Independent Leaf Suppliers Secure Their Fair Share in Global Business

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While the global leaf tobacco trade is dominated by large multinationals, independent suppliers fill a gap through fast response times and the ability to fill specialized orders. TOBACCO ASIA takes a look at some of these companies, chosen randomly but certainly representing countless others in this first installment of an ongoing series of articles on the subject.

By Thomas Schmid

At first glance it may seem that the global leaf tobacco trade is firmly in the hands of a relatively small number of large multinational companies. Yet a considerable part of the total market is also fed by a veritable phalanx of smaller, independently-operating leaf suppliers, who may have some  advantages over the big players. Not only are independent suppliers, generally quite fast in their response times, but they also prove extraordinarily flexible in filling specialized and smaller orders.

Chidziva Tobacco Processors (Pvt) Ltd. – Bringing Zimbabwe Leaf to the World

Thanks to a certain regime that stubbornly clings to power and shall not be named, Zimbabwe has the dubious distinction of being one of the world’s latest pariah states, facing more international trade hurdles than can be good for its economy. But the country – together with neighbor Malawi – is also one of the globe’s foremost producers of tobacco, both in terms of sheer volume and excellent quality.

Established in 1998, Chidziva Tobacco Processors (CTP) is by far the largest, privately-owned tobacco merchant in Zimbabwe and is obviously successfully negotiating the crippling international trade hurdles plaguing this southern African nation. In 2015, CTP purchased approximately 6.8% of Zimbabwe’s total FCV crop, an astonishing amount by any standards, which equated to around 14.5 m.kgs. green weight, or about 10 m.kgs.’s packed weight. This figure represents an increase of slightly more than 10% over the 13.1 m.kgs.’s green weight (~6.0% of total Zimbabwean crop) purchased by CTP in the previous year 2014.

The company almost exclusively supplies cigarette manufacturers around the world with its principal customers – in descending order as per volume shipped – being located in China (including Hong Kong SAR), Africa, Southeast Asia (Indonesia, Vietnam, Philippines, Cambodia), Europe and, last but not least, the United States.

“Asia to us is a particularly important market as it accounts for a rather stable 60-65% of our annual trade,” explains the company’s sales director, Ryan Sherwood. “But then again, [among Asian nations] China is extremely important to CTP and has been throughout the company’s existence. CTP places tremendous focus and effort on assuring that we provide China and all our customers [there] with the highest level of product integrity. Quality is CTP’s first and foremost objective, and business with China has remained consistent over the last three years.”

Expecting that its future market shares especially in China will continue to stay stable, Sherwood elaborates that additional growth will be solely at the discretion of China Tobacco International Inc., the country’s state-run, quasi-monopoly enterprise that determines the volume of foreign-grown and processed tobacco leaf imports.

Zimbabwe is land-locked so, CTP’s exports to customers worldwide are predominately channeled through two ports in Africa, namely Beira (Mozambique) and Durban (South Africa). The merchandise is road-hauled or railed directly from the capital Harare to either of these ports in order to meet specific vessels that in turn service the majority of the world’s ports. “Logistics and the efficient movement of tobacco globally is one of CTP’s strong points and the company is well equipped to service all of its customers’ needs,” asserts Sherwood.

He also stresses that the overall cost of production is vital to all concerned in the trade cycle, and that his company fares well in that regard, too. “CTP firmly believes [that] we have a very competitive product relative to specific qualities available from the Zimbabwean market,” he says.

Yet along with the production costs, customer support likewise is a critical factor not only to Zimbabwe’s tobacco-growing industry in general but also CTP in particular as a tobacco merchant. “Specific and strategic manufacturers need to continue to support the Zimbabwean FCV crop in order to maintain the continuity of production of the crop as a whole. Without customer support the merchants will struggle to maintain direct contract growing and ultimately the funding of growers will be in question. The reduction or lack of direct grower finance by the merchants will then have a negative effect on the quality of the crop.”

MX Tobacco – From Italy with Love

The fertile plains of northern Italy provide the perfect soil for growing fine-quality tobaccos and Massimo Mantovanelli, the congenial owner of MX Tobacco, located in the commune of Salizzole in the country’s Veneto region, proudly extols the excellence of the bright Virginia tobacco he brings to international markets. Not only that, but he also stresses the fact that he is growing his own produce, neither contracting farmers nor purchasing leaves from other traders. “I exclusively sell what I produce [myself]. This enables me to guarantee [the quality of] my product, because I know it very well. You could say that I treat my product as if it was my child,” he muses.

While he freely discloses that his most important current customers are situated in Turkey, Jordan, Israel, Serbia, Germany, Morocco, Spain, and Romania, he is considerably – and understandably – more coy when asked how his annual trade value has developed. “If we consider a total value range from 1 to 10, my total trade in 2013 was worth about 5 points. In 2014, it was 7 points, and I estimate that I will be able to achieve an annual trade value of between 8 and 10 points in 2015.”

Mantovanelli readily admits that he has not secured any customers in the Asia-Pacific region so far, nor China for that matter, but is very eager to achieve this in the foreseeable future. He asserts that he is particularly interested in expanding into China because “there is always space [there] for a product of good quality.”

Although as a grower and completely independent direct trader he has neither the intentions nor is in the capacity to compete with the large multinationals, Mantovanelli nevertheless sees this as a clear advantage, and not a handicap. He is able to foster very close personal relationships with his customers and also can quickly fill and ship orders without having to negotiate the tangled web of a multinational organizational structure. “I personally visit my customers at their offices and explain my products’ characteristics in minutest detail. That way they don’t waste time or money and also know exactly what they are going to buy. I think transparency and honesty are the two most important factors in establishing a good relationship. My satisfaction arises from my customers’ satisfaction.”

But customer service is also high on the agenda at MX Tobacco. If required, the company can issue phytosanitary certificates for the merchandise and also arrange shipping. Once the goods have reached the customer, Mantovanelli has made it a habit to pay an after-sales visit, too. “We test and evaluate the newly arrived shipment together. My customers’ comments help me to even better understand their needs so I can fine-tune future orders in line with their requirements,” he explains and adds, “Tobacco is like wine. You must taste it in order to evaluate it!” Spoken like a true Italian, indeed.