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| James B. Duke |
Cigarettes are vices for some, but a necessity for others.
Regardless, some business profit from cigarettes, especially during its advent
in the late 1800’s. It revolutionized how people can consume tobacco for a way
cheaper and easier way. One man from the era of big business came to dominate
the whole tobacco industry with cigarettes as his source of his wealth.
James Buchanan Duke (December 23, 1856 – October 10, 1925) was
born to a family from the rural area of North Carolina. His family faced
disaster during the Civil War when they were in the side of the Confederate.
Later on, during when the country was on the path of reconstruction, his family
to faced rehabilitation and eventually found prosperity. This prosperity came
from tobacco and brought fortune to the family. After studying, James B. Duke
eventually took over the family business and brought it to new heights. He was
not just interested to dominate the US, but also he aspired to dominate the
world market of tobacco. Later on, when the period on crack down on business came
to him, he complied he received. He moved towards new businesses and activities
that would give benefit to many.
James Buchanan Duke was born to the farmlands of his family.
He came from the family of Washington Duke and Artelia Roney. At a young age,
tragedy hit the family when during the infant years of James’ mother died
suddenly. If the death of his mother was terrible, it soon followed by a Civil
War that brought hardship even more. His father took part on the Confederate
Army, and resulted to their land being idle. Later on, when Union Soldiers
came, produce were either destroyed or taken. Soon after the war, his father
returned. The task that faced them was daunting. They have to recover from the
devastating war that brought turmoil. They then saw tobacco leaves growing in
their farm and decided to take a chance on it. Their family planned to sell it
to make money. So they took the tobaccos leaves and placed it in small packages
with the label “Pro Boro Publico.” They then brought their packaged tobacco to
the southern part of the state where they can easily sell them because of the
lack of tobacco in the area. They’re not disappointed. Quickly their tobaccos
were sold and they earned money enough to buy more tobacco to process. The Duke
family business, which would later be named the W. Duke Sons & Company,
began. In a while, they managed to build a small log house where the processing
of tobacco was done.
Tobacco brought prosperity to their family. They became well
known to their town for the part they play to the local economy. The young
James Duke received benefits from this newfound wealth. He received good
education. His father sent him to a local academy where he proved his prowess in
mathematics. Later on, he studied at a boarding school in Guilford County. But
his stay in the boarding school proved to be short. He later moved school and
studied at the Eastman Business College in New York. It some sort of a
preparation for Duke for the future responsibilities he would take.
At a young age of fourteen, he returned home. His father
eagerly placed him to manage young boys working at their factory. Four
years later, he joined his older brothers to become a member of the W. Duke
sons & Co. Afterwards; he became a travelling salesman where he learned
what a good advertisement could do to a product. In 1881, James B. Duke became
the president of the family business.
As president of W. Duke, Sons, & Co., he presided over changes
as well as the unprecedented growth of their company. He began by changing the
number product of their company. He chose to change their goods from tobaccos
for pipes to cigarettes. This was to take advantage of the growing popularity
of cigarettes and because it was more suitable to the variety of tobacco
growing in their area. To bring the company on the top of cigarette production,
He decided to begin the mechanization of his factory. He began to use James
Bonsack’s cigarette-rolling machine. With the help of William O’Brien, the
device was even more improved. The machine that they placed in their factory
had a profound effect on the business. It did not only produce more cigarettes,
it reduced cost of production because it needed lesser workers to operate. He
then pioneered the way that cigarettes were packed. He started to package
cigarettes in packs inside cardboard boxes with designs and the label. Soon,
other companies followed and it became a standard for cigarettes to be inside
cardboard boxes.
That rise of his company to top then began with one
government reform. The Federal government decided to lower the taxes imposed on
cigarettes by two-thirds. It became a chance for cigarette companies to lower
their prices. Duke also saw this opportunity and knew that all other would take
it. To get the edge from his competitors, he invested a lot of money in
advertising his products to billboards, newspapers, and magazines. He made sure
that many customers can see and be attracted to his product. His investment on
advertisement soon became an apparent success. His company began to be on the
top of the cigarette industry. His company grew large enough that it allowed
him to build a factory in New York City in 1884.
His goal to be on the top eventually even became closer when
a war broke out between the five biggest cigarette companies. Duke’s company,
W.S. Kimball & Co., Goodwin & Co., Kinney Brothers, and Allen &
Ginter began a war over the dominance of the industry. They began aggressive
advertisement campaigns. Price wars soon followed. It almost became in
situation that companies were willing price their products at a loss level just
to defeat other companies. Duke’s company was not immune from this war. Several
times, competitors proposed to buy him out of competition. Duke, off course,
declined. In 1890, the companies grew tired of their fierce and suicidal
competition, to stop the competition; they decided to form one company. Duke
eventually presided over for the consolidation of the companies. The result of
the consolidation was the creation of a monopolistic company over the
cigarettes industry, the American Tobacco Company, with James B. Duke as the
president and a capital of $25 million.
The company main line cigarettes that became bestseller were
that Lucky Strike and the Pull Mall. With these products and others, the
American Tobacco Company owned a 90% market share of the US cigarette market.
American Tobacco Company continued to grow and showed it
monopolistic tendencies. In 1895, the company continued to grow by combining
smaller firms to the company. In 1896, a great boost to company happened when
it became a part of the foundation of the Dow Jones Industrial Average. Duke
also flexed his company’s muscles when it began not just to dominate the
cigarette industry but the whole tobacco industry itself. In 1898, he became
the president of a consolidation of plug tobacco companies, which resulted to
the formation of the Continental Tobacco Company which has a capital of $75
million. In 1900, he founded the American Snuff Company. In 1901, he tried to
dominate the cigar industry by establishing the American Cigar Company,
however, it did not succeeded that much. He also decided that he would not just
be in charge of manufacturing but he wanted also to sell it, so he then
established the United Cigar Stores Company. He then tried to establish a
holding company, the Consolidated Tobacco Company, which would serve as the
parent company of all his assets. This, however, did not materialize because of
the start of the government’s crackdown on trusts or monopolies.
His
plan, to have a holding company, failed, but it did not much matter because he
had already had his interest in the world market. He wanted to dominate the
world market of cigarettes and began with the country that owned much of the
world trade, Great Britain. He began by buying a tobacco company in England
called the Ogden Ltd in 1900’s. This move, however, conceived as a threat by
other tobacco companies in England. The British tobacco companies then decided
to consolidate themselves to become stronger. The result was the formation of
the Imperial Tobacco Company. They countered Duke’s incursion to British market
by attempting to open a factory in America. After some battles between the
American and the British company, they reached to an agreement in 1902. The
giant companies agreed that they would stay away from each other’s turf;
American Tobacco Company in US, and Imperial Tobacco Company in Britain. The
two companies also decided to form a company that would managed the world trade
of the two companies, the British American Tobacco Company. Duke eventually was
the winner because he became its chairman which he would held till
1923.
Successful abroad, however, in the US, he faced a huge
challenge that would bring down his work. In 1907, the US government filed an
anti-trust suit against the American Tobacco Company. A long court battle
ensued four years. Sadly, for Duke, the Supreme Court decided that American
tobacco Company was guilty for the violation of anti-trust laws. The SC ordered
the breakdown of the company into four companies. Duke had no other choice but
to comply and from American Tobacco Company, came the Liggett and Meyers, P.
Lorillard, R.J. Reynolds, and American Tobacco Company itself. In 1912, he
decided to give his shares on each of the companies to the British American
Company. This, however, was a smart move, because he dominates the British American
Company. Moreover, he might not dominate the US market, but he still controls
most of the world tobacco trade.
After his loss in the lawsuit, he gave more attention to his
other interest. Even eight years before the breakup of American Tobacco
Company, he already showed interest in investing in electricity, in particular,
hydroelectric power. He invested to a hydroelectric power station at Southern
Piedmont and established the Southern Power Company (later known as Duke Power)
to manage it. In 1922, he funded the construction a huge hydroelectric power
station in Quebec.
Besides electricity, price had other business. It included
finance, such as the Citizen’s National Bank, local railroads in his hometown,
as well as real estate. He also engaged in philanthropic works. One of his most
notable was the trust fund he provided for the establishment of the Duke
University in North Carolina. He also established the Duke Endowment that aims
to improve education and health status of citizens of North Carolina. In
October 10, 1925, James Buchanan Duke died in New York City, leaving a wealth
of over $100 million.
James
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“James Buchanan Duke.” American National Biography Online. Accessed on October 31, 2013. http://www.anb.orgl
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