The American Tobacco Company was a
tobacco company
The tobacco industry comprises those persons and companies who are engaged in the growth, preparation for sale, shipment, advertisement, and distribution of tobacco and tobacco-related products. It is a global industry; tobacco can grow in any ...
founded in 1890 by
J. B. Duke through a merger between a number of U.S.
tobacco manufacturers including
Allen and Ginter and
Goodwin & Company. The company was one of the original 12 members of the
Dow Jones Industrial Average in 1896. The American Tobacco Company dominated the industry by acquiring the
Lucky Strike
Lucky Strike is an American brand of cigarettes owned by the British American Tobacco group. Individual cigarettes of the brand are often referred to colloquially as "Luckies." Throughout their 150 year history, Lucky Strike has had fluctuating ...
Company and over 200 other rival firms.
Antitrust action begun in 1907 broke the company into several major companies in 1911.
The American Tobacco Company restructured itself in 1969, forming a holding company called
American Brands, Inc., which operated American Tobacco as a subsidiary. American Brands acquired a variety of non-tobacco businesses during the 1970s and 1980s and sold its tobacco operations to
Brown & Williamson in 1994. American Brands subsequently renamed itself "Fortune Brands".
History
Origins
James Buchanan Duke
James Buchanan Duke (December 23, 1856 – October 10, 1925) was an American tobacco and electric power industrialist best known for the introduction of modern cigarette manufacture and marketing, and his involvement with Duke University. ...
's entrance into the cigarette industry came about in 1879 when he elected to enter a new business rather than face competition in the shredded pouched smoking tobacco business against the
Bull Durham
''Bull Durham'' is a 1988 American romantic comedy sports film. It is partly based upon the minor-league baseball experiences of writer/director Ron Shelton and depicts the players and fans of the Durham Bulls, a minor-league baseball team in ...
brand, also from
Durham, North Carolina.
In 1881, two years after W. Duke, Sons & Company entered into the cigarette business,
James Bonsack invented a cigarette-rolling machine. It produced over 200 cigarettes per minute, the equivalent of what a skilled hand roller could produce in one hour, and reduced the cost of rolling cigarettes by 50%. It cut each cigarette with precision, creating uniformity in the cigarettes it rolled. Public stigma was attached to this machine-rolled uniformity, and
Allen & Ginter
Allen & Ginter was a Richmond, Virginia, tobacco manufacturing company formed by John F. Allen and Lewis Ginter around 1880. The firm created and marketed the first cigarette cards for collecting and trading in the United States. Some of the no ...
rejected the machine almost immediately.
Duke set a deal with the Bonsack Machine Company in 1884. Duke agreed to produce all cigarettes with his two rented Bonsack machines and in return, Bonsack reduced Duke’s royalties from $0.30 per thousand to $0.20 per thousand. Duke also hired one of Bonsack’s mechanics, resulting in fewer breakdowns of his machines than his competitors’. This secret contract resulted in a competitive advantage over Duke's competitors; he was able to lower his prices further than others could.
In the 1880s, while Duke was beginning to machine-roll all his cigarettes, he saw that growth rates in the cigarette industry were declining. His solution was to combine companies and found “one of the first great holding companies in American history.”
Duke spent $800,000 on advertising in 1889 and lowered his prices, accepting net profits of less than $400,000, forcing his major competitors to lower their prices and, in 1890, join his consortium by the name of the American Tobacco Company. The five constituent companies of American Tobacco: W. Duke & Sons,
Allen & Ginter
Allen & Ginter was a Richmond, Virginia, tobacco manufacturing company formed by John F. Allen and Lewis Ginter around 1880. The firm created and marketed the first cigarette cards for collecting and trading in the United States. Some of the no ...
, W.S. Kimball & Company,
Kinney Tobacco, and
Goodwin & Company – produced 90% of the cigarettes made in 1890, the first year the American Tobacco Company was listed on the
NYSE. Within two decades of its founding, the American Tobacco company absorbed about 250 companies and produced 80% of the cigarettes, plug tobacco, smoking tobacco, and snuff produced in the United States.
With Duke's market control, American Tobacco grew its equity from $25,000,000 to $316,000,000.
The "Tobacco Trust"
American Tobacco Company quickly became known as the “Tobacco Trust” upon its founding. Duke controlled the cigarette market, and his trust caught the attention of legislators in the United States, a country with historical aversion to
monopolies
A monopoly (from Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a speci ...
.
American Tobacco Company focused solely on making and selling cigarettes, leaving growing of tobacco and retail distribution to independent entrepreneurs. Nonetheless, Duke aimed to eliminate inefficiencies and middlemen through
vertical consolidation. The American Tobacco Company began to expand to Great Britain, China, and Japan. The company also maintained an interest in producing other tobacco products in case fads shifted; Duke wanted to be sure that he would be prepared with a multitude of tobacco styles. The Tobacco Trust's international expansion in conjunction with its consolidation of all types of tobacco “ultimately made the Trust so vulnerable to regulation and judicial dissolution”.
The
Sherman Antitrust Act was passed in 1890, and in 1907, the American Tobacco Company was indicted in violation of it.
In 1908, when the Department of Justice filed suit against the company, 65 companies and 29 individuals were named in the suit. The Supreme Court ordered the company to dissolve in 1911 on the same day that it ordered the
Standard Oil Trust to dissolve.
The ruling in ''
United States v. American Tobacco Co.
''United States v. American Tobacco Company'', , was a decision by the Supreme Court of the United States, United States Supreme Court, which held that the combination in this case is one in restraint of trade and an attempt to monopolize the busin ...
'' stated that the combination of the tobacco companies “in and of itself, as well as each and all of the elements composing it whether corporate or individual, whether considered collectively or separately
asin restraint of trade and an attempt to monopolize, and a monopolization within the first and second sections of the Anti-Trust Act.”
Dissolution
Dissolution proved complicated. The American Tobacco Company had combined many prior companies and processes. One department would manage a certain process for the entire organization, producing brands previously owned by other companies. “Plants had been assigned specific products without regard for previous ownership.”
Over the course of eight months, a plan for the dissolution, meant to assure competition among the new companies, was negotiated.
The trust needed to dissolve in such a way that no manufacturer had a monopoly on any type of tobacco product. Investors, holding millions of dollars of securities, also needed to be considered. A large question was how to distribute trademarks and brands between the resulting companies.
The American Tobacco Company's assets were split off into: American Tobacco Company, the existing
R. J. Reynolds,
Liggett & Myers, and
Lorillard
Lorillard Tobacco Company was an American tobacco company that marketed cigarettes under the brand names Newport, Maverick, Old Gold, Kent, True, Satin, and Max. The company had two operating segments: cigarettes and electronic cigarettes.
The ...
. The monopoly became an
oligopoly. The main result of the dissolution of American Tobacco Trust and the creation of these companies was an increase in advertising and promotion in the industry as a form of competition.
Liggett & Myers
Liggett & Myers kept control of these plants: Liggett and Myers, St. Louis; Spaulding and Merrick, Chicago; Allen and Ginter, Richmond; smoking tobacco factory in Chicago; Nall and Williams, Louisville; John Bollman Company, San Francisco; Pinkerton Company, Toledo; W. R. Irby, New Orleans; two cigar factories in Baltimore and Philadelphia, and the Duke-Durham branch of the American Tobacco Company.
P. Lorillard
P. Lorillard retained the Lorillard properties in addition to S. Anargyos; the Luhrman and Wilburn Tobacco Company; plants in Philadelphia, Wilmington, Brooklyn, Baltimore, and Danville; and the Federal Cigar Company.
More recent history
At the same time as the antitrust action in 1911, the company's share in
British American Tobacco (BAT) was sold. In 1994, BAT acquired its former parent, American Tobacco Company (though reorganized after antitrust proceedings). This brought the
Lucky Strike
Lucky Strike is an American brand of cigarettes owned by the British American Tobacco group. Individual cigarettes of the brand are often referred to colloquially as "Luckies." Throughout their 150 year history, Lucky Strike has had fluctuating ...
and
Pall Mall brands into BAT's portfolio as part of BAT's American arm, Brown & Williamson. B&W later merged with
R. J. Reynolds Tobacco Company in 2004.
American Tobacco left Durham in the late 1980s. Brown & Williamson took over the
Reidsville, North Carolina operation in 1995 and closed it, costing 1000 people their jobs, but
Commonwealth Brands
ITG Brands, LLC is the third-largest American tobacco manufacturing company in the United States. It is a subsidiary of British multinational Imperial Brands. ITG Brands markets and sells multiple cigarette and cigar brands and sells blu eCigs ...
took it over in a deal completed in October 1996, when the plant had 311 employees, and kept 100 of them.
ITG Brands
ITG Brands, LLC is the third-largest American tobacco manufacturing company in the United States. It is a subsidiary of British multinational Imperial Brands. ITG Brands markets and sells multiple cigarette and cigar brands and sells blu eCigs ...
announced November 1, 2018 that the plant would close in 2020.
Redevelopment
In 2004, the previously abandoned American Tobacco Campus (ATC) in Durham was reopened as a complex of offices, shops, and restaurants. Developed by
Capitol Broadcasting and reopened as the
American Tobacco Historic District
The American Tobacco Historic District is a historic tobacco factory complex and national historic district located in Durham, Durham County, North Carolina. The district encompasses 14 contributing buildings and three contributing structures bui ...
, phase 1 consisted of the Fowler, Crowe, Strickland, Reed, and Washington Buildings, and included the construction of two new parking garages and a waterfall feature through the center of the campus designed by Smallwood, Reynolds, Stewart, Stewart of
Atlanta, Georgia
Atlanta ( ) is the capital and most populous city of the U.S. state of Georgia. It is the seat of Fulton County, the most populous county in Georgia, but its territory falls in both Fulton and DeKalb counties. With a population of 498,7 ...
and constructed by W. P. Law, Inc. based in
Lexington, South Carolina. Phase 2, consisting of the remaining buildings and expansion of the water feature at the north end of the site, was under construction as of late 2006. Many office spaces in the ATC are now used by
Duke University. It was listed on the
National Register of Historic Places in 2000 as the American Tobacco Company Manufacturing Plant.
The nearby
Watts and Yuille Warehouses
Watts and Yuille Warehouses, also known as Brightleaf Square, are two historic tobacco storage warehouses located at Durham, Durham County, North Carolina. They were built in 1904, and are two identical buildings parallel to each other with a cour ...
were listed in 1984 and the
Smith Warehouse in 1985.
The
American Tobacco Trail, named for the company, is a multi-use
rail-trail that begins just south of the Durham complex and runs towards Chatham and Wake Counties. It follows the route of the railroad (
Norfolk Southern Railway (former) Durham Branch) that once served the factories, but was later abandoned when these facilities were shut down.
Advertising
Between 1875 and the 1940s, cigarette companies often included collectible
trading cards with their packages of cigarettes. Cigarette card sets document popular culture from the turn of the century, often depicting the period's actresses, costumes, and sports, as well as offering insights into mainstream humor and cultural norms.
American Tobacco commercialised its cards through several brands, such as ''Recruit'', ''Mecca'', ''Fatima'', ''Ramly'', ''Turkey Red''. ''Old Judge''. ''Old Mill'', among others
In the golden age of radio, as well as early television, American Tobacco was known for advertisements featuring a fast-talking tobacco auctioneer named
L. A. "Speed" Riggs. His rapid-fire and song-like patter would always end with the exclamation, "Sold, American!"
Another famous tobacco auctioneer, F. E. Boone, was often heard in tandem with Riggs.
See also
*
Allen & Ginter
Allen & Ginter was a Richmond, Virginia, tobacco manufacturing company formed by John F. Allen and Lewis Ginter around 1880. The firm created and marketed the first cigarette cards for collecting and trading in the United States. Some of the no ...
*
Goodwin & Co.
*
Kinney Brothers
References
Further reading
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External links
Duke Cigarette Booklets of Civil War GeneralsA Virtual Exhibit, Special Collections, Marshall University.
American Tobacco Company, Richmond Stemmery, photograph circa 1905''Through the Lens of Time'' VCU Libraries.
Gallery of mid-20th-century advertising featuring American Tobacco Company products.
{{Authority control
American Tobacco Company
Duke family
Defunct manufacturing companies based in North Carolina