New York

Tobacco

SB273

I fa^b J Chapter in America's Industrial Growth
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SB273
T628
no. 14

bforfat/, 2Veu; Yorfc has

ry in many commercial

industry is an impor-

kitlets sold over $900
fw York State. Of this,
is. Taxes on cigarettes

to the state's treasury.

Uarters for 140 of the
Including several which
^g all firms in the city,
s, 22 export such prod-
; trade associations and
her tobacco-related in-
Mfacturers, advertising

^^f€f€Ae out of New York.

Both as a major consumer outlet for tobacco products
and as a major business /manufacturing center. New
York has served and will continue to serve in propor-
tions that have been unequalled in magnitude by most
other areas of the world.

Tobacco History Series
First Edition

i

THE TOBACCO INSTITUTE

1776 K Street, N.W., Washington, D. C. 20006

1972

NORTH CAROLINA STATE UNIVERSITY LIBRARIES

lllllllllillllllllil

S01 202396 N

New York and
Tobacco

.11 1590, when the use of leaf tobacco
was beginning in England, Hollanders were already
smoking tobacco in clay pipes and growing the plant
on a large scale. When many of these Hollanders came
to the "New World" they brought their pipe smoking
custom with them. By the time New Amsterdam was
settled in 1625, pipe smoking had become common in
the area which George Washington later referred to as
the "seat of empire"— New York.

D. H. riilL Lli^RARY
H. C. STATE UNIVERSin:

G

THE IMPORTANCE OF TOBACCO IN
NEW YORK TODAY

At one time tobacco was a major agricultural crop in
the state. Today virtually none is grown in New York,
but tobacco products are increasingly important to the
state's economy.

rowing cigar leaf

The introduction of tobacco to New York state agri-
culture occurred around 1845 near Syracuse in Onon-
daga County. By 1849, 83,000 pounds of cigar leaf were
produced there and tobacco growth began to spread
to neighboring counties. Ten years later. New York's
tobacco yield amounted to 5,754,000 pounds.

From 1862 to 1864, New York tobacco brought a good
price, selling for as much as 30 cents a pound. By 1879,
the crop amounted to about 6,480,000 pounds. Produc-
tion climbed again by 1899 to almost 14 million pounds.

After the turn of the century, with the exception of
occasional spurts, production dwindled to an almost
negligible amount. For example, in 1970, Cayuga
County contained two tobacco farms totaling 1.15 acres,
Onondaea Countv had three farms with 3.30 acres and
Oswego Count)' had two tobacco farms working 3.27
acres. According to the United States Department of
Agriculture, actual poundage yield from these farms is
too negligible to record.

B

uttressing the economy

But the role of the tobacco industry in New York is a
major one in the state's economy. According to Fortune
magazine, 140, or 28 percent of the nation's top 500
businesses have headquarters in New York. This in-
cludes many of the tobacco companies, their suppliers,
advertisers, printers and related industries. New York
is also the leading manufacturing state with the largest
city and port in the United States. About 43,000 manu-
facturing establishments— 14 percent of the nation's
total— are located in New York. Her manufacturing in-
dustries outrank those of every other state in number,
employees, payroll and value added by manufacture,
which came to over $23.5 billion in 1970 alone.

With a total population of over 18 million, an 11
percent increase since 1960, retail sales in New York are
huge— about $33 billion yearly. Tobacco and tobacco
products account for a good portion. In 1970, there were
over 141,000 retail outlets in the state selling tobacco
products. The estimated wholesale value of these prod-
ucts came to around $610 million— the largest amount
in the nation.

The state's transportation network is one of the most
advanced and refined in the world. The state barge
canal system is 800 miles long; there are 34 railroads
operating in New York; 411 landing fields including 25
seaplane bases and 34 heliports.

Within a two day's trucking haul to New York City
is 60 percent of the population of the United States and
Canada. New York's three customs districts. New York
City, Buffalo and Ogdensburg, moved exports and im-
ports valued at $26.4 billion in 1970-a 32.3 percent
share of all U.S. foreign trade.

Critical economic and industrial data for New York
extend through the tobacco industry to countless other

industries adding up to billions of dollars in business.
Manufacture, corporate headquarters, advertising, trans-
portation and other major business factions all make the
tobacco industry truly big business in New York.

T

he tax burden

Since the inception of the tobacco excise, just over a
hundred years ago, about $62 billion in tobacco taxes
have been added to the United States Treasury. The
current federal rate on each package of cigarettes was
"temporarily" raised from seven to eight cents in 1952
and has remained at that rate since then.

As the second most populous state in the country,
New York cigarette smokers pay a huge sum to federal,
state and local treasuries. In fiscal 1970, over 2.1 billion
packs were taxed bringing $174,472,000 to the federal
government and $261,698,000 to the state. The state
cigarette excise, now at twelve cents, was increased
from three cents in 1950 to its present rate.

Along with the twelve cent excise. New York City
smokers must pay an additional municipal tax— four
cents per pack. And on June 30, 1971, another special
city tax ordinance went into effect in New York City
based on the "tar" and nicotine content of each individ-
ual brand. Cigarettes with more than 17 mg "tar" and
1.1 mg nicotine were taxed an additional four cents per
pack. Brands meeting one of these levels but not the
other, were to be taxed three cents, and brands within
both requirements were not subject to the additional
"tar"-nicotine tax.

R

e flections of the twenties -
cigarette bootlegging

There was an immediate uproar from wholesalers,
retailers, consumers and the press. Although estimates

vary widely, according to many trade and official
sources, organized crime has accounted for as much as
25 percent of the city's tobacco business. Cigarette boot-
legging and illegal mail-order sales from areas where
taxes were far less than New York became attractive to
the consumer. The Schenectady Gazette quoted a State
Taxation Department official as estimating a $7 million
yearly loss in state revenues due to illegal smuggling
traffic. In 1970 alone, the newspaper said, the cigarette
enforcement division of the Taxation and Finance De-
partment confiscated over a million packs and obtained
44 convictions.

In April of 1971, the New York Times quoted Gov-
ernor Rockefeller who said:

Widespread distribution of untaxed cigarettes
in New York hij criminal elements is threaten-
ing the existence of our legitimate cigarette
industry. . . . The impact of this illegal activity
is also felt in the loss of millions of dollars in
much needed public revenues.
The Times estimated that the state was losing $5.2
million yearly and the city $1.7 million a year.

One government official, a Queens County district
attorney, told the Syracuse Post-Standard that organized
crime was "siphoning off $50 million a year" in revenues
that would have gone to the government.

From this information, it is apparent that precisely
accurate consumption figures for tobacco products are
not available in New York State.

A HISTORY OF PROSPERITY

In September of 1609, Henry Hudson, an Englishman
under the employ of the Dutch East India Company,
brought his ship, the Half Moon, into what later became
New York Harbor. Hudson was in search of a northwest
passage to the East Indies and thought he might find
one through the American northeast. He cruised up the
river subsequently named for him, but gave up his
search by the time he reached what is now the Albany
area.

Later, in 1614, Adrian Block, also employed by the
Dutch East India Company, received a three-year con-
tract from the parliament of the Netherlands permitting
the company to trade with the New World. All during
this time scattered settlements in the area of New
Netherlands were spreading and growing. With the
arrival of Dutch migrant families, Manhattan Island was
formally colonized in the summer of 1626, when Peter
Minuit, director-general of the colony, made one of
the most famous contracts in history by purchasing it
from the Indians.

JLhe first "smoke -in"

By the mid- 17th century. New Amsterdam, as New
York City was then called, had become a growing and
bustling town. Tobacco was common in the area, as the
Dutch families had been familiar with its use for years.
But in 1639, William Kieft, then director-general, issued
an arbitrary ban on a socially entrenched habit which
he found annoying— pipe smoking. The first "smoke-in"
occurred when the edict went into effect. The majority
of the town's male population smoked pipes and strongly
opposed the wishes of the director-general. Washington

Irving's splendid portrayal of life in old New Amster-
dam was typified when he wrote:

. . . the most important of the innumerable
laws enacted by the governor, is one framed

William the Testy, director-general of Netv Amsterdam, loas the target
of a "smoke-in" hij the town's pipe smokers, who refused to abide by
a ban on smoking.

in an unlucky moment, to prohibit the uni-
versal practice of smoking . . . he could not
have struck more closehj, upon the sensibilities
of the million. The populace were in as violent
a turmoil as the constitutional gravity of their
deportment would permit— a mob of factious
citizens had even the hardihood to assemble

around the little governors house, where set-
tling themselves resolutely down, like a he-
sieging army before a fortress, they one and
all fell to smoking with a determined persever-
ance, that plainly evinced it was their intention
to funk him into terms . . .
They eventually decided to extinguish their pipes,
and promised to use in the future only small, two-inch
pipes that would not cause as much irritation as the
governor said he had to cope with. But, as Irving noted:
Upon the accession of Peter Stuyvesant to the
governors chair he replaced the factious cabi-
net of William the Testy with counselors from
somniferous, respectable families, restored to
them the fair, long pipes and admonished them
to smoke, eat and sleep for the good of the
nation.

R

rom New Amsterdara to New York

Dutch commercialism began to rival Britain so much
that increasing difficulties over trade and boundaries
were inevitable. British mercantihsm in colonial days
was based on rigid monopolies. The Crown allowed no
colonial manufacture in any of her holdings. Raw mate-
rials were shipped to England for manufacture and
finished products later returned as consumer items.
Britain tightened the ropes on foreign trade by raising
a duty on tobacco that made it too expensive for the
colonists to use economically.

Disputes came to a head and culminated on Sep-
tember 8, 1664 when Peter Stuyvesant, director-general,
was forced to give up New Amsterdam to an English
fleet under the command of Colonel Richard Nicolls.
The names New Amsterdam and New Netherlands

were soon changed to New York after James, Duke of
York and Albany. The Dutch recaptured New York in
1673, but it was returned to the Enghsh by the Treaty
of Westminster, February 19, 1674.

T.

he long road to success

Tobacco manufacture got its start in New York in
1760 when Pierre Lorillard, a French Huguenot, estab-
hshed a tobacco business on the high road to Boston on
Chatham Street near Tryon Row. Lorillard owned one
of the only two pre-revolutionary snuff mills in the
colonies to survive British opposition to colonial manu-
facture. Following the Treaty of Paris, Lorillard built
his snuff mill on the Bronx River. It was later expanded
to include workmen's cottages, a warehouse, facilities
for packing smoking tobacco and the family mansion.
The original mill was replaced in 1840 by a granite
structure still standing in the Bronx Botanical Gardens.

s

end tobacco"

By the eve of the Revolution, tobacco's growth was
flourishing throughout the colonies. Though New York
did not participate yet as a tobacco growing area, the
port served as a major shipping area of colonial tobacco
to European markets. In 1776, when George Washing-
ton lost New York to the British, he appealed to his
countrymen for economic assistance and said, "If you
can't send money, send tobacco." In 1777 Ben Franklin
drew two million livres on a French loan against a con-
tract to deliver 5,000 hogsheads of tobacco to France.
British ships seized about 34 million pounds, but an
additional 53 million reached overseas markets.

lO

Manufacturing of many kinds of products in the
colonies increased tremendously with the exit of Crown
influence. Ten years after the Treaty of Paris, one
Samuel Russell of New York City, went on record with
information on behalf of the city's manufacturers:
The price of tobacco by the hogshead, in New
York, is four pence one farthing per pound. . . .
This is cash; no credit ever being given on leaf
tobacco in any part of America. The expense of
work is two pence three farthings per pound,
on what is called spun or plug tobacco— only
two-thirds of the leaf, on an average, can be
made into this kind of tobacco. The loss in
stems and dirt will amount to one pennif per
pound. Every pound of good plug tobacco,
therefore, costs the manufacturer eight-pence
per pound; and the general selling price is
nine-pence. . . . This leaves a profit to the
manufacturer of twelve and a half per cent out
of which he must pay shop-rent and be sup-
ported. The remaining one-third is made into
the coarser kinds. . . . The profits on this part
are not far from thirteen per cent.
From this report, it is obvious that at the time, plug
tobacco, which could be used for smoking or chewing,
was becoming more popular and snuff was declining in
importance.

Meanwhile, Pierre Lorillard II and his brother
George formed a tobacco company-P & G Lorillard.
The business expanded rapidly. In 1843 Pierre III took
over and changed the name of the company to P. Loril-
lard. Principal products manufactured were smoking
and chewing tobacco. P. Lorillard's company was to
become one of several giant firms involved in some of
the fiercest business competition American commerce
has ever known.

11

A

sophisticated commercial network

Charles Maurice de Talleyrand-Perigord, who later
became Napoleon's foreign minister, cast an objective
eye on the potentials of New York City in the late 18th
century. His projections for commercial success for the
city were proven true beyond his belief:

Its good and convenient harbor, which is
never closed bi/ ice, its central position to
which large rivers bring the products of the
whole countrij, appear to me to be decisive ad-
vantages. Philadelphia is too buried in the land
and especialhj too inaccessible to wood of all
sorts. Boston is too much at the extremity of
the countrif, does not have enough flour, and
has not a large enough outlet for the commodi-
ties of the West Indies, except molasses.
But if anything acted like a catalyst to further insure
commercial preeminence of the state, it was the opening
of the Erie Canal in 1826. New York City became the
immediate outlet for upstate produce and for goods
coming from all the Great Lakes border states. It was
to the Canal that New York in great part owed its com-
mercial victory over Philadelphia. Dewitt Clinton was
the major force in the drive for the canal. Clinton, who
was governor while the canal was under construction,
went as far as devoting his personal funds to help build
the 363-mile canal between Buffalo and Albany. The
canal, which some referred to as "Clinton's Ditch," was
still luider construction when Clinton died— $6,000 in
debt. But he did not pass on unrecognized. In 1876 his
image was selected for the then new Federal tobacco
tax stamp and was part of every package of cigarettes
for the next 82 years.

By 1850, New York City was distributing one-half of
all the tobacco produced in North Carolina and Virginia.

12

On the eve of the Civil War, the principal manufactur-
ing centers for tobacco were Richmond, Petersburg,
Lynchburg and Danville, Virginia; New York City;
Clarksville, Tennessee; Louisville and Henderson, Ken-
tucky; Fayette, Missouri; Milton, North Carolina and
St. Louis.

s

South Street, in New York City, was a busy commercial district in 1829.

hipping turns South

With the emergence of Hampton Roads, Virginia, as
a major shipping area after 1900, the popularity of New
York Harbor for shipment of tobacco products began
to decline. In 1893, the editor of the Southern Tobacco
Journal had commented:

Thousands of hogsheads of tobacco are an-
nually shipped from the Carolinas and Virginia
to New York and thence by steamer to their
destination on the other side of the Atlantic.

13

But there is likely to he a change in this
method of shipping in the near future. The
Chesapeake and Ohio Railroad people have
just launched their splendid boats at Newport
News and are now sending freight direct from
Virginia to foreign ports. . . . Hence we now
have a new line over which to send our to-
bacco abroad, saving, at least, the coast wise
shipping expense from Norfolk to New York.
Let our tobacco men rallij to the support of
this splendid line of steam.
By 1929, 71.01 percent of all tobacco exported from
the United States left from Hampton Roads. Overland
and coastal shipping of southern tobacco to New York
for export had become an anachronism.

c

igars take the lead.

At the time of the War of 1812, cigars had appeared
on the American market. By the outbreak of the Civil
War, Philadelphia was still the leading manufacturing
city with a slight advantage over New York in value of

14

output-$l,240,000 as against $1,100,000. In 1860, $9
million worth of cigars and $21 million in chewing to-
bacco were made in the United States. Forty years later,
cigars were grossing more than $160 million yearly, and
pipe and chewing tobacco and snuff came to about $90
million. Although these latter amounts included a fed-
eral excise of about $50 million, the increases were still
staggering.

Cigar manufacture was typically a northern industry.
In 1860 the ten leading cigar manufacturing areas were
Philadelphia; New York; Baltimore; Cincinnati; Hart-
ford; St. Louis; Hampton County, Massachusetts;
Newark; Albany and New Orleans. And when the Con-
federacy was organized in February of 1861, not a
single "tobacco state" was represented. But as the Civil
War progressed, tobacco was divided with Virginia,
North Carolina and Tennessee joining the South, and
Maryland, Kentucky and Missouri with the North.

PRIME TOBACCO.

15

c

This brought about a tremendous tobacco trade in-
crease in New York. Because of the Union blockade of
southern ports, New York City became a greater export
market for tobacco products and headquarters for Euro-
pean buyers, most of whom had done their previous
buying in New Orleans.

Shortly after the end of the War, when normal trade
resumed, New York was receiving half the tobacco
grown in Virginia and North Carolina for redistribution
to wholesalers throughout the nation. Both foreign and
western United States trade settled in the New York
area. Just after the War, more than 80,000 hogsheads of
tobacco per year were shipped to New York City for
wholesale and retail use.

igar making -historically independent

Cigar making throughout the 19th and much of the
20th centuries was limited to the old hand rolling
method, and for years New York was the center of
this trade.

Early types of cigars popular in the United States
were called "short sixties." Also popular were "long
nines" and "supers." Around the time of the War of
1812 "short sixties" were distributed gratis in taverns
and grogshops to steady customers— strangers could buy
them at two for a cent. Another saloon type was the
German or Belgian cigar. By mid-century import duties
were paid on over 100 million of this type in a single
year. The premium cigars of the day were Cuban and
imported in tremendous quantity, especially in the lat-
ter part of the 19th century.

In 1880, New York City had 14,500 people working
in small cigar factories. In all of New England the num-
ber of persons making cigars came to only 2,300. New
York state made six times as many cigars as did all New

16

c

England combined. By the latter part of the century
New York was producing more than a fifth of the
nation's cigars.

Jose Marti, head of the Cuban revolutionary move-
ment against Spain, maintained headquarters in New
York. As the Cuban handrollers worked at making
cigars, a reader would apprise them of contemporary
events in Cuba. From these "pulpits of liberty," as they
were referred to, 10 percent of the rollers' wages were
donated toward the revolution.

igar making -an impoverished, profession

But life for most of the rollers was scarcely com-
fortable. Conditions were deplorable. Most shops were
small and dirty. Whole families were crowded into small
rooms where they ate, slept and toiled. Teddy Roosevelt,
who as a New York Assemblyman became interested in
improving these working conditions, commented on an
experience he had while visiting one such cigar making
shop:

7 have always remembered one room in which
two families were living. On my inquiry as to
who the third adult male was I was told that
he was a boarder with one of the families.
There were several children, three men and
two women in this room. The tobacco was
stowed about everywhere, alongside the foul
bedding, and in a corner where there were
scraps of food. The men, women and children
in this room worked by day and far into the
evening, and they slept and ate there. They
were Bohemians, unable to speak English, ex-
cept that one of the children knew enough to
act as an interpreter.
Together with Samuel Gompers, who had been head
of the Cigar Makers International Union of America

17

and who later was to become head of the American
Federation of Labor, Roosevelt drafted and introduced
a bill in the New York legislature to help clean up the
conditions. Passed in 1884, the bill was declared uncon-
stitutional in 1885 by the New York State Court of
Appeals which said, "It cannot be perceived how the
cigar maker is to be improved in his health or his morals
by forcing him from his home and its hallowed asso-
ciations and beneficent influences, to ply his trade
elsewhere."

Roosevelt said publicly that the judges "knew noth-
ing whatever of tenement house conditions." Later,
when Roosevelt became the state's governor, he helped
clean up the situation, but it was really technology that
helped end the deplorable tenement conditions of the
19th century cigar makers. In 1900, the New York State
Tenement House Commission said:

Through the invention of a machine called the
suction table, the manufacture of cigars is
being gradually removed into factories; and
it is the opinion of those best acquainted with
the trade that it will soon disappear from the
tenement houses.

18

c

igarettes get their start

The only cigarettes in the U.S. market prior to the
Civil War were manufactured in Cuba from mild Ha-
vana leaf, with some minor cigarette importation from
England. Around the close of the War, about 20 milhon
cigarettes were manufactured in New York City.

F. S. Kinney was one of the first firms to engage in
cigarette manufacture. In 1869, the company imported
craftsmen from Europe to instruct women employees
in the art of hand rolling cigarettes. The Kinney firm
expanded rapidly and in 1877 opened storehouses in
Danville, Virginia. Due to the financial panic of 1873,
imported cigarettes began to lose favor and were vir-
tually driven from the U.S. market, thus serving to
further bolster the security of the American cigarette
manufacturers.

By 1880, cigarettes were big business. Cigarette sales
in units amounted to 400 million. New York-Jersey City,
Rochester, Baltimore and Richmond accounted for
about 75 percent of total U.S. cigarette manufacture at
the time. Cigarettes, though, were still more or less a
novelty item. The major manufacturers, Kimball in
Rochester, Allen and Ginter of Richmond, Marburg
and Feigner in Baltimore, and Kinney and Goodwin
in New York, produced 44 of the 94 important brands.
Typically, they used foreign and exotic names. Although
these domestic cigarettes were very inexpensive, the
manufacturing process remained time consuming and
cumbersome.

The census of 1880 credited New York City with
$4,320,972 in manufactured tobacco— or eight percent
of the national total. Cigars and cigarettes, then hand-
rolled, accounted for $18,347,108 or nearly 30 percent
of the national output. The city listed 17 tobacco manu-
facturing plants and 761 cigar makers.

19

D

uke enters the scene

In 1881, James B. Duke of Durham, North CaroHna,
son of Washington Duke, entered the cigarette business
by hiring 125 immigrant New Yorkers to do hand roll-
ing. The Duke company, already an established tobacco
business, turned out 9.8 million cigarettes that year,
which represented 1.5 percent of the industry total.

James Albert Bonsack, a young inventor, had de-
signed and built a cigarette making machine but was
having little luck selling it to the manufacturers. After
seeing the machine, Duke had his own mechanics look
at it, and after some minor alterations, he put the
machine to work. By 1888, in its fifth year of operation,
the machine was turning out 774 million cigarettes

This lithograph, published in 1874 Inj Currier and Ives, depicts part
of New York City's husi/ industrial harbor and tvhat was then called
the Great East River Suspension Bridge between Manhattan and
Brooklyn.

20

c

yearly for Duke. After this, Duke captured 40 percent
of the nation's cigarette business, and for the first time,
the South moved ahead of the North in tobacco manu-
facturing. After it was perfected, Bonsack's machine
could make 120,000 cigarettes daily— more than 50 times
the capability of one hand roller.

ompetition througti advertising

Realizing that urban areas provided the best ciga-
rette markets, Duke opened a New York City office. He
set up a loft factory on Riverton Street— not far from the
Bowery— and began what was regarded as a daring ad-
vertising and marketing campaign. Major Lewis Ginter,
of Allen and Ginter, was the advertising genius of the
time— his reputation was world-wide. Rival manufac-
turers had put puzzles, pictures of world rulers, flags,
actors and actresses and other attractive displays in
cigarette packages. Allen and Ginter had been distribut-
ing a fancy premium booklet portraying various types
of world architecture. But the Temple of Kom Omhoo
hardly had the appeal of the folding color album en-
titled "Sporting Girls," distributed by W. Duke Sons
and Company in exchange for 75 boxes of cigarettes.

f YouL Can't Beat 'Em-Join 'Em"

In 1889, Duke was spending close to a million dollars
in advertising. In 1890, knowing that they could no
longer compete with Duke, other major tobacco com-
panies merged with him and formed the American
Tobacco Company, incorporated in New Jersey. Under
the leadership of Duke as president, the company intro-
duced a rigid system of cost accounting, jobbers' profits
were reduced, and leaf was purchased directly from the
growers rather than through dealers. Earnings for the

21

first year exceeded $2.5 million. The new company con-
trolled 90 percent of the nation's cigarette industry.

By the turn of the century, cigarette volume had
tripled and cigarette smoking gained a wide acceptance
geographically— no longer limited to urbanites. There
were now 2,100 brands of cigarettes, cigarros and che-
roots, along with 9,000 plugs and twists, 3,600 fine cuts,
both used mostly for chewing, and 7,000 smoking to-
baccos and 3,600 snuff brands.

T

rust busting

But the depressions of 1893 and 1907 caused many to
blame economic misfortunes on big business— and the

A street full of commerce in New York City, about 1906.

22

government took aim at tobacco as a prime target.
Between 1901 and 1909, Teddy Roosevelt, the "trust-
buster," brought suit against 44 trusts and conglomer-
ates—among them the tobacco combine. By the time of
the suit, most of the nation's prominent tobacco firms
had joined the Duke combine: Lorillard and McAlpin
of New York; Mayo, Wright and Patterson of Richmond;
Reynolds, Hanes and Brown of Winston; Beck of Chi-
cago; Scotten of Detroit; Bollman of San Francisco; Sorg
of Middletown; Finzer of Louisville, and others. By
1910 the group accounted for the vast majority of
the tobacco business. The original tobacco action was
started in 1907 and in its 1908 verdict, the U.S. Circuit
Court of New York stated:

The record . . . does not indicate that there
has been any increase in the price of tobacco
products to the consumer. There is an absence
of persuasive evidence that by unfair compe-
tition or improper practices independent deal-
ers have been dragooned into . . . selling out.
. . . The price of leaf tobacco . . . has steadily
increased until it has nearly doubled, while at
the same time 150,000 additiojial acres have
been devoted to tobacco crops . . . new markets
have been opened in India, China and else-
where.

But in the end, the combination was judged to have
restrained competition in violation of the Sherman Anti-
Trust Act and following a Supreme Court confirmation
in 1911, it was divided into four major companies—
the American Tobacco Company, R. J. Reynolds and
Co., Liggett and Myers Tobacco Company and P. Loril-
lard Company. Although the overall effect on the to-
bacco business was slight, the increase in competition
caused the cost of selling and advertising to increase
from $18.1 million in 1910 to $32.4 million in 1913.

23

c

igarettes become a steadfast custom

Throughout the early and middle parts of the 20th
century cigarettes maintained and gained popularity
over all other forms of tobacco. During World War I,
two 30-car freight trains a month carrying a total of 11
million sacks of tobacco for "roll-your-own" cigarettes
with which American Doughboys would "smoke out the
Kaiser" were sent from Durham, North Carolina, for
shipment to the troops overseas.

As consumption increased, so did advertising expen-
ditures. By 1970, total advertising expenditures for to-
bacco products were in the area of $300 million. And
even without broadcast cigarette commercials, tobacco
advertising continues to be big business, much of it
conducted in New York City.

George Washington never possibly could have envi-
sioned the magnitude of the commercial and industrial
affluence of New York, but his reference to it as "the
seat of empire" has proven to be many times more
than true.

24

Data on the current tobacco industry in New York have been
supphed by the Economic Research Service, United States Department
of Agriculture; and the State of New York, Department of Commerce.
Other data on the current industry are derived from the Internal
Revenue Service, U.S. Department of Commerce, the New York De-
partment of Taxation and Finance, and the Tobacco Tax Council in
Richmond, Virginia.

Tobacco and Americans, Robert K. Heimann (1960) and The Story
of Tobacco in America by Joseph C. Robert (1967) were both in-
valuable sources for various accounts in this booklet relating to tobacco
histories and biographies. Other reference works used were The
Mighty Leaf, Jerome E. Brooks ( 1952); The Bright Tobacco Industry,
Nannie May Tillie (1948); and the New York State Business Fact
Book, Department of Commerce (1969 and 1970 supplement).

The quotations on pages 8 and 9 are from A History of New York,
Washington Irving (1809) and found in the Arents Collections, New
York Public Library, Astor, Lenox and Tilden Foundations; the Samuel
Russell quote on page 11 is from Heimann as is the quote beginning
on page 13 and the Circuit Court quote on page 23; Roosevelt's quote,
found on page 17 is from Robert as is the Tenement House Commis-
sion quotation beginning on page 18 and the Court's quote on page 23.

Permission to quote directhf from this booklet is granted.

Additional copies will be made available without charge

upon request to The Tobacco Institute

1776 K Street, N.W., Washington, D. C. 20006