Little leaf

| January 1, 2018

In the classical oriental tobacco business, securing supply may prove to be a greater challenge than sustaining demand.

By Taco Tuinstra

Despite the global decline in cigarette consumption, demand for classical oriental tobacco has remained remarkably strong. Prized for its natural aroma, oriental is a key ingredient in the American-blend cigarettes that dominate in Europe and the United States. Cigarette manufacturers in Indonesia, one of the world’s largest tobacco markets by volume, use oriental to manufacture “mild” kreteks. And the leaf seems future-proof to some extent; the leading heat-not-burn product blends are all believed to include oriental tobacco.

On the supply side, cultivation of classical oriental tobaccos is limited to only four countries: Turkey, Greece, Macedonia and Bulgaria. Attempts to produce the leaf outside of the traditional areas—in China and India, for example—have been unsuccessful, due to different soils and climates. “It’s like trying to grow American-flavor burley or flue-cured Virginia in Greece,” says Costas Gleoudis, chairman of N. Gleoudis Kavex in Thessaloniki, Greece. “Of course, you can grow them, but they will not have the same characteristics as the real classical oriental tobaccos.”

With village grading still ongoing in December, Sunel Tobacco Co. expected the classical oriental countries together to produce some 120.5 million kg of leaf in 2017 (see chart), compared with 106 million kg in 2016. Anticipating a crop of 68 million kg, Turkey was on track to produce more than projected, but the Balkan volumes fell slightly short of expectations, according to Frederick de Cramer, who recently retired as general manager of Sunel but continues to work as a consultant to the company.

Classical oriental tobacco production (million kilograms)
  2012 2013 2014 2015 2016 2017 (est.)
Turkey 63 80 61 55 53 68
Greece 20 24 26 22 19 19
Macedonia 27 33 26 19 25 24
Bulgaria 13 17 13 9 8.5 9.5
Total 123 154 126 105 105.5 120.5
Source: Sunel Tobacco Co.


The Turkish growing season was characterized by a wet spring, followed by a hot and dry summer. “Farmers continued to harvest until mid-October as the top stalks kept producing new leaves,” says de Cramer. In addition, the relatively high prices paid last year prompted Turkish farmers to grow more tobacco. “Combined, these factors led to a bumper crop in Turkey,” he says.

The classical oriental varieties cultivated in Turkey are Izmir, Samsun and Basma. De Cramer describes the quality of this year’s Turkish harvest as mediocre. While the heavy rains early in the season boosted yields, they also caused the tobacco to grow too fast. The low and middle stalks of the plants—representing about one-third of the crop—suffered as a result. The late planted crop, by contrast, features nice-bodied tobacco and mature styles, according to de Cramer.

Even with stable demand, de Cramer expects the Turkish crop to sell, due in part to shortfalls elsewhere. What’s more, currency fluctuations have made the country competitive on the global market. Compared with last year, the Turkish lira has lost 20 percent of its value against the U.S. dollar, even as the euro, which is used in Greece, has appreciated.

De Cramer is encouraged also by renewed interest from the Far East, especially from Indonesia. Confronted by an unprecedented decline in cigarette sales and domestic content requirements, Indonesian manufacturers had scaled back their purchases of tobacco in recent years, but now their stocks are running low and need replenishing.

Greece’s tobacco growing season was similar to that in Turkey, with heavy rains at the start giving way to heat and drought. The rains fell primarily in the Katerini growing regions, contributing to a slightly lower quality of that tobacco style compared with last year. Greece’s other classical oriental tobacco variety, Basma, was less affected by the rain and is of higher quality than last year, according to Kavex.

“The overall quality of the Greek oriental 2017 crop is lower than the 2016 crop,” says Kontos Alexandros, general manager of Seke. “The weather conditions were not in favor for enhanced quality.”

“The Katerini variety was heavily affected by the weather conditions, and the quality is definitely lower than the 2016 crop, with much higher inclusion of low-quality leaves—perished, mixed—especially in the low stalk positions,” he adds.

Contrary to Kavex, Seke rates the quality of this year’s Basma as slightly lower than last year’s, due to higher inclusion of low-quality leaves in the low stalk positions.

Gleoudis describes the quality of this year’s Bulgarian crop (Krumovgrad) as low and that of Macedonia (Prilep and Yaka) as good. As often, estimates of the crop sizes vary per player. For example, while Sunel anticipates 9.5 million kg of classical oriental in Bulgaria, Seke puts the figure at between 7 million and 7.5 million.

Retaining farmers

Like de Cramer, Gleoudis and Alexandros expect oriental to remain in demand. The end of EU tobacco growing subsidies in 2006 forced Greek tobacco farmers to focus on commercially viable varieties—i.e., Basma and Katerini. The less popular types have been discontinued so that production today is aligned with customer requirements.

A bigger challenge, says Gleoudis, will be to sustain production. In many origins, farmers are aging. In Greece and Turkey, the average tobacco farmer is more than 50 years old (growers in Macedonia and Bulgaria are said to be slightly younger). Oriental is a notoriously labor-intensive crop; when given the opportunity, young people opt for more comfortable jobs in the cities or even in other countries. After Bulgaria joined the EU in 2007, many rural workers moved to member states with better employment prospects.

In Greece, the depopulation of the countryside has slowed in the wake of the country’s severe economic crisis. A lack of opportunities in the cities has convinced some tobacco growers to stay in their villages, but this situation is unlikely to last. When the economy recovers, the pace of urbanization will likely pick up again, notes Gleoudis. The 2017 Greek oriental crop was grown by 14,800 farmers, according to Seke, with 11,700 of them producing Basma and 3,100 growing Katerini.

Turkey’s growers face the problem of social insurance—or lack thereof. Young people prefer working a minimum-wage city job that carries insurance over toiling uninsured in the fields. Leaf dealer initiatives to offer some coverage have proved cost-prohibitive because doing so requires employing the farmers year-round, even though tobacco production is a seasonal activity. “What is the farmer going to do in winter?” asks de Cramer. “Unless our customers are willing to pay for it, it is hard to justify.”

To retain growers, the industry is trying to make the job of the farmer more profitable and a bit easier, primarily through mechanization. But oriental tobacco is not an easy crop to mechanize. It is often grown in hilly terrain, and the plant’s characteristically small leaves present a challenge for machines.  Nonetheless, progress has been made, according to Gleoudis. The greater challenge, he notes, will be to mechanize the curing process. “Here, we face some difficulties,” he says.

His sentiment is echoed by de Cramer. A relatively new technique known as “sock curing” or “sausage curing” brings down the farmers’ per-kilogram cost dramatically—but it also compromises quality, which in turn impacts the price. “Sausage curing works only for certain grades,” says de Cramer.

Despite the challenges, de Cramer, Alexandros and Gleoudis are sanguine about the outlook for oriental. Sunel and Kavex continue to invest, even as the industry consolidates. Alexandros expects future demand for classical oriental tobaccos to be “stable-plus.”

De Cramer also sees opportunities for oriental in the wake of the U.S. Food and Drug Administration’s push for lower-nicotine cigarettes. Unirrigated and unfertilized, oriental tobacco has comparatively low levels of nicotine already, and he says it would be relatively easy to reduce them further. “We are doing some trials already,” says de Cramer.

The vacuum left by Leaf Tobacco A. Michailides’ withdrawal from the Balkans is being filled by other leaf merchants. After heavy investments in Macedonia, Bulgaria and Albania, Seke says it is now the region’s second-largest tobacco firm. The company has built a €6 million ($7.22 million) factory in Macedonia, which is scheduled to start operations in April. The new facility can store and process 3 million kg of classical oriental tobaccos. Earlier, Seke modernized its factory in Xanthi, Greece.

Missirian and Ozege have reportedly formed a joint venture, combining their forces in Turkey, Greece and Bulgaria.

Kavex recently spent €2 million to upgrade a production line and install the latest Tomra sorter for the detection and removal from tobacco of foreign matter. The investment, says Gleoudis, demonstrates Kavex’s commitment to classical oriental tobaccos. “It shows we believe in the future.”

Category: Also in TR, Editorial Archives

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