Tobacco Asia

Volume 18, Number 5

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62 tobaccoasia TOBACCO LEAF 烟叶新闻 WHO SAID WHAT? Uganda BATU ends leaf business After 86 years in this business, British American Tobacco Uganda (BATU) is going to discontinue its leaf growing and export business at the end of the year. According to BATU managing director Jonathan D'Souza, the decision was made after the company's biggest client – British American Tobacco Global Leaf Pool Limited (GLP) – selected for another player. "Tobacco is an agricultural crop, and like any agricultural crop it is affected by many risks especially weather changes," said D'souza. "Tobacco is a low-risk, low-return business. I do not think the shareholders should be disappointed. We have been in a similar situation before without a specific customer for our tobacco leaf and it was detrimental. We will now focus on importing and distributing cigarettes and growing our brand equity." BATU finance director Paul Claude Sine indicated they would either rent out or sell existing infrastructure for leaf operations after purchases from 14,717 farmers from Arua and Bunyoro later this year. He also pointed out that margins on the cigarette business were higher and more consistent than those on the tobacco leaf business, so Uganda will now import Kenyan manufactured cigarettes, with BATU handling the local distribution and sales. BATU has been scaling down its operations in Uganda since 2005, when it closed a Jinja-based cigarette factory, the first such closing since 1928. In 2013, it also closed its main Kampala plant. Indonesia Indonesia fights Aussie laws Indonesia officially submitted a written complaint in October 2014 with the World Trade Organization (WTO) against Australia's plain packaging of tobacco laws, a dispute between four tobacco-producing nations – Indonesia, Cuba, the Dominican Republic, Hondu- ras, and Ukraine – and Australia that goes back to the implementation of Australia's 2011 Tobacco Plain Packag- ing Act in early 2012. The sixth biggest tobacco product producer in the world and the 13th biggest tobacco leaf producer, Indone- sia's tobacco industry provides more than six million jobs. Indonesia alleges that Australia's plain packaging laws violate several WTO trade rules, including an agreement on trade-related aspects of intellectual property rights and an agreement on the technical barriers to trade. Indonesian Trade Ministry director- general Bachrul Chairi said his country's objections is that Australia had intro- duced the plain packaging act without scientific proof that the measure would be effective and that no better alterna- tive exists. He also said that Indonesia was forced to take its stance after talks through a bilateral approach failed. US China biggest importer of US leaf A landmark in the export of American leaf to China was passed in the 2013 marketing year: It was the first marketing year in which exports of US flue-cured to China exceeded exports to the European Union. That was in part because exports to the EU-27 continued their downward trend, falling from 77.5 million pounds for the 2012 crop to 63.8 million pounds for the 2013 crop. Exports to China, on the other hand, continued their upward trend, increasing from 59.8 million pounds for 2012 to 73.9 million pounds for 2013. Demand from China continues to be strong, but US supply has been ham- pered by adverse weather that has affected both quantity and quality of recent crops. A strengthening US dollar may also impede export growth to any source in the near term. However, much larger US produc- tion in 2014 should result in an increase in exports of the 2014 crop. Domestic use has trended downward with declining US cigarette consumption (table 2), but has been volatile in the last few years. Kosovo McCroft factory agreement Star Tobacco has entered into a management agreement with the shareholders of MTF under which Star will have the exclusivity to utilize and market the production capacity of the MTF Factory. The MTF facility is located close to the port of Durres in the Adriatic sea offering excellent logistics to North Africa, Turkey and the Middle East. It is the only tobacco manufacturing facility in Kosovo and holds an official monopoly on local production. As Star's business and engagement with government monopolies in North Africa and the Middle East is on a positive upward momentum, the strategic location of this production hub coupled to low operating costs makes this an excellent business development opportunity for the company. Commercial startup is scheduled for March 2015. "More than 1 in 5 cigarettes consumed in [the United Kingdom] have had no UK duty paid on them. It is vital that the whole tobacco supply chain stands up to this problem to help safe guard the livelihoods of hard- working retailers and protect our communities from this criminality." - Peter Nelson, Imperial Tobacco Anti Illicit Trade Manager

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