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Lombok FCV field in Lombok, West Nusa Tenggara, Indonesia. Photo credit: PT. Andalan Asia Tembakau
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Always pressed for time: Henri Kusuma of PT. Andalan Asia Tembakau at a recent tobacco exhibition. Photo credit: PT. Andalan Asia Tembakau
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Henri Kusuma checking product quality at the Kareb GLT plant in Bojonegoro, East Java, Indonesia. Photo credit: PT. Andalan Asia Tembakau
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Virginia field in Tanzania. Photo credit: G4 Agro Ltd.
Some leaf companies may have faltered during the Covid pandemic, yet others took it as an opportunity for opening up shop.
The coronavirus pandemic wreaked havoc on many business sectors, including tobacco merchants, many of whom barely managed hanging on. Others went out of business for good, succumbing to the manifold challenges the Covid mayhem threw at them. And yet, some new companies emerged too, particularly during the latter stage of the pandemic, when things slowly began looking up again.
Don’t discount Kenya and Tanzania
The nations of Zimbabwe, Malawi, Mozambique, and – to a lesser extent – Zambia and South Africa are on everyone’s radar when it comes to African tobacco. However, Kenya and Tanzania likewise grow sizeable crops.
“Kenya has been producing excellent FCV with good chemistry for a long time,” industry icon and seasoned tobacco globetrotter Dr. Iqbal Lambat told Tobacco Asia during an interview in June 2022. “However, the country has consistently faced instability in its green leaf threshing sector. Universal pulled out. Alliance One pulled out. The farmers don’t really have a choice and keep producing.” On the other hand, Tanzania is a quite consistent producer, annually shelling out up to 140,000 tons of primarily semi-flavored filler FCV, as well as small volumes of DFC, according to Lambat.
G4 Agro Ltd. -- Grabbing an opportunity
One of the latest newcomers on the Tanzanian scene is Dar Es Salaam-based G4 Agro Limited, which was founded only in 2021, at a time when the pandemic showed distinct signs of finally tapering out. According to operations director Dickson Ndanga, the firm has around 1,000 smallholder farmers under contract, each of them working 1-1.5 hectares on average. With the yield per farm pivoting around two tons of cured leaf, G4 Agro in the 2021/2022 season was able to acquire some 2,500 tons of FCV, he said. As per usual, besides processing and marketing the company also provides its contractors with extended services, such as agronomist advice to stabilize and increase crop output. On the customer end, apart from whole leaf and lamina, G4 Agro also offers cut rag and can create blends according to buyer specifications.
“The best tobaccos in Africa”
The overwhelming majority of G4 Agro’s farmers are located in the districts of Shinyanga (a.k.a. Kahama) and Geita, while Tanzania’s main tobacco producing regions are Tabora, Singida, and Mbeya. “The tobaccos coming from Mbeya and Kahama regions are the best in Africa,” Ndanga claimed, “and the ones harvested in Tabora and other regions can comfortably hold up with tobacco from other African countries.”
Alliance One currently remains the biggest international buyer in Tanzania. However, Ndanga disclosed that lately the firm is facing increasingly stiff competition from Mkwawa Tobacco Leaf, a new local company that reportedly enjoys considerable financial backing from Universal Leaf and JTI. That some of the largest tobacco sector players in the world are battling it out in Tanzania didn’t deter G4 Agro when it decided to set up shop just over one year ago.
There was one main consideration, said managing director, Alphonse Choma: “We realized that there was over-production in the past two crop seasons, with many farmers being unable to sell their harvests. G4 Agro wanted to become party to the solution and ensure that farmers could find someone to buy their crops and pay them on time,” he said.
Eyeing more business from Asia
Focusing on cigarette-grade tobaccos, G4 Agro is pursuing a direct sales strategy, with the intent to supply larger merchants and tobacco manufacturers. Ndanga nevertheless readily admitted that this has been a difficult path so far. “We have only been able to accumulate prospective buyers in Africa and Europe, but have in fact not yet entered into finalized deals with any of them.” Perhaps as a result of that sluggish progress the company is now eyeing MENA and greater Asia as potential sales regions as well.
“As a whole, Asia is a truly burgeoning market with far less syndication and bureaucracy than elsewhere,” Choma said. “We would be delighted to partner with anyone interested in our excellent Tanzanian tobaccos.” Maybe Dickson Ndanga would be well advised to focus his search on Indonesia…
PT. Andalan Asia Tembakau – An old friend bakes his own cake
Previously working as a supplier for Sampoerna and, subsequently, Alliance One out of his home base of East Java, Henri Kusuma is a well-known figure to many in the industry. With such wealth of experience under his belt, Kusuma decided to open his own company, PT. Andalan Asia Tembakau (Andalan), in March of 2021. In his all-in-one function as owner, company president, and c.e.o., he conceded that he “had to start out small, with currently only nine full-time staff, plus the usual fluctuating numbers of warehouse workers and loaders.”
The administrative offices of Andalan are in Bali, just a short hop across the Bali Straits to the eastern tip of Java. However, the firm’s warehouses are situated in Karanglo Malang municipality in East Java, one of Indonesia’s prime tobacco-producing regions. It also is where many of the country’s tobacco product manufacturers are located.
“That allows us to comfortably clear our containers at Surabaya airport and then send them on the short road trip to our storage facilities in Malang,” explained Kusuma. “The geographical proximity to our customers in the area also saves us logistical headaches.”
Import focus to alleviate chronic shortage
Some 90% of Andalan’s turnover is currently made up of actual tobacco imports, which the company typically purchases from “large overseas trading partners,” according to Kusuma. Mostly supplying Indonesian cigarette factories, the imports are obtained from quite a variety of countries: Zimbabwe, Turkey, Greece, Pakistan, Bangladesh, India, China, and Brazil, among others. “These imports are absolutely vital [for Indonesian manufacturers],” said Kusuma. “Despite its quite burgeoning tobacco growing sector, Indonesia’s cigarette-grade tobacco requirements are chronically short around 120,000 tons every year, hence the imports.” Kusuma said that, in 2021, the country had to import cigarette tobacco worth about US$586 million. That isn’t petty cash. Yet, the country also is a rather busy exporter. But, said Kusuma, that primarily concerned cigar wrapper and binder varietals such as Besuki TBN or Besuki NO.
Andalan sources its currently rather small export proportion of only around 10% of annual total trading volume from local farms. “And that [export volume] can be broken down into approximately 70% Lombok FCV, while the cigar grades are made up of around 20% Besuki NO and 10% Be-suki TBN,” Kusuma divulged.
Sticking with imports … for a while
Kusuma said that Andalan is currently not really focusing on exports. “Our importing business for cigarette factories is keeping our hands full.” Apart from rag, the company also offers expanded stems from Zimbabwe and reconstituted tobacco sheet from Serbia. While he doesn’t outright dismiss the idea of eventually becoming more active as an exporter, Kusuma might be right to stick with importing, at least for the time being. Like elsewhere in the world, Indonesia is facing a crop shortage this season, estimated by Kusuma to be hovering between 10% and 15%, which likely is going to put even more pressure on local cigarette manufacturers. “The quality of the crops also will be lower, but it is the anticipated shortage that already has considerably driven up prices [for local produce] this year,” Kusuma said.
“The domestic factories don’t have an option, of course. They need their tobacco… and that is where we can help out.”