Tobacco Goes Co-Op

Our Q&A with the U.S. Tobacco Cooperative

By 
Melissa Vonder Haar, Freelance Writer

Stuart Thompson

Stuart Thompson

RALEIGH, N.C. -- Local, farm-to-table and co-op have been big buzzwords for consumers in recent years, from the success of Whole Foods to the rise in Community Supported Agriculture programs (commonly known as CSAs). Shoppers are increasingly interested in knowing where their products come from and are willing to pay a premium for it.

But can this trend really make its way into the tobacco fields?

The U.S. Tobacco Cooperative (USTC) thinks so. Established in 1946, the Raleigh, N.C.-based company is fully owned by 850 tobacco growers. Though USTC was around long before the popularity of the local movement, it only recently went from just growing tobacco to also manufacturing tobacco products with the 2007 launch of USTC’s 1839 cigarette line. It followed that move up with more house brands and the acquisition of Premier Manufacturing Inc., Chesterfield, Mo.

To better understand the potential retail benefit of the tobacco co-op model, Tobacco E-News sat down for a Q&A session with USTC’s chief executive officer Stuart Thompson.

What do you mean by tobacco cooperative?

“USTC is owned by the farmers that grow the tobacco. There are manufacturers that contract directly with farmers, but most go through a leaf supplier. We have a very unique story: We’re selling a product that’s coming directly from the farmers who grow it.”

Where does Premier fit in?

“We acquired Premier in 2011 and use it as the sales and marketing organization for our six house brands. In 2011, those brands didn’t have a farmer connection; Premier is now owned directly by the farmers in the cooperative. They have control, all the way from the seed to the shelf.”

Neat, but what does this mean for retailers?

“When you sell a pack or a carton of our products, [that money is] going right back into the farm that produced the tobacco. This results in more satisfied customers and, long term, retailers will have a stronger loyalty with the customer base.”

“When retailers partner with USTC, they’re getting a product that’s going to have appeal to a significant segment of our culture—especially as people are getting more focused on buying locally and supporting local farming. Most people like the idea of buying a product directly from the person who grew it.”

What are some of the biggest challenges as a “new” tobacco manufacturer?

“The distribution channels are tough, and some of the major rebate programs out there certainly offer strong incentives and real barriers for us to penetrate certain markets. Those are our major challenges, as well as people becoming aware of us. People that understand the value proposition that we offer get pretty excited about it.”