TOBACCO INTERNATIONAL

TI March 2016

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10 TOBACCO INTERNATIONAL MARCH 2016 Progress Despite Headwinds We take a few pages in this issue to focus on British American Tobacco, first from the business side, as CEO Nicandro Durante and CFO Ben Stevens present BAT's Preliminary Results for 2015. Their message is that the company is making prog- ress despite headwinds. Durante said that 2015 was a good year and that the second half was strong as well. The full transcript is in this issue. We also focus of the au- thors of BAT's new scientific study, so this is a good opportunity to learn about the people behind BAT's steady progress. Elsewhere, in Brazil, one would think they'd worry more about the tumultuous political situation. But Guido Jungbluth reports that despite Brazilian politics, dealers are advising tobacco farmers not to reduce their planted area for the next season, and to stick to their crop diversification initiatives. There is rampant cross border cigarette smuggling in Brazil, Jungbluth says, and the government has abandoned the initiative aimed at curbing this illegal trade. At the end of the day, Jungbluth reports, Brazil's tobacco industry can do little to re-shape the country's political future, other than continuing to focus on innovation and keeping the farmers motivated through soil management practices, productivity gains, planning and sustainable development. Saudi Arabia is importing more cigarettes from Europe according to economic columnist John Parker. Parker describes an upward trend for total cigarette im- ports into Saudi Arabia, which he says has continued for years, even though the source of the supply has changed, as US manufacturers are already well aware. Dismal is one word that has been used to describe the 2015 tobacco crop. As leaf reporter Chris Bickers explains it, the weather was a major factor in the crop. "The 2015 tobacco crop came in only after growers had experienced a precipitous drop in production, especially compared to the season before," Bickers writes. "Some of the decline was due to reduced plantings last spring…but the main explanation for the dismal performance was low yields for the two leading types—burley and flue- cured—which were caused by unfavorable weather conditions." John Parker updates us on the factories in Iran that produce cigarettes for three multinationals: Japan Tobacco Incorporated (JTI), BAT and Korean Tobacco & Ginseng. These multinationals gained importance in Iran way ahead of today's renewed attention in post-sanction business investment which forecasters think could be meaningful. Not long ago, domestic cigarettes accounted for only about 40 percent of the total cigarette purchases by Iranian smokers. Gradually, the Iranian Tobacco Company (IRC), the large state-owned outfit lobbied to allow for- eign manufacturers to construct cigarette factories and stem the flow of smuggled and counterfeit cigarettes moving from UAE to Iran in thousands of small boats which led to various financial and economic advantages. Finally, London columnist Bob Crew suggests that even if there is a Brexit, and should Britain leave the EU, the balance of trade would still favor Britain's tobacco manufacturers because of existing free trade agreements with Canada and other countries outside the EU. publisher Rob Lockwood president Robert M. Lockwood vice president Frederick A. Lockwood circulation manager Jamie Wollberg director of exhibitions Frank B. Schuetze (Germany) accountant Roxanne Cordova Melendez Advertising Representatives austria, france, germany, switzerland, united kingdom Robert M. Lockwood tel: + 1-212-391-2060, ext. 109 fax: + 1-212-827-0945 email: robert@tobaccointernational.com benelux, italy, portugal, south america, spain Frederick A. Lockwood tel: + 1-212-391-2060, ext. 107 fax: + 1-212-827-0945 email: f.lockwood@tobaccointernational.com africa, scandinavia, southeastern us, turkey Rob Lockwood, Jr. tel: + 1-212-391-2060, ext. 130 fax: + 1-212-827-0945 email: rob@tobaccointernational.com north america, central america, caribbean Bob Olesen tel: + 1-212-391-2060, ext. 134 fax: + 1-212-827-0945 email: b.olesen@tobaccointernational.com asia (china), eastern europe (sales), middle east, oceania (australia) Kelly Hobbs tel: + 1-212-832-9322 fax: + 1-212-827-0945 email: k.hobbs@lockwoodpublications.com director of exhibitions (eastern europe, russia) Frank B. Schuetze, tel: + 49 30 645 7212 fax: + 49 30 6409 1350 email: f.schuetze@eurotab.com special sales representative George E. Lockwood tel: + 1-413-548-9700 fax: + 1-413-548-9727 email: lockwood.george@gmail.com for advertising sales in all other regions, contact: Tobacco International Magazine 3743 Crescent Street, Second Floor Long Island City, NY 11101, USA tel: +1-212-391-2060 | fax: +1-212-827-0945 sales: sales@tobaccointernational.com — Murdoch McBride, Editor Volume 16, No. 2 TOBACCO INTERNATIONAL (ISSN 0049-3945 print; ISSN 2331-8481 online), established in 1886, is pub- lished eight times a year, with four monthly issues (March, June, November, and December) and four combined issues (Jan/Feb, April/May, July/August, and Sept/October) plus a directory issue published in January of each year by Lockwood Trade Journal Co., Inc., 3743 Crescent Street, Second Floor, Long Island City, NY 11101, USA. Officers: Robert M. Lockwood, president and treasurer. Subscription rates: USA—US$49 per year, US$74 for two years; US$109 for three years. Canada—US$59 per year, US$89 for two years, US$134 for three years. All other countries: International Surface Mail—US$89 per year; US$139 for two years; US$199 for three years. International AirMail—US$129 per year; US$199 for two years; US$289 for three years. Single copy price: US$15. Annual Buyers' Guide & Directory: US$45, plus shipping. Copyright © 2016 by Lockwood Publications, Inc. The contents of tobacco international may not be reprinted except by permission. POSTMASTER: Send address changes to tobacco international, P.O. Box 424, Congers, NY 10920-0430, USA. TI EDITORIAL

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