When an earthquake of a magnitude of seven on the Richter scale struck Haiti in January 2010, it destroyed most of the infrastructure of the island, including ports and airports. Many businesses have suffered, including the tobacco sector.
A great number of retail outlets were ruined, especially in the capital Port-au-Prince, the central business district of which was shattered by the quake.
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One of the country's largest companies, tobacco leaf processor and cigarette manufacturer Comme Il Faut, managed to restore its operations a few weeks later, despite damage to its machines and workers, many who died or lost family members in the disaster.
"Our main concern was the safety of our employees," said Jean Dany Pierre-François, director of public relations at US-owned Comme Il Faut. When the rubble was cleared, Comme Il Faut had lost its manager, Lawrence Keryby, and about 30 per cent of the 400-person workforce had their homes destroyed or were mourning the deaths of family members.
So the well-manicured Comme Il Faut facility, on the outskirts of Port-au-Prince, comprising a dozen, two-storey, squat white buildings, became a temporary shelter for employees and their relatives.
Company officials brought tents, food, water and toys for the children. They also provided transport for workers to take homeless relatives to the countryside, away from the debris-filled capital city.
"The company was outstanding," said Roland Jean, a security guard. "I've been here for 20 years and, frankly, I didn't think that they would care for my family the way they did."
Once it established its workers and their families were safe, Pierre-François said, the company embarked on a physical assessment of the plant, which is located in the city of Tabarre, near the Toussaint Louverture International Airport - an area less affected by the quake than the centre of Port-au-Prince.
Most of the buildings suffered "cosmetic damages" that were repaired in a couple of weeks, he said. But Comme Il Faut could not resume manufacturing operations immediately because some steel rods on conveyor belts were severely bent and replacements had to be ordered from overseas.
In Haiti this is a serious matter. Comme Il Faut is the dominant player, with many reports claiming it has 80 per cent of the market share for cigarette consumption in the country.
It produces two main brands, Comme Il Faut regular and Comme Il Faut light, and it is planning to launch a new low-price brand in December 2010 called Points. It will be aimed at a lower market segment, which, group company officials say, is not currently targeted (and which will presumably be large in the aftermath of the earthquake). Points will cost about 20 cents less than Comme Il Faut's other brands, which fetch about USD 1 (EUR 0.74) a pack on the retail market.
High smoking prevalence
According to the World Health Organisation (WHO), about 40 per cent of the adult population in Haiti smoke (the total population is about nine million). Annual adult per capita consumption of cigarettes appears to have risen over the last two decades, with some evidence of a decline in recent years. However, consumption is often under-reported owing to a substantial illegal trade in cigarettes, and Haitian government statistics are not always reliable. The same applies to the actual size of the country's tobacco market. Tobacco Journal International was not able to secure the latest Haitian sales figures from Comme Il Faut.
Clearly, is the business is lucrative, and not wanting to lose its near monopoly in the Haitian cigarette market, company officials rushed in technicians from its American owners, who also own Kentucky's Harding Enterprises, to get the machines up and running.
A month after the quake, Pierre-François said production had returned to 90 per cent of pre-earthquake capacity and should equal this level before the summer. "We didn't want our customers to be out of their product," Pierre-François said. "It would make us more vulnerable to imports."
And while production challenges are being overcome, Comme Il Faut still faces the daunting task of distributing and warehousing its products, since many of its independent distribution centres lost their warehouses in the disaster, according to government officials.
Despite the preference among Haitians for their home-manufactured brands, the remaining roughly 20 per cent of the market is dominated by Philip Morris International, which imports Marlboro into Haiti through domestic distributors (mostly from the US) and which is widely regarded as the country's strongest foreign brand. Marlboro Lights are also popular, but currently hard to find because of earthquake-related distribution problems. British American Tobacco's (BAT) Kent brand is also commonly smoked in Haiti. But these players are suffering from the same port and infrastructure problems as Comme Il Faut.
Competing neighbour
As a result, maybe the biggest short-term risk to the Haitian company is from manufacturers in the neighbouring Dominican Republic, with whom Haiti shares the island of Hispaniola, and so products can be shipped by land. While it is an important company in Haiti, Comme Il Faut remains a small company compared to some of the tobacco giants in the neighbouring Dominican Republic, where they not only produce cigarettes, but also high-quality cigars that can fetch anywhere from USD 1 to USD 100 (EUR 0.74 to 74) in retail stores in the United States and Europe.
Cigar companies include General Cigar Dominicana, Tabacos Don Esteban, and Valdrych; cigarette manufacturers include Industrias de Tabaco Leon Jimenes; and there is La Tabacalera C por A, which makes both cigars and cigarettes. The Dominican Republic, fittingly discovered by Christopher Columbus (the first European explorer to witness cigar consumption), is the largest producer of cigars worldwide and so well placed to supply any shortages of tobacco products in the Haitian market. Brands Arturo Fuente, Romeo y Julieta Dominicana and Cohiba Dominicana are already widely smoked in Haiti.
As for cigarettes, Marlboro and Newport brands are already manufactured in the Dominican Republic and sent to Haiti, where they are distributed by the Brasserie National of Haiti or BRANA, the country's largest beer producer, although its facilities also sustained damage in the earthquake. Import quotas and duties restricting trade between the two countries are light, according to a government official.
The port and infrastructure problems potentially giving Dominican imports an advantage are a particular problem for Comme Il Faut, first because it has tended not to buy tobacco leaf from the meagre supplies available in Haiti, but has imported it from other tobacco-producing countries. This has become a problem since the earthquake, as the ports have been closed and the financial, legal, administrative and accounting services that oil the wheels of commerce have ground to a halt, slowing import supplies dramatically.
Luckily, company officials said, a few weeks before the quake hit, they had received a large shipment of raw tobacco from Argentina and China, their main suppliers. The situation has also re-ignited a discussion among company executives, some of whom have been advocating restoring local tobacco production and those who feel that importing remains the best option.
Raw material mostly imported
Comme Il Faut does buy some tobacco from local farmers, many of whom it has trained with best practice methods to ensure the quality is consistent. But the volumes are small. "We used to grow our own tobacco leaf," Pierre-François said. "We lost a lot of money because farms were looted and we had to get out of that business."
Clearly, having to import the raw materials or outsource production locally has cut into the company's bottom line. Company officials are hoping to resume their production in Haiti once the security situation improves. And while the government of President René Préval had been making improvements in this area, there are obvious concerns that the dislocation following the earthquake will fuel disorder, especially in the short term.
In the meantime, there is talk of buying tobacco leaf from the Dominican Republic, which would lower the cost of the product because of lower transport costs because of much shorter distances and the ability to ship overland.
Soldiers from the US Army Corps of Engineers have also been working almost around the clock to repair structural damage to the city's port so that commerce can resume at full speed. The international airport was recently reopened to commercial traffic after being closed for two months. Only aid and military flights had been allowed to land since the quake, as the airport's main terminal and air traffic control tower suffered structural damage.
The port problems have also been a serious blow to Comme Il Faut, because it hindered the company from exporting products. The company has built up a strong business producing customised, private label cigarettes for customers around the world, taking orders to produce specific tobacco blends for various brands. "We routinely handle dozens of packages, styles and brands," a Comme Il Faut official told Tobacco Journal International, although he refused to name the company's clients.
Thanks to a recent USD 10 million (EUR 7.4 million) investment in advanced bulk processing machinery, the company now supplies its international clientele with stock and custom-blend processed tobacco or cut rag, and it now also has the capacity to produce more than 20,000 kg of tobacco per day, officials said.
The earthquake has also slowed down orders from companies for Comme Il Faut's hand-rolled products, according to company officials.
In the long term, assuming the reconstruction effort is successful, Haiti remains a good prospect for the tobacco industry in general and Comme Il Faut in particular.
It has a lightly regulated tobacco market. According the WHO, Haiti has no government objectives on tobacco control, no laws blocking smoking in hospitals or schools, and no regional or municipal public place smoking bans. It also lacks health activist groups promoting anti-smoking messages common in nearby North America. On the contrary, tobacco and cigarette billboards are plastered across both Haiti and the Dominican Republic.
In Haiti, Comme Il Faut is also a major sponsor of football and the local music industry. This is controversial in some quarters.
Until recently, parents in Haiti could even send their children to buy cigarettes for them. But in the last two years, the government has begun urging parents to stop the practice and asking vendors not to sell cigarettes to children under 18 years of age.
That said, while Haitian laws do not require the company to put health warnings on its packs, it has done so voluntarily.
"We are not forcing anyone to smoke," said Pierre-François, a non-smoker. "What we're saying is that if you're a smoker, why don't you try our product?"
Given its yield in excise and import duties, as well as general taxation, the company is the second-largest single source of public revenue, say Haitian government officials. "The big companies are still open and in the days after the quake we went looking for them," Haitian deputy finance minister Sylvain Lafalaise told journalists in a recent interview.
The company has an equally important presence for the city of Tabarre. It is the biggest single tax payer and corporate sponsor in the region.
"They do provide a lot to us," said Francisco Jovin, the city's manager. "Not only through the obvious taxes - they provide our youth with a soccer tournament and sponsor all kinds of cultural events in Tabarre."
Looking ahead, whether these laws will tighten, and duties increase after reconstruction remains to be seen. Comme Il Faut has recently become a key supporter of the Cigar Rights of America lobbying group, which was founded in 2008. It was recruited by Litto Gomez, a prominent Dominican Republic cigar manufacturer (owner of La Flor Dominicana), who defends the rights of cigar makers and tobacco products in general. He is concerned about "excessive" taxes levied on the industry and stresses that tobacco products are legal, accusing anti-smoking campaigns of "zealotry".
"The industry is a very easy target," Gomez said. "It's important that we realise the stakes in this battle: the other side wants to erase tobacco." Enditem
