Top 5 Tobacco Producing Countries: Industry Trends And Economic Outlook

Summary

• China and India make up 50% of global raw tobacco.
• The World Health Organisation actively seeks ways to encourage regulation in the tobacco industry.
• Tobacco companies sponsor many CSR initiatives to strengthen their public image amid health concerns.

Overview

World Production

Global green tobacco production is approximately 6.3 million tons, with Asia producing beyond 60%. China, Brazil, India, the United States of America, and Indonesia are the world leaders in tobacco production. The below table illustrates the ranking in 2020 (the latest one publicly available). Interestingly, China and India together account for half of the World’s raw tobacco.

Country	Production (Tons)	Production per Person (Kg)	Acreage (Hectare)	Yield (Kg / Hectare)
China	2.806.770	2,014	1.259.549	2.228,4
India	761.318	0,57	449.248	1.694,6
Brazil	675.545	3,224	375.622	1.798,5
United States of America	285.181	0,87	129.362	2.204,5
Indonesia	196.154	0,74	206.337	950,6

The trend for global tobacco leaf production has been upward between 2005 and 2015. However, production has declined by approximately 3% a year since then. The drop is due to the active efforts of the World Health Organisation to discourage and control tobacco growth and consumption.

Moreover, tobacco leaf production has been growing in Africa and falling in other regions, suggesting a shift in production in African countries. On the other side, cigarette production has surged in Asia as the region increasingly exports.

The Production Process

Production is a tedious process. Firstly, it involves farming.

Over 15 million people are employed to grow tobacco on 3 million farms. The total output value is over USD 16.7 billion.

Then it’s processing. After being harvested and cured, tobacco travels to processing plants, mostly in China, Brazil, Dominican Republic, and the EU.

At this stage in the supply chain, over 23,774 full-time employees participate in dealing with around two million tons of unmanufactured tobacco.

Following the first processing, the tobacco moves to the manufacturing facilities in packages. The next stage is product manufacturing: Over 1.6 million people work in tobacco manufacturing in 85,883 factories worldwide, producing tobacco that in total is worth approximately USD 251 billion.

China produces over 5.4 trillion cigarettes and 25 billion cigars yearly. China is the leading supplier of cigarettes (44%), while the EU, Indonesia, Russia, and the U.S. account for 27% of the total cigarette supply.

China

Tabacco Industry

China is the biggest grower of tobacco leaf worldwide, producing approximately 2.1 million tons of tobacco leaf yearly and accounting for more than one-third of global tobacco leaf production. China uses more than 80% of the grown tobacco leaf for domestic cigarette production.

The China National Tobacco Corporation (CNTC) is by a large margin the biggest tobacco company worldwide, covering 43.6% of the world’s cigarette market. It is China’s state-owned tobacco organization, and it has a monopoly over the whole domestic market, including growing, allocating tobacco leaf, manufacturing, and distributing tobacco products.

In  2003, it launched its global strategy to export significant amounts of cigarettes worldwide. By 2015, it has joined China’s effort to build global infrastructure and influence through the Belt and Road Initiative. According to the U.N.’s Comtrade database, this action has helped CNTC export to over 125 countries and compete with the major tobacco multinational companies.

CNTC’s main advantages other than its considerable size are the lack of domestic regulation and the Chinese government’s full support for expansion. The State Tobacco Monopoly Administration (STMA) has authority over CNTC. STMA is the primary governmental body that administers the country’s tobacco industry. However, they are effectively a single organization since the same people lead them.

CNTC has been creating a significant conflict of interest.

As a signatory to the World Health Organization’s Framework Convention on Tobacco Control (WHO FCTC), China has to limit tobacco use.

However, the government reaps significant financial benefits from its cigarette monopoly. Instead of implementing a national 100% smoke-free policy as required by the WHO FCTC, China has focused on building a civilized smoking environment by creating smoking rooms.

Recent Developments

In China, the state-owned tobacco industry has contributed 456 million yuan towards COVID-19 CSR activities and has reinforced its position as significant economic support.

Moreover, CNTC continued to donate towards more high-profile nonCOVID-19 related charities  such as education, poverty alleviation, and disaster relief.

Such donations provided the industry with more incentives and credibility through recognition and public thanks at national and local levels.

In 2019, China published a new policy called The Healthy China Action Plan (2019-2030). It stresses the government’s commitment to promoting smoke-free legislation gradually and aims at a national ban on smoking in indoor public places and public transport. However, recognizing its contribution to the national economy, the Chinese tobacco industry still has a promising future.

India

Tabacco Industry

India is the second-biggest producer after China and the second exporter after Brazil. Globally, Indian tobacco accounts for over 10% of total production.

The main competitive advantage of India’s tobacco production is that various Flue-cured Virginia (FCV) and non-FCV tobacco grow in diverse agro-ecological environments spread across the country. Growing different types of tobacco (ex: FCV, Hookah, Burley, Oriental, etc.) contributes to the financial prosperity of over 15 Indian states and helps to cater to the needs of a wide range of global customers.

Another edge India has is the low production cost with average farm and export prices. Hence, Consumers perceive Indian tobacco as ‘value for money. India accounts for 6% of world exports, and 85% of trade is FCV alone.

Moreover, exports of tobacco and tobacco products have surged by 76% and 209% in quantity and value terms in recent years.

Recent Developments

While the government keeps owning shares of tobacco companies, the Indian Health Ministry has recently prohibited officials from collaborating with tobacco industries.

The tobacco industry has been using CSR as a corporate strategy to strengthen its public image and divert attention away from the negative effects caused to society. By using the opportunity to contribute to national pandemic funds, tobacco companies have received positive publicity, sometimes even under the auspices of the head of state.

Brazil

Tabacco Industry

Brazil’s tobacco production has been 700 thousand tons per annum over the past years. However, it recently declined and is likely to decline further in coming years. as the Tobacco Growers Association of Brazil (Afubra) alerts.

The past ten years have been downward for India’s tobacco industry. According to Afubra, tobacco growers (families) have dropped by 18%.

Moreover, the hectares of the planted area have dropped by 26%.

Brazil is also the highest raw tobacco exporting country. The leading importers are Belgium (19%), the US (11%), and China (9%).

Recent Developments

The tobacco industry in Brazil has benefited from senior officials’ visits to the inauguration ceremonies of factories. The media has been labeling these visits as “stamps of approval” and has been heavily criticizing them.

United States of America

Tabacco Industry

The most extensive tobacco manufacturing states are North Carolina & Virginia. However, even there, tobacco farming has been declining heavily for years.

Tobacco doesn’t play a vital role in the economy anymore. Tobacco product manufacturing employment makes up less than one-tenth of one percent of the manufacturing jobs in the U.S.

Recent Developments

The US has many tobacco product-related regulations, including smoking age and smoking bans which differ for each state. For example, some have implemented state-wide smoking bans in enclosed public areas.

Indonesia

Tabacco Industry

Last year, Indonesia produced about 236.9  thousand metric tons of tobacco. Moreover, Indonesia is one of the biggest consumers of tobacco, and the most popular tobacco products are kretek or clove cigarettes.

Recent Developments

CSR activity has been plentiful in Indonesia, considering the groundbreaking ceremony for constructing the Kediri International Airport sponsored by Gudang Garam, the biggest local tobacco company.

Besides contributing with equipment and hand sanitizers, the tobacco industry helped with ambulances and motor vehicles. The charitable campaign appeared in mainstream and social media.

Takeaways

The top tobacco world producers include China, India, Brazil, the USA, and Indonesia. All countries have seen a decline in tobacco production due to international regulations imposed by the WHO. Hence the tobacco production trend is slightly downward.

On the other side, all tobacco companies invest heavily in charitable initiatives to divert attention and build a brand associated with the public good.