CTS has become a successful niche player in the French RYO category

CTS has become a successful niche player in the French RYO category

When it comes to France’s tobacco industry, the first thing that comes to mind is “shrinking”. Tobacco sales in France are expected to fall by almost 1% annually between 2023 and 2028, according to Statista. In 2022, the French tobacco market experienced its worst value decline in a decade.

With the closure of France's last cigarette factory in Corsica in December this year, France's cigarette manufacturing industry will come to an end. Since the European Union phased out tobacco subsidies in 2006, France's tobacco planting area has also reduced from 3,149 hectares in 2016 to 1,205 hectares in 2021.

Sadly, the only part of the tobacco industry that continues to thrive is the illegal cigarette trade. Illegal smokers will account for 32% of the French tobacco market by 2022, according to a study commissioned by Philip Morris International and conducted by KPMG.

However, this dark environment belies some extraordinary success stories.

One of them was written by the Traditab Santele Collaboration (CTS), an alliance between Traditab, a company run by small tobacco producers in southwest France, and Santele, the traditional Belgian cigarette maker owned by a Flemish family.

Given the growing regulatory pressure, the two companies decided it made sense to join forces. Traditab provides the raw materials and tobacco growing knowledge; Santele provides the do-it-yourself expertise and manufacturing equipment.

Founded in 2016, CTS is currently a medium-sized enterprise headquartered in Belgium with offices in France and Spain. It currently produces and sells four brands of RYO tobacco, focusing on the concept of "terroir". This French term is used to describe the environmental factors that influence crop phenotype, including unique environmental context, farming practices and growing habitat.

CTS's Vasconha RYO brand is an American blend made from 100% tobacco grown by farmers in Gascony, the Basque Country and Aragon, the traditional tobacco-growing regions on both sides of the Pyrenees. Wervikse Tabak b34 is a finely cut, dark blend of tobacco from the historic tobacco growing region of Wervik in Flanders. Veramia's tobacco is a Virginia blend grown only in the Extremadura region of western Spain, where tobacco has been grown since the 16th century.

Pay attention to the country of origin

The company's bestseller is "1637." In October 2023, this product was the third best-selling RYO brand in France. Made from French tobacco grown in the Southwest, its name alludes to the year tobacco was first grown in the region. The brand was created by Traditab in 2008 at the initiative of Tabac Garonne Adour (TGA), a small tobacco growers cooperative that aimed to increase the prices paid by local tobacco growers.

Marketing began to be regionally focused, focusing on tobacconists. "At that time, there were not many organic tobacco products because of their popularity," said Anne-Marie Bracq, director of CTS France. "We started with 20 tons of tobacco and grew it step by step, explaining to tobacco merchants that if they choose to sell our product, they are supporting growers in their countries."

The idea is popular in France. France prides itself on its domestically produced cheese and wine varieties with clearly defined origins. The company is applying the same concept to two other markets. In Spain, for example, it has a sales force of 17 people.

CTS works with 120 tobacco farmers in France, who form the TGA cooperative, growing nearly 300 hectares of tobacco in the area between Bordeaux and Lot-et-Garonne. These farms are small, with tobacco being just one of a variety of crops, usually grown on 2 to 4 hectares.

In Belgium, CTS works with just one or two growers, while in Spain it works with 150 growers in a cooperative that grows 550 hectares of tobacco for CTS's RYO brand.

“Tobacco growing is not as traditional in France as it is in Spain, where Burley is the main variety and flue-cured Virginia (FCV) is more of a filler type,” explained Jérôme Dufieux, director of Traditab. "In France, Burley production is more mechanized, while FCV production is more of a manual process. In Spain, where the farms are larger and more specialized in growing tobacco, it's the opposite; Spanish FCV is more aromatic."

Like Traditab, CTS's goal is to preserve a centuries-old regional tradition. "Our goal is to promote a tobacco culture that includes paying farmers an appropriate price," Bracq said. "This is also important in Spain. Extremadura produces 95% of Spain's tobacco, creates 1,900 jobs and contributes 91 million euros ($95.83 million) to the region's GDP."

expansion plan

Tobacco growers working with CTS face a challenge common to farmers in other agricultural sectors: finding a successor after retirement. "Maybe tobacco is more difficult because it's difficult to promote from a health perspective," Brack said. "But we still have the issue of economic viability. At CTS we are looking at ways to sustain tobacco growing and try to develop a future for growers. , and [find out] how to support them financially. We are also working on a project to find new farmers."

Brack said CTS plans to expand its existing product portfolio by developing a new RYO brand, but it won't be easy. About three years ago, France raised tobacco excise tax to 6.61 euros, well above the EU average of 3.34 euros.

Since then, the government has continued to increase taxes on RYO, thereby removing the buffer that RYO provided between factory-produced cigarettes and cheaper illegal cigarettes. "A pack of 20 cigarettes now costs 11 euros and a pack of 30 grams costs 15 to 20 euros," Brack explained. "The RYO segment is now declining more severely than the cigarette market."

CTS is also currently involved in a cigar project. "We are developing cigars made from southern French tobacco and plan to launch them within the next three years," Braque said.
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