Tag: Oriental

Difficult Dynamics

Photo: Taco Tuinstra
The oriental leaf business struggles with adverse weather conditions and farmer attrition.
By Stefanie Rossel
“Complex” is probably the word that best describes the prevailing situation for classical oriental tobacco. In 2023, the sector again struggled with adverse weather conditions and farmer retention.
“A shared challenge faced by all countries in the current season is the impact of adverse weather conditions,” comments Stelios Grigoriadis, regional director of Europe at Alliance One International (AOI).
“The crop encountered difficulties early on with an extended rainy season, reducing transplanted acreage. Subsequently, an exceptionally dry and hot summer exacerbated the situation, resulting in volume losses for the industry ranging from 10 percent to 30 percent in specific countries. These weather-related challenges have been a common denominator in the diminished crop volumes across the region.”
The current crop volumes in the four principal cultivating countries for classical oriental tobacco, comprised of Turkiye, Greece, Bulgaria and North Macedonia, will likely to be down, says Grigoriadis, marking a departure from the trends observed in the preceding two years to three years. “This decline is attributed to different factors influencing each country’s production landscape.”
AOI emphasizes that its production estimates provide only a snapshot of the current expectations, adding that external variables may play a significant role in shaping the results. The company expects market leader Turkiye to produce 50,400 tons this season compared with 51,320 tons in 2022 and more than 55,000 tons under typical weather conditions.
AOI anticipates 37,500 tons of the Izmir variety, basically flat from the 37,450 tons recorded in the previous year. It projects the Samsun crop to decline from 3,575 tons in 2022 to 3,000 tons in 2023.
Basma dropped from 1,645 tons in the 2022 crop to 1,400 tons in the current season while Turkish Prilep increased from 850 tons in 2022 to 2,250 tons in 2023. East Izmir declined from 7,800 tons in 2022 to 6,250 tons in the current season.
Weather conditions played a crucial role in determining the quality of the different varieties. Izmir experienced a negative impact on quality compared to previous years, primarily due to the hot and dry summer conditions. “This reflects a deviation from the standards observed in earlier crops,” says Grigoriadis.
By contrast, the quality of Samsun and Basma was positively impacted. “The warm and favorable weather conditions during the curing period have contributed to an improvement in the quality of these varieties,” observes Grigoriadis. “This positive influence underscores the importance of climate factors during critical stages of cultivation.”
The East Izmir variety remained stable in terms of quality, according to Grigoriadis.

Photo: Prestige Leaf
Lack of Labor
Projections for the 2023 classical oriental crop in Greece vary. Dora Gleoudis, managing director of Greek leaf tobacco exporter Nikos Gleoudis Kavex, expects it to amount to 6,500 tons, comprising 4,300 tons of Basma and 2,200 tons of Katerini. This compares to a total crop of 8,000 tons in the 2022 season. “The quantity reduction is due to labor shortages,” says Gleoudis. “However, the crop quality in all areas is higher compared to last year’s, favored by weather conditions.”
Nikos Tzoumas, managing director of Missirian, anticipates a crop of 5,700 tons divided between 3,700 tons of Basma and 2,000 tons of Katerini. “The Greek oriental crop decreased overall by almost 30 percent,” he says. “The reasons for this decrease, in sequence of importance, are abandonment of cultivation, absence of external workforce and low field yields due to dry weather.”
The Katerini crop volume dropped by 35 percent, according to Tzoumas. “Eighty percent of this decrease was due to less cultivated land—that is, farmers who abandoned cultivation and farmers who decreased their cultivated land due to absence of workers—and 20 percent due [to] lower leaf yield following dry weather conditions,” he says. “Basma production decreased by 25 percent, caused mainly by farmers who abandoned cultivation.”
Tzoumas agrees that the quality of this year’s crop is very good. “Transplanting was accomplished under rainy conditions,” he says. “Later in the season, the extreme heat wave during July and the total absence of rainfall for four months stressed the plants and resulted in small, ripe and bodied leaves.”
Bulgaria also experienced a significant reduction in volume. According to AOI, the country is expected to harvest approximately 3,200 tons of classical oriental tobacco in 2023. Like Greece, Bulgaria has struggled with farmer attrition and unfavorable weather conditions. “The attrition of farmers raises concerns about the sustainability and resilience of the tobacco industry in these countries,” says Grigoriadis.

Photo: AOI
Up and Coming
North Macedonia appears to be a rising star among oriental-producing countries. Although its volume is projected to reach 16,000 tons in 2023, down from 21,000 tons in 2022, its farmer base remains committed. The number of growers cultivating Prilep has remained relatively stable in recent years. Yaka volumes, meanwhile, have declined to 150 tons this season from 248 tons in 2022.
Hot and arid conditions during summer in Prilep, the center of North Macedonian tobacco growing, significantly reduced the crop quantity. However, the abundant sunshine also positively impacted the quality of the Prilep crop, according to Grigoriadis. “Particularly in the middle and upper harvests, the overall quality of this crop can be characterized as above average.”
Rising Production Costs
In addition to the already mentioned challenges, oriental tobacco growers have had to cope with the still-simmering Covid-19 pandemic, the Russia-Ukraine conflict and the escalation of hostilities in the Middle East. According to Gleoudis, the war in Ukraine has dramatically increased the prices of growers’ inputs as well as labor costs. On top of that, rising prices for other crops, such as corn or cotton, have prompted some growers to abandon the golden leaf. Tzoumas notes that the war in Ukraine and the subsequent economic sanctions against Russia have affected exports to Russian manufacturers.
Tobacco farmers in North Macedonia, meanwhile, have been struggling with continuously rising labor expenses, according to Grigoriadis. “This is a result of both the government-mandated annual increase in the minimum wage and a labor shortage stemming from increased population migration,” he explains.
Turkiye, too, copes with the fallout from these crises. High inflation coupled with uncertainties in the pricing of crop inputs such as fuel, fertilizer and chemicals has created an environment of uncertainty. “The uncertain pricing of other crops has led some farmers to switch crops in the short term, disrupting planning and creating inefficiencies in the production of alternative crops,” says Grigoriadis.
“This, in turn, results in fluctuations in farmer income, further increasing the challenges faced by those in the oriental sector. The uncertain and volatile conditions in the wake of these crises not only impact the financial aspects for farmers but also disrupt long-term planning. The uncertainty in input pricing and the unpredictability of crop prices create challenges in decision-making, affecting the overall efficiency of tobacco production.”

Photo courtesy of Nikos Tzoumas
Still in Undersupply
While there have been shortages in all tobacco varieties, buyers of classical oriental tobacco, in particular, have been suffering from undersupply over the past two years. A return to balance in supply and demand is possible but depends on several factors, according to Grigoriadis.
The challenges posed by weather-related uncertainties may require growers to adjust their agricultural practices and embrace new technologies along with risk mitigation strategies. “Collaborative efforts among stakeholders, including farmers, state institutions and industry players may also contribute to a more resilient and sustainable supply chain for classical oriental varieties,” says Grigoriadis.
“Supply and demand for oriental tobaccos are and will remain unbalanced,” predicts Gleoudis. “Regretfully, options of mechanizing the oriental tobacco crop have not proven successful.” She is referring to the HMO oriental tobacco harvesting machine developed by VIT and Philip Morris International that was trialed in Greece in the summer of 2020 to reduce farmers’ reliance on manual labor.
“The opportunity to make the oriental tobacco cultivation a sustainable and mechanized crop was lost five years ago when the buyers did not embrace the HMO and the tobacco which was produced as such,” says Tzoumas. “Ten years of hard work by many individuals, five versions of improved HMO models, a new pure Basma seed with increased field yields registered in Greece and many young farmers with enthusiasm were all gone! At that time, even the farmers were ready to invest as they had understood sustainability as a tool for security and balance for their product and their life.”
His forecast for the Greek oriental crop in 2024 is therefore pessimistic. “A further decrease in production is projected to happen in the 2024 crop,” says Tzoumas. “Farmers will keep on shifting from manual to mechanized crops, missing the work force needed for oriental tobacco, and to food crops, with the latter being in higher demand.” Aggravating the situation, the European Union’s Common Agricultural Policy 2023–2027 significantly reduced the funds allocated to tobacco growers by adopting a flat rate per hectare, which is not in the favor of small holdings common in oriental tobacco farming.
Gleoudis expects Greek and Bulgarian oriental production to remain stable in 2024. “Depending on weather conditions, North Macedonia could increase its production back to 22,000 tons.”
Grigoriadis shares this prognosis for North Macedonia. “This optimistic estimate emphasizes the significance of weather conditions in determining the success of the crop,” he says. “It also indicates a potential for North Macedonia to maximize its production capacity, provided that external factors align favorably. However, it is essential to remain attentive to potential challenges and fluctuations in supply/demand dynamics that may influence the actual outcome.”
Given favorable weather conditions, Turkiye’s 2024 oriental crop could increase by between 5 percent and 10 percent, according to Grigoriadis. “The competitiveness of oriental tobacco against other rival crops and the careful management of production costs are key considerations in shaping the final outcome.”
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 2, 2024
Rare Spice

Photo: Kavex
Oriental tobacco production has hit a record low, but crop quality is higher.
By Stefanie Rossel
After peaking at 202,000 tons in 2014, oriental tobacco production has seen many ups and downs. This year marked a new low of 128,000 tons, according to International Tobacco Growers’ Association analyst Ivan Genov, citing data from Universal Leaf. Nonetheless, in 2020, Turkey and Greece managed to increase their export earnings from the crop by $6 million and $26 million, respectively, Genov noted.
According to Dora Gleoudis, managing director of Greek leaf tobacco exporter Nikos Gleoudis Kavex, the classical oriental variety grown in the Balkans, including the Turkish Izmir and Samsun varieties, accounted for approximately 92,0000 tons of the total volume. Gleoudis believes global supply and demand are balanced at current crop size levels.
Next to dark air-cured tobacco, oriental leaf has always been a low-volume niche. It is nevertheless an important variety as it provides tobacco blends with a distinct, spicy aroma. Oriental tobacco is cultivated in dry areas with little rain and lots of sun, which leads to a lower nicotine content compared to flue-cured Virginia (FCV) and burley styles. Classical oriental tobacco is grown mainly in Turkey, Greece, North Macedonia and Bulgaria. Thailand, India, Albania, the Commonwealth of Independent States countries and China also cultivate certain varieties.
In contrast to an FCV plant, which can have up to 30 large leaves, the oriental plant can grow up to 100 smaller and darker leaves. Harvesting and curing differs too: The crop is harvested mostly manually and then sun-dried for about a week, a process that contributes to retaining some of the natural sugars in the leaves. The hint of sweetness in oriental and its unique taste make it a key ingredient not only in American blend cigarettes but also in many roll-your-own and pipe tobacco brands as well as in shisha tobacco and heated-tobacco products.
A Labor-Intensive Crop
Kavex’ portfolio includes the main oriental varieties, including Basma and Katerini from Greece and Albania; Prilep and Yaka from Macedonia; Krumovgrad and North Bulgaria from Bulgaria, and Izmir and Samsun from Turkey. The recent drop in production volume was driven by a combination of weather and the aging of tobacco growers, among other factors, according to Gleoudis. “Young people still staying in their villages turn to other crops that are easier to handle,” she says. “Additionally, drought during the summer period has negatively affected the crop size.”
The quality of the current oriental crop, though, she points out, was higher than that of the previous crop, especially in North Macedonia. The Covid-19 pandemic did not have much of an impact on production, said Gleoudis, who is more concerned about the price of energy, which has skyrocketed in Europe.
Oriental leaf cultivation is known to be costly and labor intensive. Little machinery is used for planting and harvesting. It is estimated that it takes 120 manhours to 150 manhours to cultivate one acre of Greek oriental tobacco.
Recently, stakeholders have attempted to introduce more mechanization and automation into the cultivation process. A new oriental harvester, developed jointly by VIT and Philip Morris International, was trialed during the summer of 2020 (see “The Oriental Express,” Tobacco Reporter, January 2021). First tests showed that the machine, when used to harvest crops in four stalk positions, was able to harvest eight hectares of oriental tobacco or up to 12 tons of cured oriental tobacco during one season with only two people.
Whether such efforts will succeed remains to be seen. At press time, the new technologies in curing and harvesting were still at an experimental stage, according to Gleoudis.
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, 2022
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
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
A Tough Tobacco
The market for classical oriental tobacco faces many challenges—but this is a hardy business that has survived difficult times before.
By George Gay
There seemed at the end of last year to be a consensus among experts in the production and marketing of classical oriental tobaccos (COTs) that demand for this type of leaf is falling and is likely to keep falling. Of course, such a reckoning includes a prediction, and predictions are generally fraught, but I think that what the experts I spoke with were saying is indisputable given that in the future there isn’t some currently inconceivable change in the perceived relationship between tobacco and health.
At first sight, this forecast seems to provide a grim outlook for COT growers and merchants, but I think it’s too early to get out the mourning bands. The COT industry, focused on the Balkans, has faced many headwinds in the past, and it has survived—sometimes reduced in size, sometimes on a firmer, more predictable footing, but it has innovated and survived. And, from what I have been told, the challenges it faces at the moment seem likely to bring about a decline that will be manageable given that, in any case, the future will almost certainly see a supply side atrophying of tobacco growers and tobacco communities as they turn to other, more modern opportunities and activities.

The ‘threat’ of vaping
Currently, the threat to COT demand comes, mainly and not surprisingly, from the fall in consumption of combustible cigarettes that use COT in their blends, a decline that has a number of causes, including greater health awareness among consumers, increasing retail prices caused largely by tax rises and the availability of alternative, less risky tobacco and nicotine products.
But at this point, the risk posed to the industry becomes almost impossible to assess because of the complexities thrown up by the characteristics of particular markets. For instance, the biggest threat to COT would arise if vaping became acceptable to health advocates and, therefore, governments around the world and to smokers of all stripes. But this is highly unlikely to happen in short order, and, moreover, in certain markets, a switch to vaping would have little effect on demand for COT. You have only to look at the U.K. market to realize that this is true. Vaping is generally supported by the government there and, partly as a consequence of this support, it has had considerable success in switching smokers from combustible cigarettes to electronic cigarettes. But since the sale in the U.K.—a mainly Virginia blend market—of combustible cigarettes that use COT is low, the effect on COT demand has probably been so small as to be unmeasurable.
If you then turn your attention to the U.S., however, where sales of combustible cigarettes containing COT are high, a major, sustained switch to vaping would have a significant effect on COT demand. But in the U.S., health agencies have consistently delivered inconsistent messages about vaping with the result that the switch to vaping has almost certainly been restrained. In fact, this year has seen vaping take at least a couple steps back in the U.S. as misleading information about the causes of acute lung disease among people using vapor devices has been circulated by officialdom. At the time of writing in the middle of December, it seemed that the rate of switching back from vaping to smoking was falling, but much damage has been done to the vapor industry, and it is likely that the COT industry will have been one beneficiary of this. The likelihood is that this benefit will be short lived, but there is no knowing whether the skittish health agencies in the U.S. might latch on to future vaping scares that will reinvigorate demand for combustible cigarettes.
It is also possible that the imposition of vapor product taxes will slow the switch to vaping in the U.S. and other countries.
Around the world, the picture is mixed, with some countries banning or restricting vaping while others support it or at least tolerate it. But the only way to judge the impact of such policies on the consumption of COT is to know whether the market in question is a Virginia blend or an American blend market. I take it that the ban on vaping in India, a largely Virginia blend market, will have a minimal effect on the consumption of COT, but a ban on vaping in the Philippines, a largely American blend market, will help maintain demand for COT and even, in the short term, boost it slightly.
Another alternative to combustible cigarettes, the heat-not-burn (HnB) cigarette, does not pose the potential long-term existential risk to COT that is posed by e-cigarettes because, as I understand it, COT is a useful ingredient in HnB products—at least in their current iterations. But given the small amount of tobacco used in HnB products, any switch from American blend combustible cigarettes to HnB poses a risk.
This risk level must have been raised when the U.S. Food and Drug Administration issued one of its rare marketing orders in favor of Philip Morris International’s (PMI) HnB product IQOS. Although it is still to be seen how U.S. consumers will take to this new-to-them product, it must represent one of the issues raising anxiety levels within the COT industry. And the industry must already have been concerned since all the multinational tobacco manufacturers now offer HnB products and especially since PMI has been aggressive in making the point that it wants people to quit combustible cigarettes or, where they are unable to do so, switch to its HnB products.
The threat of taxes
Combustible cigarette tax increases have always posed a threat to consumption that is more acute in respect of the generally more expensive combustible cigarettes that contain higher levels of relatively expensive COT, especially the higher grades of COT. But the industry has tried to ameliorate this situation by modernizing what were highly traditional farming and processing systems and thereby reducing costs. There are limits to what can be done in a short space of time, however. Trials have to be conducted if such changes are to be introduced because it is presumably important to ensure that the special characteristics of COT aren’t destroyed or drastically reduced by whatever changes are made.
One widely ignored consequence of tax increases is the boost they give to the illegal trade in illicit combustible cigarettes, and one of the experts I spoke with said that this trade was “growing substantially,” mainly in Africa, the Middle East and the Far East in countries where borders were not well controlled.
It is often said that such illicit cigarettes do not contain the finest ingredients, one of which is COT, so any increase in sales of illicit cigarettes on a world market in decline is likely to negatively affect demand for COT, though this effect is likely to not be as pronounced as it might have been given that the regions mentioned would have markets with substantial, perhaps in some cases majority, sales of Virginia blend cigarettes.
The question of taxes is further complicated by World Health Organization policies, which on the one hand encourage tax increases on combustible cigarettes, but on the other attempt to “eliminate” the illegal tobacco trade through the employment of track-and-trace systems and undermine the switch by consumers from smoking to vaping.
Geographic spread
Another issue that arises in respect of any reduction in demand for COT concerns where the consequent fall in production will occur, assuming that the drop in demand is so big that it cannot be accommodated by the normal season to season volume and quality ups and downs that affect any agricultural product—meaning that contracted volumes have to be systematically reduced.
It is, of course, impossible to say whether any production cuts that might have to be made would be shared equally across all producing countries, fall more heavily on some countries than on others or affect some varieties more than others. However, looked at from the other direction, currently, the industry in North Macedonia appears to be the most stable production wise, partly because of the popularity among manufacturers of the Prilep variety that it grows but also because growers there receive, on top of the commercial prices paid for their leaf, national subsidies described by one expert as “considerable.”
Production levels in Turkey tend to be less stable than those in North Macedonia, but Turkey has the advantage of having a relatively big crop made up of a number of sought-after varieties, including the biggest COT crop produced anywhere, Izmir, and taking in the Izmir East variety, which, if I’m not mistaken, might be better described as a semi-oriental tobacco, though one whose price and characteristics make it attractive to some manufacturers.
Turkey, at the moment, has an advantage because the lira exchange rates against the dollar and euro are helping to make its production competitive. And it has a potential advantage in a proposed law that is apparently being worked on by the Ministry of Agriculture and that is due to be announced soon. The new law would oblige Turkey’s tobacco manufacturers—British American Tobacco, Imperial, Japan Tobacco International, KT&G and PMI—to reach within three to four years a 30 percent inclusion rate of locally produced tobacco within their local market cigarettes. Assuming such inclusion rates are currently below that level, this move would have a positive effect on Turkey’s tobacco industry, which includes COT, flue-cured Virginia and sun-cured Virginia.
Meanwhile, production levels in Greece tend to go up and down while production levels in Bulgaria seem to be on a generally downward trajectory.
The 2019 crop of COT was grown under good weather conditions and did not suffer any significant diseases or losses. As a result, the volume was close to the contracted quantities, and qualities are thought to be above average. The one exception seems to have been Turkey’s Samsun crop, which suffered untimely rains and is thought to be of below average quality.
Overall, however, the 2019 crop of COT is bigger and of better quality than that of 2018, which was badly affected by untimely heavy rain and which one expert described as “disastrous.” For this reason, grade yields were low in respect of 2018 crop tobaccos, which meant reduced profitability for merchants, who will be hoping for, and should be rewarded with, better things from the 2019 crop. Merchants will be hoping too that since the 2019 crop is close to contracted volumes, there will be no or little leftover stock when marketing is completed. In fact, one expert mentioned that it would be an “unpleasant surprise” if significant amounts of 2019 crop COT remained unsold.
Nevertheless, according to one estimate, the 2019 crop of COT (including Izmir East tobacco) produced in Turkey, North Macedonia, Greece and Bulgaria stands at 117,000 tons, and three years ago, back-of-the-envelope figures had it that a stable COT crop was about 100,000 tons. Crops of 120,000 tons were said to threaten a buildup of stocks while crops below 100,000 tons were reckoned to threaten scarcity.
Broken down, the 2019 estimate had it that Turkey had produced about 70,000 tons made up of 50,000 tons of Izmir, 9,000 tons of Izmir East, 5,000 tons of Samsun, 5,000 tons of Basma and 1,000 tons of Prilep. North Macedonia is estimated to have produced a total of 26,000 tons made up entirely of Prilep while Greece is estimated to have grown 16,000 tons made up of 11,000 tons of Basma and 5,000 tons of Katerini, and Bulgaria is estimated to have grown about 5,400 tons comprising 4,600 tons of Krumovgrad, 600 tons of Katerini and 200 tons of Basma.
From the supply side, production of COT seems assured at the levels now in demand. It would be wrong, as always, to describe growers as happy because, in their eyes at least, input costs will usually be too high, leaf prices too low and labor issues too difficult. But then again, in Turkey, growers are said to be receiving cash advances worth up to 50 percent of the value of their contracted volumes—in essence, interest-free loans at a time when inflation is above 20 percent, loans that can also be used to support the production of other crops. Certainly, there was no suggestion that growers in any of the producing countries were about to down tools.

The author would like to thank the following, listed in alphabetical order, for their help in preparing this story: Nikos Allamanis, president of the board of directors of the Hellenic Association of Tobacco Processing and Trading Industries; Frederick De Cramer, coordinator of Sunel; Dora Gleoudis, managing director of Nicos Gleoudis Kavex; and Nikos Tzoumas, managing director of Missirian and president of the Hellenic Inter-professional Organization.

George Gay
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 17, 2020
Vote of confidence

Seke opens a tobacco processing factory in Macedonia.
TR Staff Report
Facing declining cigarette sales and increasing regulatory pressures, tobacco companies around the world have been scaling back their operations and diversifying into other activities. So when a leaf merchant announces a substantial investment in its traditional line of business, the industry sits up and takes notice.
Next month, Seke will open a €6 million ($7.39 million) tobacco processing factory in Macedonia. Located near Prilep, in the heart of Macedonia’s tobacco growing region, the new facility will be able to store and process 4.5 million kg of oriental tobacco per year.
The opening is the latest step in Seke’s ambitious expansion plan in the Balkans.
Created in 1947, Seke is the Greek Cooperative Union of Tobacco Producers. Its headquarters and factories are in Xanthi, in northern Greece, an area known worldwide for its excellent-quality oriental tobacco. Today, Seke is the biggest tobacco company in Greece and the second-largest in the Balkans. It caters to multinationals, independents and local players.
Alexandros Kontos

At the turn of the century, Seke was a purely domestic player, according to Alexandros Kontos, the firm’s current general manager, who served as Xanthi factory director at the time. “The company was satisfied with the existing situation,” he says with a shrug. In 2000, Kontos left his position at Seke to run for public office.
Kontos was elected a member of parliament representing Xanthi prefecture. From 2004–2009 he served as minister of rural development. In this position, he looked after the interests of Greek tobacco growers during the EU negotiations on agricultural policy, among other things.
In 2010, Seke hit hard times, and the firm’s president asked Kontos to return and help the company improve its competitiveness. The tobacco industry was under attack on multiple fronts, and Greece had just been struck by the worst economic crisis in living memory. Many companies were having problems accessing finance. “Those were the most difficult years of my professional life,” recalls Kontos.
Despite the challenging economic environment, Seke formulated an ambitious growth plan that started with heavy investment in human resources. In addition to strengthening its leaf and agronomist teams, the company hired professionals in finance, exports and business development. “You need good players to make a good team,” says Kontos, emphasizing the importance of maintaining and enhancing the quality that has always characterized Seke’s work.
Seke spent €1.9 million ($2.32 million) to upgrade its Xanthi processing facility with the latest equipment, including a state-of-the-art Tomra laser sorter for the removal of nontobacco-related materials.
At the same time, the company decided to expand internationally. Seke’s strategic geographic location facilitated the expansion in the Balkans.
Considering Seke’s intimate knowledge of oriental tobacco, it made sense to enter other countries capable of producing that type of tobacco.
Seke set up operations in Bulgaria and Macedonia, signing contracts with farmers and hiring agronomy experts. Recently, the company started operations in Albania, too.

But Seke’s biggest splash was reserved for Macedonia, which the company views as the most sustainable source for classical oriental. According to Kontos, the country’s fertile soils, favorable climate and skilled farmers, along with its supportive regulatory environment (see sidebar), make Macedonia an ideal location for oriental tobacco production.
After receiving the applicable licenses and signing farmer contracts, Seke started operations in 2015. The company found warehouses and installed a pre-processing factory in the scenic town of Krushevo.
In 2017, the company contracted with about 3,500 growers, who produced some 2.5 million kg. This season, it expects to contract with 5,000 growers.
Initially, Seke sent the Macedonian tobaccos for final processing to Xanthi, a six-hour drive away. As volumes increased, however, it became economical to build a local factory—a move that also suited the company’s growth strategy.
Covering 11,000 square meters, the new facility is equipped with late-model presses, direct conditioning cylinders and soft dryers, among other pieces of machinery.
It will be fully operational in June and is expected to increase Seke’s local workforce from 250 to 350.
Unsurprisingly, local authorities have been keen to facilitate the company’s investment. Kontos says he has been impressed with the responsiveness of local authorities. Going forward, Seke intends to further promote Macedonian leaf qu
ality, not only by producing tobacco with desirable smoking properties but also by ensuring compliance. The company’s extensive agronomy department helps make certain that farmers use the appropriate fertilizers and crop protection agents, while minimizing environmental damage and ensuring the safety of workers.
According to Kontos, Seke’s customers have strongly supported the expansion in this country, demonstrating the industry’s continued interest in oriental tobacco. The company is eager to meet and exceed their expectations.

A sustainable source of classical oriental

It was standing room only in the theater of Prilep, Macedonia. On a chilly February evening, hundreds of farmers had come to hear agriculture minister Ljupcho Nikolovski clarify the government’s new agricultural policies. Weathered faces protruding from leather jackets took turns shouting questions about price supports, fertilizer supplies and import duties.
A beekeeper demanded protection against Ukrainian honey, which he said sells for less than his cost of production. To enthusiastic applause, another audience member asked the minister to raise crop prices by 30 percent. Tactfully rebuffing the request, Nikolovski pointed out that the government lost its authority to dictate prices years ago, when Macedonia emerged as an independent state from the Socialist Federal Republic of Yugoslavia.
Most questions, however, focused on Macedonia’s new tobacco law, which is set to take effect in the upcoming growing season. Eager to retain farmers and stimulate the production of quality leaf, the government is introducing new subsidies. Instead of receiving a flat mkd60 ($1.21) per kilogram, farmers will from now on be rewarded for higher qualities. Under the new system, grade 1 tobacco will attract mkd80; grade 2, mkd70; while grades 3 through 6 will continue receiving mkd60 per kilogram.
Jane Stankoski

According to Jane Stankoski, acting manager of the State Agricultural Inspectorate, the new law builds upon an already solid legal framework for tobacco. If you want a tobacco trading license, for example, you need not only an agronomist, a processing line and a warehouse, but you must also prove that you have sufficient funds to pay your farmers. Growers, in turn, must substantiate to the government their land holdings; they cannot contract tobacco from land that they do not own. The objective is to guarantee a fair and stable trading environment for all stakeholders.
The rules demonstrate how seriously Macedonia takes its tobacco sector. At a time when most governments are distancing themselves from tobacco—witness, for example, the EU’s “decoupling” of tobacco subsidies—authorities in Skopje are strengthening their commitment to the industry.
Part of that has to do with tradition. Tobacco has a long history in Macedonia, dating to the time of the Ottoman Empire. The country has a near-perfect mix of soils, climate and farming skills for the golden leaf. “There is a true tobacco culture here,” marvels Manolis Kazantzidis, planning and business development director at Seke of Greece. Like their government, farmers in Macedonia are serious about tobacco, he says, noting that this is not always the case in other origins.
During the Yugoslav period, the tobacco industry was run by the state. After the federation collapsed in the early 1990s, the multinationals moved in. Today, Macedonia is home to two cigarette factories—one operated by Philip Morris International and one by Imperial Brands—and a whopping 10 leaf merchants. The renowned Scientific Tobacco Institute of Prilep—the oldest in the Balkans—supplies farmers with certified seeds and researches ways to promote plant health, among other tasks.

But the country’s positive attitude toward tobacco is driven also by economic realities. Generating some $124 million per year, tobacco is Macedonia’s leading agricultural export. The crop provides a livelihood to some 30,000 farm families and thousands more in supporting industries. Those are significant numbers in a country with a population of less than 2 million. What’s more, the net returns of tobacco growing are relatively high in Macedonia; according to Stankoski, the gap between earnings from tobacco and earnings from other activities is bigger than it is in competing tobacco growing countries.
Macedonia is fortunate in that it produces a style—classical oriental—that remains in demand even as global cigarettes sales have slumped. Classical oriental is an essential ingredient in the still popular American-blend cigarettes and the emerging heat-not-burn category. According to local industry representatives, the country’s type of tobacco is used by all major players. Also, as regulators around the world restrict the use of artificial tobacco flavorings, tobacco companies are likely to seek out more tobaccos with strong flavors of their own. Classical oriental fits the bill.
Biljana Gveroska

Only a handful of countries—the other ones are Greece, Turkey and Bulgaria—are capable of growing true classical oriental. With annual production averaging around 25 million kg, Macedonia is second to only Turkey in terms of absolute output. When measured against the size of its population and economy, however, the role of tobacco is much greater in Macedonia than it is in neighboring countries. Attempts to produce the leaf outside of the traditional sourcing areas have been unsuccessful. Reflecting the strong demand and limited supply, this year’s green prices were up by 10 percent over those of last year in Macedonia.
For the reasons outlined above, industry representatives view Macedonia as a sustainable source of classical oriental. Nonetheless, even here, there is concern about the future. At 45, the average Macedonian tobacco farmer is younger than his counterparts in Greece or Turkey, but he’s not exactly a spring chicken, either. Many youngsters view farming as unfashionable. They’d rather wait tables in the city than toil in the countryside. At the same time, health advocates are pushing farmers to embrace other crops.
The tobacco scientific community faces a similar problem. One of the Tobacco Institute’s big challenges, according to senior research fellow Biljana Gveroska, is recruiting young scientists.
Stankoski suspects young people would feel differently if they realized how lucrative tobacco farming can be in Macedonia. The combination of good prices and a guaranteed market, he says, is unrivaled. Part of the solution, he believes, lies in better communication. Another part could come from efforts to make tobacco farming easier. Growing oriental is a notoriously laborious undertaking, and leaf merchants have been looking into ways to mechanize the job. The new tobacco law, too, should help—not only by strengthening the legal framework but also by ensuring that good farmers are well-rewarded.—Taco Tuinstra

May 1, 2018
$1 billion of tobacco exports
The value of Turkey’s exports of leaf tobacco and tobacco products exceeded $1 billion last year, 10 percent up on the value of such exports during 2015, according to a story in the Daily Sabah.
The value of tobacco product exports amounted to $652 million, while the value of tobacco leaf exports reached $358 million.
The tobacco product exports comprised mainly cigarettes sent to Middle Eastern countries, which were worth about $501 million.
Iran was the biggest importer of Turkish cigarettes in 2016, followed by Bahrain and Saudi Arabia.
The US was the main export destination for leaf tobacco produced in Turkey, followed by Belgium and Russia.
Tobacco exports generated the highest foreign currency income for Turkey after hazelnut exports, said the head of Aegean Exporters’ Association Mahmut Özgener.
Özgener added that Turkey had modern tobacco processing facilities and that if legislation were altered so that Turkey could process tobacco imported from overseas, the value of Turkey’s tobacco exports would soon reach $1.5 billion.
January 20, 2017
Cream of the crop
Demand for classical oriental tobacco remains remarkably stable.
By George Gay
Greece is thought to have grown about 18.5 million kg of classical oriental tobacco in 2016, made up of about 12 million kg of Basma and about 6.5 million kg of Katerini. If these estimates turn out to be correct (this story was written at the beginning of December, when both varieties were still being delivered), this is a small crop, even by the standards of the past 10 years, during which production has not been supported by subsidies. In 2015, the crop was about 21.5 million kg, so the drop from 2015 to 2016 will have been of the order of 14 percent.
Yields of both the Basma and Katerini crops were said to have been down because of dry weather, which, by way of compensation, created an excellent-quality Katerini crop and a good, above-average quality Basma crop, and because of a disease problem that was more severe than is usual. But the Katerini crop was down, too, because fewer farmers than in the past decided to grow this variety.
Part of the reason for this lack of interest among farmers was no doubt because of price, a problem whose most recent incarnation started in 2013 when all four of the main classical oriental tobacco producing and exporting countries, Bulgaria, Greece, Macedonia and Turkey, harvested big crops that, taken together, amounted to about 140 million–145 million kg and created an oversupply. The following year, quality suffered, with some observers declaring that the Greek tobacco was of the worst quality for 20 years; so again, prices were down. Prices were raised for the 2015 and 2016 crops, but not by enough to entice the required number of lapsed growers back to Katerini or new growers to enter the field.
Despite the difficult economic situation in many oriental origins, the industry struggles to attract growers and workers.
Making the job easier, slowly
Looking ahead, Nikos Allamanis, doyen of the Greek classical oriental tobacco industry, said Greece believed that it could sell a 2017 crop of 23 million–25 million kg made up of about 14 million kg or more of Basma and 9 million kg or more of Katerini. Given reasonable weather conditions, it seems that the Basma target will be reached, but there is doubt about the Katerini crop. To raise the estimated 6.5 million kg of 2016 to 9 million kg in 2017 would mean, even given reasonable weather, an expansion of the area planted to this variety. Contracts for the 2017 crop have to be completed by the end of April, so there is still time for new and returning Katerini growers to sign up, but how many will do so is in doubt.
One question that arises here concerns why, with Greece’s economy in the doldrums, would farmers not jump at the chance to grow some, or some more, Katerini. Well, the answer perhaps has to do with the fact that growing tobacco is not an easy task, that it has to be carried out away from the bright city lights, so that young people especially are not overly keen to become involved, and that it is one where producers can earn enough to survive, but little more.
Price increases, when they occur, are often small, and growers are urged—and helped—to raise their incomes by increasing yields through the planting of improved seeds, employing good agricultural practices and the introduction of automation systems where possible. This is all very well up to a point, and some growers undoubtedly benefit from the fact that automation allows them to cut down on labor. The trouble is, it takes some time for the specialist oriental tobacco automation systems to be improved to the point where they can move from the test phase to general use—to the point where they can start improving yields and, therefore, raising grower incomes. For instance, Frederick de Cramer, coordinator at Sunel, told Tobacco Reporter in an email that the Vento, or “sock-curing,” method of drying tobacco, which has been tested in Turkey for some years now, was expanding, though the quality of the cured leaf was still “not too impressive.” The system needed to be further improved, he said, and farmers, who generally supported the system, still had to be educated in using it.
Another problem with the automation approach has to do with the investment needed. Oriental tobacco transplanting machines have been improved, and they are helping some growers obtain higher yields by providing better spacing between plants and the establishment of better root systems. But such machines are clearly beyond the financial reach of these farmers, given their incomes, so financial support is needed if the use of these machines is to be expanded, and presumably that support must come from tobacco manufacturers—those who hold the purse strings.
Estimates for the total 2016 classical oriental tobacco crop range from about 100 million kg to 120 million kg.
Difficult demographics
Finally, the age profile of oriental tobacco growers has to be a hurdle when it comes to introducing new systems. In Macedonia, where, according to Iqbal Lambat, CEO of Star Tobacco International, the age of oriental tobacco growers is about 28–40 years, learning new techniques is probably not a problem. But it is probably more of a problem in Bulgaria, where this demographic is said to be about 40–50 years old, and it could be difficult in Greece and Turkey, where many growers are older than 55.
Turning such demographics around will not be any easy matter—though, according to Lambat, tobacco farming is still a multigenerational activity in Bulgaria and Macedonia. Greece and Turkey, in times of good economic growth, both experienced migrations of people to the cities, and while these countries have in more recent times suffered economic setbacks, there seems not to have been a rush back to the villages.
Turkey has clearly suffered major political and social problems in recent times, but even though unemployment is said to have increased hugely, it doesn’t seem that tobacco growing is seen as a desirable career choice for too many people. De Cramer said that the 2016 crop of Izmir tobacco, the main Turkish classical oriental tobacco variety, is estimated to be 40 million–41 million kg, which puts it about 7 percent below that of the 2015 crop of 43.56 million kg, and nearly 27 percent short of the contracted amount of 55.28 million kg.
As with the Katerini crop in Greece, however, a compensatory factor is that the 2016 Izmir crop is of good quality. The share of A/AB grade tobaccos within the whole crop is expected to be high, which should be in line with demand given that some manufacturers were unable to fulfil their A/AB grade requirements from the 2015 Izmir crop. The lower grades—kappa and double kappa—could be short, but these can be replaced easily by other varieties that fall into the blend group.
Given the size and makeup of the Izmir crop, Turkish lira prices are expected to rise by about 12 percent, but export prices will probably be offset to some extent because, in the month before this story was written, the lira had been devalued by about 10 percent.
Outlook
On the supply side, there are some positive signs in Turkey. Returns for some competing crops have not been good, and so tobacco, for which half of the green price is paid in advance, is again being seen as providing a more reliable income. And on the demand side, the election of Donald Trump is seen as possibly providing some relief on the U.S. tobacco products market, the EU market seems to have stabilized, and the Russian market is increasing once again. In any case, the 2017 crop is expected to produce about 44 million–45 million kg, which would be an increase on the 2016 crop of about 5–10 percent.
Estimates for the total 2016 classical oriental tobacco crop range from about 100 million kg to 120 million kg. Demand for this type of tobacco has its roots in premium American-blend cigarettes, and rough estimates based on the size of the market for these products and classical oriental tobacco inclusion rates have for years put that annual demand at 120 million, plus or minus. Of course, this premium American-blend sector has been under pressure because its heartland is in the West, where unemployment has risen and wages have stagnated in respect of the people who make up most of the consumers of these products. Undoubtedly, this pressure is down, too, to the illegal trade since it seems to be generally acknowledged that some nonclassical oriental tobaccos are being grown off-piste and finding their way into illicit cigarettes.
But despite the problems that exist, classical oriental tobacco production seems to be remarkably stable. “Generally, demand for classical oriental is stable, and all of the Balkan countries have been consistently meeting demand over the course of the past four years,” Scott Burmeister, regional director for Europe at Alliance One International, told Tobacco Reporter in an email reply to questions. “However, there have been some shifts from one origin to another depending on the availability of higher-quality tobaccos.
“Over the past few years, manufacturers have been rationalizing markets as they reduce blend complexities. Although the rationalizations have not directly affected classical oriental, we have seen that manufacturers are more willing to shift between origins that they believe to be interchangeable, as long as the leaf meets quality expectations.
“The classical oriental market is moving into an undersupply position due to growing yield reductions. Although the quality of the rendered crops appears to be above average, a shortage of certain styles is predicted.”

January 1, 2017
Stretched thin
Semi oriental tobacco production in Kyrgyzstan
Suppliers of classical oriental tobacco have matched production to diminished demand. Will they be able to accommodate a potential rebound?
TR Staff Report
The market for classical oriental tobacco has shrunk significantly in recent years. Following the European Union’s decoupling of tobacco subsidies from production and Turkey’s withdrawal of support for tobacco growers, production in the main sourcing areas plummeted; Turkey just harvested its smallest crop in living memory. At the same time, cigarette manufacturers decreased their use of oriental tobacco, creating an equilibrium between supply and demand. But as several oriental leaf traders pointed out during a recent visit to Greece, Bulgaria and Turkey, it’s a fragile balance, and the diminished industry would struggle to satisfy a sudden increase in demand.
Oriental tobacco has been famously described as a cigarette’s “salt and pepper” because it lends flavor and kick to tobacco smoke. Oriental tobacco is an important component of American-blend cigarettes, which rapidly gained popularity in the second half of the 20th century. But as cigarette sales started stagnating in the United States and Europe—the world’s leading American-blend markets—demand for oriental declined accordingly. Most of today’s growth markets are located in Asia, where smokers prefer Virginia cigarettes.
Also, in an effort to cut costs, manufacturers have been replacing premium oriental tobaccos with less expensive varieties and compensated for the loss of aroma with flavorings. This too has had an impact on demand for the classical oriental varieties. Nikos Allamanis, a Greek tobacco industry expert, estimates current global supply and demand of classical oriental tobacco at between 100 million and 120 million kg.
Production
On the supply side, production of classical oriental varieties has been affected by the withdrawal of support by the European Union and national governments. The Greek tobacco industry, for example, is a shadow of its former self. Whereas in the past the country’s growers could harvest more than 100 million kg of multiple tobacco varieties in a given year, they grew only two types of oriental in the most recent growing season—10 million kg of Basma and 10 million kg of Katerini (there’s also been a cautious revival of flue-cured Virginia production this year). The number of oriental leaf traders has shriveled along with the crops. Of the 22 companies operating in Greece in 2004, only four companies remain: Leaf Tobacco A. Michailides, Gleoudis, Missirian and SEKE. Socotab, which has a partnership with Universal Leaf, continues to trade Greek tobaccos but processes in neighboring Bulgaria. According to some estimates, there are about 15,000 tobacco farmers left in Greece, compared with more than 50,000 before decoupling.
On the bright side, the discontinuation of production subsidies has brought about a shift from quantity to quality. “Decoupling has weeded out the growers who cared only about volume,” says Nikos Tzoumas, managing director of Missirian. Once exposed to market forces, only the best growers could stay in business—growing in proper soils and following good agricultural practices. With the support of agricultural development programs, oriental tobacco cultivation today is concentrated in the regions of Thrace, East Macedonia and Central Macedonia. What’s more, today’s farmers are real farmers. Before decoupling, some “growers” were simply buying tobacco from others.
Bulgaria
Production of classical oriental tobaccos in Bulgaria has been relatively stable, hovering near the 20 million kg mark during the past few years. But Michail Papanastasiou, manager of Leaf Tobacco A. Michailides’ recently opened Sandanski factory, is bracing for a 20 to 25 percent drop in the upcoming season, which he attributes to the discontinuation of national production subsidies and a decline in commercial prices. Subsidies currently account for 40 percent of the money farmers receive for their leaf.
“Bulgarian growers will lose almost half their income overnight,” says Papanastasiou. He expects peasant farmers to continue growing tobacco because they have no alternatives. “Maize, wheat and sunflower don’t provide the same level of income,” he says. “And they don’t come with a guaranteed market like tobacco does.” But larger tobacco growers are likely to switch to such crops because they can make up for the lower per-kilo price with volume.
With their livelihoods threatened, Bulgaria’s tobacco growers have taken to the streets. The government is unlikely to be swayed by their protests, however, as the economic slowdown has depleted its coffers.
Turkey
Like in Greece, production of classical oriental tobacco has declined significantly in Turkey. The trade is looking at about 51 million kg of Izmir, Basma and Samsun this season—the smallest Turkish harvest on record. The decrease in Turkey was driven by the dismantling to the state monopoly, Tekel, which used to buy all unsold tobaccos at declared prices. For many years, this guaranteed uptake artificially boosted production, resulting in huge stocks and market distortions. At one point in time, Tekel was said to hold an inventory of 450 million kg. Those stocks have dwindled following privatization, and dealers estimate the former monopoly has only 11 million kg left, which will likely be sold within the next two years.
Without subsidies, farmers have found it difficult making a living growing tobacco. According to one trader, a kilo of tobacco used to cost the same as a bottle of raki, a popular Turkish drink. Today, a bottle of raki is much more expensive. And whereas in the past a typical farmer could buy a car with the income from a season’s tobacco crop, today he would be hard pressed to do so. Unsurprisingly, many farmers have abandoned tobacco growing. Currently, there are about 40,000 tobacco farmers in Turkey, compared with 62,000 only two years ago. This trend is likely to continue: The farmers who remain are aging, and their children would rather work in the cities than toil on the lands.
No slack
The attrition of tobacco farmers has merchants worried. While global supply and demand of classical oriental tobaccos are reasonably balanced today, it would be hard for the industry to accommodate a sudden increase in demand.
Such a reversal of fortunes for oriental leaf isn’t entirely unthinkable. During its November meeting in Uruguay, parties to the World Health Organization’s Framework Convention for Tobacco Control agreed to take action against cigarette ingredients. And while it remains unclear exactly which ingredients might be targeted, some fear it could result in a de facto ban on burley tobacco.
Without burley and additives, oriental is the only option to enrich the flavor of cigarettes. Regulation aside, consumer preferences also appear to be shifting toward more natural products, such as Santa Fe Natural Tobacco Co.’s American Spirit brand. Even multinationals have been launching additive-free versions of their flagship brands. Frederick de Cramer, general manager of Sunel Tobacco Co., has also noticed increased interest in classical oriental tobaccos from some nontraditional markets. Indonesia in particular has been a growth market for his company. “Turkish oriental blends well with the local tobaccos there,” he says.
At the same time, traders are keeping an eye on China, which is believed to be developing a blended cigarette with small amounts of oriental. Even if such a cigarette would include only 2 to 3 percent oriental, its impact could be huge, given the size of China’s cigarette market. China’s State Tobacco Monopoly Administration is reportedly also relaxing its concerns about blue mold. Traditionally, it has bought only tobaccos that are at least three years old, but it is said to be reconsidering that stance, possibly reducing the waiting time to one year.
While it’s always difficult to predict the market’s future requirements, and how the industry would respond to a possible ban on ingredients, the trade has its work cut out. Because so many growers have abandoned tobacco in the traditional growing areas, even a slight increase in demand would leave suppliers scrambling.
The industry has been working to develop new growing areas. Leaf Tobacco A. Michailides, for example, has been experimenting with oriental in several nontraditional areas and has been particularly enthusiastic about its results in India.
Sunel is active in Kyrgyzstan, while limited amounts of oriental are also grown in China, Thailand and certain Soviet Union successor states. But as one dealer points out, oriental leaf is finicky about soils and climates. Outside of the traditional growing areas, it is difficult to achieve the desired aroma and softness. The oriental varieties produced outside of the traditional growing areas do not compete directly with the classical oriental grown in the southern Balkans and Turkey.
The key to sustaining production in the traditional areas is farmer viability. “We need to give our growers better returns,” says De Cramer. To achieve this, tobacco companies in Greece and Turkey have been helping farmers increase yields and reduce their cost of production.
In Greece, leaf merchants have started buying tobacco earlier in the season—right after curing. The farmer gets cash in his pocket quicker and he doesn’t have to deal with storage. Of course, dealers take on extra stock under this scenario, but they are better equipped to do so than the farmer.
Traders have also been pushing the float system in Greece. “We first offer it free of charge to encourage the farmers to try it and then initiate their involvement in such practices,” says Tzoumas of Missirian. “We want to show farmers that they don’t have to run their business in the way their grandfathers did.”
At the same time, the industry has been moving toward more cost-effective packaging methods, abandoning time-consuming and expensive baling practices.
Because labor is the single biggest cost factor in oriental tobacco production, some dealers have been looking into mechanization of the process. Missirian, for example, has been working on a harvesting machine in cooperation with the engineering firm VIT. If successful, a harvester could change the cost calculation of oriental tobacco production completely.
Not all sourcing areas are equally suitable to mechanization, however. De Cramer says opportunity for mechanization in Turkey is limited because of the hilly topography of many tobacco plots and the limited support infrastructure in the villages. And the float system, he says, would be “a step too far” at this time in Turkey.
Instead, the Turkish industry is focusing on boosting yields through the use of certified seed and good agricultural practices, which should also help improve farmers’ margins.
In their efforts to sustain production of oriental tobaccos in the traditional growing areas, traders throughout the region are counting on the support of their customers. As one merchant points out, if cigarette manufacturers want more oriental tobaccos tomorrow, they had better make sure there will be farmers to grow it.
March 1, 2011