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An Industry going up in smoke.Zambia only has one cigarette manufacturing plant and Roland Imperial Tobacco Company (RITCO) is it.Feeding the nation’s favourite habit, this wholly Zambian-owned company, that is also fully indigenous, was incorporated in 2001 and owns, creates and distributes the much loved cigarette brands of Life Full Flavour and Life Menthol Brands.Managing director Dr. Ephraim Mwenda was on hand to discuss.While outside Zambia, smoking may be a habit that is losing popularity, RITCO, through an extensive nationwide network of distributers, provides indirect employment to over 10,000 entrepreneurs.Including sub-distributors, wholesalers, retailers, kiosks, foot soldiers and table tops and with their sister business, Zambia Cigarette Company, they have an open door policy to partner with reputable international cigarette manufacturing companies.Dr. Mwenda who has been in situ since the start reveals that since their inception, they have developed a distribution model that involves partnering with various international tobacco manufacturers and having looked at new opportunities to grow and change, “In 2013, Roland Imperial Tobacco established our first and the only cigarette manufacturing plant in the country and commenced production of the Life brands of cigarettes which comes in two varieties, these being Life Full Flavour and Life Menthol, packed in soft packs.” Since then the Company has gone through changes from only distributing cigarette products from partnerships with other tobacco companies to include its locally produced Life cigarettes resulting in exponential growth of market share.

“Last year (2014) we expanded our operations through our sister company Vapour Investments Limited to distribute electronic cigarettes, electronic shishas and electronic hookahs in partnership with Desonic” Dr Mwenda tells.Desonic is one of the largest electronic cigarette manufacturers in the world.
e cigarette jetblueFurthermore, Vapor Investments Limited is also in partnership with Ritchy who are one the largest E-liquid supplier s in the market.
e-cigarette importers and distributors“We are also exploring the prospects of the export market, especially considering the opportunity presented by Zambia’s geographical position of being surrounded by eight neighbouring countries,” says.
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Mwenda explains that the core activities of the company are the manufacturing and distribution of cigarettes and tobacco related products.“RITCO owns a fully functional factory that has the capacity to produce over 2 billion cigarettes per annum,” he reveals, “However the Zambian market can only consume 1.5 billion cigarettes in a year which means we have room for immediate growth.” The introduction of the technologically advanced cigarette factory has created a market for skilled labour for both Zambian nationals and expatriates, with more jobs expected to be created based on the growth projections of the company.
e cigarette altamonte mallIS THE MARKET GOING UP IN SMOKE?
e cigarette addison txRegarding the current state of the industry Mwenda speaks quite candidly, “Zambia grows some of the best tobaccos in the world and most of this is currently being exported without value addition.” The Zambian Cigarette Market has been growing at about 30% per year consecutively for the past 5 years and this has not only seen the establishment of their own plant but also the entrance of many more Cigarette Trading Companies, “Unlike the rest of the world, the opportunities for profitable business are numerous in the tobacco and cigarette business in Zambia.” Of course there are some challenges to overcome, he highlights, “As an example, we suffer from an unstable foreign exchange rate, which makes it very expensive to run a business or plan business projections.” Because the law limits cigarette advertising to below the line adverts, focus is more on one-to-one consumer advertisement and point of sale materials such as, posters and freebies such as t-shirts, capes, lighters, ash trays and designated sampling of cigarettes.
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The level of excise duty, which at present is very high for cigarettes stands at 145% or US$12.80 per thousand sticks, which is higher than neighbouring countries.“Zambia has not differentiated on excise duty for locally manufactured cigarettes and imported cigarettes,” Dr. Mwenda says, “Both have been pegged at 145% or US$ 12.80 per mile and this does not provide a level playing field for a local manufacturer who has fixed overhead costs compared to the trading organisations whose overheads are very minimal in comparison to a manufacturer.” Another major issue is smuggling.Due to the high Zambian excise duty structure, the influx of smuggled or duty not paid cigarettes (DNP) into Zambia has been escalating, “The Zambian market is attractive for the duty not paid cigarettes whose prices are very low compared to products coming through legitimate businesses,” he tells us, “This creates an uncompetitive environment because of the huge price disparities.” In addition, it also contributes to revenue loss for the Government through non-payment of the required taxes.

Another issue, which could turn into a future opportunity, is the lack of a primary processing plant, the absence of which dictates that tobacco is exported in unprocessed form, resulting in missed foreign exchange earnings which would have come with value addition to the tobacco.“Consequently this increases the product cost for Zambian cigarette manufacturers as they are forced to send the tobacco to neighbouring countries for processing before bringing it back as cut rag.” RITCO boasts a multi-lingual, multi-racial workforce of over 100 employees and in order to ensure delivery of quality service to their customers, Dr. Mwenda explains that they have specified academic and professional requirements for employees entering the organisation.For the employees already in the company and intending to further their skills, support is rendered in the form of study grants.“We place a lot of emphasis on training ‘on-the-job’ to enhance skills of staff in the technical and marketing fields,” he says, “and we have provision to take up interns from higher institutions of learning, with various skills additional to the above.

Employees have been sent for training locally and abroad whenever the need for skills enhancement has been identified.” All new employees are put through an induction program and the company places great importance on talent identification and staff development as a way of maintaining a competitive edge in the business.For RITCO there is nothing better than a satisfied smoker and Dr. Mwenda believes that customers are at the core of the business and are the most valuable stake holders, “We focus on building customer relations and offer customers good prices, a variety of products and an efficient and effective sales force team that meets their needs and requirements.” RITCO Manufacturing Division houses state of the art machinery that has enabled RITCO to produce high quality products able to compete with world class brands.Dr. Mwenda describes that it is important for them to conduct after-sales support, as this provides an opportunity to fully understand customer challenges.

With this in mind, periodically, RITCO conducts trade recognition parties where RITCO customers have an opportunity to interact with RITCO employees and help strengthen and develop the relationship.Strengthening these relationships is one of the ways that RITCO keep ahead of their competition; another is by differentiating strategies, which entail providing services to the customer differently from competition, in all areas of the business.Dr. Mwenda explains that a direct to store delivery (DSD) model is used to service the customers.This is a systematic approach that enables RITCO to fully understand its market, with regard to active customers, opportunities for growth and competitor presence.This system also helps RITCO to gather market intelligence.Providing world class, quality products and competitive pricing is essential for RITCO to stay ahead of its competition.This is also further enhanced by providing a product mix, which offers variety to customers and is able to compete at various market segments.

NEW DEVELOPEMENTS FOR 2015 AND BEYOND Roland Imperial Tobacco Company is entering a very exciting time, with new developments earmarked for 2015.The filters used in the process of cigarette making have, since 2013, been imported from neighbouring countries at a great cost but now, Roland Imperial Tobacco Company have acquired a filter making machine which will be operational by the second quarter of 2015, “Apart from manufacturing for our own needs, Roland Imperial Tobacco Company will also become a supplier of filters to other cigarette manufacturers in the region,” Dr. Mwenda says.The company plans to expand the brand portfolio with the introduction of five new cigarette brands to bring the total number of RITCO brands to seven, in the Zambian market.The new brands will be packed in hinged lid hard packs, while LIFE is packed in a soft pack.To facilitate the introduction of the new brands in 2015, the company has acquired a Focke Hinge Lid packing machine, which is expected to be in operation by the fourth quarter of the year The process of obtaining ISO 9001: 2008 certifications has commenced, in order to ensure quality service delivery and enhanced customer satisfaction.

Obtaining ISO 9001: 2008 certifications is planned for the third quarter of 2015.Despite Zambia being one of the major tobacco producers in Africa, the lack of a primary processing plant in the country has adversely affected the cigarette manufacturers and tobacco farmers.It is with this in mind that RITCO is actively exploring the setting up of a primary processing plant within the next 2 years.Suppliers of primary processing plants have been engaged and proposals have been received for evaluation.The investment in this area is expected to be in the range of $20 million.VAPOR INVESTMENTS (Sister company to RITCO) The company is currently working on introducing its own brand of electronic cigarettes, which will be introduced on the market soon.“E-cigarettes should not be regulated in the same manner as conventional Cigarettes,” Dr. Mwenda says, “Instead, regulation should highlight the growing research that nicotine based products such as e-cigarettes have a large capacity to improve public health by helping people quit or reduce smoking.”