BOSTON PUBLIC LIBRARY
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NATIONAL RECOVERY ADMINISTRATION
■ Ai-'H 8 1936
DIVISION OF REVIEW
EVIDENCE STUDY
NO. 6
OF
THE CIGAR MANUFACTURING INDUSTRY
Prepared by
C. J. McMANUS
August, 1935
PRELIMINARY DRAFT
(NOT FOR RELEASE: FOR USE IN DIVISION ONLY)
TEE EVIDENCE STUDY SERIES
The EVIDENCE STUDIES were originally claimed as a means of gathering
evidence bearing upon various legal issues which arose under the National
Industrial Recovery Act.
These studies have value quite aside from the tise for which they were
originally intended. Accordingly, they are now made available for confidential
use within the Division of Review, and for inclusion in Code Histories.
The full list of the Evidence Studies is as follows;
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
Automobile Manufacturing Ind.
Boot and Shoe Mfg. Ind.
Bottled Soft Drink Ind.
Builders' Supplies Ind.
Chemical Mfg. Ind.
Cigar Mfg. Industry
Construction Industry
Cotton Garment Industry
Dress Mfg. Ind.
Electrical Contracting Ind.
Electrical Mfg. Ind.
Fab. Metal prod. Mfg., etc.
F i she r y Indus try
Furniture Mfg. Ind.
General Contractors Ind.
Graphic Arts Ind.
Gray Iron Foundry Ind.
Hosiery Ind.
Infant's & Children's Wear Ind.
Iron and Steel Ind.
Leather
Lumber & Timber Prod. Ind.
23. Mason Contractors Industry
24. Men's Clothing Industry
25. Motion picture Industry
26. Motor Bus Mfg. Industry (Dropped)
27. Needlework Ind. of Puerto Rico
23. Painting & Paperhanging & Decorating
29. photo Engraving Industry
30. Plumbing Contracting Industry
31. Retail Food (See No. 42)
32. Retail Lumber Industry
53. Retail Solid Fuel (Dropped)
34. Retail Trade Industry
35. Rubber Mfg. Ind..
36. Rubber Tire Mfg. Ind.
:7. Silk Textile Ind.
33. Structural Clay Products Ind,
39. Throwing Industry
40. Trucking Industry
41. waste Materials Ind.
42. Wholesale & Retail Food Ind. (See No,
43. Wholesale Fresh Fruit & Veg, 31)
In addition to the studies brought to completion, certain materials have
been assembled for other industries. These MATERIALS are included in the series
and are also made available for confidential use within the Division of Review
and for inclusion in Code Histories, as follows;
44. Wool Textile Industry
45. Automotive Parts & Eq_uip. Ind,
46 . Baking Industry
47. Canning Industry
48. Coat and Suit Ind.
49.
50.
51.
52.
53.
Household Goods & Storage, etc, (Drop-
Motor Vehicle Retailing Tra.de Ind, ped)
Retail Tire & Battery Trade Ind.
Ship & Boat Bldg. & Repairing Ind.
Wholesaling or Distributing Trade
L. C. Marshall
Director, Division of Review
CONTENTS
Page
Foreword 1
CHAPTER I - THE NATURE OP THE INDUSTRY 2
Code Definition 2
General Description of the Industry 2
Number of Concerns 2
Manufacturers Classified According to
Volume of Production 2
Manufacturers Classified According to
Plant Ownership . 3
Geographical Distribution of Concerns 4
Volume of Production 4
Value of Production 7
Failures 7
CHAPTER II - LABOR STATISTICS 8
Number of Employees « 8
Employment and Wages Paid, by States 8
Seasonality of Employment ... 9
Average Weekly Earnings S
Cost of Labor Compared with Value of Product ... 10
CHAPTER III - RAW MATERIALS . 11
Principal Materials Used 11
Volume of Raw Materials 11
Cost of Materials . 11
Interstate Movement of Raw Materials 12
CHAPTER IV - PRODUCTION Ala) DISTRIBUTION 13
Geographical Distribution of Production 13
Interstate Movement of Finished Product 14
Advertising 15
Distribution of the Product 15
CHAPTER V - TRADE PRACTICES 16
The Pre-Code Situation 16
Influence of Price Cutting on Cigar Sales . . 16
Effect of Frice Cutting Upon Interstate
Commerce and Upon the Industry 16
Corrective Measures Under the Code » 17
CHAPTER VI - GENERAL INFORMATION 18
Foreign Competition ......... 18
Directory of Members of Code Administration
Agencies and List of Experts. 18
-oOo-
8352 ' • - 1 -
• t t
TABLE I -
TABLF II -
TABLE III -
TABLE IV -
TABLE V -
TABLE VI -
TABLE VII -
TABLE VIII -
TABLE IX -
TABLE X -
TABLE XI -
TABLE XII -
TABLE XIII -
TABLE XIV -
TABLE XV -
TABLE XVI -
TABLES
Page
Number of Manufacturers Making Cigars
Exclusively and Number Licensed to Hake Cigars. . 2
Manufacturers Classified According to Output ... 3
Manufacturers Classified According to Number
of Plants Owned, January 1, 1935 . • 3
Number of Concerns Manufacturing Cigars
Exclusively, ""ay Principal States 4
Total Annual production of Cigars, by Internal
Revenue Price Classes ..... 6
Value of Production ...... '
Wage Earners Employed, and Wages Paid 8
Employment and Wages Paid by Principal States
During 1933 , 8
Seasonality jf Employment. 1933 9
Average Weekly Earnings . . . . - . • . • 9
Cost of Laboi" Compared with Total Value of
Product . „ c . , o . . . . =, 10
Cigar Leaf Consumption, Domestic Leaf Crop and
Annual Cigar Leaf Supplies 11
Cost of Materials, Compared with Total Value of
Product 11
Production of Cigar Leaf, lay Types and by States,
1932 12
Production of Cigars, by Principal States 13
Relationship Between Cigar Production and Popu-
lation, for Principal Producing States, 1932 . .14
-oOo-
-XI-
8352
-1-
THE CIGAR MAMJEAC TURING- INDUSTRY
foreword
The Code is interpreted to apply to all manufac-
turers of cigars, whether they manufacture cigars exclu-
sively or whether cigars are a minor part of their total
production. Therefore, since a manufacturer must have a
license in order to make cigars, the number of licensed
manufacturers of cigars corresponds to the number of con-
cerns subject to the Code.
Census data exclude all manufacturers whose annual
value of product Is '.ess than $5,000. The exclusion of
these small estrib.'Abiinents does not materially impair the
applicability of Census data to the Ind^try as defined
by the Code, except for the single item, "Number of Estab-
lishments." The Census has estimated that more than 99 per
cent of total wage earners and value of product in the In-
dustry are covered by its reports.
8352
-2-
CHAPTER I
THE NATURE OF THE INDUSTRY
C ode Definition
Code lumber 467, approved "by the President on June 19, 1934, de-
fines the Cigar Manufacturing Industry in the following words:
"The term 'Cigar Manufacturing Industry' means and
includes the manufacturing into cigars of cured leaf tobacco,
stemmed tohacco, scrap and/or shredded filler for use in the
manufacture for sale of cigars."
General Description of the Industry
The Industry produces cigars of all price classes and cigar leaf con-
tent, including "both hand and machine made products. However, adoption
on a large scale of cigar-making machinery since the World War has rapid-
ly changed the complexion of the Industry from one characterized "by hand
processes to one characterized by highly mechanized processes.
lumber of Concerns .
Table I shows the number of concerns manufacturing cigars exclusively
as well as the number licensed to manufacture cigars, for the years
1929,1931, 1933 and 1934. The number licensed to manufacture cigars in-
cludes those making cigars in conjunction with cigarettes. It will be
seen that the total number of concerns making cigars exclusively declined
from approximately 7,500 in 1929 to about 5,400 in 1934.
TABLE I
lumber of Manufacturers Making Cigars Exclusively
and lumber Licensed to Make Cigars
(As of January 1, each year)
Manufacturers Manufacturers Licensed
Year Making Cigars to make Cigars
Only
1929 7,502 8,378
1931 6,195 7,138
1933 5,787 6,620
1934 5,473
Source: Annual Reports, Commissioner of Internal Revenue.
Manufacturers Classified According to Volume of Production
A classification of cigar manufacturer:: according to number of cigars
produced in 1929, 1931 and 1933 is shown in the following table.
8352
-3-
TABLE II
Manufacturers Classified According to Output
Number of Concerns
Output of Cigars 1929 1931 1933
Total §/ 8,378 7,138 6,620
Under 500,000 7,694 6,664 6 8 170
500,000 to 1,000,000 188 117 123
1,000,000 to 5,000,000 276 203 194
5,000,000 to 10,000,000 91 51 59
10,000,000 to 20,000,000 63 46 34
20,000,000 to 40,000,000 29 25 17
Over 40,000,000 37 32 23
Source: Code Authority, Cigar Manufacturing Industry, "Historical Back-
ground and Present Condition of the Cigar Manufacturing Indus-
try," (1935). This report was prepared "by the Code Authority
at the request of NRA. It is "based largely upon material from
the Bureau of the Census, the Internal Revenue Bureau, and the
Department of Agriculture.
a/ The total is for manufacturers licensed to make cigars rather
than for manufacturers making cigars only. The former are about
11 per cent more numerous than the latter. See Table I.
Manufacturers Classified According to Plant Ownership
Data which permit a classification of manufacturers according to the
number of plants owned are available for the year 1935 only. In that year
there were 6,683 plants owned by 6,620 concerns. Approximately 99 per cent
of the total concerns operated only one plant.
TABLE III
Manufacturers Classified According to Number
of Plants Owned - January 1, 1935
Number of Plants
Number of Concerns
One Plant
6,591
Two Plants
19
Three Plants
4
Pour Plants
1
Pive Plants
2
Si>: Plants
2
Twenty- one Plants
1
Total
6,620
Source: Code Authority, Cigar Manufacturing
Industry. Estimated on assumption
that total number of concerns has
not changed since 1933.
8352
_4-
According to the Code Authority, the manufacturers are of widely
varying sizej ranging from single cigar maker-owner shops to grouos of
factories under single management with aggregate employment of 4,000 wage
earners.
Geographical Distribution of Concerns
Cigars are manufactured in every state of the Union. The greatest
part of the output, however, is produced "by large concerns in concentrat-
ed areas and only a small portion — less than 10 per cent, according to
the Code Authority — is produced in the scattered small factories or "by
individual cigarmaker shop owners.
Table IV shows the number of concerns in the Industry "by principal
producing states. With only three exceptions, the trend in number of
plants was downward from 1929 to 1934. Illinois experienced a slight in-
crease in 1934 as compared with 1933. Massachusetts and Florida showed
increases in 1933 over 1932, but these increases were offset by decreases
in 1934.
TABLE IV
Number of Concerns Manufacturing Cigars Exclusively,
by Principal States
(As of January l)
State
1929
1931
1933
1934
U. S. Total
7,502
6,195
5,787
5,473
New York
Pennsylvania
Illinois
Wisconsin
Massachusetts
Florida
1,621
1,032
846
437
363
304
1,312
865
691
378
330
263
1,173
843
604
361
350
282
1,145
833
613
334
315
249
Total for 6 States
4,603
3,839
3,613
3,489
Total for 42 Other
States
2,899
2,356
2,174
1,984
i- ; er cent 6 States are of
U. S., Total
61$
62$
62$
63$
Source: Annual Reports, Commissioner of Internal Revenue.
Volume of Prod uct ion
From Tab'J e V it can be seen that the annual production of cigars, during
the period 1925 ~ 1934 follows a downward trend. Production for the year
1934 shows somewhat of an increase over that for 1933, however. The peak of
production during the ten-year period was reached in 1926 and the low point
in 1933. Change of consumer preference from cigars to cigarettes has con-
8352
~5~
trihuted largely to this decline.
Table V also shows production classified into the retail price groups
as set up for taxation purposes "by the Bureau of Internal Revenue. The
percentage distributions show that there was a rapid and consistent shift
of consumption from higher into lower price classes. In 1954 over 85 per
cent of the total was in the lowest price class, cigars, retailing at five
cents or less. This compared with 41 per cent in 1925,
8352
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Value of Production
The trend in value of production was more sharply downward than in
the case of volume of production during the years 1929, 1931 and 1933.
There are no data available bearing on the value of production on a state
basis, but total value is given in Table VI.
TABLE VI
Value of Production
(In thousands)
Year
Value
1929
1931
1933
$ 311,664
227,349
139,372
Source:
Census
of ManufaC"
tures.
Tobaccc
page 3.
1933, "The
> Industries,"
Failures
Data on number of failures in this Industry are not available. Be-
cause of technological improvements in production methods and of the
development of intensive advertising during the past 15 years, it is be-
lieved that the degree of mortality, especially in the hand manufactured
field, is substantial.
8352
•.8—
CHAPTER II
LABOR STATISTICS
number of Employees
The average number of wage earners employed during the years 1929,
1931, 1933 and 1934, and the wages paid during the same years is shown in
Table VII.
TABLE VII
Wage Earners Employed, and Wages Paid
Year
Average Humber of
Wage Earners
Annual Wages
Paid
1929
1931
1933
1934
84,165
58,182
54,558
57.5703/
$ 67,222,000
46,074,000
30,061,000 .
33.701.000a /
Source: Census of Manufactures : 1933, "The
Tobacco Industries," page 3.
a/ Estimated "by HRA, Division of
Research and Planning, on the "basis
of the Bureau of Labor Statistics
sample index.
.emrQloynent and Wages Paid, "by States
Employment and amount of wages paid, by principal states, is shown in
Table VIII, for the year 1933. The states listed accounted for 71 per cent
of employment and 73 per cent of the amount paid in wages.
TABLE VIII
Employment and Wages Paid by Principal States
During 1933
St cite
U.S. Total
Humber of Wage
Earners Employed
54, 558
Amount Paid in
Wages
(In thousands)
$ 30,061
Pennsylvania
Florida
Hew Jersey
Hew York
Michigan
17,
3
2,
526
418
969
744
893
9,328
5,084
3,371
2,682
1,370
Total, 5 States 38,550
Total, 43 Other
States 16,008
Per cent 5 States
are of U. S. Total 71^
21,835
8,226
73#
8352
Source: Census of Manufacture s: 1933,
Industries," page 3.
"The Tobacco
-9-
Seasonality of Employment
This phase of the Industry was the subject of a special study conducted
toy the United States Census Bureau covering 245 establishments manufacturing
80 per cent of total production for the year 1933.
TABLE IX
Seasonality of Employment, 1933
Week Ending Nearest
Number of
the 15th
Employees
January
38,293
February
41,419
March
39,592
April
38,061
May
41,083
June
43,044
July
43,779
August
44,880
September
46,049
October
46, 719
Nov ember
45, 551
December
43,337
Source: Census Bureau: Special tabu-
lation,
Table IX shows that the peak was reached in October, while employment
was smallest in April. These periods correspond with the high point and
low point of production, as revealed in a t, t-atistical report on this Indus-
try prepared in the Research and Planning Division of the NBA, in November,
1933.
Average Weekly Earning s
Table X indicates a steady downward trend in average weekly earnings
during the years 1929, 1931 and 1933.
Ave:
-age
TABLE X
Weekly Earnings
Year
Ave
rage Earnings
per Week
1929
1931
1933
$ 15.36
13.00
10.59
Source: Code Authority, Cigar
Manufacturing Industry,
"Historical Background
and Present Condition
of the Cigar Manufac-
turing Industry."
8352
-10~
Cost of Labor Compared with Value of Product
The direct relationship "between value of cigars produced and the
cost of labor involved in production is indicated by Table XI. Labor
cost is shown to constitute about one-fifth of the total value of the
product .
TifflLE XI
Cost of Labor Compared with Total Value
of product
(in thousands)
per Cent Cost
Value of Cost of of Labor is of
Year Product Labor --' Value of Product
1929
$ 311,664 $ 67,222
21.6
1931
227,349 46,074
20.3
1953
139,372 30,061
21.6
Source:
Census of Manufactures:
1933, "The
Tobacco Industries," pa*
ge 3.
a/
Ir.;/ j '.i J ec; wage earners o:
aiy.
3352
-11-
CHAPTER III
RAW MATERIALS
Principal Materials Used
Apart from packing materials, the sole raw material ingredient of
cigars is leaf tobacco , used in the form of stemmed and un stemmed leaves
and. cuttings, clippings, and scraps. Most of the supply of raw material
is domestically grown although a small portion is imported from Cuba,
Pixerto Rico and Sumatra, principally for blending purposes and for use
as wrappers for the higher classes of cigars.
Volume of Raw Material s
The amount of cigar leaf consumed in the production of cigars, to-
gether with the annual leaf supply are shorn in the following table.
TABLE SI I
Cigar Leaf Consumption, Domestic Leaf Crop
And Annual Cigar Leaf Supplies
(in thousand pounds)
Cigar Leaf Consumed Domestic Annual Supply
Year in Cigar Production Leaf Crop of Cigar Leaf sy
1929
150,873
182,973
135,500
1931
126,611
126,825
1^9,500
1933
103,954
S9,H02
62,500
1934
111,000
S2, 500
56,500
Source: Code Authority, Cigar Manufacturing Industry, "Historical Back-
ground and Present Condition of the Cigar Manufacturing Industry. "
a/ Includes domestic crop plus imports.
Cost of Materials
Available data do not permit valuation by kinds of materials purchased.
The value of all materials purchased is shown in Table XIII.
TABLE XIII
Cost of Materials, Compared with Total Value
of Product
(in thor.sands)
Value of Product Cost of Per Cent Value of Materials
Year Ma terials a/ is to Value of Product
1929 $ 311, 664 $ 13s, 35^ ^^
1931 227,3^9 119,295 52.5
1933 139,372 72,5^9 52.1
-12-
Source: Census of Manufactures : 1933» "The Tobacco Industries," page 3-
a/ Includes cost of materials, containers, fuel, and purchased elec-
tric energy. Cost of internal revenue stamps included as follows:
1933, $2,599,426; 1931, $15,534,464.
Interstate Movement of Ray/ Materials
Cigar leaf, the principal item entering into the manufacture of cigars,
is grown in restricted farming areas in which it is the sole crop. This is
due chiefly to the peculiar soil characteristics required. Its growth is
confined to relatively few states as shown in the following table:
TABLE XIV
Production of Cigsr leaf, "by Types and
by States, 1932
( In pounds)
State
Filler
Binder
Wrapper
Type
Type
Type
Connecticut
— _
22,9^1,000
3
,722,000
Florida
i4o,ooo
—
1
,972,000
Georgia
50,000
—
440,000
Indiana
225,000
—
~«
Massachusetts
~_,
g,s4o,ooo
800,000
New York
—
1,1+00,000
—
Ohio
21,462,000
—
—
Pennsylvania
U5. 912,000
4o4,ooo
—
Wisconsin
-..
36,120,000
—
39 Other States
—
660,000
—
Total
67,789,000
70,1+25,000
6
,934,000
Source: Code Authority, Cigar Manufacturing Industry, "Historical Back-
ground and Present Condition of the Cigar Manufacturing Industry."
Table XIV shows that no one state produces all three types of cigar
leaf. Pennsylvania produces 6S per cent and Ohio 32 per cent of the filler
type leaf; Wisconsin produced 51 per cent and Connecticut 33 P er cent of
the binder type while this same state produced 54 per cent and Florida 2S
per cent of the wrapper type leaf.
Every cigar contains filler, binder and wrapper leaf (except a limited
quantity having no binder). It is apparent, therefore, that the manufacture
of cigars is dependent for its raw materials on a number of states, since
no single state produces all three types. Consequently, cigar production
must entail extensive interstate transactions.
2352
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CHAPTER IV
PRODUCTION AND DISTRIBUTION
G-efl gr aphical Distribution of Production
Although cigars are produced in every state in the union, there is a higl
degree of concentration of production in a relatively snail number of states.
Table XV shows that approximately 80 per cent or nore of total production co-
from the eight states listed., with Pennsylvania producing about one-third of
total output.
TABLE XV
Production of Cigars, "by Principal States
(In thousands)
State
1929
1931
1933
U.S. Total
Pennsylvania
Hew Jersey
Florida.
New York
Ohio
Virginia
Michigan
Indiana.
Total for
8 States
Total for 40
Other States
Per Cent 8
States are of
U. S. Total
6,518,500
2,294,000
797,700
617,600
576,800
446,900
376,700
289,200
194,700
5,593,600
924,900
86$
5,347,900
1,782,900
712,300
542,300
476,100
352,200
227,000
247 , 100
118,500
4,458,400
889,500
83$
4,300,000
1,615,600
443,300
465,900
266,400
213,600
150,200
195,900
65,300
3,416,200
883,800
79$
Source: Annual Reports, Commissioner of Internal Revenue.
Actually, concentration is carried on to an even greater degree than ind
cated. above, because of specialization of certain districts in special types
cigars, Pennsylvania, for example, produces for the most pa.rt cheaper cigars
selling at less than five cents each. In general, Florida produces a higher
grade of cigars, using imported Cuban tobacco, while Ohio specializes in
"stogies. "
It will be seen from the above that, with three exceptions, the eight
states preserved the same order during the sample years shown. One exception
occurred, in 1931 when Michigan produced more cigars than Virginia and the otl
exceptions occurred in 1933 when Florida outranked New Jersey as a producer i
Michigan again assumed the lead over Virginia.
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Interstate Movement of Finished Product
The Code Authority has stated that the consumption of cigars in various
states is roughly in direct proportion to their copulation. However, certain
districts have preference for a certain price class or type of cigar. "Stogies"
for example, are preferred in the Midwestern States.
The interstate movement of cigars can he gauged hy a comparison of pro-
duction and consumption hy individual states. Tahle XVI shows the percentage
relationship "between state production of cigars and. state population for the
year 1932.
TABLE XVI
Relationship Between Cigar Production and Population,
for Principal Producing States, 1932
State
Production
of Cigars
(000)
Per Cent
of Total
Production
Per Cent
of Total
Population
U. S. Total
Pennsylvania
Hew Jersey
Florida,
Mew York
Ohio
Michigan
Virginia
4,332,7232/
1,509,282
555,623
473,387
372,744
263,121
199,401
194,090
100.0
34.4
12.7
10.8
8.5
6.1
4.6
"4.4
100.0
7.8
3.3
1.2
10.3
5.4
3.9
2.0
Other 41
States
810,075
18.5
65.9
Source:
a/
Code Authority, Cigar Manufacturing Industry, "Historical Background
and Present Condition of the Cigar Manufacturing Industry;" population
from 1930 census.
This figure does not check exactly with that given in Tahle V. See
footnote a/ to Tahle V.
On the assumption that consumption is roughly proportional to population,
Tahle XVI shows that the larger portion of cigar output is consumed in states
other than those in which the manufacturing occurred. Pennsylvania, for ex-
ample, produced 34.4 per cent of the cigars in 1932, hut consumed only 7.8 per
cent, while Hew York, which produced 8.5 per cent, consumed more than 10 per
cent of the cigars manufactured. The group of 41 unnamed states produced 18.5
per cent and consumed 66 per cent, or ahout three and o ne-half times the number
of cigars it manufactured.
It is "believed, therefore, that the interstate movement of cigars is an
extremely heavy one.
In addition, there are interstate transactions attached to the movement
of the heavy imports of cigars, chiefly from the Philippines. Imports from
this source in 1932 were estimated to he 500,000,000 cigars.
8352
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Advertisinfi:
The Cigar Manufacturing Industry is an industry which spends large sums
in advertising through the media of newspapers , magazines, and the radio. The
amount so expended "by the leading manufacturers (according to the Statistical
Report for this Industry, prepared by the FRA, Research and Planning Division,
November, 1933) was $2,300,000 in 1931, and $1,300,000 in 1932.
Distribution of the Prodn.ct
It is estimated "by the Code Authority that cigar wholesalers number ap-
proximately 6,000 and retailers upward of 600,000.
8352
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CHAPTSH V
TRADE PBACTICSS
The Pre-Code Situation
It is the opinion of the Code Authority that in addition to the -un-
controllable factors causing the decline of the Cigar Manufacturing Indus-
try — particularly the changing of the public taste and demand for the
product — the most important detrimental influences were those arising
out of disorganized merchandising.
Chief of the so-called disorganized merchandising problems was
price cutting which resulted in the Industry being brought to a serious
state of emergency at the time of HEA inception. The affects of this
practice on cigar sales and in turn on cigar manufacturing, as outlined by
the Code Authority, are reviewed in the following paragraphs.
Influence of Price Cutting on Cigar Sales . - Price cutting reduces
the number of retail outlets and available selection by driving the smaller
retailer out of business, or by compelling him to abandon the cigar brands
upon which there is no profit.
Lack of profit on price-cut brands causes the retailer to display
them less prominently, or not at all, which in turn has an unfavorable effect
upon their sales.
lack of profit on well known price-cut brands induces the retailer
to display prominently and push cigars of inferior quality yielding exhorbitant
profit margins. This is bound to affect adversely the entire consumer de-
mand for cigars.
Price confusion, such as placing odd price marks upon individual
brands and implied cheapening of quality by reduction of price, has an un-
favorable influence upon cigar sales by destruction of established goodwill,.
The price cutting of cigars does not increase their sale in the same manner
as it does other trade marked products. The consumer does not necessarily
prefer to buy the out-price cigars. However, the consumer might object
to paying regular prices for cigars which have been sold at cut-prices.
Effect of Price Cutting Upon Interstate Commerce and Upon the Industr y*
- As explained in the foregoing paragraphs, the Code Authority feels that
price cutting practices unquestionably cause a reduction in manufacture and
consumption of cigars, thereby directly affecting the volume of interstate
commerce inasmuch as every cigar is a product of interstate transactions..
Apart from this ultimate result, the Code Authority feels that certain
intermediate and contributing conditions arise which interfere with the flow
of interstate commerce. These conditions, as outlined by the Code Authority,
are summarized in the following paragraphs:
8352
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Price cutting definitely tends to reduce the number
of retail outlets in communities where it is extensively
practiced. This reduction might affect all cigars in the
aggregate or only the "brands which are particularly ex-
posed to price manipulations. In either case, it definitely
represents restraint of interstate trade since every cigar
retailer is supplied with the products of other states in
some form or to some extent.
Price cutting creates differences in "both retail
and wholesale price "between localities in different states
which might be near or adjoining. This condition invites
jobber shipments outside the jobbers' appointed territories,
and thus increases friction and unfair competition between
distributors.
Consumers travel between localities in different
states, in which, on account of price cutting, different
retail sales prices of the same brands and class of cigar
might exist. Consequently, the smokers may buy in one lo-
cality in preference to the other, thereby causing a shift
of trade from one state to another.
Corrective Measures Under the Code
The Code Authority reports that after careful study of the effects .
of price cutting and its allied abuses, the Industry decided that some
method for price control was the key to the rehabilitation of the Industry.
It was felt that price control was the most important single factor
necessary to such rehabilitation.
As a result the Cigar Merchandising Plant (Schedule I of the Code)
was adopted by the cigar manufacturers. This plan originated with cigar
retailers and was adopted by the \?holesalers and later by the manufacturers.
Briefly, the plan provides for the retail sale of cigars at prices not
less than those declared ~oy the manufacturer for each of his products and,
further, prescribes maximum discounts allowable by manufacturers or whole-
salers from those declared prices.
Mr. William Best, Sales Manager, General Cigar Company, who was the
chairman of the Trade Practice Complaints Committee, stated that while the
plan did not work out as a cure-all for the troubles of the Industry, and
while he did not agree wholly with some of the plan's provisions, he did
feel that the plan had gone a long way toward rectifying existing abuses.
8352
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CHAPTER VI
GEHSRAL IHEORMATIOH
Foreign Competition
Imports during 1932 amounted to approximately 20 million pounds of filler
and "binder types and two million pounds of wrapper type.
Di rectory of Members of Code Administration Agencies and List of Experts
A directory of the names and addresses of the members of the Code
Authority, Trade Practice Complaints Committee, Labor Complaint Board and
Label Review Officers is set forth in the following groupings.
It is believed that Mr. William Best, Sales Manager, General Cigar
Company and Chairman of the Trade Practice Complaints Board; Mr. H. L. Hirst,
Treasurer, Bayuk Cigar Company, Philadelphia, and Chairman of the Code
Authority; and Mr. I, M. Ornburn, International President of the Inter-
national Cigar Makers Union and member of the Labor Complaint Board are es-
pecially qualified through training and experience to be called experts in
the operations of the Industry. .
DIRECTORY 0E MEMBERS - CODE AUTHORITY
Mr. H. L. Hirst, Chairman,
c/o Bayuk Cigars, Inc.,
9th St. and Columbia Ave.,
Philadelphia, Pa.
E. Davis
Schwab, Davis and Co.,
10 E. 40th St.,
Hew York, H. Y.
J. J. Hast,
Standard Cigar Co.,
P. 0. Box 1675,
Pittsburgh, Pa.
D. Emil Klein,
444 E. 9,1st St.,
Hew York, H. Y.
Jacob Mazer,
J. Mazer Sons Cigar Co.,
3437 Goldner Ave.,
Detroit, Mich.
B. Meyer,
General Cigar Co . ,
119 W. .40th St.,
Hew York, H. Y.
3352
W. Eorrest Horton,
Consumers Advisory Board,
1155 Investment Building,
Washington, D. C.
T. E. Brooks,
T. E, Brooks and Co.,
Red Lion, Pa.
T. Jackman,
Teggs-Jackman Cigar Co., Inc.,
4771 Dubois St. ,
Detroit, Mich.
Walter Popper,
E. Popper and Co. ,
40 East End Ave.,
Hew York, H, Y.
I. M. Ornburn,
Carpenters' Building,
1003 K St., H. W. ,
Washington, D. C.
Arthur Schwarz,
Max Schwarz,
2nd Avenue and 54th St.,
Hew York, H. Y.
Prank P. Will,
G. H. P. Company,
3rd and Browne Sts.,
Philadelphia, Pa,
-19-
National Recovery
Administration Member
Robert E. Rinehart,
Prank Presbrey Co.,
247 Park Avenue,
New York, N. Y.
Alternates
Richard Bondy,
General Cigar Co.,
119 West 40th St.,
New York, N. Y.
Counsel (Cont'd )
Mortimer Regensburg,
E. Regensburg and Sons,
411 Fifth Ave.,
New York, N. Y.
0. R. Strackbein,
1003 K St., N. W. ,
Washington, D. C.
Counsel
Samuel Blumber&,
Blumberg and Parker,
200 Pifth Avenue,
New York, N. Y.
Sumner Pord,
Breed, Abbott and Morgan,
15 Broad St.,
New York, N. Y.
Executive Secretary
Samuel L. Kuhn,
S. D. Leidesdorf and Co.,
125 Park Ave.,
New York, N. Y.
DIRECTORY OF MEMBERS
TRADE PRACTICE COMPLAINTS BOARD
CENTRAL COMMITTEE
Mr. William Best, Chairman
General Cigar Co.,
119 West 40th St.,
New York, N. Y.
Mr. Fre.d Davis,
Schwab Davis and Co.,
551 Fifth Ave.,
New York, IT. Y.
Mr. Albert E. Gregg,
American Cigar Co.,
Ill Pifth Ave.,
New York, N. Y.
Mr. Walter Popper,
E, Popper and Co.,
40 East End Ave.,
New York, N. Y.
Mr. Frank Will,
G. H. P. Cigar Co. ,
3rd and Browne Sts.,
Philadelphia, Pa.
REGIONAL MEMBERS
Albany
Mr. T. ITorton,
G. W. Van Slyke and Norton, Inc.,
452 Clinton Ave.,
Albany, N. Y.
8352
Baltimore
Mr. William Boucher,
William Boucher and Sons,
1500 Cuilford Ave.,
Baltimore, Md.
-20-
Boston
Mr. M. Gryzmish,
Alles and Eisher, Inc. ,
54-5 Shawmut Ave..
Boston, Mass.
Chicago
Adam El son,
Nathan Elson and Co.,
19 South Wells St.,
Chicago, 111.
Cincinnati
New Hafl-o shire
Mr. Janes J. Driscoll,
F. G-. Sullivan, Inc.,
C23 Elm St.,
Manchester, IT. H.
li e .7 Haven
Mr. D. Osterweiss,
Lewis Osterweiss and Son,
20 Church. St.,
lew Haven, Conn.
Ken Orleans
Mr. ¥. Ibold,
M, Ibold, Inc.,
825 Central Ave. ,
Cincinnati, Ohio
Cleveland
Mr. J. C. Newman,
M. and ST. Cigar Manufacturers, Inc.,
922 Woodland Ave.,
Cleveland, Ohio
Detroit
Mr. Con Just,
Mazer-Cressman Cigar Co., Inc,
5031 C-randy Ave. ,
Detroit, Mich.
los Angeles
Mr. A. Sensenbrenner,
A. Sensenbrenner and Sons,
1220 Maple Ave.,
Los Angeles, Calif.
Newark
Mr. Phillip Eorristal,
Congress Cigar Co.,
744 Broad St.,
Newark, N. J.
St. Paul
Mr, A. Worch,
Worch Cigar Co. ,
1745 University St.,
St. Paul, Minn.
Mr. U. Trelles,
M. Trelles,
701 S. Peters St.,
New Orleans, La.
Ph iladelphia
Mr. Benj. L„ Grabosky,
Grabosky Bros,,
21 North Second St.,
Philadelphia. Pa.
Mr. A. J. Newman,
Bayuk Cigars, Inc.,
9th and Columbia Ave. ,
Philadelphia, Pa.
Pittsburgh
Julian J. Hast,
Standard Cigar Co.,
P. 0. Box 1375,
Pitt sburgh , Pa .
St. Louis
Mr. J. Lanpert,
Jacob Lampert Cigar Co.,
412 Market St.,
St. Louis, Mo.
Tampa
Mr. E. Perez,
Benson and Hedges,
Tampa, Pla,
8352
-21-
San Francisco
Mr. A. Petri,
Petri Cigar Co., Inc.,
Battery and Vail e jo. Sts.,
San Francisco, Calif.
York County
Jaraes Kelly,
Kelly Cigar Co. ,
Red Lion, Pa.
DIRECTORY OP MEMBERS - LABOR COMPLAINT BOAPJ)
PRINCIPA LS
Samuel L, Kuhn, Impartial Chairman,
address c/o Code Authority.
LABOR
I. M. Orn"burn,
Carpenters' Building,
1003 K St., N. ¥. ,
Washington, D. C.
MACHINE MANUFACTURERS
Joseph P. Cullman, Jr.,
Webster-Eisenlohr, Inc.,
185 Madison Ave. ,
New York, N. Y.
0. R. Strackbein,
Carpenters' Building
1003 K St . , N. W. ,
Washington, D. C.
R; E. Van Horn,
604 Carpenters' Building,
10th and K St., N. W.
Washington, D. C.
HAND MANUFACTURERS
Walter Popper,
E. Popper, Inc.,
40 East End Ave.,
New York, N. Y.
NRA MEMBER
Robert E. Rinehart,
Prank Presbrey Co.,
247 Park Ave.,
New York, 11. Y.
LABOR'S ALTERNATES
William Brandt,
622 Granite Building,
St . Loui s , Mo . ,
James Sheehan,
Labor Temple,
Milwaukee, Wis.
HAND MANUFACTURERS » ALTERNATES
A. J. Cuesta, Jr.,
Cuesta-Rey and Co.,
Tampa, Fla.
Jacob Mazer,
J. Mazer Sons Cigar, Co.,
3437 Goldner Ave.,
"Detroit, Mich.
J. C. Winter,
J. C. Winter and Co.,
Red Lion, Pa.
J. C. Newman,
M. and N. Cigar Manufacturers, Inc. ,
922 Woodland Ave.,
CI eveland, Ohio .
8352
.,23-
MACHINE MANUFACTURERS ' ALTERNATES
Harley Jefferson, Harry Michener,
American To"bacco Co., IvI. Marsh and Son, Inc.,
Ill Fifth Ave., Market St.,
New York, N. I. Wheeling, W. Va. ,
H. P. Wurman, Richard Bondy,
Bayuk Cigars, Ind. , General Cigar Co.,
9th and Columbia Ave., 119 West 40th St.,
Philadelphia, Pa. New York, N. Y.
DIRECTORY OP LABEL REVIEW OFFICERS
Arizona - California - Colorado
Idaho - Montana - Nevada -
Oregon - Utah - Washington -
Wyoming All the rest of the country,
Mr. E. L. Fries, Mr. Dean G. Edwards
Room 536 45 Broadway
751 South Figuero St., New York, N. Y.
Los Angeles, C-vlif.
8352-f
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