Tobacco Asia

12 tobaccoasia Issue 4, 2025 July / August Q&A THE TA Q A By Thomas Schmid JTI is among the "Big Five" global tobacco and nicotine product manufacturers. Since 2009, when JTI acquired leaf suppliers in Brazil, the US, and Africa, the company has been continuously evolving in its tobacco sourcing footprint. Sourcing tobacco leaves from over 30 countries, JTI employs a diver- sified strategy that emphasizes close col- laboration with suppliers and developing of vertically integrated leaf operations to fulfill the demand for high-quality raw materials. Tobacco Asia spoke with Paulo Saath, vice president of global supply chain leaf, from the Geneva-headquartered global tobacco powerhouse. Tobacco Asia (TA): At which point in the past did JTI decide that it would be more cost-effective and provide greater operational flexibility and efficiency if the firm established its own sourcing network? Paulo Saath (PS): Prior to 2009, JTI sourced all of its tobacco from third-party suppliers. Then, starting in 2009 and following the acquisition of leaf suppliers in Brazil, the US, and Africa, we began to directly contract growers according to JTI's grading and blending specifications. The initial investments in these operations were significant, focusing on the modernization of processes, equipment and systems and the development of our people. Therefore, we did not expect any short-term gains. However, we were confident that building the right capabilities would not only deliver mid to long-term benefits in cost efficiency but also drive the quality of our products and strengthen the resilience of our raw materials supply. But with the addition of enhanced agronomy practices as internally defined in our Minimum Agronomic Standards (MAS), this model became very competitive, helping us build a more resilient supply chain. TA: How much of your raw materials are you presently sourcing through direct contracting? PS: About 50% of our tobacco is sourced through directly contracted growers today, with JTI-owned processing facilities in Brazil, the US, Malawi, Serbia, Japan, Bangladesh, and Ethiopia. In other operations – such as in Tanzania, Zambia, and Turkey - JTI manages the relation- ship with growers as well as the production and purchase of leaf and outsources the leaf process- ing services. Direct contracting enables us to produce customized crops, enhance grower productivity, efficiency and leaf quality, and ensure the traceability and integrity of our products. It also enables the monitoring of labor conditions on farms and supports the efficient use of resources at farm level. [Our] operational model ensures a stable supply of high-quality tobacco leaf to JTI at a very competitive cost, mitigating risks and challenges as well as potential disruptions. TA: In how many countries does JTI have leaf operations at present, and of those, which ones do you deem the most important and productive for the company, and why? PS: We presently source tobacco from 36 countries worldwide, either directly through our vertically integrated operations or through third-party leaf suppliers. We currently work with approximately 69,000 directly contracted growers in Bangladesh, Brazil, Ethiopia, Japan, Malawi, Serbia, Tanzania, Turkey, the US, and Zambia, whereas each sourcing country has its strategic importance for our business by delivering cost competitiveness, high quality leaf, regulatory and tax compliance, and so on. Paulo Saath, vice president, global supply chain leaf, JTI. JTI's Global Leaf Operations

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