<strong>The Tar Heel Tobacco Trade Takes On a Chinese Accent</strong>

Source from:  Tobacco Asia  11/26/2013

China Tobacco International North America (CTINA), a new division of China Tobacco International EC (CTIEC), will establish an office in coming months in the Raleigh, North Carolina (NC) area.

And the move makes perfect sense, said Peter Thornton, assistant director for international marketing with the Department of Agriculture.

"A US office was a logical next step in China Tobacco's import process," said Thornton.

"The US is the last major tobacco supplier where China doesn't have a company."

China Tobacco's decision to place its North American office in NC is a major statement about how much it values the state's tobacco, said Steve Troxler, N. agriculture commissioner, in a statement issued in late June. "We think CTI's presence in our state will mean even more [sales] opportunities for our farmers."

Madam Zhanhua Liang, president of CTINA, explained the move by saying, "It is better to be closer to the market and farmers," according to the NC agriculture department statement.

A choice had to be made. "Different tobacco-growing states wanted us to… [locate in their boundaries]. We chose North Carolina due to its advantages."

The main advantage is probably that NC is the number one tobacco-producing state in the US But Liang also credited the activities of Troxler and his staff.

"This department and the local governments gave us tremendous help in the establishment of the company," she said.

"They had many choices in states to go to but the relationship with commissioner Troxler and the Chinese desire to be near the farmers was the deciding factor in the decision to establish the office in N.C.," said Thornton.

One other benefit North Carolina offers: a fine seaport in Wilmington in the southeast corner of the state.

Troxler led trade missions to China in 2009 and 2011 to build the state's relationship with the Asian country and opened a trade office in Beijing in 2011. In addition to tobacco, China imports NC soybeans, cotton, poultry, pork and many other agricultural products.

The presence of a North Carolina office should increase tobacco sales from the state to China, said Thornton.

"That is the expectation and the hope on our part."

In its new location, the company is expected to serve as the base for its North American leaf-buying operation. The company likely will buy from both leaf dealers and farmers, said Thornton. But whether it will seek farmer contracts of the type currently used in the US is yet to be seen.

Although it was not formally announced, several sources told Tobacco Asia they believe the company will buy flue-cured from this year's crop, or at least try to.

The location of the new offices hadn't been publicly revealed at press time, but several sources said it is expected to be in the Raleigh suburb of Cary.

Also located in Raleigh is the office of US Tobacco Cooperative (USTC), which represents US flue-cured growers. USTC played a major role in convincing China Tobacco International to consider putting American flue-cured in its blends for the first time in 2005 and has been the largest US supplier to CTIEC each year since then.

Mike Lynch, USTC's senior vice president for global sales and marketing, said that the cooperative already works very closely with CTIEC and expects more cooperation when the move takes place.

"But we have no special arrangement," he said. "Their intent is to do more business in the US if possible, and we want to help."

The expected increase in tobacco sales to China has already begun, said Thornton.

"They have already started to increase this year though the first three months and already have purchased more than they did all of last year."

There are more smokers in China than there are people in the United States, he added.

"China is a growth market, [and it is] increasingly looking for high quality tobaccos which are produced in North Carolina," according to Troxler.

China has surpassed Japan as North Carolina's biggest tobacco importer, purchasing US$157 million dollars' worth of tobacco in the first quarter of this year.

A payoff for burley too

The leader of the burley cooperative in Springfield, Tennessee, said the new CTI office will provide US burley growers more efficient communication and access to this growing market, providing a better understanding of the specific styles of burley necessary for the Chinese market.

"We are looking forward to a closer business relationship with CTI and are committed for the long term to supplying the best quality burley possible to the Chinese market," said Daniel Green, chief executive officer of Burley Stabilization Corp.

Although the China market is overwhelmingly a Virginia-blend market, there is a growing demand for quality burley there. How is it being used? Green thinks it may be going primarily into American-blend cigarettes manufactured for export to other Asian countries.
The leader of the burley cooperative in Kentucky said the establishment of a CTI office in the US can't possibly be anything but good news for burley growers.

"It should help us to develop a relationship with a company that we haven't dealt directly with in the past," said Steve Pratt, general manager for the Burley Tobacco Growers Cooperative Association. "It certainly will be easier to visit."

But there is nothing to report yet. "So far though we are still in the 'courting' stage," said Pratt.

Information scarce

A final note: For whatever it is worth, by American standards, this is a very secretive organization. A case in point -- the man who lead USTC as farmer-leader in the years when exports of US leaf to China first began has joined the CTINA staff in an as-yet unspecified executive capacity.

Albert Johnson of Galivants Ferry, South Carolina, was the USTC board chairman from 2005 until May of this year, when the other board members did not reelect him to that post. He could reasonably be expected to bring some degree of expertise to the effort of getting US leaf into Chinese cigarettes.

Tobacco Asia knows Johnson quite well and was able to speak to him briefly once on the telephone but he would confirm nothing about his position or anything else about the new company.

No one associated with CTINA provided any information for this story, which is based on interviews with North Carolina Department of Agriculture staffers and on a statement that the department—not CTINA—released on June 27. One of the staffers expressed frustration at the difficulty faced bringing any information on CTINA to the attention of the public. Enditem