Exploring the Potential | BATBC’s Newly Focused Export Market5 min read
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British American Tobacco Bangladesh is the largest cigarettes company in Bangladesh. In 2021, the company posted revenue of Tk 7,482.7 Cr. which is an increase of 24.1% YoY from 2020. Domestic sticks sale is the largest revenue segment of the company contributing about 96.3% of the total sales. BATB also exports both leaves and sticks which contributed only 3.7% of the total net revenue. However, the company is recently seeing potential in the export market and is making investments to drive growth from these segments.
The company started exporting tobacco leaves earlier but concerning the demand for cigarettes abroad they started to export sticks in 2019. On 17th February 2021, they invested Tk 192.5 Cr. to build a new cigarette factory in Savar to grab opportunities abroad. But later on, according to DSE on 29th July 2021, they invested Tk 322 crore to grab the growing export opportunities. According to Azizur Rahman “In 2020, it saw manifold demand abroad, especially in China” [TBS News]. The numbers of cigarette sales abroad said it all. In 2019 it was Tk 6.9 Cr. but in 2020 it was Tk 31.3 Cr.
Recently on 1st April 2022, BATB decided that they will invest Tk 574 Cr. more in its site factory situated in Savar to increase export opportunities and contingency purposes. Because lots of countries are producing tobacco leaf but not producing quality cigarettes. BATB is ensuring the quality and getting customer satisfaction even from China as well (China Stands 1st in the leaf production). Bangladesh stands 8th in leaf production and BATB produces a huge number of cigarettes from it. Currently, Cigarettes are exported to different countries, including Maldives and China.
Read more: BAT Bangladesh Showed Strong Growth Despite Pandemic In 2021
Green leaf tobacco is also exported to different continents. Such as European countries like Belgium, Spain, Belarus, Lithonia, Georgia, Netherlands, Turkey, Italy, Poland, Germany, North and South American countries like the United Kingdom, United States, Chili, and Asian countries like United Arab Emirates, Dominican Republic, Jordan, Pakistan, Indonesia, Korea, Kenia, and South Africa.
Amid the pandemic, BATB fulfilled the shipment of its ordered leaves, thanks to its strong and most modernized operation and supply chain unit. They ensured 32 Mn USD of leaf export this year. In addition to Leaf Export, the Company has broadened its customer base through the export of high-quality cigarettes to increase forex earnings.
The manufacturing unit in Savar had already been started to set the next heights of performance. The new investment proposal will cover the next phase of land development and it will expand the infrastructure to increase its warehouse capacity. This investment is basically a capacity injection. This manufacturing unit has already paved the way to reach different countries for export.
According to BATB, this manufacturing unit for export can replace some existing global manufacturing facilities. If Government supports them from their end to reduce barriers and other things then Government can diversify its exports and earn the foreign exchange that it needs. Government should look at the tax burden to enhance cigarette exports in Bangladesh. Other than this tax structure of the tobacco industry in Bangladesh is as below:
BATB stated about transforming their business,
“another major development of the year was the initiation of our second factory at Savar, which not only gives us the opportunity to increase our capability and capacity to serve our consumers but also to export made in Bangladesh products globally in the future.’
Apart from all these, BAT is eyeing some interesting segments like moringa oleifera leaf extractive.
That has a special scent or fragrance. When it uses in cigarettes, it is capable of diminishing the free radicals. Also, it has some antioxidation. Which is capable of making high-quality cigarettes by enriching its fragrances and the hazards of the cigarette are reduced. It has huge demand abroad. When it will come to cigarettes, their acceptability will grow faster abroad. BATB took initiative and they are motivating farmers to produce moringa in Bangladesh in bulk.
It will enhance the BATB capacity to produce high-quality cigarettes in huge quantities because the capacity expansion is ongoing in the Savar factory. They can utilize the huge amount of moringa cultivation for their export purposes. As moringa leaves hold a market share of 6 billion USD per annum. BATB already implemented a supply chain process for its cultivation. Through this chain, BATB can establish its stand in the global market by producing and exporting high-quality cigarettes.
In addition to all that BATB started to segregate and update its machine in the factory in order to meet the high-quality cigarettes export criteria.
Furthermore, the launch of this Savar factory has unlocked new dimensions in exporting tobacco to the group. So, the export market has good prospects and a future ahead. Everything BATB is planning to grow its future export market and reduce the payback period of its investment. The export market is growing with its high potential. Globally revenue from the cigarette segment accounted for USD $21.44bn in 2022 (YTD). Per person revenue figured at USD $3.73. In addition to that, per person is expected to consume 7.7 pc in 2022. This market is expected to grow by 4.34% (CAGR) annually. In the global comparison, the revenue is generated mostly from the US markets. Added to that, the production volume will increase by 0.9% in 2023. Thus, eyeing this global market and decision on such a huge investment have great potential ahead.
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