Tobacco Asia

Tobacco Asia 13 Q&A THE TA FT: Well, kretek is certainly a focus for us in Indonesia, and in fact Indonesia is one of our biggest markets for flavors and fragrances. We have three different factories around Greater Jakarta. I also can disclose that, starting sometime next year, we expect to begin producing capsules there as well, because the capsule business is still growing in the region, and especially in Indonesia. But we also can serve East Asia from there. TA: Competition is nevertheless very stiff. In Indonesia, for instance, MANE has to compete against companies like Trisarti, fellow French outfit Argeville, and of course Germany's Hertz Flavors, the latter having its own tobacco sector-dedicated factory near Surabaya in East Java. How does MANE prevail against this overwhelming competition? FT: Our philosophy is that there is space for everybody. Of course, we are competing against them, but our goal is not to be the number one in the flavor and fragrance industry. Our goal is to grow and transfer a healthy company to the next family generation to continue serving the industry in the best way possible, closely collaborating with the tobacco sector also. We understand from our vast experience that the tobacco sec- tor is not so different from other industries. Building a good relationship and being a trustable partner is tantamount. TA: So it's not cutthroat competition you are after, but rather organic and sustainable growth? FT: Exactly. TA: MANE also has a factory in Thailand, just north of Bangkok. What are they doing? FT: It's actually one of the biggest factories that we have in Asia. However, they are focused on perfume fragrances and flavorings for other commercial products, not tobacco flavors. The reason for that is that Thailand still maintains a tobacco monopoly in the form of the Tobacco Authority of Thailand [TOAT]. Anyway, Southeast and East Asia is already served by the Indonesian facilities. TA: How about China, which has a very strict tobacco monopoly as well? FT: That's true. But just so you know, our factory in China is 100% owned by MANE. We don't have a joint venture with the Chinese government. It's a very unusual arrangement. Also, only last year, we opened a second factory, in Pingu, just a one- and-a-half-hour drive outside of Shanghai, where our original factory is located. We are not only serving China from these two facilities but also export to the rest of Asia. China herself is very complex in terms of tobacco, of course. So it's impera- tive to be active there. It's where the biggest tobacco business is for MANE. TA: Marvelous. And the Middle East, Fabrice… what's going on there for MANE? FT: It's certainly one of the regions where tobacco is signifi- cant, where you have diverse applications, like shisha. We do very good business there; also in the cigarette industry because the Middle East hosts some of the latest independent tobacco companies that have so far escaped "Big Tobacco's" acquisi- tion drives. Nicotine pouches are also taking off big time there, and we will probably see a lot of new investment in that field. TA: Are you producing on location in the Middle East? FT: No, we don't have any production facilities there yet. We are serving the Middle East from France. TA: Turkey… you surely must be doing something there… and India? FT: Yes, we do have significant business in Turkey, of course, because obviously the country is a true tobacco industry hub. India likewise holds a lot of business opportunities for MANE. We acquired a company called Kancor there 8 years ago, giving us local access to the tobacco business in the region. TA: Overall speaking, which world markets would MANE deem its most important ones in terms of tobacco and related products? Does any region stand out? FT: It's quite evenly spread out in terms of business or reve- nues, really. But in terms of activity, I would say the one region that is for sure growing for us is Asia in general. Moreover, as I already mentioned, there is Indonesia but also India. India still has countless independent [tobacco] companies around and we are aiming at their oral products, you know, Indian-style chew- ing tobacco and this kind of thing. TA: Alright, we have covered pretty much everything about Asia. Europe I almost do not need to mention, as MANE has always been very strong there. But how about the big elephant in the room, Russia? FT: Uh, Russia… it's a country where we used to have busi- ness. But I am sure you have heard that the EU imposed a new set of sanctions on Russia on July 20, including tobacco flavors. So, we are not allowed to deal with Russia anymore. TA: Okay, so let's summarize our little chat about MANE's global strategy in a few sentences, please. FT: Well, our global strategy is to maintain our capsule activi- ties. Notwithstanding the fact that capsule filter cigarettes were banned in the EU in 2015, it's a booming segment elsewhere – and again particularly in Asia. As a patent holder and as a leading capsule producer, this is really important for us. And then there also is rising demand from the tobacco sector in terms of flavors for cigarettes, for vapes, for nicotine pouches, and other nicotine delivery products. MANE is trying to meet all needs as much as we can by being different from our competitors in terms of what we offer. The tobacco industry is very, very innovative. They have to be, considering all this pressure from regulations and legisla- tions. Do you know of any other industry that is so creative? I don't. But we at MANE will be ready for any surprises that may come along. After all, it is this readiness that has sustained our company for over 150 years.

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