Authors: Richard Kluger
Small was a veritable fount of invention. He had fresh ideas for new sets of picture cards that proved highly popular, like the “Rags to Riches” series featuring prominent businessmen who had risen from obscure origins—surefire role models for impecunious young smokers—and the still more alluring “Sporting Girls” set that revealed rather more leg than modesty then permitted.
The latter may not have qualified as pornography, but it plainly struck male smokers, who then constituted 99 percent of the cigarette market, as the next best thing. Homing in on the national craze for roller skates, Small got Duke to pay for a touring team, called the Cross Cuts (after one of the new brands), which played exhibition matches—a sort of polo on wheels—against all comers. One contest in Cincinnati drew 12,000 spectators, all properly besieged with leaflets proclaiming the qualities of Duke’s cheap, mild smokes. And as he ranged west from the Great Lakes to the Rio Grande, the indefatigable Mr. Small was only too happy to have Mr. Duke underwrite the cost of life-size carved Indians and turbaned Turks who stood beside the front door as a beckoning sentinel at leading tobacconists, carrying the proprietor’s name and, in small but still prominent lettering, the names of Duke’s brands.
But Duke knew in his heart that he had to be his own best salesman. And so as soon as the Bonsack was operating smoothly in Durham, he brought his wares to the nation’s biggest and most tumultuous bazaar. New York, with its flood of newcomers who could afford only the cheapest tobacco products if any at all, was plainly the most promising arena for Duke’s huge gamble on the cigarette. Not without misgivings by his family and associates back home, Buck came north in 1884—a tall, awkward, ruddy rube of twenty-eight with a Southern accent that did not soothe the ear in this citadel of Yankee commerce. He took a two-dollar-a-week room in a boardinghouse, opened a tiny office on Chambers Street, and hit the sidewalks, buttonholing every dealer who would give him the time of day.
The competition was intense, to be sure, but no one company and no single brand had gained anything approaching dominance. Buck opened a small factory on Rivington Street with four Bonsacks and doubled as production supervisor and sales chief. He already had the cheapest and best-looking product on the market, and his premiums to buyers and retailers were a match for any, but in that pre-electronic time he could not rely on word of mouth to spread the Duke name. He enlisted top talent and paid for quality printing to make a splash as the Duke brands were pictured everywhere: in the papers and periodicals, on the billboards that blighted the cityscape, in the programs distributed to theatergoers, in handbills at ballfields and boxing matches, on posters littering every fence and wall and storefront they let him use and on many they didn’t.
Duke was at his factory first thing in the day to greet his laborers and when the machines fell silent at night; in between he was in the field, opening up new accounts like drugstores and groceries that had not previously offered his cigarettes or any at all. And invariably he walked, in that gawky, pigeon-toed gait, avoiding the grandeur and expense of a hansom. “Walk when you’re young,” he would counsel in one of the pithier aphorisms attributed to him, “so
that you can ride when you’re old.” To cover outlying communities and
the
Hudson River Valley, Duke dispatched jobbers and drummers selling strictly his brands from wagons heaped with merchandise and free clocks and folding chairs for every merchant who placed a substantial order. By the end of 1885, the company’s volume had tripled from its pre-Bonsack days, and the New York operation was narrowly in the black. Soon the Duke factory moved to larger quarters on First Avenue at Thirty-eighth Street, housing fifteen Bonsack machines and a labor force of 750, with 40 in the printing department alone. “I hated to close my desk at night,” Duke would later recall, and when he did lock up, the inveterate bachelor would often haunt the shops that stayed open late to ask clerks what brands were moving and smokers the reasons for their preferences.
His four principal rivals, led by the Ginter and Kinney firms, still viewed Duke as a provincial vulgarian, but they could hardly gainsay the impact he was making. Duke’s growing capital needs were now being filled by the New York financial houses, only too glad to advance him thirty-and sixty-day lines of credit that were punctiliously met. With the industry leadership in the offing, Duke began displaying another trait of character besides the shrewd judgment and unstinting energy that had marked his advancement—a relentlessness that turned momentum into inevitability.
Thanks to his notably lower production costs, Duke slashed his prices further, handed out under-the-table rebates to dealers who pushed his line the hardest, and showered them with premiums from floor mops to ersatz diamond stickpins. His placards seemed to be up on every wall and building side, not infrequently obscuring those of his competitors, as he plowed back an extraordinary twenty cents of every sales dollar into advertising and promotion—a proportion that overwhelmed his rivals’ resources. Now, for the first time, he was exhibiting the
modus operandi
that was to power his triumphant, brutal career: “Hit your competitors in the pocketbook,” he later explained. “Hit ’em hard. Then you either buy ’em out or take ’em with you.”
At about that time, Duke also disclosed a supreme self-confidence that took the form of intolerance of any subordinate who supposed himself indispensable. Flashy Edward Small, for all his sales wizardry, had taken to living higher, at Duke’s expense, and talking louder about his inspired conquests and perfected art of persuasion than the dogged Duke could abide. And when Small’s figures for 1888 suggested that he was doing more talking than selling, he found his service abruptly terminated. Allen & Ginter in Richmond quickly grabbed Small in a display of defiance amid growing reports that Duke was eager and ready to buy up his competitors. Indeed, the president of Kinney, makers of the popular Sweet Caporals, confided that he was “most eager to get out of the advertising madhouse” and what he called “the damned picture [card]
business” that was squeezing his profit margin unmercifully. But Major Lewis Ginter, contemptuous of the upstart North Carolinian who was muscling his company out of key urban markets, put out word that his operations were not for sale, and claimed that Duke neither had nor could borrow enough to meet his price. But perhaps Duke would like to sell instead? It was a forlorn wish. From New York came the reply: a further price cut that gave retailers a full 50 percent higher margin selling Duke brands than others.
It was left to the Bonsack company’s president, D. B., Strouse, apparently foreseeing higher profits as purveyors to a monopoly, to promote the notion of a peaceable consolidation among the five leading cigarette manufacturers as a means of both ending the cutthroat contest among them and shutting the door on potential future competitors. Duke would be glad to meet his rivals at any time, he wrote Strouse, “to discuss any matter for our common good, but if you mean by a consolidated cigarette company that there is to be another factory started or a trust formed, and want us to take stock in them, I am opposed to anything of the kind, as we want the full control of our business, which we could not have with a trust.” Unless, of course, it was a trust he controlled. And so Buck poured it on. By 1889, he was churning out well over 2 million cigarettes a day and let it be known that he was prepared to toss the entire 10 percent profit he claimed to be making on annual sales of $4 million into advertising—on top of the $800,000 he was already spending. It was too much for the proud Ginter. No, he would not sell to Buck Duke, but in the interest of survival, he would make his pact with the devil. The heads of the five leading cigarette makers, of which W. Duke Sons & Company was by now the undisputed leader with a 40 percent share of the market, gathered at a hotel on lower Fifth Avenue the afternoon of April 23, 1889.
Throughout the course of his mastery of the tobacco business, Duke would buy or absorb some 250 companies, and in his dealings with the first four of them, he displayed the trait that would distinguish him as a takeover artist par excellence—a relative generosity to the vanquished. Thus, Duke’s 30 percent slice of their freshly baked pie was no bigger than Ginter’s; Kinney got 20 percent, and the other two firms 10 each. But it was Buck Duke, to be sure, who emerged from the meeting room as president of the new American Tobacco Company, as they styled their joint venture, capitalized at $25 million. No one supposed his title was in the least honorary; at thirty-three, just five years after he had gambled the family business on a balky machine no one else wanted, Buck Duke was king of the cigarette business in America.
VI
IN
the same year that Duke went into partnership with his father, Richard Joshua Reynolds fled from his overbearing father and, some eighty miles due west of the Dukes’ establishment, went into the tobacco business on his own.
Like Buck Duke, Dick Reynolds was a big, rawboned farm boy with little formal schooling. Where young Duke had a nearly crippling foot disfigurement, young Reynolds suffered from a lifelong stammer and what is now known as dyslexia, which left him a painfully slow reader and poor speller and often invited people to underestimate his native intelligence. Both young fellows were go-getters with the grit and resolve to match their brightness. They would go off in opposite geographical directions and choose different products to exploit at first, but it was this pair who would emerge in time as the pioneering giants of the cigarette business and their companies as its leading rivals for dominion until the last third of the twentieth century.
Reynolds, who was six years older than Duke, started with more material advantages. His family homestead in the shadow of No Business Mountain in the Blue Ridge foothills of Patrick County, Virginia, abutting the state boundary with North Carolina, was the centerpiece of an 11,000-acre spread that was farmed, on the eve of the Civil War, by perhaps as many as ninety slaves. Prime among its crops was Bright tobacco, processed by the family in a small log factory and sold as plug for a generation before Richard Reynolds was born. A handsome, powerful teenager, Dick worked the fields alongside the family’s former slaves and other hands when the war was over, knew tobacco from the ground up—and just about all there was to know about turning it into flat goods by the time he was sent off for a couple of years of schooling at a small local college. He was quick enough with numbers but floundered in his other subjects due to his reading disability. Pressed into the family enterprise, Dick spent much of his time on the road, peddling chew, his speech impediment notwithstanding. And he was good at it. Pleased, his stern Methodist father sent Dick farther afield, to Baltimore, where he established relationships with jobbers that would later stand him in good stead. While there, he furthered his education, both in and beyond the classroom, acquiring enough of city ways to allow him to move with confidence through the larger world of commerce. That exposure was likely instrumental in his coming to grasp the severe limitations of his family’s business. Its remoteness made transportation Of goods slow and expensive and labor hard to attract, and like his older brother, who had been given a stake and allowed to cut loose, Dick Reynolds asked his father to bankroll him in his own business. Dick got half of what his
brother had, plus the big licorice kettle from the old family factory, and headed due south.
He went only fifty miles, to the dusty little town of Winston, North Carolina (population 500), close by the more picturesque Moravian settlement at Salem. The sweet smell of licorice hung in the Winston air from the fifteen or so plug makers already settled there, but rather than discouraging Reynolds, the competition served his ends. There were better rail and road connections, and all the plants were a magnet for cheap black labor from the surrounding countryside. He bought a lot the size of a tennis court, put up a two-story building, painted it red, moved into the second floor, rolled up his sleeves, hired thirty pairs of dark hands to work beside his, and went into the tobacco business.
Like Buck Duke, Dick Reynolds worked as if possessed. To flavor his plug and twist, he cooked up “sauces” to his liking—blends of sugar, licorice, rum, and sweet oils—and bargained shrewdly for leaf with the fast-talking auctioneers, many of whom preached for their main vocation, and the predatory “pin-hookers,” as the tobacco speculators were called. Then he assembled a network of jobbers who handled all his sales over a territory that would eventually range as far as Georgia to the south, Tennessee and Kentucky to the west, and Pennsylvania to the north, with Baltimore as the urban hub of his trade. To woo the best wholesalers, he turned out private-label brands, sometimes named for them or their loved ones. He kept wages low and the factory clean and efficient, adding the latest equipment, like a gas-burning leaf dryer, which was far more economical than climbing to the factory roof and laying out the sugar-laced leaf in the sun. What he may have been best at, though, was inventing memorable and homey names for his brands of chew, like Brown’s Mule, Golden Rain, Dixie’s Delight, Zeb Vance, Yellow Rose, Live Indian, Purity, City Talk—and Dick Reynolds’s Best.
Within two years, he had doubled the size of the factory. By 1883, his ninth year as an entrepreneur, he had 110 hands, and the local newspaper, in recognition of his preeminence among the town’s manufacturers, referred to him as “R.J.R.” The next year, Dick’s younger brother Will, a college man, joined the sprouting company and relieved the boss of much of his leaf-buying duties. Soon “R. J.,” as he was known more familiarly around his own premises, freed himself to solidify his sales program; before long he had nearly fifty accounts in Baltimore alone. By 1886, the industry registry listed close to a hundred trademarked names in the Reynolds stable, and two of them, Maid of Athens and Schnapps, were among the trade’s top sellers.
He had become a very big, vibrant fish in a small, drab pond. As if to spite his abstemious father’s strictures, R. J. played as hard as he worked. The roseate glow of his cheeks bespoke his bottomless capacity for liquor, and his weekend-long poker games were famous locally. A bachelor married to his work just like Buck Duke, Reynolds lacked the former’s city diversions and
devoted himself, when not gambling at cards, to fast horses and pliant women. His pair of matched white steeds was rated among the finest in the state, and he liked nothing better than galloping them through Winston’s dusty streets.