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Tobacco plants on a Jomar-contracted farm in Rangpur
With Bangladesh’s tobacco production ever increasing, the commodity contributes a sizeable portion of the world’s supplies. Tobacco Asia takes a look at the country’s industry and talks to two of the main players.
By Thomas Schmid
Although a prolific tobacco producer, Bangladesh is often overshadowed by its neighbors India and Pakistan, not only because of the truly tremendous amount of tobacco shelled out by these two countries but also because of their higher visibility in the global market. This relative obscurity is unfortunate, though, as Bangladesh cultivates a variety of rather excellent crops thanks to the favorable soil and climatic conditions prevailing in the country’s main tobacco-growing regions. Burley is primarily farmed in the administrative division of Rangpur and the district of Manikgonj, while flue-cured Virginia mostly comes from Chittagong division (Speight-G varietal), as well as Kushtia district (NC-95 and K-326). Lesser traded local varietals include Tarim and Motihari.
ALSO: Why Bangladesh’s Farmers Switch to Tobacco
A Handful of Players
With production across all tobacco types increasing year after year (see table), exports presently contribute some $350 million per annum to the impoverished nation’s economy, roughly equivalent to about 10% of its total yearly export value, according to Amal Halder, ceo and director of Dhaka-based Virgo Tobacco Limited. Considering that sheer volume of tobacco, it is rather surprising to learn that Virgo Tobacco is one of only nine local leaf merchants that currently share the market. “Besides us, there are British American Tobacco Bangladesh, Dhaka Tobacco Industries, and Akij Tobacco – both of which are part of the Akij Group – as well as Abul Khair Tobacco, Nasir Tobacco Company, Jomar Tobacco, Jamil Tobacco, and Vorasha Tobacco,” explains Halder, adding that of these, Dhaka Tobacco Industries is “the largest by far”.
Courtesy of Virgo Tobacco Ltd.
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Virgo Tobacco’s DIET Plant
Growing Area Expansion
This quite small clique of industry players is supervised and regulated by the National Tobacco Committee under the Ministry of Agriculture, which also sets the annual tobacco production targets. Just like in neighboring India and Pakistan and pretty much anywhere else across Asia, tobacco in Bangladesh is almost exclusively planted on smallholder farms, each averaging about three hectares. By the 2016-2017 crop season, the total agricultural area utilized for tobacco cultivation had increased by an additional 38,000 hectares to approximately 145,000 hectares nationwide, with total tobacco yield for 2018 being projected at about 150,000 metric tons. Farmers are generally contracted by the before mentioned companies and auctions play no role to speak of. Although some rogue trading by a handful of small-scale and opportunistic merchants does occur, the tobacco amounts involved are negligible and the produce is most likely to eventually end up with the main players anyway. In terms of their quality, Bangladeshi tobaccos are most commonly used as fillers or blending tobaccos but also find their way into shisha tobaccos.
Virgo Tobacco: Middle of the Pack
Founded only in 2014, Virgo Tobacco currently has 250 employees and thus considers itself a “medium-sized company”, according to ceo Amal Halder. As such, the firm does not presently have its own primary processing machinery to produce the threshed leaves and hand strips that it primarily ships. It instead has its tobaccos processed at the facilities of Dhaka Tobacco Industries. “But we intend to set up our own GLT plant soon,” discloses Halder, but without divulging any exact time frame.
Where regular primary processing equipment may be missing, Virgo Tobacco scores big in terms of specialty tobacco. The company operates its own DIET plant, installed by market leader AircoDIET from Denmark and also maintains its own CRES and recon plants, both of them set up by an unnamed Chinese supplier. All three tobacco types are becoming increasingly important trading commodities for the company. For instance, while Virgo Tobacco, over the course of 2017, shipped only 50 tons of DIET to its customers, this amount is anticipated by Halder to double to 100 tons this year.
Unlike many other merchants around the globe who besides dealing in domestic tobaccos also import and then re-export sizeable proportions of foreign tobaccos, Virgo Tobacco exclusively handles local produce. “In terms of quality, I think our Bangladesh-grown tobaccos can easily compare to what India and Brazil have to offer,” Halder asserts. Accordingly, the company is very much export-oriented. “Of our entire trade volume in 2017, we sold only around 10% within Bangladesh while the other 90% went abroad, mostly to Europe but also Indonesia and the Philippines” Halder says.
A Few Stumbling Blocks
This all sounds rather positive. But as usual, there are a few rocks strewn in the path. Halder bemoans somewhat that his company has yet to succeed in penetrating the North American market. “It’s something that we would be very keen on doing, but so far we simply don’t have the connections and lack the communications to achieve that,” he confides. Then there is the – as Halder calls it - “big competition” with Indian tobacco, whose exporters enjoy generous government incentives. “We in Bangladesh on the other hand must pay 10% export duty calculated on the export value to our government. That makes Bangladeshi tobaccos slightly more expensive than Indian ones.”
As of recently, Virgo Tobacco has also begun manufacturing and marketing cigarettes under its proprietary brand names Desh and Partner. “But Desh Gold, Desh Black, Desh Green, and Partner are currently only sold within Bangladesh and we don’t export; at least not yet,” Halder explains, again citing difficulties in finding interested importers or distributors abroad. “I would like to invite all buyers and traders to visit our country and look at our excellent tobacco and tobacco products.”
Jomar Tobacco: An Unusual Constellation
Meanwhile, Jomar Tobacco Co. Ltd. occupies a rather intriguing position within the exclusive club of tobacco merchants operating in the country. It is neither the local subsidiary of a multinational firm like BAT nor is it a local outfit firmly based in Bangladesh and Bangladesh only, for it sits somewhere in between.
Jomar Tobacco was founded 13 years ago as a joint venture between a group of European and a group of Bangladeshi private investors, each party holding an equal 50% share in the company. The company maintains offices in Rangpur as well as in Madrid, being registered as a tobacco trading firm both in Bangladesh and the European Union (EU). “This constellation,” says Rangpur-based managing director Monower Hossain Monu, “gives us the advantage of being able to export our Bangladesh-grown tobaccos to EU countries quite easily.” In 2015, Estonia-based agricultural commodity trading firm Redisa OÜ was taken on board, ostensibly to further enhance Jomar Tobacco’s marketing activities in Europe. However, Monu preferred to not disclose details of the deal.
A Truly International Company
Obtaining its local tobaccos from contract farmers in Rangpur, Kushtia, and Chittagong, Jomar Tobacco uses the facilities of Dhaka Tobacco Industries and Nasir Tobacco for primary processing. “To support our farmers and ensure the quality of their crop, we provide them with seeds and also fertilizer and other farming materials,” adds Monu. Apart from Bangladesh-grown tobacco, Jomar Tobacco, thanks to its EU affiliation, also deals in Spanish, Italian, Croatian and Romanian tobaccos, including CRES and DIET. “This makes us a truly international company, I guess,” says Monu. Being entirely export-focused, Monu asserts that “100% of our Bangladesh tobacco is shipped abroad and we do not sell to local firms.” Describing Jomar Tobacco as a “large-scale company,” he asserts that his outfit handles an estimated 10% of Bangladesh’s annual tobacco crop.
Courtesy of Jomar Tobacco Co. Ltd.
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Jomar Tobacco’s managing director Monower Hossain Monu inspecting a tobacco field
Eastern Europe Covered, Africa Wanted
As far as Bangladesh tobacco is concerned, Monu cites the Baltic country of Estonia as Jomar Tobacco’s currently most important export market in the EU due to the rather prolific cigarette manufacturing industry situated there, which supplies a large part of Eastern Europe. “The circumstance that we are now affiliated with Redisa OÜ comes in handy,” he says. Still, Monu also would covet making inroads in sub-Saharan Africa, a region that many industry analysts believe will become an increasingly important region as tobacco markets elsewhere continue to contract due to anti-tobacco campaigns, NGO lobbying, and restrictive government regulations. “But, unfortunately, we presently don’t have a single customer [in Africa],” he says. “Yet particularly our Bangladesh FCV NC95 is world famous for its aroma and taste, while Bangladesh burley is much sought after for its high nicotine content.”