Since these illicit cigarettes do not use tobacco produced by Indian farmers, the result would be loss of earnings and livelihood of millions of tobacco farmers who are dependent on the crop in the country, he added.
January 14, 2021
22nd Century Expands VLN Tobacco Cultivation

Photo: Matt Mullen
22nd Century Group will significantly expand its growing program for VLN reduced nicotine content tobacco based on the company’s latest sales projections. This new planting for VLN tobacco is in addition to the company’s sizeable inventory of VLN tobacco, which is earmarked for the launch and initial sales of 22nd Century’s VLN reduced nicotine content cigarettes.
22nd Century’s Modified Risk Tobacco Product (MRTP) application for VLN cigarettes is currently in the final stage of review with the U.S. Food and Drug Administration (FDA). Once authorization is granted, 22nd Century will begin marketing its VLN cigarettes, which contain 95 percent less nicotine than conventional cigarette brands.
“We are prepared to launch our VLN cigarettes within 90 days after receiving marketing authorization from the FDA,” said James A. Mish, chief executive officer of 22nd Century Group, in a statement. “There are more than 34 million smokers in the United States and research shows that a majority of these smokers are looking for alternatives.”
22^nd Century says it is also interested in licensing its technology other cigarette manufacturers to help them comply with the FDA’s plan to make all cigarettes non-addictive. “We look forward to the tobacco industry joining our efforts to truly reduce the harm caused by smoking and protect future generations from ever becoming addicted to cigarettes,” said Mish.
In partnership with select tobacco farmers, 22nd Century will plant this new VLN tobacco throughout the U.S. tobacco belt. The company’s proprietary, reduced nicotine content tobacco contains, on average, just 0.5 milligrams of nicotine per gram of tobacco, compared with conventional cigarette tobaccos which often contain 20 mg to 30 mg nicotine per gram of tobacco.
Published in 2017, the FDA’s comprehensive plan for tobacco and nicotine regulation aims to set a product standard for cigarettes that achieves “minimally or non-addictive” levels of nicotine. The FDA projects that within the first year of implementing a mandate, it will help more than five million adult smokers to quit smoking and will save more than eight million American lives by the end of the century.
January 12, 2021
Zimbabwe Earns $763 Million From Tobacco

Photo: Taco Tuinstra
Tobacco exports earned Zimbabwe $763 million in 2020, reports The Street Journal.
More value-added tobacco in the form of cut rag and cut stems were exported in 2020 compared to 2019, the Tobacco Industry and Marketing Board (TIMB) said.
Exports of byproducts increased from 36 million kg in 2019 to 43 million kg in 2020.
Despite Covid-19, Zimbabwe exported 187 million kg of tobacco, equal to the previous year’s volumes, according to the TIMB. “Global tobacco movements in the year 2020 have not been impacted significantly regardless of the global pandemic,” the TIMB said in a statement. “More value-added tobacco in the form of cut rag and cut stems have been exported this year [2020] compared to 2019. The Far-East was the top destination for Zimbabwean tobacco as 33 percent of total exports were destined for China.”
The average tobacco export price in 2020 was $4.06 per kg compared to $4.51 per kg in the same period in 2019.
Tobacco generates 30 percent of Zimbabwe’s foreign currency, bringing in more than $600 million annually.
January 7, 2021
Reinforcing Resilience

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

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

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

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

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

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

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

January 1, 2021
The Oriental Express

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

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

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

January 1, 2021
Promoting Inclusiveness

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

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

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

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

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

January 1, 2021
Rolling With the Punches

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

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

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

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

Importing leaf from certain countries had been challenging, however. “In some cases, it still is,” says Wallace. “We’ve been waiting on a container from India since June, for example. It is finally supposed to arrive in the next couple of weeks, but it should never take so long. As far as I know, most of the delay was due to Covid-19 restrictions and issues with various countries and shipping agencies. Sourcing here in the USA has remained unphased, which is really great for us since that is most of what we sell.”
For 2021, he forecasts a return to a more steady and predictable business. “I think it now more depends on the growing season, leaf quality and the overall market economics rather than outside factors such as Covid-19. Hopefully, it ends up being a good year.” —S.R.
Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.

January 1, 2021
ITGA Concludes First Online Annual Meeting

Image: ITGA
The International Tobacco Growers’ Association (ITGA) held its 35th annual general meeting online for the first time in history. This new experience presented a unique opportunity to open the session to a wider range of participants. As a result, the event attracted 174 attendees from four continents and 24 countries.
The 2020 gathering kicked off with the finance committee on Nov 18th, a closed session for ITGA members only, followed by the “issues day” on Nov 24.
The issues day was opened by Malawi’s Minister of Agriculture, Robin Lowe, who discussed the challenges and prospects facing growers in the wake of a global pandemic and deepening economic crisis. Lowe reinforced the government of Malawi’s commitment to the tobacco sector and all its stakeholders.
ITGA President Abiel Kalima Banda emphasized the resilience of the tobacco sector and the importance of collaboration throughout the supply chain, while Antonio Abrunhosa, ITGA’s CEO, stressed the mission of the association, as the only global voice of tobacco growers, to defend the growers from the effects of new regulations that are putting ever more pressure on their daily activities.
The panel comprised 14 speakers that covered a wide range of topics, including a global tobacco market overview, innovations for sustainable agriculture, social and environmental good practices.
ITGA tobacco industry expert Ivan Genov analyzed the tobacco leaf market providing the latest production data and forecasts. Despite the prevailing volume declines across multiple markets, Shane MacGuill, Euromonitor’s senior head of tobacco research, noted that the consumption of tobacco products remained stable amid the pandemic. However, the crisis could establish a new, more restrictive normal for tobacco control, he added.
MacGuill also discussed the emerging demand for new substances and the growth potential of the legal cannabis market. In relation to the increasing need to diversify, William Snell, co-director of the Kentucky agricultural leadership program highlighted opportunities in the hemp industry.
The issues day also featured representatives from major tobacco manufacturers, merchants and suppliers. Speakers included Vuk Pribic, leaf supply chain due diligence director at Japan Tobacco International; Carlos Palma, sustainable agriculture global manager at British American Tobacco; Lea Scott, vice-president of agronomy services at Universal Leaf Tobacco Co.; and Gary Foote, head of global sustainability at Alliance One International.
UNITAB Secretary General Przemyslaw Noworyta discussed the future of tobacco growing in the European Union; Heliodoro Campos Castillo, manager of the National Tobacco Fund in Colombia highlighted the tobacco-growing sector’s resilience in Colombia; and Mayiwepi Jiti, founder and president of Zimbabwe Integrated Commercial Farmers Union shared her view on the agricultural labor practices and challenges in the country.
Karima Jambulatova, executive director at ECLT Foundation, and Nadia Fengler Solf, manager at the Growing Up Right Institute addressed the problem of child labor.
Matija Zulj, CEO of AGRIVI, and Rodrigo Tissera, head of business at KILIMO, shared their visions on innovation in the tobacco sector with presentations about e-agriculture.
November 26, 2020