Changing perceptions

| November 12, 2016

U.S. tobacco is generally regarded as the world’s best. The U.S. Tobacco Cooperative wants to ensure it also gets credit as such.

TR Staff Report

Founded in 1946, the U.S. Tobacco Cooperative (USTC)—a grower-owner cooperative comprising more than 750 member growers throughout North Carolina, South Carolina, Virginia, Georgia and Florida—has spent the past 70 years securing its status as a key player in the tobacco industry. And for the past several years, the Raleigh, North Carolina-based organization has undergone a series of significant transitions designed to help highlight U.S. flue-cured tobacco as the most sustainable and compliant tobacco crop in the world.

From officially changing its name in 2008 and renovating its headquarters building in 2015 to purchasing several new marketing centers in recent years, breaking ground on a new green storage facility in July and consistently hiring top talent, USTC has reinvented itself as a company and is changing the way the world views the U.S. flue-cured tobacco supplier and its members’ crops.

While USTC has made significant strides toward changing the industry’s perception of the company itself, its latest focus is on educating industry stakeholders on the intrinsic value of tobacco grown on U.S. soil versus crops grown outside the United States.

Stuart Thompson

Stuart Thompson

“There are many benefits to the U.S. crop,” says USTC CEO Stuart Thompson. “Child labor here is virtually nonexistent. There is no deforestation. There is no problem with tobacco replacing food crops. Our growers abide by good agricultural practices. These are the largest commercial tobacco farms in the world. They are highly efficient, and our growers are precision farmers. We have a core group of very loyal growers who bring us the absolute very best tobacco that they have, and they do that every year. These growers have proven that, despite challenging weather conditions, they can produce year in and year out. We know the U.S. crop is the key ingredient in virtually all premium blends. It’s sustainable, it’s socially responsible, and it’s secure. Our hope is to highlight that to the global markets so that people will rely more on U.S. flue-cured tobacco.”

Although some in the industry are aware that the U.S. flue-cured crop is the highest-quality tobacco available today, according to Thompson, U.S.-grown leaf has not received sufficient recognition for its intrinsic value. So USTC has set its sights on promoting the benefits of U.S. flue-cured tobacco—benefits that are passed down from the grower level to the leaf suppliers to the manufacturers and, ultimately, to the consumers who purchase the products. U.S. growers self-finance, a burden borne by suppliers in many other origins along with the associated bad debts. The U.S crop is dollar-based, eliminating currency risk. Because of the sophistication of the U.S. grower base, suppliers do not have to maintain large agronomy teams to assist growers. All of these costs are borne by the U.S. growers and included in their green price.

USTC is not content to simply say that U.S. tobacco is the best; the company is backing its claim with data.

“You have to look at the United States and the resources that are here—in terms of water, land, food sufficiency and environmental protection—and then compare that to tobacco crops grown in lesser-developed countries, where there is population pressure, climate change, food shortages, and where water is becoming a critical issue,” says Jim Schneeberger, USTC’s vice president of business development. “In other countries, the questions are already being asked: ‘Why are our natural resources, like water, being used to grow tobacco rather than food?’ Overall, with our climate and environment in the U.S., we’re not sacrificing food crops to produce tobacco—and in many cases, tobacco complements other rotation crops. It’s very difficult when you have people struggling to produce food and they are being told, ‘Don’t grow your crop on the riverbank because it will cause erosion.’ For them, it’s not a choice. They have to grow that crop to survive.”

“I think something that we pass over is just the consistency and the size of the commercial farming operations,” says Thompson. “The grower base here in the U.S. is made up of precision farmers, and they are excellent at solving problems that happen in the field. At North Carolina State University, we have the pre-eminent tobacco research facilities in the world, which is an important resource for the tobacco industry.”

Because of the sophisticated techniques used to produce this crop, buyers who source their premium tobacco from U.S. farmers can rest assured that they will ultimately end up with their requirement each season.

”What this means is that the U.S. growers will produce the styles that are in demand year in and year out with what they need,” says Thompson. “So for manufacturers that are focused on having their consumers having a consistent experience, they need to think about sourcing tobacco from origins that are going to be consistent year in and year out. That’s why I think the U.S. crop is really key and that our customers would be wise to look to the U.S. to source more of their core grades.”

According to Schneeberger, this consistency is particularly important for manufacturers of premium brands with loyal followings that can’t afford to deviate from the high-quality blends their consumers are familiar with.

“The fact that we don’t have a lot of the issues that affect the lesser-developed countries is part of the intrinsic value of the tobacco in this market,” he says. “Manufacturers don’t have to worry about their brand’s quality being jeopardized or their brand integrity being put at risk because of the compliant production model here in the U.S. So we are really assisting the manufacturers secure their brand integrity by guaranteeing the integrity of our U.S. flue-cured crop.”

Although it’s simple to state that U.S. flue-cured tobacco is the best in the world, it’s imperative for leaf suppliers like USTC to substantiate such a claim with actual data gathered from the farms where the flue-cured crop is grown. USTC has taken several steps to prove their growers’ crop is top quality, the most significant of which is initiating independent third-party audits for 100 percent of its grower base.

“Many of our growers have multiple contracts that require high standards,” says Thompson. “We felt we needed to jump to the forefront in promoting the sustainability of the U.S. crop. So we took the position that we’d do 100 percent independent audits of all of our growers. And as far as we know, no other major leaf supplier in the U.S. is doing this. Several companies conduct 100 percent audits, but no one else does 100 percent independent audits.”

“It’s expensive for us, and it’s time-consuming for our growers to conduct those audits,” says Thompson. “We’ve also launched our own audit platform, where our own leaf department is doing assessments on every farm visit as well. We just don’t think the U.S. crop has been getting the credit for its sustainability and social responsibility that it deserves, and we want to highlight that. Whether buyers decide to purchase from us or not, we want them to recognize just how good the U.S. crop is.”

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Earlier this year, USTC broke ground for an expansion of its operations in Timberlake, North Carolina.

Social responsibility and sustainability may be the key focus of the new goals USTC has set forth, but for USTC, the focus on social responsibility and sustainability doesn’t stop at the grower level—it also spills over into the production process.

Earlier this summer, the company broke ground on a brand-new, $13 million green storage center in Timberlake, North Carolina, which will complement its current leaf processing facility.

“We continue to make investments with the goal of reducing our green conversion costs,” says Thompson. “We’re adding 150,000 square feet of green storage at that site, so the total facility will be just under 600,000 square feet. By investing in this new green storage facility, which will be up and running for the 2017 season, USTC is further reducing operating costs on a significant scale.

“With this addition, we’ll be able to store 10 million pounds at the plant, so if we need to make changes to the blends to meet a customer’s needs, we can do that right there. It will generate significant savings and process improvement.”

Perhaps the most notable aspect of USTC that sets the company apart from other leaf suppliers is their unparalleled investment in their growers. In the past five years, USTC has returned more than $42 million in patronage dividends to its members.

“People like our story, and they like our patronage,” says Thompson. “They like the idea that we work for growers. They like the idea that we send profits home. It’s very compelling. We look to maximize our profits and we look to maximize the amount that we can send back to our growers. That formula seems to be working well.

Whether they are investing in their growers by returning profits in the form of patronage dividends or purchasing new facilities to reduce operating costs, USTC is well-positioned to succeed in their goal of promoting U.S. flue-cured tobacco to those within the global tobacco industry.

“What we’d like people to do is to really think about us as the premium supplier in the U.S. Our larger customers consistently tell us that we score the highest in quality,” says Thompson. “Because we actually do what we say we’re going to do. We’re very transparent. We’re the real deal. If somebody wants the best U.S. leaf, which also happens to be the best in the world; if they want to get it from someone who is deeply committed to social responsibility; if they want to do business with someone that is financially sound; if they want to do business with somebody that is only interested in integrity—we’re the best match.”

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