Authors: Richard Kluger
It was the very brand that Hill, as a young executive under the tobacco trust thirty years earlier, had ushered from the mutt of the all-Turkish breed into the top position in the premium twenty-five-cent field. Now reblended, placed in a paper wrap instead of a deluxe box, and made longer—85 millimeters instead of the standard 70 (or about 3 1/3 inches rather than the normal 2 3/4)—but a bit smaller in circumference to exaggerate its length, Pall Mall was handed to Hill’s right-hand man, Paul Hahn, who was charged with edging it into the marketplace starting in 1940. Two decades later, long after emphysema and its complications had put George Hill in his grave, Pall Mall would reign for half a dozen years as the leading U.S. cigarette.
IV
THE
pricing blunder made by the big three brands at the onset of the great ’Thirties Depression might well have eroded the oligopoly they had constructed over the previous dozen years, but as the threat of cheap cigarettes receded along with the hard economic times, it became plain that the industry leaders had weathered the storm well. Their most obvious challenger, Lorillard, had been unable to advance its Old Gold brand much beyond its initial successful incursion in the late ’Twenties. By 1940, Old Gold had faltered badly, selling one-third fewer units than it had a decade earlier. Two other cigarette makers had come forward, however, and each would become a major player in the business.
The more likely contender, given the resources behind it, was Brown & Williamson. Formed as a partnership in 1894, B&W was a small Winston-Salem maker of plug, snuff, and pipe tobacco that branched out by opening a factory in Louisville, close by a ready supply of Burley leaf. Looking to establish a presence in the growing U.S. cigarette market, British-American Tobacco picked up Brown & Williamson in 1927 and launched a new brand that bespoke its English ownership—a fifteen-center called Raleigh. It soon did well enough to become the No. 5 brand, behind Old Gold, but was suffering as
the Depression hit, so its management cut the price and adopted a strategy that the industry had all but abandoned since Camel loped onto the scene. Each pack of Raleigh began to carry a coupon on the back, redeemable for playing cards, a card table, and later other prizes like electric toasters and irons that, in a sliding economy, were available cheaply enough to be factored into the selling price while keeping the brand both competitive and profitable.
The couponing of Raleigh became typical of the B&W marketing game: instead of trying to compete with the industry leaders by riding a single, strong entry and putting all the company’s resources behind it, the Louisville-based company developed a stable of specialty brands, each different in some notable way from the majors. In 1933, B&W brought out a mentholated brand to compete with Spud, marketed by its Louisville neighbor, Axton-Fisher. Menthol, a chemical compound extracted from the peppermint plant and classified by medical science as a mild local anesthetic sometimes used in veterinary medicine, served to mask the harsher taste of nicotine and other elements in cigarette smoke by, in effect, numbing the throat to the irritating effects without diluting them. The menthol additive gave Spud’s taste a kind of cooling, faintly medicinal quality that some buyers believed made smoking a less unhealthy habit. Brown & Williamson’s new menthol entry, at fifteen cents, was a nickel cheaper than Spud and had a much more suitable name—Kool. Its ads featured a playful penguin and copy that narrowly skirted the sort of blatant malarkey peddled by the big brands, “
GIVE YOUR THROAT A KOOL VACATION!”
a typical ad was headlined, and its text followed up: “Like a week by the sea, this mild menthol smoke is a tonic to hot, tired throats. The tiny bit of menthol cools and refreshes, yet never interferes with the full-bodied flavor … .” Kool remained a specialty brand for the time being, as did B&W’s 1936 novel entry, Viceroy, the first serious brand to feature a filter made from cellulose acetate, a highly malleable substance and more effective in certain configurations than the crimped paper and cotton wadding filter offered by Parliament, another premium brand introduced a few years earlier by a small, New York independent, Benson & Hedges, better known as tobacconists to the upper crust.
While none of its brands had made a big splash, Brown & Williamson’s entries were selling half as many units as Liggett & Myers’s by 1940 and held the No. 4 spot in market share. Closing in behind it by then, however, was a company with an old name that it had lately resuscitated with notable success.
Operating out of the lower floors of an inelegant, eight-story building with balky elevator service on New York’s Fifth Avenue, a few doors north of giant American Tobacco’s relatively palatial headquarters, little Philip Morris had found itself trapped by the price wars of the early Depression years. American descendant of the old London firm and the new breakaway independent from bankrupt Tobacco Products, Philip Morris relied for most of its business on its twenty-cent premium brand, Marlboro, which was stuck on a plateau of half
a billion or so units a year and going nowhere in those hard times, and its ten-cent entry, Paul Jones, which was going great guns but, given its low profitability, rapidly depleting the company’s limited capital. The luxury market, where the company had historically been strongest, had such bleak prospects in the early ’Thirties that its proprietors halted all imports, including the company’s old English namesake, Philip Morris, in the brown, simulated cedar box.
But Philip Morris was run by a pair of wily, highly experienced men determined to make a go of the small enterprise they had liberated from fallen Wall Street titans. Its president, Reuben Ellis, had made a lot of friends in the industry with his surface joviality and a habit of wiring congratulations to dealer customers when they placed healthy new orders and, for good measure, on their birthdays. Underneath there lurked a shrewd, stubborn penny pincher whose credit-consciousness helped keep the company afloat by reassuring leaf buyers who continued to supply the cash-short outfit. Ellis’s close associate Leonard McKitterick was the more cerebral of the pair; his patience and undemonstrative mien did not entirely cloak strongly held opinions and intense drive. The third and junior-most member of the company’s ruling triumvirate was the master salesman Alfred Lyon, a feisty and voluble native Londoner whom McKitterick had hired twenty years earlier to sell Melachrino cigarettes and who for the past dozen years had been globe-trotting as the chief international purveyor of Tobacco Products’ melange of brands. By now fluent (or so he said) in six languages including Hindustani and able to double-talk in English to the great amusement of those in on the gag, Al Lyon was full of jokes, tricks, and wonderful stories in which truth and apocrypha were so inextricably blended that even he no longer could distinguish them. He loved to recite the perils of his swaying voyage by camelback from Baghdad to Tehran, where he successfully sold his wares to the shah of Persia. And there was the time after the Great War when Al arrived in cash-poor Poland and to clinch a sizable sale had to barter his cigarettes for a considerable flock of geese. Since the birds were highly perishable and not readily transportable, the enterprising Lyon hired a bunch of local maidens who, for a modest ration of coffee he had previously acquired in a similar fashion, plucked the geese, whose feathers were shipped to Paris, where a well-heeled upholsterer converted the deal to cash. On enlisting Lyon’s services, Ellis and McKitterick sent him to the fast-growing West Coast market to raise the Philip Morris standard, threadbare as it was.
To stay afloat and then prosper, the company plainly needed a new product, and while its distinctive features eluded them for the moment, Ellis and McKitterick were sure of one thing—it had to sell for fifteen cents and remain at that price, whatever the battering or temptation to lower it. At above fifteen
cents, no new brand, or even an established one, could sell in volume during a depression; at a lower price, the new entry would be caught up in a glutted battlefield, where jobbers and retail dealers alike were being crushed by what they saw as the tyrannical domination of the big three brands, which in their zeal to stamp out the economy brands had slashed prices and, with them, dealers’ margins. If distributors’ livelihoods were unmercifully squeezed in the process, that was their hard luck, and for a time they might have to sell cigarettes as break-even goods or loss leaders. At Philip Morris, though, Ellis and McKitterick calculated that a new brand retailing for fifteen cents, or two and a half cents higher than the Big Three, would allow vendors as much as a 15 percent profit margin per unit, while wholesalers, for only a penny and a half more per pack than the major brands charged them, could realize a relatively vast 4 percent net. There was every reason to believe, therefore, that a new Philip Morris brand might win preferential treatment within the trade if it could generate sufficient demand.
But how, in those parlous times, to justify the existence of any new brand, let alone one selling at a premium? Philip Morris floated out a prosaic brand called Unis at the magic price, but nothing happened. Then Ellis and McKitterick devised a brand with claimed smoking qualities and an aura that gave it a chance for survival.
While in semi-retirement, McKitterick had found himself in a golf foursome on the Riviera one day in 1928 with a retired industrial chemist who six years earlier had filed a patent for a new kind of humectant, a humidifying agent that was proving useful in the manufacture of cosmetics, antifreeze, and explosives. The substance, a synthesized organic compound called diethylene glycol, might also be advantageous in the making of cigarettes, the chemist pointed out, because it avoided the irritating effects of glycerine, the humectant currently used in cigarettes to prevent their drying out and burning with a harsher than normal taste. Glycerine, an alcohol-like compound that neither hardened nor evaporated, had a nasty way, when heated, of producing acrolein, a form of tear gas, the irritant that Thomas Edison had wrongly suspected of being produced by burning cigarette paper. Diethylene glycol, McKitterick was told, gave off no acrolein and thus would contribute to a milder smoke. McKitterick promised to explore the possibility if he ever returned to the tobacco game.
When he did so the following year at Rube Ellis’s request, McKitterick remembered the conversation about glycol, and put Philip Morris chemists to work in the old brick factory on Richmond’s Tobacco Row blending the new humectant into a batch of Marlboro, the premium brand aimed at women smokers and promoted as “mild as May”. The company’s panel of eleven taste-testers reported that the glycol seemed not only to reduce the expected irritating
bite of the inhaled smoke but also to bring out the Turkish content in the blend. But with the economy going bust, Philip Morris did not dare to experiment with one of its new fifteen-cent brands.
By 1932, though, when the search was on for a new fifteen-cent brand with a marketable difference, the glycol humectant was reexamined, and the company chemists tested, within their highly limited competence, to see whether it was safe for human consumption. At the same time, the leaf blenders elected to replace the 5 to 10 percent of the mix composed of Maryland tobacco in most leading brands with Latakia, a small-leafed variety grown mostly on Cyprus that took on a rich, earthy aroma yet yielded a mild, even bland smoke. Worked into the new Philip Morris blend, the Latakia contributed to a darker, more pungent tobacco that the company leaf men left free of most of the sweeteners used in the best-selling brands. This somewhat neutral taste struck Ellis and McKitterick as a highly marketable commodity, with perhaps particular appeal to women smokers.
All the blend needed was a name and a package. The solution to both lay right in front of their eyes, but they had been too close to see it. After hosting a dinner in Pittsburgh for jobbers and retailers at which he confided the company’s plans for a distinctive new brand, McKitterick was approached by the proprietor of a hotel tobacco counter and urged to name the newcomer after the distinguished old-timer that for some thirty years had been associated with quality cigarettes—the tiny Philip Morris brand. Put it in a paper-cup package like other popular brands but let it closely resemble the old brand’s attractive sepia-brown box with the simulated wood grain imprinted on it, and smokers would be more inclined to believe they were being offered a premium brand at a reasonable price than just another flashy suitor for their affections.
How better to overcome price resistance than to suggest that the new brand was a bargain, not a deeper reach into the customers’ pockets? McKitterick and Ellis would advertise the new Philip Morris as costing “Now Only 15 Cents,” though in fact it was a totally different product in its mix of tobaccos from the old twenty-five-cent British import made from Turkish leaf. To stress its Old World roots, the words “English Blend” would be added prominently to the front of the brown package, though there was nothing English about it except the nationality of the man after whom the brand and the company were named. To further emphasize its pseudo-Englishness, the new paper-cup package retained all the old elements that did not apply to the American variation, including the British royal coat of arms; the company’s name with the abbreviation “Ltd.” printed in type six times larger than its American counterpart, “Inc.,” which followed it; and the words “London W.” positioned in such a fashion as to imply that it was the company’s home address, along with the added misinformation that the manufacturer had factories there and in Cairo
and Canada, in addition to one in Richmond. To achieve instant lineage, the package also declared that the makers had been “Established Over 80 Years.”
In-house, the Philip Morris people quickly took to calling the new product “English Blend” by way of distinguishing its name from the company’s, but as soon as it began being floated out to the public early in 1933, everyone called the brand Philip Morris. If the name, the whole English getup, and its pricing at “Now Only 15 Cents” were part and parcel of a single, calculated deception—well, it was harmless enough—and as William Esty’s ads for Camel were about to point out to smokers, “It’s Fun to Be Fooled.” In their introductory advertising pitch, Ellis and McKitterick were slightly less disingenuous than in the naming and packaging of the new brand. “Play it safe,” the Philip Morris ads advised smokers, by buying the only brand that didn’t produce irritating acrolein. The new smoke had “a natural, distinctive mildness found only in this new cigarette. … Philip Morris taste
[sic]
different because they’re made different.” McKitterick, however, was not entirely persuaded by the company’s testing that the brand’s distinctive humectant in fact created no acrolein or comparably irritating ingredient upon combustion, so he ordered the advertising to drop for the time being any direct references to the alleged chemical benefits in the manufacture.