History of cigarettes: the time of monopolies
Today we will explore the history of the US cigarette industry. Today I will focus on important events of the early 20th century, which marked the beginning of the modern market formation.
So, in 1890, the “big five” tobacco manufacturers were formed, headed by James Buchanan, the brilliant leader of the W. Duke & Sons company. American Tobacco Company received trust status and began an active campaign to seize control of the entire tobacco market, from farmers to individual distributors. In an era of industrial expansion, Buchanan built a vertical empire, with total control of all stages of production and appropriate leverage on everyone — tobacco farmers and tobacco suppliers, warehouse owners, foil and tobacco box manufacturers. The tobacco trust, using huge capital and connections, interfered in many areas of business, often openly blackmailing those who disagreed with commissions, fines and other methods of pressure.
The already large capital of the trust, growing bigger by the hour, made it possible to act aggressively in the competitive tobacco market. For example, in the 1890s, American Tobacco bought National Tobacco Works, P. Lorillard, Marburg, and Butler-Drummond, merging them into a subsidiary, Continental Tobacco. In 1899, Buchanan’s empire absorbed its largest rival, The Union Tobacco Company trust and all its constituent companies, Liggett & Myers, W.T. Blackwell and The National Cigarette and Tobacco Company. Finally, in the same year, American Tobacco acquired two-thirds of R.J. Reynolds Company.
American Tobacco has not lost sight of the weaker smaller manufacturers of hand-made cigarettes who were almost no competition to them. M. Melachrino, S, Anargyros, Monopole and Schinasi Bros. with such varieties of cigarettes as Melachrino, Murad, Helmar, Mogul, Natural, Egyptian Prettiest, Egyptian Straights and Egyptian Deities became an asset of the tobacco trust. That variety was used to create a range of cheap Turkish tobacco cigarettes for the domestic market (Hassan Mecca and Fatima cigarettes). Thus, American Tobacco “covered” all price categories for tobacco consumers with its products.
By 1909, The American Tobacco had achieved remarkable success in the tobacco market. Thus, the trust owned 86% of the total cigarette market, 85% of chewing tobacco, 76% of smoking tobacco, 97% of snuff and 14% of cigars. The numbers were so impressive that they caught the attention of the President of the United States, Teddy Roosevelt, known as the “destroyer of trusts.” However, make no mistake about the uniqueness of the Tobacco Trust, similar companies have existed in other industries. There were giant lead trusts and copper trusts, sugar trusts and rope trusts, oil and cotton trusts. The Sherman Act, aimed at protecting free trade, already existed, and the government’s close attention was quite ordinary.
The late 19th — early 20th centuries brought at least two economic crises to the country’s economy, affecting society as a whole. The true causes of the crises lay in the speculative economy of the US in general, but the government declared “big business” to be the “enemy of the people”. It was then that the Sherman and Clayton Acts were developed, declaring illegal any agreements aimed at restricting production and trade. Between 1901 and 1909, the Roosevelt administration sold over forty lawsuits against various trusts. This fate did not pass The American Tobacco either, but that’s another story.