Tobacco Asia

Volume 19, Number 3

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62 tobaccoasia / Issue 3, 2015 (July/August) Starting in April of this year, Philip Morris Inter- national Inc. (PMI) changed its approach to ac- quiring leaf tobacco. In what it called a new "mod- el" of leaf procurement, the company elected to end its direct purchasing of US tobacco through contracts with growers and instead went 100% to acquiring US leaf through dealers. Two dealers, to be specific: Alliance One International (AOI) and Universal Corporation (Universal). The traditional interface between buyer and grower that had been in effect for so long (if you count the history of PMI's parent company, Philip Morris) was erased with the signing of legal documents. The conversion seemed to run strangely coun- ter to the strategies of the two Asian companies that came into existence in American in the last five years. In 2010, Japan Tobacco International created a new leaf company in Danville, Va., for the pro- curement and processing of US leaf tobacco and called it JTI Leaf Services (JTI LS). Dealers were, and still are, involved: it was a joint venture with leaf dealers Hail & Cotton of Springfield, Tenn., and J.E.B. International of Danville, Virg. But JTI LS' goal was to contract directly with American farmers—face to face, so to speak—to supply JTI's needs for quality leaf. It has set up a process- ing plant in a pre-existing building. Three years later, China Tobacco International made a similar decision when it created its subsid- iary China Tobacco International North America (CTI-NA) and established an office for it in the Raleigh, NC, area. Like JTI GS, the help of deal- ers has been sought, but the company has been committed to direct contracting with the growers. As far as is known, the company hasn't set up a processing plant to date. Now, if things are as they have been described by the three companies, then it is apparent that there is a significant contrast between the two Two Philosophies of Leaf Procurement Compete in the US By Chris Bickers A flue-cured tobacco "live" auction takes place at the Big M Warehouse in Wilson, N.C., in 2013. Owner Mann Mullen (at left among those following the sale and wearing a blue shirt) says that far from being obsolete, the auction system allows farmers to get the best price available. But there has been a change at Mullen's warehouse: He now runs a "sealed bid" auction where buyers review the tobacco one bale at a time and make their bids in writing. Visible among the buyers is dealer Rick Smith of Independent Leaf Tobacco (right).

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