1994 Key A--ea: Leaf - Security and Vconomv of T
-f Suoofies
1. Dom-lic Tobacco Production
1.1 Quantity: Plans for domestic crop must reflect
the Operating Companies
rrquiremenEs for domestic use (based upon the
individual Operating Company
duration poLicy) and for exports (see later
section on exports). Uncontrolled
expansion with "the hope" of exporting any
surpluses (ic no commitment) is
nor acceptable.
1.2 Quality: Plans must show quality improvements
and how these will be
obtained. particularly with regard to improving
grade turnout.
1.3 Yield: 1.1inimurn target yields/ha must be set
for the next crop (1995) for
each type grown.
. g Yields must show progressive iniprovement.
However,
these must not be to the detriment of quality.
1.4 Price: Annual cost of production surveys
(tobacco and competing crops) must
be carried OUE to establish realistic and
competitive purchase prices so that
farmers' returns stimulate the required production
without adversely affecting
essential food crop production. Export pricing
implications must also be
considered.
Net returns to farmers should be com*tive with
returris achievable from
non-tobacco crops. Returns should be increased by
a combination of
improved yields, reduced real cost of
inputsilabour etc (ie efficiency) rather
than having to resort to automatic price
increases.
1.5 Master Farmer Schemes: Where not already
implemented, each Operating
Company must establish a scheme for identifying
and rewarding (prizes.
-=ter range of crop inputs available. etc) the
better farmers. It is appreciated
that these fmners will have hi.-her yields and
better grade outrum. However,
plans must clearly show your scheme tNllaster
farmer, category A farmers,
etc), how you intend to identify these farmers and
actions to support and
motivate them to achieve better quality and to
provide a greater percentage of
your purchases.
1.6 Afforestation: Every Operating Company using
woodfuel (for all or pan of
the curing - flue/fire - and for barn
construction. etc) must have an
afforestation programme with the objectives of
achieving self sufficiency in
wood supply over the shortest realistic time
period. Plans must show target
dates for self sufficiency. Further specific
details will be forwarded to each
company in due course.
Afforesta.don schemes should be based around
farmer plantings. and where Ui
CD
feasible. be supplemented by company managed
plantations. Improvements in
specific fuel consumption (amount of fuel used to
cure one kg of tobacco) ON
must be achieved, ic targets set and actions
shown. NJ
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BATCo document for Province of British Columbia 23
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have tight contracts with dealers. This is
particuMy important now when
there is a world surplus of tobacco.
2.2 Run of Crop: Exports should be run of crop
otherwise there is a danger of
debasing your domestic cigarette quality which is
unacceptable in any market
and even more serious in a competitive market. If
exports are not run of crop
it is difficult to truly cost these exports and we
would question your profit
figures.
2.3 Price/Proritability: Exports must be
profitable on the accounting basis
established by BATCo Finance (paper circulated
December 199 1), unless there
is an overriding need for forex earnings, however
if the latter is the caw this
must be clearly stated in the plans and agreed by
your Regional Director.
Exports must be profitable even without any local
currency devaluations.
Devaluations are a bonus and not a reaLstic reason
for pushing exports.
'ne "BATCo Leaf Export Policy% circulated to ail
e-cporting Companies on
September 1 1993, clearly states the direction the
Group is !~g with r,,-.d
to exports. The policy must be followed and any
exceptions can only be
approved by L=f Depa=ent and the RBU.
Margins in a normal year should be sufficiently
large enough to cater for
fluctuating export prices (ie current world
tobacco surplus has depressed prices
in 1994 - recovery to some extent expected in 1995
for flavour tobaccos and
1996/7 for filler tobaccos).
2.4 Otber Factors: Tobacco quality must be
acceptable. continuity of supply
must be assured. crop chemical residues must be
below permitted levels.
processing specifications mast be mer. and
infestation controls well
established.
2.5 Export Contracts: New L=f Export Contract
Guidelines have been
circulated. Each Company must incorporate the
rccommendations/poinEs
made in these Guidelines when their respective
Export Contracts are next
renewed (usually every year).
3. GT T Pro-qi-ff
3.1 Quality Control Protocols: All Operating
Compaaies have already received
the new quality control protocols (ic methods for
measuring processing
specificatioris). These must be implemented so
that youlwe have confidence in
the various specification measurements reported
and that the figures am
comparable over our industry. The new
International Coresm scre= must be
used as they are an integral part of the protocol.
3.2 Processing Specirications: ALL Operating
Companies havealre:itly received
the new processing specification targets. Wbilst
them are for tobaccos Lr'
purchased internationally by BATCo they should be
used as a standard by all CD
Opetating Companies. viost companies must plan to
meet and even exceed r
these standards and the targets must be clearly
shown in the forthcoming
CD
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BATCo document for Province of British Columbia 23
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Company Plans. Some companies, with older
equipment, may have
difficult= in the short term. However, in these
cases, progressive
improvements must be shown/stated, actions
required to achieve this
improvement and a target date set for
meeting/cxceeding BATCo standards.
Export customers processing specifications must be
met.
It is important to remember that the domestic
ciprette factory is also a
customer just like any export customer.
3.3 Processing Costs: Whilst it is fuUy
appreciated that we need to upgrade plant
and equipment with the knock-on effect of
depreciation increasing processing
costs, we must remiain My competitive. Processing
costs in some operations
are stiU too hi-, h and every effort must be made
to reduce these, targers must
be shown and actions clearly stated to achieve
these targets.
3.4 Infestation Control: Good housekeeping and
cleanliness am the basis of
good infestation control. The selection, use and
storage of infestacion control
chemic3ls must be strictly in accordance with
BATCo policy (issued February
1992 with updated additions).
4. Yrnoorted Tobaccos
4.1 Purchase Requirements: AU orders/requirements
for imported tobaccos must
be placed through BATCo L=f Department, Woking,
who are responsible for
coordinaring, supervising and negotiating prices
for Group purchases.
4.2 BuyizLg Cornmi ion: The BATCo Board have
agreed to a standardised
worldwide buying commission of 3 % which is now
applicable to aU tobaccos
from all sources.
4.3 Import Restrictions: Where imported tobaccos
are essential to enhance the
smoking quality of domestic tobaccos and thus
provide a competitive
advantage, Government pressure to reduceieliminam
imports must be msist~.
4.4 World Supply/Stocks: nere is currently a world
surplus of all types of
tobacco and prices have, in most cases, dropped
significantly; the exceptions
are thomsources with a market support system (e.-
USA, Canada).
Government bodies/dealers etc in a variety of
countries are now holding
surplus stocks of tobacco which are also
depressing prices. Whilst many of
these stocks am not within our grade/processing
specifications they present an
opportunity for requirements for unplanned
business (tender sales etc).
Most major supply countries have cut 1994
production to such an ex=E that
there could well be at least 20 % less flue cured
and 25 % less Burley available U-
for international trade this year as compared to
1993 (Oriental to remain C~
unchanged, fire cured to increase sfightly).
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BATCo document for Province of British Columbia 23
April 1999


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1995 production is not likely to increase
(Oriental to decrea dramatically)
unless; there is a major shift in overall demand
and price. This could cause a
major supply problem in 1995/1996 for quality
tobaccos with a violent swing
to a shortage simation and rapid escalation of
prices.
However, the situation continues to be volatile
and BATCo Leaf Department
will provide updated information through their
quartedy review.
4.5 Visits: RATCo Leaf Department have to approve
and coordinate all visits
from BATCo Operating Companies to major producing
Arms.
5. Stock Duration Policy/Stock Re-misters
5.1 Durations: BATCo Operating Companies must
establish stock duration levels
within the policy guidelines given by the BATCo
Board, recognising the
intrinsic differences between 'filler" and
"flavour" tobaccos, the ageing period
required and the use of two crop blending for
flavour grades - essential
contributors to smoking quality and hence consumer
acceptance.
However, gives the volatile nature of sales in
cermin markets and the tobacco
supply scenario (see above), BATCo Operating
Companies should work aitbin
~he fle-abilitv siven in the mideiines, to
maintain higher than normal stock
durations of those imported tobaccos considered to
be at risk or to take
advantage of depressed world tobacco prices.
Any decision to purchase extra tobaccos at
depressed prices against future
yean requirements must be first approved by BATCo
Leaf Department and the
RBU.
5.2 Stock Regis;ters: Both the Imported Tobacco
Stock Register and a Domestic
Stock Register am now operational. BATCo Operating
Companies are
requested to participate is returning information
for these schemes so that
better control and potential movement of stocks
can be organised within the
Group.
6. Functional 17-nertiqe
6.1 Recruitment: BATCo Operating Companies must
continue to recruit high
calibre, high potential local national leaf staff.
Particular emphasis must be
given to recruitment for leaf blending and product
development.
g
6.2 Training- Training/development programmes must
be drawn up and carried
through for all managers idenffled as having high
potential with particular
emphasis on the Leaf Functional Training Courses
being offered by Souza
Cruz, the Oriental Courses being offered by BATCo
and the Blending Courses
being offered by BATCo. All leaf managers should
at some stage of their
career attend a detailed finance course and need
to be fully aware of Elie
financial impact of their decisions on the Company
as a whole. All requests
for training must be channelled through BATCo L=f
Department who will
approve and assist companies with their training
requirements.
BATCo document for Province of British Columbia 23
April 1999