Future for flue-cured tobacco lies overseas
Jun 12, 2006 9:37 AM, By Chris Bickers
The future for flue-cured tobacco lies overseas. The only hope for expanded sales of U.S. tobacco lies in development of foreign markets.
Kirk Wayne, president of Tobacco Associates, an organization that promotes the export of U.S. flue-cured leaf, told the annual meeting of his organization that there have been some recent successes in maximizing overseas markets.
But it hasn’t been easy. “The key to success includes a good quality product, appealing packaging, proactive and well planned marketing sales strategy,” said Wayne. “Funding is needed to support the brand, along with solid consumer insights, extensive input about the market, and total organization buy-in and commitment.”
There have definitely been some success stories. Who would have predicted a few years ago that Vietnam would one day be a significant user of U.S. flue-cured? Thanks in part to Tobacco Associates’ efforts, American bright leaf is finding its way into a number of Vietnamese cigarettes.
• The Aroma brand, marketed in North Vietnam, has already proven to be a success, and has become its manufacturer’s top-selling brand with 2005 sales exceeding 30 million packs, said Wayne. “Since Aroma’s introduction in November 2000, leaf purchases by the manufacturer — Bac Son Cigarette Factory — have roughly doubled annually due to growing consumer demand.”
• Sunbird, another Bac Son cigarette marketed in North Vietnam, is in its early stages of product introduction. Americans are hoping it does well. Sunbird has the highest U.S. tobacco content of any brand currently marketed in Vietnam.
• Paladin, an all-flue-cured brand aimed at the premium market segment, will be launched this year by another Vietnamese manufacturer, the Saigon Cigarette Factory, and it is working on an American-blend brand yet to be named.
•Thanh Hoa Cigarette Factory, yet another manufacturer that has received assistance from Tobacco Associates, has developed an extension for its popular Vinataba brand which should be introduced later this year, said Wayne.
And there have been success stories in other overseas markets. Among those listed by Wayne were:
• Matrix , launched in November 2002 by Continental Tobacco Group in Hungary, has performed well and is now marketed in Austria, Belgium, Czech Republic, France, Germany, Hungary, Italy, Netherlands, Slovakia and Spain. The brand and all extensions (full flavor, lights, and ultra lights) deliver quality taste from the U.S. tobacco core, said Wayne.
• Chopper, a brand whose packaging features eye-catching motorcycle imagery, was launched in December 2004 by the Thailand Tobacco Monopoly and has made an impression in the Thai market.
But the outlook is not terribly optimistic for U.S. tobacco producers, said Farrell Delman, president of the Tobacco Merchants Association.
World cigarette consumption is in a long-term decline, and stocks are stable, Delman told the Tobacco Associates audience. And consumption of cigarettes of the American blend — that combination of flue-cured, burley and Oriental tobaccos that has been so popular over most of the last 100 years — is stagnant worldwide.
The solution is for American growers to go out and make something happen.
“Leaf exports provide the only hope for increased utilization of American flue-cured given the ongoing decline in the U.S. cigarette market,” said Delman.
“Burley will do better in the new price environment so grow more burley,” he advised growers.
There is some growth in key foreign markets. Some Asian and former-Soviet Union markets are opportunities. But stable export development funding will be vital to make any headway here.
Jerry Jenkins, a flue-cured grower from Blackstone Va., and the president of Tobacco Associates, told farmers at the meeting that the opportunity created by the recent price reduction will be a brief one.
“We have a window of opportunity now,” Jenkins said. “We need to act on it. We need to assure adequate funding of this organization.”
The last thing American farmers want to appear as is “unwilling or unable to compete on the world market...The future is now!”
Wayne concluded with a similar plea for continued farmer commitment to export promotion.
“In my career with this organization, I can honestly state that Tobacco Associates has never been more effective,” he said. “We have genuinely dedicated personnel, a team of superior consultants and agents, important and personal contacts abroad and programs that are in real terms building new customers for U.S. flue-cured. Now is a critical time to strengthen and expand the programs of Tobacco Associates.”
There was some marketing news among burley farmers and their representatives attending the meeting. The Tennessee/Virginia/North Carolina burley cooperative is partnering with a small tobacco company to produce a new cigarette that will be called Nashville.
“We are working with Wind River Tobacco Company of Jackson Hole, Wyo., to make Nashville, a cigarette whose burley component will be 100 percent American grown,” said Charles Finch, managing director of Burley Stabilization Corporation in Knoxville Tenn. “We feel like a good quality cigarette reasonably priced will sell well. We need something to support our farmers and this is one way of doing it. If we get into a profit mode, we will be able to return some of the profits to our farmer members.”
George Marks, a burley and dark tobacco grower from Clarksville Tenn., said Nashville will use some of the burley loanstocks and may well end up using some flue-cured loan stocks also.
“It will be a hands-on product for the grower,” said Marks, who is president of Burley Stabilization Corp. “We wanted to do something to help ourselves in our current situation.”
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