Two American leaf traders dominate global supply, but fail local farmers

23 June 2016

Alliance One International

Alliance One International (AOI) claims to operate one of the largest networks of tobacco growers, buyers, processing facilities and distribution operations in the world. It reportedly purchases tobacco from about 45 countries and supplies to cigarette manufacturers in about 90 countries. It handles about 400 million kilos of tobacco a year. Its annual revenue is more than $2 billion.

In the ASEAN region, AOI purchases tobacco from Thailand (4 offices), Indonesia, Myanmar and Vietnam. Its head office for the region is located in Singapore.

AOI claims to use a sophisticated product integrity programme that provides “top-down and bottom up traceability” meaning it “can track the tobacco from the farm to the finished product.” Hence it should be able to fix the basic problems plaguing tobacco growing – such as child labour, pest problem, pesticide poisoning, green tobacco sickness and poor leaf prices.

In Indonesia, AOI purchases over 90 percent of tobacco through direct contracts through its wholly-owned subsidiary PT AOI. While AOI claims to have implemented its Agricultural Labor Practices (ALP) program, however it does not have adequate human rights due diligence procedures in its supply chain. In other words while it condemns child labor, it continues to buy leaves produced with child labor, takes no responsibility for farmers suffering from pesticide and nicotine poisoning, and no consequences on the company for wrong doing. 

Universal Corporation

Universal Corporation claims to be a leading global leaf supplier. It is an American company that purchases, processes and sells a variety of tobacco leaves, and operates in more than 30 countries.

In the ASEAN region, Universal has offices in Indonesia (2 office), Philippines and Singapore. In Indonesia, Universal boasts of providing storage capacity with “international approved condition, labelling with barcoding, quality assurance department which meet international standard.” All of this means little to the tobacco farmers battling low prices and harmful effects of growing tobacco.

Big tobacco are the main customers of these two leaf trading companies. They control leaf supply, prices, but ignore their own standards and fancy traceability which does nothing to stop child labor, low prices nor protect farmers from the harms of pesticides and green tobacco sickness.

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Farmers complained in 2015 tobacco price decreased compared to the previous harvest, from Rp 170,000 per kg to Rp 150,000 per kg, following weak demand from cigarette companies in contrast to the abundant harvest.
 thumb down Attack of leaf-eating caterpillar cause concern among farmers in Klaten district (Central Java). Association of Indonesia Tobacco Farmers said the leaves are damaged and cannot be sold when caterpillars attack the crops.
thumb up  Exposed: Human Rights Watch (HRW) exposed children as young as 8 years old work in Indonesia’s tobacco farms, where they are exposed to harmful effects from nicotine poisoning and toxic pesticides, and dangerous physical work. Indonesian and multinational tobacco companies benefit from child labour but have failed to ensure children do not carry out hazardous work on farms in their supply chains. See full report and news
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Exposed: “The unfair trading system has put farmers in the least profitable position. They share the ‘crumbs’ of the big pie,” says Hasbullah Thabrany, Center for Health Economics and Policy Studies, University of Indonesia. Pandaya, Jakarta Post
thumb down  Tobacco growers in the tobacco growing area in North Philippines handle tobacco leaves with their bare hands. Photos: Manila Bulletin 27 Feb 2016, The Philippine Star 19 &11 Feb 2016, Business Mirror 12 Feb 2016
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Child labor is still found in tobacco growing in the Philippines. However tobacco industry’s front group ECLT Foundation prefers to term it, “family business”.
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The bulk of ‘sin’ taxes, 85 percent, are used to provide health care for 14 million Filipino families, or about 45 million Filipinos, while 15 percent fund alternative programs for tobacco farmers/ workers such as infrastructure projects and agro-industrial projects. See News report

A better system is needed to hold tobacco companies (local and international) and leaf traders (local and international) accountable for the problems the tobacco growers face on the ground.