Authors: Richard Kluger
Still, all this amounted to little more than guesswork, essentially devoid of knowledge of specific organic interactions. Yet an intuitive consensus had emerged that filling the lungs repeatedly with smoke from any source was not a practice likely to improve bodily functions. The pioneer botanical geneticist Luther Burbank captured the growing distress among serious scientists of the day, remarking that cigarettes were “nothing more or less than a slow but sure form of lingering suicide. … Would you place sand in a watch? Would you smudge a house full of beautiful pictures?”
The vested interests of the American Tobacco trust were not powerless against this mounting chorus of concern. Duke fielded a small army of lawyers, lobbyists, and other persuaders who appealed to the hearts, minds, and pocketbooks of legislators being asked everywhere to crack down on cigarettes. By century’s end, most states had laws on the books proscribing the sale of cigarettes to minors, but so long as they remained more honored in the breach than the practice, Duke’s people were not greatly distressed. Total prohibition of the product was a much graver matter, and the industry’s operatives largely succeeded in preventing the passage of such measures in the populous Eastern states and the heavy-smoking South. To improve the dwindling profit margin of cigarette sales, industry agents reached a forceful arm toward the Senate Finance Committee, which, in secret session, rolled back the wartime excise tax on the short smokes. The prevailing level of political ethics may be inferred from the fact that three members of the key Senate committee owned tobacco stock, including its chairman, Nelson W. Aldrich of Rhode Island, who held more than a million dollars’ worth. When the tax cut became law, Duke pocketed the savings, thus bringing a nice extra 2 to 3 percent of his gross to the bottom line.
Senator Aldrich and other federal lawmakers happy to do Buck Duke’s bidding were very much around four years later when Congress passed the epochal Pure Food and Drug Act and a companion law to monitor meatpacking
practices. As the culmination of a twenty-year reform drive to curb manufacturers who believed that having enough money was a license to operate beyond the public’s scrutiny, no matter what their abuses, these laws were championed by President Theodore Roosevelt and won wide public support. For too long, milk had been watered, meat adulterated by filth, flour “extended” by chalk, and artificial flavorings, colorings, and preservatives added to food products untested for their safety. No ingested products were subjected to heavier processing, more additives, or as many known or suspected toxins as tobacco products, but when the long and acrimonious debate over the Food and Drug law came to an end, tobacco was egregiously excluded from regulation. The industry would argue forever after that tobacco was neither a food nor a drug and thus properly exempted; others have said the exemption was the result of pure economic and political might. The ingredients and processing of tobacco products in the United States would remain beyond serious government oversight for the rest of the twentieth century.
IV
A
s if to greet the bright new century by setting his vast, somewhat ramshackle holdings in good order, Buck Duke fused his two principal units, American and Continental, into a single monolithic holding company, Consolidated Tobacco. Its sales were running at an annual rate of $125 million, and its workforce numbered 100,000. He was well on the way to dominating almost the entire U.S. tobacco business. As befit his new rank as a major industrial baron, Duke lived in a Fifth Avenue mansion and had begun the process of converting a 300-acre farm he had bought along the Raritan River in New Jersey’s Somerset County into an Elysian showplace. Still, he needed new worlds to conquer—or, more precisely, the Old World.
The Consolidated colossus shipped a billion cigarettes a year to sales offices in Canada, Australia, China, and Japan—next to nothing compared to what Duke had achieved in America. The chief problem was that most foreigners preferred dark Oriental leaf or some domestic variant thereof. The notable exception was Britain and its empire, which at that time happened to occupy a major portion of the earth’s landmass. Cigarettes made from barely sweetened Bright leaf imported from America were much in vogue in England. John Player & Sons, operating out of Nottingham, had introduced its cheap Gold Leaf Navy Cuts in the mid-’Eighties, and the larger firm of W. D. & H. O. Wills, out of Bristol, had soon followed with its popular Wild Woodbine. Here was an immense market, if one counted the empire as a whole, where a little American ballyhoo could go a long way.
The problem, of course, was the historically high British tariff walls meant
to repel predators precisely like Duke, even as they had driven off Spanish tobacco products three centuries earlier. Exporting finished American goods to Britain would thus be prohibitively expensive. But Buck was a much better merchant than the Spaniards, had the grit and wherewithal to stage a far more effective invasion than their armada had managed, and he even spoke a semblance of the same language as the British. Within a fortnight of their landing, a pair of Duke’s top lieutenants had bought up for $5.3 million the sizable tobacco operations of Ogden Ltd. of Liverpool, whose Taps brand was a serious competitor of Woodbine and Navy Cut. The whole British tobacco industry went into an overnight frenzy. The American tobacco king, whose bully boy shenanigans were well known to them, seemed the very embodiment of the brawling young nation across the Atlantic which by now had turned into the industrial prodigy of the world. The prospect was even more frightening when word emanated from Ogden’s that the Duke from Durham intended to reinvest every ha’penny he reaped in England, slash prices, and flood the island with cheap smokes until the established native firms sued for peace on terms that exalted him.
The full measure of Duke’s cheek became manifest soon after the chiefs of the thirteen ranking tobacco companies in Britain gathered for six days of intensive soul-searching in Birmingham, pledged to one another that none would sell to the marauding buccaneer, and under the leadership of seventy-one-year-old William Wills agreed to pool their fortunes in a corporate confederacy. But when they sought to register their compact under the name of the British Tobacco Company, they discovered that Duke’s people had already claimed it. Instead, they settled on the Imperial Tobacco Company of Great Britain and Ireland, Ltd., chartered at the close of 1901 and at once among the nation’s largest enterprises. They promptly made a show of running up the flag by offering a bonus to every retail shop that agreed not to stock any brands made by American Tobacco or its British affiliates.
Duke, a master at this sort of game, managed to make Imperial—or “Imps,” as The City crowd took to calling the tobacco amalgam—look unsporting by counteroffering to distribute any profits his Ogden’s unit ran up over the next four years among all the dealers that handled its brands, with no requirement to boycott Imperial brands in the bargain. Such boldness astonished the sedate British tobacco trade, soon showered with gifts and souvenirs by the interlopers, who also unleashed an unprecedented flurry of advertising and price cuts. This courtship of the British cigarette market would only grow more ardent, the rough-hewn Duke let it be known.
This goading threat did not sweeten the considerable West Country charm of Sir William Wills. The Imps head quickly maneuvered to take over the United Kingdom’s leading tobacco retail chain, shutting out Ogden’s product
line, and countered Duke’s efforts to corner the market in Bright leaf, mainstay of the top British brands. When the Wills family put out a peace feeler, Duke turned standoffish, claiming he was occupied just then with the landscaping of his New Jersey Shangri-la. But when Imps signaled that it would be a lively bidder for any worthy tobacco business in the States, Buck understood he was facing a formidable adversary and that an armistice was the only prudent alternative to a financial bloodbath for all.
The agreement as worked out at Wills’s home off Hyde Park in effect created the first global trust. Duke sold Ogden’s to Imperial for a 14 percent stock interest in the British combine; Imps and American Tobacco agreed not to conduct business in each other’s home terrain and indeed swapped exclusive trading rights to each other’s brand names in their domestic markets. With regard to the rest of the world, the two giants joined to form the British-American Tobacco Company (BAT) to sell the Imperial and American brands globally. But Duke, as was his wont, got the lion’s share: two-thirds of the BAT stock and chairmanship of the board.
In short order, British imperial outposts were being surfeited with BAT cigarette brands, and a big new plant was rising in Shanghai to bring cheap smokes to the Asian masses.
V
THE
larger he got, the less charitable Buck Duke became. It was not enough, for example, to buy three-quarters of the window display space from the Bewlay chain of tobacco shops; Duke wanted outlets of his own that were unquestionably loyal to his brands and perpetually pushing them and no one else’s. Toward that end, he engaged the services of the Whelan brothers, whose small chain of United Cigar Stores headquartered in Syracuse, New York, was a welcome departure from the dingy old shops, haphazardly stocked and often inconveniently located, that typified much of the retail tobacco trade.
Correctly anticipating that the rest of the retail business would not embrace news of the trust’s entry into the field, the United Cigar deal was consummated secretly. But word of it could not be contained, and dealers were alternately furious and tremulous; mutterings about leagued boycotting of Duke’s brands were detected by the trust managers, who elected to ride out the storm or, in some cases, try to lie their way out. To allay alarm among Boston retailers, for example, Percival Hill, by now Duke’s ranking henchman, wrote toward the end of 1902 to the owners of Estabrook & Eaton, the city’s leading tobacco wholesaler and retailer, that American Tobacco “would be very much pleased if your firm were to become even more influential than it is at present, in a retail
way, as a protection against this new company in Boston … . Of course all rumors to the effect that our company is in back of the United Cigar Stores Co. are entirely without foundation.” Six months later, First Vice President Hill was writing to George J. Whelan, president of United Cigar, of his displeasure regarding “the disposition on the part of some of your employees at certain of your stores to further the sale of goods competing with similar goods of our manufacture.” Hill reminded Whelan of the latter’s pledge that “you would always further, as far as you possibly could, the sale of our products; in fact, we have stated to you that unless this was done we would consider it in our interest to hamper your enterprise in every way we could.” Lest Whelan remain in doubt as to how closely the trust was policing their agreement, Hill then cited the place, date, and precise nature of the infractions that prompted the menacing protest,
e.g.
, at a store on New York’s Sixth Avenue a customer requesting a ten-cent packet of pipe tobacco was given Mastiff, a rival brand.
To assure United’s spread and success, American Tobacco operatives worked to drive competing shops out of business. That many of these were very modest establishments run by pensioners, invalids, or aging war veterans was of small concern at 111 Fifth Avenue. Whatever was necessary to drive them from the vicinity of the newly arrived United Cigar emporium was done, whether that meant simple price-cutting or dispensing free merchandise to the clientele or pressuring their landlords to increase their rents or, as a last resort, buying up the property and pushing the rival proprietor off the premises. Ruthlessness had grown into brutality. And arrogance had become so routine that Percy Hill did not hesitate to write to one of the trust’s largest independent retail chain customers, Acker, Merrall & Condit, objecting to a delivery to its prominent Forty-second Street outlet of rival Silko cigarettes, remarking, “As this is a brand for which there cannot possibly be any demand, I cannot understand why in the world they should be purchased.”
It was a short step from deception and oppression to outright skullduggery. A series of interoffice letters surviving from 1903 disclose a system of underhanded activities involving aliases, spies at rival companies, and fake “independent” outfits whose true purpose was to damage the operations of the trust’s remaining competitors. That this villainy was clandestine by design is shown by a letter from mastermind Hill to a San Francisco agent regarding a formerly hostile independent now being harnessed as a front for the trust. Hill urged that this development be kept “a very confidential proposition” since the whole point of it was that there not be “any suspicion that we are connected with it in any way.” To discomfit the independent People’s Tobacco Company in New Orleans, Hill set up Craft Tobacco, whose puppet proprietor eagerly reported his plans not only to try to hire away from “the People’s their principal [work] force” but also to “endeavor to cause a strike within their factory.”
When inside sources told Hill that the Ware-Kramer Company, one of the few surviving sizable independents, had just shipped 5 million cigarettes to China, Hill was alarmed in view of the ambitious plans in the Orient for newly formed British-American Tobacco. He wrote at once to the head of Wells-Whitehead Tobacco in Wilson, North Carolina, the trust front nearest to the Ware-Kramer operation, asking to be advised from what port the rival cigarettes were shipped, where they were due to be landed in China, and either the brand name or the markings that the enemy cargo containers bore; a plot to shanghai the goods was readily inferable.
Eventually Duke’s high command grew so determined to crush all remnants of competition that any substantial jobber who was willing to discontinue handling competitors’ merchandise would receive a 6 percent discount on top of all other existing inducements. When this freeze-out arrangement was prevented by the courts, the trust simply began making payments for “special attention” to its products, the nature of which it did not have to spell out, and before long more than 250 distributors across the country had signed up for the program.