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Pan African Tobacco Group founder to retire

| January 7, 2013


The Pan African Tobacco Group’s founder, Tribert Rujugiro Ayabatwa, will retire after a 52-year career, passing along the management of his companies to his sons and son-in-law.

Paul Nkwaya, Ayabatwa’s eldest son, will serve as the group’s marketing director, while his youngest son, Richard Rujugiro, will serve as technical director. Son-in-law Serge Huggenberger will serve as financial director.

Ayabatwa, 72, will continue to advise his sons and son-in-law on company management, but will no longer be involved in day-to-day operations.

“I am very proud of what I’ve accomplished over the last five decades,” Ayabatwa said. “I worked extremely hard to create jobs and opportunities for Africa, and have no doubt that my sons and son-in-law will lead my companies successfully into the future.”

In his retirement, Ayabatwa plans to spend more time on his charitable endeavors. He is developing a foundation mainly to help aspiring African entrepreneurs.

The Pan African Tobacco Group and the other companies Ayabatwa founded operate in 10 countries and trade in 27 countries in Africa and the Middle East. Combined, Ayabatwa’s companies employ 26,000 people who in turn support at least 182,000—in Sub-Saharan Africa, each employee supports at least seven people. From South Africa and the United Arab Emirates to Angola and Tanzania, Ayabatwa companies manufacture cement, tea, plastic shoes, beer, snack foods and cigarettes.

Ayabatwa, a Rwandan refugee with just an eighth-grade education, had to create many of his own opportunities. “My goal was never about making money; it was about building something up, creating something,” Ayabatwa said. “That is what I tried to accomplish and that is the legacy I leave to my sons and son-in-law.”

The Pan African Tobacco Group has subsidiaries in several African countries and in the UAE. Its subsidiaries include Leaf Tobacco & Commodities in Uganda, Vision Tobacco in Dubai, Barco Trading in Angola, Burundi Tobacco Company in Burundi, Leaf Tobacco & Commodities in Nigeria, the Congo Tobacco Company, Mastermind Tobacco Company in Tanzania and Arkan Leaf in Angola.




The future in fueling

| December 5, 2012

A new curing technology, developed in Croatia, substitutes biomass for expensive oil and gas.

By Robin Sutton Anders

For the past five years, Croatian tobacco growers have witnessed a startling decline in revenues. But unlike other farmers around the globe who attribute their recent losses to lower demand, poor weather conditions or stifling regulations, Croatian growers point to a rising cost of energy. “The decrease in growers’ profits is estimated to be 15 percent, so the production of tobacco is stagnating, or even slightly decreasing,” says Vladamir Hrovjc, managing director of Herbas d.o.o., a Croatian company that manufactures tobacco processing machinery.

“Tobacco drying costs have increased up to 40 percent in the last five years,” Hrovjc continues. This increase is foreboding for the entire Croatian industry, including Herbas, whose machinery sales depend on the industry’s success. So through long-term cooperation with Hrvatski Duhani, a leading Croatian manufacturer of flue-cured Virginia tobacco, Herbas set out to reduce the cost of drying flue-cured tobacco for struggling growers.

Fired up

Because the typical Croatian tobacco barn’s thermal generator relies on expensive gas or oil to dry its flue-cured tobacco, Herbas immediately recognized the need to find an alternative energy source. According to Hrovjc, the company started by experimenting with biomass like wooden chips, pellets and firewood. An effective generator, however, would take more than just a new fuel source, Hrovjc says. “Tobacco is typically dried using thermal generators fueled on gas and oil because using biomass tends to lead to great temperature losses. The temperature of outgoing gasses was around 300 degrees Celsius.”

The company developed a new model thermal generator based on the principle of pirolitic biomass burning, which it hypothesized would lead to more efficient combustion. The result was encouraging—the temperature of outgoing gasses in the chimney measured 130 degrees C.

Hrovjc explains how it works: “The biomass is put into the input hopper, which can be positioned at the side or in front of the thermal generator,” he says. “Then it is transported by a caterpillar conveyer system into the furnace. This dual-axial caterpillar transporter system ensures safety from [the] return flame.”

The barn’s thermal generator furnace—located beneath the ventilator—is made out of sheet metal, and the parts exposed to intense heat are constructed from fireproof sheet metal. “An 18,000 cubic meter air-per-hour ventilator creates forced air flow,” Hrovjc explains. “The thermal generator has primary and secondary air dampers which are angled at 90 degrees so to manually choose the ratio of external unsaturated air and internal recycled air. The temperature of output air is 130 to 150 degrees Celsius.”

Basically, Hrovjc says, the dry distillation of wood is carried out within the furnace, which creates a gas that burns with minimal ash and soot. “So cleaning the furnace is easy and done only once in a drying cycle.” Ash is removed manually by emptying the ash tray. And depending on the type of biomass used, it is necessary to periodically clean the thermal generator chimney.

Putting it to the test

Last year, Herbas conducted a series of tests to determine whether the biomass was, in fact, more cost-efficient. “We compared natural gas, oil and biomass,” says Hrovjc. “The results indicate that drying tobacco in thermal generators fueled on biomass is three to four times cheaper than those fueled on gas, and five to six times cheaper than those fueled on oil.”

Of the three biomass forms tested (wooden chips, pellets and firewood), firewood 1 meter in length was shown to be the cheapest fuel for drying.

Justin Macialek, a research assistant at North Carolina State University who studies tobacco mechanization and post-harvest curing structures, visited Herbas’ research facilities this past August to see for himself the company’s new curing technology.

Macialek also works with biomass fuels to generate heat for tobacco production and, like Herbas, understands growers’ interest in biomass fuels runs deep into their bottom line, as rising fuel costs in the United States also contribute to growers’ production costs. “One of the issues driving biomass burner selection is the uncertainty of gas prices that vary from year to year,” he says. “This past year it was $1 a gallon, but the year before it was $2 per gallon. That makes it tough for growers to budget their production costs.”

In Macialek’s view, Herbas’ biomass fuel system performs above standard, but he points to a remarkable adoption rate of the burners by Croatian growers as evidence of its success. “This is the second year biomass burners have been available to Croatian growers,” Macialek says. “The first year their technology was available, two growers used the burners. This past growing season, 42 growers utilized the technology. They were able to adapt the technology to existing barns and also build new barns using biomass burners. That greatly reduced their production costs.”

From hothouse to greenhouse

According to Macialek, U.S. researchers have been tinkering with biomass burner technology for a while.  At North Carolina State University, the biological and agricultural engineering department studied biomass as a fuel alternative for tobacco barns in the late 1970s and early 1980s. “When gas prices went back down, nobody wanted to use wood for heating,” Macialek says. “But in 2007, when gas prices started increasing again, people gained a renewed interest in alternative energy and we started looking at biomass fuels again.”

Whereas these new burners can torch costs in Europe, implementing the technology in the United States is not necessarily the most cost-efficient strategy, says Macialek. “In the United States, a very small percentage—at most 5 percent—of growers currently use wood as a fuel source.”

All things being equal, Macialek believes gas is more efficient and convenient for most U.S. growers, as fueling barns with biomass requires extra management time and maintenance costs.

And although the payback period for initial investment in Herbas’ technology is just three to five years, most growers only have contracts for one year at a time. “It’s difficult to make an investment for three to five years if growers are uncertain whether or not they will have a contract in the following years.”

For growers uncertain about their future with tobacco, old barns can be retrofitted to fit the biomass burner technology. Further, growers can use their burners for a variety of farming needs, dramatically slashing the payback time.

“A disadvantage of buying this equipment is that tobacco production only lasts two to three months a year, so you’ve got a short time to recoup costs,” Macialek says. “However, we work with a grower who uses this boiler system on his barn for tobacco in the summer, and in the winter he uses it for his greenhouses while he grows tomatoes. In late winter he’ll use the system to heat tobacco transplant houses.”

Hrovjc believes the investment in biomass burner technology can be recovered more quickly—in just two to three years. One grower, he says, even recouped his expenses in one year.

The future of biomass

Macialek predicts technology like Herbas’ biomass burner will only be adopted in the United States if the market turns enough so that alternative fuel technology offsets grower input. “It really comes down to convenience,” he says. “Even though gas prices are currently anywhere from five to 10 times the cost of wood, there’s a lot of value in the convenience of flipping a switch.”

In the meantime, there’s no question that Croatian growers have already realized the benefits of Herbas’ new technology. “It’s beneficial that the growers have committed to using biomass to fuel their barns,” says Macialek. “And if Herbas can help local growers produce tobacco for a lower cost, they can in turn pay lower costs for that tobacco.”

As local growers continue to realize the benefits of Herbas’ new technology that saves money while stabilizing input costs, what’s on the horizon for the tobacco machinery manufacturing company? “We’ve already come up with some high-quality solutions for increasing machine capacity and improving raw material processing,” says Hrovjc. “In the future, we’d like to continue to modernize production and develop new processing lines for our customers.” For the country’s growers and manufacturers alike, new technology that aids in production while reducing input costs will likely be an easy sell.




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Rising tide

| August 1, 2012

The Global Tobacco Networking Forum comes into its own.

TR Staff Report

After a cautious start in Rio de Janeiro in 2008, and a significant boost in Bangalore in 2010, Tobacco Reporter’s Global Tobacco Networking Forum truly came into its own in Antwerp this past June. The event not only attracted a record number of attendees from all parts of the world, it also enjoyed the support of major global and regional manufacturers. Some participants have already dubbed GTNF the tobacco industry’s “Davos,” after the prestigious World Economic Forum meetings in Switzerland.

The background of the GTNF is by now well-known. Aware of the industry’s increasing need for timely information and meaningful interaction, Tobacco Reporter in 2008 came up with an alternative to the congresses that dominated tobacco events at the time. The traditional congress concept was based on one-way traffic, with participants listening to a series of prepared presentations. Interaction with experts was typically limited to a brief question-and-answer session, after which the respective parties went their own ways. The messages of the speakers, however inspiring, were often quickly forgotten as attendees returned to their offices and resumed business as usual.

Talking with experts from inside and outside the tobacco industry, Tobacco Reporter realized it was possible to make its events more impactful. By tweaking the Congress format to allow for more interaction, the quality of communication would improve significantly. Instead of asking the audience to passively consume a series of lectures, event organizers should offer attendees an opportunity to directly engage with the experts. And because every member of the audience was inevitably an expert in his or her own field, the value of the resulting exchange of information would be greater than the sum of its parts. Thus the GTNF was born.

While the networking concept had been successfully applied in other industries, it was new to tobacco at the time. Tobacco, of course, is a notoriously conservative industry, so the sector’s initial response to the new forum was cautious. A relatively small number of people attended the first GTNF in Rio de Janeiro, Brazil, but those who did so were well rewarded. When Dayton Matlick, the president of Tobacco Reporter’s parent company, SpecComm International, asked participants at the end of the event to share their thoughts about the forum, the response was overwhelmingly positive. Attendees said the gathering had given them an opportunity to interact with people they would otherwise have not encountered, and that the intimate nature of the discussions lowered the barriers to communications.

As every marketer knows, there is no better marketing tool than word-of-mouth, and word about the GTNF spread quickly. When Tobacco Reporter held its second forum in Bangalore, India, in 2010, attendance was significantly higher than in Rio. More than 200 industry representatives, including senior executives from leading cigarette makers, traveled to Bangalore to see what the buzz was about. They did not leave disappointed. Some left the event determined to take actions based on the discussions they had participated in. Others said they had become aware of fundamental issues that would affect their business. And virtually everybody Tobacco Reporter spoke to acknowledged that the GTNF had given them new ideas that would benefit their organizations.

The word continued to spread after Bangalore, and Antwerp became the best-attended GTNF to date. As the number of participants rose, so did the buy-in among the companies that the industry looks to for leadership—the major cigarette makers. GTNF Antwerp was supported, through participation in the forums, by the world’s leading tobacco companies: Philip Morris International, British American Tobacco, JTI, Imperial Tobacco Group, R.J. Reynolds TobaccoCo., National Tobacco and many others.

Cigarette makers sent some of their top talent, with the GTNF list of speaker biographies reading like a who’s who of the tobacco industry.

But perhaps the most striking thing about the event’s attendee list wasn’t who participated from the industry, but who participated from outside the sector. In addition to leading financial analysts such as Erik Bloomquist (Berenberg Bank), Bonnie Herzog (Wells Fargo Securities) and Jonathan Fell (Deutsche Bank), the GTNF attracted journalists from some of the world’s leading publications. Jon Copestake and Kevin Dunning of the Economist Intelligence Unit, a sister organization of The Economist magazine, evaluated the industry’s outlook against the global economic environment. Other prominent media speakers included Jamie Dettmer, who has written for The Times of London and the Sunday Telegraph, among other publications, and Mick Hume, editor-at-large of Spiked.

Even more remarkable was the participation of several leading public health advocates. Scott Ballin of the Alliance for Health Economic and Agriculture Development and Jeff Stier of the National Center for Public Policy are by now familiar faces at Tobacco Reporter events, but the participation of Francis Crawley, Delon Human and Anders Milton represented a true coup. Crawley is executive director of the Good Clinical Practice Alliance, Europe, and aWorld Health Organization expert in ethics; Human is president and CEO of Health Diplomats, a Swiss advisory and consulting practice; and Milton has been a senior adviser to the Swedish government delegation to the World Health Assembly and president of the Swedish Red Cross.

Participating in sessions on harm reduction, smokeless tobacco and alternative nicotine products, these high-profile health advocates offered the industry an opportunity to interact with its critics in a constructive manner—something that hasn’t always been possible in other settings.

The GTNF also proved a useful platform to announce new developments. Coresta, the association that promotes international cooperation in tobacco research, announced its new guideline for the treatment of cigarette beetles during the GTNF. The organization’s secretary-general, Pierre Marie Guitton, had graciously agreed to moderate a session on infestation management (and another one on low-ignition-propensity cigarette papers). The organization’s endorsement of the controlled-atmosphere technology as an alternative to existing beetle-control approaches provided a fertile base for discussions.

In a separate forum, Oded Shoseyov of the Hebrew University of Jerusalem, Avi Tzur of Recon Inc. and Juan Sanchez Tamburrino of ATC Biotec discussed alternative uses for tobacco.

Other sessions covered topics such as illicit trade, security of leaf supply, the impact of ingredient bans and the threat of plain packaging, which is currently under way only in Australia but is being considered in other jurisdictions. The plain packaging panelists examined the tensions between health considerations and intellectual property rights. They also assessed the strength of the industry’s pending court challenges against the measure and the potential unintended consequences, such as increases in counterfeiting.

The presence of both manufacturers and suppliers on the panel and in the audience enabled participants to view the topics from different angles than they might have been accustomed to. For example, corporate affairs people, who might normally look at the plain packaging issue from a legal perspective, had an opportunity to see the issue from a printer’s perspective, and vice versa.

Patrick Basham, director of the Democracy Institute, was in top form as he set the agenda and guided the audience through the program. In doing so, he skillfully drew on his extensive industry knowledge and sense of humor. On the morning following the Golden Leaf Awards banquet and celebration, Basham helpfully recited the dictionary definition of hangover.

Fred Vandermarliere, director of Gryson Tobacco Co., welcomed delegates to his home country and provided an entertaining overview of Belgium’s history, covering the kingdom’s various occupiers, its linguistic struggles and cultural treasures, such as Duvel bier and Manneken Pis, the famous bronze sculpture depicting a naked little boy urinating into a Brussels fountain basin.

Unlike the previous editions of the GTNF—which were held on dry land—the Antwerp event took place on two event boats that had been reconfigured to accommodate conferences. The setup proved ideal for networking—although in the downstairs rooms the noise of the engine at times forced participants to raise their voices, especially during docking maneuvers. In between sessions, delegates mingled in the bar area or went outside on the deck to enjoy a smoke and—on the first day of the event—the abundant sunshine.

This being northern Europe, the pleasant weather didn’t persist, but that didn’t dampen the mood. The passengers simply moved inside to the upper deck, where instead of banning smoking, the organization had simply asked smokers to be considerate in deciding where and when to light up.

As the Belgian and Dutch landscape slid past in the background, you could see procurement managers mingling with leaf suppliers and instrumentation manufacturers talking to health advocates. CSR managers drank coffee with automation specialists, while financial analysts exchanged cards with fumigation experts. The interaction continued during the gala dinner. Instead of sitting only with colleagues, many participants stepped out of their comfort zones and shared a table with people they didn’t know before. Some even dined with their competitors.

If anybody ever doubted the GTNF concept, the networking crowds on the Oceandiva conference ships would have convincingly disproved their reservations.

The natural way

| April 1, 2012

The organic approach to tobacco production continues to grow in the United States

By Chris Bickers

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

The future of organic tobacco looks bright to Aaron Sink of High Point, North Carolina, USA—so bright, in fact, that earlier this year he bought a farm specifically to grow organic tobacco. “We are getting a good vibe about growing this type of leaf,” he says. “The manufacturer, Santa Fe, is pushing to increase production of organic cigarettes, and that gives us the chance to increase at our end.”

Sink has built a greenhouse on the new farm and was moving curing barns on it when Tobacco Reporter interviewed him in March. “I am definitely willing to make some capital expenditures to provide it.”

But he still has to rent much of his tobacco land—80 acres this year—and the organic approach has provided an unexpected benefit: It has helped him gain access to rental land that he might not have gotten if he had been growing conventional. You see, he farms on the edge of an urbanized area, and city landowners are not always anxious to rent to conventional farmers.

But near chemical-free organic culture is much more appealing. “My landlords like the idea of the organic option,” Sink says. “It has definitely opened some doors for me.”

That’s the good news. The bad news is that organic is a very difficult way to grow tobacco. No weed-control chemicals are approved for organic, so all that a grower can do is plow.

Same thing for disease control: Crop rotation is substantially the only tool available. Sink grows one year of tobacco followed by wheat, then a year of a legume. Of course, as far as possible, he chooses disease-free fields for organic tobacco.

Sucker control has been an enormous problem for organic tobacco in the past, with most of it having to be done by hand. But for the last two seasons, Santa Fe growers have had an effective option. OTAC, a new contact sucker control agent developed by Santa Fe and Fair Products, was approved for use in organic programs in late 2009. In Extension testing in North Carolina at the time, the results from use of the fatty alcohol product were similar to other sucker control products, said Loren Fisher, N.C. Extension tobacco specialist. “It doesn’t appear that a farmer would lose any control by using it. OTAC looks like a good fit in organic tobacco or in any program where you are trying to reduce or eliminate the use of MH.”

Insect control is a major problem also. Sink uses a couple of cultural methods of dealing with the situation: He plants sunflowers around his organic tobacco as a trap crop for beneficial insects like ladybugs, and he sows tall fescue grass in vulnerable areas to compete with those weeds that might host other insects.

These practices help, but Sink has learned he has to tolerate a little more insect damage than he was accustomed to before he went organic. “Especially, there isn’t much you can use on aphids in this type of tobacco,” he says.

Among other tobacco farmers who have gone organic in recent years:

Roger Smith of Brooksville, Kentucky, USA, says the interest in organic tobacco is definitely growing.

Roger Smith of Brooksville, Kentucky, USA, has tried to come up with a feasible insect control program. “We’ve learned to promote populations of beneficial insects like ladybugs and lacewings by planting crops that attract them,” he says. “They like to breed in sunflowers, hay and certain flowers.”

Back in the early 1990s, Smith was one of the first American farmers to grow organic burley, and there are still only a few of them. Now, he says he would not be raising tobacco if it wasn’t organic. “But you have to work hard at this to make it work. Organic burley will be confined to small-scale growers until there is more demand. But the interest is definitely growing. The price offered by SFNTC is substantially higher than the market price.”

Smith is planning to produce 4,000 pounds of organic burley this year. He hopes he will get a boost from a variety that is relatively new to his farm: KT 204. It has the reputation of yielding higher than the standard organic variety, TN 90. KT 206 had performed well too in recent years, but it is no longer available as an organic seed source.

Smith is optimistic about the future of organic tobacco, although he notes that anything in agriculture is iffy at the moment.

It is challenging for farmers to change the way they farm, and it may well be difficult and costly, says organic tobacco grower Billy Carter of Eagle Springs, North Carolina. But if you plan carefully, including finding a dependable commercial company who will work with you, it can become a profitable venture.

One reason is changing consumer demand.

“A high percentage of consumers are requesting a more natural vegetable,” he says. “People don’t want a lot of additives and poisonous materials put into food products. And many people are aware of the threat of ground water and soil being altered by chemicals.”

Naturally, to be certified organic, the land must be free of pesticides and chemicals for a period of three years prior to the first sowing date, he says.

“The crops need to be rotated regularly to avoid depletion of soil nutrition. Soil and nematode samples must be taken yearly for nutrition analysis. And drip irrigation is preferable to overhead watering techniques. We also hand-water crops as we see fit.”

Like nearly all of Santa Fe’s growers, Carter uses sunflowers to keep insects in check.

“We plant two rows of sunflowers to every eight rows of tobacco. We seed the sunflowers about 10 days before the tobacco is transplanted.”

There is no crop dusting or pesticide runoff. Natural fertilizers are used in a dedicated certified crop. “Organic farming can build up soil organic matter better than conventional no-till farming.”

Aaron Sink of High Point, North Carolina, USA, is making capital expenditures this year to produce more organic leaf.

Stanley Hughes, a flue-cured grower in Orange County, North Carolina, is a real believer in organic tobacco. “Particularly because of the favorable price I get when I bring in a certified organic crop of quality tobacco. By producing quality leaf, using environmentally friendly chemicals and proven cultural practices, I’ve been receiving a premium price.”

Hughes was one of the first organic farmers to cultivate tobacco under contract to Santa Fe Natural Tobacco Company.

“Organic tobacco is a nice little niche market for a small farmer like myself,” he says. “It allows me to make a good living farming full time.”

The price Santa Fe pays is justified, says Mike Little, president of the company. “Our organic growers are producing crops that are under more stress and a whole lot more susceptible to Mother Nature, so we pay them a little more.”

The prices are not guaranteed, he points out: Growers are paid only if their tobacco tests free of prohibited pesticides.

“There’s a near-zero tolerance under the USDA certification rules,” says Little, who initiated the program for SFNTC. “If we find something that exceeds the rules, then it won’t make organic. It’s not that we won’t take that tobacco, but it loses organic certification right there. We’ll go ahead and use it in one of our conventional blends.

“Nevertheless, we are committed to organic production in order to continue using the best possible tobacco in our products. Once farmers learn to produce organic tobacco, they find the skills and knowledge translate well to growing organic produce.”

Little takes pride in the fact that once the company recruits a grower to its organic program, he never asks to get out.

“We have an attractive contract; growers understand and like that about us. Also, we work hard to establish and maintain good relationships with all of our growers. We are in communication with them year-round.”

Organic certification allows the growth of other high-value seasonal crops, which can demand a premium price on the ever-expanding organic market, says Fielding Daniel, SFNTC’s director of leaf. “Our growers are heartened by this new and profitable market and worry less about petrochemicals, the cost and the risk of mishandling of them. Many also tell us that they are seeing a return of long-missed wildlife and nature to their land.”

Little says Santa Fe is committed to this type and will continue to promote organic tobacco production.

“Although organic farming is more labor intensive and requires land to lie fallow for three years before certification, we are committed to its principles in order to continue using the best possible tobacco in our products,” he says. “Sustainable agriculture promotes the interests of small independent farmers, not only for tobacco but also for the organic vegetables and other crops grown in rotation with it. More organic production is in line with our company’s principles and better for the environment.”