Schweitzer-Mauduit Chinese Joint-Venture for Reconstituted Tobacco

by

By TobaccoChina Online

Schweitzer-Mauduit International’s (SWM) subsidiary established in Hong Kong and four subsidiaries of China National Tobacco Corporation jointly invested to set up China Tobacco Schweitzer (Yunnan) Reconstituted Tobacco Co., Ltd. (hereinafter referred to as CTS), of which China Tobacco and SWM respectively control 50% of the equity. After the signing of the contract for knowhow licensing, SWM agreed to provide CTS with the most advanced proprietary technology for reconstituted tobacco and continuous technological improvements.

With its investment project approved by the National Development and Reform Commission of China on September 29, 2009, CTS was registered in August 2011 and was formally put into operation in August 2014. As a Sino-foreign joint venture, it has concentrated the advantageous resources of both parties, enabling this young enterprise to take on a high starting point from enterprise management, technology, product quality, to marketing and other aspects.

     The production process of papermaking reconstituted tobacco was developed by Ned Flaxman of Schweitzer Paper-Making Company in the 1950s. Its initial aim was mainly to make full use of tobacco fragments produced during tobacco processing and to improve the utilization of tobacco raw materials. It began in the 1980s to be used for the preparation of cigar wrappers and binders. Since its scale application in the tobacco industry in the 1960s, the amount of global paper-making reconstituted tobacco has been increasing year by year. This is closely related to the global trend of reducing tar and harm of cigarettes and increasing the utilization rate of tobacco raw material, for which papermaking reconstituted tobacco has played a positive role in promoting.

When it comes to papermaking reconstituted tobacco production enterprises, SWM comes to mind first. SWM is not only the largest manufacturer of papermaking reconstituted tobacco in the world, but also the first enterprise in the world to use two-step papermaking technology to produce reconstituted tobacco. At present, using a papermaking process, the annual capacity in reconstituted tobacco of the Company has reached over 80,000 tons, covering a variety of mixed type, flue-cured, burley, Maryland tobacco, etc., with more than 60 products in about 250 batches sold to more than 50 countries and regions in the world each year.

SWM consists of two commendable business units: engineering paper (EP) and advanced material and structure (AMS). Its engineering papermaking department has fiber technology, papermaking, and remanufacturing business with production facilities in Brazil, France, Poland, and the US, as well as two joint ventures established in China. The reconstituted tobacco products produced by SWM have been the main source of the use of reconstituted tobacco in Chinese cigarette manufacturers for a long time. In 2011, SWM’s papermaking reconstituted tobacco technology was officially licensed to be used in China.

Advanced Enterprise Management

SWM appointed John Tennier, who holds rich experience from SWM’s Ancram Mill in the US, to China Tobacco Schweitzer as General Manager. He has brought to the Company the improvement of organization management, optimization of function and process, introduced advanced modern management methods, and paid more attention to its interoperability of information and resources with international tobaccos.

Tennier said, “The environment of the international tobacco industry, similar to that of China, is highly regulated. SWM has made CTS more aware of the world’s tobacco rules through its own resource advantages and experience. No matter what country you are in, the products you produce are regulated by the country that you sell to. SWM passes on its experience to CTS, helping it to reduce the probability of trial and error.”

“The development of tobacco products has a strong regional nature. When the products of CTS are to be promoted in the market, it is particularly important to produce a product that is adapted to the style of local needs. Since people everywhere in the world have different tastes for cigarettes, SWM can provide the company with information on the international market, which is very important for the competition in the international market.”

Leading Technology

SWM’s papermaking reengineering tobacco technology is in the forefront of the world, and the products produced are in the international leading level, both in inherent quality and physical index. CTS obtained the most advanced reconstituted tobacco production line of LTRI Company in France. Through 50 years of continuous development and improvement, the production line has excellent equipment, stable operation, advanced centralized control, and a single line capacity of 30,000 tons per year. It is the world’s largest single line capacity of regenerated tobacco production line.

On this basis, the Chinese shareholders of China Tobacco Schweitzer appointed Zhou Guiyuan as deputy general manager of product development and product development director. Zhou was the chief raw material engineer of Yunnan-based China Tobacco  Technology Center. He has led the R&D team, based on the unique flavor and style requirements of Chinese cigarettes, adding natural plant fragrance materials to reconstituted tobacco leaves, creating a new functional reconstituted tobacco leaf which is different from SWM traditional products, and making the products of CTS more adaptable to the demands of the Chinese market.

“In recent years, the demands for cigarette consumption have grown diversified and individualized. China’s tobacco industry has also done a lot of innovation and upgrading work, and there are more and more new forms of tobacco such as fine cigarettes, flavored capsule cigarettes, and short cigarettes with various innovative products in taste and fun emerging endlessly. It can be said that the emergence of this innovative form has also raised higher requirements for the reconstituted tobacco products,” said Zhou.

 “In order to win the market, it is necessary to break through the quality confinement of traditional reconstituted tobacco and highlight its characteristics. At present, the Company is no longer satisfied with the production of products and begins to focus on the research and innovation of the recombinant tobacco technology, developing a variety of styles and personalizing products by virtue of the flexibility of technology and providing reconstituted tobacco products with different flavors such as orange, plum, cocoa, and other flavors according to the requirements of different cigarette styles and characteristics.

“Furthermore, upon moving towards the international market, CTS has focused on the new trend of international tobacco development and developed new types of tobacco products like heated-not-burned products,” he continued.

With independent research and development at the same time, CTS has maintained product superiority as well as product development and innovation capabilities by establishing joint laboratories with customers and carrying out domestic and international technical exchanges and cooperation.

Continuously Upgraded Product Quality

CTS not only boasts advanced production equipment and technology but also implements the strict production process standard of SWM and the production management concept of “control of results and quick response mechanism”, making its product quality index obviously superior to the Chinese tobacco industry’s similar product quality tolerance standard.

CTS’s current Deputy General Manager of Production Process, Michel Barale, from SWM, has 31 years of experience in production management. Michel Barale has influenced CTS’ continuous improvement not only in product quality but also in process through a set of data. “First, in terms of improving the quality control parameters, the qualification rate of the products was 93% at the beginning of 2016. After a series of continuous upgrading and transformation, presently the qualified rate of the products has reached 99.6%. Another case is the increase in raw material preprocessing rate, which had been increased by 8 points in 2016 through continuous adjustment; the third example is about the downtime, which was 23% in 2015, but now it has dropped to 10%, and the downtime is the same as SWM,” he said.

Through continuous improvement and upgrading, the company has made significant improvements in production and equipment maintenance, realizing self-management. Frontline employees have fully mastered the skills to control advanced production equipment. While ensuring the stable operation of the production line, a preventive maintenance plan has been formulated to prevent a shutdown caused by an accident.

Safety Management Detailed in Action

Safety production is an important cornerstone to ensure the quality and efficiency of production. Liu Changbo, the current Deputy General Manager of Finance and Business Management, who came from Hongta Tobacco (Group) Co., Ltd., has extensive experience in risk control, profit control, and safety management, etc.

“Safety is no small matter,” said Liu. “These refinement measures were initially introduced from SWM. In the introduction of the production line, CTS also introduced foreign, mature, and complete safety management standards and ideas. From initial safety awareness to the habits that have now been formed, CTS’ safety control is carried out into every detail.”

He also said, “Safety input is an imperceptible resource input, which ensures that CTS reduces the probability of safety accidents and improves production efficiency. The biggest highlight is that by December 8, 2016, the company had achieved “No accident in a million hours of work’. By December 31, 2017, the company had realized 1,288 days of nondestructive accidents.”

Internationalized Talents Cultivation

The current Deputy General Manager, Tu Yangang, who is in charge of the Personnel and Supply Chain Departments and came from Hongta Tobacco Group, has witnessed the development of China Tobacco Schweitzer.

Tu said, “In the aspect of talent reserves, in addition to the senior executives appointed by each stockholder, the company also has a young talent team with an average age about 32 years old, injecting vitality and creativity into the enterprise. On this basis, a set of more distinctive talent management mechanism has been formed with a combination of advanced talent management in China and foreign countries. By sending part of the staff to the factories of SWM in the US and France for field training and inviting foreign advanced talent management consulting companies to CTS for post-training, our talents highlight international management quality and systematic thinking.”

Creating Marketing Ideas of Value for Customers

From the initial production stage in 2014, the stage of steady promotion in 2016, and then to the market stage in 2017, CTS has gradually grown to maturity. As the shareholders of China Tobacco and SWM continue to invest in resources and their own continuous investment upgrades, CTS has been expanding its influence in the Chinese market and has enhanced its strength to enter the international market.

CTS’ Sales Manager, Jin Yigang, who came from Hongyun Honghe Tobacco (Group) Co., Ltd., has a wealth of experience in domestic and foreign cooperative production management and marketing. He has introduced domestic and foreign customer resources as well as brand-new marketing idea for CTS.

“China Tobacco Schweitzer is an international company. We not only provide differentiated products and services to Chinese tobacco companies but also attach great importance to providing cost-effective products and services to foreign customers. The reconstituted tobacco industry will enter a new development opportunity in the coming years. We need to reserve products and technology and establish contacts with all the customers in China,” said Jin.

He also said, “[CTS] not only provides high-quality products for customers but also pays more attention to creating value for customers. We focus on product sales and customer relationship management. We not only provide active after-sales service for customers who have purchased our products but also to providing information and technology consulting services to tobacco companies that have not purchased our products. Our customer relationship management consists of three levels. The first level is to provide customers with after-sales service in the process of product use, the second level is to provide the customer with the latest and valuable information consulting services, and the third level is to provide professional technical support by building joint laboratories with customers.”

As much as SWM is providing CTS with advanced technology and management as well as international tobacco information, CTS has also become a window for SWM to understand the Chinese tobacco market from different cultural perspectives. If their relationship used to be described between shareholder and investee, it is more of a partnership now. China Tobacco Schweitzer is full of confidence for the future.