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Full text of "Evidence study"

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, 



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~7~ 



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 



-13- 

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. 



8352 



-14- 



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 



-15- 

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 



-16- 

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 



-17- 

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 



-18- 

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 



JL