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PMI announces new U.S. tobacco purchasing model

| November 5, 2014

Philip Morris International is adopting a new leaf buying model in the United States. The company will transition from directly purchasing tobacco through contracts with U.S. growers to purchasing through two suppliers, Alliance One International Inc. (AOI) and Universal Corp. This new purchasing model will take effect on April 1, 2015.

“Moving to a new system for leaf purchasing in the U.S. will help us achieve important supply chain efficiencies while remaining a major purchaser of U.S. grown tobacco,” said Nicolas Denis, vice-president leaf, PMI.

“While we are changing our approach to buying tobacco in the U.S., PMI’s commitment to improving farm labor conditions on the farms from which we source tobacco has not changed. We require our suppliers to adhere to our practices, principles and standards, including our leading Agricultural Labor Practices (ALP) program. Through supplying leaf to PMI in many markets around the world, AOI and Universal are key partners in our efforts to implement our ALP program on the farms where we source tobacco. With these new U.S. supply agreements even more U.S. tobacco growers will come under PMI’s ALP standards,” said Denis.

As a result of this transition, approximately 35 PMI employees based out of Richmond, Virginia, will be impacted.

“It is unfortunate that this decision will impact some of our employees and it is our priority to provide them with the best possible support and assistance during this transition,” said Denis.




AOI to supply PMI

| November 5, 2014

Alliance One International has been selected to supply U.S. tobacco to Philip Morris International (PMI), as PMI adopts a new leaf procurement model in the United States and Canada.

On Nov. 5, 2014, PMI announced its decision to transition from direct contracting and purchasing of tobacco from U.S. growers to sourcing its U.S. tobacco requirements from Alliance One International  and another global leaf merchant, effective for the 2015 crop.

PMI’s supply chain modification will position AOI to expand its North American footprint to include additional tobacco growers, and further expand the availability of North American tobacco to the wider, global market.

AOI and its predecessor companies have supplied tobacco to PMI for many decades. The two companies work closely together to advance continuous positive change in tobacco-growing communities on a global basis.

This work includes the promotion of Good Agricultural Practices that provide growers knowledge and skills to produce higher quality cash and food crops with improved yields, while striving to mitigate environmental and social impacts. Alliance One says it is committed to action-oriented social responsibility and the best practices set forward in its Agricultural Labor Practices code.

“The U.S. tobacco market has undergone substantial changes over the past decade, and continues to evolve at a rapid pace,” said Pieter Sikkel, president and CEO of Alliance One International. “PMI remains committed to sourcing in the U.S. market, and this transition ensures that PMI will continue to purchase high quality U.S. leaf through an optimized and efficient supply chain, while Alliance One expands its U.S. grower base and full service business. “

“We remain proudly committed to our current, well-established U.S. grower partners and look forward to working with a new grower base as well as other service providers,” said Herbert Weatherford, AOI’s regional director for North and Central America. “The broader grower base better positions Alliance One to expand the availability of U.S. and Canadian tobacco to domestic and international markets.”


Regulators shouldn’t disfavor e-cigarettes

| November 5, 2014

Strict regulation of electronic cigarettes isn’t warranted based on current evidence, according to a HealthDay News story quoting a new study and reproduced on the section of the US Department of Health and Human Services’ website.

On the contrary, allowing electronic cigarettes to compete with regular cigarettes might cut tobacco-related deaths and illness, the researchers concluded after reviewing 81 prior studies on the use and safety of the nicotine-emitting devices.

“Current evidence suggests that there is a potential for smokers to reduce their health risks if electronic cigarettes are used in place of tobacco cigarettes and are considered a step toward ending all tobacco and nicotine use,” said study researcher Thomas Eissenberg, co-director of the Center for the Study of Tobacco Products at Virginia Commonwealth University in Richmond.

Although the long-term risks of using electronic cigarettes remained unknown, the new study concluded that the benefits of using these devices as a no-smoking aid outweighed potential harms.

The study, partly funded by the US National Institutes of Health, was published on July 30 in the journal Addiction.

The full story is at:

Singapore to ban sales of shisha

| November 5, 2014

Singapore’s Ministry of Health (MOH) intends to prohibit the import, distribution and sale of shisha from later this month, according to a Channel News Asia story.

The Parliamentary Secretary for the MOH, Associate Professor Muhammad Faishal Ibrahim, was said to have announced the proposed ban in Parliament yesterday.

According to the National Health Survey 2010, 7.8 percent of young adults aged 18-29 years smoke shisha at least occasionally, compared to 1.0 percent among older adults.

Meanwhile, the Student Health Survey found that the proportion of students who used alternative tobacco products, including shisha, had increased from 2.0 percent in 2009 to 9.0 percent in 2012.

Dr. Faishal said that in view of the health risks associated with shisha smoking, and to prevent the proliferation and entrenchment of shisha smoking in Singapore, the ban would be imposed later this month.

“However, as a transitional measure, existing licensed tobacco importers and retailers who import or sell shisha tobacco will be allowed to continue importing and retailing shisha tobacco until Jul 31, 2016,” he said.

Alliance pays lower tobacco prices but seeks to improve social responsibility

| November 5, 2014

The prices paid for farmers’ tobacco by Alliance One International during the second quarter of this financial year were generally below those of ‘last season’.

In announcing the company’s second quarter results to the end of September, CEO Pieter Sikkel said that the challenging conditions identified at the end of fiscal year 2014 had continued during the first half of this year. “These included adverse weather in some regions during growing and harvesting that delayed purchasing tobacco from suppliers and building global oversupply,” he said. “Market prices paid for tobacco from suppliers remains generally below last season resulting in a reduction in cost per kilo this quarter of approximately 2.1 percent to $4.60 per kilo.

“As anticipated, the slow start to buying reduced first quarter sales versus last year and has had the same impact through the second quarter. For the second quarter, kilos sold reduced 16.7 percent to 107.1 million and revenues declined 15.8 percent to $589.8 million versus last year, which are in line with internal expectations. Our internal forecast for the full year estimates similar revenue and improved core income before taxes and other items.”

For the quarter, it was stated that income before taxes and other items improved $45.6 million to $8.4 million and included a $5.5 million reserve for customer receivables and lower cost or market adjustments on inventory. Last year’s results had included $55.6 million of debt retirement expense mainly related to Alliance’s refinancing.

“Tobacco markets, globally, are in oversupply and we are well positioned with a controlled quarter end inventory level of $976.4 million, down $8.4 million compared to last year,” Sikkel said. “Our net debt this year also decreased $130.6 million to approximately $1,230.7 million and we plan to work on further year-over-year reductions as we move forward.”

Sikkel said Alliance would continue to invest carefully where appropriate returns were achievable, incorporating further improvements to sustainability and social responsibility initiatives. “Many key customers value these global initiatives and are beginning to monitor how we measure our success and areas for improvement,” he said.

“Developed sustainability and social responsibility programs are becoming requirements to be a leaf supplier for many manufacturers. As such, controlled investment in these core areas with focus on our customers’ longer term requirements should improve our results and increase shareholder value.”

Don’t get sniffy about these detectors – although more research is needed

| November 5, 2014

Portable devices are expected to be used in the Netherlands to take from cafés air samples that will later be analyzed to help inspectors determine whether the national tobacco smoking ban has been broken, according to a story by Janene Van Jaarsveldt for

The strategy, which is based on research by the National Institute for Public Health and the Environment (RIVM), is aimed at reducing the number of ban violations that, it is estimated, occur in as many as a third of the country’s cafés.

The samplers, which would be operated by representatives of the Food and Consumer Product Safety Authority (NVWA), take air samples that can be analyzed in laboratories.

The RIVM is recommending that further research be carried out to determine how the sampling method might best be applied in practice.

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