Category: Uncategorized

Generational Change

Photo: Universal

Human rights and the environment are at the core of Universal’s social and sustainability goals.
By Timothy S. Donahue
There are numerous moving pieces in the sustainability puzzle. Many global enterprises now see environment, social and governance (ESG) programs and sustainability issues as urgent business matters. Strong corporations realize that managing ESG programs effectively enables the company to build trust and long-term value in an ever-changing business environment.
According to experts, sustainability, as a part of a company’s ESG standards, must be a corporate strategy and is critical for a business to stay competitive.
Being an agricultural company, Universal Corp., the world’s largest supplier of leaf tobacco, must be ultra-aware of the impacts of environmental issues such as climate change and the social supply chain risks that it encounters. Universal understands the need to adapt to survive. It has been a lesson learned throughout the company’s long history.
Founded in the late 1800s, Universal incorporated in 1918 and was listed on the New York Stock Exchange in 1927. The company has survived the stock market crash of 1929, two world wars and two pandemics.
Early on, Universal’s environmental programs were traditionally focused on reducing carbon dioxide emissions centered around efficiency and cost savings. Today, those early efforts have evolved into a variety of policies and practices that are designed to enhance the resilience of Universal’s infrastructure and its supply chains.
This is now referred to as ESG, the corporate governance and investment framework. Sustainability is the relationship between a company and the environment. ESG encompasses a set of standards for Universal’s socially conscious investors to screen potential investments, including sustainability.

According to Airton Hentschke, senior vice president and chief operating officer for Universal, the company considers a science-based and evidence-based approach to its sustainability practices. Universal is concerned about climate change and how it will impact its footprint in the future.
“We have set emissions targets that were approved by the Science-Based Target Initiative, and we are in the process of formalizing our approach to reduce emissions. We are looking into the future for pathways to net-zero emissions,” he explains. “Engagement throughout the supply chain has made the most impact in reducing emissions. Engagement allows us to align expectations from our customers through to our farmers and supply chain partners.”
Hentschke says that the evidence is clear that Universal must contribute to emission reductions to build sustainability and support a thriving planet. “Universal relies on the communities we operate within and attempts to address the root causes of social and environmental issues in these communities,” says Hentschke. “We believe in being a responsible and sustainable corporate citizen and will continue to implement practices with the intention of benefitting our diverse global stakeholders.”
Challenges lie ahead. Universal operates throughout the world and impacts thousands of people every day. The company operates in more than 30 countries, employing a multicultural and multinational workforce. Universal’s global operations face unique challenges in each of their operating environments related to local social dynamics and traditions, according to Karen Hall, director of sustainability at Universal. She says that ESG is a collection of numerous programs, such as Universal’s corporate human rights policy, which extends equitable expectations to all its operations and to its suppliers.
“We support our local teams so that they can focus on their communities and supply chain and address risks and opportunities as they arise. One example is in Brazil where we needed a larger workforce than the adjacent community could fulfill, so we contracted buses to bring workers from rural regions to our operation,” Hall explains. “A risk and opportunity were addressed here. The risk was a labor shortage, and the opportunity was to engage and employ a rural workforce that would not have had access to these jobs without our support.”

Facing the Issues
Experience makes a difference. The Universal team is skilled at identifying risks and opportunities in communities where it contracts tobacco. Its farmers are the most important segment of Universal’s supply chain operations. Universal is involved in the Sustainable Tobacco Program (STP), an industry-wide initiative jointly developed by tobacco manufacturers and experts to assure standards in agricultural practices as well as environmental management and key social and human rights matters.
In 2020, the STP made changes to better address eight core issues: governance, crop, climate change, human and labor rights, livelihoods, natural habitat, soil health and water.
Universal has been supportive of the STP from the program’s inception. Lea Scott, vice president of agronomy for Universal, said the STP provides an alignment across the tobacco industry under a cohesive set of standards and best practices.
“It’s positive for all stakeholders from investors to smallholder farmers. The new program has several strengths, including aligning common goals and focusing on continuous improvement,” says Scott. “With any new program, we are working through implementation with the aim of continued improvement and transparency.”
Prior to 2020, Universal took a risk-based approach to addressing issues in its operations and supply chain. The company would implement programs that addressed mainly key risks in particular regions. Its Agricultural Labor Practices (ALP) program, for example, sets global expectations, such as no child labor, fair worker renumeration and no forced labor in the tobacco supply chain.
“In regions where a specific risk has been identified by our farmer monitoring, we tailor programs to address these risks. In the United States and Europe, for instance, we have worker interview programs to engage farm workers and monitor their treatment while in other regions we have child labor programs that focus on removing identified root causes of child labor,” says Scott. “The new STP in 2020, along with ALP, better highlights Universal’s efforts and the commitment we put into addressing the identified risks. It has also reinforced the unity and commitment within the industry to addressing human rights violations in the tobacco supply chain.”
Child labor is a major concern for Universal. Seventy percent of child labor is estimated to occur in agriculture, mainly taking place in family subsistence and commercial farming. While there have been significant advances made in tackling child labor, in recent years the progress has slowed and has been uneven across regions. According to the United Nations, the number of children in child labor has declined by an estimated 19 million since 2000.
Universal is committed to an industry that works in unity and alignment on human rights issues, including child labor, according to Hentschke. Universal, along with other major transnational tobacco companies, has been involved with the Eliminating Child Labour in Tobacco-Growing Foundation (ECLT), a Swiss-based nonprofit organization dedicated to eliminating child labor since its inception in 2000.
The ECLT focuses on regions where child labor is at higher risk for occurrence and where local stakeholders are willing to engage in programs, explained Hall. The ECLT functions as a link between industry and local stakeholders like government and nongovernmental organizations so that programs are designed in sustainable and impactful ways.
“Universal believes that children should grow and have access to educational opportunities that are not impacted by labor requirements at home,” says Hall. “While technology has been beneficial in understanding the extent of child labor, understanding root causes does more to benefit children and reduce the risk. When we understand why children work at a young age in various regions, we can address the underlying cause. For example, in Africa, we found that mothers and children in some areas had to walk a long distance for access to clean water.
“Based on a geographic information system analysis of existing boreholes and water access, we drilled and repaired boreholes to increase water accessibility. Technology helped reduce the risk of child labor, but the root cause needed to be identified for the appropriate technology to be implemented.”

Being Transparent
Universal has a variety of projects all over the world that reinforce its commitments to environmental, social and financial sustainability. Hall says programs and projects are most effective when they engage a variety of stakeholders and address motivators of an identified risk or issue.
“Effective programs not only mitigate the issue but also educate, have strong community participation and contribution and are the basis of sustainable change and improvement,” she says. “Programs with these characteristics have the potential to result in real cultural change.”
Another example of Universal’s unique commitments is its Village Savings and Loan (VSLA) project in Malawi. In this program, Universal subsidiary Limbe Leaf Tobacco Company works with an NGO to bring financial literacy to the region’s growing areas. The program focuses on teaching women how to manage money and how to invest. The VSLA addresses several social issues, including women’s empowerment, child labor and farm livelihood.
Words mean little in sustainability and other ESG goals. Without openness in failures and successes, the impact of any efforts is greatly reduced. Hall says that the key to managing ESG issues effectively is transparency. Universal uses the services of an outside law firm to conduct an independent benchmark assessment of its various compliance policies.
Scott adds that Universal’s operational and supply chain practices are routinely assessed, and its global operations work together to provide the data and resources used by third-party groups and stakeholders to verify the company’s practices. STP has also been a great resource to highlight the adequacy of Universal’s programs.
“While the tobacco industry continues to effectively work together, we are increasingly utilizing third-party assessments. For example, we are engaging NGOs to conduct Human Rights Impact Assessments to support our social programs,” Scott says. “We will utilize the results from these assessments to refine our programs and further improve our local actions as well as share this feedback with other regions in our supply chain.”
Hall says that, internally, Universal believes its ESG and sustainability goals are aligned with global best practices and meet stakeholder expectations; however, the company is always looking forward. She said that preparing for the unexpected is a necessity to ensure that in 2050, the goals that Universal is creating now will come to fruition.
“It might be costly now, but what’s the cost really going to be like in the future? And how much do we invest in people right now and [in] social programs right now?” Hall asks. “But how far will that investment take us if we don’t also do what we need to as an industry to reduce our climate impacts?”
Universal will continue to adapt to changing expectations and conditions. It is difficult to predict what will change, but if the current climate situation does not improve, Hall says the world will continue to see increasing changes to global weather patterns. Universal intends to be mindful of these changes and will use data and resources to adjust its operational programs and practices as needed.
Hall adds that the company will also build resilience through continued variety in development, agricultural practices and communications with Universal’s grower base. Farmers, Hall says, are the most important link in Universal’s supply chain, and the environment is the major concern for them.
“We will need to monitor the environmental and social situations in our supply chain and continue to have diverse global sourcing to mitigate any future unforeseen issues that may arise. We will take the lessons learned from the past century—especially the last decade—and apply them to the future,” says Hall. “No supply chain will be perfect, but Universal intends to have programs and practices in place that help us manage and mitigate risk to the benefit of our all of our stakeholders and global customers.”

Timothy Donahue is the assistant editor of Tobacco Reporter. Since joining our team in January 2013, he has become not only an expert on the traditional tobacco business but also a well-respected voice in the rapidly developing vapor industry. Tim spends much of his time on the road, attending conferences and interviewing industry representatives. His networking skills, work ethic and quick mind are valuable assets to our diverse audience.

August 1, 2022
Making a Splash

Photo: NewCo

A small water filter and a biodegradable sample bag may help reduce the environmental impact of tobacco production.
By George Gay
The U.N. Biodiversity Conference is due, Dec. 5–17, in Montreal, Canada, to convene governments from around the world to agree to a new set of goals for nature, according to the Secretariat of the Convention on Biodiversity. That is the good news, I guess. The bad news is that, in a note posted June 21 on the U.N. Environment Program website, the secretariat said that despite ongoing efforts, biodiversity was deteriorating worldwide and that this decline was projected to worsen with “business-as-usual scenarios.”
One of the concerns I have is that we seem to be piling one existential crisis on top of another. A decline in biodiversity feeds climate change and environmental damage, and climate change and environmental damage feed a decline in biodiversity. And because of this seemingly catastrophic loop, I find it’s easy to become overwhelmed by a feeling of helplessness. But there is another way of looking at things. Firstly, we can admit that we are faced with an existential crisis, and secondly, we can respond positively in any and every way possible. And, luckily, there are some seemingly modest interventions that step out of the shadow of business as usual and punch above their weight.
The idea that, in attempting to tackle the environmental crisis, we needed to look beyond the obvious, major interventions was suggested to me recently by Rainer Busch, the managing director of the tobacco dealer NewCo, in response to something I had written about deforestation being caused by tobacco farmers using wood fuel for curing tobacco. While accepting that such deforestation was a problem, he pointed out that a bigger problem was caused by the need for farmers and their families—along with many other people in less developed countries—to burn wood for other reasons, including the need to boil otherwise nonpotable water.

Starting Small
Fortunately, this domestic problem, while bigger, is potentially easier to address and is starting to be addressed in a modest way through a newly incorporated company, NewCo Pro, which was set up to focus on business opportunities that embrace positive socioeconomic initiatives outside the tobacco industry, though mostly connected with it. And one of NewCo Pro’s first initiatives has seen it partner with Sydney 905, a South Africa-based company that offers water filters.
Jose Maria Costa, the senior executive advisor at NewCo Pro, who first came across these filters, is passionate about their potential to improve the lot of people who do not have easy access to potable water. Costa, who has lived in and visited many less developed countries, told me that, notwithstanding his experience, he was horrified when he started to investigate how, in the 21st century, millions of people lived without ready access to acceptable water. It seemed impossible that so many people still lived in this way, he said.
There are a lot of water filters on the market, but Costa reckons the Sydney 905, for which NewCo Pro is the worldwide sales agent, is ideal. And it is hard to disagree. This is a robust, easy-to-use, versatile unit that is small enough to be carried in a largish pocket but with capacity enough to serve a family. It is mainly intended to be fitted to the outlet tap of a container of collected river, well or rainwater, and, using a simple gravity feed, turn about 30–35 liters of murky-looking contaminated water crystal-clear and safe each hour while retaining naturally occurring, safe minerals. But it can also be used to process mains water, where such is available, or it can be attached to a plastic bottle of water taken from a river, in which case the drinker supplies the necessary pressure simply by squeezing the bottle. It uses neither chemicals nor batteries.
As well as the Sydney 905 Filter, which uses a 0.1 micron hollow-fiber membrane that Costa expects to attract most interest, there is the Sydney 905 Purifier, which uses a 0.01 micron membrane and is therefore suitable only where mains pressure is available. The exact specifications of the two units are fully explained at www.newco-pro.com, which also provides the results of water purity tests undertaken by various official certification bodies along with some informative and entertaining videos.

Return on Investment
One of the most compelling things about the Sydney 905 filter has to be its value. While, at about $40 a unit, it would not be cheap for a financially impoverished family, there is no need to change the filter, so the unit could last for very many years without incurring any maintenance costs as long as it is regularly and conscientiously cleaned using a simple backwashing process. And while the initial outlay is not insubstantial, the payback is rapid and ongoing. One Kenyan farmer who wrote to Costa said that by using the filter, his family of 10 was saving about $60 a month because it no longer had to buy bottled water. Additionally, another savings, in costs and health, was being enjoyed because the farmer and his family were no longer losing work and school days to sickness caused by water pollution.
It is surely not beyond the bounds of possibility that these filters could be provided free of charge by major companies working closely with tobacco and other farmers or that at least these companies could provide interest-free loans to help such farmers buy them. After all, as Busch pointed out, the use of these filters can help in the fight against deforestation, and as Costa added, most tobacco companies have committed to the U.N.’s Strategic Development Goals, No.6 of which aims to provide everybody with clean water by 2030.
Things are moving. Costa said that NewCo Pro believed it was close to an agreement to start production of the filters in India, for the Indian market, and that the company had been in contact with large nongovernmental organizations, local governments and tobacco companies around the world. But progress is not what it should be, given the personal and population-wide problems caused by the lack of potable water and given that the Sydney 905 solution to the problem seems so simple but powerful. Achieving goal No.6 is going to require all hands to the pump and a willingness to step out of the shadow of business as usual since, according to the NewCo Pro website, in 2022, 844 million people lack basic water services, 2.2 billion people lack safely managed drinking water, and 3.5 million people die each year from causes linked to unsafe water.

Biodegradable Bags
Meanwhile, there is a certain irony in NewCo Pro promoting the distribution of these filters because they are made of plastic, and another NewCo project is aimed at reducing the use of plastics. But there is a clear difference here. The filter units are meant to last many years whereas the plastic NewCo is trying to eliminate is single use, such as that used for wrapping leaf tobacco samples.
Busch has been working on this project for about three or four years now, since before the formation of NewCo Pro. He started by replacing the plastic sample bags with reusable cotton bags, but while these were popular with customers up to a point, they had the disadvantages that they weren’t transparent and that they weren’t as good as plastic at retaining moisture.
What NewCo Pro is now offering is a transparent bag made from potato starch. These EU-certified and Germany-certified food grade bags are 100 percent biodegradable so that while, theoretically, they have an unlimited life under normal circumstances, they break down into compost that can be used as fertilizer within 90 days to 150 days of their coming into contact with an environment open to the elements. Busch said that farmers in Italy and Spain are already using seedbeds made from the product, which is ideal for such use and better than commercially available fertilizers, a seemingly critical factor at a time of soaring fertilizer prices.
But there is a catch. While the people on the ground who Costa talks with are enthusiastic about this biodegradable product, the message apparently is not getting back to the people who make the decisions, or those people are stuck in business-as-usual mode and are not making the decision to change from plastic to potato starch. If it is a lack of decision-making, this seems incredibly short-sighted, especially given the huge problems being caused by plastic waste and given that switching to the new type of bags would allow companies to improve the services they offer and be seen to improve those services while incurring only an immaterial increase in costs. There seems to be no reason why companies could not make the switch immediately. After all, if a relatively small leaf dealer such as NewCo can research this matter and make the change, surely others, with the research having been carried out for them, could make the switch also.
Undaunted, NewCo Pro is already researching the use of potato starch for applications that go beyond sample bags—applications such as replacing the polyliners used for packing certain lots of tobacco for particular customers or replacing the plastic polypots used in the production side of the industry. And it is willing to put companies wishing to follow its lead in touch with the suppliers of such materials. When it comes to plastics, the message from Busch and Costa is “enough is enough.”

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.

August 1, 2022
Turning Point Brands’ Sales And Profits Down

Turning Point Brands (TPB) reported net sales of $102.9 million in the second quarter ended June 30, 2022, down 16.1 percent from the comparable 2021 quarter. Net sales of new-generation products declined by 45.1 percent while gross profit decreased 14.2 percent to $51.5 million. Combined net sales for Zig-Zag and Stoker’s products demonstrated comparative resilience and decreased by 0.9 percent for the quarter.
“We are pleased with the stable performance of both the Zig-Zag and Stoker’s segments during the quarter in light of a heightened inflationary environment for our customers, with rising prices at the pump impacting consumer traffic in convenience stores,” said TPB President and CEO Yavor Efremov in a statement.
“While overall sales decreased 16 percent from the previous year, Zig-Zag and Stoker’s sales were steady despite weakness in the wraps and loose leaf subsegments. Zig-Zag maintained its leading positions in both the roll-your-own paper and cigar wraps markets while Stoker’s MST experienced accelerated share gains driven by consumer trade-down to the value category.
“Despite NewGen revenue decreasing 45 percent from last year, the segment remained relatively stable from the previous quarter and profitable as we continue to monitor FDA regulatory developments. We continued to deploy a substantial amount of our free cash flow toward share repurchases during the quarter while maintaining a strong balance sheet, providing us with optionality on further capital deployment.”
“Going forward, we maintain a favorable outlook on our underlying business and our competitive positioning. However, given the market environment during the second quarter, along with continued inflationary pressures and resulting uncertainty of consumer confidence, we feel it is prudent to adjust our outlook for the year.”

July 28, 2022
Staying the Course

Photos: KT&G

KT&G continues to make progress toward its ambition of becoming a top-tier global player.
By Stefanie Rossel
It’s an ambitious goal: By 2025, South Korea’s leading cigarette manufacturer, KT&G, wants to play in the top tier of global tobacco companies. At the time of writing, the company appeared to be well on track to achieve its ambition, weathering unprecedented macroeconomic challenges along the way.
In the first quarter of 2022, KT&G’s sales soared to krw1.4 trillion ($1.11 billion), an increase of 16.1 percent over the same period in 2021. Operating profit stood at krw333 billion, up 6.3 percent year-on-year. The double-digit growth in sales was driven by strong exports and the performance of KT&G’s overseas cigarette subsidiaries as the company concentrated on the global business arena.
KT&G sold 11.5 billion cigarettes overseas in the first quarter of 2022, a 43.8 percent increase over the same quarter last year. “Amid an easing pandemic situation, demand for cigarettes has increased in the Middle East, Asia-Pacific and Indonesia,” a KT&G spokesperson told Tobacco Reporter. “Total overseas sales—krw226.3 billion—were up 62.6 percent compared to the same quarter last year. The dramatic increase can be explained by the volume increases in high average selling price regions, such as [the] Middle East and Asia-Pacific.”
Covid-19 brought about significant challenges for KT&G. In response, many parts of the company, from daily operations to engagement with business partners, underwent major changes.
One of the most difficult challenges, according to KT&G, was to expand its global business amid a pandemic. Despite the situation, the company added 23 new export markets in 2020 alone—a remarkable accomplishment given that many countries imposed nationwide lockdowns during that year. Since face-to-face meetings with overseas business partners and physical market visits were impossible, the company had to strengthen its digital and online business model. It conducted rigorous market research on target markets and communicated with overseas business partners by utilizing digital platforms. KT&G even managed to establish a subsidiary in Taiwan in March 2021.
After experiencing the pandemic in 2020, KT&G set “resilience” as the keyword for its 2021 business management goal. “The keyword ‘resilience’ reflects our determination to not only recover from the negative impacts of Covid-19 but also leap forward and achieve greater advance amid the pandemic situation,” said KT&G’s spokesperson. “During last year, we tried to act fast and seize opportunities in the rapidly changing global economic order.”

KT&G’s ambitions to become a global top tier player are spearheaded by CEO Baek Bok-in.

Strong Growth in Indonesia
KT&G’s long-term strategy to become the fourth-largest player in the global tobacco industry is comprehensive: Next to driving business diversification and maximizing both financial and nonfinancial values, the company intends to bolster marketing capabilities by channeling more investments into distribution networks as well as the marketing infrastructure in key markets, especially in its overseas subsidiaries in Indonesia, Russia and Turkey.
The plan appears to be working out for most of its overseas operations; growth in the first quarter of 2022 came mainly from KT&G Indonesia, the country’s sixth-largest independent kretek manufacturer, previously known as Trisakti. KT&G acquired Trisakti in 2011, thereby benefitting from the kretek manufacturer’s well-established sales network.
Indonesia holds great significance for KT&G, considering its market size. To increase its presence in Indonesia, KT&G is developing its brand portfolio to better satisfy local consumers’ needs while at the same time investing in the marketing and sales infrastructure.
The U.S. turned out to be a different story, however: Instead of expanding its distribution channels as envisaged, KT&G in December 2021 announced the suspension of its U.S. business, located in Fort Worth, Texas, for an unspecified period. KT&G says it is reviewing its U.S. business amid intensifying regulations and growing competition.
According to the Korea Herald, the decision will cost the company about krw205.8 billion in lost sales, representing around 3.9 percent of KT&G’s overall sales revenue in 2021. Furthermore, the newspaper reported, mandatory tobacco escrow accounts for smoking-related legal settlements had added burdens to the already difficult business environment. A KT&G spokesperson told Tobacco Reporter that the company will offset the lost U.S. business by focusing on growth in new markets and other overseas subsidiaries.

In early 2020, KT&G and PMI entered into a three-year supply and distribution contract to commercialize KT&G’s Lil products outside of Korea.

New Lil Variant Introduced
Unlike international competitors who have suspended or discontinued their operations in Russia after that country’s invasion of Ukraine, KT&G continues to operate its cigarette manufacturing plant in the Kaluga region, located about 150 km southwest of Moscow. The site has an annual production capacity of 4.8 billion cigarettes. Among other products, it manufactures KT&G’s leading Esse brand. According to KT&G, the war has had only a limited impact on its Russian operations because the factory is geographically far removed from Ukraine. KT&G said it was keeping a close eye on the situation to ensure that local business operation and employee safety are not compromised.
The company is not present with its brands in Ukraine but markets its heated-tobacco product (HTP) Lil in the country through a partnership with Philip Morris International.
In early 2020, KT&G and PMI entered into a three-year supply and distribution contract to commercialize KT&G’s Lil products outside of Korea. Lil first launched in Russia, Ukraine and Japan—in the same year the agreement was signed. A year later, the product was commercialized in 10 more international markets. Today, the product is present in 25 markets. KT&G says it is strengthening its R&D and device technology in order to satisfy various needs of global consumers. Since 2017, it has filed over 3,000 patents related to heat-not-burn technology. With the commercialization of Lil in Europe, KT&G has stepped up its patent filings on the Old Continent as well. Last year alone, the company filed 233 patents in Europe.
One of the results of the company’s R&D efforts is Lil Hybrid EZ, which debuted in South Korea in May. Lil Hybrid EZ shares the same platform with the original Lil Hybrid. Just like the original Lil Hybrid, it features a “Smart On” system, which instantly starts heating the stick as it is inserted. The differentiator is price: Lil Hybrid EZ is offered at a more affordable price point without compromising the quality, according to KT&G.

KT&G’s Lil heat-not-burn product is currently available in 25 markets.

Increasing Domestic Share
Despite challenging times, KT&G has managed to expand into many new markets. In 2019, the company’s products were present in around 80 countries. In 2020—after the outbreak of the coronavirus—KT&G’s geographic footprint grew to cover 103 markets, many of them in Europe and Africa. Today, KT&G is present in more than 120 countries. But the company insists it is not merely looking to increase the number of export destinations. Rather, KT&G is invested in expanding sales coverage and elevating market presence in each market in a qualitative manner, according to a company spokesperson.
KT&G has also managed to strengthen its domestic leadership by expanding its brand portfolio of low-tar/low-nicotine and “smell-down” products. South Korea’s market for combustible cigarettes declined by 2.7 percent in the first quarter of 2022 compared to the same period last year due to a shift in consumer demand toward HTPs. Despite this, the company managed to grow its market share by 1.2 percent to 65.7 percent.
Amid intensifying competition in the market, KT&G says it strives to maintain its leadership position and competitiveness in the domestic market by improving its products’ quality and developing a brand portfolio that aligns with market trends. It is continuously adding new low-tar and low-nicotine, “smell-down” and super-slim variants to its main brands, Esse, Raison and Bohem.
The “smell-down” segment is typical of South Korea. KT&G has developed various technologies, such as the cigarette breath reduction technology and a “finger zone” on the tobacco rod that reduces cigarette smell on fingers. Most of the newly launched combustible products produced by KT&G and other cigarette manufacturers in Korea come with such smell-down features. The potential of such technologies overseas will depend on the regulatory and competitive environments of the target markets, according to KT&G.

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.

July 1, 2022
Craving Normalcy

Photos: Taco Tuinstra

Climate change, war and a lingering pandemic exacerbate the typical challenges presented by leaf tobacco supply and demand.
By George Gay
I have a question. Given the environmental crisis the world faces, why are the tobacco industry’s operations dominated by flue-cured tobacco varieties rather than sun-cured varieties? I mean, why cut down trees and burn them as part of the flue-curing process when it is possible to rely on the energy freely and directly available from the sun to cure tobacco? It cannot be a quality thing because whereas, for example, sun-cured classical oriental tobaccos are sublimely aromatic, flue-cured Virginia tobaccos are unremarkable at best.
Another argument that cannot be made is that the industry was not aware of the deforestation it was causing by flue-curing tobacco and therefore hasn’t had time to switch from flue-cured to sun-cured tobaccos. The issue of tobacco-driven deforestation was being widely discussed in the early 1980s and probably before that. Of course, not all flue-curing relies on burning wood, but that which doesn’t, as far as I am aware, requires, directly or indirectly, burning fossil fuels.
So what is the answer to the question posed above? I think there are probably very many answers, none of them particularly convincing, so I believe that even now efforts should be made to switch production from flue-cured varieties to sun-cured and, perhaps, air-cured varieties. And maybe this will happen, partly because of the growing alignment of environmental and health activists and arguments.
A recent report by the World Health Organization and Stopping Tobacco Organizations and Products (STOP), Talking trash: Behind the tobacco industry’s ‘green’ public relations, accuses the industry, mainly in the guise of the four major multinationals, of “greenwashing.” And though some of the report is lightweight and unconvincing, its uncomplicated messages are likely to register with a nonindustry audience. “Tobacco growing and curing are also both direct causes of deforestation,” the report says in part.
In addition, according to Natalia Pujalte writing in May in The Parliament Magazine, the EU presented in November a proposal for new regulations that would allow “only deforestation-free and legal products” to be sold on the EU market. Tobacco wasn’t mentioned in Pujalte’s piece, but with the regulations still under consideration and the EU’s aversion to all things tobacco, it is unlikely the industry will slip through the net.

The developed world is currently facing levels of inflation not seen in decades, so the entire supply chain has been suffering cost increases that are difficult to offset.

Pressing Challenges
I suspect that 99 percent of those working in the tobacco industry will disagree with my suggestion and come up with all sorts of reasons why sun-cured and air-cured tobaccos cannot be used as the main ingredients in cigarettes, at least in part because they have other things on their minds. According to a number of respondents to a Tobacco Reporter questionnaire, the leaf industry is suffering from the effects of everything from climate change to the war in Ukraine and long Covid.
Jose Maria Costa
Although Jose Maria Costa of NewCo said leaf tobacco demand from a wide range of customers was holding up well, he positioned a range of industry problems within that affecting just about every business and individual globally. The world had been through 15 difficult years since the financial crisis of 2007–2008, he said. And more recently, the war in Ukraine had been launched before economies around the world had a chance to recover from the impact of the Covid pandemic. The developed world was currently facing levels of inflation not seen in decades, so the entire supply chain was suffering cost increases that were very difficult to offset. Logistical challenges that had been evident for a year were adding to the problems, with prices for a container quadrupling for certain routes. At the same time, there were smaller-than-desirable tobacco crops in key markets such as Brazil, and prices were going through the roof in all markets.
And whereas the tobacco industry had been through a lot of changes and cycles over the years, things were different now, Costa said, implying, I think, that there were now more, worse problems that were proving harder to overcome. The world needed a period of stability, and the tobacco industry did too, throughout its supply chain, he said.

Craving Consistency
Meanwhile, Christian Adi Njoto Njoo, the president of Mangli Djaya Raya, which for more than 60 years has produced, processed and traded tobacco from its base in Indonesia, told Tobacco Reporter that his current main concerns are focused on how to ensure production is sustainable in the face of anomalous weather patterns and how to address market inconsistencies. Addressing the challenges caused by climate change would need an elaborate plan devised and supported by a broad range of stakeholders, including governments, and would be a long-term project, he said. And in the meantime, recent prolonged rainy seasons in Indonesia were predicted by the Indonesian Agency for Meteorological, Climatological and Geophysics to continue through at least this year and next, which could mean shorter crops and prices rising to previously unheard of levels.
On the other hand, market inconsistencies could be improved in the short term, Njoto said. They were caused by a lack of central planning that allowed a vicious season-by-season cycle of production boom and bust to develop as growers, who were not fully informed, reacted to the prices paid in the previous season, not necessarily to the needs of the current season. Some market inconsistencies, he added, could be improved through government regulation and by better and consistent planning by medium to large corporations when deciding on their purchasing, production and price indications for future seasons.
One indirect result of the boom-and-bust cycle was volatility in the stocks and prices of fertilizers and crop protection agents, followed inevitably by higher production costs and pressure for tobacco price rises. The scarcity of fertilizers in recent times had seen their prices increase hugely to the point where the government was currently trying to control the sale of fertilizer on the domestic market and to limit and even ban its export.

Around the world, leaf dealers are pondering how to ensure that production is sustainable in the face of anomalous weather patterns and how to address market inconsistencies.

On the Bright Side
The Tobacco Reporter questionnaire asked, basically, what is currently positive about the leaf tobacco industry, what is negative and what can be done to improve things.
Njoto identified unhelpful regulations as being a problem for the industry, though he recognized that regulations were necessary in respect of protecting certain industry stakeholders, especially farmers and workers, and also the environment. In fact, he accepted that, in Indonesia, regulations were less strict and made more sense business-wise than those in some other countries and regions. It was also helpful that government-owned tobacco research facilities, laboratories and other institutions had been steadily improved in recent years through increased budget allocations drawn from various tobacco industry-related tax revenues. At the same time, government and private extension services, including the gradual implementation of sustainable tobacco programs required by the major multinationals, were aiding tobacco farmers, workers and other industry stakeholders.
However, he said, it was concerning that “international regulations” were starting to be introduced, and introduced without enough consultation, which meant some were poorly received and adapted and therefore hindered the industry’s stability and development. This situation needed to be improved by ensuring a balance was struck between the health and economic interests of all stakeholders.
Interestingly, ITC, India’s dominant tobacco manufacturer that has been closely linked to the success of the country’s flue-cured tobacco industry, mentioned no problems in its response to the questionnaire, preferring to concentrate on what it sees as the “world’s best public/private partnership model in agriculture,” namely, the Indian tobacco auction system, which was introduced in 1984.
ITC made the point that while flue-cured tobacco occupied less than 0.10 percent of the country’s total arable land area, it was an important, sustainable commercial crop, generating enormous socioeconomic benefits in terms of agricultural employment, farm incomes, revenue generation and foreign exchange earnings. In part, this was down to the Tobacco Board’s e-auction system for this type, which provided for fair assessments of growers’ bales in respect of both weight and grading, healthy competition, fair prices and, importantly, prompt digital payments.
Also accentuating the positive was Frederick de Cramer, a tobacco industry doyen now involved with the production of Latakia tobacco. In Turkey, opportunities were being created by a tobacco law instigated last year requiring cigarette manufacturers to include 10 percent locally grown Virginia in their blends, he said, a figure that was due to rise to 30 percent in four years. Local cut rag operations that bought domestically grown sun-cured Virginia (SCV) and flue-cured Virginia (FCV) were looking into the possibility of providing access to their leaf sources to cigarette manufacturers. But de Cramer pointed out, too, that, currently, there was a need to apply better agricultural practices to increase the quality of the SCV and FCV produced in Turkey for both the domestic and export markets. And there was a need, too, for a good big-leaf processing line.
Turning to the issue of locally grown classical oriental tobacco, de Cramer said a reduction in demand for these varieties was causing concern for the long term. Multinational tobacco manufacturers had reduced their demand for these varieties for a number of reasons but mainly because of price/cost considerations. In recent months, though, the Turkish lira had devalued substantially against the dollar, and it was possible that demand for Turkish oriental tobacco could increase. But there is danger nevertheless, said de Cramer. While classical oriental tobacco had been and still was a vital component of high-quality American-blend cigarettes, multinational manufacturers were no longer supporting this traditional leaf as they had in the past. Demand had been reduced due to several factors, including the switch to nontraditional cigarettes such as e-cigarettes, lower oriental inclusion rates in traditional blends, even the removal of such tobaccos completely from some blends, and import duties in some countries imposing de facto import restrictions.

Demand for classical oriental tobacco has declined due to the switch to nontraditional cigarettes such as e-cigarettes, lower oriental inclusion rates in traditional blends and import duties in some countries.
(Photo: Tobacco Reporter archive)

The Greek Outlook
This partly mirrors what has been happening in Greece, where the future of the leaf tobacco industry is apparently under threat. I say “apparently” because industry experts in Greece are reluctant to say anything even though problems have been apparent since at least 2019. Little wonder perhaps. From what I can surmise, it seems possible that within three years to 10 years, Greece may no longer produce classical oriental tobacco—possibly no tobacco at all.
Assuming this is correct, how did things reach such a pass? For many years, the Greek tobacco industry operated in a country that supported production. The industry had easy access to finance, good extension services and a lot of skilled growers who, in general, were paid fairly. It had good processing facilities, a stable customer base and well-established export systems.
It is true that production levels were sometimes out of kilter with the market, but there were multiple reasons for this, not all of which were within the control of the Greek industry. And, in any case, production of classical varieties of oriental tobacco were cut back hugely in 2006 to 20,000 tons a year after the decoupling of EU crop-specific agricultural support, a move that seemed to stabilize the industry and align it more closely with the new market realities.
Clearly, what is at the root of the problem is demand. Again, from what I can surmise, the classical oriental tobacco crop last year fell to 11,900 tons, the smallest crop of classical oriental tobacco ever in Greece, while next year’s production might or might not hit 10,000 tons. Why? One major factor is that Philip Morris International, which had, for a number of years post-decoupling, agreed to buy a significant proportion of Greece’s crop, pulled out of that agreement in 2019, partly, I guess, because of its commitment to switch its production away from traditional cigarettes to IQOS. Subsequently, its orders placed with Greek processors seem to have fallen to a fifth or even a tenth of what they were.
Is there any way back for Greece? Possibly not. Even if demand started to pick up, the industry would have to attract a new generation of growers to tobacco, which, on current evidence, might prove difficult. But never say never. There are many unknowns currently affecting the tobacco industry, not the least of which concerns how successful heated-tobacco products and e-cigarettes will be in a world starting to concentrate on environmental issues. And the issue of filters cannot be ignored. Will they be banned eventually, which would make sense environmentally? And if they are banned, along with flavors, how do you make a decent cigarette? Well, one obvious way would be to use classical oriental tobacco.

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.

July 1, 2022
Not “A Solved Problem”

Photo: nikodash

Acknowledging reality at the E-Cigarette Summit
By Cheryl K. Olson
After weary years of disdainful comments and dismissive studies about nicotine, and especially vaping, from my public health colleagues, the recent 2022 E-Cigarette Summit in Washington, D.C., gave me cause for hope. It was energizing to see researchers, advocates and regulators sincerely attempt to share and discuss their varied findings and experiences rather than “preach to the choir” more evidence supporting preexisting beliefs.
For example, Peter Hajek of Queen Mary University of London discussed nicotine’s effects on the developing brain. He threw cold water on assertions that nicotine can cut IQ by 10 or 15 points. These claims, he said, come primarily from chronic large doses, close to a lethal dose, in animal studies. It’s unclear whether this is relevant to voluntary dosing among humans. He went on to question the basis for accepted wisdom on age of smoking initiation and nicotine dependence. At last, nuance instead of diatribe!
The U.S. Food and Drug Administration and public health researchers have always been concerned about tobacco product effects on vulnerable populations: people at greater risk of starting to use tobacco, suffering from tobacco-related diseases or having problems stopping use of tobacco products. But the scales were tilted toward stopping youth from initiating use and thus away from all those adults getting sick who can’t or won’t quit.
At the E-Cigarette Summit, a rebalancing seemed to be underway. Along with the usual (and appropriate) concerns about youth and vaping, there were sessions with titles such as “Let’s not forget the smokers” and “‘Smoke-free’ means smoke-free not vape-free.” Could we be approaching a point where the famous appropriate for the protection of public health standard gives protection of smokers’ well-being the weight it deserves?
This reframing of tobacco harm involves acknowledging some unpalatable facts. First, smokers still exist in persistently large numbers, many in marginalized pockets of society. As Nancy Rigotti of Massachusetts General Hospital/Harvard Medical School noted, “Disparities in tobacco use really drive health inequities in the U.S. And that’s another reason why we need to be addressing the adult smokers.”
Second, medical best practice approaches to quitting are not working and have no hope of getting us to a smoke-free society. Third, although cessation of use is preferable, harm reduction is a valid goal, sometimes the only realistic one—and it requires actively promoting appealing alternatives to smoking.

Dated and Overrated
Various media campaigns have urged us to “make smoking history.” Sadly, that’s not the path we’re on. According to Vaughan Rees of the Harvard T.H. Chan School of Public Health, the commonly recommended “safe and effective” medications fail to help most smokers, especially those from marginalized populations. Calculating their overall impact at the population level, he said, “We see a less than 1 percent reduction in the prevalence of smoking using current first-line smoking cessation medications.”
He concluded, “The best evidence-based interventions are dated, overrated and cannot meet the challenge of reducing tobacco-related harm in this century.”
One problem is that people who could encourage smokers to quit have become complacent. As Rigotti described in her talk, “Let’s Not Forget the Smokers: A Clinician’s Perspective,” “These days, for some of our clinicians, it’s really tobacco use is a solved problem.”
Rigotti quoted a cardiologist colleague who told her, “Gee, most of my smokers have quit now.” This doctor’s patients are well-off, with good health insurance. “If instead she were working in a safety net hospital,” Rigotti noted, “she would know that there are lots of smokers but that their smoking behavior was very intractable.”
Even before Covid-19, tobacco treatment struggled to gain physician mindshare. “We’re not very exciting because we haven’t had a new tobacco product on the market for more than 10 years,” said Rigotti. That is, physicians lack new pharmaceuticals to treat nicotine addiction.
What might change clinicians’ attitudes and practices? The comfortable route, Rigotti said, would be e-cigarette products designated as medical devices, similar to the U.K. approach. But that is likely years away. In the meantime, promoting the fact that the FDA has authorized the marketing of some e-cigarettes “is an opportunity FDA could take advantage of to say the public health benefits outweigh the risks for some members of this class of products,” she noted.
Her final recommendation was increasing doctors’ comfort with the idea and practice of harm reduction: helping patients who can’t or won’t quit. “Everyone’s comfortable with long-term NRT [nicotine-replacement therapy] now; you’re doing it [harm reduction] already,” she said to her fellow physicians. “And maybe you should be doing more of it.”
In the last decade, recreational nicotine products have proliferated like wildflowers: pouches, gums, heat-not-burn and many more. I would add: Why not do more to educate physicians about those? Especially given the new recognition that alternatives to smoking should be (gasp) appealing.

Push and Pull
Treat nicotine addiction with a medicine: That’s the traditional approach to smoking. Another welcome development at the E-Cigarette Summit was hearing multiple speakers advocate for new options, even flavored ones.
Dorothy Hatsukami of the University of Minnesota focused on factors that might push people away from smoking and pull those who won’t quit toward alternatives. Given that (as her slides noted) “nicotine maintains addiction, but other constituents kill people,” her recommended “push” was policies to reduce the nicotine in cigarettes.
However, she noted, for those smokers who are unable or unwilling to quit, a “pull” is also needed toward alternative nicotine-delivery systems. Hatsukami described a colleague’s study supporting that “in the context of very low-nicotine cigarettes, you still need to have [alternative] products that are appealing. That have a range of flavors as well as higher nicotine doses.”
“New technologies clearly are needed to fulfill the promise of tobacco harm reduction,” Rees asserted in his talk. “We need reduced exposure products that meet the needs of smokers.” Such products, he said, along with regulatory standards that reduce or eliminate known toxicants, are the way to prevent a pandemic of 1 billion deaths from smoking in this century.
Rees showed a refreshing willingness to consider what works, whatever the source, including a 1991 paper from the Philip Morris archives. “One size does certainly not fit all. I learned that from seeing what were previously secret tobacco industry internal documents,” he said. “They designed cigarettes to meet the needs of specific subgroups of smokers. And were successful at creating demand for their products.”
Along with a focus on rapid delivery of nicotine to the brain, “they also worked very hard to ensure that tobacco products are attractive, that they are convenient, that they are easy to use. That the chemo-sensory qualities of smoking are appealing enough to promote continued use,” said Rees.
Several speakers made it clear, citing randomized trials and real-world evidence, that boosting continued use is key to reducing harm through e-cigarettes. This included Andrew Hyland of Roswell Park Comprehensive Cancer Center and the FDA-funded Population Assessment of Tobacco and Health (PATH) study. He talked about PATH data on the one in six U.S. daily smokers with no plans to ever quit and who don’t vape. About 2 percent of this group tried and stuck with e-cigarettes, becoming accidental quitters.
These never-quitting smokers deserve more attention, said Hyland; they are “at much higher risk for a bad cigarette-caused health outcome because they are much older, heavier smokers and at the low end of the socioeconomics distribution.” Electronic nicotine-delivery system products have the potential to expand the pool of smokers engaged in cessation, thus raising overall quit rates.
How can we get the level of switching success seen in randomized trials of e-cigarettes to happen for more smokers in the real world? David Ashley of Georgia State University, former director of the Office of Science at the FDA’s Center for Tobacco Products, focused much of his opening keynote, “Thinking Outside the Box on E-Cigarettes,” on that question. He stressed that smokers need the opportunity to try various products to find the right one for them as well as coaching on how to use the product.
“Purchasing a poor device from a gas station or grocery store shelf, trying it out by yourself with no instructions, does not maximize the likelihood of successful quitting,” Ashley said. He contrasted this with a vape shop that takes a “hands-on interactive approach … working with smokers to find the best product for them.”

Living with Uncertainty
Jamie Hartmann-Boyce of the Centre for Evidence-Based Medicine at the University of Oxford, summarizing the latest Cochrane Review of electronic cigarettes for smoking cessation, made a plea in her talk’s title for “Living with and Addressing Uncertainty.” There is now moderate-certainty evidence from randomized trials, for example, that quit rates are higher with nicotine e-cigarettes than with NRT. As more results pour in, the Cochrane Review is now updated monthly.
In closing, Hartmann-Boyce noted that this field “since its inception has been hampered by false dichotomies: Are [e-cigarettes] safe? Are they not safe? Do we protect children? Do we help adults? And now it’s ‘Is the evidence certain or is it uncertain?’”
She pointed out that just as risk exists on a continuum, so does uncertainty, and that science is working as it should to move us toward firmer ground on e-cigarette effects. “We are getting more certain,” she said. “But what always remains certain is how harmful cigarettes are. And we should not let unnuanced discussions about the uncertainties of e-cigarettes get in the way of communicating that evidence as well.”

Cheryl K. Olson is a California-based public health researcher who specializes in behavioral health issues and consults on tobacco product behaviors via McKinney Regulatory Science Associates. She spent 15 years on the faculty of Harvard Medical School.

July 1, 2022
ZoVoo Launches New Products in Special Event

During a recent product launch broadcast live worldwide on June 29, ZoVoo released four new products, its Gene Tree special edition ceramic core technology, and ZoVoo shared information on its peak performance in the electronic atomization field.

The first disposable product in the DRAG family, the new DRAGBAR R6000 is ZoVoo’s pod-style disposable. It has a classic leather texture design and its new airflow adjustment function, according to a press release.

ZoVoo also launched its lightest and thinnest ceramic core disposable product, the DRAGBAR Z700 GT, which “adopts the latest upgraded ceramic core technology, and reconstructs a new thin and light experience,” according to a release.

The new core is the latest nano-microcrystalline ceramic core independently developed by ZoVoo, GENE TREE Special Edition is the first “powder free” ceramic core with proprietary patented technology in the industry, according to the release.

Also launched, DRAGBAR F8000, with max 8000 puffs, adopts the infinite airflow adjustment system, and matches with high-performance of a mesh coil. Also, the new VINCIBAR F2500 adopts Kevlar texture, integrates light and shadow aesthetics, elegant and comfortable. With max 2500 puffs, 15 flavors and mesh coil design.

June 30, 2022
Bidi Workers Demand Protection Against Cigarettes

Photo: WESTOCK

Bidi workers in Bangladesh formed a human chain on June 21 outside of the Pabna Deputy Commissioner’s office, demanding protection against competition from “foreign” cigarettes, reports The New Nation.
According to the leaders of the group, the biggest competitors to bidis are low-quality cigarettes, which are mostly owned by foreign companies and have not been set to increase in price much in the 2022/2023 budget.
“Bidi industry is a domestic worker-friendly industry,” the group leaders said. “Bidi is a 100 percent indigenous technology-based industry. On the other hand, everything in cigarettes is imported from abroad and depends on technology. Foreign multinational companies are smuggling thousands of crores of rupees by burning the lungs of the people of this country.
“If all kinds of conspiracies against the domestic bidi industry, including the withdrawal of discriminatory advance income tax, are not stopped, we will be forced to wage a fierce agitation.”
After the protest, the leaders of the group presented a memorandum to the prime minister through the deputy commissioner of Pabna.
The group demanded an increase in the price of low-quality cigarettes, withdrawal of a 10 percent tax on bidis, and legislation to protect bidi workers.

June 22, 2022
U.S. Health Groups Call off Menthol Lawsuit

Photo: eccolo

Action on Smoking and Health (ASH), the African American Tobacco Control Leadership Council (AATCLC), the American Medical Association (AMA) and the National Medical Association (NMA) are dismissing their joint lawsuit against the United States Food and Drug Administration. A rulemaking process to ban menthol as a characterizing flavor is in progress, and “we are grateful to be able to declare victory in this case,” the plaintiffs wrote in a joint statement.
The lawsuit followed the 2013 Citizen’s Petition, which called on the FDA to prohibit menthol in cigarettes.
“As African American physicians, we are thrilled with the FDA’s proposed rule to ban menthol in cigarettes and flavored cigars as a remedy to settle our lawsuit,” said Rachel Villanueva, president of the NMA. “This proposed rule will save lives and improve health within Black communities. This would not have been possible without the leadership and assistance of our co-plaintiffs and attorneys, whom we wish to sincerely thank.”
“We are encouraged by the FDA’s recent action to propose a ban on menthol-flavored cigarettes. We look forward to participating in the rulemaking process as we continue our collective push to ensure these harmful products are removed from the market once and for all,” said AMA President Gerald E. Harmon.
“The FDA has finally taken a major step forward to protect the health of Black Americans, but the work is far from done. We will not stop until no more Black lives are lost due to the predatory marketing of menthol cigarettes and flavored little cigars,” promised Phillip Gardiner, co-chair of the AATCLC.
“ASH’s goal is to use litigation as a tool to protect the right to health of all citizens against the harms of the tobacco industry,” said Kelsey Romeo-Stuppy, managing attorney at ASH. “We are proud to have been a co-plaintiff in this extraordinary demonstration of the power of proactive litigation.”

June 3, 2022
Fruitful Cooperation

Photos: Alliance One International

By partnering with Bayer Crop Science, Alliance One International improves farmer livelihoods.
By Stefanie Rossel
Ending poverty is the first of the United Nations’ 17 sustainable development goals, which are supposed to be achieved by 2030. According to the U.N. Food and Agriculture Organization (FAO), the battle to end hunger and poverty must be principally fought in rural areas, which is where almost 80 percent of the world’s hungry and poor live. Success requires investment in “agents of change,” according to the FAO—smallholders, family farmers and other vulnerable groups. To feed more people with less water, farmland and biodiversity, better management and improved techniques in agriculture will be needed.
Agriculture is central to all activities in smallholder communities. In economic terms, most activities in these communities revolve around being able to develop a system that provides food security and improves the health of its members. The work of smallholders is an economic driver, creating prosperity for the community.
Keen to enhance farmers’ incomes, Alliance One International recently embarked on a new project. In June 2021, the company announced that its Alliance One Brazil (AOB) subsidiary was partnering with Bayer Crop Science to provide quality maize seeds and agronomic support to smallholder tobacco farmers in Brazil. AOB’s goal is to help its contracted farmers diversify their income by strengthening the quality and yield of a crop that is cultivated complementary to tobacco in the country.
“For AOI, improving farmer livelihoods is a top priority, and we are committed to maximizing all farmers’ income potential by 2030 through appropriate training in good agricultural practices and the opportunity for crop diversification,” explains AOI President Alex Strohschoen. “Through this partnership, we are making strides to achieve this goal and have already seen positive impacts for growers and their communities.”
During the 2020 growing season, AOB implemented a pilot project in which 2,300 of its contracted Brazilian smallholder tobacco farmers received a high-quality agronomic package for maize. “While many of our contracted growers in Brazil already grow maize in addition to tobacco, they lacked access to high-quality crop inputs such as seed, fertilizer and agronomic support,” says Strohschoen. “This prevented them from scaling up their production and limited their financial return. This agronomic package provides our contracted growers with access to Bayer’s maize seed varieties as well as fertilizer and hands-on guidance from our agronomists and field technicians, helping improve crop quality and yield, in turn, increasing the farmer’s bottom line.”
Globally, AOI employs approximately 1,000 trained agronomists and field technicians that conduct more than 1 million farm visits annually. “These individuals regularly share their expertise to support our contracted growers and are key to this partnership,” says Strohschoen.

Alex Strohschoen

Research Required
Bayer Crop Science offers a range of maize varieties with enhanced features. For instance, a maize variety can be more water efficient, high yielding or resistant to typical maize pests than other varieties.
In the case of AOI’s contracted Brazilian growers, use of Bayer maize varieties, grown using high-quality fertilizer and agronomic support from AOI, made a difference. “Prior to this project’s implementation, our Brazilian tobacco farmers that also cultivate maize produced on average less than 5,500 kg/ha,” says Strohschoen. “The agronomic package that we provide gives growers access to some of the most advanced technology available on the market, potentially increasing yields to over 10,000 kg/ha.”
As part two of the initiative, AOB offered the opportunity to participate in the program across its grower base during the 2021 growing season. Following the season’s completion, Strohschoen said, participating farmers saw a 15 percent increase in maize yield compared to the 2020 growing season, increasing a farmer’s income by $270 per hectare on average. “This additional income supplements the livelihood of our contracted growers and is an important piece of addressing other concerns, such as child labor, deforestation, etc.”
Similar to Africa, where climate change appears to be a big challenge for farmers, extreme weather patterns are impacting crop production in Brazil. Less and less predictable weather patterns make it difficult for growers to determine the right time to plant whereas the worsening precipitation deficit as well as increased frequency and severity of droughts are becoming more prevalent and more concerning. “Food insecurity is a global issue driven by various factors, including increased demand, war and conflict, climate change, and economic slowdowns and downturns exacerbated by Covid-19,” says Strohschoen.

An AOB leaf instructor (left) and a contracted farmer

Expansion Envisaged
Over the next three years, AOB intends to expand the project to include other crops—and other countries. AOI works with nearly 300,000 farmers in 20 countries across five continents, and it is the company’s aim to provide all of its contracted growers with the opportunity to diversify their income and increase their bottom line, says Strohschoen. “To do this, we must evaluate a number of factors to ensure we are implementing projects in the appropriate regions with crops that offer our contracted growers the greatest potential return. For example, we began this project in Brazil because approximately 75 percent of our contracted Brazilian farmers produce maize in addition to tobacco. Since these farmers were already growing maize, many had the infrastructure necessary to produce the crop prior to implementing the project.”
Following the success of the project’s first two phases in Brazil, it makes sense to expand it to a country with a similar climate and where growers have a seminal relationship with maize. “As we enter the 2022 growing season, we plan to introduce the program to our contracted farmers in Argentina, where a significant portion of our grower base could benefit from improving the quality and yield of their maize crops,” says Strohschoen.
In addition to the maize project in Brazil, AOI is also working on other projects around the globe. “For example, in Malawi, we have commercialized new groundnut and soya seed varieties,” says Strohschoen. “We provide interested tobacco growers with inputs, including agronomic expertise, helping them diversify their crop portfolios and produce high-quality crops for domestic, regional and international markets.”
With tobacco accounting for 54 percent of merchandise exports in 2019 and about 15 percent of GDP, the landlocked Southeastern African country is one of the world’s most economically tobacco-dependent nations. Not only in Malawi does food security remain an issue; it’s also a global problem that is being exacerbated by various factors, including increased demand, war and conflict, and economic slowdowns and downturns aggravated by Covid-19. Currently, Russia’s war against Ukraine is severely jeopardizing food security around the world.
“AOI is committed to doing whatever we can to transform people’s lives so that together we can grow a better world,” Strohschoen says. “This starts within our immediate network. To do our part to address global crises, we must first look at what improvements can be made within our supply chain. This begins with providing our contracted farmers with the tools they need to diversify their income and create additional food sources in their communities.”

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.

June 1, 2022