Moving mainstream

| November 1, 2016

Will organic tobacco be able to break out of its niche?

By George Gay

In writing about organic tobacco two years ago, I tried to imagine why a consumer might buy cigarettes made of such tobacco, given that they would presumably be more expensive than would the general run of cigarettes. I speculated, without much conviction, that there might be a taste factor, or at least a perceived taste factor. A more likely reason, I thought, was that smokers who were generally well-informed, altruistic and better-off financially might make the decision to switch to organic cigarettes on the basis that encouraging the production of organic crops rather than conventionally grown crops was good for the environment.

And then there was the health argument. Some people, we are told, either consciously or unconsciously, equate organic with health even in regard to tobacco. Most smokers, I think, would probably assume that the danger they face comes mainly from inhaling smoke produced by burning tobacco, whether that tobacco is organic or not, but, two years ago, I suggested that even some better-informed smokers might believe that, since organic cigarettes have fewer additives than do traditional cigarettes, and, since, as anti-tobacco activists tell us, the additives support the addictive nature of cigarettes, organic cigarettes would allow you to break your habit sooner and to reap the health rewards that earlier quitting promises to deliver.

I have to say that I wasn’t particularly convinced by this argument, but, taking a look at the internet the other day, I saw that this line of thought is more common than I had imagined. You can read testimonials by people who say that they have used organic tobacco to wean themselves off smoking. And perhaps they have.

In the middle of September, a story by Sara Chodosh on the Popular Science website, www.popsci.com, claimed that “[n]icotine needs you just like you need it.” “That sweet release of dopamine only happens if you really believe in it,” she wrote. “A new study in Frontiers in Psychiatry found that only smokers who thought that their cigarettes contained nicotine got the satisfaction of smoking. Anyone who was told they weren’t getting nicotine—even if it was a normal cigarette—was left unsatisfied.”

Is it, I wonder, such a big jump to say that people who smoke organic cigarettes believing them to be less addictive than traditional cigarettes are able to quit more easily than if they had stuck to traditional cigarettes?

If we accept for a minute that this is true, then we come up against the question of whether tobacco manufacturers should convert as many of their products as quickly as they can to organic tobacco. And at this point there are a couple of things to consider. One is whether quitting is easier with organic products because the way in which the nicotine is delivered is less addictive; the other is whether quitting is easier only because smokers—or that would surely have to be, some smokers—believe that that is so. In the first case, it would seem that the ethical approach for manufacturers, at least in so far as their customers are concerned, would be to go full out for conversion.

organic-leaf

Don’t says so

But things become more difficult in the second instance because of the fact that, in some jurisdictions at least, it would not be possible to tell smokers that the tobacco they were smoking was organic. And in this case, providing smokers with organic products would be as pointless as winking at a girl in the dark.

Is this important? I think so. I have heard of one instance where a manufacturer gave up on an organic tobacco production project because it was not allowed—along with other manufacturers, of course—to mention in one of its major markets that the tobacco included in its cigarettes was organic.

Is this perhaps a case of unintended consequences? I often look at outcomes that are declared as unintended consequences and wonder whether there wasn’t more intention about them than meets the eye. But in this case, it might be that what has happened wasn’t foreseen. In not allowing a tobacco manufacturer to get across the organic tobacco messages, the rule makers might have ensured inadvertently that some smokers will take longer to quit their habit than they otherwise would have done. And at the very least they will have ensured that some tobacco will be grown conventionally rather than organically, with the environmental consequences that implies.

Incentives will be vital in determining whether organic tobacco will thrive or remain a marginal product.

The people I consulted on this issue had widely differing views. In one camp were those who, like Rainer Busch, shareholder and general director of NewCo, thought that organic tobacco had little future because, on an increasing number of markets, manufacturers would not be able to inform consumers about the tobacco’s provenance, starting in those more affluent markets where smokers were more likely to buy into the organic message. Others, such as John Wallace, principal of Leaf Only, thought that organic tobacco had a good future, partly because, come what may, the major manufacturers would want to make mention in their social responsibility reports of their conversion to such growing methods.

As usual, the reality probably lies somewhere between these two poles. In markets where manufacturers have been able to establish a brand as organic and where they still have an opportunity to do so, the momentum of those brands will probably carry them forward for a number of years, even if sometime in the future it is no longer possible to declare their organic credentials on or inside packs. American Spirit, owned by Santa Fe Natural Tobacco Company in the U.S. and by Japan Tobacco (JT) elsewhere, is an obvious example of such a brand.

But would manufacturers feel they ought to grow organic tobacco just to bolster their social responsibility reports, unless the cost of production fell significantly? Possibly not, but, on the other hand, since the move is in any case at least toward the use of pesticide-residue free (PRF) tobacco, perhaps this momentum will eventually propel them toward organic.organic

Momentum

In any case, there are sure signs that the production of organic tobacco is increasing, albeit steadily. Frederick de Cramer, business coordinator at Sunel, said that the production of organic Izmir, the only organic oriental tobacco grown in Turkey, would this year reach about 2,500 tons packed weight, of which Sunel would account for about 1,800 tons. Sunel produced 30–40 tons in 2012 and about 300 tons in 2013. In 2014 and 2015, with two other dealers involved in organic oriental in Turkey, volumes reached 1,500 tons and 2,000 tons respectively. This year, only two dealers were involved in organic oriental production in Turkey, but de Cramer is confident that production will lift above 3,000 tons within three years.

He probably has every reason to be confident. Having paid $5 billion for the non-U.S. rights to American Spirit, JT is likely to be aggressive in its marketing of this brand, which, on the U.S. market, under Santa Fe, seems to grow, steadily, year on year.

And if production of organic oriental is increasing, it seems logical that production of flue-cured and burley must be increasing too. Certainly, Wallace said demand for organic tobacco had been increasing year-on-year in line with the gravitation of consumers toward natural products of all types. And he said he believed that demand would continue to grow. Certainly, some U.S. farmers were being asked to grow more organic tobacco each year.

Wallace makes a good point. In North Carolina, for instance, organic farming of all types is increasing and organic tobacco farming is at the top of the league. According to the U.S. Department of Agriculture’s (USDA) National Agricultural Statistics Service’s (NASS) 2015 Certified Organic Production Report, which took in all known USDA-certified organic farms across North Carolina, last year the state’s 203 USDA certified-organic farms sold $82.4 million in organically produced commodities, including $56.6 million in crops sales and $25.8 million in sales of livestock, poultry and their products. “The top three commodities in certified organic sales were tobacco at $29.3 million, chicken eggs at $21.2 million, followed by sweet potatoes bringing in $10 million,” said Dee Webb, a North Carolina state statistician. “Organic farming continues to grow in North Carolina. We now rank 16th in the nation in total value of certified organic agricultural products sold from 203 certified organic farms.”

The 203 certified organic farms comprised 28,727 acres of land. Eighty-three percent, or 23,719 acres, is cropland, and 5,008 acres are in pasture or rangeland. And the future looks bright. An additional 3,074 acres are transitioning to organic production on certified farms. And of the 203 operators, 33 percent have been farming fewer than 10 years, and 44 percent have grown or raised certified organic products for fewer than five years. Eighty-six farms plan to increase production during the next five years and 75 farms expect to maintain production.

In an organic tobacco program, sunflowers serve as a trap crop for beneficial insects.

In an organic tobacco program, sunflowers serve as a trap crop for beneficial insects.

Keeping up

But even so, the question arises as to whether the supply of organic tobacco can keep pace with demand. De Cramer certainly thinks so, at least in respect of organic oriental, partly because of the approximate 20 percent higher income that growers can expect to earn by growing organically. This increased income has the advantage, too, of making it easier to convert the best farmers to this type of production. And in the U.S., according to Rick Smith, of Independent Leaf Tobacco Company, growers can expect to earn for organic tobacco about twice the per-pound price that they could for nonorganic tobacco.

The difference between the price premiums seems easily explained. While growers in the U.S. tend to be independent, so that some of the additional costs of growing organic tobacco would be borne by them, in Turkey the additional costs involved in organic tobacco production tend to be borne by the dealer overseeing the production. De Cramer explained that half of the farmers that grow tobacco in Turkey do not own their own land, so to ensure they keep their land on a long-term basis and thereby retain organic certification for it, a dealer such as Sunel has to support farmers in respect of land rent. The pesticides used in organic production are far more expensive than are traditional ones, he said, and the difference is absorbed by the company. Also, an independent certification company has to be employed to assess and check each plot of land and each farmer’s practices, in addition to the checks made by Sunel; and the extra costs involved in this certification process, those of residue sampling checks, and those of transportation and storage checks, are again borne by Sunel.

So farmers can be persuaded, but is there enough suitable land? Again the answer seems to be yes. Although it takes three years to certify land for organic production, the currently-modest increase in demand for organic tobacco means that this is not a huge problem. Anyway, as Smith pointed out, most large operations in the U.S. have land certified for other crops, and that it is those operations that will have to grow more organic tobacco, both flue-cured and burley. And they would do so if the price were right. In Turkey, of course, the availability of land is more fraught and forward planning is needed.

So the farmers can be persuaded and the land can be found, but who will buy this organic tobacco? The major manufacturers or their subsidiaries are the ones who are mostly using it or who are showing an interest, but most companies will have an eye on the situation. While organic tobacco at present makes up a tiny proportion of overall tobacco production, it garners a lot of attention because it is novel and initially difficult to produce, and because it sells for prices above those of nonorganic tobacco. No doubt many manufacturers are looking to see where organic tobacco might fit into their portfolios, initially in respect of cigarettes, though surely the argument for using it in smokeless tobacco must be even stronger.

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