DEPARTMENT OF COMMERCE 

OFFICE OF 

NATIONAL RECOVERY ADMINISTRATION 

DIVISION OF REVIEW 

THE TOBACCO STUDY 

The Tobacco Unit 

Industr Studies Section , Tobacco Unit 

March 1936 
YJ7 

UNIVERSITY 

OF FLORIDA 

LIBRARY 
> , 

. . ? O E E -:r oRD > 

>' _ ... -

This study of t he To bC'.cco Ind.ustr3r \i.e.$. p repar ed by I:J. emb e r s of t h e 

Toba cco UDi t of t he Industr-J Studie s Se ction , L'h ', LT. D. Vinc ent il1 cha r g e. 

The Tobacco Unit cte·sire s to e:\.1-? ress it~ ·appFeciation of the ·u.n.failin;g court esy rmd coop era tion eli sp l ayed b;:,r of fici a ls of all Government 

dey.:trtments t he..t have a ided, :i.. 4 the Jre:0ar r'.t ion of thi s ma teria l. Speci a l 

a cl:l10Til e c:Lgment . is maD.e _to the . Treas'l;trx . J? eyc;tr t men t, p a rticula rly to · t he 

I l1Col'1e Tax -Bureau.ax' ..o .. '.robacco .Ta:: Divi sion of t h e J3ureau of Interna l . .. ... . .. ' 

J.&ver:t.w; ·to t he :Bur 0&U . 0f Labo r St s/ci t~ \3 of the Depa rtP1ent of Labor ; 

to the Bureau of Agrieill.tura l Economics of the Department of Ag ricultu r e ; 

to the Ag riculturc:..l .A0.ju.strlent .Jicl.r.li:ni stra.tion ; and. to the Tob2.cco Div i si on 

of the Bureau of re <:; ~".. and Dome sti c . Cour-:1 erc e , De -:Ja rt ment of· Comi11erc e . 

Si lil rl r, t h e To bo.cco Unit i s i ndeb tE?cl to 0ll di vi sio: s of t h e 

G.us tr r; a l most \"1 i thou t exc ep tion memb e r s of t l.1e Industry hr.v e given 

fl~ee y informa tion n e eo.e cl in cert c;.in sections of t h is stuc::r. f • . 

I n t he organization an d. lJr esentation of ma.t e ri a l t h e Unit rli sl1es to 

a c::norrled .. ge va luable .edi tori a1 assistance from o the :.:· mem .. be l'S of t he 

Divi sion of Revieu , 

At .the back of t hi s reuort rji·l ·l be fom1d .. a lJrief st a temen t of the 

studies .u..n c .. 1.· ak:en ~ _t he Dtvisio_n of Revi ew. 

• • •' I 

. . . ,. . ~ .. . . . . ' .. 

• • • o I 0 ~ o • # 0 • e • • 

. "' f." ' 

10591 -i-
... 

.. . . •: ~ ..... •,r J"' 

' .. . . , . '.· ..... f, • , 

. . . . . . ' . . ... < • • 

· ': :.: • · ., TABI.J} OF 0:!.7T~i:TT S ' .... ·. : ... · ... . . r • .. -;. • 

) 

. . . 

CHAPTER i - TH:S LARG-:8 CORPORAT1CH L: THE TOBACCO i!AliUFACTURIUG I J:JDUSTRY 

A. D]jFI}J ITION ••••• . •.•.....•..••.............. . ..........•• 

B. SI G1TI3'IC.AJ.JC3: IlT J:lHC CI GARETT:L'• Slfl.T.E? , CIIEWIHG 

MID SliOKilTG TOBACCO i.i.AlJtJF.ACruRii;G HIDUSTRY •••••••••••• 

C •. THE BI G FOL.T.il - A : ii SlJOUER •••••••••••••••••••••• • •••••••• 

D. O'Wl\JERSHIP .A.lTD COlfTROL •••.•...••••• • •.•..••.•••..••.••••• 

E. 

F. 

1. 

2 . 

3. 

4. 

5. 

Stoc 1c 0 mershi -o •..................•..............• 

!Jon- Voti ng Stoc3c •............. . .......••.........• 

Character of the Director ates •••••••••••...•.••••• 

Returns of ~ Iana,·~emen t ••••••••• • •...•..•.••.••.••.• 

( a) 

(b ) 

( c ) 

Pre l iminary ............. . ..................• 

By-lau XII .............. . ..................• 

( i) 

( ii) 

( iii) 

The American Tobacco Co~)any •••••••••• 

LiP.:get t &, Mye r s ·I'oba.cco Como an." ••••••• 

R. J . Reynolds Tobac co Conroany •••••••• 

Recent Develouments •••••••••.••••••••••••••• 

( i) Li5 eett""& lbrers Tobacco Comnany ••••••• 

(ii) 

(iii) 

Arnericcn :2obncco CoJIDJany •••••••••••••• 

R. J . Re;rnolds Tobacco Cor.ronny •••••••• 

Conclusion •.•......•.............................. 

( a) Return to Executives •••••••••••••••••••••••• 

(b) Non- Voting Stock ............................ ( c) Character of the Director~tes ••••••••••.•••• 

CI GARETTE SELLIHG PRICES Ai.D POLICIES ••••••••••••••••••• 

1 . 

2. 

3 . 

4 . 

Prel i min:::tr;r ••.......••. . ....•.•..•....•......•..•• 

( a) Ordinary Discounts ••••• ••••.••••••••..•••••• 

(b) Rru1ge of List Prices ••••••••••••••••• •• •···• 

Character of o~)etition •••••••• •••.••..•••••••••• 

Channel s of Distr ibution •••••••••.•••••.••••••.••• 

S-oecial j)iscounts ancl Alloru:mces •••••••••.•••••••• 

( a) 

(b ) 

( c ) 

De finition •..• •.•. .......................... 

Their General C~aracte ristics •••••••.••••••• 

Thei r E:cten t •........ . .... .. ...............• 

PRODUCTIO}J ••••••....•.•••.....••••..••••..•••.•••••.•••• 

G. AS ETS~~~ Ull~INGS OF THE v i G TI~E •••••••••••••••••••• 

1. 

2 . 

Can i t al Inve st ed ••..•...•......••....•.••........• ..., . ~arn 1ngs •.•.................................... • . • 

3 . Disnosition of Net Ear nings •••••••••••..•••••••••• 

H. ASSETS .fufD EAR~THiGS OF rHE TOBACCO IliDUSTRY ••••••••••••• 

I. IH'DUS·:rRY COJ.iP.Art.I SOHS •••••••••••••••••••••••••••••••••••• 

Ap1) e ndi ;~ 1 • . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............. . 

AlJl)endi x 2 •.... . .......... . . . .. . .....................• 

Appendix 3 • . .......... ~ ... . . . .... . ... . ..... . ..... · · · · • 

CHAPTER I I - r!E ECO!TO;IIC AlD SOC IAL SI'ATUS OF LABOR 

A. LABOR I:iJ THE CIGA...~ I' TE , SlTUT::.\ CHEWETG Alf:D S1iOKI TG 

PAGE 

7 

7 

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65 

T03ACCO iiAlJUFACIU::tEJG IiiDUS·I:ctY • •• ••••••••• • •••• • •••••• • • 70 

- ii-
'i" 

't 

~ 

II) 

j.. 

:s. 

c. 

. ,S1.1mma,-ry • • • • • • • . • • • • • • • • • • • • • • • • • • •. • • • • • ~ • • • • • • • • • • • • • • 

. a.-. 

. 2·. 

.. 3 .. 

-T~1 e Size· of t he Labor Force . ............... .. .... . Regional· C oncen.tr·at ion •• ~ •• ·• ·• ·. ·• ·• · ••••••• · •••••••••• • 

Co:r!iJOsi tion with Rest:J·ect t o Color a'1d Sex ••••• •••• 

• • 4 .. - Dis.tributign l)Y Conmanies ••••••••••••••••••••• ~ ••• 

. 5 • . · Workers in TJ'a;;e· Gr o.uos Pre scribed by the Code • · ••• • 

6. Average Hourly Ea rning s in I.farch 1935 •••••••••••• • 

7. Aver age Hourl ;r Ear11ings in. Code Groups •••••••• •••• 

~. Averape Hours Worked Per Week ••••••••••••••••••••• 

9. 

.10. 

.11. 

.12. 

13. 

.14. 

.15. 

Average Ea rnings Per week •••••••••••••••••••••••• • 

Position o-f t he3 Individual Worker ••••••••••••••••• 

HA.:J.ufactu:rers · vercus · I nd.enenden t Leaf Dealers a'. • •• - · ~ 

Cc;)!:rsarisons ·with Ot 1e:L~ :r i mes ••••••••• · ••••••••••••• 

Comuarisonsw ith Othe r ·Indust:ries ~~ ••••••••••••••• 

ernal~ks ·Gn ·Pal" ticul<::.r J3ranches of the Cod.e Industry 

.Armua1 -EC~ rnin,q:s ·a..'1d ··':.he ·Hunbe:t ·of ·weeks Worked by 

• . . . . . . . . . ·Tobacco ·I.Ie.nu.fa ctur in;; ·Employees in 1934 ••••• 

CO!v!P.ANY .l?OLLC IES OF · \lE1~.ARE WORK ••••• ••••••••••••• ••• • •• 

.1. . I11t~oduction ·•· .................... · ••• • •••• ••••• • •••••••• • • • • 

. 2 •. 

3 . 

4 . 

5. 

6. 

7. 

8. 

9. 

10. 

11. 

12. 

. \lac a t i 011s ••.•.• , •. •' .~ ...... . · ....... · e·; • •• e .••••••• ·• ••••••••• ; ••• 

.Sick .Lea .. ve •• ~ .•.. ~ .•... ·.· · ... · .· .. · ..• · .· .• · ..•.••...•...• • # Insura_11ce ••••••••••••...•. ••••.•• .••••.• ••••. •• • • • • 

Pensions •.. ............................ ~ ...... ; .........•• 

l\1e d.ical· ·Se·r v·ices ·····•·. · ••• ·•·•·•·•· •·• · •••••••••••••••••••• 

Safety. Prog!'a:tn ••••••• • •.••••••.•••. ~ . • • . • • • • • • • • • • 

Re creational· :Ac·ti vi ties •••• ••••• •••••••••••••••• •• 

Educational Woxl~ ·•·•·• ·• ·• ·• ·• ·• · •• • ·• · •• · •• ·• ·• ·• ·• ·• -. · ••••••••••• 

Cafeterias •••.••.•.•••.......•.. ....•... .. .... • • • • 

Other Welfa.re Worl: •••••• ".- • •••••••• ~. · ..•..•••••••• 

Exarr:Jles of We1f?re Policies •••••••••••••••••••••• 

llEC"H.Al IZi~T ION ••• ·• "• ·• ·• ·• ·• r• .. -.~ .e •.. .~ .~~ .: ... ·•·• ·•· ••.••• • 

1. Histor icctl •••··•••••• ....... •••••••· • •e••••••••••• 

2. Under tl1e Code · ~ ~ ~ • ...••••.•.....•....••...•.... ~ •• 

3. 

4 . 

Post-Code Conditions • ••••••••••••••••••• •••• •••••• 

Conclusi on •.........•.•......•••......... ~ ..••..•• " . .. . . ... CHAPTER · III ·- IliTEGRATION 11ITH AGRICULTURE 

.li. . TRODUCTIGl~ · , e e e • • •. e ~ ~ ~; ~; ••••• · ••••••••••••••••• ~ •••••• 

J3 . PRESE17T METI>IO:kJS · 0F · SEL1I.JJG ·LEAF · TO~ACCO ••••••••••••••••• 

.1 • •• The L00se Le a f' · and ·A:J.ct:i:on W2.rehouse •••••••••••••• 

(a) 

(b) 

(c) 

(G.) 

'e) 

G£). 

.. 

·Ral'id.i t y · of Sa les ••••••• · •••••••••••••••••••• 

mpGr ance of ·Adequate ·ttghting •••••••••• ~ •• 

.. f]he Sma .. ll · t1n..r l~e t · . .. . ...... -. ~ ................. . 

. ·l.'Ic:mdat ory Governr1erit Grading •••••••••••••••• 

The Short Harl;:e ting Season .................. . 

.Unfai-r ·Trade Practices •••••••••••••••••••••• 

(1) 

( 2) 

Subsidized Trucking •••••••••••••••••••• 

Reba~ting ••• •.. .••• ••. ......•.•...•..••• 

( 3) Reservation of Ploor Spa c e •••••••••• ••• 

2 •.. ,T...h.e. .1.1ar.vJ.and. Ma:rl~e · • ·• ·•·• • ·• · •••••••••••••••••••••• ; •• 

3. The Connecticut Vtuley Situa tion •••••••••••••• ••• • 

-iii70 

72 

74 

74 

74 

75 

77 

80 

81 

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83 

84 

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91 

93 

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107 

108 

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. . . 

4 . J3arn- :3u,ying l.Iethods of Cige:\r Ucmufacturers • " •••••• 

5. Coll us'i'on 'i 'n PUrch'a .se of Lea.f' · •• · ••• · •• · •••••••••••••• · .,.. • • • • j • • • 4 ' • ,. i - t 

n . Conclusion ••••••••••••••••••••r••••••••••••••••••• RE~·JUSTL.iE ~~ :r·s· '{d bEl.WID. FOJ. V .Lilli OUS TYPES OF TOBAC.CO •••• 

1'.· Shifts in Production Areas ••••••••••••••••• ·• ~ ••••• 

2 . The ·s·ou.th At'lan.tic Sta tes •••••••••••••••••• · ••••••• 

CH'.APTER IV - FO ~IGl~ TRADE IE LEAF TOI3ACCO 

Part 1 - ·;.rJtE DJ!P.ORTAli(CE ·oF TOBACCO AS Ai.f EXPORT COMMODITY AliD 

Part 

THE GRCnirH OJ? FOREI GN COLfi'ETITION ••••••••••••••••••••• 

A.. Trill r·i iPoR.TA!rcE or TYP:ii:S ••••••••••••••••••••••••••••••••• 

B·.· .THE CE.A.NGE n; Sl.iOKIEG TASTES ••••••••••••••••••••• · ••••••• • if 1o I ' • • ' • • • • 

C • TI-L:::! D.iilii{ TYPES •••••• • , • • • • • • • • • • • • ••••••••••• , •••••••••• ~ f ~ • • • • 

1. The Lost · Italian i.!arket •••••••••••••••••••• , ••••••• 

D. ~. IAR L.A.lTD l'O.Bli..CCO •••••••••••••••••••••••••••••••••••••••• . E. Btrn.LEY·· TOBACCO •.••••••••••••••••••••••••••••••••••••••• • • . ' " . . . F. BRIGHT FLu'E CURED TOBACCO •••••••••••••••••••••••••••••.•• • ' • .t I • ' • • • • o t .. fO ~ • f • • t t 

1 .•.. Domestic Production _. ......... . • •••••••••••••••.••••••• 

.2 .•.. Foreign Pr,oduction ••••••. • .• •.• •••••••••••••• •.• •••••• 

. . . ;3 . . . Sm-rta_ry .• · .• .••. • ••.•••••••. • •. • .• • .•. • .• • • • • • • • • • • • • • .• • • • • • • 

2 - THE RELATIOH OF TRAJE :JAR.:::, IERS TO _,'\HERIC.AlT EXPORT TRADE • • • .. • .. ' ... . j , •• ' ' • • • •• ' ' • • • t 

A.. GOV;E;R,.i lfG r:r. ! O~~.O;I?.O LIE.S ••. • • _. .• .• .• .• .• ••. • .• .• •. • •••••••••••. • •••••• 

B. PREFER..E ,rriP.~ Dilli S ••••••••••••••••••••••••••••••••••••• • • 9 • • ' • • • o o I t t o "' • o o o o o ·~ 0 

9.· .. G9;LP. ?}1;BAit.G:O.s. ,A;lip_ .Q.U.O.TA ~sT~.r P.T.r o~ s ••••••••••••• , ••••••• 

D. IMPORTANCE OF THE BRITISI1 COHPAIH:ES ••••••••••••••••••••• I • " ' • o • 1 • ' .,. 0 .. ' o ,o • o I ~ f • ' • • I 

E. COl,TCLUSIOlT •••••••••••••••••••••••••••••••••••••••••••••• • • • ' • ' • • • • • 7 ... , • • , •• • .., • .. • • • 

. . . CH.API'ER V - THE CIGAR iiALTJFACTU:rtiHG I:IDUSTRY 

I • • • .. 0 ' o f • ; I • • • 

f':llfil.m ~"'Y • • • • .. •. • .• .• • .• • .• .• ... •. •. •. •. • •. • ,• .. • .• .• .. • .-:. •. •. • • •. • • .• • • • • • • • • • • • • • • • ,• • 

A. DEFilHTIOJ.T .AlifD PB2SI: T POSITIOlJ OL' TKE INDUSTRY ••••••••• 

· ·1. Defini t.i.or1 'o'r' ·t he. Ind. ~s trv• · •••••••••••••••••••••••• 

· · . .(a), ' p~:s cr p,t\ ~ o~. HarHl l"anufacture of Cig:ars ••• 

. (b) . . P.e.s_c_r,ip_t_ion of Ia ine H_anufa cture of _Cigars 

2. Present Position of t he Indust~r •••••••••••••••••• 

(a) Number · of EstablishiJents ••••••···•···••••••• 

(b) Total Investment •••••••••••••••••••••••••••• 

(c) Annual Production ••••••••• , •••••••••••••••. •. 

(d)· · ETnPl.oY.Dieilt ·• · ... · •• ·• _.. •• ·• · ••• · •• · •• ·• '· •••••••••• • • • • • • 

:s·; 'DiVELOPI.ffi:iTT. ·oF- THE I NDUS·rRY ••••••••••••••••• : ••••••••• · •• , . . . . . . . C. L.ABOR IH CIGAR I.'iAJ:fl.JFACTURilJG ••••••••••••••• ._ •••••••• •. • • l f e ' ' ' ' 0 ,. f • ' • t I I 

.lo •• 

1. Er.rol oym.en t ••• !' ••••••••••••••••••••••• , • • • • • • • • • • • • 

· ·:<.a) .... T.ot.a}. :B.rn;'1,lOY]Ilent •••••••••••• •••••••••••••••• 

(b) Division of Em1Jloyment by. Sex •• · ••• •• •••••••• 

'(c)' : P.i:vision:.o{ ~mployment by Occupati'ons ••••••• 

,(d). .. S!3,RS,OP..al i ty· of :i!:~Jl oymen t ••••• ~ ••••••••••••• 

.(e). ;R.,eg,i.o;.1a;J. .con.centration of Emp l oyment •••••••• 

.(f} P.i.s.t.r.i:b:U.t.i.o.n. o;f Emy>loyees by Size of Company 

,(g) :Pistribution of EmPloyees by Ages •••••••••• • 

.2 .•. , Hour.s · ·of EIIDJl oymen t .• ·' ••••••• , ••••••••• • •. • • •.• • • • • • • 

-iv-

-- , 

112 

112 

113 

113 

113 

123 

125 

125 

125 

126 

127 

128 

129 

131 

131 

132 

133 

135 

135 

13.5 

136 

136 

137 

140 

141 

141 

142 

143 

144 

144 

144 

144 

145 

145 

149 

149 

149 

150 

150 

151 

152 

154 

154 

154 
3. Wage ·Rates and E<§.rning s • • • • • • • • • • • • • • • • • • • • • • • • • • • 157 

(a) Annual Wage s and Annual Payrolls •••••••••••• 157 

(b) Weekly and Hourly Earningq in the Cigar 

Industry Compared to Other Manufacturing 

Industries ~. .. ......... . .. . . . . . . . . • . . . . • . . • . . • .. 158 

(c) Wage Rates a.na · Earnin ~ by Occu:p~~ion, Sex, 

and Grad.e ,. 6:f ·Product ••••• ~..... • • • • • • • • • • • • • 159 

· (d) Earning s by States •••••••••············••••• 162 

4. echanization ..................................... 165 

·s. Effect of the .Code on Labor ••••••··············••• 170 

D. MAJOR INTIUSTRY PROBLEMS ••••••••••••••••••••••••••••••••• 174 

1. Declining Volume of Production • • • • • • • • • • • • • • • • •. • • • 174 

2. Trend Toward Lower Priced Cigars •••••••••••••••••• 174 

· 3. Mechanization and Concentration of Production..... 178 

4~ . . Integration . ni th Ae;z:icul ture , • • • • • • • • • • • • • • • • • •. • • • 181 

· · · ( ~~ : Tobacco · Buying ethods •••••••••••• _.. •. • • • •. • • • 182 

CBAPTER VI ~ .DISTRIBUTION OF TOBACCO PRODUCTS 

. . . ~ . - . . . . . . ~ART + ."7 Q~~G~~ .I!'I Q~LS 

·A. rftH:E · sr TUATio:N · rN- · G.E:NER.Ai. · ••••••••• · ••••••••••••••••••• •••• 

B. lvi.ANUFACTURERS i ·WHOLESALE · BIWWHES · ~ •• ~ ••••••.•••••••••••• . . . . . "' . •. . , . 

C. THE TOBACCO WHOLESALER ••••••••••••••••••••••••••••••••.•• ,. - 1 • • • • • ' I "• , • • • 

D. CONDITIONS IN TEE RETAIL TRADE ••••••••••••••••••• · •• ., ... 

E. p~~CE CONDITIONS ' iN Ttffi TOBACCO TRADES PRIOR TO THE CODE. 

1. Vanishing 1•Iart;ins ••••••••••••••••••••••••••••••.•• • 

2. Retail Tobacco Chains in 1932 and 1933 ••• ." •••••••• 

F. PRICE REGULATIONS IN THE RETAIL TRADE ••••••••.• ! ••••••••.• 

1. Effects of Price Regulations •••••••••••••••••••••• 

(a) Independent Retailers ••••••••••••••••••••••• 

(b) Chain Ciga r Stores ••••••••••••••••••• • •••••• 

(c) . . Cha in Drug St or ~ •· ~ •· .' ~ ~ •• ~ .' •• .": ~ .'. ~ ~ ~ •••••.•• 

(d) _qhain ~oc ry ~to~ s .•. ~ •••••••••••.•••••••••• 

. . ) Department $tor:e;~ •• ·· ~· ···················· 2. ~rice Spread Between Popular ]rands and Ten Cent 

Brands •••.•.....•.. • ..• • .. · ... · • • · · · · · • · • · • · • · • · · • 

3. · The Ci r Merchandis-ing :Plan •••••••••••••••••••••• 

(a) Operc: .. tion of the Plan •••••• ." •••••••••••••••• 

G. RELATIVE STABILITY OF RETAIL PRICES •••••••··········•••• 

H. PRICE REGULATIONS IN WtiOLESALE TOBACCO TRADE •••••••••••• 

1. Effects on the Sub-jobber •••••••••••• ·.-. ••••••••••• 

~ ·· compliance with Wholesale Price Regulations ••••.•• 

r. so:Lurridu ·o:F coDE PROBLEivis .............................. . 

. Possibility o:f ao~~oiiciation ..................... . 

. ~· . . Attem-pt to Secure Voluntary Agreements •••••••••••• 

J. LABOR IN TOBACCO DISTRIBUTION •••••••••••••••••••••••.••• • • • ' • ' ' • I • •. ' ' ' : 

l~ Hours 

2. Hours 

: .: :: .. :~J 

and Weges in the Retail Tobacco Trade ••••••• 

and Wages .in ~4e Wholesale Tobacco Trade •••• 

aladj-q.~~n}E?Ift .with Qt:l:~~r Wholesale Trades ••• 

-v183 

186 

186 

187 

188 

188 

1 88 

188 

189 

189 

190 

. 190 

190 

191 

191 

191 

192 

192 

193 

193 

193 

194 

194 

194 

195 

195 

195 

196 
, , c:: . 

PARJ: I I - JD·.m:rH'ISIHG PRACTICES 

A. ADVERTISI:i:G PRACI'ICES AS .AFFECTI NG DI STniBUTI ON DT 

T03ACCO ••••••••••.•••••.•..••••.•.••..•.. ; •.••••••.••• 

1 . Qood-:WLV- . and. Comoe.ti t i ve Warfar e ••••••••••••••••• 

2 • . . The £~y~Jisi~ An rJnriatiOJl ••••••••••• • ••••••••• 

(a) .. t~r.'! $,11 , 12, ar.Q.. 13 •••••••••••••••••••••••• 

.. C'o) .. T .. e. J~ ti rm s Bill for Aciver~ising ••••••••••• 

(c). !$.'i'OPC':1CC 0 1 s s·'1<:,·.r£? 50 to 60%? .:.-•••••••••••• 

3 . The.4~;e ;tis in~_Q~s t of. Di stribution •••••••••••••• 

B To:nACCO C01 ";:) · :_) -;"\ - c ""' -,...,. . I' , .... Rl"'S • . '..D • Jw~ -,-\.~j.J .,_ J v ... :.;lt lJ lJvt:i~ ~ • • • • • • • •••• • • • • • • • • • 

.1 . 1933 9~~-l .. T.ubac r o L5.,ll.Pf:?_ ·-··•••••••••••••··~···••• 

2 . . The Ten j.ic ~~~;-..: ~~e: ~~-J2 . • • .,) •••••.••••••••••••••••• 

3 . CQmJ}arison of -'kS7 B:-~ .:_ r.1J]. b.__E.:o endi tures ••••• ~ •••••• 

(a) 

(b) 

(c) 

NeuspalJer Acive:~. isi P.g o • •••••••••••••••••• • •• 

Uagazine Advertising ••••·•···············••• 

Radio Br oadcast Advertising -••••••••••••••••• 

4. Rccani tulation ................ . ................... . 

5 . Estimating the TotGl Cost ••••• • ••••••••••••••••••• 

Q, W:~T IS THE COST? ••••••••••••••••.••••.•....••••. • •. : ••• 

p. •' T~lli' 0 · :EJ.,ncTs ' • • t 0 • · OF 

' t 

j_Di.Eitir • 0 I SIHG COMPETITION ................. 

• 

~. 

;E . ADV'ERI'ISIFG ALLO'ff.AliJ'CES •••••••••••••••••••••••••••••••• · •• 

. . . 1" •.. Tob'a~-c~· Prod~cts as Los's' Leaders •••••••••••••••• · •• 

2 . Eff ect of Loss Leader on Retailers •..••..... • · • • ·. • 

3, •. Advertising Allowance s to Chains , etc •••••••• •. : . • • • ( • t 

' t ...... 

CHAPTER VI I - ·:rHE IUPORTAlJCE OF TH:S TOBACCO 1 iAln.JFACTURIUG .. ' .. . . ,. .. . .. INDUSI'RY 1'0 THE FEDERAL GOVEP311E:rT AS A SOURCE 0}, TAX REVEliUE • t .. • • • • • • • • # 

. . . 

196 

196 

200 

201 

202 

204 

205 

207 

207 

208 

209 

209 

210 

222 

223 

224 

225 

226 

226 

227 

228 

229 

A. GEl~ ••••• • ••••.••••• . •• . •..••.•••••••••• ·. . • . • • • • • • • • • 235 

.B .• .Aj):qiTrqu~ :~Ax. .I~E;~$. FROII cusTo .rs REC...JIPTS AIID . . .PRddESSilTC~ T.AXES • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 237 0' ' I o 4 • • I • • • • • 

. c • . ~:r.A~~ :~i\..41\.'L'XOU .••.•••••.•. •....... . ................ .. ....... 237 

D. DisPARITY IH TAX HET:iODS • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 238 

. .. . .. . ' .. . . .. . ... 

. \ -~~.~C~~.QF ~SEARQ~ IN THE TOBACCO INDUSTRY ••••••••••• 239 

.~ • . ~}~FIELD FOR COORDINAT£D IliDUSTRY RES~~CH ••••••••••••• 240 

1 . . The Curing of Tobacco •••••••••••••••••••••••• •• •• • 240 

2. Prinarv Leaf l1fa.rket • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 241 

3 . Products • . . . • . • • . . . . . . . . . . . . . . . . . . . . • . . . . . . . • . • 241 

4 . The .Ar;inr:: of T~bacco • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 241 

5 . Distributi on Problems ••••••••••••·••••••• • •••• •• •• 241 

6. Labor ••••••••••••••••••••••••••••••••••••• : . ... • •• 242 

7 . For eign Mar kets •••••••••••••••••••••••••• • : . • • • • • • 242 

8 . Rel ationshin th Gover nnent ••••••••••••••••• • • • •• 242 

C. ASSOCI ATI ONS IN THE IliDUSTRY ••••••••••••••••••·••••••••• 243 

1 . Func tional Organization and the Relationship of the 

Assoc iat ion to Resenr ch ...... . ... . ·•·•·· ..... .... • • • • 243 

- vi-
D. COliCLUSIO:N . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244 

P..PPE:IDIC.GS ro l'IIE T Ol3.t\C C 0 SI}:UDY •••••••••••••.•••••••••••••• 245 

1J~l endix 4 

Taxation, Revenue Receipts •••••••····••••••••••••••••• 245 

Cha..-r1ges in Rates of Trl.-"'<:a tion • • • • • • • • • . • • • • • • • • • • • • • • • • 247 

Sta tes Taxing Cigar ett e s ••••••••••••••••••••••••.••• · •• 248 

States Taxing Smoki ng Tobc.cc o ••••••••••••••••••••••••• 249 

Sta tes Taxing he~1ing Tobacco • • • • • • • • • • • • • • • • • • • • • • • • • 250 

States Ta.x:ing Snuff • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 250 

Table - Receip ts fro;n Ciga,rette Taxes ancL per cap ita 

con S1.1.1Ilp t ion ..•.•...........•.......•. -: . . . . . . . . . . . . . • • . 251 

Appendix 5 

List of 

Appendix 6 

List of 

.Appendix 7 

Unpublished. Haterial on YThich Chapter V is Based 259 

Basic Tables fl~om Dep a,rtment of Labor • • • • • • • • • 263 

Distribution •••••••••••••••••••••••••••••••••••••••••• 269 

Appendix 8 

Table 1- List of Codes in Tobac co Industry ••••••••••• 276 

TabJ.e 2 - Finished Code Histories in the TobR.cco 

Indus try •.......................•.......... ~ . . . • • 276 

Append i x 9 

Foreign Tracie in Tobacco •••••···•·••••••·········••••• 277 

- 0-

-vii-

- · 1 -

THE T 0 B A C C 0 IN D u ·s ·T R Y 

* * * * * * * * * * * 

SU Mhf: ARY 

* * * * * 

Ever since the Colonial period in Virginia w~1en tobacco was the first 

mediu1n of exchange and the first; export commodity, t he story of tobacco 

has been a panorama of ft~eric n economic history. The tobacco industry 

is typical of the r evolutiona-ry ·changes whicl.1 have taken place in a.griculture, manufacturing, distrib ~tion and foreign commerce. Altogether, 

a general study of the tobacco industry affords a wide view of .American 

experience in governmental activities and business develOl)ment. 

Tobacco, today , provides the South AtlaLtic States an agricultural 

income greater thanthat from cotton; it rank s first in other important 

farming areas. In d.ollar value, tobacco rank s second among agricultural 

commodities· exported. Its manufactured ~reduct is worth a billion dollars 

wholesale. The labor employed is both white and black, North and South, 

union and non-union. No other manufactured product, liqu or inc,luded, 

furnishes (as of 1935 ) so large ·a p roportion of the national governmental 

revenue. 

In the spring of 1933 , the · tooa cco indust:i.~y well illustra.ted the immediate need for gov e rnmental intervention in the public interest. The 

p rices then paid the farme r for hi·s tobacco, the wage levels for labor, 

the policies toward distributors a<'1d consumers -- all combined to exhi-bit dep ressed p rices for the grmll}'er and inadequate vvages for labor on one 

side, but continuing large profits for t h e manufacturers on t he other. 

In 1932, average prices paid farme rs for tobacco were far below cost of 

p roduction. General wage levels -...v ere below adequate subsistence requirements. Wholesalers and retailers "~Jvere suffe ring severely and, in part, 

directly from the sales DOlicies and distribution me t hods of some of the 

large manufacture rs. 

Cooperation and, later, an agreement with the Agricultural Adjust-

!i1ent Administration i:!l the fall of 1933 , when the manufacturers guaranteed hi gher price levels for tobacco and a c e rt a in volume of purchases; 

and t he compliance of tob a.cco manufa cture rs· with the President 1 s B.e-emp loyment Agreement, represen ted the first forvv ard steps t aken by t h e 

manuf a cturers. It Yv-a s not u iltil February of 1935 that t he cigarette, 

snuff, smoking and chewing tobacco indus·try a ccept ed a Code of Fair Competition and that Code was limited solely to ·labor standa rds. Later during the Code period, \vages were r a ised someYvhat above t h os e existing under 

the President 1 s Re-employment Ag re ement, and with that addi tion, represented roughly a so:; incr2a.se ov e r t he weekly ear:..1ings that had p revailed 

in early 1933. 

There was another Co de in the industry -- one for t he cigar manufacturers·: Under t his cig·ar manufacturing Code, a;L t hough t he Code provided 

a considerable increase in wages , the long struggle betvYeen t he handworkers a~d the machine operators resulted in exemptions and many inconsistencies i~ w~ge rates . 

10691 
-2-

The leaf dealers, whose primary business is emort, employ negroes for 

stemming and other unskilled ouerations during the short marketing season 

of tobacco leaf. For years these unskilled workers, representing the lowest class of casual labor, have received a meserable pittance as their wages. 

No Code agreement for leaf dealers was ever reached. Comparisons of wages 

paid by leaf dealers with those paid by the manuf~cturers , often in the 

same areas, show a condition to exist that needs immediate remedy. 

The situation existing siace the end of the NRA Code period is of decided interest. The large manufacturers in the cigarette, snuff, smoking 

and chewing tobacco industry have not only continued their wage siiandards 

under the Code, but they have raised them. Comparisons with the automobile 

indust!"'J in Section 15, Part A of Chapter I I of this study are well worth 

reading. Although the wage levels, particularly for tUlskilled negro women , 

are still on a very low subsistence basis, the general labor storJ of this 

particular industry, developed from Code experience , shows for the first 

time a sense of social responsibility. It is unfortunate that the s~~e 

conditions do not exist in the cigar manufacturing industry; there, with 

certain definite company excentions, even t' e low code standards have been 

dropped. On the distribution side of the tobacco industry, wholesalers 

_and retailers have lost the profit advantages received during the Code 

period; they are continuing actively however, through their a.s sociations 

an attempt to work out their problems. 

'l'he whole situation in the tob acco industries became so deeply a national concern that, in 1ebruary 1935, under an Executive Order of the 

-President of the United States, the Division of Reasearch and Planning of 

the National Recovery Administration began a survey of the manufacturing 

indust~', covering not only labor but other problems pertinent to the position of the manufacturers i.1 relation to the national e conorny. Immediately after the Schechter decision and the formation of the Division of Review of the National Recovery Administration, it was determined to continue 

the Tobacco study, Yvideni -lg its: scope to cover the several divisions of 

the industry and to develop insofar as possible ~L1'3ir inter-relationships. 

The •J:lobacco Unit of the Industries Studies Section , Division of Review, 

was therefore authorized to include in its study a survey of the methods 

of purchase of tobacco leaf from the farmers, to trace the relation of 

tobacco to world trade and to ex~ine domestic processing and distribution 

of all important tobacco products. The present study is a result of that 

survey. It is not complete, as this report 9oints out; there are wide 

areas yet to be surveyed; and the need of continued research is indicated 

constructively in each phase of this present report. 

Almost without exception the representatives of the industry have 

talked freely with members of the Tobacco Unit ~1d have aided materially 

in the compilation of part of the in~ormation here presented. 

TDe Tobacco Study as here presented surveys the tobacco industr; in 

the following relationships: 

Chapter I. - The Large Cornoration in the Tobacco ivianufacturing Industr; . 

10691 

Th.ere is· d.i scussion of the divorce- of management fro1p ownership. 

Non-voting stock, first used as a legal device for co:r;1trol; the 

character of the directorates and the limitation of their membership to those holding other official positions in the corporations; 
-3-

the re~neration to management; - -- these are all given critical exrunination. Cigarette selling ~rices and uolicies, the effect of these 

policies on v,rholesalers -and retailers, and on the relative position 

of the largest compenies in the industrJ are studied. Comparisons 

.are made of their ass-ets a.Yld earning's with those of the entire tobacco industry and with other industries. 

Chapter II. - L~e Economic and Social Status of Labor. 

The study of wage levels gives an op~ortu_Ylity to trace regional, sex, and racial differentials. T'.ae extent of welfare practices 

is described ~J1d the question is raised whether the welfare programs 

at present condu cted offer resistance to adequa.te wage levels. Labor studies are presented to reveal certain inadeql;_acies of the wage 

structure. 

A survey was made during 1935 by 'John P. Troxe'll covering the 

labor union organization in the cigarette·, snuff, smoking chewing 

tobacco iudustr.r.- This ·survey is.- in the file · of· 11 Special Materials" 

of the Divi sian of Review. A .. "'l independent survey , by Dr. Charles 

S. John.s-o:n of.: Fisk: Un:i versi ty, was made , during the Code period and 

was e:specially con:c e rn'ed vri th living conditions in a number of tobacco manufact"J..'ing centers in Virginia, North ·carolina, and Kentucky'. 

Chapter III. - Integr?-tion with ric-..Ut~re. 

But a few of t h e many problems e.r e list e d, indicating the 

inter-dependence of this industry and tobacco culture. No one of 

the present methods open to the farmer for selling his tobacco is 

free from fault. There is need of immediate consideration of 

this p roblem by goverrll"'lent as well a s by industry. 

The readjustments in demand for vn,rious t ynes of tobacco h ave 

resulted in '?ronou..Yl.ced shifts in prociuction a reas. The dependence 

of the South Atlantic St a tes on both tobacco cult-ure and tobacco 

manufacture is of such significance that this area is given special 

consideration. 

Chapter IV. -Foreign Tra de in Leaf 1oba cco. 

So large a p roportion of -~erican grown leaf ordinarily finds 

its way into foreign markets that the American tobacco manufacturer 

alone cannot guarantee reasonable prosperity to the American tobacco farmer. Certain foreign mar~ets h ave been lost and carmot be 

regained. This chapter indicates possibilities of new markets abroad, 

b a sed on further ane.lysis of v,rorld req1.1..irements. Trade barriers, 

such a s government monopolies, preferential duties and quota restrictions are discussed and comment is made on the tariff walls 

erec"Ged ih the -past by this Government and their restrictive influences on tobacco export. · 

Cha.pter V. - The Ci gar MMufacturing Industry. 

All the problems incident to a declL1ing industry a r e here illust:L~ated. The never-ending pressure on labor, as on all other 

costs, has resulted in wage levels, still continuing, that h ave no 

10691 
r 

-4- .. . .. '• •' 

license to exist in .~errcan industry. The increasing use of the 

' · cigar making ine has had ,.~ss influence on total labor employed 

than has the decline in cigar p roduction. No attempt has been made 

to answer t hese l)roblems. 

A field survey now in nrog ress by the Bureau of Labor Statistics, Department of Le,bor (covering wage l evels· and annual earnings , in plants manufacturing ci.gars by hand ~nd in highly me chanized factories). should be of ~.::~. t aid in showin:; t he m1fortunate 

conditions su.rrounding labor in ·t his industr-<J. This is but ano.ther 

instance of the n eed of further ~tud . 

Chapter VI. Dis~ribution of ob ac co Products. 

This chapter is a conside r a tion of the national uroblems that 

arise f-rom the distribution and the adve rtising ~.)oli cies of the 

manufa cturers . Seven chan.;es in the channels of distribution for 

tobacco p roducts a re described ; t he subject of demand in relation 

to p rice is considered ; t he effect of loss-leader p ractice is evaluated. Tne decline of the tobacconists' shous, the growth of chain 

stores and of co-o:perative of various kinds, and direct selling by 

manufa cturers to r e t a ilers of lare;e uurchasing po·.<re r -- thes e are 

factors that ca ll for continued analysis. The us e of large scale 

ndverti sing campaigns , rum ing into s cor'es of millions of dollars, 

p resumab l y to develop consumer dernand ; the effec ts of a dvertising 

on the Tihole industry ; t he social and economic cons equences of advertisLJ.g ·allowances, free deals and the like , constitut e a field 

of mo r e than industry interest end si gnificance. 

Cha:pter VII. - The Imoorta-nce of t he 'l'obacco Manufacturing Industr; to 

t e Fede r al Governmeat as a Source of Tax Revenue. 

!lecognizing that it is not the 1)rovince of this study to pass 

upon t he v ari ous p robl ems of taxation as illustrated by this indust 'ry, the f act that t obacco manufacturing is t he l a rgest single industr.r source of f ede ral revenue warrants a fuJ.l statement of its 

contribution and a direct comp a rison with other revenue sources. 

The ST)ecial St a te excise taxes and State s a les taxes are discussed; 

for they tend to decrease government revenu e from tobacco products. 

hiention is made also of the graduated t ax on cigars and the ~iffe rent tax rates on cigarettes ro1d on other p roducts. 

Chapter VIII. -Possibiliti es for rte s earca in the Tobacco Industr.t · 

10691 

He rein a r e o~tlined the fields of research which invite t he attention of gov e rnment and indust!"J . Tnere is op·0ortuni ty for t he 

tobacco industry to establish a J:obacco :t~esearch Foundation in which 

all divi·sions of the industry take part . Some such nlan v~ ould permit the tobacco industry to work its own· way out of its many maladjustments, and make thereby a. valuabl e contribution to the national 

economy . , :: 
5 . . . - -

.APP~.rmi CES 

..:\.'Yoenc.ix 1· - ProLuction 

T[ ble rwnber 1. Q;u..o.ntitJes of Ch eniEg , Smoking and. Snuff Tooa.c c o, 

Ci g::..rs ano. Cig arettes r.:1anufa ctured by the To bacco 

IndJ .lstry in the United Sta tes, anc1 the quC'.nti ties, 

( c>l1d Percentages of t~1e total), proC:.uced. by s elect ed g roups o:: cor-po~n. ons. For CC'l.lenc.c r 3rears 

1S34 to 1926 ~nclusive (2 she t~) 

O:ri(;inal and. ten photo st2 ~ic cop ies 

Table lTunber 2 . List of rtatemen t s ·oasic p roduction data 

I-0':2E: This Apyendix bou..'ld 1.!i th C~apt er I . 

An•; eP.C:.ix 2 - - ?inancia l 

Table Fu.-·nber 1. St2.tement r: ~: ,, cornpari sons of !Je t S::!.le s, Comp i l eo. j_Je t Profit, Sta tutory r:et Income anG.. Cash 

Divi d.enf.s paicl. fo r certain g rou:_?s of Tobacco Corn orations to a ll To:Jacco Corj_Jorn ti ons re~o ortins 

on Income .1ax Returns for years 1926 - 1934 

inclusive. 

Ta"ble lTurnb er 2. Le tte r dated. Januo.r y Z? , 1936 from wm. F. 1-.kJ.eynolds, ACirnini strati ve Assistant to the Secret c.· ~r 

o:Z the Treasur~r. (8 pag es) 

'11able llwnber 3 . Mar~<:et .VLlue, as nt Janue.r z:- 2, 1933, of the 

Cap ital Stock of the Big Three . 

':1.1able !~umber 4 . Basic Financi a l Da t a . 

1-0TE: Tl1i s .A:pper..dix bounc' wi t il Chr:.p t er I. 

A-0·::_1enc.i x 3 - - Finc-nciEJ.l 

S:o..bl e ~:maber 1. Th e Offici o.l Positions and Stock Eolt.i ngs hel0. b:r 

the Directors of the Big Three (3 p ::>t;es). 

Table .!.Iumber 2. or-p or at io~ In~or.1 e Tc-.x :teturns for 1923 - 1933 f or 

six c roup s as li steO. on each J?G.ge of t h is table , 

s..horling· f or each y ea r tota ls for certah: i -+:ems of 

assets, liabilities, receipts, · anD. ded.,lctions; 

also compiled net J?rofi t or d.efici t , st2.t u tor;:r net 

income or deficit , n e t loss for p rior year , cash 

di-viciend.s :paid, ross profit f rom sa le s, a n& r:;ross 

:profit from othe r operations . ( o pa es) . 

l~OTE : This Appendix bouncl wi t !.1 ChC1.:pter I . 
r 

-6- . 

Appendix 4 -- Taxation 

Table Number 1. Total Revenue Receipts of the United States Government; Total Internal Revenue Collections, (showing 

revenue from tobacco taxes and other major groups); 

and Total ·Customs Receipts, (showing import duties 

on tobacco and all other commodities) . -For Select-

, .ed Years between 1935 and 1914. 

Table :i:.J'umber 2. Ci1.:J1.Ges in es of Taxation on Toba cco Pr oducts 

f rom 1914 to 193 5 (i clusiv ). 

Table l umber 3 . Sta t es Taxi n'--:; Ci car ette s ano. their r e.t e s of t r1:ati on; Sta tes Taxi nc Smok ing Toba cco ond the ir 

r ates of t a...--::a tion ; Sta tes t axi ng Cheni ng Tobe.cco 

a nd. t hei r r C<.tes of t axation ; Stc.tes a...~ in.r- Snuf: 

anC. thei r r a tes of ~..xa tio . 

~able Humbe r 4 . Re c ei ;> t s fror.1 Ci .:;a rette Ta"'\: e s 2nd Pe r C['i)i te1 Ci .::;~ rette Scles in St a t e s Taxin:; Ci c:.:trcttes Alone . 

Tabl e ~:un oer := . Li st of StD.ter.wn t s. 

j-O:rE: Ap:0endi x 4 i s bounC:. i7 i t h Chap t e r VI I. 

A-:rJe':lc.i :: 6 -List of Ba si c Tabl es receivec. f ror.1 the Departr.1en t of Labor 

on Humbe r of :2rm;lo-rees, hours, Dllc3 ec.r .i nv:s i n t he ci,:;e re t te , uff , che'7i nc.· a11d snol;:i nr; to bc.c co manufnctu ri 11-:; 

i nd· str:r 

lTOTE: A l i s'c of t :1e se Tabl es is B?)) end.ecl. t o Chap t e r II . Tile Tables 

Tiill be founcl. 'in ~re::.d.i:: 6 . 

Di st ri Jlti orl. 

Li st of Co ee s D..i.1C. Li st of Fini shed Co de' Hi stori e s in t h e 

Tobc.cco I nC'ustrv·. 

To.ble lTumb e r 1. Li st of Co de s. 

T2.ble :i.Tumber 2. Finished Co de d i stories in t h e Toba c co I ndust ::.::r 

in t h e l\Tationa l Re cove r:r Adrninist!'ation fi le s. 

Ai:roendix 9 -- Foreign Tra d.e in Toba cco 

10691 

Table :Jum'Jer 1 . A descrip tion of a serie s of cllarts nne. t ables in 

photosta t form, cove ring exports of leaf t obn.cco 

a;,.1cl 'tob.s.cco })ro ducts f rom t h e United Sta te s to 

ea ch of seven countries, "IThi ch e.re in .r o.tioaal 

Re cove ry Ac1":1L1i strD.tion files, To-oD.cco Unit, 

~~art . 
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CHAPI'ER I 

I'EE L.A.RGE COill'O . .:<. NIION L . ~: E TOBACCO MA.NUl.·'ACTURI.r1G HIJUSTRY 

11The tr.s.nslation of perhaps t wo- t h i r d s of t he industria l wealth of t he 

country fr u!ll i il.d:.v i <iual rm ~1 p to ownersh i .9 by t h e l a rge, publicly financed corp orati ons vi t a lly chan ges tne lives of pro-perty or-mers, the 

lives of the workers, and the me t h ods of p ro:?ert y tenure." (*) 

Berle an<i Mean s de fi ne t h e 11 uasi-:~mblic corp oration" as one 11 in 

which a l a.rge measu re of sepa ~e ti n of m;nersh ip and control has 

t ak en p lace t hrough t h e multip lica tion of owners" ( **), a11d names 

a~on5 oth er disting uishing hro~acteristics tha t of the public market for its s e curities . 

. The grm; th of the Cj_Ua si-public corporate structure is of peculiar 

s.i gnif-icance in t h e too a cco mo..nufa cturin.g industry . The monopoly 

develop ed. by Th e American IJ:•oba cco Company in the l a st decade of the 

nineteenth century and continued until 1910, resu lted in the decree 

of dissolution by · the Sup re:r!e Court of the Dni ted States in riley, 

1911, ba sed on direct viola tion of the Sherma n Act. In its decision, 

the Supreme court recognized the interest of the -general public a nd 

further t h e large interests of t h e investors in the seduritie s of 

t he com-oJc:..ny. (***) 

Th e toba cco i::1dustry, together with the · oil industry, nas res:?onsible in larg e part for direct n&tional r e cognition of the interests 

of t h e g eneral public anQ t h e intere sts of investors in the conduct of large corporations. 

Since 1911, the corpora te system has g rown by leaps and bounds. 

As of January 1, 1930, the two hundred. larg est non-banking 

corpora tions , rr i th combined a ssets of ei ghty-one billions of dollars, re:pre s ented nea rl;)r ha lf of all corpora te wealth in the United 

Sta tes. (****) List ed run ong these t wo hUndred corporations are 

four tob2.cco co m~c:.mies: T'1 e .fu1 er ican Tobacco Com ~ny, Liggett & 

N~ ers Tobacco Com~ an , P. Lorillard Company, a nd the R. J. Reynolds 

-------·---

( *) 11The i•llOo. ern Corpora tion and Priva te PropertJr", by Berle and 

Me a ns, Preface, p age vii. 

( **) See further notes a nd q_u otations, pages 7-10 of this ch· .. ptor. 

( ***) U. S. v. The erican Tobacco Co., et al., 221 u.s. 185. 

(****) Berle c: nd Means, page 19. 

10691 
r 

-8-

Tobacco Company, all of them owned or controlled by the American 

Tobacco Company before its dissolution. (*) 

As compared with average assets of forty and one-half million dollars for each of the two hundred largest non-banking corporations, 

these four tobacco companies sho~ average assets of 172 million 

dollars and three of them, the Arnerican Tobacco Company, the 

Liggett & Hyers Tobacco Company and the R. J. Reynolds Tobacco 

Company, show combine<i assets of 578 million dollars, or an average of 193 million dollars. (**) The market value of the preferred and common stocks of the Big Three together, as of January 

2, 1936, was $1,481,596,000 (***) (based on stock outstanding, 

December 31, 1934. 

In addition to the four tobacco companies named, three snuff companies which were component parts of the trust prior to its dissolution, and certain other tobacco manufacturing corporations, 

illustrate clearly many of the characteristics of the quasi-public 

corporate structure. (*~**) 

( *) Abundant sources for definite statistical and financial information concerning these foUl~ companies are available. Standard 

Statistics, Moody's and other published nanuals, have together 

recorded their growth since 1911. Government sources, the more 

important listed belo~. have also been extensively used. 

1. Treasury Department, Bureau of Internal Revenue. 

(Group information only). 

(a) Statistical Section, Income T~~ Unit 

(b) Tobacco Division, £,i iscel1Cl.J.""'leous Tax Unit 

2. Federal Trade Commission 

3. Securiti es and Exchange Commission. 

( **) Berle and ·eans, page 20. 

( ***) See Appendix 2, Table 3. 

(****) ''The Mod.ern Corporation and Private Property" (Berle and Means, 

ldacMillan, 1933). Nu.11bers in par en theses refer to pages. 

10691 

1. The two hundred largest non-banking corporations have shown 

a rate of growth of 5. 4% (from 1909 to 1928), more rapid than 

that for all coporations of 3.6% in the seme period, and as 

compared with a rate of 2.01; for all non-banking corporations 

other than the two hundred. (35) 

2. ''The trend of the recent past indicates --- that the great 

corporation --- uill become increasingly import ant in the 

future1t ( 41) 11There is apparently no immediate 1 imi t to its 

increase . It is coming more and more to be the industrial unit 

with which American economic, social and political life must 

deal." (44) 

3. ''The pro cess of stock dispersion has proceaded furthest in 

the very large companies. tt (47) --"The larger the size of the 
10691 

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company, the smaller was the proportion of stock held by the managements" (i.e.' off1cers and dir~ctors). (52 ) . . 

4. Individuals with . ta..~able incomes under $5,000, estimated in 

number from t hree and one-half million to six and one-half million, 

received (1929) 26 .28% of a ll corporate dividends (60). Based on 

1922 tax returns, 11 the conclusion s eems certainly war ranted that 

corporations repres ented very much more than half of the national 

saving.s: apart from "those d irectly employed by the ovmeru. _(64) 

5. "The value of an individual's wealth is coming to depend on 

f orces entirely outside himself and his own efforts". (67) 

6. "Finally, in the corporate system, the 1 owner 1 of industrial 

wealth is left with a mere symbol of ownership while the power, 

the responsibility and the substance which have been an integral 

part of ownership in the ~ast, are being transferr ed to a 

separate group in whose h"and.s lies control u. ( 68) Control over 

industrial wealth C<3n be and is being exercised with a minimum of 

ownership interest. (69) Five najor types of control evidenced: 

11(1) control through almost complete ownership, (2) majority control, (3) control through a legal device ·without ma jority ownership, (4) minority control, and (5) umanagement control 11 (70), 

defined as "ownership so widely distributed that no individual or 

small group has even a minority int erest large enough to dominate 

the affairs of the company". ( 84) liThe stockholder is practically 

reduced to the alternative of not voting at all or else handing 

over his vote to individuals over whom he has no control and in 

whose selection he did not participat~.u (87) 

7. "Are we to assu;11e for him II (i.e. , the controlling ind.i Vidual) 

11what has been assumed in the past with regard to the owner of 

enterprise, that his major aim is personal profits? Or must we 

expect him to seek so~e other end - ~resitge, power, or the gratification of professional zeal?!! (122) 

8. IIFor the tens and even hundreds of thousa..n.ds of workers and of 

owners in a single enterprise, individual initiative no longer exists. Their act b;i ty J.s group activity -- the problems of con-· trol have -become problems in economic government". (125) 

9. 11 Both the Nev-; York Stock Exchange and the New York Curb have 

refused to list new issues of non-voting common stock11 • ('?6) 

10. ''Legally, the proxy i s an agent for the shareholder; and ce ssa:~ il3r under a dut3r of fidelity to him. Factually, he is a 

dumm;;r for the management, -- perhaps assisted by the company 1 s 

attorneyu. (2·15 ) · 

11. !!There is no longer any certaint;y- that a corporation will in 

fact be run primarily in tl1e interests of its stockholders. The 

extensive separation :of m1nership and control, and the strengthening of the powers 6f control, raise a new situation calling for a 

decision whether social and legal pressure should be applied in 

an effort to insure corporation operation primarily in the inter ests of the 1 owners 1 or whether such pres sure sha.ll be applied 

in the interests of some other or wider group". ( 333 ) 
-10-

C. THE BIG F01JR - A MISNOME.."R 

While P. Lorillard Company was an i mport ant unit at the time of dissolution of the trust, in fact it was given a percentage (in value) 

of cigarettes, smoking tobe.cco, and little cigars in excess of that 

alloted to Liggett & Myers ·r oba cco Company, and further a position 

(and products) far mor e important t han t hat r;iven to the R. J. 

Reynolds Tobacco Company (*), its vr esent st atus does not wa rrant its 

considera tion v;ith the three other l ar ge companies. It ·is, therefore, 

for the purposes of t his study i ncluded in another group of companies. 

D. J· JWNERSHIP AliD COHTROL. 

' 

1. Stock ~ne rs ip 

An anal ysis of the total cap i tal stocks of t he Bi g Three outs tandi ng as of December 31, 1 934 ( * *), cl early shows the marked 

degr ee of separa tion of ownersh i p f rom control which ex ists in 

t hes e corpora tions. The tot a l pa r va lue of stock issued and outstand ing by t hes e t hr ee corpora tions a t the above date was 

$372, 241,125. Of t his amount, o ly .75~ was owned by the 

off icers and direct ors, while 97.25% was owned by stockholder s 

not dir ~ connected with t he Management of the corpora tion's 

af fairs. 

The percent age of t he ca-p it al st ocks of a.ll cla sses, outstanding 

a s of December 31, 1934 , owned by d irectors and officers for 

each of the t hre e co r~or ti ns , and t he stockholdings of all 

others follon : 

Amer i can Tobacco Co1n:pai"1Y 

Liggett & !,yers Toba cco Co. 

3 . J . 3.eynolds Toba cco Co. 

Toget her 

Percentag es Owned By 

Officers and 

Dir ec tors 

. 28 

1. 75 

7 . 98 

2.75 

Others 

99 .72 

98.25 

92.02 

97.25 

· The R. J. Reynolds Tobacco Com:9any shows by far the largest proportion of stock ners p by officers and directors, approximately 8% of the total ~p it l stock outstanding. In the American 

Toba cco Company , the management ~ms a neglig ible ·portion, 

approximately 1/4 of ~ of the tot a,l capital stock outstanding. 

This company is an excellent example of the extent to which the 

control of t he larg e corpora tion has passed from property owners 

to centralized management groups. 

"( *) 11 Competition in the .A:n erican Toba cco Com:9anyu, by Cox (1933) p . 30 . . , 

·• ( **) Source: Securities and. Exchange Commission. This subject is 

trea ted i n great er det ail in .A:9pendix 2. 

10691 
-11-

~n e modern lars e corp or::cttion is, of necessity, a form of business organi;:;ation proviC..ins for a nd requiring & wide d.istri but ion in the ownership of its securities. The divorcement of 

o~nership fro~ control i e not a new 9robleo, but one which must 

continue to commanci increasing attention. Certa,in files and 

re:COi.~d.s of tLe Securities and Exchange Comrnission are publicly 

available · to acqu::tint stoc~;;:holders and others interested with 

pertinent fscts on t~ is and other rele.ted matters. As long ago 

as 1927, Professor William z. Eipley of Harvard University (*) 

sugges te~ "introduction of shareholders' independent audit or 

general check-up commit tE:es 11, and commented up on the fact that 

"such inclepen<ient auditing at the e:;.cpense of the corpore.tion 

but under t h e supervision of shareholders entirely independ.ent 

·of the management, is necess a r y under the British Companies Act; 

as also in Germa.ny. tt T··1e d efinite and :pe r r1anent advantages to 

management of s·ome form of direct stockholders representation is 

obvious. 

2. Non-Votin~g Stock 

Uncier this same subject, t he relation of ownership and control, 

the employment 9f the legal device of non-voting stock is of 

decided interest. The considereble extent of its use by these 

three ccr-po:rat·ions i n the tobacco industry, as an aid in retaining control by the management, is most pertinent to this 

study. 

This type of stock not only dis-franchises the owner from any 

right of participation in the election of the directors, but 

prohibits its holder from any voice whatever, dir ect or indirect, insofar as the managem0nt of the affairs of the corporation is concerned. The inter est of the owner of non-voting 

stock is practically limited to the divi<iends "~Hhich he may 

receive by virtue of h is stock ownership. 

Due to the evident limitations of non-voting stock ru1d the 

discrimination as between stockholders which this instrument 

permits, the New York Stock Exchange and the New Yort: Curb have 

prohibited the listing of new issues of non-voting stock. (**). 

The R. J. Reynolds Tobacco Company was the first of these three 

corporations to mak.e use of this class cf stock, by the authorization and sale of 100 .• 000 shares of Comruon B stock without 

voting rights, v.1 ith a par value of $100.00 per share, in 1918 

(***). Under the -y~eemptive rights of the common stock holders, 

this non-voting stock wa~ first offered to them. 

( *) "Main Street and Wall Streetu, Little, Brown and Company, Boston, 

1927, page 215. 

( **) See note 9, page 9. 

( ***)Later changed. to par of $25.00 and again to par ·of $10.00. 

10691 
r 

10691 

-lG-

~: ::;. .!.__ .... - et !: ',:: [ .. ~ e:.·s To"bcc0o Co·::?eny :foJJ.0\7 ecl the example of the 

:a. J. Reynolds Tobacco Company in 1920, selling $10, 73~ , 200 of 

Common B stock, and the ~~erican Tobacco Company, nine years 

later, sold its first issue of this class of stock. As of 

Dece;nber 31 , 1934 , t he records of the Securities and Exchange 

Commission show that out of a total par value of $372,241,125 

of all stock issued and outstanding of these three corporations 

in the tobacco industry, $225,288,525 or 60 . 52% consisted of 

non-voting stock. The percentages of non-voting and voting 

stocks outstanding in each of these three corporations as of 

December 31, 1934, were as follows : 

~~erican Tobacco Company 

Liggett & lljye r s Tobacco Co. 

R. J. Reynol~s Tobacco Co . 

Percent of Stock 

.rJon-Vo t in,g 

45 .74 

56.40 

90.00 

Voting 

54 . 26 

43 .60 

10.00 

It will be oted that stoc1<:holciers owning lOib of the par value 

of all stock outstanding o.f t11e R. J. Reynolds Tobacco Compa..'1.y 

are entitled to participate in the selection of the management 

of the corporation, ~h il e stoc~cholders owning 90~, the holders 

of the Common B stock, are deprived of any voice in the direction 

of the corporation 1 s af.tairs. While this illustre.tion exemplifies to an extreme degree tne extent to whi ch this legal device 

of non-voti ng stock ' as been employed in the tobacco industry, 

it should, in fc1irness to this corapany, be stated that only 

$10,000,000 of this amount resulted from the sale of non-voting 

Class :a stock, the reraaining $80 ,000,000 being accounted for by 

stock dividends declared by the directors of the corporatio:r.. 

from its surplus. 

In discussing the distribution of the par value of stock outstanding betTieen off icers and Qirectors, and other, it was 

stated that the officers and directors own less than 3·;b of the 

total ca-_p i t a l stock outstanding , at par value, ',7nen considering 

the combined position of the three companies. In making a 

similar comparison of the votes held by officers and directors 

and those held by others, it was found that the former have increased their percentage from 2. 75i~ of the par· value of a ll 

outstanding stock owned to 59~ of the nmaber of votes conferred by reason of their stock nership of those classes of 

stock possessing voting rights. The percentage of votes held 

by reason of stock ownership as between officers and directors 

and others for each of t h ese comoanies is as follows: 

American Tobacco Co apany 

Liggett & I.iyer s Tobacco Co. 

R. J. Reynolds Tobacco Co. 

·Together 

Percentages Owned By 

Officers and 

Directors 

.43 

3.79 

34 . 44 

6 . 59 

Others 

----

99.57 

96 . 21 

65.56 

93.41 
-13-

Because of- the wide divergence between the three companies in 

percentage of voting stock to total stock outstanding, the 

average figure is of little significance. 

-· As "of December 31, 1934, t he total stock holdings of all classes 

of .stock held by the managements of Liggett & Myers Toba cco 

Company and t:L1e American Tobacco Company we re insig:lificant. 

It is evident that their managements were no longer dependent 

for control upon the stock they own, whatever differences in 

character or amounts of the various stocks outstanding. For 

these t wo companies, the trc:;nsition -p eriod from strong minority 

control to direct management control has. been ended. 

The situation as regards the ::nanagement of the R. J. Reynolds 

Tobacco Company (incorporated under New Jersey laws) differs 

from that of the two other compru1ies. The management of ·this 

company owned sligh tly more than lj3 of all voting stock as of 

December 31, 1934. In addition t hereto, 200,000 shares of 

common voting stock, or 20% o: t he total voting stock, was in 

the netirement and Insurance I nvestment F\u!d (*); thes e shares, 

company-ovvned, cannot be voted under New Jersey law. Because 

of the fact t hat voting privileges given to only 10% of the 

ten million shares outstanding, and because of the u.."lusual 

terms of llemployee profit participationll (**) and its direct 

incentive for ownership of common vot ing stock, all classes of 

employees of the R. J . Reynolds Tobacco · company are interested 

in t he acquisition of common voting stock, and in the r atio 

tha t this class of stock bears to all other stock outst anding . 

In this company, therefore, management and ownershi p are not 

divorced insofar as t he voting stock is concerned. The 

significance lies in the ten to one ratio of non-voting to 

voting stock , a ratio so abn-ormal that only the remarkable 

success of the management in ear~ing profits has warr~"lted the 

continufu~ce of such a ratio to this date. 

( *) Of the totaJ. of o·ne million shares of common voting stock of this 

corpora tion, the r e cords of t he company filed ';'i th the Securities 

and Exchange Commission indicated that 307,000shares were owned by 

employees other th an officers and directors, as of December, 1934. 

As of Janu ~y 1936 (and after a sale in 1935 to employees of the 

compa"ly by the Executors of the st te of \lr. ]OWLlan Gr ay, former 

Chairman of the Board of Directors, of all or part of his holdings 

of 75,000 shar es of common voting stock), eighteen hundred em·:Jlove es, 

other than dire ctors or officers, we re stockholders. Four hu_~dred 

of these wer e. new stockholders. (Derived from a letter from t he 

company , dated J~"luary 27, 1936.) Stock ho ldi ~gs of common voting stock as of January 1936 are therefor e indicated to be a s follows: 

Officers and Directors 

Retirement & Insurance Invest-

:n en t ]'u_YJ.d 

Other Employees 

Otherwise Held 

Shares 

269,000 

200,000 

382 ,000 

851, 000 

149,000 

Total Stock Outstending 

( **) See page 17, this chapter. 

1,000,000 

10691 
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The unusual era of prosperity through which America passed 

from the turn of the last century to 1929 Tias responsible, 

the Sherman and Clayton Acts notwithstanding, for tremendous 

corporate growths and profits. The return from investment in 

the R. J. Reynolds Tobacco Co1upany to those who bought either 

its common or non-voting B stock e.s late as 1916 or 1917, 

seems hardly credible. Is it to be ~ondercd ~t that the investor gave but scant need to the right conferr ed upon him in 

his stock certificate--or to their lack? 

Similarly, though in lesser defree, the earnings of the two 

other companies during the s arne period, were such that without 

interruption the manasement advanced toiTard complete divorcement from supervision by stock ownership. 

3. Character of tl e Directorates 

The files of t1e Securities and ~~change Commission, covering 

t~e year of 1934, rJere e:~arninec. to secure the lists of individua.ls on tJ.1e boards of directors of these three large corporations in the tobacco industry. Every one of the forty-one 

directors (A.11erican mobacco Company with 17; Liggett & ~yers 

Tobacc0 Company with 12; R. J. Reynolds Tobacco Com·oany with 

12) const ituting all the ciirectors for the three companies, 

held ot· er official positions in one capacity or another with 

tnese corporations. This ap~ears of unusual significance 

since it is customa~r for all cor9orations comparable to these 

in size to have at least some representation on their boards 

of directors of sto~hold.ers nitn no other official relation. 

It is eviaent that a board of directors so consituted is 

directly subservient to manugement control. 

It is ap?arent also that tne Big Three , due to their earnings 

and strong financial position, have maint ined their inde- · 

pendence· of cny outside baru~ing or financial assistance. One 

of the funda~ental conceptions of director responsibility is 

that of examining and passing upon the acts of management, in 

behalf of ownership. Insofar as this conception of the duty 

of directors is concerned, a question arises at once when dual 

responsibility is thus acce~ted by management . In Appendix 3 

of this study, dealinG \7ith the Cigarette, Snuff, Chewing and 

Smoking Tobacco Manufacturing Industry, tables are presented 

based on infor~ation from the Securities and Exchange Commission, sho~ing the official positions and stock holdings of 

these directors. 

4. Ret·u.rns to Management 

(a) Preliminary 

Today, increasing interest is displayed by stockholders 

in the amounts of salaries that large corpora.tions are 

pay~g to execut ives. The Bureau of Internal aevenue 

and Securities .and Exchange Commission are the chief Gov' t 
10691 

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sources for information of t h is nature. Add. itional inforsa t ion co:Jc e:..·:r1 i..1.g· s alaries a::.1d. ot::.er r Pt u.rns to 

man ger~1ent paid by the three large tobacco corporations 

to officers and directors has beEn obtained. from data 

:t' iled. b:y· t h ese co"Jm.s.nies rv- i th the :T!,ederal Trade Commission, in its surve~.r of the tobacco rna 1ufacturing industry for the five yea.r period 1928 to 1932 inclusive. 

The s e thr e e companies h ave filed with the se~~rities and 

Exchange Commission their respective profit participating 

p la11.s f or officej.'S 2nd director::; for the yea r of 1934. 

Two of tl.-w three -- the R. J. Reynolds Tobacco Company and 

the American 1'oba cco Com any -- in filing with the Commission, r'lade ir da te. covering e:·:· ec"L'.tive sal c.ries im-

~ediately e.vailable to the ~ublic. 

Ligr:;ett & I.. yers Tob.:.cco Company, in filing this information, 

marked it as nconfidential" o.nd requeste..i in accordance with 

the law a private hearing before tlle Commission for its 

decision a s to publication of ti1e d<::·.ta. As of January 1936, 

no decision ned been made by the Commission. 

Therefore; to mak e 2. comparable a.n·:tlysis of the remuneration of officers a.n<i executives of thor:;e companies, it has 

be e~-... nece s s·ary to rely to a considerabl e ex t ent upon the 

five y ear period 1928 to 1932 ir..clu s1ve, as s h own in the 

records of the :?ederal Trade Commission. 

(i) ·Th e Americ311 Tob s.cco Compa.'Yly shows the' most liberal 

pol~cy in the ·r e:nunerb.tion of its executives. During 

the f i ve ;>rear _;Jeriod. 1m.G.er examination, the records 

ind.ic.r:.te th<.t, to.:;e ther, officers end directors of 

this cor~or tion received tota l compensa tion of 

$12, 806 , 101, oi w.i1ich $3, 706, 205 rep ress n ted salaries 

?.nd $9,159,895 other cor::rpensa tion from participa tion 

L1 ~ e ·orofi ts of the co r.J r~v in accordance with its ~ - " 

J3y-lm: XII. This p rofit p G.rticipa tion plan provid.es 

the .. t the president and :._ ive vice-pr e sidents tog ether 

shall be entitled to participa te in t en percent of 

the :-1nnua.l n e t p rofits of the com9any , (after divici. erids on l)referrecl stock ) in e::cess of $8,222,245. 82, 

the estima ted ru;10un t o:f the net profits earned durinc t h e year 1910 . Th e p lan further p rovides that 

the a1nount available snall be distributed.: 25 ~ to 

the president and 15~ to each of the five vicep residents. This plan of p a rticipa tion in the comp a'Yly1s profit, a llwed to e~ecutives, accounts <iuring 

the se five years for mor.e tha n 70% of t i.1eir total compensa tion, roxim t~ly ·_ two a nd one-half times their 

fixed salaries. 

Duri:nr; this five year pe:rioc1., $3,848,620 w2 .. s :paid to 

the president as t ot'$.1 compensation, approximately 
,. 

10691 

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30~ of the entire compensation paid to all executives. 

The total compensation paid in 1930 and 1931 was larger 

in each of these years than in 1929. The large profits 

of this company (_t\Jnerican Tobacco Company ) for these 

years are discussed le.ter in this chapter. 

The remuneration of the president of the Awerican 

Tobacco Compan;r for t h1s five year period averaged in 

excess of three-quarters of a million dollars per 

aru1um, and in t~o of these years, 1930 and 1931, 

amounts exceeding one million dollars each year Tiere 

paid to him. This executive receiveu the hi ghest re-

;nunerc tion of any cf the Big Three executives. 

(ii) Liggett and I;.yers Toba cc() Compa.ny 

A comparison of the profit sharing plan for executives of the Liggett & liJYers Tobacco Co .np~J.Y shows 

that it is practically identical wi th the plan of 

the American Tobacco Co illp~J.Y in a ll respe cts, save 

one. This plan, also, is outlined in a By-law XII, 

suggesting a co~on parent age. The one uifference 

between the two plans, however, has great significance. The plan of the American Tobacco Company provides for partici pation by the president and vicepresidents in 10 ~ of the net 9rof i ts after deduction, 

while the Liggett & ••Jyers Tobacco Com~any limits the 

participation of their off icials to ~~ of similarly 

determined net prof its. 

Furthermore, t h e 1928-1932 report of t he Feder al 

Trade Commission previously r eferred to clearly shows 

that the fixed salaries of t he six participating 

executives of the LigGett & i•/ye rs Tobac co Company are 

substantially lower than those paid by the kaerican 

Tobacco Com~any. During this five yea.r period, the 

American Tobacco Compeny paid its president in fixed 

salary a total of $667,500 as COillpar eL to $250,000 

paid to the president of the Ligge tt & Hyers Tobacco 

Company . 

The total com·oens a tion Daid to executives of the 

Liggett & ~Aye~s robacc ~ Company was less than 43~ of 

the tot al compensation paid to executives of the 

A;-nerican Tobacco Company . 'Wh i l e a certain proportion 

of t h is difference i n the total amount of compensation 

is explainable by comparison of their net income 

records, by far ·the najor portion is accounted for by 

t he ri tion in the percentage of participation. 

It should be noteci al"so that the total comp ensation 

paid to the President of Liggett & Myers is 70% less 

than the anount rec e ived by the president of the 

American Tobacco Company during this same period. 
10691 

-17-

(iii) R. J. .?.evnoJ.d s Tobacco om ·. n~r 

While both . the ·.American ·Tobacco Company a:c1d Liggett 

& Mye:::·s Tobe:.cco com-9any have J.efini te plans for rem~Ule ration of their chief exe cutives a s previously 

outlined, the "employee profit participation pl an" 

of the ·R. J. Reynolds Tobacco Compa.ny differs so 

materially fron the plans of the other two companies 

tha t ciiroct cOiitpa.risons cmmot be made. While the 

Fecieral Trade Commission i n its report on the period 

1928-1932 listed_ the tote.l amount of compensation by 

t!.1 e executives of the t wo other l c::.r ge companies, it 

listed_ onl;f the specific s 2.laries of the officers 

and. d.irectors of t he R. J. Rec~rnolds 'l1obacco Company. 

This company is t herefo:::·e treated under Section (c) 

immediatel y follo-.;dng. 

Comparisons t hus far mDd e ar e based primarily on Federal 

Trade Commission data and refer to the years 1928 to 1932 

inclusive. The following c01nr1 ents are bas ed upon the 

mat erial filed by these tnree conpanies with the Securities and Exchange Commisson as of De cember 31, 1934. No 

information is available for the intervening year of 1933. 

As discussed l a ter in this Chapter, in connection with 

the finc.t.ncial growth of these companies, their combined 

earnings available f or d.ividends in 1932 ($100, 017,097) 

were considerably l a rger than in 1929 ($84,406,253). 

Their profit showing did not indicate any im~act from the 

depression until 1933. Since 1932 t heir profits have 

been so fa:r below the immedia tely prior period. that remuneration to management insof'&r a s it is based on earnings na turall;y has shown a decided. d ecrease. 

(i) Liggett & Myers CCobacco Company 

As previously stated, certain information filed with 

the Securities and Exchange Commission by the Liggett 

& Myers Tobacco Company is not as yet a:vailable, so 

tha,t it is not possible to ri_lake a direct comparison 

of the amounts of "other . compensation" for the three 

COi:1panies. Significant facts about the two other 

co!:lpanies are, however, available. 

(ii) American Toba cco Company 

On July 12, 1933 a t a meeting of the board of directors of the American Tobacco Company a resolution 

was unanimously adopted, the following be ing a portion thereof: 

"This Qompany does hereby declare its policy 

that hereafter no President or Vice President 

/.ii 

I 
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s:~~::.l oe e::.E,ct~:;u to 01 ·ice unless he shall in 

advance, as part of h1s terms of compensation 

for his employment, agree in writing to waive 

2ny ycy"1e:r...ts to him under Article XII of the 

By-Lro s of this Company in excess of an ~~ount 

computed in conformity '7 i th the following 

formula. 11 

Then follows a formula specifying the method for 

calculati t he amounts to be paid under Article Xlil 

to the president and to eeC.:1 of tne five vice-presi-

~ents of the company f or the years of 1933 , 1934, 

1935 and each yea.r thereafter, reducing some'7hat the 

renunc" tion to of.:'icers and based on l ar ger and increaui awounts of de~uct ions from earning s before 

st-ttinf" u·9 lO,o of the rernain1ng e ! rnings as their remuneration. 

The CO Jilpa!l' further made the statement to the 

Securities and E':cha.nge Commission tha t during 1934, 

no ?a.yrnent c in e:Ace ss of ,;30,000 to any one person 

resulted from the refit sharing arrangements. With 

Articl e XII ap9arently still unchanged as a By-Law, 

it is evi dent that there heve been 1aivers of its 

full privileges by the execut ives of this corporation. It is es~~ed that the publicity r esulting 

from the r eport of the Feder a l Trade Com!lission, combined with the heavy drop in earning s uere l argely 

res onsible for these changes . 

(iii) R. J, Beynolds Tobacco Comyany 

From da ta i n the doc,::ets of the Securities and Exchange co ~u is ion, as of ilecember 31, 1934, t here has 

been secured the P.eynolds pl an for uemployee profit 

par ti cipa tionll by both off icers and employees. 

Article XII of its By~laws is quoted herewith; 

11All of the Company 1 s officers and employees 11ho 

have o1ned its com ... on stock and have been in its 

employ for not le ss than twelve months, then next 

preceding nay be allo-:v ed, in the discretion and 

at the option of the Board of Directors, beginning ith tne y ear 1912, to participate in proportion to the Com~ on Stock thus onned, in the 

Company ls annua l profits which are in excess of 

the ye rcentage of the profits earned during the 

year 1910, to wit ; 22.19 ~er cent, not exceeding, 

however, 10 per cent of those profits in excess 

of 22. 19 per cent of its entire outstanding issue 

of Common Stock, ta~ing into account pro rata 

any increase or decrease thereof made during the 

year. The Common Stock owned by an officer or 
-19-

employee, for the purpose of this ~y-law, beginning with the year 1916, shall include any 

stock P.Urchased during the year from an officer 

or employee or from the personal representative 

of a deceased officer or employee, provided 

such stock would have entitled the former owner 

to participate in proportion thereto had it been 

held f or the entire twelve month period. n (*) 

As the above plan for profit participation is based on 

holdings of common voting stock, the company does not 

consider that amounts distributed under the provisions 

of this plan should be classified under nother compensation''~· 

The outsta~ding differences in this plan from that of 

the other two companies are (1) the necessity of investment in the common voting stock of the company (**) 

in proportion to the r e turn realized, (2) the provision her by all officernand all em~loyees m~ participate, based on their holdings of common voting 

stock, n.nd (3) employment by the company for not less 

than twelve months. 

Aga in referring to the Securities and Exchange 

Commission, there was set aside from the profits of 

t he year 1934 and carried to reserve for the Retire-

·ment and Insurance Investment Fund the sum of 

$500,000. As this fund contains 200,000 shares of 

common stock, it is evident that the participation of 

t h is fund represented $2.50 per share. There was also 

a declaration qy the Board of Directors on December 

31, 1934, under Article XII of t he company 's By-Laws 

and payable to 1,489 officers and employees in the 

sum of $1,629,257.50. Based on the $2.50 per share 

participation in the fund, it is assumed that the 

number of shares participating in the last named 

amount is 651,703. 

The officers and directors of this com~any owned 

334, 410 shares of common holding stock as of March 

18, 1935 (***). Bas ed upon such holdings there was 

( *) There has been no increase in the amount ($10,000,000) of common 

stock (voting ) since 1916. (Excep t changes in par value nd consequently in number of shares). The practical result has been 

that 22.19% or $2,219,000 has been deducted from profits each year, 

before the 10% is determined as nemployee profit participation" on 

the employee-owned common voting stock. 

( **) The company reports that there have been many exchanges by employees, of B stock for common voting stock, on a ba sis of heavy premiums for the common voting stock. 

( ***) See Table 1, page §6 Appendix 3, 

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I 

I 

/ 

I , -' 

i 

J ' 
( *) See Table VI. 

10691 

evidently distributed to the officers and uirectors 

the sun of $836,025 U-l'lder the "employee profit partici·;>ation plan", or ap~roxima .. tely one-half or· the total 

paid to all enployees. Since the common stock holdings of officers u.nd directors are 'known only as of 

harch 18,1935, the:i.:'e is orobc; bly some variation from 

the actual stock holdings as of December 31, 1934. 

Therefore, the sums so paid to officers and directors 

ure subject to any change in stock holdings between 

the t-rro dates. 

By referring again to their By-Law XII and the note 

thereto (page 18; , it r·1a.y be assumed that the sum 

payable to officers and employees, holding coml!lOn 

stock, and tl1at amount carried to the reserve for the 

ri etirement and Insurance Investment Fund, a total of 

2. 129, 257.50, represents the lO·,o deducteu from 

profits in accorda...rl.Ce ·.lith the _plan and for that 

year. 

The one point of similarity between the plans of 

these three companies is tha t a certain :percent.1ge is 

deducted from the earnings of the company either bef or e or after ·net profit is a etermined. Since the 

eari.ling s of t he R. J. 4··eynolds '::obacco Company in 

1934 were $21,563,894 ... s compc. red to $36,674,800 in 

1931 (*), it is evident that the sums paid under the 

ll e;n:ployee profit participation plDn" have been 

materially reduced from t he high point. 'I'he share 

to officers ana J irectors has apparently been further reduced by decrease in their stock holdings. 

.. \ 
-21-

5. Conclusion 

: . 

(a) Return to Executives 

: ~ ~ . . ·; ·; ·:. 

.. :, .• 

· ·· ·· ·. ·: ·. If, in each case, Article XII of the by-laws of these 

coiTipanies was drawn upon the dissolution of the trust in 1911 ~ ' . . 

·· or · \'f(ithin a few yea~s thereafter, the methods of computing addi t'ional compensation to executives, based on profits over a..r1d 

· above the 1910 earnings, had. much in its favor. A distinct 

incentive for developing additional profits was presented to 

the officers, and the 10% share of the. additional earnings 

allovied to the exe.cu ti ves, as in the case of the American 

.Tobacco Company; then apparently represented a reasonable compensatiori for their ~~rvices. 

The tremendous development of ci-garette smoking in which 

these three companies have had so large a part, has resulted 

since in such increase in their· earnings that the 1910 profits 

are but a fr.actiori . of · total profits, and .the ir deduction, 

prior _to _determining the net 8arnings on which the percentage s 

for officers' compensat.ion are based, hl:'l.s become relatively 

immaterial. The percentages to management, 10~& or otherwise, 

have grown t·o represent a much larger proportion of total 

earnings. 

The total · remuneration to executives of the Liggett & 

Myers Tohacco ·company is not ·' out of line with the consistent 

earnings and growth of the corporation. The fixed salaries 

are moderC!-t~ _. for . a corporation of this si~e, and the percentage of profits· distributed in the form of ·other remuneration, - . . . . 

to certain of its chief executives, · is not excessive. This 

conclusion ~s 'based.. upo~ remuneration to its principal 

officers as shown in the records of the Federal Trade Commission for the perio·d end:ing 1932. As· previously stated, 1934 

in~ormation from the Securities and ·Exchange Commission is 

not available.· 

rrhe me'thod of p ayment ·IDa the directors and officers of 

the R. J. Reynolds Tobacco Company ha s several unusual pro -~ 

visions. 

1. No director, official or o'ther employee can participate in the "employee prof'i t participation" · plan unless he 

.. ~s the owner of cornmon ·(voting ) stock, and the p a rticipation 

· ;i's directly proportion.al to the stock owned. The incentive, 

·· ., i. ·e., to buy or add_ 'to stock holdings, is excellent . ... 

2. The "employe e profit participation" plan is open 

to all emp loyees. It is estimated that employees other than 

directors and officers now hold (Jan~ry 1936) approximately 

382,000 shares of common voting stock, distributed among 

1,800 stock holders. Employees also have beneficial interest in 200, 000 shares in the :::te tiremen t ··and Insurance Investment Fund. These, together, represent ·· 5B.2% of all 

COiill!lOn voting stock. This opp ortunity to own stock and 

10691 
. . ' 

10691 

-22-

participate in profits is of decided advantage to all employees who can avail themselves of its privileges; and to the 

company. 

3~ The fixed salaries of the five highest paid executives- as .shown in the files of the Securities and Exchange 

Commission for ~he year 1934, total $199,000. As in the case 

of Liggett & Myers Tobacco Company, these fixed salaries are 

without questio'n moderate for the responsibilities of management resting upon the shoulders of these executives. 

In the case of the American Tobacco Company (as previously mentioned), there has been a readjustment in this compensation to management although the By-Law XII itself remains 

unchanged. A far simpler method of readjust~ng this would 

have been to reduce the percentage of earnings applicable to 

the remuneration of officers • 

There is no question that mana~ement is entitled to fair 

compensation for its services. Individua ls whose skill in 

management is pri'rilarily respons·i ble for the remarkable financial success of these companies deserve liberal rewards. 

Based on any such rate of earnings as that of 1928 to 1931, 

the present method of ·executive profit-sharing as outlined in 

By-Law XII of all three companies is not, in all instances, 

equi.table to stockholders. Giving full ~?eight to the excellent showing of earnings during that period, it is still 

evident that the share of profits paid some officials is a 

.reproach to' management . 

By-LaTI XII was originally drawn to develop incentive in 

management . The profits at the peak and at the present time 

are so much larger than those on which these methois of 

profit sharing by management were based that it cannot be determined to what degree incentive still remains. There is a 

wide difference between ''other remuneration", or o.ddi tional 

compensation or p rofit-sharing beyond fixed salary and based 

on profits; and excessive returns to officials that points 

toward a greater intere~t in personal profits than in corporation earnings. 

The present size of these three corporations would 

ordinarily prevent the ownership by younger men in responsible positions of considerable amounts of company securities. No such holding is essential for profit participation in the .Aroa rican 'Tobacco Company or the ·Liggett & Mye rs 

Tobacco Company, nor should the lack of it prevent executive 

r emuneration in direct proportion to accomp~ishment. 

(b) Non-Voting Stock 

Two of these three corporations have ev~dently passed 

beyond the st~ge where non-voting stock has 'bearing on management con~rol. It is possible, but highly improbable, 

tha't the thi:rd has not. 7hatever the original motives for ' . : · .. :: :: . : 
10691 

- 22-

issuing stock of this 1!:l racter (in the case of the R. J. 

Reynolds Toba.cco Conmc.ny the p:rofi t participation plan has direct bearing), the question is naturally raised. concerning the 

elimination of the non-voting restrictlon on all stock. 

(c) Character of the Directorates 

' . 

As the d.irec tor a tes are at present· co::1s ti tu ted, the directors of these corporations, insofar as they pass upon the 

acts of the officers, pass upon their OV1n acts, and their decisions therefore represent the policies of the controlling 

executives. 

r.rhe first step, evicLently, is a readjustment in the direc·torates. The ~oards might be enlarged to permit membership thereon by stockholders ... not otherwise associated with 

management, or in some instances, minor officials, now board 

members, might be replaced by such stock holders. To these 

direct representatives of ownership, d.efini te responsibility, 

possibly along the lines of the British Companies Act as defin~d by Ripley, should be assigned. 

It was not until 1933 that these three companies felt 

the impact of the depression. Since that time, profits have 

been smaller; socia.l responsibility to ~griculture and to 

labor, and other charges, have increased costs. The joint 

competitive position of these three companies in the tobacco 

manufacturing industry has no,t improved. 

A wise management, facing problems of greater responsibility and of decided social import, will of its own accord 

seek the cooperation and assistance of ownership. In the 

period that this study has been in process, the interest and 

keen appreciation of management in these problems has been 

sometimes evident. ~he large corporation is an integral part 

of American industrial life. It bears upon its shoulders the 

same ~ual burden existing in every component part of the 

national structure, that of recognition of present social responsibi~ity, and adjust~ent to its needs and demands. 
-24-

E, CIGABETTE SELLI!JG P~ICES A:EJ POLICIES 

The Ame1,i can Tobacco Compan~/ (Lllcky Stril-e), Li -r;g ett & Myers 

Tobacco CompanJr (Chesterfi eld) , Dnd the R. J , Reynolds Tobacco 

Company (Camel) have manufact red rnoBt ~f the snall cigarettes 

ever since the present type of blended cige.rett e became stan9--

ard. T:his section is concerned ·-rith sales policies governing 

tnese t hree brands and a fourth, Old Gold, manufactured by P. 

Lorillard Company, (*) The conpetitive position of thes~ companies in t he industry; t h e strH:ing adl1erence to the same 

list p r:be ·-,ith its conscqu~nt lack of price competition ; the 

large e-:penG.i t u res f or j_Jtl')lici ty (**) to develop consumer demand for p articular br~ s; the relations of these companies 

to ~- eir va riou s classe s of distri0utors- all these are factors of c reat significance. 

(a) Ordinary Discounts 

While there ar~ e:::ceptions, the standard discounts are a 

trade discount of 1~; of list and an additional discount 

of c), for cash, 

(b) Range of List Prices 

Table I indicates the range of manufacturers ' list prices 

since ITovember 1919 as reported by Cox and Barney(***) . 

Comparatively fre q11ent changes and some price variations 

occurred prior to 1923. For the follouing eight years, 

or until June 24, 1931, prices renained stable and approximately uniform at $6. 40 per thousand, except for the 

period betryeen ril 1928 and October 1929, uherr prices 

were lo ;rered to $6 . 00 per thousand. Since 19 28, these 

four brands 1 ave been sold a t the sane list, changes in 

pri~e by these fo,,_r concerns being practically simultaneous, 

(*) Tl1.e populs.r brands discussed herein are ~- esignatecl for excise purposes b~.r the In t e:rnal Revenue Bureau as 11 snall cigarettes weighing 

not more than three :9ounds per thousandll , Small cigarettes are 

subject to an excise of $3. 00 per thousand. The other ~ell lmom 

brands, including Phili-p l.Iorris, mentholated cigarettes and the 

ten cent bra:.11ds, are in this same excise ~lassification . 

( ** ) See Chapter VI, Distri~~tion, Advertising. 

(*** ) 11 Competitio:.1. L1 the American Tobacco L1d1..1-stry 11 by Reavi s Cox, 

Columbia University Press, 1933. Chas. D. :Barney & Co ., Ne11 York 

City, "The Tobacco Industry" , lOth Edition , 1934, 

10691 
-2~ 

In June of 1931, the list for small cigarettes was increased 

from $6.40 to $6.85 per thousand. This price increase will 

remain as one of the ·most s-ignificant steps ever taken b~l the 

manufacturers in the histor.y of the cigarette indust~J• Consideration must be given to the fact that this increase of 45¢ 

p er thousand was made in a period of low labor costs and uhen 

leaf tobacco was at its lowest price since the war. 

TABLE I 

CIGARET-TE P:TICES 

Date ~.'Ianufacturers' List Prices §} 

E) Q} 

November 1919 $8.20 9:/ $8.00 

December 1919 8.00 --- December 1921 7.75 7.50 

January 1922 7.50 

r·:larch 1922 6.80 6.80 

A1.,_gust 1922 6.20 §} 

October 1922 5.80 §} 6.40 

August 1923 6.45 ~-- '-' 

April 1928 6.00 6.00 

October 1929 6.40 6.40 

June 1931 6.85 6.85 

January _1933 6.00 

February 1933 '5.50 

January 1934 6.10 

uoreover, the full impact of the depression was becoming most 

pronounced. In view of declining costs and decreasing consumer buying 

pouer, a general decrease in list prices might well have been expected 

under con&itions of free competition. 

Pro frQction figures of the Big Three indicate that they had maint a ineQ a peTcentage of approximately 91% of the total production of small 

cigarettes for the years of 1928, 1929, and 1930. It is evident that 

§} Inclucles excise of $3.00 per thousand. 

~ Cow il~d from data provided by th~ ·American Tobacco Company as reported by .Reavis Cox ncompetition in the .Aroerica."l Tobacco Indust~J11 , 

Columbia University Press, 1930, page 199. 

£1 Chas. D. Barney and Company, New York City, "The Tobacco Industry11 , 

lOth edition, 1934, page 26. , ... · · : , ·· . . ' 

9:./ Special allowance of 20 ~: ~ .. i8h in add.i tion tiQ · ~e usual 10% and. z; . ""11 t ,J • 

§} Prices quoted net stbj_ect to: 2;1 . di.scoun · fat' casn :i.J;l ten days • . . 

10691 
-26-

the manufacturers felt confident that they coulQ maintain their joint 

competitive position at these higher prices in spite of· the continuing 

do1J'7!1uard spiral of the depression. That t~is percen;tage (91%) would be 

continuad at the higher prfce levels is an assumption of at least semimonopolistic market control. 

A further examination of Table I shows that the price of $6.85 per 

thousand remained unchanged until January 1933 when the list was louered 

to $6.00 per thousand. This decrease ~as almost immediately followe~ 

(February 1933) by a further cut to $5.50 per thousand. This v-ras the 

lowest list price since the war or since the excise on small cigarettes 

had been raised to $3.00 per thousand. 

The underlying causes for these two sharp breaks in list prices are 

obvious. At the close of 1932, a£ter a period of eighteen months, it 

was evident that the Big Three had failed to maintain their competitive 

position in the industry. In 1932, the Big Three produced only 81.47; of 

the total small cigarettes m~~ufactured , this comparing with 91%, the 

average for the three years prior to 1931 when the price was raised to 

$6.85 per thous~d. A still shrinking pocketbook was refused the high 

retail prices. 

Six other manufacturers produced 17.9 billions of small cigarettes 

in 1932, amount~~g to 16.8% of the total production for the year as 

compa~ed to 8. 2% for 1930. Large increases in production of the ten cent 

brands (*) and in roll-your-own cigarettes indicated thatthe depressionridden consumer had ~hifted to more economical forms of smoY-ing. The 

high p~ices permitted also some expansion of mentholated cigarette sales 

of ot_1er blends of small cigarettes, particularly the Phillip Morris and 

the Raleigh. The low list price of $5.50 per thousand uas a definite 

attenpt by the Big Three and P. Lorillard Company to regain their former 

proportion of the business. Retail prices broke to the lowest level in 

years. 

(*) No statistics have been obtained ~1owing the definite amount of 

ten cent cigarettes manufactured. 

High prices for the standard brands, cheap tobacco leaf and lo\7 

uage rates were responsible for its rapid grouth , particularly 

duxing the period under discussion. 

T~e ten cent cigarette, of course, would not be justified if unable 

to absorb the additional uage cost Q~der the code and since its 

· termination. During 1934 ~~d 1935, the processing tax and the high 

cost of tobacco leaf, particularly Flue-Cured, together ~ith the 

excise of $3.00 per thous.and, the same as· for all small cigarettes, 

f.orced almost all manufacturers of ten cent cigarettes to inC"'..lr 

·· loss on· this product. The elimination of the processing tax and 

the lower price paid for tobacco leaf in the fall ~~d winter of 

1935 will again plac.e the. manui~t-q.rer of the ten cent cigarette on 

a profitable basis~ :see' CJ:ia~ter "T_\'le··.Contribut.ion of the Tobacco 

Industry to National Income Thr~ugh Tax Revenue"• 

. . . .. 

10691 

. . .. . .. . .... •,.rc:.~ .·· .. • .. :•.,;: ~ • • • • • • I 6 ' ol • 

. . ' . . . . ... ' .... . ·~ .. ··. . . . . · . . ... 
-27- .. 

I n January 1934, the list price of Lucky Strike, Chesterfield, 

Camel and Old Gold was ra se~ to $6.10 per thausa~d where it has since 

remained. The 1933 earnings. had shown extremely heavY shrinkage; wage 

levels had increased due to the President's Reemployment Agreement; 

processing taxes had been added; the cost of tobacco leaf was decidedly 

higher, Further, the year and a1balf of low prices had aided but little 

in i ncreasing the share of the Big Three in the total number of small 

cigarettes manufactured, (in 1933., their share was 83. 9%; in 1932, 81. 4%). 

It was evident, also, that higher. leaf cost and processing taxes would 

practically wipe out any margin of profit in the manufacture of the ten 

. cent cigarettes and expensive promotional campaigns for these brands 

would be out of the question(*) • . 

2. Character of Competition. 

The habit-forming characteristic of the product, the relatively 

slight differences in tobacco blends, and the same list p rice -- all 

point toward a form of competition between these companies of which 

price competition is not a part. Were it not for the special allowances 

later discussed, the statement could be .made that competition is not on 

a price basis. That there is competition of the sharpest character among 

the brands of the large manufacturers, there can be no question. It 

con sists in the direct effort by each manufacturer to secure a larger 

share of the cigarette market by the use of various publicity channels. 

3. Channels of Distribution.(**) 

As mass distribution developed from mass production, the manufacturers uhose principal channels of distribution had been tobacco, drug 

and grocer jobbers, began to sell direct to the large department stores, 

retail chains and other large retailers. The fact that tobacco manufacturers sold these retail a ccounts at the same discounts of l o% and 2% 

given to uholesalers, decidedly complicated the wholesalers' problem, 

since the gross margin alloued to the direct retail buyer represented 

the combined gross margins of wholesaler, of the sub-jobber, and, in 

part only , of the retailer. This step also transferred to the manufacturer the choicer volume and credit accounts. 

4 . Special Discounts and Allowanc e s . 

I n addition to the problems resulting from t he se two distinct t yp es 

of direct buyers, t he re is a further complication. The manufactu r ers --

and by no means limited to the Big Thre e --have made and are still making speci al 11 secret 11 allowances over and above t he standard discount s . 

Thi s subj ect merits plos e scrut iny . 

( a) Definition . , .. 

. · 

As u sed by the Feder al Trade C:ommi ssion and in t his r eport, 

apeci al allowance s and discounts ar e defined as al l t hose 

forms of discounts , exclu sive of c ash discounts , which ar e not 

(* ) Proc essing t axes we r e probably a heavi er burden on some manufa ctur er s 

of t en c ent cigar e tt es t han on the Bi g Thr ee , becau se of ~e l arge r op or~io n of Burl ey t obacco i n t he t en c ent cigar et t e. ~ur ey bore 

a heav1 er pr oc essi ng t ax than Bright Flue-Cur ed during most of the 

p roce ssing t ax ~e . 

(**) See Chap t er VI, Distribution . 10691 
, 

.shown by the manufP..eturers on .the fr:c'e' o.f ·.their re lllar 

invoice, but which ~~e subsequently. paid or allowed by 

them to chain stores, wholes al ers or othe~ outlets •. 

(b) Their General Ch ct ristics 

Al . such nrice CO liC essions ma,y be divided into ,three gene r al ca t egori es: (1) volu."'le or quan tity; (2) a dvertising 

and nromotional; (.:? ) ?.11 othe r s . v·ari a tions i n t y·oe s of 

allowanc es ext end fr )m ordinary discounts in~re sing with 

VOl U!Ile purcha s e to strai ght ca sh. r e funds for. which no expl .:ma liion need be given: ' · 

(c) The i r Extent 

I n a st udy made by t r1e Feder al Tr de Commi ssion, sev er al 

hundr ed r euorts we1;e secu r ed from manufacturer s of tobacco ro duct , groc eri 8s , and drugs, covering t he ir sal e s 

and allowances t o a l a r ge numbe r of sel ect ed distriou tors 

f or t he 'e~ s of 1929 a.:1d 1930 . Of t he 134 manu fact"G.r ers 

r eporting , 89 gave allowances i n 1 929 and 94 i n 1930 . 

Mo r e manuf'l.cturers made allowanc es t o chai ns t han t o who l esaler s and tho u r onorti on of cha.i n accounts r eceiving all owanc es was f ar gr eq,t e r than i n the c ase of whol es 3.l ers. 

32 . ~ of the chains r ec eived allowances from manufactu re r s 

as against -~ of t t e 'tobacco whol esal ers . 

Almost without exc ep t i on , t obacco wno l esal e r s (*) r~r 

othe r lines . The ~u ct s of many of the other items 

ordina r i l y ,g.llow ~; r di scounts ai'ld give speci al allowances r epresentin6 f ar hi gher uerc entages on t heir sal e s 

t o who l esFJl e r s t han t hose al lov-ved by th8 tobacco manuf acture r s , and the snme cut ric e st ory , both whol esal e 

an~ r et ail, has fo ll owed i n t i eir inst anc e . Without 

que st i on, J.:;h e -practices of manufacturer s of thos e othe r 

p r oducts have com;li ca ted t he lJrobl em_s of the to"uacco 

manufacture rs . 

Ref erring again to t he stud.y made by the Federal Trade 

Commission , t he tot al allowance s by all tob acco manufacturers maki ng allowances to chain stGr es in 1930 , r epr esent ed onl y 2 .13-':, of their sal es to these ch ai ns. 'Tnil e 

the ue rcent age to to tal sal e s is r elativel y insi gnificant, 

the urac t ice s that have developed t he r efrom ar e f a r more 

s erious t han t he percen t age would indicat e . The r e is no 

qu estion t hat a co nsiderabl e uart of these tot al allowances 

to chains are given to a small numb er of large chai ns, 

furnis.hing a furt he r pret ext for t he use of tobacco p roducts, urincipally cigare tte s , a s loss l eaders. 

(*) Ordinarily cl assifi ed a s t hos e for whom tobacco p roducts r epre sent 

more th-an 0:~ -· of tot al sales. 

1 0691 
-29-

The data from the Federal Trad co~i~ &ion is based on 

1929 and 1930. That these sam~ .: ~19- ~c ~s are still in 

use is indicated by the textimo!iy res~_r:I. ted before the 

Special Congressional Committee on the Investigation of 

the American Retail Federation on :the quE!stion of the extent of special allowances made by the manufacturers of 

tobacco products, one large drug chai~ 'Y~S shown to have 

received sp ecial allowances from twenty :Qf the largest 

manufacturers of tobacco products (*) , . 

Most of the large cigarette manufacturers gave this drug 

chain 5% in special allowances for disp.lays. One manufacturer paid $25,00 per store making window displays for 

one week; another paid the chain $3,300 per month. 

Special allowances on cigars ranged from 2% to 7% and one 

manufacturer paid this drug chain $25.00 per store for 

making a window display for one week. One large ci garette 

· manufacturer paid a grocery chain $1.00 per store per 

month for seven months in 1934, an amount computed to be 

in excess of $100,000 (~. Special discounts for the i ntroduction of new brands were common . 

In this connection it is interesting to note that the 

same sources rep orted that both the drug chain and the 

grocery chain received allowances in excess of th ir direct advertising outlay. However, it must ot be considered that these chains limited their promotional activities to paid advertising space in outside media. 

Their counter and window displays in practically all 

case s were considered va luable advertising space . 

While, as already mentioned, the special allowances to 

the wholesalers are much less in amount .than to the chains, 

a field study in December, 1935, by this Unit, covering 

certain metropolitan centers, discloses the methods used 

by tobacco manufacturers with the wholesale trade, particularly the tobacco wholesalers. The following illustration was picked a t random in a large metropolitan . 

center (***). 

One tobacco wholesaler was allowing a large reta iler 10% 

and 2% discounts, presumably the total discounts from 

list given this wholesaler by a manufacturer. It may 

safely be assumed that this wholesaler did not pa ss on 

these discounts without other compensation in some form 

of special allowances from the manufacturer. Competition 

(* ) Hearings before the Special Committee on Investi gation of the American Re tail Federation, House of ~e resentatives, Seventy-Fourth 

Congress, First Session, Vol. No. 2, July 31, August 8-9, 1935, 

pp. 75-80. 

(**) .rtema r ks of Han. \/right Pa tman, Cong ressional Re cord, 74t h Congr ess, 

First Se ssion, July 29, 1936. 

(***) Data on fil e in Tobacco Unit. NRA Files. 
' . 

-30-

is such among the manufacturers that if one manufactur8r 

makes a special arrangement of this character, it is 

highly probable others will follow and at once. The effect on othe r wholesalers is demoralizing. 

In connection with a campaign of this sort, special allowances, ordinarily taking the form of free cigarettPs, are 

made by the manufacturer direct to some of the larger retailers who buy t hrough wholesalers. The chain stores also rece ive allowances of this character, whatever their 

channel of purchase of tobacco products. With these 

sp ecial allowances to a sma ll list of large retailers, it 

is enevitable t hat some reta iler will cut p rices using 

cigarettes as a loss leader. The final step, of course, 

is a spread of the cut price. This is exactly what 

happened in t he metropolitan center from which the illustration is taken. Small r e tailers without the advantage 

of special discounts or the fr ee cigar tte~ are forc ed to 

do bus ss at a loss or quit. 

This subj ect receives furthe r attent ion in the Chapte r on 

Diotribution and .in particular under t he heading of "Advertising". It is enough to point out the responsibility 

of the manufacturers in br eaking down standards of distribution and profits of distributors both wholesale and 

retail. 

These p oli ci e s a s exemplified by the tobacco manufacturers 

find the ir cour1terpart in many other industries. The tobacco manufacturers are by no means alone in continuing 

methods and practices t hat place a heavy burden on channels of distribution. Because the tobacco manufacturing 

industry has shown such rapid growth and large profits 

and has also been built upon the direct development of consumer demand, it has paid little attention thus far to the 

economic p osition of the wholesalers and retailers, a 

group essential for t he proper distribution of tobacco 

products. 

]oth wholesalers ~d r e t a ilers, in talking about their 

problems, have genera lly stated their belief that these 

trade practice s of the manufacturers a re primarily responsible for their troubles and ra~e evidences a decided 

lack of good will toward the manufaeturers on this account (*). This lack of good will is, without question, 

in part responsible for the loss in comp e titive position 

of the large manufacturers. 

The growing sense of social responsibility evidenced by 

industry in general is a most significant result of the 

efforts to admini~ter the National Industrial RecGvery 

Act. The recognition by the tobacco industry, definitely 

(*) From field study by this Unit, data on file. NRA Industries 

Studies Files. 

10691 
. -31-

including the three largest corporations, of its responsibility to labor has been elsewhere discussed. (Chapter 

II) There is no doubt that a similar social responsibility toward distribution must be recognized. Further 

economic research is required so that the problems and 

inequalities of distribution may be clearly presented. 

If the large manufacturers have the vision to see the 

benefits that will accrue to themselves by the elimination of the friction they have created with the distributors,· such a program of research will originate with 

them. Recognition of social responsibility, primarily 

to the national economy, will not permit further avoidance of this major problem. 

10691 
-32-

?RODUCTIOJ:J 

Due to hGn~E::s in n et: ods of co m:~ ilation by the Bureau of I n t e r i1D,l 

~evenue , Trea sury Del?a rtment, a ncl the ne cessity for g roupi nG certain 

in:.:orma tior... to -')revent disclosure of t h a op ero.tions of individual 

comJ:ai1i es, ;/e["..rlv comparisons of a ll t y-pe s of r:1c::nufncturec_ to bL.cco , 

ci.- rettes D.~1CL ci c;(',rs ca·mot be m:-'.C:e f or extended p eriods ( *) . 

Ir t h e '.-:r n~ b~·. co manr-=-r:.ct'..l rin~ inclu tr , p roduction ~1 as r eclined from ~8 400 000 p om1c

1 s i n 1931 to 115 , 500 , 000 p ound s L : 1934. 

During the s e sr:me ' ' C::tr s, the to ~al of smoki n-"" tob ceo mQ.J."1ufa cturecl 

inc l~ ased 5 . !5;o -- froo 180, 000, 000 ~:>o unds to 193, 000 , 000 p ound s. 

One g rou'l? of rrt(\,_n.l:f tctu r e r s ro~Y·')ec._ f ron 79 . 1;.; to o4 . 6~; . Coi nci C:entc:.ll , c- s e cond n;r o rp of manufoctur- e rs i ncre.:; sec_ t h eir -aG rc nt~ e 

f rom 14 . 5c:b in 1931 to 29 . l(o in 1934, t"n increc-.se of 111 . G~ ; t l1e 

b~ c.n ce of thl:; L1d.ust~ sl.onec;. :E~c- cticall·.r :10 ch2ng e ( 6 . 4;'b to 3~) . 

es ti ·1f~ cl a!1~;es l1.:tve tc.~cer: )l ace i n t he L eo : rauhica l loc £" tion 

of factori es ·-,ro fucinG s 1?.11 ci c-c. r ette s, e nd in t h e _9e rcent at;e of 

·1ro duction i n various r te s . TL bl e II follonir:g sh o·. s c, marl-eCl. 

incr e£~ se i:- produc t ion in t h r ee st nte s, l' orth C0..rolina , Vir.::;ini o. 

't.nc1 nt .c· , Ti i t:! l i ttle ci.1ange i n t ' e ··Ttlr.'lber of fr: ctori e s in busi-

:J. e s s L1 ~1ore c-t< tes. Tl1e pe· c ent c.:.:-;e of tot ~. l "'Jroduction of smo.ll 

cico.re t te s i.1 t~10 se stc...,tes jlli'lneC'. f r ofi'l 61. ~ i n 19 20 to S2. 'J2.~ i n 

1S'34 . :-e,: .._-o -r_-:: c;t:-te shoTis tLe ::eovi est 1.os-; il1 t ':lis s£~"1 e -.,"'rio0. 

G-0nerD.ll3r, tl c c or.ceDtr t:'tior. L: Vir .,.i:'li c. o.ncl :-o r t h Carolina, re)rese;.:ts a c;rou:pir:::; of the r.10 r e ir.,)ort m:.t mam..-.factul~e r. ·:rho ure a 

l c:- r g e amount of .dri -;l!t Fl ue- Cnrer1 to b::cco i n their :;_:> ro C:.uc t s; si ·li -

l c:-.rl-·, ent l~, ')l'Od::..:.cti on i s basec1

_ primo.ri 1 'r on 8. ~e usc oi 13u rlG , 

g rown in ~ot are~ . 

Ti1e ecoi1omi c .... .r.c. r.o c iDl p robl eur.; basecl U!')OY~ ~1 e n.9.m1£r:.c t u:'e of tobe.cco p roduc t s, o t.i1er t'--..:- ::.:. ~-- rs, a :te lo cc.li z e o., C~n l t o '.'. l a r 0 e 

e=:t ent bm.:m0. U) ri t h the ecoi:or.1i c i nc:ust r i 2.l p ro speri t :r of t :1e 

Sou t :1 Atlc;1 tic st ates rr!cl j{entuc'!.::-• . 

( *) Se e Aon endL- 1 , Tables 1 c:..nd. 2 . 

106Sl 
-33-

r.rABtE I I 

lli."'.:J.os r of Factories in Busine ss on Ja:nu r lst, and the Pe rc ent of Tota l 

Pl~o -c-..ction of SI.:IALL CI GAR:::;TT:SS ·o roducec_ in the states leaciint:; in [:

f c.cture , for the r;ele ct ed 3rea:rs of 19~ \ 1930 an<i 1920. ( *) 

,__'JTl-oer of fac tories in 

bl.lsL.".!.e ss 0::1 Janunry 1 

United St c;.t es 

orth Carolina 

Virg inia 

Kentucky 

1Je1. Jersey 

C2.lifornicp erE;. S3' 1 V , .ni e, 

·e, : Yo r k 

Other States 

Perce:r:.t of Tote.l Proc'.uction 

United Sta t e s 

l-o:rth Carolina 

Virg inia 

Kentucl":y 

.,. r1 erse '" 

Ca lifornia 

Perms:rl vani a 

1;ery York 

Otl1e r States 

1934 

111 .... 

i:) 

7 

:_:;; 

4 

12 

5 

4.) 

26 

00 00I ~ 

:S3 . 50 

29 . 45 

9 . 47 

3 . 89 

2. 74 

• 59 

. 22 

.04 

G. ASS~TS AYD ElL:.IJIYGS OF fJ:'H3 .3I G lt?.EE 

l . Ca1Jite.l Inr ~t d 

1930 1920 

110 237 

7 5 

7 8 n 

..:> 1 

3 13 

8 4 

9 23 , o .._ 126 

22- 57 

100.00~ 2.00.00~ 

63 . 79 50. 84 

23 . 50 11.06 

3 . 58 . 02 

4 . 21 6 . 60 

3. 86 2. :0 

. 05 4 . 03 

.95 22. 83 

.OG 2. 22 

TJ .e ca_;i tal investect in the Bi g Three com .~ nies has s~lOI'ln a 

t r emend us inc:ree:.se since the t :cust cti ssol uti on decree of t he 

Suy reme Cou rt in 1911 ago.i n st t h e olG. Ame rican Toba cco Con-

~; an , of r7ilich tl1ese co m:9 E~ ...... . i e s m3re a. p c:.rt. Table III 

followirlG, S~10 S e car i t c; l func'1.s ir-ve st e d by the Bi::; 

Three. 

( *) Source: A:c.nua.l Re ·;ort s of the Co m:·:i ssione r of Inter:.:e.l Rever:ue. 

lOG91 
- 34-

T.ABL~ I I I ( *) 

Ca:~) i t a l ~"'unds Invested 

cor-m a.i'1Y Dec . 31 , 1912 j)ec . 31 , 1934 

D 

Percent of 

Increase 

Ame rican Toba cco Co mp an~r 

Lic6ett (..; Myers Toba cco Co . 

R. J . Reynolds Tobacco Co . 

$J 38 , 392, 000 

73 , 130 , 000 

15 , 844, 000 

$277 , 518, 000 

211 ' 193, 000 

149 , 931 , 000 

100 . 5 

18J . 8 

846 . 3 

Total ~22 366 000 $633 , 642, 000 180 . 9 

Ca.pi tal Funds c.re :1Gre C:.efineO. e.s the <:JTlount of cB.l:>i t 2..l stock 

i sued E~ t ~a r value ~) lS "'.cc·llTiu.l'-.t eci rofi ts ret£~.ined in the 

business and fundecl. inJ.ebtedness: the r are equivalent to the 

?let assets of tl1e com•x ... :1i e s, :plus funC:.eC: indebteCiness. 

As evi denced. in the above table , the c 0.p i tal funds in~este d in 

the three com:ranies conbined s of Deccr.1ber 31 , 1934 shoTI an 

increa.se of 1 20 . 9% c.s cor:rJC~. re d. to :9ecer r 31 , 1912, the yeC~ r 

folloi?'ing the decree . 

There e:::d.sts amone; the in<hv idual comgani es n 11id.e differm1ce 

in t he ~e rce ntuge of incre se in ap it 1 funds invested. A1-

thoueh the R. J . Re·;nold.s 'L'o bucca Com·9any sho,.-rs C'. remart:able 

r c.te of increc..se , t h is coMpG1Jl,;t still ran1>::s l ast , as of Decembe r 31 , 1904 , in the ~~OL~ t of c0pital f ·unds invested. 

2. Earnings 

-

To..ble IV present s t he t ota l amount of income cwailab1e for 

divi dends be5 innin.g r:i th tl1e cclendar 3rea r 1912 r..nd enc::.inc 

Decernbe:;..' 31 , 1934, a '?e riod of 23 :rears. 

Total I ncome Avc:.iLs.ble fo r Divi dencls 

1912 - 1934 

Compe.ny Amount 

Percent of 

To tal I ncome 

Al"Ti e riccw.1 Toba cco Com·xmy 

Li ~c:; ett (}; H:rers Tooacco Co . 

$490 , 676 , 461 

302, 337 , 203 

44t:1 , 7 67 ' 817 

40 . 03 

24 . 27 

R. J . Reynolds Toba cco Com:_Ja..r.y 35 . 70 

Togeth er $1,245 , 781 , 481 100 . 00 

( *) Source: Standard. Cor porc_t i on records anc~_ Ii oo ~r 1 s Manual . 

( **) Sou rce: Sa.me a s for Tc.b1e I I I . 

10591 
-35-

This l .::.r g e surn of one and one-quarter billion doll2rs of n e t 

ee.rning s available fo::..~ G.ividends Tias unint rru~·Jtedly o.ccL.unul a ted over the t l.'enty-three y ear period TI"i thout one sin.sle y ea r 

recording a loss either for the three companies co nbin d or for 

eny single one of the ip.dividual companies. The aver2.g e a~c1ual 

ea rnin0 s for the Big T11ree ove r this period exceede& $54,000 , 000. 

In three ;;ears of this ·perio d., 1930, 1931 anc. 1932, tl1e net 

ee rninss exceeded one hundred million dollars annually . 

The Bi:; Three recorded net e c:trnings of $ 25,513,103 fo:r the y ear 

1912, reached. their lo1r oint in 1914 11i th earninss of only 

$19,942,924, regi stere&· t h eir p eak in 1931 with total ea rnings 

of $105,707,939 a nd clo sec. this 23 yea r p eriod l!i t l1 net ea rj_lings for 1934 amo~1ting to $55 ,128,138. Table V set~ forth 

corresp onding information on ea rning s for each of the three 

· com~ani s. 

TABLE V ( *) .,., . .iiia rm.ng s 

Am. Tob. Co. Li "t'et t •• X :> 8: R. J • Rey nol d s 

l.Iyers 

Net rni n~s for 1912 

Lon est Annual Ea r ning s 

1912-193-1 

$15 ,443,960 

( !.915) 

11, 234, 532 

(1931) 

46,189, 7'-11 

23 ,504,554 

-~ 

.:p 7,169,186 $2, 899,937 

,(1914) ( 1913) 

5 ,391,174 2, 862, 567 

Hi c;he st Anm.1.al Er. .. :~ in s 

1912-1934 

(1930) 

24 ,002,315 

( 9~31 ) 

36, 674, 800 

l:e t ~a ~1 in s for 1934 

;. l~ e annm .1 ea rning s 

1912-1934 21,681,585 

20,086,690 

13,145,096 

21, 536 , 894 

19,327,731 

From these fi gure s, it will be ob se rved t hnt v.1 t:1ou.gh the 

Ar.1erica n Tobo..cco COJ.1:9an..v r anks first in ave r ase annua l ea rning s, the otl1e r tuo COffi})ani e s he.ve mat ri ll r i oprove cL the ir 

rela tive y O si tion as ccmparea to the y e a r 1912, Vl i t h the n e t 

eo..rninGs of the R. J. Rey nolds Tobo.cco Co mpan r sho·:Jing n 

remarkable increa se. It is a lso interesti ng to :'lat e hoVI 

closel y the rn~ngs of the t h ree compP.ni e s p;..rallel ec..ch 

for the ye ~ 1934. 

3 . Dispositi on of Net l~ in s 

Table VI, ne~~t pr'esentecl, shoTI"s the c:.i sp o si tion r.:ade by the 

Bic; Thre e of the net income a.va ilable for dividends for t h e 

23 yec:-.r p eriod, 1912 to 1924 :1"s inc1icat e d by the compila tions 

o:f I:iood.Y1 s L1am1a. ,l an( St2.n6.ar d Coroora ti 0:11 Records: - ~ 

(*) Source: See Table III & IV. 

10691 
DISPOSITIO~T 0? 

- 36-

T.:wL"S VI ( *) 

AVAI LA.BLE FOR DTVID:!UDS 

1912 - 1934 

Cormany re t Incone 1"1. 

J < sh Divio.ends Paid Retained In Busi-

.:'i.vo..iL::.ble for Per ": *' ,,., o~ .. .... (*.:C) Per 

Divi dends knount Cent_ Ar.1o1mt Cent 

.An1Gri can Tobacco ·;>.,; ''LI98 ' 0 "7~' 0 ' Li~ - .) l $405 , :337,180 :n . 30 $ 93 , 119 , 201 1G. 67 

Co M~Jan~.-

Li s~et t ,. ;~rers 302, 037 ' 303 208 , 769 ' 295 39 . 05 93, 567 , 908 30 . 95 c..; 

Too . Co . 

R. J . Reynolds '~4~1 , 737 ' 317 31C, 6f-.7 , 500 71.65 126 , 110 , 317 23 . 35 

To b . Co . 

To ._) ··et~ler $1 , 24o, 731, 4rJl $932, 983, 975 7t.1, . 89 ¢312, 7 97 ' 506 2CS . ll 

( *) 

( **) 

( ***) 

10691 

Tl c three corrr•)onl es <'.s D. 6 roup , oi stri but eel three- fourths of 

t hei r income in crsh div dend~ and re~ ained one- fourth in the 

business. ~1e Americ~ n Toba cco Con'>Cl~" h~ s distribut~?c. t}le 

1:-r.;est pe rcento --;e of its :c.et income i::1 C."'..sh ciividends. Alt~ 0U£h the R. J . Re~rnol&s Tobu cco Comnanv hos reta lnecl in t:1e 

busL1es!':. t :1e 10..1\;est ozwu..J.t of income , its divi<lend poli ~;- hc:.s 

been sli ~htl ~r more libero..l ~lC'n t.ha.t of the JJi J~ett & Lye:~s 

Tobacco Co r~rpal\';" • Of the total of $932, 983,975 of cc.sh C.ividends pai c. c .1rin::; this pe iod, $812, 281 , 7 23 ,_7o.s pai d on coi!lMon 

stocl~ i ssue·s or sli -~l tly more than 87)b of tho total di vide:uO.s 

po.i d . The amount of nGt income r etained. in the busine~s , ,-.~1 ile 

onl'' one- fo\.J.rth of 'Ghe net income earnecl, is neve rthelGss o.. 

size.ble run olmt , anC. of <'e ci c

1 er sif;nificance '7hen consiG.eroC in 

rela tion . to t ho runount of cn.~·) i t ::1l stoc~: issued ::mc3. !JO.i d il!• 

The accnmul.:.t e C: ea rnin::;s from J a:mG..i.J' l , 1912, to Decer'lb3r 31 , 

1934 reJjai:1ed in the business by the Bie Three amounted. to 

slightly more t han tne er:tire ca:oi t ul stoc1: equity paid. i :1 D.t 

December 31 , 1934 plu.s the su.~lus eJ:i sting a t t 1e beginning of 

the ~eriod , J nnuary , 1912. (** *) 

Tl1is indicate s the e:~ tent to which these three com·Jenies hc.ve 

gone in finD.i':)Cin_:; t ; eir ·bus:.necs ou t of net :~. rnint;s rr,.th· :c tl.an 

tl1rol..lt_zh t he sale of capital stock. The Ame rican Tobn.cco Com )2.n:r, 

due to its l c..r C;e net ....-rorth ( $133 , 037 , 148) in 1912, sho·..rs o.. much 

lo :er percm.J.t a_:;e \"!~1 en cor.ro o.red to t }le t'Yo ot~'l er com:)e.nies. Tl•e 

R. J . e~rn olds Tobc:cco Co:1j;)a11y, i7i t l1 accumulated e a rnil1£s ret a ined in the business CLl·:.rin-.:::: this 23 vea.r T.Jeriod ar:tollilti ~v'; to ~- I • 

more t han five nnd one- quarter times their cap ita l stocl: ecrui ty 

:oaid in (eno. of 1934) p lus t : eir exi-sting surplus as of J D.a·c..arJ' 

1 , 1912, fm.~nishes an e::cellent illustration of the e~:tmlt to 

uhich soJ::;e com~.)E'n ies hc.ve r elieC: ·~1 on the retention of net eo.rnings,_ in finencin{:; e=;::o(),ilsion. 

For Source , see Ta bl e III, page 34 

Either capitalized. r i ssua.nce of stoc~c or c.red.i ted to surylus. 

For Source , see Table III, p<'.;;e 34 
-37-

H. ASSETS M~ EARNINGS OF THE TOBACCO INDUSTRY 

Year 

1926 

1927 

1928 

1929 

1930 

1931 

1932 

1933 

This section is based on data contained ir! the published reports of the Commissioner of Internal Revenue. The interpretation 

of t his information is s~bject to certain limitations" set forth in 

a letter from the Treasury Department, dated January 27, 1936, and 

which appears in part as Table 2, Appendix 2 of this study . It is 

suggested also that ? rior to further reading of this section, Table 

1 of A~pendix 2 be examined. 

vfuile it must be noted that this information is based on reports from corporations only, it may be s~ated th~t for all practical purposes, the corporations rep resent the entire tobacco manuf acturing industr~; the amount of business transacted by individuals 

as distinct from corporations is insignificant and affects but sli g~tly the total figures. (*) 

The total ass ets of corporations wnose p rinci-pal line of business is tobacco manufacturing is in excess of one billion dollars. 

F~gures for four years are shown below: 

Number of 

Year Corporations Total Assets 

1930 351 $1,195,940, 801 

1931 318 1,171,429,041 

1932 336 1,106,217,695 

1933 351 1,033,724 ,283 

It will be noted ~h t the total assets show steady reduction 

for each year after 1930. This decline i n the amount of aggregate 

assets is, no doubt, principally due to sustained dividend payments. 

Table VII follo':ving indicates the volume of business done by 

all corpora tions in the tobacco m&!ufacturing industry, 1926 to 

1933 inclusive, and t he trend of s ales during this period (1926 --

Index, 100) . 

TABLE VII(*) 

- llmber of - Statutory 

Corporations Ne t Sales Index Ne t Income 

497 1, 13'1 , 7o2 , 192 100 .0 $115,108,720 

430 1,171,093,621 103 .2 122,299,922 

419 1,179 , 89?,428 103 .9 119,530 ,648 

420 1,247,033 ,708 109.9 127,740, 109 

392 1,147 , 464 ,549 101.1 137,1 33 ,598 

366 1,1 63 ,7 06 24:~ 102.6 136 , 887 ,408 

370 1,023 ,155 ,166 90.2 133 ,247 ,921 

383 9:34 ,083 '116 81.4 . 50' 331 '561 

(*) The tot al receipts froill individuals engaged in tobacco manufacturing, 

reporting for 1933 net income of $5 , 000 and over, amount to $2 ,115 ,000, 

less than 1/4 of ~ of the amount repo rted by cor orations for that year. 

(*) Eased on compilations of the 3ureau of Internal Revenue. 

10691 
. . 

. . 

Ye ar: 

• --38-

These sales are net sales by m~~ufacturers. The relatively 

small charge in volume ·<?f sales, particularly when cigarette prices 

in 1932 and 1933 a.re cons:ldered, warrants the conclusion tha t ci.o-ar- . 0 

e ttes and othe r tobacco p roducts Rre no longer in the luxury class. 

Th is· is strikingly represented later in this chapter when comparisons are made between the tobacco mru1ufacturing industry and certain 

other sel ect ed gr oups. 

It should also be not ed before uassing this table that the 

number of corporations actively engaged in this industry in 1933 

was ~~ l e ss than in 1926 . The industrJ is still continuing the 

process of concentra tion. 

Table VIII following s tne division of t he total sales of 

t h e i ndustry as bet ween t hose cornoration reporting statutory net 

incomes (*) and t hose co rpora tions r eporting deficits in their income tax r e turn s. 

TABLE VI I I ( *) 

NE-I' SALZS OF COH.PG7.ATI ONS REPO?.Tii'JG 

St atutory Net Income 

:% to all: 

:Corpora-: 

.: tions Amount 

• 61oi to · • I • 

:Tot al: 

:Sal es: 

St a t ut ory 

:7b to all: 

:Cor:r;>ora-: 

No.: tions 

Ne t Deficit 

5'b to 

Total 

AQount Sales ----------------------------------- 1926: 289: 58 .15 

1927: 261: 60 .70 

1928: 238 : 56 .80 

1929: 243: 57.86 

1930 : 195 : 49 .74 

1931: 155 : 42 . 35 

1932: 114 : 30.81 

1933: 122 : 31.85 

1,1 1,1 2, 56 8: 7. 04 : 

1,149 ,055, 860 : 98 .12 : 

1,161, 49 3, 653 : 98 . 52 : 

1,202, 648 ,288 : 96 .44 : 

1,078 ,1 87,181: 93 . 96 : 

1,072,199 , 623: 92 .14 : 

963 ,126 , 649: 94 .13: 

819 , 838, 493: 88 .72: 

208: 

169 : 

181: 

177: 

197: 

211: 

256: 

2 61: 

41.85 

39 .30 

43 .20 

42 .14 

50 . 26 

57. 65 

69 .19 

68 .15 

33,599 ,5 1: 2.96 

22,037,761: 1. 88 

17, 403,775: 1.48 

~.385,420: 3.56 

69,277,358 : 6 .04 

91,506 , 622 : 7.86 

60,028 ,517: 5 .87 

:104,246,623:11.28 

It will be noted. t hat the percentage of corporations in this 

industry reporting st atutory net income shows a decreas e of app roximately 42~ in 1933 as com-oared to 1926 . ' . -

It is evi dent that t his decline in t h e percent age of corporations reporting urofi t s was p rimaril..r due to the depression. While 

this table does not bring out t his fact, it is later shown that the 

drop _in number of corporations reportir-g net income wa s with one or 

t wo exceutions among the smaller a sset cl asses. 

Tne year 1932 accounts for the l argest drop in ratio of corporations in this indastry report~g statutory net income (the percentage for that yea r 30.81,; , as COffi?a red to 42.35~ for 1931). 

(*) See Tno1 e 2 , ix 2 . (*) For so ~rc , s·ee . ·I'abl e VII. 

10691 
Year 

1926 

1927 

1928 

1929 

1930 

1931 

1932 

1933 

-39-

A further an~_ysis is of interest: the uercent~ges of cor9oratior.s reporting statutory net income or deficits offers a most interesting comparison vii th tne percentage in dollar volume of net 

sales of these corporations. Although the number of corporations 

reporting losses during this ei~'l].t year period range from 39 .3;) to 

69 .19 ; of all corporations reporting, their sales ranged only from 

l.L18~b to 11.28~; of all sales made in this industry. Further, sales 

in this same grouu for 1933, showing a sales percentage of 11.28,, , 

are far larger than for any of the prior years mentioned. 

Table IX following states the statutory nat income (*) or deficit covering this eight year period for all tobacco manuf cturing 

concerns re~orting to the Bureau of Internal Revenue. 

TABLE IX (**) 

S·-ATUTORY NE'I' IECO ·:i3 OR DEFICI? 

All ·robacco ,anuf ac turing Corporations 

Corpora- <~ to I Corpora- 1o to 

tions Net I~come Sales tions Net Deficit Sales 

289 117,365,959 10.56 208 S2,257,249 6.72 

261 124:,774,568 10.86 169 2,474,546 12.23 

238 121,677,829 10.48 181 2,147,181 12.34 

243 132,581,671 11.03 177 4,941,562 11.13 

195 143,788,111 13.34 197 6,654,513 9.61 

155 142,493,817 13.29 211 5,606,409 6.13 

114 138,398,553 14.37 256 5,150,632 8.58 

122 65,224,339 7.96 261 14,892,778 14.29 

The relatively steady increase in income from 1926 to 1931 has 

taken place in spite of a drop of illOre than 32? in the number of 

corporations showing net income. The surprisingly small decrease 

in net income for 1931, 1932 and tae haavy dro~ in 1933 are eXJlainable only a fter consideration of tne sales uolicies of the large 

coruorations. (***) 

In 1926, 497 corporations reuorted to the 3ureau of Internal 

?evenue showing eithar net income or net deficit. In 1933 the numbe r dropped to 383. This is at lea st a partial indication of continued concentration of tobacco manufacturing among a smaller number 

of coruorations. 

In the year of 1932, 114 corporations, approximately 6~; less 

than in the year 1926, report ed statutory net incoille of $138,398,553, 

or 17. ; more than for 1926. This also indicates that the profits 

of t- e tobacco manufacturing industry are showing similar concentration among a smaller number of cor0orations. 

(*)For definition, see ADpendix 2, Table 2, paragraph 7 (b). 

(**) See Appendix 2, t able 1. 

(***) See this Chapter, Section E, Cigarette Selling Prices and Policies. 

10691 
... 

. . 

I . 

. . 

-40-

FtJ.rther reference to Table l of Apl)endix 2 is suggested for a 

C'Jinpari son of co.sh di viden:ls Daid . by a ll corporations whose l?rincip<3l .lil':.e of business iS "iiOb 3.CCO manufa cturing , With the dividends 

p a id by va rious grou1)s t he rein shown. 

r:;:'he as~ divid end s Da i d. durin-g t h i s ei sht year period agg regate ~708 ,5 55 ,6 , or an annual 0v e rage of ~88 ,5 69 ,450 . It is further of intereSt t o note t he inCrBasing amount for eash dividends 

paicl since 1926, and pe.rticularly the l a rge sums pnid during the de1:;r essi on period, a consi de rabl e Dortion of which h a s come from surn lus r Rthe r t han earnings . 

_IFD:JSTRY COMPARISONS 

Tlis section of t he study is conce rned with c e rt.olin comparisons o f t he t obacco manuf<>cturing industry to a ll m nufq,ctu:ring indu s tri e s and also to selected m~nufacturing g roup s a s cl assifi ed 

by the Bureau of Interna l Revenue . The facts given herein have been 

p repar ed from data compil ed by that Bur eau , FJnd apnl y to coroorations 

only. 

-Table X, following , shows :? C'Jm,p rison of the trends for the 

eight year ue riod 1926 to 1933 inclusive , cove ring t h e above g rou1)s. 

It will be noted that t he toba.cco industry re~.ched its peak 

in dollgr vol ume of sal es i ll 1929, s did a ll cornorations i n 11 

manufa cturing group s and also t he selected g roups. 

Of particular i nterest is the r a t e of decline in sales from 

1929 to 1933 . The net s::1.l es of all corporations in the United 

Sta:ces i.n all manufacturins gr oups , f or the year 1933 , showed a 

de cline of 52.9~"6 i n dollar volume from the -p eak ye a r of 1929 . In 

com1)aring t h e n et sales of tobac co marru.factu ring corporatj ')11S for 

t h is same p eriod, it will be noted t hat t he decline was by no means 

as drastic , t he sales for 1933 showing a reduc ~io n of only 25.96;J 

from 1929. In othe r ws>rds , t he decline in s[i,les of all cornora tions 

in the tobacco manu factu ring group e.s bet,"!een thes e years was app roxi mately one-he1d t hat suffered by all' manufacturing corporatio:1s • 

10691 
INDEX l'nJlvlBERS SHOWING .:E1' SAI; S ..:'?.F. u POR ALL · ORPOHATI OI S I'll ALL HANUFACTlJRI.I •. , GR ·;r:>S COMBINED 

.AliD IN CERTAI N SELECTED ~~W\.JF .. Cl'UluuG ... l ;, '3 -:v { J'u.t ••• Sid.<"' 1J2 t 1933, HCLUSIVE. (1< 26 11 I NDEX OF 100 .0) 

All 6orporati ons in: 

All manuf acturin£ groups in U.S. 

Selected Manufacturing Groups: 

TOBACCO PRODUCTS 

100 

100 

Food products and beverages 100 

Textiles and t heir products 100 

Chemicals and allied products 100 

Motor vehicles, complete or parts 100 

Factory machi~ery 100 

Agricult ural l-Iach. and equ.~.p. 100 

J~7 

101. 8 

103 . G 

103.1 

100.7 

109.6 

87.2 

78.5 

107.3 

1928 

107.5 

103.9 

105.9 

101.1 

117 .7 

101.3 

87.2 

106.4 

1929 

115.7 

109 . 9 

109.6 

106.4 

125.7 

117.7 

96.5 

147.9 

1930 

94.0 

101.1 

97.6 

82.9 

120.7 

73.7 

72 . 4 

116.5 

1931 

70.1 

102.6 

76.0 

68.4 

~0 .2 

52.0 

55.2 

62 . 6 

1932 

48.9 

90.2 

58.1 

49.7 

78.0 

26.7 

33.5 

29. 8 

CO!ITPOSITE HATI OS OF HET IlTCOl/lE TO 1.-iET SALES ;.IH~ .:LL COHPORA'.i'IONS I N ALL !.IJUIU1•. ~,l:" '": :ROUPS 

COMBil~D AND IlJ CERTAI A SELECTED lJlANUFACTUIIT (U0UPS FOR THE YEARS 1926 TO 193 ~, 11JCL1JSIVE 

All Corporations. in: 

All manufacturing 6roups in U.S. 

Selected Manufacturing Groups z 

TOBACCO PRODUCTS 

1926 

6.19 

10.14 

Food products and bevera6es 3.17 

Textiles and their products 1. 57 

Chemicals and allied products 9.76 

l,iotor vehicles,com.plete or parts 8.57 

FactorJ machinery 10.80 

Agricultural l"iach. and equip . 9.90 

1027 

5.07 

10.44 

2.86 

3.88 

4.80 

7.12 

15.35 

12.39 

1928 • 

5.87 

10.08 

3.30 

2.41 

8.33 

6.69 

9.18 

16.97 

1929 

6.13 

10.20 

3.29 

1.91 

9 .02 

7.70 

10.33 

13.54 

1930 

12 .00 

2. 82 

3.99) 

3.49 

4.33 

3.39 

7.38 

Source: Prepared from tabulations compiled by the Bureau of Int ernal Revenue. 

Not e: Figures in parenthesis indicate deficits. 

1931 

( 1.48) 

11. 80 

1.75 

4. ~2) 

(.92) 

1.13 

(4. 15) 

( 6.80) 

1932 

5.43) 

13.48 

.70 

7.03) 

(.52) 

(13.80) 

(15.58) 

(29.41) 

1%3 

54.5 

81.4 

62.9 

59.5 

76.6 

40.7 

38.2 

36. 6 

1933 

1.35 

5.51 

3. 69 

2.93 

2.24 

2.36 

.35 

( 6.00) 

I 

+="" I-' 

I 

-42-

In making sirnile.r coinpari sons to corDorations in the various 

manufacturing g roups, it will be noted tJ.1;..1 t the tob a cco manufacturing corporations made the ost favora-ole showing , and by a wide margin . 

The comparison in the percentage of decline as evidenced in 

the tobacco manufacturing industry and in the food products and 

beverages industry is of particular interest, since the -products 

of eac:1 of t hese groups a re i n evenJ-d.ay demand by the consuming 

public. It -vvill be noted t].m.t L~ the :9 ea:..'-c year of 1929, the sales 

index numbers were '1ractically identical for the t wo groups. In 

1933 , t he index numbers were 81 Jk for tobacco and 62.9 for the food 

group, represent ing a de cline i n sales frorr. 1929 of a:ppro:ximately 

42% for food products as compPred to 26% for tob a cco products. In 

1932, a l arge r variatio1 i n the r a tes of decline was shown between 

t he net s a l e s of the se t wo rou s. 

For the JJUrpose s of compc:tr a tive a.n alysis, grou-p s manufacturing 

both consumable goocls and dur :;tble good s have been included. The 

comparison with t he textil e , chemica l and motor vehicle groups a re 

of d ecided interest. Th e second section of 1'able XI shows t ile re.tio 

of net income to net sales for a ll corporations manufacturing tobacco products and for the same period of years, and the com-oarative 

percentages with t he othe r coroora te g rouns. 

The ratios of net income to net sales for corporations manufacturing tobacco -0 roducts a re de cidedly higher ~n those shovvn 

fo1~ all manufacturing group s for each year of this period. Tnis 

s e.me statement ap-olies also in corresn onding comparisons with the 

selected manufacturing groups, excepting only the t wo durable goods 

groups mFtking f a.ctory machinery a..-r1d agricul tura.l machinery and 

equipment. With these t wo g roups, this statement applies in a 

majority of the years. -

From the percentages L1 this table, it is evident that the 

full impact of the economic collapse was felt in the year of 1932 

by all corporations engaged in manufacturing, since a. composite 

net loss r a tio of 5.43 ·; is shown to tot a l n e t sal e s. 

The six oth er manuf a cturing groups selected here for cornpe.rison also made t heir most unfavorable records in 1932, with one excep tion., che 1ica ls. The average net loss re.tio of .92~ in 1931 

for all corporat ions manufacturing chemicals and allied products 

was l a rger tha~ that of 1932. 

I n contra st, it is h i ghtly significant to note that the corporations engaged in toba cco manufacturing, when consiocered as a whole, 

entirely esc ap ed the force of the crash until 1933. Their best 

showing during this eight yea r period was made in 1932, when net income ratio to net sales was 13. 48; . Th eir dr astic decline following in 1933 wa s primarily due to a price war resulting fro~ their 

sales p olici es and not from any curt ailment in the consumption of 

tob a cco products. 

10691 

-43-

. fhe ther compared with consumr..Lble goods or durable goods industries, the in~ of the toba cco manufa cturing group is most signific.qnt, a:'l.d stands in a cl a ss by itself. TD.is is ev en more s criking when it is borne in mind tha t more than 5(} 1

; of the net selling 

price of tobn.cco mc-umfacturers represents ove ~cnment excise t o.x . 

T~e a v e r age r atios of net i ncome to ~e t sales vifouJ.d be far highel~ 

if the excis e we re eliminat ed . 

Starting in 1931 , t h e Bureeu of Intern l Rev enue has sepa r a ted 

corpora tions into v a rious a sset classes , showing for e a ch cl ass 

statistica l (Jata on assets cmd e a r1dngs . I t is to be r egr etted 

tha t t h is most valuable information does not extend ove r a longer 

pe riod of yea rs. It is of inestLJable VEllue in bringing out facts 

on the co nc entra t i on of 'bu.siness :.md of n rofi ts among the larg er 

co rpora tions. 

T0ble XI followi ng shor!s ru.tio s of net income to ne t s al e s 

by tot al a ss e t classes f or the s ame groups given in 11able A . 

The situa tion El S r eveal ed i n ·rabJ.e XI p r e sents a very dark 

p icture , due , of course , to t he fact that the thre e years covered 

follow i n t he depression pe riod . 

'rhe first i tern of interest i s t he i mprov ement i n r Rtio s as 

the size of the co:c-poration increases . It is i mpossible to st a te 

tha t a simil:c:,r cond.i tion obta i n s i n other t han dep ression years:; 

si nee no st a tistical b asi s for judgment is ;;v aila1Jl e . 

The average ratios of net income for co rporations in a ll manufacturing gr oups combined, for 1932 , i n a ll the various total-assets 

cl asses, were negative, with l a r ge r deficits reported for this year 

t han in any year of the three year period covered. Coryorations 

ma..:.rmfa ctu ring tobacco p roducts, i n t he tot a l-assets class of one 

million to five million doll a r s , reco rded average net earnings for 

1932 of .1 , ru1d t he average net income r atio for all reporting 

tob a cco corporations in the tot al-a ss e ts cl asse s of five million 

and ov e r was 15~; of net s al es. I n 19 ~3 , av e rae;e earning s for a ll 

co rpor a tiohs manuf a cturi ng tobacco declined from 1932 , while small 

increase s i n average earnin:;s we re r e corded in 19 33 for corporati ons 

in c-"'11 manuf P..ctu ring group s combi n ed . The p rice ·w·ar , so ofte ~1 mentioned, was agt=l.in :cesponsible for to~1acco 1 s showing . 

It will be obs e rved that all co ~o ti ons manufacturing toba cc o products m,de a f a r more fav orable showing from the standpoint 

of n.vera,5e n~ t e;~ in s under t l1e v a rious tot al-assets cl asses in 

each year of th'3 three year pe riod t hAA that snown for the average 

of all manufvct, I;ing corpora tion s. 

Corres~on din g comparisons with t he othe r six select ed manufacturing grou,Js s ho'l7 s ome wide v ariations . 'rhe average n e t income 

ratios for cor porations manufacturing f oo d and beve r age products 

["•n d for corporations manufacturing chemica l end allied products make 

a bett e r showi no than t h e average for all corporations manufacturing 

t obacco i n most of t he tota l asset-cl a sses f or ea ch of the three 

years. Tni s particularly apnli 0s to co~Jor tions in asset-classes 

of less t han one million dolla r s , and · is indica tive of a g ree.ter 

10691 

TABLE XI 

AVERAGE RATIOS OF NEl' INCOME TO ~'Rr SALES FOR ALL CORPORATIONS IN AIL MANUFACTUrtTNG GROUPS 

AND CERTAIN SELECTED MA.NUFACTURH-l} GROUPS CLASSIFIED ACCORDING TO TOTAL-ASSETS CLASSES FOR 

THE YEARS 1931, 1932 and 1933. 

Total-Assets Classes - Figures in Thousands of Dollars. 

50 100 250 500 1,000 5,000 

Under to to to to to and 

All Corporations in: 50 100 250 500 1,000 5,000 OVer 

All manufacturing groups in u.s. 

1933 -5.2 - 2.3 - 1.1 .3 1.1 1.8 2.4 

1932 -10.6 - 8.:? - ?.9 - ?.4 - ?.3 - ?.? - 3.4 

1931 - 6.? - 4.? - 4.3 - 3.8 - 3.3 - 2.? .3 

Selected manufecturing groups: 

TOEACCO PRODUCTS 

1933 - 2.8 - 2.3 .4 - 5.5 - 4.1 3.8 6.0 

1932 - ?.1 - 2.7 .6 - 1.9 - 5.4 4.1 15.0 

1931 - 3.1 - 2.2 1.4 - 1.6 o9 6.6 12.7. 

Food products :md beverages 

1933 - 2.7 - 1.0 .3 2.3 3.? 4.3 4.8 

1932 - 5.1 - 3.7 - 3.6 - 1.3 .? o5 2.3 

1931 - 2.2 - 1.3 .? .1 1.0 .5 2.8 

Textiles and tteir products 

1933 - 2.7 .4 .6 2.2 3.4 4.6 6.2 

1932 - ?.2 - 5.1 - 5.2 - 4.9 - 5.9 - 6.4 -10.5 

1931 - 4.9 - 3.8 - 3.5 - 3.3 - 3.4 - 4.3 - 5.9 

Chemicals and allied products 

1933 - 6.4 .4 1.0 3.6 5.3 ?.1 1.7 

1932 -10.1 - 5.4 - 3.5 - 1.7 .2 2.9 .4 

1931 - 6.9 - 3.? - 1.1 .5 o5 2.? - 1.3 

Motor vehieles,comp1ete or e~ rts* 

193:) - 5.4 - 8.:? 1.3 - ?.;? 2.5 500,000 and over 1 

\ **' ,

19;)2 -15.0 -14.? -16.3 -25.4 -1 3.6 500,000 Hlld over 
All Corporations in: 

Factory machinery* 

1933 

1932 

Agricultural Mach. & Equip.* 

1933 

1932 

Under 

50 

- 8.6 

-21.5 

-19.0 

-19.9 

( Cont::Lnued) 

50 

to 

100 

- 4.5 

-19.9 

- 5.8 

-26.2 

100 

to 

250 

- 4.0 

-19.6 

- 8.2 

-21.5 

250 

to 

500 

- 1.5 

-18.0 

- 4.5 

-16.8 

500 

to 

1,000 

- 1.5 

-1?.2 

- 4.3 

-31.7 

- 2.1 

-2G • ., 

- 5.2. 

-34.6 

Source: Prepared from tabulations compiled by the Bureau of Interna aven . 

(*) No statistics available for the year 1931. 

(**) To ~or..cee.l identity of indb-idual corporations, ratios are nat shovm r-..r 

the :;rol1ps from one million to 5 million e.nd fro~TI 5 nillion e.nd over. f~ll 

corporations ir;. these two groups e.re included in the ratio shm•m in the 

g ... ~oup heo.ded 11 500,000 to 1 rr..illion". 

Exple.no.tion ~ I.iinus siblls preceding ratios represent deficits. 

-

-

5,000 

and 

Over 

7.5 

6.? 

6.9 

-29.9 

I 

~ 

\..11 

I 
-46-

degr e e of concentration o;. profits, in tobacco manufa cturing, among 

the high asset-classes, wllic~l have recorded the best ;we rage earning s of any of the groups listed in tne te,ble. 

In closing this section, a furthe r word of c aution is necessary. The report of t h e Bureau of Internal Revenue for 1934: is not 

yet available. That tD.e ratios for these three y e .:.J.rs will be considerably changed is evident frorn information avail able from public 

r, ources. The toba.cco industry hRs shown little change in 1934 and 

in 1935 , while many other industries which followed the normal curve 

of the depression, showed considerably imnroved earnings during 

these years. 

- 0 -

10591 

-4'?-

(Production) 

T . .i\..BLE 

1 Q,uanti ties of Cherri ng, Smok i ng and Snuff Tobacco , Cige.rs 

and Cigr.:·.l"'et te s :nanu:fc;cturocl by the 1'o ba cco I ndustry in 

the Uni ter1. St2.tes, and t!le qu.:mti ties, (and Percentage s 

of the total), lJrod_uc ecl by selected_ g roups of COl"'lJOro..tio:;:ls. 

For calenda.r :rea rs 1926 to lffi4 inclusive ( 2 sheets) 

Ori ~1o.. l G.no_ t en :;Jhotos"SaU.c co-c i es. 

2 Li st of stateme~ts. 

10691 

@AI'riTIIS or CRniiiO, SVJXI!IO .AliD Sl!U:n' TOBACCO, CIGARS .AliD CIOARE'l"'''S 

IIA.IUJ'AC'l'lJIIED IIY THI TOBACCO IlllllJS'rRf Ill THI OIIITID S'l'M:li:S, .AliD Tllll QUANTITIES, 

(.AJID PI&-CDTAGIS OJ' THE TOTAL), PRODUCID Rf SELECT'ID GROUPS Ol CORPOIIM:IO!IS. 

C.&LJ:!IDAR TUBS 1934 - 1926 

(POONDS A1ID IITJIBERS UPDSSII:D Ill TBOUS.AJIDS) 

!'9UCCO mlUS'rl!f OIIOapS 

TOBACCO I!D!JS'l'R! Ill 11. S, I 

~ 

SIUCTID CORPORA.TIO!IS: 

~ 

p!.!Cm COl!PORA.TI 0!15 1 

CLASS OJ' TOBACCO PROD~TS 

TOB,lCCO (POUIIDS): 

Pl'IIC Cbntac 

!'wlo' Cbniac n--eut Cbning 

Scrap Chewing 

1'wiot, J'in&-Cut 6 Scrap Cboring 

'rlltal - Chewing Tobacco 

&.oktac 

Snuff 

fatal - Chewing, lboldn« & Snuff 

Larp Cipro (lllmlber) 

!ball Cip.ro (111m> bar) 

L&rp Cipre\\ao (JI'IDberl Slull Cipratteo (llulllbor 

TOBACCO (POUNDS) 1 

Pl..,; Chewing 

Par Cent, of Tobacco IDd.u•h7 

(D) 1'wiot, Jin..,Cut & Scrap Cbarin« 

Par Cant, of Tobacco IDd.uo\ey 

To\al - Cbowlng Tobacco 

Par Cant. of Tobacco IDd.uat17 

Slloldng 

Par Cant, of fabacco lDd.uot17 

l!nuff 

To\al - Chewing aDd !baking 

Per Cant, of Tobacco I.o.duet17 

(Snuff not Included) 

Larp Cipre (llulllber) 

Sllal1 Cipre (Jilllllber) 

L&rp Cigarat tao (l!llmber) 

9nal1 Cipratteo (11\nbar) 

Par Cant, of Tobacco IDd.uatey 

TO!W<CO (POONDS)I 

Pl..,; Chewing 

Per Cant. of Tobacco lDd.uetey 

!D) fwlet, J'in&-Cut 6 Scrap Cbnin« 

Par Cant. or Tobacco lDd.uet17 

Total - Chnin« Tobacco 

Per Cent. of Toba.cco IDd.uot17 

!boldn« 

Per Can\, or 'rllba.cco IDd.uetey 

l!nuff 

fatal - Chorine " lbokin« Par Cant. af Toba.ceo IDd.uet17 

(Snuff not Included) 

L&rp Cipro (liunber) 

9nal1 Cigero (Jilllllber) 

L&rp Cigarattao (ll\lllbar) 

9nal1 Clgarathe (ll\lllber) 

Par Cent. of Toba.cco IDC!uet17 

1934 

62,76o 

5,080 

2,971 

~ 

52,837 

115.597 

193.075 

36.894 

345.566 

4,525.780 

221,977 

88,202 

129,97b,JJ4 

50.564 

80.6~ 

4,291 

8.1~ 

54.855 

47.5~ 

124,82b 

1>4.~ 

(C) 

(C) 

(C) 

103,268.?70 

79.5~ 

8,590 

13.7~ 

2).951 

45.)~ 

32.541 

28.1~ 

56,117 

29.1~ 

88,&58 

28.7~ 

(C) 

(C) 

(C) 

25.649.095 

19.7~ 

J'OO'l'JOTISt (A) - "Scrap Cbn1J>«0 included uDder 0 91loldng" prior to 1931. 

(B) - 0 9Dolc1og0 1nc1udao 0 Scrap Chewing• prior to 1931. 

1933 

61,)62 

5,042 

3,120 

!i!l.m 

52.886 

114,248 

191.766 

36.099 

342,113 

4,JOO,o45 

209.515 

2,846 

114,874,217 

49.39) 

80.5~ 

4,055 

1 1~ 

53.448 

46.8~ 

128,192 

6b.8~ 

11n,b4o 

59-3~ 

(C) 

(C) 

(C) 

96.397.562 

1!3.9~ 

8,115 

13.~ 

23.411 

44.3~ 

31.526 

27.6~ 

52,25) 

21-3" 

83,779 

27.4~ 

(C) 

(C) 

(C) 

17,820,473 

15.5~ 

19J2 

61,945 

4,918 

3.355 

~ 

58.353 

120,298 

190,987 

35.994 

347.279 

4,)82,723 

278,749 

3.374 1o6,632.434 

50.331 

ln.~ 

4,196 

1~ 

54.527 

45.3~ 

133.026 

69.6~ 

187,553 

6o.~ 

(C) 

(C) 

(C) 

86,785,214 

81,4~ 

7.969 

12.9" 

27,125 

46.5" 

35.094 

29.~ 

46,356 

24.3~ 

ln,450 

26.~ 

(O) 

(C) 

17.958,241 

16.8" 

(C) - Included under "Balance or Induatey• to conceal data rap<>rted aDd tdent1t7 of corpora•ton. 

(D) - 0Tw1ot, J'in .. eut aDd Scrap Cbewl.Dg• ccablnad. to conceal data reported and ldant1t7 of corporation. 

1931 

76,653 

6,378 

4,170 

§.!.lli 

71.71!3 

148,436 

182,947 

39,854 

371,237 

5.347.921 

338.997 

5,16o 

117,064,214 

b2,148 

ln.1~ 

5.532 

1-1" 

67.680 

45.6~ 

144,631 

79.1~ 

212,311 

64.1~ 

(C) 

(C) 

1o6,120,245 

90.6~ 

9.125 

12.7~ 

33.657 

46.~ 

43.382 

29.~ 

26.518 

14.5~ 

69.900 

21,1~ 

(C) 

(C) 

1939 

86.274 

7.624 

(A) ~ 12,71} 

(A) 98,91f7 

(B) 232,013 

4o,76b 

)71,766 

5.893.890 383,070 

7.3&7 123,802,186 

b9.788 

80.9" 

(A) 5.279 

(.t.) 75.0&7 

(B) 135,448 

(C) 

(C) 

112,6b4,o41 

91.0ll 

11,)50 

13.1~ 

(J.) 2,222 

(J.) 13.572 

(B) 53,594 

b7,166 

20.)~ 

(0) 

(C) 

10,122,938 

8.~ 

1929 

96.744 

8,187 

5.556 

(J.) 'tt743 

(J.) 110.481 

(J) 229.585 

41,128 

31n,200 

6,518.533 

419,880 

9.952 122.392, 31n 

78,506 

ln.~ 

(J.) 5. 841! 

(J.) 84.354 

(B) 128,568 

212,922 

62.6~ 

(C) 

(C) 

111,332.70) 

90.9" 

(J.) 

(J.) 15,919 

(B) 55,469 

71.388 

21.0~ 

(C) 

(C) 

(C) 

10,002,44) 

8.2jl 

JJ>Pa!DIX I, 

TJ.BLI I. 

1928 

100,646 

8,892 

5,186 

(J.) (t?i.07! 

(J.) 114,124 

(B) 229,849 

41,76o 

386,333 

6,373,182 

415.535 

10,4o3 

108,705. 506 

83,286 

82.8~ 

(J.) 6,072 

(J.) 89.358 

(B) 128,6b5 

(C) 

(C) 

99.504,497 

91.5~ 

(J.) 

13,295 

13.~ 

2,146 

(J.) 15,441 

(B) 55,552 

10.99) 

20.6" 

(C) 

(C) 

(C) 

6,822,973 

6.}~ 

19?7 

103.918 

7.988 

b,287 

c.a.> ct?i.215 

(J.) 118,193 

(J) 236.779 

41,352 

396.324 

b,519.005 

439.419 

11,432 

99.809,032 

85,840 

82.6~ 

(J.) b,41fl 

(J.) 92.321 

(B) 132,898 

225.219 

&3.4~ 

(C) 

(0) 

93,824,97.5 

94.~ 

(J.) 

14,005 

13.5" 

2,330 

(J.) 16.335 

(J) 56.382 

72.717 

20.5~ 

(0) 

(C) 

(C) 

3,0?6,94o 

3-0ll 

( SIID'I' 110. 1 

or 2 SKDrs) 

1926 

109.76b 

9.179 

6,985 

(J.)'b 

(J.) 125.930 

(J) 245.450 

39.216 

410,596 

b,498,b41 

412,315 

13,211o 

92.096.974 

89.999 

82.0ll 

(J.) 7.091 

(J.) 97.090 

(B) 137,008 

(C) 

(C) 

89,132,4o1 

9&.8~ 

15,845 

14.4~ 

(J.) 2,744 

(J.) 18,589 

(J) 6o,JOO 

78,889 

21.3" 

(C) 

(C) 

(C) 

1,255.6<>9 

1,4" 
QUANTITIJ:S OF CHEWING, SIAOJ:I!IG Allll Sll1lFF TOBACCO, CIGARS AND CI<Wml"''1:S APP'E!IDII I, ( 5I!D.'r 110. 2 

IWIUJ'ACTURID BT '!'Hi TOBACCO I!IDUSTRT IN '!'Hi UNIHD STA!I'ES, Allll THE Q1IA!I'riTIIS, 

(AND PER-CENTAGES OF TKE TOTAL), PRODUCID BY SELSCHD GROtiPS OJ' CORPCJRA!I'IONS. 

!ABU I. OJ' 2 Sl!BTS) 

CALI!IDAR TURS 1934-1926 

(POU!IDS ARD !IUio!llERS DPKESSED Ill T HOUSARDS) 

TOBACCO rNDUSTRY GROuPS CLAS~ OF ToBACCO PRODOOTS 1~3~ ~~:m mz 1m 1~32 !~i:2 121:11 ---..!iZ.I 1926 

GROUP C 

SJ:LIQTS! CORPOR.\TIOII§ I TOBACCO (pQO!IDS) : 

P111t; Chewioc (C) (C) (C) (C) (C) (C) (C) (C) (C) 

Grouped to ahow other thaD 

omok1114: tobacco. Twiat, J'in.-Cut a. Scrap Chning (C) (C) (C) (C) (C) (C) (C) (C) (C) 

Snokt~>& (C) (C) (C) (C) (C) (C) (C) (C) (C) 

Snuff 35.~ 34,bb3 34.510 311.2!12 J9,109 39.51; 4o,ooo 39.724 37.72!1 

Per Cent. of Tobacco Induatr,y 9&.0 96.0~ 95 9~ 96,1~ 95.9~ 96.1 95.1~ 96.1~ 96.~ 

SELECT'ID CIGAR CORPORATIONS: Lar~ Cigare (!lumber) 1,4o2.334 1,101,S41 1,079.8&9 1,428.5!1; 1,470.692 1,712.416 1,518,504 1,502.947 1,39&.&&4 

~ Per Cent. of Tobacco Iaduetr,y 31.~ 25.&~ 24.6~ 26.7 25.~ 26.3~ 24.8~ 23.1~ 21.5~ 

SJ:LICTID CIGJ.R I(O~ORATlOliSt Large Cigar• (Number) 2,427,274 2,020,030 2,107,641 2,!129.o49 3.109,461 3,518,1&8 3,114,68& 2.996.117 2,79!1,105 

~- 1Dclu4ioc certain Per Cent . of Tobacco Iadnetr.r 53.6~ 47.~ 48.1~ 52.9~ 52.8~ 54.~ 48.9~ 46.~ 4~,1~ m..,bere of Group 1, 3nal1 Cigar• (Jiumber) - (C) (C) (C) (C) (C) (C) (C) (C 

SELECT~ ~IgAR CORPO~IONS: Lars• Cigar• (!lUmber) 615.913 91b,b15 84l,llb 970,077 1,004.270 863.~ 835.!177 852.941 84o,ll94 

~ Per Cent. of Tobacco Induetr,y 14.4~ 21.3~ 19.~ 18.1~ 17.~ 1~, 1~.1~ 15.~ 12.9~ 

r thaD Groupe 1 a. 2 . ) 3nal1 Cisar• (JIUmber) (C) (C) (C) (II) (C) (C (C (C (C) 

B&LANCi: OJ TOBACCO UIDIJSTHT: TOBACCO (POUNDS): 

P111t; Chnioc 3.b06 3.854 3.645 4,7!0 5.1}6 4.754 4,065 4.or 3.922 

Per Cent. of Tobacco Induetr,y 5.7~ &.3~ 5.9~ 6.~ 6.~ 4.9~ 4.0~ 3.9 3.6~ 

I 

Twiat Chewinc 2.449 2.759 2,618 3,4o1 4,015 4,J1!j 4.424 4,008 4.761 til 

Per Cent, of Tobacco Iaduatr.r 48.~ 54.7~ 53.~ 53.~ 52.7~ 53.~ 49.!1~ 5Q.~ 51.9~ ' nn.-eut Chninc 979 1,~ 922 1, 1,197 1,011 1,4}6 1,~ 1,~8 Per Cent. of Tobacco Iaduetr,y 32.9~ 33· 27.5~ 25.1~ 25.5~ 19.5~ n·1~ 25.~ 22. ~ 

scrap Chninc 21,1&7 21.b2& 23.492 21,1 1 (J. (J.) (J. (J. (J.) 

Per Cent. of Tobacco Iaduetr.v 48.~ 48.4~ 46.9~ 46.~ 

Twiat. J'in.-Cut a. Scrap Chninc 24,595 25.420 27.032 ~.594 (J.) 5.212 (J.) 5.46o {J.) 5,8b0 (J.) 5.464 (A) 6,329 

Per Cent. of Tobacco Indnotr.r 46.5~ 48.1~ 46.3~ .4~ 

Total - Chewioc Tobacco 28,201 29.274 J0,677 37.374 (J.) 10,"-48 (A) 10,214 (J.) 9.925 (J.) 9.537 (J.) 10,251 

Per Cent. of Tobacco Induotr,y 24.4~ 25.6~ 25·5~ 25·~ 

s..oktnc 12,132 11,321 ll,b05 11,798 (J) 42.971 (B) 45.548 (B) 45.&32 (B) 47.499 (B) 48,142 

Per Cent. of Tobacco Iaduotr,y "·~ 5.~ b.1~ &.4~ 

SDufi 1, 5 1,4}6 1,414 1,512 1,651 1,b~ 1,7b0 1,621 1,488 

Per Cent, of Tobacco Indnatr,y 4.~ 4.0~ 4.1~ 3.9~ 4.1~ 3.9 4.?~ 3.9~ 3.8~ 

Total - Chninc. Snokloc" Sauff 41,798 42.031 43.7!>0 50.744 54.97& 51.375 51.317 5!1.&64 59.881 

Per Cent. of Tobacco Indnetr.r 12.1~ 12.3~ 12.&~ 13.7~ 14,8~ 15.1~ 14.8~ 14.8~ 14.&~ 

Large Cigar a (JIUmber) 1.446.w 1,3b3,4oo 1,433.9!>0 1.548.w 1,7!0,159 2,13&.896 2,422,619 2,6&9,247 2,8~,642 

Per Cent, of Tob4CCO lnduetr.r 32. Jl. 7~ 32.~ 29. JO.~ 32.8~ 38.0~ 41.0~ .~ 

Sull Clgaro (Number) 221,917 209.515 278.7 338.997 J83.Q70 419,8!10 415.535 439.419 412,~ Per Cent. of Tobacco lnduetr.r 100.~ 100.~ 100. 100.~ 100.~ 100.0~ 100.0~ 100.~ 100. 

Large Clgarettea (WU.ber) 88,202 2,S110 3.374 5,1b0 7.367 9.952 10,~ 11,432 13,24o 

Per Cant. of Tobacco Ind1atr,y 100.~ 100.~ 100.~ 100.~ 100.0~ 100.~ 100. 100.~ 100.~ 

Saal1 Cigarette• (Bnaber) l,058,bb9 b5b,1!12 1,888,979 1,235.~ 1,015,207 1,()57,235 2,J78,03b 2,957.117 1,708,9&4 

Per C&nt, of Tobacco lndnetr,r .8~ .6~ 1.8~ 1.1 .8~ .~ 2.~ 3·~ 1.8~ 

SOURCJt- ftATISTICAL UCORDS Or TD TOBACCO TAX DITISIOJI, BUIII.AU or mDIUL RnJDIUI, Ulfl'l'D STJ...~S TRUSUI!f DJPARNJ:II'r. 

lOCIIliOTIS I (A) - •serap Chninc• tnc1u4e4 under •a.o~rtnc• prior to 1931. 

(J) - ·~tnc• 1Dclu4u 0 Sc..-p Chewinc• prior to 1931. 

(C) - lnclu4e4 under "Balance of lndnetr.r• to conceal data reported and tdenU\7 of oorpora\lollo. 
-50-

APFE:i.JD I X 1, TABLE 2 

:ii.A SIC fRO:UUCTIOH D.ATA 

FollovJing i s a list of om~n. at i ve sta ternent s p repar ed. ~: ro :-,1 t:1e 

st2.ti Eti c o.l r e co rd.s of the Tobacco Tax Di Yi sion, Bureau of L'lte rnal 

.J.evenue , and from the Annu.:"l.l Reuort s of the Conu;1i s sioner of Int erilClJ. 

J.evanue. Portions of the basi c da.ta conta ined. in thes e statemen_ t s h'- ve 

b een us'30_ in ::_-,re-;?aro.tion of certa in Ta bJ.es a.11C'. erc nto,s :~ o.~ peo..ring in 

t~::.e te1:t : 

S3CTI o:a 0. 2 ( *) 

STAT:=MEUT 

ITu1C-sR 

-----· 

1 

2 

3 

4 

5 

6 

7 

St tements shoTiing for the ca nd r ye0~B 1926 to 1934 inclusive; 

i.Ju.rnbe r of fo.ctorie s in business in J c.nuary l st, 

Q,11c1.nti t ies of To"opcc o, (Unstenm0o_, steYJmed, scr['.p s, i n 

process, P.nct st ons), used i n manuf<.ctnre , 

Q.1.w.ntities of Chet!inG, Smokint;, c·n!l Snuff toba cco -yro C:.uc ec , 

Q,uonti ties of Ci ,~~ o.rs c:~nG. Cigarettes : rod.uced. 

]'or the Tobacco In ~_ustry , ano. rou. s of sel e ct e d cornora tion s o.s 

foll oi7s: 

Toba cco I:n ustl~y in the United. tes 

Selected Co ~~orntion s 

Grou:i) B Sel e ct ed Corpo r n tions 

Group C Other Corp o rutions 

A g roup consisting of cigar rnanufc.cturer s 

A second ,::;roup of cicar manufacturers 

Inventory of Lea£ Toba cco, ( Unstemmed, stemmecl., scrr-ro s, D.l"l0_ 

stems), at bec; inni~g of year; q_uv.nti ties of Leaf To b~. cco, 

(by clas8e s), r eceived from me rs and other source·s; a nd 

the quanti ties ex1_;orted a nd sh i p:·Je<l to othe r sourc e s d.D.ring 

the c a lenda r y ears 1933 .s n d 1S34, for a selected g roup of 

cor- or tio 1s 

8 A t hird. c;r ou:9 of ci,gar manufacturers 

S A fourth s rou'? of ci 0 o..r no.nufc.cturers 

( *) l!'or ~)u_r: o s e of i clentifi Ce.tion, a ll orit;i nal -,·ork lXA.p er"' Ti ere L1c'.exed 

by s e ctions. Sec ti on lio. 2 &e~ls ri o~rily n ith stati stics of reduction. 

10691 

,· 

STATEMENT 

~lJMBER 

10. 

11. 

12 •. 

13 . 

14 . 

13 . 

16. 

17. 

18. 

19 . 

10691 

-51-· 

Rat es of Taxation; Amo1.mts of TC?....'lC Collected; Quanti ties taxpaid for consumption; Average Q;uanti ty of yearly conBumption 

Per Capita; by classes of tobacco p roducts, (Cigarettes, 

Cigars, Chm<ing and Smoking Tobacco, a nd Snuff) a lso r:; iscellaneous tobr.cco tax l"evcmuo, for the fi seal years end.ed Jm1e 30, 

1900 to 1934 inclusive. 

Production of Tobacco Proclucts, (Small Cigarettes, Flub, Trri st, 

Fine-Cut, and Sera~ Che·wing Tobacco; and Smoking Tob ac co)~ in 

the United States, North 'Carolina, Virginia, and KentucJ:s•; and 

the percent that e a ch St£'.te 1 s p roduction beP..rs to the United 

st te , for the ca lendar ~ears 1926 to 1934 inclusive. 

Prociuction of Toba cco ·ProC:.uct s, (Plug, ·Tr:Ji st, Ffne-Cut, a nc1 

Scx·a:p Che11ing Toba cco, SMoking, Snu£f, ·Cigars and Cignrettes), 

in the United States, and in the ten ( 10) le2.ding stat es in 

manufacture of toba cco products; a nd the percent that each 

Sta te's production bec::rs. to the ,Uni tecl St a tes, for the calendar yea rs 19 26 .. to .. T934 ·inclusive. (Data on Larg e Ci go..rs for 

calendar years 1920 ·to . l934 inclusive) 

Humber of Cigar Manufo.cturers; D.Gcregate m.unb e r of Large Cigars 

proo.uced, classified_ as to output; and percent of the total 

production in the United St o..tes, for the calendar ye£'-rs 1926 

to 1934 inclusive. 

Quant.;i ti~s .Of Leaf Tobacco, (unstemmed eq_uivalent), used_ in 

manufacturtpg Ciga rs, Cigarettes, Tobacco and Snuff , for the 

calendar years 1920 to 1934 inclusive. 

Summary of operations of ·manufacturers of Tobacco, Cigars, end 

Cigarettes, sho~ing; number of manufact~·ers; tot a l p ro duction 

classified as to output; anc1 percent of total, for the cc::lendar years 1926 to 1934 inclusive. . ' 

Summary of op erations of p roducers· and dealers in Perique Tobacco, for the calenda r ~ears 1926 to 1934 inclusive. 

Eumber of Deo.lers in Leaf Tobacco in Business; quanti ties of 

Leaf Toba cco exported.; ana. q~nti ties received from1 Fo.r me r s, 

for the ca lendar years 1926 to 1934 inclusive. 

Q,uanti ties of Leaf Tobacco importee]_ by; Deale rs in Lea f Tob['.cco, 

Ciga r Hanufa.cturers, and Toba cco Manufacturers, for the ca lendar years 1924 to 1930 i nclusive. 

Quanti ties of Leaf Tobacco, (Unst emme d., stemme d_ , scrap s, cu ttings 

a nd. clipJ;Jings), armed or held. on January 1st by; De a l ers in Lea f 

Tobacco, Cigar Manufacturers, and. Tobacco Manufacturers, for the 

c a lenc1a r years 1924 to 1931 inclusive. 
Sr:.!AT:=;lC NT 

lf"u1 {8ER 

1 

5 

TAJJL:Z 

~TULBDn 

1 

2 

4 

10 691 

S:ZCT ~(- -1:0 . -1 

l:ionthly que.nt i t i e s of ma Ttlic~ct red Toba cco Products, (LarGe 

Cigars - Classe s A, B, C, D, nne-;_ :t!; , Sr.1all Cigars, ['. e c:n0. 

Smnll CiGar e ttes, Snuff and Cheni n.:; and. Smoking Tobacco) , t x::-

:pai d. f or consum!•ti or:, toge t he r r:ri t il i mp orts f rom t he Phi li::._J-·Jine 

I sl e..nds, D.nO. Pue rto Rico , f or the y ea rs 1925 to 193'5 i nclusive . 

Q.uanti ties of manufu.c tur ed Tobacco Products, Che~"T in , Smoldng 

and Snuff Toba cco , Large Cl.nd Sme.l l Ci gEl.rs, La r g e <m c1 Small 

Cigar ettes, Pe ri que Tob .... c co , scrans, cuttings, cli ~Jp in.; , sifti DGs, et c .' Cit:nre tte I per s anc._ t ub e s) , export ed in bo:.1c:_, for 

t he f i s ca l year s ended J une 30 , 1926 t o 1934 inclusive . 

Contents of A-)iJendi x 2 

Financi<..~l) 

Statement shoning compari sons of lre t Sa l es, Compiled l·e t Profit , 

St o.tut or.t ~-et I ncone 1.nd Cash Di vi dend s pai d. f or ce r to.in g roups 

of Tob~.> cco Corpor otion s t o a ll ·Tob<'.c co Co rpora tions re}Jortint: 

on I ncome To...~ Retur ns fo r year s 1926 - 1934 i nclusive . 

Letter d.ated Jarru.a.ry Z7 , 1936 ( anc. ~() esented. i n part) f r om i7m. 

I-i . J:~ Reynol c.s , Ao.nini st rati ve Assi st ant to the Secretc.r:r of 

the Tr easury . ( 8 p:1ges) 

l<iarke t Value , as at J anu.a y 2, 1936 , of t he Ca-oi t a l St ocl: of 

the .B i c; Thr ee . 

Li st of ~atemen ts . 
J.l1 

~!D;!!T!ti2D8 

Tear Amount 

!lET SALiS: 

1926 $1,134.762,129 

1927 1,171.093.b21 

1928 1,178,897,428 

1929 1,247,033.708 

1930 1 '147 ,464.549 

1931 1,1b3.706,245 

1932 1.02a.1s5.16b 

1933 92 ,085,llb 

COWPILED NET PROFIT: 

19<'b 125 ,180,357 

19<'7 134,055.44o 

1928 128,000,037 

1929 la8.577 .829 

1930 1 7.934,b44 

1931 145,155.4o8 

1932 142,b45.97b 

1933 63 ,255.1b9 

STATI!l'ORY NET !»COME: 

1926 115,108,720 

1927 122,299.922 

1928 119.5~.648 1929 127 '7 ,109 

1930 137,133.598 

1931 1)6,887, 4o8 

1932 133,?47 ,9<'1 

1933 50.331 ."'1 

CASH DIVIDENDS PAID: 

1926 71. 435 .552 

1927 1a· 517.976 

1928 6 ,0112,649 

1929 92,728, 054 

1930 105 ,700,653 

19)1 107. ?33. 24o 

1932 98 .898 ,233 

1933 95.134 ,237 

jppE!IDIX 2, 'r.&liLI 1 • 

STllDG:IIT SHO'IIING COOARISO!IS OF NET SALiS, C<IIPILED NET PROJ'IT, STATlJrORY NE'l; Il!Cot.!X 

AND CASH DIVIDENDS PAID toR C:!:R'l'AIII GROUPS OF TOBACCO CORPORATIOllS TO ALL TOBACCO CORPORATIONS 

RIPOR'l'IIIG 011 IIICO~IJ: TAX IU:l'URJ!S J'OR TEARS 192&-1933 

Group A Group 11 Selected Group Selected Groupe 

Selected General Selected General of other of Ci@;ar J.ll Other 

~D!!I:Ition! ~O!J!Or,.tiona ~rnoration~ Qowrationa Corpor,.tiona• 

jmount Per Cent .lmount Per Cent .Amount· Per Cent Amount Per Cent Amount 

$bb3,430,bb9 58.46 $108' 7b8 '051 9.59 $ 33.421,843 2.95 $162.236.752 14.30 $16b. 904' 814 

b89' 244,186 58,8b 124,~5.b54 10,63 35.128,490 3.00 17b,4o1,734 15.0b 145.783.557 685.343,b~ 58.13 142. a·99b 12.08 34,b97 .209 2.94 178.905.583 15.18 137 ,48b,9b7 

741,262,7 59.44 14b,32 ,219 11.73 34.551,b77 2.77 18b,146.008 14.93 138.749,0b0 

778, 44o' b97 67.84 142,0!>2,452 12.38 34,430.79b 3.00 162 '039 '451 14.12 30.491,153 

761,870,9K7 65. 47 139.710,774 12.00 33.926,788 2.92 138. 8b2, 558 11.93 1!9.335.138 

b55.914, 244 b4.11 162.292.910 15.86 31,185.341 3.05 99,268,174 9. 70 74,494.497 

593.790,448 b4.26 148. 771,1b9 16,10 30.9b9 ,400 3-35 82,955.084 8.98 67.599,015 

78,459.478 62.b8 7.935,080 6.34 8,473, 709 6. 77 12,384,SK7 9.89 17,927,203 

84,232,031 62.8~ 6,099, 216 4.55 9.367.397 6.99 16,6o4,o86 12.39 17,752.710 

83,011,391 64 .85 2, 794,877 2.18 9.77~,014 7.64 19,158,449 14.97 13,26o.ao6 96,814,014 69.86 (220,26o) (.16) 10.18 .095 7-35 18,393.962 13.27 13,4o6, 18 

n6.116,1a8 78.49 4,015,8~ 2.72 9.429, 5~ 6.37 12,228,221 8.27 6,144,567 

120,206,1 3 82.81 8,391,9 5-78 9,222,62 6.36 7,123,033 4.91 211,664 

118,630,227 83.17 13.696.914 9.60 8,668 ,836 6,08 908,937 .63 741,062 

55.959,1165 88,47 (5,000,114) (7.91) 8,474,117 13.4o 1,359.1!98 2.15 2,461,803 

73.625.591 63.96 7.!!43,141 6.82 8,221,356 7.14 12,282,089 10.67 13,136.~ 

79' 513.646 65.02 5.9K7 .309 4.89 8,9a5.673 7.31 16,530,807 13.52 11, 3a2· 

78,360.582 65 .56 2,558,667 2.14 9,1 5,165 7-~ 19,124,758 16.00 10, 3 1,476 

91,765.902 71.84 (595 '777l ( .47) 9.502,214 7. 18,162,680 14.22 8,905.090 

109 '7K7 ,421 80.o6 3.608,752 2.63 8,69l,I!K7 6.34 12,092,138 8.82 2,953.400 

114,011,961 83.29 7.939.554 5.80 8,459 .o75 6.18 6,981,679 5.10 (504,861) 

110,964,586 83.28 13,215,299 9.92 8,019,031 6,02 684,338 .51 364,6b7 

44,681 .938 88.78 (5. 647 '109) (11.22) 7. 972 ,832 15.84 1,049,082 2.08 2,274.818 

41,4o7, 677 57.97 b,075,082 8.50 5,048,194 7.06 5.356.230 7.50 13.548.369 

43 .558, 488 59.20 3' 581.882 4.K7 5,048,194 6,86 9 ,198, 891 12.~ 12,190.521 

46.534.306 72.66 2,495 .209 3-89 5,268,194 8.23 11,149,159 17. 1 (1,4o4,219) 

64 ,400, 695 69.45 2,!!6b, o66 3.09 5.535.080 5.96 9.535.468 10.28 10,a9o. 745 

78,671,142 74.43 2,846,986 2.69 5.844,968 5.53 8,86b.504 8.39 9. 71,053 

78,867.945 73.68 3.566.302 3-33 5,!!23 .70!! 5.44 8,051,626 7.52 10,728,659 

78,868,119 79.75 5,Q76,196 5-13 5,823 .708 5-89 5.594,247 5.66 3.535.969 

74,141,813 77.93 4,792,862 s.o4 7.993.791 8,4o 4, 722,942 4.97 3,482,829 

Source: Prepared by Tobacco Unit from data cCllllpiled b;y tho Bureau of Internal Reveaue, 

• Figures of 0 J.ll Other Corporations• obtained b;y deducting the total of the amounts ahown for the. oelected groupo of corporationo 

from the total amount liatod for 0J.ll Corporations•. 

'Explanetion•: 

J'igureo in parentheses indicate deficita. 

Percentage• are computed in relation to the amounts for all corporationo, 

For general explanations and limitations of the basic da~a tabulated b;y the Bureau of Internal Revenue, it is bgportant to aee letter (presented in part) dated January 27, 1936 from wm . B. McReynolds. Administrative Assistant to the Secretary o! 

the Treaoury, in Appendix 2, Table 2, 

Per Cent 

14.70 

12.45 

11.b7 

11,13 

2,bb 

7.b8 

7.2S 

7.31 

14.32 

13'.24 

10.36 

9.68 

4.1~ ,1 

.52 

3.1!9 

u.41 

9.26 

s.65 

6.97 

2.15 

(.37) 

.27 

4.52 

18.97 

16.57 

(2.19) 

11.22 

8.96 

10,03 

3-57 

_3.66 

I 

\11 

...,. 

I 
' 
- 54-

TABLE 2 

APPE1T]) IX 2 

Letter (in rt o: Win. H. !vicReynoJ.ds, Adm i nistrative Assistant to the 

Secreta r y of the Tr ea sury, sent to the Tobacco Unit, in connection with 

material furnished by the Treasury Department, dated January 27, 1936. 

--- 0 ---

In reply to the letter of May 13, 1935 from Mr. Meredith :S. Givens, 

National Recovery Administration, to Mr. George C. Haas, Director of 

Division of Research a~d Statistics, Trea sur y Departoent, requesting 

co;npilation of certa in data from corporation income tax returns, tables 

have been prepar ed by rep res enta tives of the office of the National :rte00very Administration from the work sheets of the Bureau of Internal 

Revenue. 

This office has r eviewed. the data as shown in the tabulations submitted by you and is in accord v;ith your rsquest that the information 

be used by your organization. 

The data included in the tables, in so far as they relate to corporation income tax returns, cover Section no. 1. and Se ction No. 3 

of your memorandum dated September 18, 1935 amplifying the previous 

correspondence. 

SECTION NO. 1 

Statement No. 1 Comparison of certain items of Assets, Liabilities, 

Receipts, Comp iled Net Profit or Deficit, Statutory 

Net Income or Deficit, Cash Dividends paid, Profits 

and Losses frorn sales of capital assets and the 

Computed Net Income or Loss from Operations, by 

Total Assets Classes, by returns with net income 

and no net income, for calendar years 1931, 1932 

and 1933, for 14 selected industry groups. 

10691 

By Total Assets Classes of: 

Under $50,000 

50,000-

100,000-

250,000-

500,000 -

1,000,000-

5,000,000-

10,000,000-

50,000,000 

$100,000 

250,000 

500,000 

1,000,000 

5,000,000 

10,000,000 

50,000,000 

and over. 

Also in a ggr egate for: 
\" 
-55-

All Corporations with balance sheets. 

All Corporations without balance sheets. 

All Corporations with arid without balance sheets. 

Classe s grouped to conceal data rep orted and 

identity of Corporations. 

For Industry Groups; a s :fol1.ows: 

Calendar years 1931, 1932 and 1933: 

1. Food Products, including beverages. 

2. Tobacco products. 

3. Textiles and their products. 

4. Chemicals and allied products. 

5. All Industria l Groups (except Agriculture and 

related industries ·group ann Finance Group) 

6. All Manufa cturing Groups. 

7. All I ndustrial Groups in the United states. 

8. J~~iculture ~nd Related Industries. 

9. Financ.3: Bariking, Ins.urance, .1eal Estate and 

Holding Corrpanies; · Stock and :Son.d Brokers, etc. - . . 

For Industry Groups, as foliows: 

Calendar years 1932 and 1933: 

10. kiotor Vehicles, complete or parts. 

11. Factory Machinery. 

12. Agricultural Machinery a..Tl.d equipment. 

For Industry ·Groups, as follows: 

Calendar Years 1933 only: 

13. Food and kindred products. 

14. Liquors arid beverages . . 

Statement No. 2 Comparison of Total Assets, and Certain items of Liabilities, Receipts, Deduct~on s., a..'ld Cash and Stock 

Dividends paid, by returns with ne:t income and no net 

income, and by ·returns with balance sheet.s and with 

and without balance sheets, for the calendar years 

1926 - 1933 inclusive, for the 14 I:ndu~ try Groups 

listed ahove. 

SECTION NO. 3 

Statement No. 1 Data covering total assets classes and COI!lbined figures 

transcribed from Section Ho. 1, Statement No. 1, for 

compara tive study in trends and percentages, for .each 

of the 14 industry gro·ups listed above . 

. .. . .. 

10691 
-36-

Statement No. 2 Data covering ~1~et incorrs 11 , IINo net income II, and combined figures transcribed from Section No. 1, Statement No. 2, for comparative study in trends and percentages, for each of the 14 industry groups listed 

above. 

Six tables ~ere also prepared, in accordance with your request, 

for groups of selected companies whose predominant business is classified as manufacturing tobacco, . cigars, cigarettes and snuff, and dealers in leaf tobacco. These tables include group totals for certain 

items of assets end liabilities, receipts and ded~ctions, compiled net 

profit or deficit, statutory net income or deficit, net loss for prior 

year, cash and stock dividends paid, gross profit from sales and gross 

profit from sales and gross profit from other operations, for the calendar year 1926 to 1933 inclusive. 

GElrE:tAL ~I.k~AT ICJ ·s AllD LU..:ITA1ICJNS CJF THE DATA 

Extreme caution must be exercised in the use of the data. The 

definitions of the items from Phich ratios and percentages Tiill be 

computed must be kept 1n mind, as uell as the difficulty of a comparison over a period of _years . The major changes affecting the industrial and other classifications under wh ich the returns were tabulated, 

and the provisions of t~e revenue acts under which the returns were 

filed, \7hich have occurred in the years 1926-1933, inclusive, are 

listed below. 

1. The data shown in the tabulations are taken from returns as 

filed and prior to any revisions or adjustments that may have subseqlently been made as a result of an audit by the Bureau of Internal 

Revenue and without any analysis or adjustment of the underlying 

charges and credits leading up to the figures on the returns, nor an 

adjustment of the data reported on the returns to a common method of 

accounting. 

2. The statistics tabulated from the returns are limited to the 

information as rep orted by the taxpayer and include only the data 

that are available and can be definitely allocated. It frequently 

happens tha-t (a) the returns are not completely filled in, or (b) if 

they are filled in, the inforoation is rep orted in a manner which 

precludes the possibility of allocating items to the definite minor 

classifications. 

3. The tabulations for each year include calendar, fiscal and 

part year returns. l he fiscal and part year returns are those for 

which the greater part of the period falls in that particular calendar year. 

4. The in.dustr1al classification is based on the predominant 

business of .nonaffiliated corporations or of groups of affiliated 

corporations filin.; a single return. The industria l groups, therefore do not represent corporations engaged purely in the industries in 

whcih they are classified, due to the diversified industrial activities 

of many corporations and especially to affiliated corporations filing 

consolidated returns, which latter include the income, deductions, 

10691 
-57-

assets and liabilities of the subsidiary corporations . 

i ary corporatio-ns could be segregated; man y might fall 

vis ions othe.r th.an those in which they are included. · ,: · 

If such subsidin industrial di5. S~rict comparabi~ity of the corporation income tax data from 

year to year is not -possible. Shiets <in the data in the various classifications are due, among other causes, to consolidated returns be:l.ng 

filed for concerns formerly filing separate returns and the disintegration: of groups of concerns filing consolidated returns. 

6. Although the tables 'in this study do not include returns for 

1934, year attention is called to the chan ge in the ·industrial classification ~h~ch will occur for returns for that year. By the Revenue 

Act of 1934,. effective for t axable · years beginning after December 31, 

1933, the privilege of filing cons olidated returns is .limited to railroad corporations. In the forthcoming Statistics of Incom~ for .l934 

the -consolidated returns for railroads and the consolidated returns 

fq,r ~R Prations with yea rs ending in the period J~+_y ~ · ~3 4 'to November ~0, -.1934 wil.l be classified. as previou sly accord,i_pg td' the predomi!wn:tr business of the group ·cf subsidiary concerns in l1:1sle-d in the consoli ~ted return. The returns (except for railra ous ) "'for the calendar 

ye:a~ 1934 and for fiscal yaar-s ending in the period January 31, 1935 to 

Jun.e .. 30, 1935 will be classified according to the business of each ·comp~y · Although . the industrial cla ssification of returns with years be..:. 

ginning after Decem~er 31, 1933 should be a finer industrial distribu- · 

't-~9n", Of the re~urns, it wilJ not be a pure industria l c:lassification, 

due to the diversified ·i n.dusr::·ial activities of most corporations. 

7. Changes in the provj sions of the revenue acts under which the 

returns for given ;{ears at'e f iled also. int erfere with a precise comparability of the d~t a over a period of years. The major changes for 

the years of 1926 to 1933, aff ecting the data included in · these tabulations are as follows: 

(a) Additiona l r a tes, filrst i mp osed by th~ Rev·enue Act of 

1932, are applied t o the i ncome ::-ep orted in consolidat.ed retl.irhs. 

These higher rat e s were prooa:bly influential in the· reduction.:of 

the number of consolidated returns filed in 1932 ?nd 1933. 

(b) The sta tutory net i ncome is the excess of gross income 

over deductions as defined by law. Losses sustained during a 

taxable year not comp.ensated for by insurance or otherwise, are 

entirely deductiple from gross income, except that for years 1932 

·and 1933 losses from sales or exchanges of stocks and bonds held 

two years or less (other than bonds issued by a government or 

political subdivision thereof) · are ~llo ed only to the extent of 

g~ ins from such sales. This limit~tion on the deduction of losses 

for 1932 and 1933 does not . apply to banks and trust companies. 

10691 

The net loss for prior year (resulting from the operation of .any 

trade or business re gularly carried on) which is allowed as a deduction according to law, has not. been subtracted from net income 

in these tabulations becwAse it was not considered a current year 

loss. 
-58-

Assets and Liabilities 

8. In connection with the classification of corporation data for 

1931, 1932 and 1933 by size of total assets, your attention is 'directed 

to the fact that the balance .sheet form "Schedule K" of the cotporation 

income tax return provides, in the reporting of assets, that reserves 

for depreciation of capital assets be deducted £rom the gross amount of 

capital assets and also that reserves for bad debts be deducted from 

the gross amount of accounts receivable. · 

9. All items of assets and liabilities, as well as 11 Total assets 

and/or Liabilities 11 , represent amounts shown in the balance sheet as 

of the end of the taxable year. 

10. Common and preferred stock Shifts occur between years in 

the amounts tabulated as 11 Common Stock" and "Preferred stock'' due both 

.to variations in reporting these data and to the method of tabulation . 

.- Fo~ balance sheets in which par value common and. preferred stock are 

-:·.- - not reported separately and a book value is given, the amount is tabulated as common stock. For balance sheets with no par value stock and 

reporting book value, the procedure has been as follows: For 1926 -

1931, the amounts were tabulated under "Surplus and undivided profits 11 , 

-· . for 1932 and 1933, the amounts of no par value common stock and preferred stock w·ere tabulated under "Common stock11 and "Preferred stocktt 

respectively.. t,or balance sheets with no par value stock and not reporting book value, the -n.e.t Porth was tabulated under "Surplus and undivided profi ts 11 • Your attention is called to the fact that the 

amount of preferred or commo'n stock contains only the amount issued or 

outstanding (unissued stock is not included). 

-. 

. . - • ,,i ~ 

11. Surplus and undivided profits (less deficits)- ~or each return there is tabulated either the "Surplus and undivided profi ts 11 or 

the 11Deficit 11 which is obtained by combining the last two liability 

items on the balance sheet. In tabulating the returns by industrial 

groups and by total assets classes, the sum of the 11 Defici ts" is subtracted from the sum of the i terns 11 Surplus and undivided profi ts 11 , and 

the result is labelle9. 11 Surplus and undivided profits (less deficits)." 

Compiled receipts and statutory deductions 

·12. The column headings 11 Net sales 11 and "Gross sales 11 are identical as explained in your footnote B on the tables. 

13. Gross receints, from other onerations- The cost of operations 

has not been deducted. 

:- I ~ 

.. _ i4. Total co~piled receipts- Includes net-~rofit from sale of 

capital assets (real estate, stocks, bonds, etc.) but not gross re-

.ceipts from these items. Excludes nontaxable income other than interest 

on ~ax-exempt obligations and dividends on stock of domestic corpora-

:-·:· .tiqns' as reported 'in Schedule L of the return. 

15. Cost of goods sold- This item represents only such amounts 

as were shown specifically among items on the face of the return under 

"Less cost of goods sold". Items which may be allo~able to 11 Cost of 

10691 
-59-

goods sold11 but which were reported under :'Deductions" on the face of 

the return are included ·under 11Miscellaneous deductionsu. As an illustration, · on the 1933 return tl1:e amount' tabulated as "Cost of goods sold" 

includes salaries and wages · only when shown specifically in i tern 2 (c) · 

on the face of ~he return ~ -salaries and wage~ which may be allocable 

to i tern 2 (c) but whfch were report·ed elsewhere on the return are tabulated "Miscellaneous deductionsn. 

16. Depreciafi'ort ·and Depletion·- The amormts used in the study 

are allowable deductions reported on the face of the return. If items 

of depreciation and depletion are found in "Cost of goods sold", "Cost 

of operations" or "Other · d-eductions authorized by law", they are removed from these categories and tabulated as '

11Deprecia ti on" or "Depletion". When such removals occur necessary adjustments are made in 

"Total cost of goods sold", "Gross profit··fi·om sal:es 111;-' ".Total cost of 

operations", "Gross profit from operations" and "Total incoma 11 • 

Annual statutory depreciation is predicated on cost or value as 

of March 1, 1913, of ca:9i t al assets (not, however, includ.ing land), 

whereas the balance sheet fi 6ure for gross property account represents 

the amount shown in the financial statement of the corporation, and 

may not be cost of property, due to adjustments and revaluat.ion up or 

down. For this reason, it is impossible to determine accurately the 

percentage of depreciation sustained annually on the basis of the data 

contained in the tables. The annual depletion is likewise determined 

by statutory provisions and cannot be related to the current book value of the depletable assets. Also, in this connection, your attention 

is called to the rulings on depletion which are found in Regulations 77, 

Income TaX, Revenue Act of 1932, Articles 221-248, pp. 59-88. 

17. Cash dividends paid- The amounts tabulated for consolidated 

returns, in general, exclude inter-company dividends. 

18. Taxes paid other than the Federal Income Tax - does not include amounts tabulated in "Cost of goods sold". 

In a study of statistics compiled from income tax returns, it 

must be borne in mind that returns are filed for tax purposes rather 

than far economic analysis and the data are taken from returns as 

originally filed by the taxpayer ru1d prior to an audit by the Bureau. 

Therefore, in the finer sense it is not possible to secure true indexes or ratios between selected items as representative of given businesses because of these conditions. 

The statistics fTom the returns truly reflect, in a broad sense 

and in aggregate, the economic changes from year to year, but in the 

refined classification by industries, by sources of profits and losses, 

by assets and liabilities and related items, the above considerations 

must be taken into account, together with the provisions of the revenue 

acts affecting income and deductions as defined for statutory incorre 

tax purposes. 

10691 
-60-

You are referred to the text in eaqh volume of the Statistics of 

Income for 1926 - 1933 for a description· of the tabulation of· corporation income . tax returns in any particular year. Also, your attention 

is called to the synopsis of ~evenue Acts 1909 - 1933, which is contained in the 1933 Statistics of Income. Table ~ of this synopsis, on 

pages 220 - 221, contains the corporati. on income tax provisions. 

The tabulations mentioned herein are being forwarded to you under 

separate cover. 

In the event that further correspondence relative to this matter 

is necessary, please refer to IT:C:St:E;1l. 

By direction of the Secretary. . . ·•· ·. :• 'I 

., 

... 

· .. 

. ··· 

•• -' .. _'' '11. • ... 

. ' 

.. . : -

' ' 

.. , ... • I I 

'.·: . ·,. 

I • •' : .. 

; ..... ~ 

. , 

10691 
-61-

APPmDIX 2, TABLE 5 

MARKEr VALUE;, AS AT JANUARY 2, 1956, OF 

THE CAPITAL &rOCK OF THE BIG THREE 

• • • • (A) : (B) 

: Par : Shares Out- : Lowest Market 

: Value : standing at : Price (Per 

• • : Dec,51,1954 : Share) on , • • • (Number) : Jan,2,1956 

A!erican Tobacco Co. • • • • 

ColiiDOn Stock, Class a.1• : $25 Y: 11 6091 696 

: g;· Common Stock, Class •s• : $25 ; 5,1541 458 

• • 

Preferred stock ( 6% CJlllll-; 

• • 

• • 

lative) : $100 : 

Total : • • 

• • • • 

Liggett & Myers Tobacco Co: • • 

• • • • 

Common Stock, Class a An : $25 . 

• 

• • • • 

Comon Stock, Class "B" : $25 • • 

• • • • 

Preferred stock ( 7% CWII.l-: .,_;· 

lative) : $10J.r ; 

Total • • • • 

• • • • 

526,997 

859,856 

2,277,085 

225,141 

R, J, Rgrnolds Tobacco Co.: : 

Common stock, .Class ".!" : $10 !t: 1,000,000 

Common Stock, Class "B" 

Total 

• • 

: $10 

• • 

• • 

GRAND TOTAL ( 5 companies : 

together) : 

• 

' . • 

: 9,ooo,ooo 

• • 

: 

• • 

• • 

. 

• 

SOURCE: (A) Securities and F.«change Commission 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

. • 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

• 

$97-l/4 

$99-5/8 

$140 

$110-1/2 

$110-l/2 

$156 

$60 

$55-1/4 

• • 

: Calculated 

: Value as of 

: Jan,2,1956 

• • 

• • 

• • 

: $156,542,956 

• • 

: 512, 270,378 

• • 

• • 

• • 

• • 

• • 

• • 

• • 

75, 779,580 

542, 592,894 

: $ 95,014,088 

• • 

• • 

• • 

• • 

251,617,671 

• • 55,121,996 

: $381, 755,755 

• • 

• • 

• • 

• • 

oo,ooo,ooo 

: 497, 250,000 

: $557,250,000 

:-

• • 

:$1,481,596,649 

• 

(B) The Commercial and Financial Chronicle, Vol,142,No,5S80, Jan,4,1956 

Footnotes Nos, 1, 2, 5 and 4 - Standard Corporat1on Records, 

J/ Includes 11, 200 shares held by company- in treasury. Y Includes 441 362 shares held by company in treasur:y. 

1'_ Includes 91 000 shares held by company- and carried at cost in .assets. 

"j/ Includes 200,000 shares held in "Retir8Jilent and Insurance Investment Fund" , 

1o&;n 

-62-

APPElJDIX 2 - TA:BLE IV 

Followi ng is a list of st te~ents prepared from various sources. 

Portions of the basic data conta ined in these statements have been in 

preparation of certe.in Tables appearing in the Text. 

Statement r o. 1. Comparison of certain items of Assets, Liabilities, 

Receipts, Compiled Uet Profit or Deficit, Statutory Net Income or 

Deficit~~ and Cash Dividends Paid, :By Total Assets Classes. 

For selected industry groups of corporations, (listed below), 

for the calendar years 1933, 1932, and 1931. 

Groun 

1 

2 

3 

4 

5 

6 

7 

No. 

Food Products, including :Beverages 

Tobacco Products 

Textiles and their products 

Chemica ls and allied -products 

All Industria l Groups in the Uniteci Sta tes, except 

Agriculture and related industries, and the Finance Group 

All Manufacturing Groups in the United States 

All Industrial Groups in the United States Agriculture 

and related industries 

9 Finance, Real Estate, etc. 

10 Motor Vehicles, complete or parts 

11 Factory Machinery 

12 Agricultural .1 achinery and Equipment 

13 Food and Kindred products 

14 Liquors and Beverages 

(Original work papers only) 

Statement .rro. 2 Cor:J.narison of Tota.l Assets, and certa in i terns of Liabilities, Income, Expense, etc. 

F'or selected indus try grou"9 s of corporations (Same Indus try 

Qroups listed in Sta tement No. 1 above), for the calendar years 

1926 to 1933 inclusive. 

(Ori inal work papers only) 

SECTION lW. 3 

Statement No. 1 Certain financial account data for each of 14 selected 

Industry Groups from corporation income tax returns, by the 11 combinedi' totals of concerns reporting 11 Statutory Net Income" and 

"Statutory l?o Net Income", and by total assets classes, transcribed from the basic data appea ring on statements in Section No.1, 

Statement No. 1, for a comparative studJr in trends and percentages. 

(Original work papers only) 

------------------------------~------------

(*) Prepared from the statistica l records and publications, (statistics of 

Income), of the Bureau of Internal Revenue 

10691 
·' 
:-63-

Statement No. · 2 · Certain financial account data for each of 14 selected Industry Groups from corporation income tax returns, b7 the 

totals of concerns rep orting 11 Statutor;y· Net Income", "Statutory No 

Net .Income 11 , and 11 Combined11 , and by those returns 11wi th11 balance 

sheet·s., and. t!?-ose' 11 wi th and without 11 balance sheets, transcribed 

from the basic data appearing on statements in Section No. 1, 

Statement No. 2, for a comparative study in trends and percentages. 

{Original work _papers only) 

* * * * * * * * :* .*' * * * '* * * * * * * * * * * * * * * * * * * * * * * 

CorporatioP. ... ~pcome tax returns for 1926 to 1933 inclusive, filed 

by six lected group s 'of corporatio~s whose pi-edominant business is 

cla ssified as "Tobacco Products", sh.owing ·for each year the group 

totals for certain items of assets, liabilities, receipts and deductions; also comp.iled. net :p r:ofi t or deficit, sta tutory net income or 

deficit, net loss for r~or year, cash dividends paid, stock dividends 

paid, gross prof~ t from s~l s, and gross p rofit from other operations. 

(Data tabulated from. retu rns. as filed :tnd prior to any revision or adjustments that may have subsequently be en made as a result of an audit 

by the :Bureau of Int~rn l, Revenue and w~thout any analysis or adjustment of the .underlying :charges and credits leading up to the figures 

on the returns., 'now ari 'adjustment· of t'he data reported on the returns 

to a common method o·f :accounting) (*) . · 

(Original work papers and one photostat cOpy ) 

Following. st teme nts .rel(itive to 'l:he American Tobacco Comp any~ 

Capital ~ds Einpipyed for the Period :Begun January 1, 

1912 and Ended December 31, 1934. (**) · 

(Original and one -carbon copy) 

Net Assets Gr_o:ups and Their Changes for the Period :Begun 

December 31, 191~ --~d Ended December 31, 1934. (**) 

(Ori gina l and o·ne carbon copy) 

Profit and Loss for the Period begun January 1, 1912 and 

.. ended December 31, l934. (**) 

Following 

1912 

(Original and ort~ carbon copy) ' ' 

statements relative to Liggett & Myers Tobacco Company; 

Cap ital runds pl6yed for the period begun J anuary 1, 

and ended December 31, 1934. (**) 

(Original and. pne carbon copy) '. .. 

Net Asset Groups and the ir change s for the period begun 

December 3l. -- 19ll. C?-~1d ended December 31, 1934. (**) 

(Original and ·one carbon copy) -----

(*) Prepared by the Statistical Section, Bureau of Internal Revenue 

(**)Prepared from data published in Moody 1 s Manuals & Standard Corporation Records. 

10691 
-64-

Profit and Loss for period begun January 1, 1912 and ended 

Decemoor . 31, 1934. (** ) 

(Original and one carbon copy) 

Follm1ing statements relative to -· J. Reynolds ':i'obacco Co.; 

Capita l P:.:uJ.ds em;> l oyed for the period begun January 1, 1912 

and ended December 31, 1934. (**) 

(Original and one carbon copy 

Net Asset groups and their change s for the period begun 

De cember 31, 1912 and ended December 31, 1934. (**) 

(Origina l and one carbon copy) 

· Profit and Loss for the period begun J anuary 1, 1912 and 

end~d Dece~ber 31, 1934. (**) 

(Original and one carbon copy) 

Consolidating statement of op rat~n6 r esults and ratios for the 

year 1916 to 1934 inclusive for ~he .\mer i can Tobacco Company, R. J. 

::teynolds To ba cco Company, and Lig~=-ett & i.iyers To ba cco Company. (**) 

(Original and one carbon copy) 

Consolidating statement of Cap ital Funds employed for the peri od 

begun December 31, 1916 and ended December 31, 1934, inclusive for The 

American Tobacco Company, 3 . J. Reynolds Tobacco Company, and Liggett 

8~ i<A.yers Toba cco Coopany. (**) 

(Original and one carbon copy) 

Consolida ting statement of Profit and Loss f or the period begun 

January 1, 1916 and ended December 31, 1934 for The American Tobacco 

Company, R. J. Reynolds Tobacco Company, and Liggett c· Myers Tobacco 

ComJ_)any. ( * * ) 

(Origina l and one carbon copy 

Comparison of Asse t s'· Liabilities, :qece i:(J ts, Deductions, etc. for 

each of the follo~ing industrial groups; (***) 

Tobacco Produc ts -::7 i th and 7ithout Jalance Sheets 1933-1926 inc. 

Tobacco Products ·:i th Balance Sheets 1933-1921 inc. 

Food & Kindred Products ~- i th and \ii thou t :Balance Sheets 1933-1927 inc. 

Food & Kindr ed Products ~;i i th l3a lance Shee ts 1933 only 

Petroleum .7 i th and ::iithout 3p,lance Sheets 1933-1926 inc. 

Retail Trade iVi th and J"i thou t Balance Sheets 1933-1926 inc. 

(**) Prepared from data published in I:oody' s !'flanuals 8: Standard Corporatio~ Records. 

(***) Tabulation sheets and published reports, (Statistics of Incorr.e ), of 

the Bureau of Internal ~evenue. 

10691 

.. 

~ 
1 

-65-

APP JLliTDIX 3 - FIN.hNCIAL COMPANY GROUPS 

To Illustra t 9 the Text of CHAPTER I - THE LARGE CORPORATIOW 

IN THE TOJ3ACCO HANUFACTURING 

INDUSTRY 

Table I 

Table 2 

Name 

F.ichard 

James F.. 

John A. 

Jc:tmes R. ' 

- 66-

CvnsistL1g vf 

The Off icial Positions and St ock Holdings held by the Directors 

of the Big Three (3 es ). 

Corpore.t i on Income a~'" Re turns for ~26 -19 3 f or six grou-.fJs as 

listed on eP.ch par e of t hi s t abl e , shaming for ea ch yea r tota ls 

for certa in items of a ss ets , liabilities, recei]tS and deductions; 

also CO TTlJi led net profit 0r deficit, statuto17 net income or 

deficit, net loss for prior year, cash dividends pa id, stock 

dividends )aid, gross :,? rofit f rom sales, a.nd gross profit from 

other o~ rations ( 6 pages). 

:Boylan 

Coon 

Crowe 

Cummings 

_.\.ppendix 3 - Table I, :page one 

Al' .. iERI CAN TOBACCO COMP.Al\1Y 

List of Directors, their Of f icial Positions and 

fJ.1heir Stock Holdings as per 

December 31 , 1934 

Position Preferred Com!llon 

D. & s. :Jone 1 

Asst. m 

.L • l'1one None 

D. & Asst. t o V.P. 5 :None 

.Asst. Sec . !Tone None 

Common B 

None 

10 

187 

}Tone 

c. Huntley Gibson D. & Fa ctory 1 igr. l'one 1 Hone 

Patrick H. Gorman D. ~ Mgr. Cigar Leaf I' one 101 50 

Paul r-, .

~ . Hahn D. & V.P. lJone 505 None 

Tullis Harkrader .,.... 'l :..J, cc Traff ic I.'Igr. 1 None 500 

~d und A . Harvey D. ,. 

<.:C Credit l':Igr. 40 None 240 

James B. H . :0. ,.., __ arvl e ~ T. 50 118 117 

George 'IT. Hill D. ' Pres. 80 3 ,010 18 ( . 

James E. Lipscor1b, 

Jr. D. & Pres. of 

Leaf Sub. 100 100 222 

Charles E. Neiley Il. 1 

cc V.P. 100 5,000 1,000 

"V . H. Ogsbury "i"'' 

.!J, C.:: Asst. t o V. P. 50 Eone 80 

Fred B. Reuter D. & Asst. Auditor Eone l 160 

Frank v. Riggio D. & Hgr. Sales Dep t. 2 242 260 

Vincent Ri ggio n. & V.P. 90 4,745 40 

Thomas R. Taylor :u. & V.P. & Auditor 20 None 100 

ilm. E. Witzleben J . !") • "': 

~ A QV', Mgr. 30 None None 

Source: Securities & Exchange Commission 

0691 

Name 

c. J. I' oms 

J. w. Aildrews 

vi . D. Carmichael 1

:f 0 Vi . Flowers 

E. H. Thurston 

G. v. \7hi taker 

E. T. Noland 

Ben. Carroll 

c. B. Arthur 

R. D. Frisselle 

0 F. Gre en 

s. Tisdel 

B. Fleming 

J. Sunders ~ "'· s. Abbott ., ~7 • J, iiililson 

i. <;' -D, rr.ni te 

-67.;. 

Appendix 3- Taple I, page 2 

LIGGETT & riTKlS TOB..,iCCO COUPA11Y 

List of ~ir ctors, Their Official Positions 

Rnd their Stock Holdin?:s as of 

:E'ebruary 15, 1935. 

Position Preferred Common 

-:> 

... 0 & D. 1,000 17,500 

V. P. L..: D. 3,800 

v. P. ' D. 100 1,966 , _,.; 

v. P. & D. 14,300 

v .. P. (:, " D. 3, 00~ 

1T .. P. & D. 5 "7,500 

Secy . r, u.: D. .. . , 5,154 

Tr~as. & ..... 

jJ, 2,426 

Asst. Treas·-Secy. c'C D. 124 500 

Branch figr. Be D. 100 

Sal es l< 'Igr. & D. 760 

Asst. Tre s-Sec~ • ~ D. 2., 500 

Asst.Treas-Asst. Secy r) ') 252 

Auditor 

.,.~sst. Auditor 

Asst. Auditor 

Asst. Auditor 

ource · Securities & Excl1ange Commission 

0691 

Common B. 

837 

334 

60 

280 

726 

636 

843 

20 

88 

134 

40 
Name 

W. ii . Reynolds 

Bo1T1!Ilan Gray 

s. Cl ay '17illi ams 

J ames A . Gr ay 

r. H. Xirk 

R. E. Lasater 

c. W. Harris 

lvi. E. Lot sing er 

J . .. . Gl enn 

R. c. Hab e r k ern 

1 . F. Owen 

R. D. Sho r e 

•CApp endix 3 - Tabl e I, ~ag e 3 

?.. . J. REYNOLDS T03ACCO COUPANY 

s~ of ~i re ctors, t h e i r Off i ci a l Positions 

and their St ock Ho l ding s as of 

! Iar ch 18 , 1935 

?osition Com'ilOn 

D. Chair.'1e.n ~~-{e

tive Com:Jit tee 0UO 

:J. Cha irman 3o a r d 

of Dire c t ors T: I 0"0 ~-· ...., 0 

-· l e e - ..J lalr:-J'"'""l 

3oard Di:. ecto r s 32, 00"1 ...... ?r esi d nt -r ,000 -· . ' 

'Z:;:-e cut ive -- -.) r: ,ooo 

J . II II '•;) 1 500 

:J. 11 11 3 , 000 

J , ~X. Secre t c..r:r c ' ori'J 

:!:> • J , 36() ...... u , 7.50 -·· 

.J . J.l' ~· 0 

:J . ..:xecut ive ':;r epsurcrlO,OOC; 

Common 3 

163 ,397 

150 ,000 

70 ,000 

43 ,258 

9,025 

47 

5,000 

8 

2, 600 

10 ,000 

.above f i gur es include o.ll shares s~Ynn of r10 cor6. on nar e of et ch Jir ector and 

Offic er of t h e .~ st an t ,l us o.l l ot her shar es , i f any , r eport e d by ec..c'1 as 

benefici all y o ... n ed . 

Source: Se cu r iti es f. :a:~ an~e Com:nission 

10691 
- 69-

TABL:8 2 

Co r j_)Ora t i on Income Ta,.,-c Re t urns f or 1920. - 1.933, 

f or Si x Gr oup s 

(Thes e are t he orig i nal nega tive uhoto st a t s . No oth er co-yy i s ava ilc. ble . ) 

0691 

CHAPTER II. THE ECOlJOlA:!: C AND SOCI~ STArUS OF LABOR 

Se ction A of this cha.)ter is besec on. :r'iel c;_ st J.d ies of t h is Industry by 

the Bureau of I.sabor Sta tistics a s f ollows: 

1. Fi eJ. d st' l_ct;-,r ·w~ ing t~1e Code per ioci in t h e Sp ring of 1935. A 

smal l number of leaf cleaJ.e:r·s 1 plants ,_ncie!' no Code was a.lso 

included in t h is study. 

2. A s e cond f i eld stuc.y i!l the Fall of 1935, after the termination 

of the Code. This study also included certa.in leaf dealers 1 

establishments in the South Atlantic Sta tes. 

Unl e ss otherwise noted, ~a e?. giv en i n Se ction A a re based upon tables 

prepared from these t v.o field stucLies. 

A htl.BOR IN T:IE_ Cl ~Al.l.E ~':P E"' SJlJ1!,J'? __ _ CHEVliNG AND SMOKING- TOBACCO MP..NU-

. FACTURJ HG I NDUSTRY. 

S -:-_Livli\.Lt{ ----

In 1935, ':'l'Orkers ernl_Jloyed in t he ci€\erett e, snuff, cnewi ng and 

smoking tobacco manufa cturing industry numbered about 42,000 , 

some 80 pe rcent of wl:om '!'lere 1occ.-.t ed i n f our Son t hern Sta tes --

North CarolinD., Virf! inia, entuck~/, and Tenness e e -- 1rhile the 

remainder spread from l~ issouri into N8w York , with negligible 

numbers elsewhere. lJ.1he force compr ised in ro1.::.g hJy eq_ua.l prOl,)Ortion white men, white woman, negro men, and neg ro women. 

Three com~anies designat ed for the pur~oses of the Labor Study 

a s the Big Three (Rey-nolds, Li g,:.; et t and My ers, and American 

Tobacco , e~ployed 65 percent o f all workers and 85 percent of 

the negro wor;,.:ers. 6 CO!n)an i es (I..orillard, :Brown-\Jilli e.mson, 

Axton-Fisher, Phili:t:> 1:-/Iorris, Larus, and Scott en-Dillon) employed 

another fourth of a ll the v.rork ers, while three snuff comnani e s 

(U. S. 1.1ooacco, Helme , c:.nd American Snuff) , tog ether ""T ith the 

small tobacco companies, emp loy :'d t l1e rema.in ing tenth. In all 

company grou-p s but the Bi g Three, white workers predominate; 

thr ee-fifths of the Big Thre e work ers were negro. In part this 

results from the fact that the Big Thr ee engage to a larger extent 

than the other com1Janie s i~1 ea rly preparatory processes such as 

stem'Ti ins of the toba cco leaf. It is in such chi efly manual processes, or as corn'non l abor, that the g reat ma jority of the neg ro 

workers is employ ed. 

As the result of a field su rvey (*) made by the Bureau of Labor 

(*) Shortly aft e r the Executive Order au thorizing the study of the 

Cigarette, Snuff, oling a nd Ch in~ Tobacco Industry, the Toba cco 

Unit i:r.. the Division of Review, National Re covery Adnlinistration, 

arra!".\g ed for a field study by the :Bureau o f Labor St a tis tics, De -

partment of Labor, covering wages and hours in the tobacco indust ry. 

Prior to the actual field '70r;c the Toba cco Unit s ent representatives 

to a lar e number of f a ctori es, a nd de termined both the occupati on al 

classifica.tion and the p lant coverag e desired. Throughout the course 

of fi eld work a nd office tabul a tion, the Unit cooper a ted ~ith the 

Bureau of Labor Statistics, a~d ultimat ely set u-p the forms f or the 

basic tables in ~hich the results are incorporat ed . 

10691 
· ... 
10691 

-71-

Statis tics, Depertment of Labor , in t he Syring of 1935, it is p ossible to examine cl os el y the s itua tion o f t he d ifferent sex-color 

group s co:npos ing the · labor :force .:;,n d. t he differ ent wage grou:)s s e t 

up by t he Co de . One of t he first f a cts to a!_Jp ear is that, particularl 7 a s 1'8t':9ect G e r..rni nf...;s , t !1er e a r e marker_ diff erences in level 

associa t ed with s ex a n C- ::.~ o-:!: t he -.- -ork erG and e.xglainable only 

in part by diff ~c s in t he ~a ct r of the work p erforne d . 

Thus in arc 1 1905 , whit e men 9&.rned on the a.verage 55 cents an 

hour; ·;;hite ~7om n, 41; n vf T O men, 3 ?; a:.."l.d negro women, 31. On a 

weekly basts, t aking t he grou:.o s in the s ame order, the average 

fi gur es r an : $1s:' .50 , $1..3. 50, $13 .50 , [;.nd $11 --the longer hours 

put in by negro nen bri n,:sing t h eir a.verage 1! :e ·~ ly earning s to app ro x imat el y the s ame l ev el as t hat of hite women . 

.Among com:._Jan.:- rou )S, if snu.f£" compani e s a re :f)Ut aside, the Big 

Three in i.iarch 1° 3 5 pai d to the s ex-color group s in general the 

highest hourly a nd meekly r a t e s, though negro men l-ad a hi her 

hourly rate with the Second Six cospanies a nd ''7 hite men a higher 

weekly r a te with sm&ll compa n i es , where their hours were long est. 

In general, earnin s 7i th s:Llall companies we r e comparatively low. 

Des pite the hig;her earnings of particular se ~;: -co lor classes ·with 

the Big Thre e companies, the averag e hourly r a t e pc.id by this g roup 

to a l l employ ees was compa ratively lo.-, , -becn.use of their larg e em-

? loyment of negroes. 

With r e ference partly to different branches o f ma nufacture, the 

Code s e t up four cla sses of emj)loye es, for ea ch of which a different minimum wage , r a ngin.q; f rom 40 cents dOi"/':'1 to 25 cents, wa s p rescribed. Fro~ a na l y sis of t he occuyations entering these gro ~? , 

it appears that about one ·-f ourt h of a l l '7or~( ers fell in occup ations 

entitled to the 40 -cent r.:lininn .. 1!'1 , a11d that t~1es e occupations (co n -

finad to the final stages of cigcc,rett e a.nufacture) employed white 

work ers almost cl sivel . The p roportions of the workers ent itled 

to the · 35- a nd 30-cent minimG. ~not be ind icat ed closely (beca use 

of admixture in the returns of the ch ~ing toba cco emuloyees entitled 

to onli 25 cents), but did not ex ceed 40 p ercent o.nd 2o percent respectbrely . 

2xruninati on of thes e Code rou~s on t he basis of actual earning s 

reveals, as would be e xpected , that rou )S as a whole averaged above 

the minimum rates. SoQe Code viola tions ar3 indicated by the f a ct 

that in certain cases even averag e earnings for negro orkers in 

)articular occupations fell below the p rescribed minimum earnings. 

But many ayparent d efections from the 35- and 30 -cent minima result 

from the failure of the returns to sej?arate chew ing-tobacco employees 

from wag e grm.r-_ps. 1.Vi thin each of the Code wage groups, the occupational average s spread over a wide enough rang e to indicate that the 

setting uu of mini~a did not reduce workers within a gro1Jp to one 

level. 

·,7hen at t ent i on is turned from averag e conditions to the dispers ioil 

of hours and earnine;s for indi vidu l wor1.cers , it is found that some 

eight percent of all employees are in a very low earning grou? , receiving in .Jviarch 1935 less tha.n 5)8 a wee_c This low group is constituted larg ely of workers in a fe~ occupations -- notably stemmers , 
( *) 

(*~) 

~J ickers, 3-nd ser rc ~1 ers r:-'lere 10mon, especially ~egro ~omen, are 

primarily e!2:tJlO ye<i . I'er:ns o+' "":'l l· ~c f or this F-;roup <-re s tl~on ly affected by the existence of even less favorable conditions -- far 

lower wages and lo:1 -;er hours -- in s inila r employ:nent by indeJ:Jendent l ea:= deal3r co:nJ_.)~.nies. (*) 

For all workers, h0urs c.,:nd earn ings in harch 1 935 represent distinct 

improvenent over those obt~inin~ in earlie r ~eriods e:mmined -- 1930, 

1933, c: nd 1934. bioreover, ther e is clear i'1d icat ion that the termination of the Code did not lead to breakdonr'1 of standards, but that 

in Septc;:Jber 193:5 1ourly ;_md weeldy earnings were higher on the whole 

than in the sp ring . 

.against wap.:es paid in man,lfactu.Ting inclustries in the country at 

l2rge, tob cc o wages in i:iar cn 1 035 e e distinctl;'l low. Against 

wages p· id in some other Southern ind~stries and in some of the industrie s i mporta!lt in the to ba ceo m=!nufc.cturing St ;=~. t es, :9art icularly 

by compariso:n wi tr: cotton-textile We. ge R, they make a better showing. 

In evaluat in:s the sig:1i fi cw'1 ce of su ch cor:1parisons , account :1ust be 

taken o f t he relat ive uni~porta~ce of labor costs in tobacco manufacture (as compe re . for example , ~itn lab0r cost in cotton goods 

manufacture) and of the e·:ce_Jt i onal j)!'Os}eri t ;y- of the tobacco co~­

panies. 

1. ~he Size of the Labor Force. 

In Me.rc:1 1 S'35 there we:·e abou t 42, OOC wa;:;e earners and minor salaried 

er.tployP-es j_n the inC.ustr r define<i by the Cocle :.. or cigarette, snuff, 

cheminc , and smok in.c.; tob;;.cco rr.anufCJcture. ("'*) Since actiyity in 

i.Iarch "<ec; so:Jewhat low'3r tha:J. for the ·rear " s a vrhole, average em!Jloyment for the y ear mC~_y :? erha_Js !'1m a little higher than this. In 

numb er of rtrork:ers , the:- ef'"'re, t -J.is l1'lanufacture is among the more im-

:Jortal1t code ~-ndus ies, since less t ha.n 80 of the first 500 cocl es 

a::;>? roved had a s :na11y as 4v, OvO employees even in 1 q29, when eJ'l:)loyment generally ~as distinctly reater than 1935. (***) 

-I 

.h.n independe·flt field survey of living conditions ar!long tobacco workers 

Tias conducted in the spring of 1S35 by Dr. Charles S. Jol~son of Fisk 

university. The scope of the surveJ differed in sundr.Y respects from 

the Code industr27 -- coverino o:1ly si~ Souther"'l cities, omitting snuff 

employees, and including employees of independent leaf dealers. Dr. 

Johnson 1 s corrmlete manuscri·ot is on file in Di·.rision of Review, Nation- - ~ 

al ~ecovery Administration. 

This fif ure is beseC. on questionnaire or payroll returns secured 

from all lead ~ C0!!1J?a.'1ies and froE a sisnificn.nt fraction of the 

small companies, and on an estimate for the re:1aining small companies. 

It excludes officia ls, executives, and persons enge.ged in buying or 

sellinb of leaf and manufactured tobacco produ cts; but includes, 

along Tii ~1. wag e earners, :tJersons of lower supervisory rank and ordinary office and clerical orkers . 

(***)Leon C . . Marshall , "Hours <1nd Wages Provisions in .. IRA Codes 11, tl}e 

:Brookings Institution Pamphlet Se ries 1Jo . 16, 1935, :? · 4. 

10691 
-. 

' l - {t.,...'-

Th; s fL..,u·e of 4 ?. , (:t''! is S·)·"e7:18 t h i p;her thc.11 su.gFested r the Census of f/:3JJ U:a.ctur ~s fo r l ;3 0 or t han ,,-,·i "Ll b e -r- epor· t ·3C. , 1J rou a·b~ y, by 

the Censu s of }J1anufactures. for 1935. TJ:le Census put:;; the number of 

wa1;e en.rners i n ci "'"ar et t e, he,..., i~.:, and smo 1dn ''; toba cco, and snuff 

manufuct·u1· e in : iarci1, 1 ~3 , at on:y 31 , \JOC: -- or 33, 000 if one adds 

an est imate for sa laried emiJlo;y·ees ( *) -- against 38 ,000 indicat ed 

for t hat .:n onth by 1 935 r e t'.ll'ns (subsection E·, this chapter) (Tihich 

show er.1:9loy1nent f or :.larch , 1°33 , a:;>p:r.oximately lCJ~o belo, .. that for 

March , 1 935). 

Two Census 0r.1issions ch i efl y a ccou nt for tl.1is differen0e : (1) the 

omission of small establish1uents wi til p roduct valued at less than 

$5,000, and (2) t he omiss ion o f leuf deyartments of manufacturing 

plants . (**) The Code included such l eaf departments (oeginning as 

it d_i d "'T i t. h the lJrocess nf redrying or with deli ver~r of the 1 aaf to 

the manuf1: cturing l.Jl ant), a nd embra c ed. e st,a blisb!nents of a ll size. 

For the s e rea sons, fi gur e s <:::.J?:·;> l yin€' to the Code indue try naturally 

run higher than C·3 nsus figures. 

(*) For salaried emp loyees ( includi ng in t his case managers, superintendents, and like administrative of cials) the Census g ives no 

monthly fi g>J.res hut only a n averag e for the year of l, 8 28. 

(* *) While it is the i nt ent of the ·Cetlsus to 0::1it stemming and reha nd--

ling , evid·ence exists t hBt such "Jerations are not in fact always 

omitted from its ficures. 

10691 
-74-

2. Regiona l Concentration 

Regional concentration of the industry enhances greatly the 

i r:rpo rt ance of t ·is emnloyruent to u n.rticulC"lr States. Ap·o roximately 

four-fift hs of the workers -:1ere emplo~red in the tobacco belt of 

the South, ir the four adjacent Stntes of North Carolina, Virginia, 

Kentucky'· and T.ennessee -- with almost half of all employees in 

1'iorth Catoli·na alone. The -r e~aining fifth spread across the six 

or eight Northern States from New Yor:~ and Hew Jersey into idissouri, 

with a few scatterings else ;{/.lere , as in C8.li fornia. Obviously the 

ind:L!.st.ry as employe r is i moo rt:mt nri:'l'{rily to Southern factory 

labor. 

3. Composition wi t h resnect to Color and Sex. 

I n view of the regional concentration of this industry and its 

heavy dependence on u.l'lskilled and se-ni-skilled labor, it is not sur-

·o rising t :> find tha t almost half the ·, orkers a re negro. I n neither 

sex do negroes ·oredominate , but in both t hey a·1proach equality of 

numbers \'Ti t'h. the whi te, and on t he who le conmrise some 45 per cent 

of the l abo r f orce . Outside t 11e four Southern States, of course, 

the proportion runs v ery muc S!Jaller t han this, while in those f our 

States it r en.ches the half- wrw marl:. 

Int e r esting shifts in this proportion occur, however, when one 

examines wo r kers i n different company g r oups . Thus, the Bi g Three 

compani es , as a g r oup , e::rrpl o~r in both cigarette manufacture and in 

chewing ancl smolring tobacco ma.rmfacture distinctly more negro workers than white . In .. arc~1, 1935 , almost three-fifths of t heir ·:Tor:{:-

ers VTe re negroes, comp . r ed vvi t h only one-third negro workers in the 

smal l companies , and still smaller n rol?ortions ( a fifth and an eighth 

resuectively) in the other tobacco g roups 8nd t he snuff conpanies. 

Even greater variety, of course , anpears Among individual concen1s, 

with some em:_1 lo in~ no negroes at "~11 , while others have 90 per cent 

or more. I n part, the differences nr e a result of location; bu t 

in pc.rt t he verj dissimilar Drol)o rtions of negro workers presume'bly 

reflect differences ei t er in t he type of operations (e. g . ste;-araing) 

or in company policy. 

Among both 'vvhi tes r.t.nd negroes, t:1e i 1dustry as a whole em:-_Jloys 

a slightly higher nmnbe r of nomen than of men. In snuff manufacture, 

men predominate; but L'l t !le tv!O othe r branches of the industry --

cigarettes, and cl e::ing and smoking tob a cco manufacture -- there is 

a sl ght ~r gh~ r :':Jroportion of women than of men. 

LL -. Distribution oy Compani e s. 

10691 

Of the aggregate of 4~ aoo 1orkers , 65 ne r cent, or practically 

t wo out of eve~r three, we re e~!loyed by the three largest COW)~1 ies 

R. J. Reynolds Tobacco Company, Liggett & l\'iye rs Tobacco Co!IT')any, and 

American Tobacco Company . Another 24 per cent we r e employed by the 

six tobacco compqrdes next in size -- 3 rovm oc v illia.mson Tob acco Corporation, P. Lorrillard Company , Axtoa-Fisher Tobacco Company , P!lilip Morris and Con1pa.ny , Ltd ., Inc., Larus c:: 3rother Company, L1c., 

and Scotten Dillon ~obacc.o Compan,-; 4 pel~ cent '7ere employed by 

three snuff companies -- United States Tobacco Compan;'l, George ·;· . 
-75-

rie l me Como.<my, nnd. L\.merica.-~1 uff Comn any ; ?.nd only 7 per cent by 

t h e rem;;dning in:iet qrrr.ina ·lie · m:un·ber ( ne :chaps 110·i; exceeding one or 

tvto hundr ed) of small comp anies. (*) Clearly, as regards the condition of l ,q,bor wi t h rem.)ect to wage s 8-Ed hours, it is desirable 

to exarrtir;e clo s ely t h e ri e CO!iTIJ ;lr.ti es wh ic .~. toge ther emp loyed ninetenths of a ll the workers. 

The wag e p rOVl Slons in the Code for t he Ciga rette, Snuff, 

Chewing, and Smok in; r.L'ooac co TJ.;;.n,lfBctu ring I ndustry covered four 

main groups of o:L.~ke rs, for euch of which a different minimum hourl y wn.ge vvas p:resc ri bed. At t l1e to;:>, with n 40-cen t hourly minimum, 

crune factory vvorlce rs engc::.ge d i n th e fina l s·tag es of ci garette manufacture, toge t he r with office vvo l~e s in all branches of the industry. (**) At the b ottom, with a 25-cent hourly minimum, came all 

worke rs engc? ? ed L1 processing or manuf8.ct-u.re of chewing tobacco, 

together wi t n 11 slow" st emme rs · ( ***) in cigarette o.r smoking tobacco manufacture. Intermed.i .ate we re two groups, one ~- at a 30-cent 

m2n1rnum -- co:'llp rl s2ng sev~n s·pecified. occupations, (****) and the 

other :-- ~ a 35-cellt minirrrwn -- comp rising all p rocessing or manuf acturing worke rs not elsewhere sp ecifiec. The 35-cent group thus 

embraced employees engaged 11 in the :;recessing or hancUing of ciga rette toba cco at ·any stage prior to the fabrication of the product" or 11 in the processing or manufp,c ture of snuff or smoKlng tobacco" -- other than t hose in occupa tions specifically excepted. 

( *) The number of small companies cannot be determined from reports 

either of the Census of Manufacture s or of the Bureau of Internal Revenue. The Census i:1 its latest report, covering 1933, showed. 139 establishments (omitting, of course, those ·with product valued at less 

than $5·, 000) whose nrirnary busine ss was 1r.anufacture of cigarettes or 

chewing and smoking tob a cco and snuff; but since the term establishment , though it may apply to multi~le p lants in one nlace, ordinarily 

means a single plant or factory, t he number of establishments covered 

is greater than the nlli~ber of companies covered. Again, the Bureau of 

Int e r nal Revenue reported 98 ciga.rette factories and 738 11 tobacco" 

(chewing and smoking tobacco and snuff) f a ctories in operation on Je.nu a ry 1, 1935; bu t the Bureau 1 s tot a ls refer to separate plants, not to 

comp anies. Tz1us, a sL1gle company mi ght enter the totrtl many times , 

since each of its ci garette plants and each of its 11 tobacco11 plants is 

coD..nted separately. Tile scrap chewing dena rtments of cigar comp anies 

also enter the fi g-u.re s, such depart:::1ents being requ ired to register as 

separate tobacco factories. 

( **) The Code spe cif ied. for "accounting , clerical or office" workers 

a minimum of .$16 for a 40-hour week , exceut that offic e boys, girls 

and messengers (not to exceed 5 per cent of t he office force) might 

get 20 p e r cent less than that. 

( ***) Not to exceed 15 pe r cent of all h and ste:muers. 

(****)Searchers, p icke rs, cleaners, hangers, p ri zers, classers and 

hand stemmers. 

10691 
-76-

G-reat intere st nat-LlraD.v att aches to the number and type of 

employees included i n t11e four wage g roup s. On t he se points some - - information can now be de rived, on the basis of a survey of employrnen t in t he intiustry conduct ed for Nc:.tiona.l Recovery Administration 

by t !1e Dena.rtment of Labor in the Spring of 1935. ·;mile aot a comp lete c en sus, the surve~,r cove r ed a l a r ge fraction of the industry, 

embracing nearly 60 ·oe r cent of nll employee s in a sarnule selected 

to represent fairly different size com-panies, different regions, 

~nd different branches of tr e industry. 

The survey does not pe1·rni t a 4- way breakdown like that in 

the Code, b ec ause it does not segregate employees in chewing tobacco manufa cture f r om these in smo:tdng tob acco. It do e s, hov-1ever, 

pe rmit t he st ~temen t t hat unde r the Code about one-fourth of all 

v10 r kers in the industi"J were accorded t he L~O -c en t minimum; less than 

40 per c ent v;e r e acco rded t he 35-cent minioum (the fi gure include s 

an unlmovm number of chewing-toba cco employee s entitled to only 25-

c ents); and l ess than 20 per c ent we r e accorded the 30-cent minimum 

( again , the figure includes an unknown number of ernnloyees subject 

to the 2b-cent minimum) (*). For about 9 ner cent of the industry 

no minimum hourly v1age was sr;>ecified in the Code; while for the re-

(*) The abov e brPakdown of employees i n to grouns subject to the specified 

hourly minima was made by alloc a ti n5 to eac. gr oup t he occupa tions tha t 

c arue under th~t g roun as defined by t he Co de . Tnus , t he Code indicates 

t hat the 40-cent !'1i n i rnu.m i s to anry l •r to office wo r ke r s .?.nd to ciga.r e t t e 

·:~orkers e:1~aged i !'! 11 fabrica tion11 of tne product, a s distinct from p roc essing or h~~dling of cigarette tobacco a t any st age prior to fabric a tion. 

AssUi:·in3; t hat fabrication, or 11 f inal finishing11 ( as the Code Advisory 

Committ ee c all ed it in l etter of Marcn 14, 1935) includes not only shap -

ing of t he p roduct but also wr apning and nack ing for sl ipment, 11 classes 

of cigarett e worke r s enter t nis -10-cent grouu ( along with office workers); 

viz.: 

Ca rton makers 

Carton packers 

Ca rton a~pe rs and 

banders , hand 

Ca rt on n r a-ppers and 

bande rs, machine 

Ci garette c a tchers 

Hand packers 

Hach ine adjusters 

!·.'iaking-machine feeders 

i :aking-machine operators 

Pacl<:e rs, c ase 

Pa cking-mach ine o:Jerators 

( ·:;:he se occupational cl asses we re defined jointly by ren resentatives of 

l'i:?A 'llld the Bureau of Labor Stcttistics, Department of Labor on the basis 

l o.rgely of a fi eld study preceding t he ·.-1age and hour survey in the Sprin6 

of 1935 . Each class embraces seve r a l i ndi vi duel oqcupations vary ing ~r 

slightly in cha r a cter.) To t he 35-cent u~ a re ll~c ted occupations 

p rocessi ng or handling cigarette tob a cco, ~~d a ll p roc e ssing or manufacturing occupations in snuff and smo king toba.cco, except in each case t he 

seven specified for the 30-c en t group ( a nd exce-p.ting slmv s temme rs). As 

stated above, it is unfortunat e ly not p ossibl e to separate out from the 

figures for these t v:ro grou-ps employees in · che,.li ng tobacco manufacture, 

who we re g.ccorded a. 25-cent minimum. 

1 0691 
- 77-

ma ining 6 pe r ce;.1t not acco1.~ n~e d for Above the anplicable minimu:rn 

c anno t r Padily be determined . (* ) 

If col9r and sex of: ~lE~ v.ro r ke r be t aken into c~ount, certain 

ma rked concentra tions av"~e r. Most noticeable are these t wo: (1) 

t hat practically · all viOrke rs entitled. to the 40-cent minimum we re 

white (less than .4 per cent were negro); and (2) that in seven occupations subj ect to the 30-c ent mi nimu.in (or in the case of chewing 

tobacco worke rs 25-cent) 90 per cent of t he worke rs. w~ re women, 

with negro women outnumbering the white two to one. In no other 

grou-:J did negro women fi gure to a signific::Lnt de gree . 

6 . Average · H<?urly Ea rnings in March 1935. 

to 

Agains>li t he Code provision ( asjthe l east tha t workers should 

get) a re to ·oe put t he c:~ cts as to what they actually get. Presumably groups as a whole would earn more per hour than the minimum 

rates set in the Code. Fran: t he Bureau of Labor St =tti sties survey 

already described, t he f acts a.an be elicit ed. And although the Code, 

as already indic ated , nowhere deals with a single minimum r a t e for 

all worke rs, it will undoubtedly be useful to start with the overall position. 

In }/iarch 1935 , then, a month after the Code becAllle effective, 

all employe es in the Code ind.ustry earned on the average a little ·tc ) ov er 41 cents an hour.(* In a l abor forc e so diversely constituted, 

however, with resp ect to color, sex, and -- in some degree -- location , a single average could hRrdly be , and in fact is not, a typical figure about which othe r r ates cluster. It is practically essenti a l to deal with a scale of ave rages, including r a tes for white men, 

white women, negro men, and negro women . In this scale the departures 

from the central fi gur e of 41 cents are indeed wide, with white men 

--,----c--------·--= - ----------. 

( *) Occupations not readil;>r assi gnabl e to a particular minimum comp rise: 

foremen, in spec tors, 11 mi scellaneous dir ect 11 and 11 rni scellaneous in'di rect 11 

·workers in cigarett e manufactu r e , together with 11 mi scellaneous indirect" 

wo rke rs in snuff and smoking tobacco ma.TJ.ufacture. 

Occupe tions for which no minimurr wage r a t e was prescrib ed by t he Code comprise: 

Janitors, cl eRners 

lvlach ini s t s 

Power-House workers 

Skill ed me ch~nics 

Skilled mechanics' helpers 

Subst andard workers 

Servic e employees 

It should be r emarked, howev er, that t he Code prescribed for watcrunen (a 

small group included by t he Department of Labor with service employees) a 

minimum wage of $18 for a week of 56 hours. 

( **) All the figur e s dealt with here, unl ess otherwise indicated, a~ce the 

weight ed a s distinct from t he simple averac;e s constructed by the Bu. of 

Labor Statistics. The simple averages co ~nonl y ru.n somewhat higher than 

the weighted, but do not tell so true a story, becau se they under-re:9 resent the Big Three Companies and consequently the proportion of negro 

workers. 

10691 
-78-

-~¢ above P •. nd neg ro women ¢ below the g ener3.l o.verage . In descending order, the (rollncied ) fi gure s run : white men , 55 cents; white 

women , 41 cents; neg=o men , 37 cents; negro women , 31 cents. 

rrhi s si tue.t i on , throughout the wage da.tu. , strongly suggests the 

opera tion of t wo wpge diffe reHti a ls, color n.nd s ex , which could., if 

it exists, be co11firrne d only by- a stB.d.y of occuoa tional rates and 

group s . The Code forbade ::my £ex di f fe r ential for 11 female employees 

p e rformi ng suostanti 1.l l;.· the same work as male employees" , but did 

not ~d rt to reg iona l or to color differentials. 

?h e geu e r al. av P. r Rges a ff or d ?.1 so a first vi ew of the position 

of worke r s i n di ffe r ent iz ~ como'J ni e s. Rev e rting for a moment to 

t ile singl e fi gur e emb r a ci n -:; worke rs with out r egard to color or sex , 

and ali gn in ~ on t 1.i s b a.si s t be sev e r a l compa ny g roup s , one finds 

tnu t the ~ rhr ee c ompcmi es nnd t ne snall firms raid. a little less 

t han t he ge1J.e r ,1.l av e r pge l;)e r hour ( r espec t ive l y o~1e cent and two 

c ents l ess), .J.~e eas the i ntermedi a t 8 :3nd "the snuff com11 a..11.i e s p a id 

more t han t 11e t!Cne r al averCJt;e ( r especti vel ; one c ent and ten cents 

more ) . ( *) 

~hen ore looks ~t t ne r ates ~R d t o ench sex-color clnss , 

hov~ ev r, t he Bi g ·rh r ee and t he Se c ond Six Corrrpuni e s ch ange pl a c e s . 

That i s , v:i t' resu e c t; to eacl1 of t he fo,J.r cl 3sses -- white men , 

v1hi t e women , negr o men , ne5r o v1omen -- it ,'1,UT.>eCJr s t hat the Bi § 

Thr ee co.npani es pai d mo re per hour (though in m~ instanc e s only 

a t ri f l e more) t han the av e r age for thoG cl ass in a l l compnni e s 

combined , whf'r erts, the Sec ond. Si x c ompani es paid exc ep t to neg ro mer. -- l ess p e r hour t h.!'ln t he a v ,;:- r age . (**) 

Th e BX1)1Dn a tion of t hese c;,:r;mar ent contradictions wh ereby the 

Big Thr ee c ompani e s b e tte r ed t 18 a ll-comp any hourly av e r a ge for 

e ach particu l a r cl ~ss of workers and y e t f e ll short of it for all 

workers toge t he r , w il e t he Second Six omn~ ni es f ell short of the 

a ll-compa ny e for mo s t cla ss e s of YJ orke rs and y e t e xceeded 

it for all worke rs to6e t her, li e s i n the composition of t h e labor 

force . As noted earli e r , a l 8 ost th r ee - fifth s of t he work ers for 

t he Bi g Three comp ani e s ar e negro , wa8 r eas mor8 t h an four- fifths 

of th e worke r s for t 11e Seco nd Six c ompani e s a r e white . In other 

( * ) ':..1h e notic enbl:r 'L d g:h fi gur e for snuff conmani e s is discuss ed l a ter. 

( **) I n det a il , t he s di f::'e r enti a l e a r ned L1 Viarch , 1 935, by em-

:s>loyee s of the Big ·:rh r ee and t h e Se cond Six comp ni , a.s against t h e 

c ompar abl e av e rGJ_ges for 11 corrrpan i e s comb ined , r a n as follows: 

All -.'io r "ke rs Whit e Men Whit e Women eg ro ·.~ n Negro Women 

Big Th r e e ~ 

- . fl. 7 /-3 . 0 /- .1 f . l .~ 

Se c ond Six /-1. 2 - 3 . 6 - 2 . 7 fl . l -. 2 

10691 
. -79-

" 0 r cls, the Big Three errrrlo r heavily the t wo low-wag e classes -- negl'O :t~ en ;1 nd "~i'.;o t"U -- v•.i1ere·• :> ~e i nt e.r me d.i 0.te co::f9ani e s emnloy ;Jrime rily the two hie,ner-wage cL;.l,sses -- white men and women. 

Di ff~:. 8n s i n COY1mosi tirjn of t he l a-bor force, in turn, are 

<'l.ssoci a tecl in p::t:-..'t wi tl.1 di.ffer euces i n tne o::>era tions p erformed, 

since the Bi g Three companies do relatively · more stemming than the 

Second Six. He re, as i n t ile C:J.Se of s ex-color differentials, examination of p a rticul <'1 r occup? tioas is n e eded, to show in this c a se 

h ow the different comp any g roups compq,re with res-g:ect to rates and 

t y·9 e of labor ern--1 loy ed for identical on e rR.tions. 

In the ~-t e of the small and. the snuf f com'l_!ani es, no contradictions arise. Not only to their entire force but also to each 

sex-color class, snuff corapc:mies p aid more uer hour and small compe.nies p aicl l e ss per hour th;Jll th ~ compa r able gene ral average. (*) 

For the small co:-.1nc11ies, l owe r r a tes a re in h c:J.rmony with reiterated 

statements during t l1e pP riod 0f Code formatio n the.t such companies 

could not affor8. to "? a? su~g ested minima, and pro.bably reflect the 

fact th<=~.t the small concerlls a re en.;aged. to a rel a tively large extent in a declining industr.r -- che'ifing tobacco manufacture. 

The high averages disnl~ved for snuff cowpru1ies result from a 

combination of factors; such as ulant loca tion (more than half the 

snuff employees are loca ted in the North) and negligible employment 

of negro women, the lowest wage class. 'I'hpt the r a te differential 

reflects also the highly mechanized chara cte r of snuff operations is 

suggested by the f a ct that it persists in a majority of cases even 

when comparison is made ag.q,inst tob,c~ cco plants in the sBme States by 

sex and col.or. In connection with the showing mad.e for the snuff and 

the small companies, it is vvell to recall that tog ether they employ 

little more than one-tenth of the l abor in the industry. 

- ------ - - ( *) In de t a il, t 1e ·cents differential ea rned in !~£ arch, 1935, by em) loyees 

of the sm.g,ll and the snuff compani-es, as at,ainst the corrroarable averages 

for all conpanies combined, .ran · a s follows: 

All Worke rs White Men Whit e 1fl'omen Negro v; en Ne.gro Women 

Sma ll corn 

T)ani es -2.0 -1. 8 -5.7 - 4 .4 -3 • L_1 

Snuff compru1i es f9.6 f5.1 /-1. 5 -1.5 a/ 

9:} Th e differential for neg ro women is f6.0 cents, but the reported TI~1 loyment of neg ro women is so S.1lall that the figure lacks significance. Snuff 

differei1tia.l for all workers exceeds that for groups, because negroes de-

. press th~ all-company figure. 

10691 
...; · 

~80-

7. Average Hourly Earnings for Code Groups 

The presw~ption that in the industry as a whole the wage 

gr ouns defined by the Cocle wou..ld average above the set minimum 

rates is borne out by the record. It will be recalled that the 

40-cent minimu.rn al) lied to a dozen occupations, all (exce;)t office 

workers) co.nfined to cigarette ma.nuf ct~re. In all these·- occupations avera e hourly earnings were above 40 cents, settling in most 

case s a t 41 to 48 ce·1 ts, but rising higher than that for two factOI"J 

occupations a.s we ll as for office workers. ( *) One defection stands 

out; namely, tha t in four of five of these occupational classes, the 

averages for negro workel~s we re barely above or actually below the 

prescribed minimum. Even though the nuwber of negro workers involved 

is small, such defection might appear significant. 

In this connection, however, a technicality of the computation 

must be borne in mind; to wit, that workers in occupations common 

to several br~1ches of t ' e indust17, including some of the occupations here in question, were allocated to a particular branch according to t.'l-).e '1riillai7 p roduct of their plant. Hence a minor number of t he emJ?loyees classified as cigarette workers may in fact 

have been working in smol-ing or plug departments entitled to only 

a 35 or 25-cent minimum. This circumst ance, together with chance 

errors in t he occupational assignments, p.robably accounts for the 

defect of the negro average in three or four case s, though it does 

not suffice to explain all cases. 

I!l the gro·np of wo '::ers entitled to a 35-cent m1n1mum, all occupations but one averaged above the n r escribed figure, varJing for 

the most pA r•.; between 37 C'lnd 43 cents. (**) l'he exception \vas stemming-ma chine feeders, who got a little less than 35 c~nts (34.7). 

When one exmnines the grou JS on a color basis, no exce1Jtions a t all 

c>}.T )ear amonc; white workers -- in A.ll the affec ted occupations they 

averaged above t he 35-cent minimum; but among negro workers exceptions multiply, with negroes in nine occupations, chiefly in the 

chewing and smoking tobacco and snuff br:mch of the industry , avera,ging below 36 cents. The impossibility, already indicated , of 

se~arating out from the group entitled to a 35-cent minimum the employees in chewing tobacco P-nti tled to only a 25-cent minimum may 

be as sumed to oe the chief explenation of the defect in the negro 

average s. 

For the groul) of seven occupations entitled to a 30-cent minimum, the story is essentially the same as above . Except for negro 

workers in one or two occupntions (for whom again, presumably, the 

inclusion of employees in chewing-tobacco manufacture helped lower 

the average), average hourly earnings cleared the minimum by amounts 

va rying from one cent to several. The diversity of average hourly 

earnings among occupations in this group, and still more in the 

( *) ivlaking-machine operators averaged 51 cents, machine adjusters 68~ 

cents, and office workers 57 cents. For occupational classes no weighted 

but only simple averages have been computed. 

(**) hachine cutters averaged 4:6 cents; and in the smoking and chewing 

tobacco and snuff branch of the industry, carton maKers also averaged 46 

cents and machine adjusters, 60 cents. Inspectors and foremen, likewise, 

had high hourly averages. 

10691 
p 

u . 

-81-

othe r grou"9 s, i nd.icnt es t hc1.t the setting up of wage minima, did not 

reduce workers to flatly uniform levels. 

It is of incident al int erest tha t in those occu~ations for 

wh ich no miniruum was spe cifi ed -- comprisil:6 , it vlfill be . remembered., 

some nine per cent of all workers -- emp loye e s belonged more l a r gely 

to occupations with rather high hourly earnings tn;in. to those with 

low earnings. The small m_unber of substandard worke rs in this group, 

however, averaged ~1ly 24 cents an hour. 

Average Hours or ed Per Week (*) 

The Code provided that the normal work- week for wage earners 

and minor sal C~ ried employees should not exceed 40 hours, except 

for a few snecified groups. (Engineers, firemen, receiving and 

shipl)ing employees could work 44 hours; and. watchmen, 56.) In the 

we ek of March 1935 covered by t he survey, hours for a1l workers 

combined averaged well below 40 , barely exceeding 35. In fact, from 

the month by month figures avail able, ~hey seem to have been below 

40 (for all workers combined.) ever since t;he summer of 1933. ( **) 

Among company Groups, · the nearest approach to a 40-hour week 

in March 1935 was made lily the snuff companies, with an average for 

all employe es of close to 38 hours. Longe r hours in snuff manufacture than elsewhere were connected, parti ll~r at least, with a, 

seasonal a ctivity not experienced by other 1)rr..nches of the industry. 

Outside t he snuff companies, the Big Three had the fullest week, 

averaging 36 ¢ours. Their white workers had shorter hours than those 

of any other comnany group, but the ·longer hours and the number of 

their negro workers bolstered up the group average. Smail companies 

fell a little below the total-indust-:uy figure of 35, even though 

their white employees worked relativel y long; while the Second Six 

had the shortest work-week of any group -- not much over 33 hours. 

(***) In some instRnces, the number of hours worked resulted directly from st aggering of employment. 

(*) In this section again the weighted r a t her than the simple averages 

secured in the Bu. of Labor Statistics survey is used. Giving due representation to Bi g r_r:rnree 1 s negro employees, the weighted figures show 

somewhat longer hours, for all companies combined and for the Big Three 

group , than do the simple averages. 

(**) The month by montl1. figures (not all of which are published) are compiled by the n~ loyment Division of the United States Bureau of Labor 

St ati sties. 1Yhey cannot be sub-divided to shmv narticular cl'asses of 

workers, exceut t hat employment in chewing and smoking tobacco and snuff 

f a ctories is reported separately from tha t in cigarette factories. 

(***) One plant in the Second Six group showed· ail exceptionally short 

week, of only 24 hours; but even vii th t his pl:-mt omitted, the Second 

Six still had a shorter week than the other groups. 

10691 
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Some differences in hours associA.tea with color and sex a_;y.)eared. l .L • 

'rhus, women, <Weraged only 3--1 nours against the men's 36; white workers only 3~ hours a;ainst the negroes' 36 . Except for the influence 

of the Bi g Three Compol1ies, the color average would have run in the 

op<;osi te direction, since ::J.rnong all other compan.y groups -- (Second 

Six, small, a\ld snuff) -- v1hi te \'Y orkers hnd a fuller week than negroes of the same sex. With ~he Big :rhree, not only did negroes 

work longer than wnite employees , but negro women wo r ked a trifle 

longer thru1 negro men. This was the only instance in which the 

wo rk-week for women exceeded that for men of the same color. 

9. Average Earnings per v7 ee,: 

Working Rpproximatel ~r 35 h rmrs , at anproxirnc:~ tely 41 cents per 

hour, the average ernnloye e in the Code industry earned $14 .50 for 

the week . Three of_ the four sex-color classes in the industry, 

hoyvever (white worJen, and :1egro men and women), earned less than 

$14 . 50; and one class (white men) e a rned more . In descending order, 

their average pay ran: rvhite men, $19.50; white women, $13 . 50; 

negro men, $13.50 ; negro women , $11. In evezy group of companies 

this same descendint::> scale a:opeared, exceut that in the Second Six, 

negro men -- 'uecau.s e of slightly longer hours -- earned a trifle 

more th~1 white women. (*) 

Though the industry averag ed $14 .30, tne only company grvury 

to 13:verage that much was_ the group of three snuff companies, which 

snowed a figure of $19. In part this relatively high figure resulted from the practical non- employment by these companies of Hegro women (from t he l a c1: of stemming operation), but it also reflected better-tban-averA.g e hourly r a tes and longer--than-average 

hours for each of the remainin ; employee class es. 

Just under the total-industry figure were the 3ig Three companies, with a..n average of $1 4 .44. The Second Six and the Stilall 

companies followed at about half-dollc:-JX intervals, with (rouncled) 

figures for the week of ~14 and .:;;13 . 50 . EF.J.Cil sex-color class except white men likewise made more with the Big Three than elsewhere 

(snuff compnnies aside); t. us, white women earned almost $2 more 

with them th&i in the nearest comp e ting g roup; negro men almost ~1 

more; and negro women almost $3 more . In the case of negroes this 

s~read resulted from the combination of better-than-average hourly 

~ates and longer-than-average hours; while in the case of white 

women it was the result solel y of the relatively high hourly rate 

(44 cents), their wo r k - week with the Big Three, as already noted, 

being verJ short. White men earned most from the sma.ll companies 

(snuff companies still aside) where their hours were longest; and 

also because of longer hours, negro women made somewhat more with 

(*) Rounding of the figures to the nearest half dollar puts negro men 

aJG the same a;.>proxima.te level as wni te women; thou6h more detailed figures si1ow the white women slightly ahead. (See note, next page . ) 

10691 
- ( -83 

the Second Six. (*) 

10. Position of the Individual 'Nor"Aer 

To sup lem~nt the incomplete view ~f forded by averages, it is 

essential t6 consider the effective limits of hours and earnings. 

In defining those limits here, no at terrr~:>t is !'llade to consider extreme ca ses, the ~u~ose being solely to get a view of tpe s~tuation of the bulk of the vvorkers, and of significant depa~tures from 

average con1itions. 

With respect -first;· then, to hourly earnings,. the b~ll} of 

the o1~kers -~ in ~ach case. roughly 95 per cent -- ~e re 9D;bj ect to 

the following limits, according to their color and sex: ~egFO 

women , 20 to 20 cents; negro men, 25 to 50 cents; white women, 25 

to 60 cents; &~d white men, 30 to 90 cents. The order here _is the 

same as that indicated oy the P.verages per nour, which ran, · resp-ectively, for the same groups: 31, 37, 41, and, _b5 cents. Earnings 

were most diversified in the highest -paid gro?--p·,. rno st .l,llliform in the 

+owest . 

A point to attract attention is that a signific'ant num?er (S 

per cent at least) of the negro women were receiving less per hour 

t han tfle lowest !'llinimum prescribed by the Code. (**) In all sexcolor classes, some infraction of the 25-cent minimU!'ll ,anDear, out 

only in the CF.ISe of negro women are they consider~ole . Almc;>st all 

tile se subminimal ·women we re ·hand s tenu-r.ers, and only. a_· qmaii number 

of them we re classified a s either slow or substanda.id. _ - • • ,_ • 0 , 

Affected. by l ength of wee~c as well as by hourly rate, weekly 

earnings naturally range more widely than nourly. On a we ekly _basis , t he bulk of tne worK:ers (again, close to 95 per cent in each 

of the several group s) came within the following limits: negro 

women , $4 to $15; negro men, $6 to $18 ; white women, $6 to $20; and 

white men, 10 to $35 . Thes e r anges indicat e t hat those near the 

top of the group earned 3 or 4 times as much as those toward t he 

bottom. If the limits are narrowed to the belt of highest concent r a tion, they become: $8 to $14 for 75 pe r cent of negro women; 

( *) rhe weighted average weekly earnings by company groups ran, in detail, 

as follows: · 

All C9mpanies Big Three Second Six Small Snuff 

All $14. 50 $14 .44 :j) l4.13 $13.67 $19.19 

White len 19 . .56 20_.03 18 .18 20.25 23.67 

White v omen 13.51 14.36 12 .55 12.04 14.97 

Negro Men 13.45 13.65 12.71 10.82 14.. 90 

Negro Women 10. 92 11.33 8.34 8.57 . ( aJ 

(a) The snuff company average for negro women was $10.75 but less 

than a half-dozen v1e re reported. 

(**) Since frequencies cover only t he unweighted fi5Ures , p roportions 

in low gr oups may be somewhat higher t han·indicat ed in this section. 

10691 
:.) 1 '> t0 q 8 fo r 80-o!': ~ •1e r cent of l1egro men ; '?10 to .; 16 for about 

D-' ~; t;.; .1. ' ceuii o .{ le wui ~.~ e ., c:.,_<:L ; ' ·lh .' ,. ]_ ·, ~o ~;.:-'1 fGi' ti:1e s ame ;:> r0~1 ortion of whit e men. It will be observed that the earnin.o-s of white 0 

Yv orkers are less highly conc entrat8d t?.nd more diversified than those 

of :1eg ro es . 

rhe lowest earning s attached for t he· most part to women i n a 

fev11 occupn tions. Three-fourths of a.ll v10rkers i n those particula:c 

occupatio:c1s receiving l es::, t han <;')8 ue r v1ee~..c -- and· about 8 uer c ei1t 

of the entire force did receive le ss than t hat were whit~ and 

negro wo::nen engaged in largest numb e rs as 1:> icke rs, searchers, or 

hand sternme rs. .Aga in only a mi nor prop ortion we re classed as slow 

or subst andard. In other i nstanc es ve ry low earnings, seemed to ref lect either part-time work by a few employe es in occupations normally igher-pa id, or CC~sual work ( a s in t he case of floor hands). 

For no g roup VIere they as marked as for negro women , a lmost 20 per 

cent of whom earned less t han $8 for the week . 

As resnects l ength of nork- 7eek , employees apPar ently suffered 

more from under- ernployme ... t than fro"r' exc essive hours. Less than 5 

pe r cent v:o ~ced more than 40 hours , and less t han 1 ner cent worked 

48 h ours or mo r e . (*) On tne other h.:-J,nd, a fifth of the men and 

aLnost t wo-fifths of t he ViO!;Jen 70r!>.:ed l ess t hru 32 hours. 

Ye t ;;rhile a l a r ge no rtion of the negro women we r e under-employed , anothe r sizeable groun ht;.d particularly long hours , running 

from 41 to just unde r 48 . For the most part , the women wo rkins 

these lo:1ger hours ·were n icke rs, searchers , and hand s temme rs --

occupations char acteri zed , as alreadY no ~ed , by low earnings de -

spite the long hours . 

11. fvic:mufacturers Versus Independent Leaf De -·lers 

It has just been indicated t hat the outsti3.Ilding instances of 

low hourl y r a tes, long hours, and low wee~:: y rates occurred in occupations connected with the ea rliest s ages of manufacture -- primarily with stemmi ng. Stemmi ng operations are carried on a lso by 

inderendent leaf deA.l ers; and i n order to compare their r a t e s -Ii th 

manufacturer s 1 tes for similar onerr-~.tions, payroll dat a for leafdeal e r empl oyees vre re collected in the sp ring of 1935 and agaii.1 in 

t he fall. Viliile compilation of the spring data has been delayed , 

the f all data , covering elev en deal e rs in Virginia and No rth Carolina , a re sufficiently in hand to ,permi t some compa risons of hours 

ro1d earnings i n the t wo industries.(**; 

( *' Whil e the fi gures m~.r include sorne c ases of Co de violation, the 

various excep ti on s permitted to t he 40- hour week would suffice to account for the small u roportion of ern')loyees indicated. 

(**) The fall da ta hav e this adv an t age , that special a rrangements were 

m~de to kee~ a record of hours wo r k ed. Since the industry pays piecerates largely, littl e information on i1ours and hence on hourly rates 

was secured i n the spring. . ·" 

10691 
-85-

Employees of indep endent leaf dealers f all into three main 

occup 2.tional c a t egories: floor worke rs, T,)i cke rs an d s earchers, 

anC. h ond stemrners. In leaf ocealers' and a lso in manufacturers ' 

pl <).nts, negro men -predominate among floor worke rs, while negro 

wome -,1 are ti1e oredorninant class in ~he other t wo occupations. 

Av e r .J.ge conditions with respect to h ours and earnings for the se 

employees in the Code industry in March 1935 and in leaf dealer 

pl c,nts in October 1935 n.re compared in the following t able: 

iv1 anufacturers 1 versus Leaf Dealers' Plants: Haurs 

a.nd Ea rnings in Selected Occupations in One Week · 

Occupa tion ~'ld Industry Av e rage: : 

Pe r Capita: Average 

Ea rnings : Hourly 

(dollnrs): Earnings 

(cents) 

Hours 

li'loor work ers, negro mrtle 

Tob acco manuf ctnrers 

L8af de a lers 

3<±.8 

49 .2 

12 .99 

10 .82 

37.0 

22.0 

Pick ers a~d s earche rs, e~ ro fe~a : 

I'oba.cco manufacture rs 

Leaf de 0.lers 

33.1 

39 . 8 

9.72 

5 .39 

29.3 

13.3 

~~ Eln d st err.mers, ne t§;ro female 

Tobacco Elanu f a c ture rs 

Leaf G.e alers 

34.0 

39.1 

10 .49 

5 .17 

30.8 

13.2 -------- -~--- ------

Bar ninp;s of leaf de aler employee s we r e obviously exceedingly 

lm•! an d. their hours long as compa r ed with t h os e in t he same occupation s in manuf a cturers' p lnnts. (*) It is contended that t he 

dea lers, who st ern fl r for exp ort, must ha v e ch e au labor if 

t h e business is to remai!1 in t !"d s country. T:1ei r s ternming operatio s~ conducted for the most n art during the green-lea f season, 

a re c oncentrated in a few ~ont 1s of th e year and offe r supplement a l employmGnt to f a r m laborers or attract casual workers. Hence 

it is not to be surnosed tha.t t h e t v;o labor forc e s are directly 

competitive. Ye t the existenc e of such extremely low rates for 

vv ork of the same general cha racter undoubtedly dep r-e sses t h e mark et for r->.11 worke rs i n these occunA.tions. 

~~ . .Qonroari so!!_§_ with Other Time s. 

Whil e surveying YU'l.ge s ,3Jld hours in the Code industry for 

fliarch 1935, t ne Bu:ce cm of Labor Strttistics ga l:; he red figures for 

lVi9,rch 93~~ <•lso and -- by a la.ter follow-up -- for Septemb e r 1935 , 

i n orl er to uermit compa rison of conditions under the Code with -:---:---

( *) As r e spects 8a rninc;s, ;J.t l east, t he dif f e rent .nonth s involved do 

not a ccount for the differer.ce in l evels, since (as will be indicated 

l a ter) emp loye es in manufacture rs' lJlan t s had hi gher ea rnings in the 

fall t h an in t h e S1Jring. 

1 (){)9 ] 
-86-

conditions "9rior to tne ince-ry tion of the Ha.tional Recovery .Ad.ministr_ation and subsequent to the termination of codes. 

Other mat eri a ls avRilo.ble include: a survey by the department 

of the cigarette branch of ti1e industry in t he s;)ring of 1930; returns for all branches of the inc.l.ustry in June Md November 1933, 

secured by a l-1c-~.t ion l Recovery Administration questionnaire during 

the early period of Code discussions; a snecial study ·of man-hour 

employment and ea rnings in 19 ;~3 , made by the Bureau of Labor Statistics in cooperation with t he Bureall of the Census; and the partial survey, co duct ed for the lifationa.l Recov e ry Administration by 

the Bureau of Labor Statistics of wage s and hours during July 1934 

in six occupa tion s in the cigarette, smoking , and chewing tobacco 

industr-,t in Virginia and l~ orth Cn.rolina . (*) W'tlile the diverse 

scope of t l ese mate rials p recludes analysis of chang es in the volumes of ern11loyment, infe r ences Cc'..ll be drawn as to cha..r1ges in hours 

and earnings ov e r the period cove red -- 1930 , 1933, July 1934, and 

the spring and fall of 1935. 

The average ernployfle in cigo r e t te mailufa cture W8.S distinctly 

better off i n Larch 1935 tfuan he hacl b een in ~~a rch 1933 or 1930 . 

As against 1930 , his weckl ; enr ning s h;,.d inrproved slightly and h is 

wo r k - week h .s.d shortened !'Ik'l.t e ri ally. As against 1933, his •.veekly 

earnings h .">.d increased by one-half, with only a moderate increase 

ove r the v e r y snort hours t hen obtaining. His be tter position 

was t hus due to :::1. sharply ni gher r curly r a te combined with a short 

work-week . ( **) 

In a simil (=l r w :r , ~;he av Gr ase effi9loyee i n t he tot '11 Code industr y ·-,as dist i nctly better off in : 1a .ccn 193b than in t-~'Ja rcn 1933 , 

since his hourl;y and weekl ;v earni ngs had botn increased materially 

t!1ough he \'.'O r k -week continued ~r st10rt. For white v1or~~ers and 

negro t he doll r 6ai r. w~s '1bout t ne s~Tie, but on a ~e rcent age basis the negro gain was of course much g~r , being r eck oned from 

a lowe r base. The sa.me t i ngs ho l d trll.e of male vorkers as contr s~ d with fer:.ial e , the women f ?.ring r e l ativ el y be&t e r t han the 

men, though t hei r dol u jl.in C.iffered but little. The grea.test 

adv anc e a c c rue:\. to n egr o ·:rorr,en , the ; roury in c;he ~ost di sadvantageous position, •r~ i th av e r·1;.:;A 'il eekl y ea rning s in lvmrch 1933 of only 

6.50. (***) 

(*) It mi ght b e thought tha t t he won tnly fi gure r egul a rly published by 

the Division of Employment St a tistics of the Department of Labor on 

employment, p Dyroll s, o.nd earning s in the chewing and smoking tobacco 

. I 

and snuff industry could be combined with its unpublished figures for 

t h e cigarette industry (as distinct from cigars .and cigarettes combined) 

to secure a continuous record of fluctuations in loyment and earnings 

in the Code industry . In fact, however, t h is c annot well be done, since 

tr1e Division's figures for cigarett e ~~nuf cture omit some very important 

plants, and h ave b een .strongly influenced in rec ent years by returns 

from a single com'1aay with hi ghly seasonal ste!1l1Tling operations. The Division now has unde r advisement t he im_orovement of its cigarette sample. 

(**) Comparisons ~re based on unwei ~t d averages of all companies reporting in each period. The 3u. of Labor St a tistics, 1930 study apPeared 

in its :Bulletin 532, ·:~ ages a nd Hours of J.Jabor in t e Ciguret te ~J anufa.cturi ng Ind:u.s try., 1930 11 • 

(***) Fi ~es used ~re weighted ver~ges for all rep orting plpnts. 

10691 
-87-

Com-parison with November 1933 agai n indicates a gain in weekl y egrnings for March 1935, not due t his time , however, to a l a r ge 

diff e rence in hourly r ates· but rnther to a fuller work-week. Hours 

in November 1933 we~e abnormally low becaus e of reduced manufacturing activity. Hourly rates, which had been increased by the substituted President's Re-employment Agreement, under which the industry was then operating, Cl-re indicat ed a s not much lowe r t han in 

dicated as not much lower in March 193[). For all employees, the 

fi gure is 41.0 cents per hour for November 1933 ag::dnst 41.3 cents 

f or March 1935 . The comparison is not entirely valid, however, 

since the November 1933 average does not include employees in some 

of the lower~p n. id preparatory p rocesses that are represented in 

March 1935 figure. (*) For the full year 1933 average hourly 

earnings in ci gar e tte, snuff, chewing ar:d smo king tobacco manuf a cture as defined by the Census have been reliably indicated as 

a little above 37 cents. ( **) In July 1934, with the President 1 s 

Re-employment Agreement st~dards still being observed, hourly 

rates in six occupations in t :h.e ci garette industry averaged from 

2 to 6 cents belo~ t h ose of the Co~e month, March 1935. (***) 

The evidence thus i ndica tes <=t definite, if nn.tural, improvement in t he position of work ers in March 1935 a s against u rior 

yer-rs , -- an· i mp r ovement represented bJ l a r ge r hourly and weekly 

earning s wit1 gene r a lly short hours . Summn.ry figures to show 

whethe r t he gai ns a chieved we r e tnaintained aft e r the t e rmination 

of t }:}e Code a re not available, but i :.1spection of t he fi gures for 

:l.ndividual u l ants· leaves no doubt that - as late as September 1935 

at l east t hey were maintained. 

Weekl y earni ngs of worke r s i n t he industry as a whole were 

1.m.questionably l a r t:;er in Sep tembe.:r . t han in Iv;arch. In p a rt this 

incr eF~ Se ·was the result of longe r h ours attendant on gr eater activity in Se;ytemb e r, but it ref1e ct ed as wel l numerous increases 

in hourly e .'l.rning s. In snuff Dl ants , hourly earnings tended to 

decli ne , an::-l a:wo~ g small companies decreases we r e s o:-f!enhe.t more 

numerous th&TI i'Tlt r ease s . But i n Second Six and ';a:r· ti 1. J.;J.rly in 

Bi b Thr e e pl ;~ n ~s' re t he bulk of t.D. e wo:-ke rs are eiL}."lJ.oyed' ad-

....,...-,-- an e~ quit_~ crec.rly predomi:'lD.t~d . ( *'·<**): ·-------- -

( *) Re sults of thE: Nl:-:..A questi onnc--;.:.re are present ed i n Charyt ers VI and 

VII of a r eport b~r Don::1.:d Y. Yakeley , ReseF~ rch and Pl a.rmi.ng Division, 

11 Ci ga.rette , Snuff, Che-,;ting and Smoking 'roba cco Manufacture 11 , Sent ember 

21,. 19~~~\ . T.ne fi gure of 41.0 is corrr_Puted from his sepa r a t e items for 

t he different brqnche s of t he industry . . 

( **) Comnuted fro r.! da ta in the r eport by . rt"l'lur F. Beal of t he Bureau 

of LF~:bor Sto.tistics, 11 Man-Hours of Employment L1 35 Manufa ctu ring Indust-rie s in 190311 , n . 5. 

(***) Se e the r e'Jort of t he Bure."l.U of Letbor Statistics, 11 A Study of Six 

Occupat ions i n t he Ciga rett e , Smokins r.rob::tcco, and Chewing Tobacco . .Industri es i~1 Vi.r gini a and North Ca rolina, Jul r 1934 11 • The r eport a lso 

cov ers ear:dngs in Gh ewi ng and sn1vk "tng tobac-co manufacture, but does no t 

c ombine the b ro 0::-''1.J.1.c ::o? s , so ~at conp<uison wi t "h the join t figures com- piled for Marcn l:3 .~ ot ~ble . 

(*"'**) 'The CJ.1ec>: en' concliti c·ES L 1 .3 q: tem'ber 1935 coven~d ct representative r:~mp le of t he ·;,o:. -~ rs sc. r~.c duled :fo r Ma:::-~!1 1935 . The aup roxirnate size of 

the Saimle ( as C:· !~. 1.T:st t he nur.ubers s:ne:t.'.lled in Ma:cclJ.) varied as follows: 

.Big Thr ee emplo;/a e s , 20 per c ent; SE;eond Si x , 40 per cent; small companies, 

95 per c ent,; ar1d snuff pl a:11 ts, 80 ner c ent . 

l()6gl 
Ua es in the tobacco manufacturin5 industr y rank lo~ as como:-;·..,_r c d ,~: i t h ~1 o se 1_:)<-"'.i d r mai.1ufa ct'.lring industry in general . Of 

t~:e SIJ I:JO.i.1U ~t. cture s reJ?Ortec' u_ .. 1on onthl~r b~r the Division of 

Em~lo ment Stc tistics of the Department of Labor, only eight 

(omitting tobacco industries ( *)) rel)orted .!eeldy earnings 

lm-r e r in I :e.rch 1935 t l1En t he $1·1 . 50 -_Ja i o. by the Code indus try , 

c:-.nc. only fi vo ep o:c~ted loTiel~ ho"'..uly earnings, For all rnanufc>.cturing industries combined, Tieekly ea rning s averaged $21 , for 

& Tieek l ~ hours longe r t l12.11 the tobf' c co neek . 

Of the eight ino.ustries ranlcin~ louer than tobacco , three ~ere 

c~own b e cai.1se of 2.11 except io nall~,. sl1ort ork ~eek , hourly ea rni ngs i n each of them bei nl-: l'li_;ner tllo.n in toba cco . ( **) The 

remaining f ive not onlJ fell belo7 tobacco on 11eekly earning s 

but c::.l so wero t he on ~r i ndustries to report loner hourly earni r.gs. They corm n~ sed : tur .)e::1ti ne nnd r;sin, cottonseed ( oil, 

ce:J!ce , a nd me:"'-1) , f e rti li ~ars , cot ton goo d.s, a nd canning end 

·) reservinG• ( ***) T~1i s lou- uasl: ..,TOU1) ms includes three 

Sout~1ern inC::tlotri e s, at le:.st t· ro .of ul1i ch - - naval stores a nd 

~:.e rtili ze s -..:.. 1m:ulo:r De ro , .. ·or'~e rs rgel~ . 

In the four St2.tes '.rho··e t:1e Co c'o in cl ..l.stl~r is iefl~r concentl~eted (·· o:~t:;. C:-..rolinc'L, Vir~in , Ken tucl~r , e.ncl Tennessee), the 

i m··)Ortant mc...nu.facturL1.~~ inoustri e s c.re, b e sides tobacco :-cotton 

g oods, 1"J1i t .. ;ooo.s, :~D.i lro e-~cl rep:"'-i r shops, furniture, rayon, El.nd.. 

l umbe r. ( ****) The natiOi1<::.l f i QJ.res just r eferred. to ino.ica te 

for a ll t hese competint; in0u Btri es excep t co tton goods hourly and 

r;ee!~ly ua~es c:p·;n~eciC'bl r l1 6~ler tha.n in tob.s .. cco . (*>;**) But none of 

( *) I n ciGc r ma:.1ufc..ctu re 2..l r.o , eD.rni:.1g s rD.ust have been less than 

$14 . 50 . The Di vi sioi.l does not publish figures for cigars 

se:oerately, but reported p e r cc.pi ta 11eeJ..::ly earnings in cignr 

c.~1c . cigo.rette manufac ture combinec1 at $13 . 37 . 

( **) T:1cse th:t'ee r; ere : shirts a no. colla rs, r'l en 1 s furnishings, and 

c:.st - i ro:1 •Ji ·r) e . 

( **~) 

(  ) 

Fo:t' tnrDentine 2nd. rorin, the sto.tement re specting hour-ec,rnillb s 

is be> sed. on llil'•mbli shed figure ~; o·"' e1e C:.epartment of La bor, 

Division of m~:> lo yment St c:-.ti sti es. 

I m•Jortc-nce is judGed br nUJ.lber o:r na£:;e earners employed in 1933, 

t he l atest Census zrea.r now l'Va ilable . 

( ** ***) 1e hourl~r ear;1 i n-:;s i n March 19 ~~5 r nnged from 43 . 8 cents in sailmills to 65 . 2 ·cents in steam railroad repair shops, and the per 

CF.'p i t a 11eeldy ec r nings from $1 !:) . ·~ ~; to $26 . 03, in the same t ·1o 

inCl.ust ri es. Excludinr" r a ilroad. repair sho::_:> s, the u 9per limit 

10691 

is 51 . 1 cents ·oe r h our ano. 19 . 21 f or the week , in r o.yon manufact ure . 
. ( *) . 

( **) 

-89-

these mc:mufactures (possibly ra3ron ( *)) is confined so <:'. 2; el r 

to the sout~1 as is tobacco; hence the No :i.·thern Tia;:;e diffel·ential infl11ences their over-all figures more strongly th.:1n it 

.influencec the tobacco over-all. 

A comparison confined to the Southe rn States is plainl r d.esirable, but is difficult because of the scarcity of data. (**) 

Such figures as are available, however, sugsest that ...-rhen com-

·oarisons are restricted to other mar .. ufoctures in the same a rea, 

vm.ges in toba<;:co manufa.cture occupy a mid-way position. 

To be sure, for all factory 7or~:ers rep orted upon in the four 

States of North Carolina, Virgi:::1ia, ·Kentucky and Tennessee, })er 

ca·oita Tieekl~r earnings in March 1935 i:ve re $15.50 a:::sainst a 

figure of only . $14 for the Code industi'iJ in the same St a.tes. 

( **:tc) The general hourly Hag e in this area in Idarch cannot be 

figured, pince man-hours or ~ed are available b3r States from 

May: 19 35 o nl3r. 

In 1933 a little less then 70~~ of the wage earners reported bJr 

the Ge?:nsus in 11 Rayon c:mc. Allied Proctucts" were in Southern Ste.tes, 

against ·about SO% of tobacco (not including cigar) workers so 

located in March 1935. 

Fo-r ra;yon, lumber, and hosiery and uno.ernear, 1932 is the l 2.test 

;>rec::.r covsred by 11'P.ages and· Hours 11 Bulletins of B. 1. s., Ile~)o rtment of Labor; anc. for furniture, 1931 is the latest year covered. 

According to the sections in 1JRA concerned ui th these industries 

(Industry Studies and Statistics) !JRI\ ho-" s no inforrnntion on Hc.ges 

L1 Southern St[l.tes later than that Given in these Bulle tins, excep t in the case of lUJnber. For lumber, the Code Authority 

suppl-ies data on average hourly and weekly -rra.ges in the 11 South11 

for July anc3. December 1933 and the 10-month period. Janua r y-October 

1934 ~- the South comprising in this instance 10 southern-p ine 

States. ]ec&.use of the unlike perio0.s covered, and the minor influence on the agGre g~ te of the t1:o toba cco-manufacturing States 

included ( No rth Ca rolina and Virginia), no use of these fi ~ures 

is made here. Reports of State Ilepartments of labor and in&ust~J 

might yield usef1.ll informati.on, but to examine them in the time 

allotted this stu~r has been imp ossible. 

For r a ilroad repair shops, current hourlY wages in the Southe rn 

region cen be computed from monthly reports of the Interst::1te 

Commerce Corruni ssion. The t 3rpe of l abor employed in this L1G.ustr"'J, 

hoTiever, appears unsuitable for compa rison nith labor i n tobacco 

manufacturing. 

( ***) The figure for a ll f a ctory uorkers is computed from the unvTeighted 

aggregates of numb er employ eel and p q:rroll s, published by the Ili vision of Ernplo~rment Statistics. The Ilivision ha s estimated. its 

cover8£e of facto~J workers in the : several States 2 s follo'.7 s: lTorth 

Carolina, 74~; Virginia, 60;-b ; Kentucky, 44%; and Tennessee, 50~ . 

10691 
A,:;e.in.st 1c.rti culc.r i:n<.'·1st ri e s, ho··ever, the story is sor:lePhe.t 

different . L.l i;,:~.~- ]5: ;.) t~1e :lOL,.rl:- ~"r. l,l in;s ifi thi s f' r vc of 

r<orl~ers i~ i:-wort c.~. nce mr nu.factures o tner tha~1 tobacco rc;.n c; s 

:follottC': 

Hours cnc . .6::-.rnin£ s o: F'lctory ';"'orl:ers in Soecified nc' Uf'tries iil t:w ?our 

Sk.tes o~ liort:1 Cc:..roli m, , Virb ir..ia, KentucJ:;:T, c:-·n.cl Tennessee, l!Ia ~,- lS35. 

i b:1.u.f r- c ture Avereze 

T{m.J rl r 

Hours 

i/orl:::eCl. 

-:.· ael:ly 

~t"-.. l"ni~1t:;s 

- ------- -------·---· ----·----~~ :::n:::..·· .:.::n:.t.:pl...!:·s~:__ ___ ___::__ ____ _ 

Co'cbJl1 goods :16 . 1 33 . 2 11 . 99 

IC1i t oods ~2 '3 34. 6 14. 75 

Furr~i ture 33 . 9 38 . 1 13. 68 

R.n.;:: on en c. Alli oci Products f)0 . 4 38 . 3 19 . 32 

Sa\lmill s ~n 1 32. 9 10 . 23 

Source : Cc:n~11:. ted. from ficurE·s f'l '.rni shed by the United Str .... te"' Dev,"~rtment 

of ~abor , Division of Emplo•n1cnt :~: ti ~tiC's, O.t1 [1,.~/'Te/"c te employ--

ment , :Ja..y;..,olls, and m.::n "10l.:rs in each of these :nclustries i:1 the 

.four StC't es Si"'ecifieC:.. ;.~r?.c:.sured a..-;< L1.~t avel'~.~e ei7!1} loym.:mt reported·for 1933 the si7e of the sar'P.llP is inr.icr-.. teC:.. C~ s n.n,.ing 

from 25 yel,cer.t ::'or s<?.l! mills to complete coverace for ra~ron . 

If a.::;ainst these fi;ures are mctchcd tho ivlarch fie;ures fo::' tob:;.cco L1. t: is D..rea - - i1o~.:r1;;~ ec:.rni~ :~ c 40 cents, hours :'or'::ed 

35, .7ee::ly ec.rl1inr·s $14 -- it <1p·1onrs that on both an hourly 

anc. a ~;ec};: l~T o· .si f' e~ rnL ,c ::: in t :1e Coc.e industry i7ere hi::;her 

than eo.r::in._;s in cot ton -:--ooc, fj, f·.uni ture , and sar;rmill s, ( *) 

th.ow;h lo:1er tilt:.1.l ' eL.}"nii:.z s in r n_7on :..:. ncl. knit cood.s. The G.i f -

f e rence in mo nths · nvo l vcd. me,y c.f:n c ct rclati ve po si tio11 ni th 

respect to 7eekl y- en r:..i ngs but is unlikely to offect it rii th 

respect to hourly. 

For cotton m~nufo.cture , "by -:C}.r tl1e 1· .r,;-'3st er:t:')lo~rer of ~e ctorJlabor in tl1i c J.rea, a ferr sup·oJ.ementP.ry fi311res are e.t hcnC.., 

tencling to confi rrn still furti1.Jr the inU.i cations alreaCI~r i ven 

thc:.t cotton- mill r c:tes fall 2.:9preciaoly bela:-' the toba cco 

rat0s. In the 11Textile Re:?ort 11 n.: .. ~.cl.e b:r B. L . s. carl~ last 

year, e:verf:l{;e E:t"'.r:i.1ing s per i1our i:"'l. cnttofi mills in the South 

\'ere reportec. for Aru;ust 1934 (the latest month covered) at 34 

cents for me~1 and 32 cents for ·.:omen. Cor-re~ondin ~ e.verc{;cs 

for tobacco factories in the Sout:1 in 1/.a rch 1935 Tiere : r.3 , 

45 cents; women, 35 cents. 

( *) Perquisites L1a,y cifect the money ":le~es paid. in !lam!:ills; it rrill be 

noted. <:.'.1 so t:hat the s<.urrple for this inC:.ustrr is corJ:9a1~c?.ti vel "nn.ll. 

10691 
-91-

A colle.t eral fs.ct hi.:;hljr import2.nt to comparisons of this sort, 

however, is the relative burden of l c:,bor costs in dif:fe:cent 

industries. It ha s frequently been emphasiz ed that in the tobacco Code industry this burden in exceedingly low. 

14 . Remarks on Particular Brancl1e::; of · the Code Indur,try. 

The methoc:t of comp iling the wage and hour returns does not p ermit a clenr-cut distinction among the severa l bramhes of the 

Co de industry - cigarettes, smokinc; tobacco, chewing tobacco, 

and. snuff. 'l1his is so for two reasons: first tha t in many cases 

it was not p ossible to identifzr the branch to Tihich }X~. rticul r 

em::_Jlo3ree s belonged; a nd secondl3r, thc.t in classify ing t he returns 

from mul tip le-l? roduct p l ants, the Dep<.trtment followed. in [;eneral 

n standard practice of allocating a ll emp loy ees wi thL'l a lJlant 

to tha t branch of the industiJr indica ted. by the ~J rimo y J:'WOC:_uct 

of the plant. (*) 

From informa tion S1..lpplied by the compnnies themselves, it is 

possible to see han f .1.r the results p roduced by this system of 

classifico.tion cliff er from those p ro duc e d ~ a more exact e.ssignme'rit of employee s a ccording to their a ctual duties. Tl1e 

compan • 1 t t t t - ., 1· · ' · '- " J ' '- • :L e s own s a em en , at:: en as a \7ll.O e, :Lna.l C8. ~.,eo_ G!.lo. v :Ln 

Nia rch 1935 , 51 pe rcent of all er.rployee s r:ere e~ge1 ed i n ~Jera

tions com:ected with cige.rette manufo.cture and. 49 }.J e rc ent in 

operD.tions connect eel 11i th manufacture of cheTiing a nd smok i ng 

tob.scco and. snui'f. (**) The office classification, h owever, 

thren 61 percent of the employees to the cicarette bro.nch and 

only 39 percent to the othe r t11o branches. Since the snuff 

returns uere on t he whole pretty distinct, the im1ic.s.te cl ch sroportio n woul 0. be still l o.r ge r as betneen cigc>rettes ar:c1 cheTIing and smoking toba cco. It is also u..nfortunate, in vi err of 

their sep a ration in the Code and t heir diverse trencts, t hat 

selJar.s.tion of chewing tobacco mo..m ... lfac ture from smoking tobacco 

ma;.1ufacture nas found_ imp r a ctica l 

Ye t although t he me thod of compilation blurs the u icture as 

between industl"'J brD.nches, some general differences are Jlainl~· 

incHcated. Em1Jloy e e s in the snuff branch of the industr y hcwe 

unquestionably lone;e r h ou :ts c:md higher weekly an.d hourl;y earnin{;s than t h o se in an;;r other branch . Hence the approp riat eness 

( *) In t he outst a ncUng c2.se of t he R. J. Reynolds Com my , it modi f ied 

this rul e by a lloc3.ting t h e clep :.~tm ent s u i thin a pl ant r a the r than 

the entire p lant. 

( **) The necessa r y informe.tion was secured, by lett e r of personal visit, 

from all t he Big Three Companies, from five of the Seconct Six companies, and f rom thre e other ( il1cluding tl!o of the snuff) compani es. 

In the case of small companie s it i s i mproba bly t hat d.ifferences 

between B. 1. S. off ice allocation and com1Jany a lloca tion e.re imp ortant. Hence f or t l1e se comp anies t he tabulE~ ted em:9loyment is 

usec1 in compilinG both paiTs of agg regates contrasted above. 

10691 
10691 

-92-

of ~re scri bin,; for this bi"anch uase minimCJ. as lon "-s those T .. ·e:-

scribed for smoking to l>c2 ceo mnnufacture , c s r?[\s done in the 

Code , is ~1ot apparent . Emplo,-ees in the ci gc:.trette brcncll of 

the industry, L1 tu.rn , gene rn .. lly r ank above t hose in :..-.mokin<; 

ere C'he1.-'inc tobacco l'lanuf<:> ct~ lre rti th res~)e ct to both ho-:1rly end 

\:ce~l~r c~rn incs , thm.1.g;1 exce?tion on one score or the other 

might be T"lc:-de of negro non1en c>.nil Tihi te men . 

:'inall:r, it i R :p robflble , fror.t the UVet'Gl{;CS di s·;>le. red oy smo.ll 

cor.1:9c2.nios ongr "ac1. <r::>e ~r i n cher:in.-; tob'\cco ma.nufactu e , as 

\7cll a s from other ovic.ence , ~w. t t his Ci.eclining branch of the 

L~d.u;t:r~- pc:.ys t l1e lone st ·. ·C1.-=>es. 

OT:L : A list of the be:- sic t rbles r e ceived frol71 the 3ureau of Labor 

Stc:-ti r;tics on nUJnber o: cr:n lo~ ee s, hours, and eE~.rnings in 

t ne ci:o.rette, snuff, che d.ng , ano. smoldn~ tobacco manufacturin:· inC!."'..l.:::tr:-, to ~e t er '.7i th copies of tables one thyou,::;h 

s.:n-er., are listed rJ s CJp ·JenC:. ix 6 of trli s c!1e.p t er nre in t~1e 

Tobacco St·1C::,~r Ur.i t file:· o:c the •.. A P.ecord.~ Section of the 

Depo:.·tm-;nt of Co;!lme rce emf. e r e 1ot here reproduced. Tc.'.bles 

8- 10, ruic:1 i:1 t:1eir p es:mt :~ orm r:roulcl i'!'lvolve c!.isclosures, 

c..re :1ot ircludcc. ~"~ut hr' .. '~ e 1)8•3:1 r eturned ~o the Department 

of La0o-r, .. t:;;e;, :':.C. ,-o.u:.:s Jivision. 

- oJo-
-93-

15. Annual Earnings and the Number of Weeks Worked by Tobacco Manufacturing Employees in 1934. 

In addition to vreekly e a rniur,s, the agents of the Bureau of Labor 

Statistics secured also, so f a r as p r a cticable, da ta on annual earning s 

and on numbe r of ue ek s Tiorked. Al t hou,;h the industr3r coverage is far 

less comp lete f or t :ne se i t er.1s than for the '.-reekly fi{"ures, and. although 

the data p erta in onl r to en ,)loy ees ·7or).dng in 1934 who vrere also ·working 

in March 1935, yet becau se of the g ree,t interest a tta ching to them, such 

data as u ere secured nre sur11marized belon . The figures p ertain to 1934, 

the latest calendar y ear pre ceding t he field survey. 

To oa cco uorkers e~ lo red oy manufa cture rs Tiho came '.v i thin the scoye 

of the tobacco manufactu rL1g Code ave r aged 47.4 week s of work il1 1934 

foT nhich they received a n average of $700. The s e ave r age s are based on 

the records of 7,815 JTJale a~ d fem<9,le workers, bot'h '7hite and colored 

taken from the pay roll records of 16 plants by ~0; ents of the ]urea~ of 

Labor Statistics. Fig ures just r eleL;Sed by the Bureau of Labor Ste.tistics 

(Harch 1935) reve t?vl that t he annual ee.rning s in the r1otor vel1icle ind.ustr a s a Hhole yre :..·e exactly $900 in ·1934 , while , t he nverage number of. 

weeks worl:ed was only 37.7 in the y ear. ' 

r. J.~o ees in the cigare tte branch of t he tobacco industry Tiorked 

more ne el>:s and hacl his her <mnual earning s than those in the combined 

chewing and snaking tobacco ana_ snuff branches, averag ing 48.2 week s and 

$705 ngainst 44 .9 ',;eeks nncl $682 for the '.7orkers . p ro d.uc ing chewing , smokint , and snuff. On a sex-color basis, cigarette uorl:ers have the advant age ove r chewi ::1.g , smoking <:;,nd s.nuff workers in tha t t hey average d from 

1.4; ',7ee.ks (VThite males) a nd 6.8 week s (, .. ;hite femn.les) more of Tiork per 

ye a r. HoTieve r, t h is c:~dv nn t e..ge do e s not folJ.o u t hroup.:h the annua l earning s of the various se~-color g r oups, b e cause t he avera{-';e r.:mnual ear:nings 

of white fellml es ln the ci,sarette industry is the only Ewerage annuc:l 

figure exceedinr; t he rmnual earning s' of the sex-color g roups o.f ~hevr ing, 

smol:: ing tobacco and_ snuff ';rorkers. 

It becorae s o:f inte r est to com:_oare the vreeks norked by tobacco 

emplo re es a..nd. t heir a nnua l, earninGs ",J i th t hose of t he au tomo·b ile employees, 

Tiho, on the av T.a:~ e, 1k px10~1.-? t he h i ghe st p aid for tine \7orl::ed in all 

manufa cturing indus trie s. For this 'J urpos , fig1.1re s for only white male 

and VThite fei!lale. tobacco V1iorke·:rs wili b e u s ed, since t he automobile 

industry does ·not r·ecognize a. color n roblem. . ~ 

In the tobacco l:Janufc.cturing ustry, all ':rhi te males averaged 49.4 

weeks of ·r.rork for l!hich they received on t he average $1,048. In the 

cigarette industry , t hey 1."Torkec_ 4 9.7 'weeks f or $1, 018 and in the smoking , 

che,..r ix r.,· and snuff 8. ) vrcek s were worke d_ fo.r $1,170. Opp osed to these 

averaees, the male workers in the aut.omot.i ve industries ~orke d 37.8 

weeks during rrhich tir11e they aver:o:ged $923 . There v1e.s only a o. 7 neek 

differential in t he automobil e ind.ustry betn een the nale and female 

norke:.:·s, ,;rhereas in t he tob acco industry ~7h i te fer:.1ales worked on the 

average :four ·ne eks les's t haa males. Thus, the leng th of the work ye a r 

for Hhi te females in t he t ob,acco indu stry exceeded t hat of f emales in 

the autoT'Ilo 0 iJe inclu s tr~; 'Jy L O:i.' e tlle,n e i <;ht. ',7e cks·, .!ll l '.7ni to s in 

the tobacco industry avera,T,8 d 45. 4 weeks of work for which they re~e ived 
-94.-

an o.ve r a:7;e of $617 ; the;r nor1:ec1 4 7 . 2 Tfeeks i n t he ci c:n~e e indust r-- for 

$ 542 ; a:1cl in t~1e sr:-JoJ<-:L1r:; , Le·~: ; a n0. snuf:" indust r :r ~1e~y o. ~~ ed 40 . 4 

cs and ::.~ eived $546 . Tl e fenal es in t he aut omo b ile i ndustry '7 r~·ed 

only 37 . 1 ':7eeks f or n h ich he r EJ.ve r .tged $6l""7 or ap-o rox ir:1a t el y one ·0e r 

c e::.t :!lo re t h0.n a l l '7l1i t e fe 11a'.e s in t ha tobacco na11ufacturi n[•; i ndu s trie s . 

'Vihile the fore go ~ clis cu ssion e·i v o s ;::: b road vie~'! of t he p o s ition 

of t oba cco ne: nuf ·~ turi , -!Orkers ov er the '/ear , it C.oes no t r eve a l any 

of t he SJ? ecial ch a r a c teristic s perta i ning to the rel a tive numbe r of 

'7orke rs em·Jl oyed ~ull o r short time , more of t ho se ctu8.ll r ear ;1in:::; 

r el 2tive1-- ll i &;r"" or l o•.• · es f or the ·e . The f ollo·7i nz, d i s cussion , 

1ou~)-L b:i.·ie:f , -:-·i l l t:1ro-;r sone lir.,ht on those p o i nts. 

Of all.. tobacco 11 0r~·: rs ·covered '-Jy t hese U.a t a ;~ ·-·ere enployed 50 

·7eel:s o :t.· J1o re 1 '1 J S-34 . 'Jh i t c nal e:3 ·-ere rti ulP rl r fort unat e in t hat 

85 ·0e r c e:,t of t he rJ f e ll in the a'Jo7e c l :.1.s s . l'he .rrol.T') a lso i ncluded 

69 . 6 -J e r ce11t of t~ e coloroc. -1.•.l es, 69 . '3 ry e:L·cent of trG· col ored fe:1a l es, 

and 61 . 7 -.? e 1·cent of e h i te f e: 1r les. Less t lLc:m 1 0 p ercent of the 

··ro r ke:L s i.1ac1

• u_"fl.c"ce l- :::,5 rre el s of · ·orl:, ·- ith -rl ite 1['.l e s -:t?ld col ored feno.les 

havinr· t he f·u.lle :.> t e~J lo 1ent . rr.c.i t c l 8-;"JD.les shc;•-re C. l ar _, er }?e rcents i n 

ah1ost e ve r ;r t •-;o "e<31': intJl'Val u-o to 36 -reeks of n orl-: i n the ye a r t han 

anJ otl1e r €.,r ouD . Vlj17 littl e variation fro'11 e1e above c ond i t i on s ' HlS 

founci to st a s be t ..- een c i r'o.rette ~rorl. ers o.nd t l1.e rest of t he tob acco 

i ndus t r -r • 

Al1:1ua l ear :u.!lr;s r e ve:tl 1o 1·e vari tio.!l a.s b et'--een the se ~:-c lor 

g rOU')f_; .:1 rreel;:s ,-·or1 _cd_ . For ev::c.nyle ' 2c . 2 p erce'1t o::.' o.ll , rorl:er s 

e a rned less thEJn ~500 , , rhile 5 . 1 ·0erc e n t of t1 e '7hi te L1ales, 2'3 . 1 ,')er.:. 

cent of ~1 e ':~1 i te ferw.l cs, 21 . 9 p erc ent of t~ e co lo red r:1ales und 30. 1 

:;_J ercer..t of coloreti. fer:n les const i tut ed the Gr oup . At t he t~ r extr e:-1e 

1 9 . 0 :oerce:1t of all norl':e r s e a rned. $900 o r more . T:: is g r ou:_o cons i ;:; t ecl 

.o f 57 . 2 JJercent of the 11hitc •1a l e s , 2. :.3 p erc ent of t~1.e colored rnnl es, 

anCI. o:Z 6 . 1 ne rce:1t of the '71 i te fe:n.1 les. Eo colo r eJ.. fea?.les earned a s 

ouch a s ~9 00 • 

..,he :Jo s t co:1ce:1tr n t ed r r oun of .,... or l~ers i n the indus try <7 S n. -7hole 

EJ{')'Je a re cJ. to e e.rn 4')0 and less "t- al1. $300 1 61 . 0 pe rcent of a l l •1o r ke r s 

h.::.wi ne r...nm.lP.l earnin-"'s be t--e en these a-nounts. 'i7hi te nal E? s are concent rat ed bet•Jeen $700 and l e ss tha:1 $1,100, 4 7. :3 pe rcent , 1hile 8;3. 3 perc ent of all colored. ual e s e ·-,r11ed $400 and l ess t han $800. ~~1 ty :percent 

of t he '7h i te f emales earned $400 nn d unde r $900 r-rhile 95 . 2 p e rcent of 

.t h e colorecl fer1ales earned $200 a nd less than $700. 

In t h e c i e:are t te i ndus t r:r 12 . 0 pe rcent of a l l Tio'rke r s earned less 

"a..."l $400, '!h ile i n he-- r~ , smol:in.r; and snuff 1 2 . 7 · 2_J ercent earned l e ss 

t han $300. On t he other h <'.nd , 36 . 3 pe rcent of a ll ' 'o rke r s in cigarettes 

enrne cl 800 or no re r:hil e onl;y- 2<: . 3 perc ent of the \TOl l:e s i n t h e other 

o rMche s fel l i n t h:;,t cl a ss i f i c ation . 

As oetl7e en t he Ci f; a.ret t e brc..nch and snokii1.::- 1 che-ri n.r, and snuff, 

t he a nnual ear r:L g s of o.!ll :- colo red ua les a-ppear to l-u;we co ~m n hC~ 'l. ct eristics , t h a t i s , 83. 6 ·oe rcent of t ho se i n t h e cir·are tte i ndustr:- a nd 

82.1 pe r c e ::1 t of t hose eLTo loyed. in t h e ot ~1e r branch eo..rned $400 anu unC:e r 

$800 . 

1 0691 
. ..... 95-

The sex- color g rou;os ir_ ci[':arettes sho17 G2 . 2 pe rcent of all white 

ma J.es earning $60() out l ess than $1,100; 95 . 8 ·percent of the white 

fe;Jal e s ea.r:nin::; $400 and 1L""lde :..~ $900 ; E'.nd. BS: .l ~) erce~t of the colored 

females as ~1e..ving earned. $300 and l ess t han $600 . Of t he 36.3 · · 

percel).t of a ll Tiorkers who eC' l·ned 1·1ore than $BOO, the group consisted of 

68.3 p ercent of all Y7hite . mc:-.le r. , 4 . 8 percent of a ll colored males, and 

of 14.9 percent of the 17lhi t e f ewales, no colol~ed fer:1ales having earned 

ths.t nuch. 

The data. for che11 in,r;: , s!.10k L1p; tobacco a::1d snuff wo r~":e rs shaH concentrations of uhi te male wo ~::e rs ai.1C1 colore d fer:1a l e workers cons ider.-

ably above t hose of the s i nilar gro\..1-"_i: s in the cic arctte b ranch. The 

t1nite 1ale s v.:-ho earned $9011 but l ess t h.:m $1, 400 in this ora 1ch vrere 49. 3 

percei:l t of all ,-rhi te Hales, ...-:rhile in Cif;arette mamlfr.cture the corresponding g r oup :as only 12 . 7 ~Je rcent . Of t he coloroc. females , 73.3 

pe rcent. 1:iQrking in chewing , SJI1oking Fl216. snuff e arxleci $400 out under $600 

wh ile the CQrre spondir.g c ro1.':p in ci-:;t:.rette n anufa cture Pa,s 60.1 percent. 

Of the 1.2 !17 percent of all ·.-?orl::e rs 0ho ear:1ed under $300 , the g rou-p consisted of 5 . 2 ~ercent of all ':7~~i te Tia l es, J . 4 perc e:..1t of all colored 

males, 22 . :? p ercent of all nh ite fe;.:1ales , ar..d 13.1 percent of the colored 

fe r:wles s tucL ies i n the ch e,-r i r_,:.s , dn6 and snuff b:rc..nch. At the other 

extreme 78. 6 percer:. t of a l l c:;L1i te males, 3 . 2 pe rcent of th€;3 colored males, 

17 .o p ercent of t he wLi t e f 8P18.les, and but 0 . 3 pe~· cent of all colored 

fema l es made 11:'9 the .r:;rou:-p e a rning $800 or raore in t ile re r. 

One defection L1 the che-.7 ing, s oaking a nd snuff annual earnings 

data, seeras of considera-Dle ir!I_'9 ortance. It is r egistered in the clistribution of the annual earr..inrrs of the white females f or vrhom this i t en 

" is repo rted. Some 1 8 percent of them are sho';7!1 as having earned $100 

in 1934. Ins:pection of the constituent returns, however, disclo ses that 

practically all these ·;:rh i t e Dowen 1.vere er::rploy ecl d.u.ring the stem,.1ing 

sea son by a singl e pl er:t located. outside the fm::.r Sout he rn StP.tes. 

Since it ha s a l:reaci.;:;;- been p ointed ou t t~1at conditions in snuff 

manufacture nre hic;hl:'· dissiroi:!.a.r from those in c he'i1 ing and othe r tobacco oanufacture , it is unf ortu_ne,te tha t a more corrro l ete breakdown by 

ind.ust:ry brunches has no t bee:1 p racticable in this discussion. Possibilities of c1isclosu:re , ho\7ever, forbade separate present ation of the 

snuff figures. 

rote : Table s covering t his section a re not in the files of t he Na tional 

Recovery AcLrn inistl'a tion but in t he files of ~1 e :Bureau of Labo r 

Sta tistics. 

- 0 -

10691 
-96-

B. COMPANY POLICI~S OF WELFA.ctE ·;mm~ 

1. Introduction. 

The policie s of the do::~inD..nt co:·:1panies in the tobacco industry 

res:9ecting Vlfe lfare ' ''Ork , ;rhe ther significant or insignificant 

in aJ9raising the total effect of the industry' s industrial 

policies, are nevertheless essential to a broe.d survey of the 

industry. :_-;-plfare ·~ork is sometimes a manifestation of cont inuing paterna listic attitude toward industrial relations. Since 

t he wa.c;e income of uns}-ill ed workers is inadequate to provide 

desirable standn.rds of livinr; , es:9eci ll~r nhen satisfactory 

wage incoT'le is .. <:no"r'T!l to be ~ell ,.,ithin the capacity of most of 

t he tobacco industry to pa~r, it c.ecomes necessary to a)pr c:dse 

both the pu Jose and effect of such welfare 1:-rork to determine 

whe t her or not it i s a factor i n resistance to the develo ,Jment 

of tVage income essentia l to desirable living condi·tions. In 

what fo lloT'•s , the attern·Jt i s simpl y to st<.1te the welfare :tJOlicies of t:1ese· compan es~ ( *) ·-

The follO"?iru; description of company policies as r eportecl. b;J 

t heir central offices points out the e~tent to Tihi ch they have 

eng~ed in welfare ork. The scope of such 1'70rk , it will be 

not ed , is not insignificant . ive of the e i ght co~pani es hav e 

organ i zed welfare sy stems; one ma intains contact ~ith a small 

group of employees; t ne other t~o have very limited welfare 

policies. 

2. Vacations 

as a general rule, the co m!)ani es studi ed gave t heir salaried 

emlJloyees (office) t~1o weeks r va cati on "'Ti th pay . Of the eight 

compani es, four r eported tha t such va cations were granted a fter 

one y ear ' s s ervice; two companies gave them to emJlOyees with 

six months' service. In one company the va cation period varied 

fr9m one to o weeks; in another the sal aried employees got 

one week with pay and one we ek without pay . ·rwo comj)anies extended the ~a id vaca tion ) rivil ege to forem en ~ho wer e working 

on a salary ba sis. 

Four compan i e s r eported t hat t heir wa~e earners could get va cations Ti ithout yay ~pon request. One co ~pany closed at the end 

of the y ear for overhauling and this served as a vacation period (without j?aY . f or its wage earners. Another co'lpany gave 

(*) Letters were s ent to the nine l arge tobacco conpanies listed herewith: Ame rican Tobacco Co ~pany, Axton-Fisher ~obacco Company, ro ~n 

8c illi a:ns on Tobacco Company, Larus & 3rother C1., Inc., Liggett r<-. 

Myers Toba cco ComparrJ , P. iJorillard Coml)ail;/, Philip ·!'.!orris & CorJpany, 

Ltd., Inc., R, J. Reynolds Tobacco Company, Scotten Dillon Tobacco 

Com:9any. Ei ght responded, and the descri}tion is based on t heir answers and r epresents their polici es. 

10691 
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t en da s at c: ristmas t i ne·, a lso without -yay , but with a cash 

·ores ant. Srn·te T7aF,_e ea1· 1e rs in one com1) an;;r were allowed one 

we e1<: ~it h pcy ; th8se were in l::e;v positions. 

3. Si cJ.: Leave 

Four cor:1pani er3 stat ed that they gave ·s ick leave with pay to 

s a l aried employees, .ut they had no fi "'{S d p olicy as to how much 

time was alJ.owc:ble on t h is basis. In n fift.1 compa ny, sick 

leave was g i ven onl;r to )ff ice m~J loyees ( the policy as to time 

b e ins indafini te), a nd in a si xth, supervisory for emen were include d r.:.s ·•el:.. a ::; o:'f ice ..-ror ·~ ers; here B.lso the time alloi7able 

f e r s icl;:: l eave was :':. n ciefin it e . 1'wo cor·1:panies j_)aid their salt=iri ed er lJ.)lo ee ~ t hr ow:;J:1 t i1e entire ::_Jeriod of sickness. There 

,rTas one compr; nJr which re ort ec~ £?;ranting sick lea ve with pay to 

wage earner"' '"'hen, i n t he ju dgment of the company, individual 

conditions warrant ed s·1ch lea ve. 

Six of the eir,ht co m)_)ani· s .t? r ovid.ed s ome forl!l. of insurance for 

at least some of their wo r k ers. In t "?o c c.s e s , the insurance 

e~:tePded to all emplo;y· ges n d W<i.s volunt a r y a nd contributory --

t h e em·9loyne :_;Ja.y ing } art of the cost a nd t h e e.nyloy er paying 

:?art. It cover ed life 2nd disabj li ty. In a d.di tion, accide:!"lt 

a nd sickness b en e fits were ~aid by one tyye of policy; whil e 

in the other, sick bene fits and hospit c..l bills were handled. 

t r.rough a v:el f.are associA.tio"l fina.nced jointly by the wor.r: ers 

and t he coopaEy. 

Two of th8 companie s paid t h t3 entire cost of insuro.nce with no 

contribution fr~m emp l oy e es. One , hich ha d a group insurance 

j?Olicy for total disa-oili t y 0r death, covered all the wh ite 1Vorkers, but not the negroes. r he other yla n was not, strictly 

sp eaking , insurancB, b·..:.t in the evtmt of the death of an emlo ree earning ~ot mo r e t han $50 . 00 a V~?eek, the company aid t0 

~is e~ ficiary an a~ount not exceeding $1,000. 

In t he other t 'IIO cor:)a.'1ie s, insurance systems were limit ed to 

the better paid , ... orl;:ers . The officials of one were covered by 

a voluntary contributory ro~p life insurance p olicy. The other 

ex t end'3d this :9 rivilege to foremen and tneir superiors; in this 

case 1ere Wc..s also a contri·ov.tory a.nnu i ty sche!:l e available to 

':?hi t e ':lale sa lar ied. employees. 

5. Pensions 

fuiJ.e six of the eig ht companies granted p ensions to workers, 

in onl:r one instance were de fi'1ite standards s e t up as t o eligi -

bility. rhe other five com ani s gave p ensi ons in individual 

cases, presumably passing on the merit o: each case as it came 

up . One of t h es e five re} orted t hat the aMount to be paid was 

worked out with each employee, on the basis of leng t 1 of service; both wage -earners and salaried workers g ro Nn old in their 
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employ were eligible . The policy of another company was to 

grant pens ions to incapaci tat r.:~ d p ersons 11 ·-rho have rendered 

faithful service''; this pension was not less than $30.00 a 

month, but its actu~l amount and the eligibility therefor were 

judged by the individual case. 

lvien of 65, women of 60, and permanently incapacitated persons, 

if they had served the company for twenty years continuously, 

were eligible for pensions under the one formal pension plan 

encountered among the eight tobacco companies studies. The 

amount rec e ived was based on average earnings and also on 

length of service, but was not to be less than $6.00 nor more 

t han $40.00 a week . However, the right wo.s reserved "to terminat e . . . the plan . . . when in the judgment of the Board 

of :Uirectors it shall have become ex-pedient to do so 11 • 

6 . Medi ca l Services 

Three compani es gave no :nedi cc..l care at all. One company gave 

its employees physical exaninations; another had a doctor on 

ca.ll and. also used t he city ambulance. However, in the other 

t hree compan i ·)S, worker s could ava il themselves of organized 

medical programs. In one '"'7hich had doctors in daily attendance 

and always on call (in all pl ants except one . the employees 

were given free medicine, free optical service, and if they 

earned $5 , 000 a year or less, surge:F~J bills were )aid by the 

company. The doctors 1 services could also be used in the 

homes of the '170rkers. :EinJ? loyees were taught the value of preventive medic ine; they went througn a physical exa~ination 

before being h ired, a.Yld co uld t ake periodic examinations thereafter. 

A visiting nurse was used by another company to follow up cases 

cared for in the plants ('r,hich were equipped with emergency 

hos·)itals and disnensaries, with full-time nurses in attendance). .. -" 

If, u~on investigation, it was deemed necessary, free hospitalization was given. 

A complet~ly_ equipped central medical department was maintained 

by the eighth com~any. Two full-time doctors, a full-time dentist with an assistant, twelve nurses, and a technician were employed, and the laboratory was equ i pped for X-ray, fluoroscopy , 

and various tests. 1edical and dental care was given to all employees. Physic&l examinations were given before hiring , and 

vaccination was compulsory. The ~olicy of the company was to 

carry on educational t.70rk in the medical field; a typhoid immunization campaign caused thousands of employees to take preventive dos es, and exa~ination of pregnant women employees 

brought 1005; cooperation from the women affected, the company 

reported. The medical depart~ent also save information on prenatal car e and on contagious and communicable diseases. Hospitalization for employees and their dependents was arranged 

with the local hospitals, through a system of weekly deductions 

from wages after the employee returned to wo rk. This comp~y 
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i s at the :9:res ent time "'TOrking on a plr:m which will g ive their 

eml:)loyees fre e hosp italization to the value of $90. 00 in any 

one year, a nd will y l aborat ory f ees and opera tinG ro om expenses up to $15. 00 in that p eriod. 

7. Safety Program 

Safety prog rams varie d widely, dep ending on the size of the 

company. In only one plant was there no organized safety program. Edu cational and prev entive work rras handled by simp le 

set-D:-ps of committ ee s and by regula.r weekl~r ins oe ctions, lectures, p rizes for suggestion s , posters, co uncils, and. interdep artmental competition in the larger comp anies. Four companies used a.ir-conditioning . Du.st..:.control devices were used 

by t wo companies, nnd res p irat ors by a third. 

First-e:.id care lik ewise varied. Four companies had first- a id 

rooms or fully eq,Jipped pl ant :h.os )i tals in their plants. Three 

of the se a l so reported that the31 had full-time nurses on du t y 

there. One company had a rnom and beo. f or those who were incape ci tated a t worl:, a nd a f irst-aid k it in ea ch department 

which v:as in the ca r e · .of departme nt managers , who were g iven 

in.strn.c tion in first-aid. In <:mo ther, the fo remen gave first -

aid. Prac.tica l nurses. were hired in the plnnts of a third, 

with a doctor on ca11. One company had no p rovisions for 

first - a i d · tn i.t s plant. 

8. Recreational Activities 

Recrea tion for their employ e es was organiz ed in some form by 

all bu t three companies . :aaseball was the popular sport; five 

compani es had teams in at l east some of their plants. Three 

compani es aiso offer ed bowling to their workers; basketball and 

voll eyba.l l wer e other orts mentioned.. One employer had arrang e d. grOUJ.) rates a t the local Y.M.C.A. 's for both ":7hite and 

negro employees. · 

c Educe.t i onal Work 

Educational work wa.s not so well organ.ized a s recreation . Only 

t hr ee compani es did anything in t h is field. One firm furnished 

sup plies f or cla sses. Another repo rt e d that t h is y-~ e of work 

varie d , employing not only their own methods, but "cooperation 

with outside organizations". In one plant of that company, t h i s 

cooper a tion t ook the form of a rrang ing ro~p rat es at night 

school.· 

?.m1cation in p ublic h ealth, as typ ified in the campaigns ca rried 

through by one compan;).r, has be en discussed in the description 

of the ir medical servi ce g iven previously. TJ.1is same company 

spcms·o'red an eng ine ering club f or white worke rs in mechanical 

divisions 1~ hich f ulfilled social a s well . as educa tional func-

~on~). and onc e a w~ek during the noon hour relig ious services 

were held in the various departments, fo~lowed by group singing . 
-100-

10 . Cafet erias 

Cafet erias ~rere me.intained by si:"r of the com:.~an ies reporting, 

and one furnished a free lllllch to its eMj_)loyees. A second gave 

a hot meal to salaried em)loy ees, and coffee free to factorJ 

'l!o r 1cers . Other com:._:>anies did not i1ave cafeterias in all their 

1JlE'nts, but where ~1 ~r did have them, t ro remarked that they 

'!"ere run on a non-profit ba sis. 

11. Othe:c Welfare '!ork 

In addit i ·)n to the above services, the different firms engaged 

in va rious other activities. One firm gave all its employees 

a t Christma s a cash present , e.veraging $12 .66 l CJ.s t year (1935), 

and :'nether gift. 'r'-;o compani es said that they hel:9ed "worthy 

employees 11 -- in one case loaning t hem mon0y r.r ithout interest. 

One comJe.n;;.r also paid funera l ex)enses of employees in certain 

ca s es . Cor:1pa:1y l1ousing was mentioned by one employ er; in this 

instance t i.1e rent 111as a:J)l i ed against the lJurchase l_.)r ice. 

12. Exam·f)l es of -:elfar e Pol_icies 

In connect ion with :;e dical ca r e , two com·oanies were in the foreground in giving their em2 loyees fre e service. The American 

Tobncco Company maintain d hos:9itals in all its plants but one, 

with a ful l-tine nurse and doctor in daily att endance and on 

call a t any time ; the company l)aid for surgery bills, gave free 

medicine , care of the eyes , and similar services. Sick leave 

for both salaried em )loyees and wage-earners was determined on 

t he basis of individual conditions. 

The system of care for health of the ern:.;> loyees of the R. J. :d.ej'-

holds roba.cco Conpa11y (des cribed as the ~hth company under 

Section 6 on i-.lg dical Services was but part of this company's 

orga11iz ed welfa r e policy. The joint contributory system of insurance -- covering sick benefits, disability, and death; the 

standardized pensi on plan -- the only one found in the industry; 

the Jrovisions made for recreational a ctiviti es; the excellent 

f irst-aid system with a graduat e nurse in each plant; --such 

::_J royisions mark the compa.ny 's welfare policy as taking in a 

wider scope than any other in the tobacco industry. Another 

dis.tinctive feature of its plan is that a fund of $10,000,000 

has· b een set aside from t he surplus of the company and invested 

in the com..l!lon vo'ting stock of the company , the regular dividend 

r eturn on "!hich is made exclusively ayplicabl e to the support of 

the comp ~r 's welfare program. The company contends that this 

greatly reduces the pressure of the expense of welfar e work 

against wage levels. 

Among the :smalle.r compani es , a generous policy was evinced by ' - Larus cG rot -- Co'., Iric. -It was this conpany which paid all 

its sala ri ed-worker s in full through any per iod of sickness; 

bore the entire cost of. insurance for t7hite employees; and gave 

Christmas presents of money to all its workers. 
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C. MECHANIZATION (*) 

l. Historical 

There is, of course, a natural trend in industry towards mechanization. This trend, steadily progressive, has a varying rate 

of speed, dep endent largely on consUJ!ler demand, economic pressure, and resultant invention. The cigarette, snuff, chewing 

and smoking tobacco manufacturing industries have followed this 

natural trend. They present within their group practically all 

of its major variations. 

Prior to the develo nt of the cigarette industry, the trend 

towards mechanization among manufacturers of tobacco products 

was from normal to sub-normal. The excellent development of 

the cigarette fa,brica ting and packaging machines forced the 

first hir,hly mechanized de artm nt in this industry. Mechanization slowly followed do'IJI! n the line, covering the processes 

prior to . f abrica tion, but owe~ no such degree of development 

a s in the finishing processes. Since the large manufacturers 

of cigarettes were also mru1ufa cturers of smoking and chewing 

tobacco, it was but natural that a considerable impetus should 

be given to imj_)rovemen t of mechp.nical ·equipment in the manufacture of these two products. 

The processing of tobacco in the course of its manufacture divided naturally into · three sections: 

l. All ope rat ions up to and including the storage of 

the dried leaf. 

2. An. intermediate section from that point on through 

processing of tobacco up to , but not including , the 

final o~erations of f abrica tion and packaging, and 

3. The operations of final fabrica tion and packaging. 

Until a period ending about 1928, the opera tions of the first 

section, performed almost entirely by the colored race (in the 

South Atlantic states ), were g enerally the same . for all ? roducts. 

These particular operations were simple in chara cter and the 

long hours and low wages t hen in existence acted as a brake on 

rapid improvement of mechanica l J.J rocesses. 

Due to the impetus g iven to mechaniza tion by ciga r ette manufacture, the intermediate section showed a varying trend. The concentration of cigarette manufa cture among a sma ll number of concerns, and the comyetition resulting therefrom, forced the construction of economic compact units for cigarette making , both 

(*) This discusston of mechani za t ion is bas ed on a field study in the 

summer of 1935 , by a trained factory engine er, F. D. i·:ianni ng , at 

that time consultant to t his ·unit. 

For mechanization in the Cigar r:I anufacturing Industry , see Chap ter ¥. 

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. -102-

by the introduction of mor e moclern machinery, and by better 

flor of the ~roduct througn the pl ants by re-design in plant 

layout and increased use of conveyors. 

Prior to ' the code, most of the larg~ companies making any considerable quantity of cigarettes had already eliminated hand 

stemming insofar aS possible. 

The smaller concerns manuf·-.cturing srookin~:; and chewing tobacco 

faced an entirely different situati~n. With the decline in 

consumer demand and the larger companies fairly. well mechanized, the s~aller coup~~ies were feeling a new economic pressure and were trying to lower costs, thus speeding up the mechanization treYl.d. Their problem was almost l,nsurmountable wherever volume was insufficient to warrant the use of expensive 

equ.i.}_)ment. The result has been steady concentration of production, as small companies have been .forced out. 

The snuff industry, with steady consumer demand, no economic 

pressure, und lrea,d r well mechanized, was giving no consiterable thought to further mechaniz a tion. 

Except insofar as ci g-arette Sl'lOking displaced other forms of 

toba cco use, mechanization in the fabricating and packaging 

section of cigarette manufacture had not resulted in technological unemployment. As a . general thing the labor employed in 

this section, mostly younr.; white women, hc s b~en secured from 

outside as the business has grown. 

2. Under the Code 

There was a 1')ronouced effect froM the code on the me chanization 

trend. 

The most important of the early operations in the processinr of 

tobacco is th2t of stemming. It is sometimes done prior to 

storage or the leaf rnav be stemmed after storage and as it start 

'in the process of mamlfacture. For this reason, it is found in 

both the first and the intermediate sections. In hand stemming, 

done on ~ieee r e te, the effect of the code was the rapid elimina 

tion of slow employees whose piece rate earnings did not equal 

the mini~um hourly code r ate required. 

Except for a sma.ll am0unt of leaf that must be stemmed by hand, 

machine stemming is :9racti cal. A fair ba.sis o: measurement of 

the out:yut of stemmin<::.; machinery is its comparison with the out-

:l)Ut of an aver.a;?e hand stemmer in terms of pounds of leaf stemmed per day, with the daily output of a stemming machine in 

pounds of leaf, ·divided by the number of employees in the crew. 

Measured on sucb. a basis, the older stemming mp.chines in use 

when the Code went into effe ct (varying more or less with the 

product and plant ~ayout , were two or three times as productive a s the ~nd method. None of these older machines r ate ve~J 
106 1 

high in mechani cal e fficiency . i.f easured r the same yard-stick , 

s ome of t he newe r nachine s are ~u ch more effective, e qualing, 

de ending on the y~ e of ~r oduct, the outpu t of five to six 

hand stemmers. 

Certain large stemming ma.cl1ines are limited in us e because of 

t heir high cost and t heir requirement of high volume output . 

.A sma ll t y;_Je , ·Pully a s effecti ,-e a s the large ma chine, enabl es 

t he small com~any to compete in t his op·eration on even terms 

with the ·large cor-pora tion. There are definite indications 

tha t the newer machine s a r e coming into increased use and wherever installed there wil l be a r esulting drop in the number of 

stemP'l ing employ ees of a})ro xima t ely 75 i~ as compar ed to hand 

stemming . 

During the l a st five years, there ha s be en materia l improvement 

in drying or ordering ma chine s , in the methods of conveying 

tobacco, and th er e roc ing it. ~hile labor still repres ents a smR.l l :percenta.ge of the total cost of toba cco manufacturing , the increa se in l a bor cost s r esulting from the code accelerat ed t he re~l cement of e qui _t)ment of this character. Further elimina tion of hand l a-bor t 0ok pi ace , a lthough to no such 

extent as in t he st emming op era tion. 

Other definite trends toward mechani zation (a nd p rior to the 

f abrica tion and packag inr:;) , ar'e indicat ed i n the increasing u s e 

of automa tic feeders, r e- de sign of nt l ayout, and improvements in cutters, the l a tt er a.pproximately doubling the output 

p er ma chine. .All of these develol_Jments are resuJ.ting in the 

further elimina tion of em}loyees. 

3. Post-Code Conditions 

In fabric a tion, packagi ng and ' final opera tions, :performed almost entirely -by t he whit e r a c e , a.nd where the O) era t i ons are 

already l ar gely mechani zation is limited. Furthermore, the 

ma ch iner'J already in pl a ce a s a 11 hol e , i'ncluding cigarette making , is not under p ressure from consumer demand. ~n is condition, of course, does not obta in in al~ individual companies. 

The output of the dif ferent types of cigarette ·mak ing machines 

may var y widely . J'.·Iost ma chi nes a re not ru.n at me chanically 

normal output, due to ·the necessity of mak ing a quality produ ct. 

The mechanical out}ut of cigarettes er ma chine i s not, however , 

a true measure of output. If, as· a ba sis of op era t ion, t he output i s de t ermined yer OJ? era tive _p er minute of the cre i'! requir ed 

to op era t e a battery of c i ga rette mru~ ing machines, incl uding 

the makin.£?;-ma.cnine operators , catchers , inspectors nd adjusters, 

a mak ing machine at a relatively low mechanical r a t e per minut e 

may show t he highest output per operative. 

There was found t o be wide varia t ion in t he industry on thi s 

particular product j_ on cost, and the best op era tive perf ormanc e 

was on a rela tively lory r a t e of me chani cal outpu t . 
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The elimin.a t ion of l .s' or is still :p roce 0ding in this sect irm, 

but i n of f a r less i ;n1Jorta nce than in the inter:nediate section, · 

not only in the proc0ssing of cigarette tobacco, but in smoking 

a n u c ewin::; to ~ ceo man.u.f:-l ct ure. 

To sun ariz , the introduction of the code into the Cigarette, 

Snuff, Chewing a nd Smoking Tobacco ·1am1factur ing Industries 

a ccelerated the nor11a J. treno toward Mechanization, vrhich is 

still continui ng , as wa __ e levels \7ere found to be slightly 

hi ~he r in the -•al l. of' 1 935 than during the code p eriod. The 

effect of further mechaniz~tion 1'1ill be felt )?rinciually in 

the preliminary and intermodiate op erati0ns, those performed 

in the Sout h Atlantic stCJt e s by tne colored race , nnd .. ,ill tend 

directly t owards a reciuction o f the::.r n'l.mber in the industry. 

Also, in t~e fabrication of ci ga ttes, it is still possible 

for some concerns to reduc<:; the number of ern ·Jloyees on the 

operation of ci .,.a:ret te making by j_ ro imat ei y 40%, this by 

the ad<ii t i on ·~ me ch nic<'ll Jpl io.nces a lrea dy available, a nd 

further a djustments of :t>:resent standard equipment. 

Prior t o and. durine; the code period, there h· s b een one notable 

exce:-)t i on a.P'lOnf: t he larre cigarette manuf<"' ct"J..'ers to the general practice o f eli ina tinf' a ll )OssP l c l1and st emming . This 

corporation i s s)re.q,cling out the ~Je rj_od of adjustment -from hand 

to machin e stemming in a success ul effort to prevent unemployment . It offers an e~cellent illustration of the tT~e of research n eeded by the industry as a hole, if further distress 

is to be avoided ~s me chani zation v roceeds. Had this been done, 

much past s 1.l.ffering f rO!J t :1e occasiona'l. rapid r el)l a cement of men 

and women by m~ hin s mi ght have been avoided. 

It is unfortunate t hat facts covering the pro)ortion of labor 

costs to total production costs are not available for this 

study. That labor costs gene rally represent but a small proportion of total costs is evident . 

rhere ·nr.:.s bee!l a decided question a s to the advisability of cooperation of any character between members of the industry in 

discussion of its problems. Insofar as joint effort for g reater 

knowl edge· of the effects of mecha nica l p erformance on t e chnolog ical unemployment is considered, su ch cooper ation is not only 

justifie d but essential. 

With the present trend to':Var d further necha.ni zation definitely 

continuing , VTi th labor costs but a small ~Je rcent e of total 

costs, the social responsibility to·~arc . l e bor requires a comp lete analysis of all -;_Jroblems having to do u ith technolog ical 

chang es. 
-105-

CHAPTER III 

INTEGB,A.~ION WITH AGRICULTURE . 

A. INTRODUCTION 

To~acco is the oldest ca-sh crop in the United States. Its 

11roduction and position in the economic welfare have bulked large 

in the - commercial and agricultural d~elopment of this country from 

earliest Colonial days. 

Its impol:"tance is greater than .the acreage cultivated or the 

cash valued received would indicats, · because production is localized 

to certain distinct areas where it is generally the princi~~l source 

of agricu~tural income. 

Buying methods in the various .areas are not satisfactory, but 

the ~assibility of constructive change is severaly hampered by the 

inertia of long established t~adition and the active opposition of 

buyers, whose present advantages ~igh t be curtailed. 

Ul}~il 1933 and the introduction of the crop control pro-gram of 

the Agricultural ~djustment ~istpation, the lack of a · suitable 

sense of the mutual interests of tobacco growers, workers.. .and consumers resulted in a complacent attitude by.manufacturers. towards 

depressed leaf prices. (•) · 

B. PRESENT METHODS oF·· SELLING LEAF TOJ3.A.CCO 

1. .The 1toose Leaf and Auction Warehouse 

There are several ways in which tobacco is marketed by the 

~owe~, . each of which is peculiar to a certain area of the 

country. Flue -Cured, Burley, Dark-Fired Virginia, ~Cured 

Virginia, One Sucker, Green River, and ~ark-Fired KentuckyTennessee are marketed -through the auction warehouse syos·tem; 

although an uncertain small percentage of the last three types 

is also sold at the barn door, 

Tobacco, under this method ~f marketing, is brought to a 

cen,ral auction warehouse .by the farmer, and is there sold by 

competitive b_:i,dding to bUYQrs· representing tobacco manufacturers, 

exporters, other dealers, and ~peculators. The warehouse exacts 

certain commissions from the farmer for selling the tobacco, 

which vary in amount with the weight and value of the sale. It 

is, therefore,to the direct advantage of the warehouse to have 

tobacco bring as high a price as possible, for the warghouse 

profits in a direct ratio with the producer. 

This systQID has been in general use for at leas~ eightyfive (85) years and is considQrably out-moded in its style of 

Operation. However, in spite of its obvious defects it is the 

most satisfactory method now existing in this country for the 

sale of leaf tobacco. 

(*) See Cha~ter I, Section E (b). 

10691 .•. 
, • I ~ 

10691 

• • .,..,. ,. , • I I, .. ,, . ..... . 

(a) Rapidity of Sales 

, ,.. 

(b 

(c) 

One' of the most striking disadvantages of the 

system is the rapidity with which sales are made. 

~ing the Code period, sales were ·limited to a maximum of 360 piles per hour, but it is common to find as 

'many as 400 or more piles sold per hour. Such excessive speed, in selling, forces the tobacco buyer to 

make a hasty appraisement of the lot offered for sale, 

and in order to protect himself against increasing 

his grade average, he bids o~and often secures, certain lots at prices lower than the tobacco should 

bring. It is impossible to avoid a wide variation 

in the price of to-bacco of the s arne quality when the 

transaction is conducted at such a rapid speed; for, 

irrespe ctive of the degree of skill which the buyer 

may possess, he cannot fairly appraise the tobacco offer ed in an elapsed average time of ten seconds or 

less. \ 

.. 

Importance of Adequate Lighting 

Color is one of 'the most important ·qQalities determining the value of 'tobacco.·· ·This '" cannot be accurately gauged by the buyer excep~ under good lighting conditions. It is ' of ·deciaed importance to the 

farmer that his tobacco be sold in a uarehouse which 

is corrc ctl7 lighted by windows and sky-lights so 

that it may be displayed, examined, and purchased 

under the most favorable c0nditions. lf the farmer's 

tobacco is displayed in an old warehouse, pressed into 

·service by the lack of space caused by the brevity of 

the marketing·season, where the illumination is unsatisfactory or' the sunlight too brilliant, he stands 

to r ealize less than his tobacco is worth, because the 

hurried buyer must pr0tect himself by making a conserva tive i~ when he is in doubt as to the quality of 

his purchase . · • 

The Small Market ·· 

Although the development of good roads and the 

increased use of automobiles and trucks have tended to 

less eri -the number Of markets on which tobacco is sold, 

nevertheless, there still exists a "nttmber of small 

markets. All companies do not have their onn buyers 

on small markets, frequently placing their orders 

through local buyers, who often handle several accounts. The farmers suf fer ~hereby from a lack of 

true competitive buying. Furthermore, where there is 

not a full representation of buyers, and where a considerable amount of the tobacco sold is purchased by 

commission men, it is possible for a warehouseman and 

a buyer to combine for the purpose of depressing 

prices by jointly buyin~ in the tobacco for resale at 

a higher price on another ~' or on some other market 
10691 

-107-

The primary reason for the continuation of these small 

markets, where w~ehouses ~re generally old and poorly 

lighted, . is the short season, .and mar·ket glut, later 

discussed. . .l 

.. 

(d) Mandatory Government Grading 

The greatest source of dissatisfaction among 

farmers is the wide range of prices frequently paid for 

identical grades during the .same sale. Under the present system, it is almost· impossible to expect any other 

condition to exist as a very large proportion of' the 

tobacco offered is not well graded by the farmers. 

One solution of this serious problem might be 

found in compulsory government grading. Although 

there is a certain amount of gTading done now by government agents, it is of relatively minor importance. 

If, however, competent government experts were employed to grade all tobacco sold and if the average 

~arket price for each grade were published daily, the 

farmer would then have a standard by which he could be 

guided 'in the sale of his tobacco. 

Mandatory government grading would aid distinctly 

in familiarizing the farmer with those grades most in 

demand, and encourage him in such producti~. Closer 

cooperation and better understanding between the grower, warehouseman, and buyerWJuld result~ and a far more 

orderly marketing machinery for one of America's greatest agricultural crops would supplant the haphazard one 

now in use. 

The adoption of such a plan would unquestionably 

mean .a considerable readjustment of the Loose Leaf and 

Auct~on .Warehouse system as it now exists. 

(e) The Short Marketing Season. 

The tobacco marketing season opens in Georgia 

about August first and moves progressively northwardr 

A small group of expert buyers take what they want 

from each market as they move on through South Carolina, 

and Virginia- ending in Kentucky or Tennessee sometime 

in April or May. 

j 
'\ ' .· . -. . . 

. . 

.. 

! ~ . · .. 

' . 

10691 

The short season is caused by the farmer's fear, 

engendered from years of experience, that the big companies will buy their requirements of what he has to 

sell during the early part of the market, and that 

when they have done so prices will break. His creditors, and this is particularly true of share-croppers, 

are anxious to have their accounts settled before the 

end of the year. 

The disadvantages of this system are obvious. If 

the farmer does not offer his tobacco before the large 

buyers have withdrawn their support from the market, 

he must elect to sell at a loss, or stand the expense 

and hazards of shipping to a distant market, perhaps 

in another belt. Because he does not have time carefully to grade his crop, sorre of his better tobacco 

is sold with the poorer lots. 

Under the present system, · labor is worked night 

and day for a brief period. This is undesirable (1) 

from management's point of view because of the haste 

wi t h which purhcases must be rehandled, and the overtime wages involved; and (2) from labor's ~oint of 

view because employment is for a very limited period 

of weeks, with a resulting long period of idleness . 

This glut of the market could be relieved by 

l engthening the buying season. The farmer would 

th en have time to grade his crop intelligently. 

Modern and eff icient warehouses would be used and 

tobacco displayed to better advantage. 

Two seriOU3 difficulties are recognized in 

connection wit. this lengthening of the season. The 

far mer would have to readjust his marketing habits, 

and the purchaser would have to readjust his buying 

staff to the longer selling period~ 

Neither of these objectives is impossible of fulfillment. The first could be handled by the cooperation of an active trade association, the Department of 

Agriculture ·and the county agent. It should not be 

difficult to induce the industry to increase the number of buyers if necessary. Such added expense would 

be more than o·ff-set by consistent grade standards. 

(f) Unfair Trade Practices· ~ . . 

Sev~ral trade practices indulged in by warehousemen have resulted in considerable harm both to them and 

the farmers. 
10691 

-109-

(1) Subsidized Trucking 

One of the most glaring practices is 

that of employing truckers to induce farmers to sell their tobacco at a certain warehouse. The trucker so employed receives a 

fee from the warehouse in addition to his 

drayage from the farmer. If the farmer has 

not instructed the trucker to deliver his 

tobacco at a particular warehouse, the trucker may shop around from one warehouse to 

another until he gets what he believes to be 

the maximum fee. 

By axrangemen t with a warehouse, the 

subsidized trucker may also demand an additional fee for placing the fa~mer's tobacco 

where it will be promptly sold. 

It is the poorer farmer who is unable 

to transport his own crop to market and who 

is therefore at .the mercy of the trucker. 

Warehousemen .in their eagerness to secure a volume of business have lost many 

thousands of dollars through engaging in this 

sort of competition. 

(2) Rebating 

Another unfair method of competition has 

been the occasional practice by some ware· 

housemen of rebating to prominent growers a 

part of the fees a~d commissions. 

(3) Reservation of Floor Space 

The practice of reserving floor space 

for large and. influential growers has developed, particularly in Kentucky. Where a 

marketing season, it is often possible for a 

large grower to arrange for a favorable display of his crop. 

2. The Maryland Market 

The method of marketing tobacco in Maryland differs materially from the auction loose leaf warehouse system. 

This crop is sold by "closed-bid auction". Under this 

p lan, tobacco is graded and packed in hogsheads on the farm 

and consigned to a broker or the Maryland Tobacco Growers 

Association, Inc., which now has a membership of more than 

5, 000 growers. 
10691 

-110-

In either case, sam~les of the contents are removed by 

state inspectors, sealed, and turned over to the consignee for 

display. Buyers make the rounds of the brokers' offices and 

submit sealed bids on such tobacco as suits them, after an 

examination of the samples -- all bids being opened at the 

close of the day. Jaltimore is the sole market for Maryland 

tobacco. 

This method of selling tobacco is highly unsatisfactory. 

There has been much complaint about poor grading and careless and inferior packing on the part of the growers. Such 

fuulty preparation, coupled with the fact that samples are 

not always representative of the lots offered, has been harmful. oreign buyers have also complained of poor packing and 

.inferior grading, and these complaints are refl ected in decreased purchases. This has be en particularly true or Fra~ce, 

which until 1934 was by far the leading export market for this 

type. 

If the Maryland growers are t o recapture lost foreign 

markets, and to retail, at a fair price, present foreign and 

domestic business, they must pay more attention to packing 

and grading and devise an. intelligent pl an of marketing to 

r eplace that now in use. Buying by samples, drawn from hogsheads packed by the growers, was discarded in Virginia about 

1850. 

. .. 
-111-

3. The Connecticut Valley Situation 

Conditions exist in .the Connecticut Valley, with 

reference to Shade Grown Sumatra type cigar tobacco, 

that are not found elsewhere in this country, except in small areas· in Georgia and Florida. Certain grades of this particular type of cigar wrapper o~acco ordinarily bring the highest prices for 

any ··tobacco produced in the Unit-ed States. 

In the production of American type Sumatra Wrapper 

leaf for use on the cheaper grad~s of cigars (*), 

it has been found necessary to ·shade the growing 

plant . ( *'* ) . 

Due in large part. to the fact that the cost per acre 

of raising this t;ype is far beyond ·that of any other 

American type, there has grown up a producer-dealer 

group, bette·r able to finance this problem than the 

farmer. 

Almost 80% of this Shade Grown crop of the Connecticut Valley is controlled b y an alert trade association composed of these producer-dealers (***). The 

association aids its members in growing tobacco to 

the specifications of cigar manufacturers. Non-members of the association are frequently financed by 

the member dealers. 

Apparently, the only other outle t tha.t farmers can 

find for ·this type of tobacco is a contract with a 

manufacturer before the crop is ~~own. 

(*) See Chapter V - The Cigar ·Manufacturing Industry. 

(**) n The shades are constructed of poles with wires stretched 

across to support a covering of cheesecloth ..•.• The effort 

i~ to produce a 60 percent shade to protect the plants 

from direct and intense sunlight, conserve moisture •..•• 

From 7,000 to 9,000 acres of tobacco are grown under shade 

each year in the Connecticut Valley and from 3,000 to 4,000 

acres in Georgia and Florida, II Circular 249, U. S. Department of Agriculture, page 40, by Charles E. Gage. 

(**~) From field study by this Unit, January 1936, data on file. 

10691 
10691 

- 112-

This me thod limits tne nUmber of ~r.mrers 2..nd ~J .e s in the 

hands of the producer- d.ec: le"-~ or mQnufacturer c;.n 1..musual O.P10U.i"lt 

of control , uhi ch , for ·!}re.c tical purposes, . tri Js t he lr.rr.1e:r 

of a lar,ze :part of his bar,_:;aining povrer. 

4 . Barn- Bu,vin.r; I,iet~1oo.s of Cip-o.r ManufC'cturer s 

This subject has been treated in Ch;;..p ter V, The Cis().r '·o .. nufe.cturing Ino_u,.t~r. Exeep t for certain f a rmers' COOlJerc.ti ve s, such 

as t he Wisconsin Cooper .:1.ti ve , the method of ht~ying from t he 

f 2..rmer a t his ba rn is used not only in connection \1i t~1 the seedleuf filler type gro m in n~rlvania o.nd Ohio , but also tne 

Connecticut Valley toba ccos other t hr..n the sha..de- g rm7n t> _Je . 

ThG 11 circui t riders " :sent out bJ the l a r g e menufacturers end the 

den.lers Cl.irect to the f g rm barns hnve the f 2.rmer nt ['.. e.e ci ded 

sadv2..11 . The possible effect of this systen on over- · . ..,roduction in o..r.. i n ustry llhere t here h~ .. s been steo.c\y o.ecline in 

demand : or tobacco le2 is an· illu.str o..tion of t he inequi tc.'1..ble 

bu rden ple.ced on .8-;S ricul ture in tl e sale of one of its most imrt · ·.t cornr1odi ties. 

It has been tr..t ed eo.rli e r in t h i s chanter t hot the .rl.ucti011 nnd ~ 

Loose Lec.f .:[' rehouse r.'rstera, in rrs1i te of its evi c"..ent c3.ef icie~1

ci es, i s to G.a:r the most sa ti sfactor:r me t :10cl t :lc:J.t the f.. rmer hr s 

for s.:'..le of tobacco lea f . It is not assumed, houev er, thr .. t the 

auc tion r:1ethocl is fit tee:. to the s:-'.lo of ciGt:".r '}Je s. 

5 . Collusion i n Purcha se of Leo..f 

I 11 Decer.:J.ber o.J.. 1935 this w""li t mo.cJ.e a f ield survey with tech;1ical 

assistance , coverin;~ the Flue Cured a rea onl3r, ,,7 i th C'.i rect reference to this question . 1To evicl.ence 11o..s di scovereci. in0.icc ting 

such collusion. 

Thc;re h2 .. s bee:i.1 f requent comp l aint b;r toba cco farmers thfl .. t the 

p rice of the lem is d..e·o ressed b3r manufc ... cturers and other buyers. 

Tabl e I II , t h i s ha ter~ sho\7S the earl~r avera0e p rices (1925-

IS34) of Flue Cured .::-nd.. Light Ai r Cured toba cco (the l < ..st ncmed 

including Biuley c:md I:Iar.,rland) . These ·· ty-Jes re Jresen t n lo.rr;e 

part of tl1e toba cco used in cigaret te manufa cture . Until 1930 , 

or ice av e r ,:;1.g es. for t hese ,_r~J es -were ge!lerally equal to 11 ~Jo. ri t:r 11 

:prices c .. s l i .. ter etermi~1ed by the Ag ricultura l AdjusL1e:J.t AO..-

mini stra tion . 

In 1930 anc1. 1 931 , averfJ.g e p rices ::ere very lo"IT. The com·olaint 

of f a rmers is based. pal·ticulnrly on these t\7o years, toc ether 

vrith t h e op ening p rice levels in 1933 . Th ere is no evi0.ence 

shown in these r.>rice levels of at~' intere st by manufacturers or 

other ouy e i'S i n the fnrmers 1 e.C0110mic distress. 

I :n 1933 , t h e marl::et for Flue Cu::ced op ened t:"Nt such lo';7 levels 

t~1 t farme1·s f orced t he closing of the auc tion r-rareho,lse s. 

Th is J.~e ul ted in conferenc e s bet':reen t h e Ar;ricul tura l Ac justment 
.u l l3-

Ad.mi ni st ;.:-a t ion ancl ~1e mc. ~ufc turers , when 

p l edged t hemselve s t o su:n}.Jort t h e t oba cc o 

of asr eed amow.1t s c.t a.g reed :9 ri ce lev els. 

out i n ~, ccor0 ance r: i th the at=;r eement. 

the manuf.:-,c tur ers 

ma rket by 11urchase s 

'lbi s u rosrDm .iorked 

The t obacco p r od.uction control ro t; ~ of the Ag r icul tu!'a l 

AC..j u st ment Admi ni str:>..t ion r.'r.ts ir. f,_lll o-ve r ation d·uri ng the 

bu.;:.ri ng seasons of 1934 .:<.nci 1 935, and. ~1 ce l ev el s ge~1ero,ll~r 

during t hese t u o yr ars hn.v e b e en exc eedingl ;;r sc:,ti sf a ct o17 t o 

the f armer. 

8 . Con clu sion 

Coop ehe ~1 si ve :;.~es ea rcb. i s ne e deC. lJefo l'e the mo st s c-.t i sfc.cto r ,r 

nethods mc..y be .e rrn~ nee: f or s el l.inc tooc:.cco lea£ by the 

fo.n 1e r. Th e t aslc i s o.s muc .. 1 -gi t hin the ,n~ ovi e of t he l eaf 

dee,l ers anc3. wanufa c tm ·ers a s \7i thi n thC'.t of t:'le Department of 

.Ag ricultur e . As i n so :nany oth e r instanc e s r:1entione cL i n t h is 

study , i t i s evi c.ent that r esearch a l one 11 ill p oi n t t he vra~r t o 

prevent con tinuation of :!1 re sent seri ous mal adj u st ments. 

1. Shi f ts i n Pro duc ti on Ar eas 

Tobacco i s r a i sed on apyroxi mD.tel 3r 400 , 000 fa,rms in the Uni ted. 

StE,t e s, and ordin ril r con stitute s ~1.e :;_:) rinciyal soul"Ce of t heir 

cash i ncome. To da;y-, nppr mo ~r 45 pe rc ent of tota l ::>r d.uco~ , ( *) is e:x::;> ort ed. There are six cl.i stinc t cla s si f ica ti ons, 

al l of r:~1i 1 lJ..stv e speci al u se s o.nd ar e ~J~o ,vn in \ve ll--def i ned 

a.r eas. 

As consuming habi t·s 'l2. .::;: , both ::1t home a nd abroad, such cl-_ang es 

a r e re cte ~ i n t :1 e der:w..n d fo r particul a r t ypes, and t he e conomic eff ect r esulting thera from. is conc ent r at ed r.ri t hi n t h e speci a l 

a rea s v-rher e t l:.o se t;Tpes a re g ror.rn. 

On t he paGe s i mnedi2.tely ollo 7in~ , thr ee t able s a r e shorrn, coyeri ng (1) l eo.f t obo.c co }YCoduc tion :for t he Uni t ed. Stat es t:.nd fo r 

thirteen sel e ct eo. states ( 1839- 1929) ; ( 2 ) t he ncreage hn..l~ve st ed., 

p roducti on, c.1.ncl val ue, fo r the Uni ted St o.tes a nd t he sa:ne c; rou~ 

of st o..t es; ( 3) t he estimatec1 C:l l~eac; , p ro duction, anct farm ve.lue 

e.no. p rice ~) el~ pound., sub eli vi cled. b:r classes. 

Table I shorrs r emar kabl e shift s. Vi r g i n ic.!. has D.p7 )<::re:r.. tl~r :9Lss eo. 

its pro duc ti on -~ eak , ancl h a s i ncree.:s ed. i ts to tD.l :>re ducti on by 

onl y one-th i r cl. since 1839 . In Ke ucl~r , the l a r ge i ncrease has 

been y rimarily i n Bur ley. lJorth Cc:.rolina ha s g r 0\7n to lc: :.. r 

:rroduction t han r ot h er stat e. l.Iaryl anc:t ~o ro uc ec. t he sc:Jne 

['mount in 1929 as in 1839 , 11. .e y years ago. With t he singl e 

exc epti on of Connecticut, t h e st cotes -o roducit.g the ci c;ar t y-p e 

of leaf -- among tl1em, Ohio, Indi ana, Wi s consin, and_ e1L.I1s~r lvnni a -- sh ow a ma t eri a l dec r ease, Penns~r lvo..n 2- l e ss tha n t he 

other st ate s. ~-:-----_:: - ----------- ( *) C' J1P.p ter I V -Foreign Tr'1.6.e in LE".3.f Toba cco . 

10691 

..... 

0 

$ 

..... 

LEAF TOBACCOa PRODUCTION AT TEN YEAR INTERVAlS, 1839-1929 . . , 

FOR THE UNITED STATES, AND FOR THIRTEEN SELECTED STATES 

HISTORICALLY IMPORTANT IN PRODUCTION, WITH PERCENTAGE 

DISTRIBUTIONS 1839-1929 AND 1934. 

TABLE I · 

Pro~~tion (1000 1bs.) 

: • I : : f 

Virginia 

Kentucky 

Tennessee 

: 

. . 

. . 

----

~ryland 

North Carolina 

Missouri 

Ohio ---

Indiana 

: 

. .. . 

: 

: 

1839 . . 

. . 53,4371 

. . 29,550: 

. . 24, 816: 

9, 068: 

1, 820: 

1849 

: 

: 

: 

1859 : 1869 

• 

561 8031 123,968: 371 086: 

. . a 

1879 : 1889 : 1899 : 

79,989 1 48.523: 122,885: 

: : : 

55,5011 108,1271105,306i 171,121i221,8ff0: 314,288: 

t : ; : : : 

20,149: 

: 

21,407: 38,411: 15, 785: 

:· : 

49,158: . ' 

26, 082: 12,357: 

t ! 

1909 . • 1919 : 1929 

t 

398,482! 512,000! 389,277 ....... :----"'"---'i-:---~-

68, 757: 

! 

17,846: 

138, 813: 

112,590: 

: 

19,575: 

107, 784 

24,750 

502,600 

17,114: 25,oas= 12,3201 12,_0_1_s~= ___ 9,~4_2_5~= ___ 3~,_04 ___ 2~= _____ 4~,~4_2_5~~~----3~,_5o_o __ ; _____ 4L,_o_5_o 

10,454: 25. 093 : 18, 742 : 34, 735__:_ 3 7. 854'"?: __ 65_,,"-9_5_7 .... :.---· _88_.,:...,6_0_3....,; ___ 65_,,~3_6_0.....,~~--4_0....:,:....8_8_1 

_C_o_nn __ e_c_t_i_cu_t ____ ~=r-----4_7_~~: ____ 1J-268: 6,ooo= I 

8,873: 7,710 1 

14 045 :' 8 87'5: ..,___ . , : 

6, 882: 

16,931: 

45,500: 

21,388: 

28,110: 

46,909 : 

17,600: 

46,950: 

60,960: 

15,112 

28,496 

Wisc ')rsin 

Pennsylvani a. 

Geor cia 

t 

: 

: 

. 

. 

. . 

. . 325: 

I 

52: 

: 

162: 

: 

: 

913: 

t 

74: 

: 

424: 

. . 

: 

3,182: 

: 

104: . . 919: 

. . 

. . 

. . 35: 

. • 

289: 

t I i 36~ 943: 28,956: 41,503: . . : : 

46: 

. . 229: . . 

Z23: 19, 896: . . 264: 

. . 1, 106: --. . 

. . 46,165 t 

. . 25,583: 

: 

1,486: . • 

: 

56,760: 

. . 77,254: 

: 

14,310: . . 

48,125 

49,536 

82,460 

89,870 

Total fer u.s. : 2191 163: 199,7fi3a 434 1.209a262 1 7351 472 1 661:4881 257: 868,113a 1,055,765a 1,465,481: 1,524,677 
TABLE I 

Total Percentage1 

Fe~ 13 States : I 

Virginia 

· Kentucky 

I 

I 

I 

I 

I I I I I 

1S39 1 1849 I 1859 I 1869 I 1879 I 1889 I 1899 . • 

I 

1909 ' 

. I 

1919 I 

. . 99.3t 

34.,41 

: 

24.4: 

28.4' 

I 

27.8: 

I 

95.61 

I 

92a81 

I 

95.61 ' 96.81 

I 

96.41 

I 

97.81 

I I I I : : I 

24.9t 40.1: 36.2: 45.41 36.2: 37.7: 34.91 

I : I I f t 

' 

t . 

1929 : 1934 

7.2: . . 25.5: 

Tennessee 13.5: 10.1 : 10.0: 8.2: 6.21 7.41 5.7: 6.5: 7.7: 7.1• 9•5 ------------------------------~ t : --------------~~----~~~---- I t --------------- --------------------~--------~~ I 

_IM_ry.&-l_an_d _____ : __ 1_1_._3_: __ l_o_._7_: ___ a_._a_: __ 6. o: 5 . 5 : 2 .s : 2. 8 : 1.1: 1.3 s 1.6 : 

North Carolina 

. . 

. . 

. . 7.7: 

t I : t 

6.0: 4.2: 5 .71 7.41 14.7t 13.1: 22.21 33.0: . 

t I I t I I 

Missouri I 4.1: 8.6 5.81 4.7: 2.5: 1.91 .4: .4: .21 .31 --~------------------~------~ : t ------~~--- t I : f : : I 

2.1 

38.2 

.3 

Ohio 1 2.7a 5.21 5.8• 1.11 7.3: 7.7: 7.6: 8.4: 4.5• 2.7: 2.0 ----~~----~----~~----~----~~------~~----~~~--~~~----~~ l : I : : I t : I I t 

Indiana a .·aa .5 t l.81 3.5: 1.9: 1.6c .az 2.01 1.2: l.Oa .6 

I I I I : : I I I t I 

Connecticut 1 .21 .6 1 l.4t 3.2: 3.0a 1.8a 2.01 2.71 3.21 l.9a 1.3 

I I I I t I I I I I I 

Wisconsin : - I I -: .4t 2.2: 4.0: 5e2t 4o4t 4.2: 3.2: .9 

: t : t : : I I I 

Pennsylvania .1: .5 f .7: 1.3: 7.8: 5.9: 4.8: 4.4: 3.9: 3.2t 1.6 

t : : I I I I : I 

South Caro l ina a - : : - : - : - I - : 2 e3 I 2 e4 I 5 e3 I 5 e4 t 

I I : I I t I I I 

Georgia a .1: .2 : .2 : - 1 .o: .11 .1: .1: leO: 5e91 2.9 

Total Production t I : : I I I I I I 

for U.S.(l,OOO : : : I : I : I t I : 

lbs •) 21~ 163cl99, 753 a434, 209a262• 7351472, 661a4881 2571868,113111 055• 765 1 1,465.48lal524, 677al, 096,000 

SOURCEc Department of Commerce, ureau of the Census, Stocks of Leaf Tobacco, Bulletin 163, 1927, Pages 16-17 

Department of Agriculture, Yearbooks of Asriculture 1931, Page 702, and 1935, Page 453• 

I 

.... 

.... 

\.11 

I 
.... 

0 

$ 

..... 

North Carolina 

(Types 11-15,51) 

LEAF TOBAC, · __ .)ACREAGE HARVESTED, PBODUCTIO: - )o V ALOE 

IN THE UNITED STATES AND IN EACH OF THE THIR1'"£'EN PRINCIPAL PRODUCING STM?ES, )UTH RELATIVE IMPORrANCE OF 

ACREAGE, PBPOOCTIO~ AND VALUE IN EACH STATE TO 

THE GRAND TOTAL. ANNUALLY 1925-1954 • 

• . . • . . . • 1925 • 1926 • l927 . 1928 . 1929 . 1950 . . . . . . . 1951 . : • . • . . . . . • . . ' . • . . . 

. . 

. . 1,628: 1,556: 1~864: 2~000: 

• 1 576: 1 289: 1,?.11: • 

TAJ3LE I-I 

. . 1952 1954 ~ . 1955 . . 

. . . . 

. . • 

1 ;1,.,_ 

" ~.l.. 1~ 757: 1,555 

1,026: 1~578: 1,096 

:250 642:251 :?1)8: 25:0 462:274 689: 107,821:179~486: 240,937, 

• : . . . • . • . . • • • • • . • . • 

• • • • . • . . . • • • ! • • . • . • • 

• . . • . . . . . : • . . • ~ . . • . Acreage Ha.rvested (11 000) : 547: 565: 659: 728: 75§:_ 766: 69_!31._ 470: 687: _ 51.4_ 

1 Total U .s • .t-.creage : 51,2: 54,7: 42,4: 59,1: 37.0: 56.~: 54 .9: 55 .~: 59.1: 58,5. 

Production (1,000 lbs. ) 80 ,1 65:586 460:485 685:49 08:487 968: 85, 90: 79 6: ~9~~4:55§~859:418,802 

~::.% .... T:!:...:o::.:t:.:al~.:..U..:.. ....... s:::..;.~P...:ro=du.=.c=-t~i::.;:o~n:....-_:=--__:;:2:...:..7.z..,.:..6::...: _...:5~0..:..,0;::...:..: --=40 .1: 56,4: 51.7: 55,6: 50.~: 28, €: 59.1: 58,:? 

Value ($11 000) : 87,458:102,625:1061 850: 971 585: 95,690: 751 59p: 42 1 198: ~245: 86 217:122,~90 

%Total u. s. Value : 57,9: 44.1: '42.7: 55,5: 55,2: 55,8: 52,£': 52,7: 48.0: 50,8 

Kentucky (Types 22-24, 51, 

55,56) , Acreage Harvested (1 1 000) 

%Total U, S, Acreage 

Production (1,000 lbs,) 

% Total U. s. Production 

Value {$11 000) 

% Total U. S. Value 

Tennessee (Types 22,25,51, 55) 

Acreage Harvested (1 . 000} 

%Total U. s. Acrea e 

roduction 1 000 1bs, 

~Total U. s. froduction 

Value (~1 ,00 ) 

~ Iotal U. S, Value 

. • . . . . . . : . • • • • • . . • . . • • . . . . . . • • • • . • • . • • • 

: • . • . . . : . • • . . . . • 

: 479: 426: 290: 588: 486: 519: 565: 424: 454; 347 

: 27.4: 26.2: 18.6: 20,8: 24.4: ~ 24.~ : 28,5: 50,0: 25.8: 26.0 

:587,990:558,568:202,?.69:500,700:592,688:572,125:488,725:515,862:525,155:281,216 

: 28,2: 27.8: 16,7: 21.9: 25,s: 22.e: 50,9: 50,8: 25,€: 25,7 

: 62,078: 58,008: 45,286: 75,175: 68,720: 45,599: 54,699: 31,270: 52t841: 44,151 

: 26.9: 16,4: 17 ,,.5: 27.4-: 24.4: 21.5: 26,8: 29,0: 18.~: 18,3 

• • • • . . . . . . . • . . . • • . . . . • . . . . . • . • . . . • • • 

• 150: 88: 161: 155: 120 • 

. . 

. . 

. 6.£: 8,2: 5. 7: 5.9: 7!5: 7.7: 8.5: 91 e: 9 1 5 • 

. • 16.045: 11,155: 14,656: 17 ,1g~: 21,554: 18,625: 10.008..! 10. 6J,2: 15,754: 15~642 

. 7.0: 4. 8: 5.9: 6.2: 7 !6: 8.8: 7.7: 9,8 : 7..7: 6 1 E • 

I 

..... 

..... 

1' 
..... 

0 

$ 

..... v 

. 

• 

. 

• 

. 

• 

• • 

. • 

• • 

• • 

1925 . 

• 

. 

• 

. 

• 

26 : 1927 

• • 

. 

• 

. . . 

• 

. . 

: 5,2: 4 ,4: 6.~ : 

; 12.077; 15.250; 15.713: 

: 5.2; 5,7: 6.5: 

. 

• . 

• . . . . 

19?8 

• • 

. 

• 

: 

82, 288: 

6,0: 

5.8: 

. . 

1929 

. 

• 

87 ,084; 

5, 7: 

15,955; 

4 ,9: 

. . 

. 

• 

. • 

98,600: 

6,0: 

s.e: 

. . 

. . 

: 

. . 

• • 

. 

• 

: 

4,4: 5,8: 6,4: 

24,574; 49,0ip: 1;1.,161: 

5,0: 4,5: 6.2: 

. . . . : 

57,600 

12,442 

5,2 

Georgia (Types 14,45 62) : : : : : : : : : : 

Acreage Harvested {1, 000) : §7: . 52: 82: 122: 98: 114: 84: 24: 66: 51 

Value ($1,000) : 23~· 1 6, 768: 10, 767: 4, 056: 11 420: 61 626: §,12i 

% To'J;al U, s. Va1ue : 31J.. 5 9: 5.1: 5.J: 1 = 5, 7: 2,£ 

Maryland (Type 52) . 

• 

• . 

• 

. • 

. 

• 

. . . • 

. . . . 

. . . . 

. . . 

• 

. 

• 

. 

• 

. 

• 

Acreage Harvested (1,000) : 50: 31: 55: 55: 58: 54: 54: 52 

Connecticut (Types 51, 52, 61) 

Acreage Harvested (1,000) 

~Tot~ U, S. Acreage 

Production (1,000 1bs,) 

% Tot!l U. s. Production 

Value {$1,000) 

% Total U, S, Va;tue 

. • 

• • 

• • 

. 

• 

. . 

50: 

1,7; 

: 40.019; 

• • 

• • 

. 

! 

2,9: 

7.604: 

. • 

. 

• 

22: 

1.4.: 

29,546: 

2.3; 

10, 447: 

4 . S; 

. . 

• • 

24: 

1,5: 

?8,985: 

2.4: 

10,009: 

4. ;?: 

. 

• 

25t 

1.3: 

29,750: 

2.;?: 

ll,067: 

4. 0: 

. . 

. . 

2].: 

)..;t.: 

28,496: 

1.9; 

15, 678; 

418; 

. 

• 

• • 

25: 

1,1: 

. 

• 

: 

25: 

1,2: 

2, 0: 1.8; 

12,024: 6,669: 

s. 7; s.;t: 

• • 

. 

• 

15; 

1.1: 

22,099: 

2. ?: 

4,155: 

3,8: 

• • 

• • 

14: 10 

,8: . 7 

18.578: 14,27§ 

l.Z: l,t 

4. 510: 4,840 

2.4.: 2, 0 

• 
Wisconsin (Types 54-55) 

Acreage Harvested (11 000) 

%Total U, S, Acreage 

Production (1,000 1bs,) 

% Total U, S, Production 

Value ( $1, 000) 

% Total U, S, Value 

Florida (Types 14, 45, 62) 

Acreage Harvested (1,000) 

% Total U, s. Acreage 

froduction (11 000 lbs,) 

% Total U, S, Production 

Value ($1,000) 

% Total U, S, Value 

!/Preliminary 

I 

I 

• • 

: 

. 

• 

• • 

. • 

• • 

: 

• • 

• • 

• • 

. 

• 

• • 

• • 

• • 

; 

• • 

. 

• 

. 

• 

• • 

. 

• 

• • 

: 

• • 

5, 7: 

7,612: 

5,5: 

• • 

. 

• 

1.5: 

5,292: 

1.4: 

. • 

. 

• 

52: 

. . 

• • 

2,9: 

5,776: 

1,6: 

.. 

• 

. . 

1,0; 

.L,... , ~61· • 

• 5: 

. . 

• • 

29: 

1,8: 1,8: 

: 44.000: 55.550: . . 

. 

• 

. 

• 

. 

• 

. 

• 

. . • 

. . 

. . 

• • 

. . 

. 

• 

5,2; 1.0: 

7,260: 4,602: 

5,1: 2,0: 

. 

• 

. 

• 

7: 

,4; 

5,824: 

,4: 

1,805: 

,8: 

. . 

. 

• 

6: 

.4: 

5,808: 

2,195: 

.9: 

. 

• 

• • 

2,0: 

4,556: 

1,8: 

. 

• 

• • 

. 

• 

2.5: 

7,084: 

2,6; 

• • . . .. . 

.5: .8: 

1,404: 2,696: 

,6; leO: 

: 

. . 51: 

2,0: 

55,170: 

2.7: 

s, 507; 

2.1: 

. . 

. 

• 

9: 

,6; 

8,228: 

• 7: 

2,865: 

1.1: 

. . 

. 

• 

57: . 

2.0: 

48,150: 

5,5: 

7,025: 

2,6: 

. 

• 

. 

• 

12: 

.6: 

9,216: 

• 7: 

2, 682: 

1.0: 

. 

• 

. . 

2.7: 

6,654: 

2.4: 

• • 

. 

• 

1.0: 

' 2,752: 

1,0: 

• • 

. 

• 

59: 

2,0: 

48,125: 

5.1: 

7,219: . 

2.6: 

• • 

. • 

11: 

,6: 

9,650: 

,6: 

5,005: 

1,1: 

. • 

• • 

2.8: 

5,072: 

2,4: 

• • 

: 

17: 

,8: 

1,154: 

.5: 

: 

. 

• 

. 

• 

• • 

5,4.: 

5,550; 

2,7; 

• • 

. • 

1.2: 

1,255: 

1.0; 

• • 

. • 

. 

• 

. • 

5,2: 

2,276: 

2.1: 

. 

• 

. • 

1,0; 

996: 

,9: 

. . 

. . 

. 

• 

. 

• 

1.8: 

1,976: 

1.1: 

. 

• 

. 

• 

,8; 

900: 

.5: 

. • 

. 

• 

45: 40: 28: 15: 

2,0: 2.0: 2,0: • 7: 

52,890: 48,800: 56,180: 16,025: 

5,2: 5,1: 5,5: 1,2: 

5,289: 2,655: 1,250: 849; 

2,5: 2,0: 1.1: ,5: 

. • . 

• . . • • 

• • 

. . . 

• 

. 

• 

2.0 

2,6g6 

1.1 

,6 

944 

,4 

,6 

10,051 

,9 

774 

.3 

11: 9~~----4=-=------6~=----~7 .5: l5: ,5: .5: .5 

9,756: 7,598: 5, 512: 4, 822: 5,054 

,6: .5: • 3: • 5: .5 

2,675: 1,687: 855: 776: 1,554 

1,5: 1,3: .at ,G 

Sourc. : Department of Agric l ture, Yearbooks of Agricul 'blre, years 1925 to 1955 

I 

...... 

...... 

en 

I 
CLASS 

U.S. TIJI'ALS (ALL CLASSES) 

!cregge Harvested (1,000) 

Production (11 000 1 000 lbs 1 ) 

' Dollar Value (~1,000) 

LEAF TOBI} . EETIMATED ACREAGE, PRODUCTI' .,ARM V ALUK, AND 

PRICE P& ... vJND, SUBDIVIDED BY CLASS, WITh l. .....rlCENTAGE RELATION OF ACREAGE, PRODUCTION AND V ALOE OF EACH CLASS TO 

THE TOTAL. YEARLY 1925-1934. 

. 1925 . 1926 . 1927 . 1928 . 1929 • 1950 . 1951 . 1952 . • . . • . • . . • . . . . . . . . • . . • • • . . . 

• 1 1 751: 1,628: 1,556: 1,864: 1,988: 2,ll2: 2,000: 1,409: 

TABLE III 

1953 . 1954 • 

. . 1,755: 1,271 . : 1,576: 1,289: 1 ,211: 1,575: 1,537: 1,647: 1,584: 1,023: 1,566: 1,046 

:250,642:251,208:250,462: 74,156:282,168:211,156:129,689:107,776:177~905:225,179 

Average Price, cents per lb.: 16.8: 17.9: 20.7: 20.0: 18.4: 12.8: 8!2: J-0,5: u.Q: 21t5 

. 

. . • . 

. . 

. . 

. . . . . . . FLUE CURED . 

. • . . . . . • . . . • . Acreage Harvested (1,000) 801: 958: 1,120: 1,088: 1,128: 977: 618: 920: 687 I 

~ Total U. s. Acreage . . 61.6: 

Production (11 000 lbs,) 

Total U. S. Production 

Dollar Value 1 000 

~Total u! S1 Value . . 60.4: 

Average Farm Price 1 t per lb: 20.0: 24.9: 8.4: 

. : . . . . . . . . . . . FIRE CURED . . . . . . . . . . • . . . . . Acreage_ H~~s.t_ed (1,000) __ : 275: 254: 150: 184: 225: 255: 253: 159: 168: 149 

%Total U. S. Acreage : 15,7: 14,4: 9,6: 91 H: ll.2: 11.0: 11,7: ll,Bt 9,7: 111 7 

Production (1,000 1bs.) :210 1 755:188,752:113,458:156,526:1871 291:1661 Sl8;1881 1S6:1251 24j&128,043:1261 477 

%Total U. S. P~oduction : 15.?: 141 6: 9,4: 91 9: 121 2: 101 1: 11.9: 12 ~: 9.~: 12,1 

Dollar Value ($1,000) : 211 ·146: 141 804: 17,140: 191 549: 24,794: 141 159: 9,~573: 71 778: 11,634: 151 614 

% Totr~ U. S. Value : 9.3: 6,4.: 6,8: 7,1: __ .8.9 8: 61 7: 71 4: 7 ,2; 6,S: 6,1 

Average Farm Price, ¢ ner 1b: 10.2: 7,8: 15,1: 141 2: 15 ~: 8,5: 5,1: 6~-- 91 1: 10,3 

LIGHI' AIR CURED . . . . . . 

. . . . . . . . . . . 

• 

. . 

. . . . . . 

. . Acreage Harvested (1,000) : 575: 578: 275: 361: 458: 517: 550: 455: _ ___§.35: 540 

%Total U. S, Acreage : 21.4: 2512: 17.5: l9.4: 25,0: 24,5: 27,5: 52,2: 501 9: 26 1 8 

Production (1,000 lbs.) ·302,530:514,835:2021 405:289 1 596:5661 965:5761 337:4651 590:356,465:596,986:257,245 

~Total U. s. Production : 22.0: 24.4: 16 1 7: 21.1: 25 1 9: 22,9: 29,3: 52 1 9: 29,1: 24,G 

Dollar Value (i1,000) : 55,854: 42.956: 51,770: 871 616: 811 516; 60,251: 42,005: 45,581: 45,297: 45,755 

%Total U1 s. V:li.ue : 24.2: 18,6; 20,7: 52 1 0: 28,9: 28.5: 52,4: 40,:5: 24,5: 19.6 

Average Farm Price, ¢ per 1b: 18,5: 15,6; 25.6: 50.5: 22,2: 16,0: 9,1: 121 9: 10,9: 17,0 

I 

..... 

..... 

\,{) 

I 
Class 

DARK .AIR CURED 

: 19~2~5~=~~~~~=~1=9=2~7~=~~1=9=?8~~=1=9=29~~=~1=9~~-- . . . . . . . . . . . . . . . 

• 

.Acreage Harvested (1,000) : 111: 91:· 55: 61: 75: 78: 88: 49: 42: 42 

%Total U. S, Acreage : 6,3: 5.€: 5.4: 5,0: 5,7: 5.'-'7.-.: __ 4=,4: 5.5: 2,4: 5,~ 

Production (1,000 1bs.~)----~=~9~2~·~2=5=8~:~78~,~4=2=8~:~5~6~·=6~79~:~4=5~•~8~7~4~=-6=1~,~4=2;1~:-=6~~··,~o~2u5~:~7~5~,~77~0~:~5~9~,~189: 51,781: 57,145 

%Total U, s. Production : 6,7: 6.1: 5.0: 5,2: 4,0: 5,_,_7-=-=---'4=.,_,7-=:. __ 5=·~8::...::::___;:;;:..2~.5:;:.;::;___...!:::5~.~€-

Dol1ar Va~ue ($1,000) : 7,445: 51 655: 5,757: 5,147: 6,620: 4,840: 21 518: 1,651: 2,514: 2,824 

%Total u •. <e' Value : 5.2: 2,4: 1,5: 1,9: 2.5: 2.5: 

Average Fa!m Price, ¢ per 1b: 8.1: 7.2: 10.2: 11,7: 10,8: 7.9: 

. . . 

• 

76: 

. . 

. . 

62: 

. . 

. . 

55: 

. . 

. 

• 

62: 

: . 

• 

5,4: 

1.5: 

4.2: 7,5: 

. . . . 

1,5 

7.€_ 

% Tot al U , S ~ -'A=c=ro...:e:..,;:a-...,g,..;;.e_ ...--___ : ___ 4=·'-"5'-": __ --'5::..:•'"""8:.-::.: 5, 4: 5 • 3: 5 • 5: 5. 5: 5, 8: 5 • 0 : 2, 0: 2 • 2 

Production (1,000 lbs,) : 91,751: 67,195: 60,629: 67,868: 73,351: 75,271: 91 1 694: 68,802: 52,279: 54,057 

%Total U, S, Production : 6,7: 5,2: 5,0: 4,9: 4,8: 4,4.: 5,8: 6,7: 2.4: 5,5_ 

~Do=l=l=a=r~V~al==u=e_$=1=~0::...::0:..,;:0~)-----~=--=9~,8=0=9::...:::~~6~,=6=6~5:~~8~,~2=9=2-=-:-'1=0~,~1=0~8~:-=9~,~50~7~:~~6~,=0~7~3:~~6~,~2~2~9~:~5~,~0~8~5~:-~l~,7~5~6~::__~5~,~1~65~ %Total U. S. Value : 4.5: 2,9: 5,5: 5.7: 3,5: 2,9: 4,8: 2,9: 1.0: 1.4 

Average Farm Price,·# per lb: 

CIGAR BINDER 

. . 

. . Acreage Harvested (1,000) : 

. . 

10.7: 

. . 

. . 

9.9: 

. . 

13,7: 

. 

• 

70: 55: 58: 

4 0: 5.4: 5,7: 

: 95 159: 70 752: 67 845: 

% Total U. S. Production . 

• 6,9: 5.5: 5.6: 

Dollar Value (~l,OOQ) : 14,578: 14.264: 12,3 78: 

% Total U. s. Value . 

• 

Average Farm Price,¢ per 1b: 

CIGAR WRAP]IER 

. 

• 

. 

• 

6.3: 6.8: 5.1: 

15,5: 

: 

. 

• 

20,2: 

. . 

19,0: 

. . 

14.9: 

. 

• 

64: 

3.4: 

83, 537: 

6,1: 

14,840: 

5,4: 

17,8: 

. . 

. . 

12.7: 

. 

• 

61: 

5,1: 

81,228: 

5.3: 

16,544: 

5.9: 

20.4: 

. 

• 

. . 

8,3: 

. . 

. 

• 

70: 

3, 3: 

93,691: 

5. 7: 

14,332: 

6.8: 

15,3: 

. . 

: 

6,8: 4.5: 5.1: 9,2 

. . 

68: 

. . 

52: 

. 

• 

. . 28: 

5,4: 5.7: 1.6: 

87,122: 72,357: 57,565: 

5.5: 7.1: 2,8: 

7,576: 4,990: 3,252: 

5,8: 4.6: 1.3: 

8,7: 6,9: 8,6: 

. : . 

• . . 

17 

1.5 

26,528 

2.5 

3,194 

1,4 

12,1 

Acreage Harvested (1,000) : 7: 8: 12: 11: 9: 7: 6: 7 

%Total U, S, Acrea e : 0,4: 0,5: 3: 0 6 

Production 1 000 1bs, : 7 558: 8 525: 7 048 

%Total U.S, Production : 0,5: 0,7: 0,9: 0,8: 1,0: 0,7: 0,5: 0,7: 0,5: 0,7 

Dollar Value ($1,000) : 6,318: 7,100: 9,152: 8,797: 81 235: 7,904: 5,269: 3,512: 51 552: 4,841 

% Total U. s. Value : 2, 7: 3,1: 5, 6: 3, 2: 2,9: 3, 7: 4.1: 3, 5: 2,0: 2, 2 

Average Farm Price,¢ per 1b: 85,8: 83,3: 86,9: 76,5: 55,3: 68,7: 62.8: 50,7: 57,7: 68,7 

Source: U. S, Department of Agriculture, Bureau of Agricultural Economics, Crop Reporting Board, Tobacco by 

Types, April 16, 1934. 

Note: Total 1954 U. S, Production does not include an estimated 28,500,000 pounds of Burl~, Dark Air-Cured, 

and Fire-Cured Tobacco in excess of allotment harvested and rendered unmarketable b,y growers operating under contract with the AAA . 

10691 

-121-

Table II, cov e ring ten ye rs only, endin~ with 1934 , indicates 

steo.dy or increa sin5 ) reduction in t :1ose states raisi~b Flue 

Cured c.nd Burley, the types most l :J.r gely usecl in cigarettes. 

Again the heavy losses in the sta.tes producing the cigc.r t-: pes 

a.re indicated. 

The consto.ntly increasin(; proportion that Flue Cured bea:L,s to 

total United St c.tes p roduction, a s shown in Table III, is of 

g rea t significance. 

The Fire Cured ·tyye, ~roun both in Virc;inia and in Kentucl~r

Tennessee, has dro :;?~J ed in t l-J.i s :9eriod from 210,753 , 000 p ound.s 

produced. in 1925 to 126 , 477 , 000 pounds in 1934. Its dolJ.a r 

value ~1as decreased in about the same p rop ortion. Its forei gn 

market has been drying U}':l, a.nd its only other m;:tensi ve use is 

in the manu fact1.u,e of snu£f. It is interesting to com·Jare the 

averag e f,?..rm price per p ound for tlli s typ e with the avero.ge 

rnin~s of snuff comyini es. 

Cor_pora tion statements incl.icr>te tJ.1r:.t the three la.r gest Si.1l1ff 

comlJanies for t ho perioo. 1 925-1933 i n clusive, reached their 

highest ea rni ngs, $9 , 500 ,000 in 19.39 ; and their loiTest ::'r~1 ings , 

$7 ,900 , 000 in 1933 . Cash c.i vidends in excess of $5, 000 , 000 

were paid each of these jre.ars b:r these three companie s together. 

The snuff com~JCU1ies o.re ·by all odds the l e.r c;est buyers of Fire 

Cured toba cco for domestic use. During this same period of 

years, the ave r ac';e p rice of this toba cco paid the fa.r mer r c .. nged 

from a high of 15 .1¢ in 1927, to a low of 5.1¢ in 1931. The 

dollar value to the f arme r of this entire crop incluo.ing t:he 

amount exported., ranged during these sc:.me years from a hit;h of 

$24,800,000 in 1929 to a low of $7,780,000 in 1932 (see To.ble 

3, page this chapter). 

In 1931 , t he three larg est snuff compani e s produced in e:::~cess 

of 38 , 000,000 pounds of snuff at an estimR.tecl :profit of .?2¢ pe r 

p ounci, but in t hat same yep r, the <.i.vero.ge f a rm :price for Fire 

Cured tobacco Tio.s 5 .1¢ per pound. 

I n 1933 , the farner received an avera .,:se of 9 .1¢ for Fire Cured 

tobacco. In 1933, the t hree est snuff companies m~de a 

divici.encl disbursement a t the ap·c)rox imo.te rate of 23¢ per p ound 

r:1anufactured. 

The Da r!:: Air Cured typ e, with production of 92,258,000 p ounds 

in 1925 , droptJed to 37,145, 000 pounds in 1934. T:1.e ci g<J.r types, 

excepting onl.;- cigar Wl~ap pe r, show similar or worse declines. 

The crop of cigar filler worth $10,000 , 000 in 19 25 brought but 

little more than $3, 000 , 000 in 1934. Production droplJed from 

92,000,000 p ounds to 34,000 ,000 pounds. Cigar binder made ~! 

even worse showing. Its dolla r value for the same year s etacreased from $14 , 600 ,000 to $3,200, 000 and its p ro onction d.ropped from 95, 000 , QOO pmmds to 2o,OOO , OOO p ounds. 
c.uct 

i~'" "' v 

-122-

T!le ~.: r~ el:.. -:e of un r.t "':tl''' e '.:. tobncco us e e. ir.. n~ nceacture i:1 the 

Unit e cl Stc-.Jces of 8.ll to oC~c cc n ro ciucte is shoun in To.,bl e IV, 

b e lmr. Tl1o ~· r!c e(l_ :;.~ ~s e in :1ercc.Ltns e of toba cco no• r conSUi11e0. j ~ t lte J<"lnuf.:- c~ __ ·c of ci.--;n r e t t e s, a'!'lC tl1e :1e".V l loss es 

i n .... --. 11 - t'- 'P. .t..., .J. "~ t '---""" .y.,, .... c-u , i --,r"_ .... ! l " · 

.. '·~' tev , "'".J 1'1'' · 

' + .J t'.... ·1 e n• nJ-r "" ~ t T"'o • ··-e"s ,.J.. " '".) -r 

- ·~e" .!. ( ·• 

nr ~.bh~ ~~ ro :-e l'i t y ;~or :Z:: r: 1s ·c s J:[.i sin-r:; to.uC'c co le~ f are the 

Srm.th Atl<J.:--tic ~t 9s -- " .il c' l~ ntlJcl;::-r E.'.nci Teilresre e , uhe.·e ;'1ue 

et~ ::-.:.C. 3ur}.ey , !'vSl-GCti r e l y , <>.r e r-rcmn. 

1'. 00 1310 1920 1925 93~ 

2? . 7 2c . 6 ..... r· ,co • ._·) 20 . ? 1£1 '·' - · v 

c _;_:-·c-t e t te s 3 . 4 5.7 ~ 3 . 0 ~)4 0 4C. 4 

8l,,,.f i.. , Ch ell in:; & 6:1 . 9 60 . 7 50 . 7 45 . 3 37 . :1 

Snt ~::i c Toba.cco ----

P r o6·uct 

Ci c:, c.rs 

/)I • 0 .: 10n .o,; :1.00 . ~~ 100 0'

1 

·- • ,J l OC' . ~~ 

-------------------

T.:.1ble V, fol l oPL'l[" , '"10'\ is t :J.e D Ol.VlCLs of un r~ teJ J'l GC. tob::.cco re0"Lti.rec' :t'or t!1 ;:~ sene Tollp of -,r or.uct s. T'1;.: clor..estic cors ... ,J:"'pti on of c. ll t-,_ c s of un ::ten.r.1e ·,_ tob:: c c o .ll~' s r-"Jout doubl et si·:1Ce 

1900 . 

TABLZ il 

P0unc z of _ Ullst amqed To hc:.cco Con nurne ci ( (; 0 () omit ted) ( *) 

1900 1920 19')5 1934 

10-5 , :;95 168 , 596 .:.1: 9~01 111 , 123 

Ci << ret te s 10 , 084 t~6 ' ~J 07 244-, 315 3? 3 , 383 

s_:,J..f:.: , Cho"ITi :ne; G; 2S2, 37f '32 , 47G 325 , 10 9 289 , ~'4 

Sr1o·· : ·!_ r:..,-:; Tobt: cco 

It i s evid.ei··t t h2 t the "Leavy cl e cl:Lne in t 11c cig" :c i nru str:.r s_;_i1 Ce 

19;:'0 h2 s f ol'cec a r e · .dj u stne:nt i :1 -rro cuctioi: E12'll.OI1G tl:.e c :;ricult J.ral ere. s isi:~ · t h e ::;e c i ,7<..r t~ pG . Th e locos in f o r c i ?;L cl cn:cd.ld for t Jw : .Firco_ t "rJe s Iltts h<· d si o i l_n_ r effe cts. T!1e 

c.i S'9r0-9 0rt:.on.:::,tc i i:creaso i n t h e t.' '1101.1.nt of to')acco as e~. i '1 cigar e tte l1D.::u.fr ctu·e lo s b:r. ow~h t :;r t3<:.tm .. ~ -') rosv erity to the o..:i."'eas 

_::;rOY;rii"G "':b.lf' C,:_re c:. [nci. Burley , }'J:lrticulc.rl:; · ci..urinp- the :re~.: ·s 

thc.t tl1e cro; i12.s b e r~ 1:n d cn"' conGrol. It is s<'fe to US'"''W1e , 

.bnzed u·.:>on s t ::-.tisJcicn o? r e c ent y earn, t 1w.t t .11e r equi rer.vnts for 

s·nuff a.:'lci c~1ewi~g to u[:' cco m.:.:;nu_f .... cturo nill not lncreaze . Ci ,.,.c.- r 

l ee.:f t ;;.. .... )e s ['.re ·:not u see:. in eth er f.,nerict.n tob .... cco -.;>ro d::.lCt s e:;:-

ce;1t for scr<'-l) che'.·i in{c,: , the co ~l sULrp tion of \rhich in 1934 ·.7<:' s 

2? ~ less t 11G'I.l in J S31 . I'ur t lle rmore , tl1ese ty·_,ez ere not e::-Jorted 

e:;:ce:,ot i n snall Cl_uPn t i t i es. It tJ:p-o ear:.:;, t he ref ore , t hut u:~leEs 

(*) Annual Rep orts of the Comnissioner or Internal 3evenue . 

10 6Sl 
-123-

there is r:w,r ked incl'eA-se in 'che·· co;,:c su.nption of cicrrs, ·.7hicl"'. i s 

improbable, ,.rocluction o: tiii s pLrticular c1£",ss of 1e;:-.f 0 illJ. 

never :..~each its foj,"me:- peak • 

.2. The South Atlantic States 

There· is not only the p roblem of shiftinG area s fo r tobacco cu.!.-

ti Vatior-., but e1e relations:lip Of toba,CCO to oth er V?_; :~icul ture 

corm:10di ties. · The South Atla:n tic States ~-Jresent an. int; eresting 

illustr~tion of this problem. 

Four sta tes -- Virginia, ·ljorth Carolina, South Carolina <-nd 

Georgia -- depe~1d for agricultural income to a marked C:.e.:;ree on 

t~o cro~s, cotton and tobacco. Florida, growing some cotton end 

tobacco, is included to coo:ple te the g roup. 

Bright Jnue-Cure·d tobacc-o (T;nres 11-14) grown in these five 

states is used primarily in the manufacture of cigarettes, although small amounts find their way into the manufacture of 

chewing and smoking tobacco. · Approximately 55% of the FlueCured crop is exported in leaf form, although Flue-Cured 

represents 70% of all tobacco exports. \Vhile the money value 

of the total cotton crop· grown in all southern states is far 

greater than the value of the total tobacco crop, the relative position of the two crops is different in these five 

states. 

In 1910, cotton :proc.uc tion in t lle South Atln.ntic Sta.tes o.nlol·U+ted. 

to 3, 710,000 bales, having an estimated fE'.rm -value of $2S5, 000 , 000 

and in 1934 2, 406,000 ba les with an estirr.ated farm VC',lue of 

$152,500,000. When compared with 1910, he year 1934 sho';ls a 

decrease ii.:.. 'bales producec. of a-;? ~o roxi ately 35:, an<i a re c._~.,_ctio:n 

in 1~ value of 42%. (*) 

In 1910, t:_i s rou~"l of five states produced 32';6 of e1e el:ti::.~e 

cotton cro·:) of the United St a tes, Qnd i n 1934, 23:~ · The sto,tes 

of South Ce,roli:-1<:\ ar. cl Georg i e. acco1.mt for the Major uortion of 

this decree.se L'l ::? reduction . 

II~ 1910 t h ese saae sta tes produced. 273 ,758 ,000 ~O"t.L'1c1s of tobacco 

Tiith,an esti::w.t ed farr:1value of $27,360,000; i n l 924 , 605 ,640 , 000 

p ounds, a11 i:i:wrea.se of aj_r'?roximc."tely 120 . In 93~ , to bn.cco ~J roduction had an estimate d_ farm value of $164, 500 , 000 , or 8.'9~1 ro imate1;:r c.t O~ increase n-hen cor.:pared u i 1 1910. 

Tlhile t h i s g rou::_-. of st c:..-.te s accoun.tec for onl ' 2J~ of t he total 

tobacco prod:u.ced i:J. the United States in 1910, the~r a cc01mte6. 

for ap~o roximatel:r .:55)o in 1934, }ll'acticall~- do11ble the ~r 1910 

r2.tio. The sta te of "'Jortl1 Carolina alone is res:po nsi ble for the 

major ·p ortion of this increase ~: it~1 a production of 418 , 800 , 000 

pm.L.'lds in 1934, com~Jore . \:i tl1 a proo.uction of 1 29, 500 , 000 ~J ounc s 

in 1~10. 

( *) Based on date:-, Dubli shed in the Ye <.'.rbooks a: the United. St a tes De·oartment of Agricu.ltu!'e for the years 1910 and 1934. 

10691 
---

Cotton 

Toba cco 

- 124-

In the South Atlantic States, these tHo crops tozet~1 r :12.C:. 2.n 

estimated farm val ue in ~9 0 of $292, 400 , 000 as co~p ~e& to 

$317 , 083, 000 in 1934. These amounts were res-pectively 32% c,nd 

37r;'o of the estimated farE'! value of these tno combined crolJ S ior 

the enti re United States. Wl:ile there he..s 'bee21 a relo.t"ivel~r 

small ir..creo.se i1: 1934 over 1910 in t~1.e estimated fD.rm ve.lue of 

these t n o crops combi ned, it is of p~rc:mount importa nce to record the change in relative position of ec: .. ch of these tno crops 

during the period covered. Tb.i s is shot7n in the follo·-rL:::; 

tc: ble: 

TABLE VI 

Co·rTOtT Al8 TOnACCO CO: iPA..:TID 

--- - - --- ----- 1910---- ---- -

Est. Fariu Vah:.e 

$265 , 074 , 804 

27 , 360 , 000 

Per Ce::t 

90 . 65 

9 . 35 

1934- ------ ( *) 

Est . larm Value 

$152, :5 80,000 

164, 503, 054 

Fer cent 

48 . 12 

5l . GC 

ToE;;e ther $292, L12>4 , 804 100 . 0 $317 , 083, 054 100 . 0 

(*) !teem 

10591 

Tobe.cco, constituting lese t:um 10~ o:Z the total estiw'te0. fr rm 

v·c~ue il: lSlO, accour..tc: for r:10re t~1c: n one- hE:11f of the tot2.l 

estinatec1 farm ~r.s ue in 1934. If the rele..ti e trends of t:1ese 

tno cro-:? s co ::t i~ue , t~1e e conomic 2-t':;ricul turol p ros::;_:>eri t-,.. of 

this section is evi0.entl:r to becor.1e more r•nd more &e~)er!Cl.ent O!l 

its to bccco lJrodu ction. This is po.rticula rly true ol 1-ortn 2.r..cl 

South Cr.rolin and Georgie'., 'uotl1 Virginia anc3. :i'lo::ido. havL1c; 

g ree ter El.c;ricultura l d.ivel~sificB tion . · 

dhile it is impossible to estimc .. te \7i th o..n.y C.e.;ree of c.cc1..1.:c.:-cy 

t 11e amount of Bright Flue- Cured to"Jacco that tvill be requireCI.. 

£o r d.onestic co:1slli!1"9tion d.urii:;; t!le ne:':t fey: yecrs, the steady 

increase in ci::;arette con su:.n})tion b~r the American public •·.2.rra..nts 

the COilslusion that t~1ere v.ill be a slo1.7l3,.. increasil1G c.ema.nd for 

t h is type b;;r _t..me ricc:n manufa.ctlli~ers , 1..mless there shoulc. be .2.a 

DI'..forse e~1 chm:;3e to blends usinc; a smC>.llGr -proportion of FlueCureci Leaf. Eo:-rever, the pel~ce~1tat;e of tobacco export ed is so 

lart;e that t-1e eco:1omic o.~· ricult·c.ral prosperity of this section 

is de:_Jendent upon & continuation of Tiorld markets. T~1is sul>ject, 

uhich i ~ of mc: .. jor im-yort a:c.ce , i :; cU scusseci in Cha:)ter I 1. 

The industri a ::. -pr :pe rit r of al:!. of these five states j_s d.elJende~t to a coi.1siderable e:::tent o:;.: t~1e :9roc"lucts made from these 

tTio a,6ri C"LU tural COP."'.modi ties. north Carolina leC'.f..s in tobacco 

manufacturing as in tobacco :_Jroductior.., and also hc:.s e:::ceedingl3r 

la.r ge textile manufe.ctu.ri:;::g interests. 

I t does not appee..r proba'Jle that these s.tate·s Tiill materi c.l ly 

increase their present percentF~e of manuSoctured tobacco ~r

duct s. .Ar~r considerable e.d.di tional cont ri butio:G to ti1e eco:r.or.1ic ~)ros-peri ty of t~'le South .Atlanti c States on the pa:-t o: tl1e to- bacco mc: nufactw Jng L1d.ustr.:r is largely limited, therefore , to 

an inc:tease in the. levels of leaf nri ces 2n0 of l:a{'·es. 
-125-

CRAFTER IV 

FOREIGN TRADE IN LEAF TOBACCO 

PART 1 - THE IMPORTANCE OF TO:BAC80 AS AN EXPORT COMMODITY AND THE GROWTH 

OF FOnEIGN CONWETITION 

Leaf tobacco enters world trade for two reasons - first, to supply 

.the needs of countries that cannot produce it- and second- to supplement or augment local production. 

A--THE U,;pORTANCE . OF TYl?ES • -+ • ~ • 

Tobacco is a commodity made up of a nllinber of diffe·ren t types, ·· each 

one of which has separate and distinct uses. Althoug~ a l~mited degree 

of substitution of one type for another is possible, . the differenc·es in 

types are so great that anything approaching complete substitution is 

impossible because of individual ~making habits and preferences. 

To a lesser degree there is the same differential within each type. 

This is best exemplified in the case of the principal type, - Bright 

Flue Cured. The demand for this type of tobacco is world-wide in 

character, but certain grades or qualities have very specific markets. 

This complexity of types and qualities can be more easily understood by explaining that although tobacco is grown for domestic use in 

almost evety country of importance with the exception of Great Britain, 

Denmark, Norway, and Holland, more than half of the tobacco that enters 

world trade comes from the United States. This country is, by far, the 

~argest source of J.eaf tobacco, the next 1?-rgest being the Netherlands 

E, ~st Indies whose exports averaged only 30% as· much in the five-year 

period 1926-1930. (*) 

The United States also imports substantial amounts of Turkish leaf 

from Greece and Turkey for blending in cigarettes, and cigar leaf from 

Cuba, Puerto Rico, the Philippines and the East Indies. Turkish leaf 

as a type does not compete with any type produced in this country. 

B--THE CHANGE IN SMOKING TASTES 

As the general demand for tobacco has increased and as consuming 

habits have changed, and furthermore, as foreign production has been 

initiated or has expanded, just so has the United States ·foreign trade 

in leaf· tobacco followed these change s. 

The United States Department of Commerce classifies tobacco exports 

into ten separate types. Each of these types is grown in separate and 

well defined areas with practically no over-lapping . Consequently as 

any change in consuming habits or in foreign production is reflected in 

the demand for a particular type, so the economic effect is concentrated 

within the special area where that particular type is grown. Thus, the 

sharp decline in exports of the Dark Fired types has adversely affected 

(*) · Plantation Crops. Empire Marketin)?; Board, London, November, 1932 

10691 
-126-

certain tobacco growing sections ·Of Virginia, Kentucky and Tennessee; 

while the increase in exports of ]right Flue Cured, due to the immense 

.growth in cigarette smoking , has been of great benefit to the So1,1th 

Atlantic States. 

. Analyzing changes in recent years by comparing the five-year period 

from 1927-31 inclusive with the three-year period 1932-34, annual exports 

of all tobacco in the first period 

average d . ............................................ . 553,158,000 lbs., 

430,320,000 lbs., 

122,838,000 lbs., 

while for the latter period they were ••.........•.•... 

or an aver age annual 1 os s of ....•.........•....•...•. 

·men broken down by p rincipal ··exp ort t ypes the following average results are obtained: 

TABLE I (* ) 

. EXPORTS IN PUll DS 

Increa se or Decrease 

Type Av. 1927-31 Av. 1932-34 Amount Percent 

Bri&ht Flue Cured 386, 821,000 286, 412 ,000 -100,409,000 -25.96 

' Da rk Fired Type s 108, 623 ,000 86, 375 ,000 -22,248,00() -20.48 

Maryl and & Ohio 11, 966 ' 00t) 8, 019,000 -3, 147, 00() -26.30 

Burley 9, 653, 000 13,112,000 ~3,4 9,000 . ,. .. 35. 83 

Green River 8, 965 , 000 3' ·1 58 ' 000 -5,907,000 -65.89 

One Sucker 3, 415,000 1,058,000 -2,357,000 -69.02 

Black Fa t, e tc. 4, 904 ,000 8,786 ,000 ... 3,882,000 •79.16 

It is o.bservable from the above fi gur es t hat t he exports of ]right 

Flue Cured and the Da r k Fired t ypes comp ris e the bulk of the export 

trade in leaf, with a decided prep onder anc e of the former. Further, it 

is particularly noticeabl e tha t there has been a decrea se in the eA~orts 

of every type during the se cond period with two exceptions, Black Fat, 

and Burley t ypes. 

C--THE DARK TYPES 

The figures in Table I do .not go ba ck far enough to indicate that 

some years a go the rela tive p osition of t he Brigh t Flue Cured and the 

Dark types ~as reversed. In 1912 the Dark t ypes, consisting of Dark 

Fired Virginia and Dark Fired Kentucky- Tennessee , together with the 

Dark Air Cured types, One Sucker and Green River, and Black Fat, according to estimate s made at the time, (~) comprised 65~ of the tota l exports of Arnerican lea f, while Bright Flue Cured nas only 26.7% of the 

. to.tal. In volume this represents a decline in exports of the Dark 

types from approximately 230 million p ounds in 1912 to only 67 million 

(*') Fi~e s compiled from Department of Agriculture 1935 Year Book 

(**) Department of AgTiculture V.P.I.Bulletin 244 

10691 
-127-

1in 1935, or a net decline of 163 million pounds. In 1935 Bright Flue 

Cured accounted for 73.07 per cent of total exports of leaf tobacco, 

which amounted to 396,300,308 pounds. (*) 

' -

While it is generally understood th?:t consumption of the dark 

types has not increased appreciably in ~~rope, production in Europe of 

substitute dark tobaccos ·increased from 3.:1 IPillion pounds in 1920 to 

?49 million in 1932, or a net increase of ~38 million pounds. (**) 

Production of Green River type in Nyasaland is now of sizable proportions in comparison to foreign demand. Tbe. British companies, The 

Imperial Tobacco Company and Gallahers, Ltd., have evidently shifted 

their main source for this type from the United States to South Africa 

in order to take advantage of the preferential duty. 

While there will probably be a continued appreciable demand for 

dark tobaccos in the important European markets and in parts of Africa 

and the West Indies, there is comparatively little chance that former 

levels of exports to European markets can ever be attained for these · 

types, particularly in the case of Italy. 

1-The Lost Italian Market 

Table II shows exports of Dark Fired tobacco from this country to · 

Italy from 1918 to 1935. 

TATILE II (***) 

DARK FIRED TOBACCO EXPORTS TO ITALY 

Calendar ;year Quantity in Pounds Value in Dollars 

1918 50,357,819 7,356,959 

1919 43,623,888 8,375,622 

1920 44,160,278 13,097,714 

1921 50, 589,889 1],,267,083 

1922 37,96~,398 ~,072,658 

1923 34, 316' 42.0 .. ,. ·8, 390,196 

1924 16,893,207 3,893,207 

1925 11,263,481 2,877,197 

1926 5,935,509 1,387,452 

1927 3,262,039 648,014 

1928 1, 817, 126' 387,980 

1929 3,375,137 938·, 144 

1930 3,880,689 832,234 

1931 4,085,116 811,728 

1932 2,223,636 329,510 

1933 1,660,409 254,064 

1934 2,141,053 380,861 

1935 842,709 216,654 

(*) Department of Commer-ce, :Bureau of Foreign and Domestic Commerce 

Bulletin issued February 1936. . 

(**) "Consumption and Production of Tobacco in Europe 11 by J. B. Hutson, 

Chief, Tobacco Section Agricultural Adjustment Administration MS. 

(***) Department of Commerce, Bureau of Foreign and Domestic Commerce, 

Tobacco Division. 

10691 
.-128-

The loss of th@ Italian market, which was once the most important 

foreign outlet for ~erican Dark Fired tobacco, does not mean that there 

has been any let-up in the demand for tobacco products made from this 

particular type of leaf; it si~ly means that the American leaf has been 

replaced by native leaf gro\vn from American seed. This ability to supply its own needs, coupled with intense nationalism and its economic 

90nditions, has made Italy practicnlly independent of the United States 

for its requirements of Dark Fired tobacco. In fact, not only has the 

market been lost to American exporters, but Italy, · through its ability 

to produce large quantities of Dark Fired tobacco, has become a serious 

threat to American trade in this type of leaf in other world markets. 

The question involved is one of replacement of American leaf by 

native production, rather than by imports from other countries which 

must be accepted by Italian consumers. Since the tobacco industry in 

Italy is a state monopoly, there is little likelihood that the once important Ita lian market for American Dark Fired tobacco will ever be restored to American exporters of leaf tobacco. A logical hope is that, 

owing to a growing preference on the part of many consumers for a milder 

type of toba cco, American Bright Flue Cured and Burley types will find 

favor once a gain with the Italian smoking public, and thus off-set to 

some extent the loss of the Dark Fired business. 

D--MARYLAND TOBACCO 

~aryl nd tobacco comprises about two and one-half percent of American production. (*) Neutral in aroma, its usefulness is found in its 

unusual burning quality. i"fhen it is blended with othe r types in cigarettes, the burn is materially improved. 

From early colonial days, when irg inia l eaf was sold through 

English merchants exclusively , Maryland tobacco had a free competitive 

market in France, Holland, and itzerl nd. Until a f ew years ago, 

France was the leading exp ort market for this type. In 1927 exports to 

France amounted to 8, 957, O·JO 'lbs., but in 1934 they had declined to only 

162,000 lbs. (**) Other i mp ortant export markets are SWitzerland, the 

Netherlands, and Belgium. ~r a number of years there has been a larger 

relative stability in the production of }/aryland tobacco than in any 

other American type. For the sixteen year period, 1919-1934, the 

average yearly production was 23,000,000 lbs. (***) In 1928, 51.01% of 

the Maryland crop was exported; in 1932, 37.01%, and in 1934, 30.21 . 

For the same years the exports of karyland tobacco r cpre sen t ed, ' ' 

(*) U. S. Department of Agriculture. Year Book of Agriculture 1935 • 

. (**) These figures include not only Maryland, but also Ohio export 

tobacco. However, the amount of the latter is very small. 

Source: Tobacco Division, Bureau of Foreign and Domestic 

Commerce, Department of Commerce. 

(***) .. Department of Agriculture Year Book of .Agriculture - 1935, 

page 456. 

10691 
-129-

respectively, 1. 88%, 2.47 ~. and 1. 60fo of all tobacco exports. (*) \Thile 

it is possible that the French market for Maryland tobacco is not lost 

to the extent that the Italian market is lost for Dark Fired tobacco, it 

is improbable that future exports of Maryland tobacco to France will 

ever attain former levels. 

The Maryland growers are partly to blame for the loss of the French 

market because of poor grading and careless and inferior packing (the 

J.,oose leaf auction system does not prevail in Maryland). :France is in a 

better position than other foreign customers to be independent of Maryland tobacco, because of nearljr comparable types that are obtainable in 

Algeria und Madagascar.· However, if the growers will 'grade, pack and 

otherwise properly handle their product, at least a part of the French 

markets may be restored to them, other i mportant foreign outlets saved 

and new outlets created. 

E--BURLEY TOBACCO 

Burley tobacco is grown ex tensively in Kentucky and Tennessee, and 

along the borders of adjacent states. It is second only to Flue Cured 

in volume Of production. 

Increased demand for Burley in American blended cigarettes (Camels, 

Lucky Strikes, Chesterfields, etc.) has not kept pace with the . increase 

in its production. Very little Burle~ is exported. In recent years, 

the ?mOunt has never exceeded 6%. (**) This ~e is used extensively 

for American smoking ·mixtures, and also for plug ·chewing tobacco. It 

has to. a greater exten_1 t 'than any other type the ability to absorb a 

large quantity of sweetening and flavoring. 

Table ~II shows Burley production for the year~ .- 1931-1934, gl. v1ng 

the percentage of its total to all the United States topacco production, 

and ··also it.s percentage of total farm value, of all tobacco production. 

It will be ·noted that the average price per pound has almost doubled 

during this period, while at the same time the total ~~~ply of stocks on 

hand has also appreciably increased. 

(*) Depa rtment of Commerce, Bureau of Foreign and Domestic· Commerce, 

Tobacco Division. 

(*'*) Department of Commerce, Bureau of Foreign and Domestic Commerce, 

Bulletin 521, issued July 2, 1935, page 8. 

10691 

7 
Production in lbs. 

( 0()'} om i t ted) 

Percent of total 

tobacco production 

Percent of total 

farm value 

Ave. Price in 

cents per lb. 

To tal supp 1 y 

in lbs. (000 omitted) 

-130-

TABLE I I I ( * ) 

l31JRLEY TOBACCO 

1931 1932 

435,313 308,385 

27.49% 31

1.15% 

29. 2~b 35. ~b 

8.7¢ 12.5¢ 

956.9 1,008.2 

1933 1934 

375,453 233,827 

27.47% 22.35% 

22.17% 17.7% 

10.6¢ 16.9¢ 

1,119.7 1,120.8 

In the period 1916-1920 inclusive, production of Burley averaged 

281.7 million pounds. In 1929 production reached 342 million pounds; 

but decreased to 234 million pounds in '1934. The piling up of surplus 

stocks of this type has created a considerable problem in the tobacco 

industry. Because of decreased production under··crop control, and increased consumption of the popular brands of cigarettes, all of which 

contain an appreciable quantity of Burley in their blends, production 

and demand are today in better relation than for the past five years. 

Although some efforts have been made to p opularize Burley in foreign 

fields, the type in leaf form has never found marked favor outside the 

United States. 

More than for any other American type of leaf, with the exception 

of Bright Flue Cured, substantial foreign outlets are needed for Burley 

to care for the production over and above domestic requirements. Manufactured American tobacco products, a majority of which excepting cigars, 

contain Burley in their blends (*~, are popular in many foreign lands, 

and would enjoy much larger export sales i f it were not for excessively 

high import duties. Therefore, there is a distinct opportunity offered 

to American exporters for the development of foreign made tobacco products containing a sizable percentage of Burley type. It is believed 

that much can be accomplished in this direction, and once a taste is acquired for this type, either in a blend or in an all Burley product, this 

tobacco may well become an important factor in the export of American 

leaf. Because of its mildness, it is particularly well suited to cigarette blends and to smoking mixtures. 

(*) The United States Department of Agriculture, Bureau of Agricultural 

Economics, Crop Reporting Board - "Tobacco by Types" - April 16,1934 

("'*) Some smoking mixtures a."'l.d plug chewing tobaccos are almost entirely Burley, except for flavoring. 

10691 
F--BRIGHT FLUE CURED TOBACCO 

1. Domestic Production 

l3righ t Flue Cured tob~cco is the ' ou ts·tanding type grown in the 

United StateE. It has an even greater relative money value compared 

with its production. As an export commodity, it now dominates foreign 

tobacco trad.e. 

This is substantiated by the percentage figures given in Table IV, 

which show the relative position of Bright Flue Cured to the total tobacco produced in the United States, and also the large percentage of 

the American tobacco exports of this typa. -

TABLE 

BRIGHT FLUE 

1931 

Production, lbs. 660,879,000 

% of Total Production 42.3% 

Flue Cured Tobacco 

Exported, lbs. 388,252,00() 

% Total Tobacco Exports 74% 

Av. Farm Price per lb. 

% Total Farm Value 

8.4¢ 

43.5% 

IV (*) 

CURED TOBACCO 

1932 

376, 819 ~ 0()0 

36.8% 

255,311,000 

62% 

11.5¢ 

0 "d/_ 4 . 2p 

1933 

738,583,000 

54.1% 

297,941,00() 

68~ I 

15.3¢ 

63. % 

1934 

556,930,000 

53.3% 

305,548,000 

69~ I 

27.3¢ 

68 % 

As indicated in the 'discussion of Dark ·types, the present dominance 

of Flue Cured tobacco is of comparatively recent origin~ The growth of 

this type reflects the sharp world-wide increase in per capita tobacco 

consumption following the World War when smoking became general with 

women, and also the decline in the use of cigars, smoking tobacco, and 

chewing tobacco in favor of cigarettes. Declining export figures show 

the increased foreign production of the Flue Cured type which has now 

reached substantial volume, notably in Canada, British India, British 

Africa, and China. 

Also reflected in the United States world trade in this type are 

various foreign policies regarding duties, tariffs, trade barriers, and 

government monopolies. Beyond all these influences, however, an even 

force is observed in the financial and commercial dominance of the tobacco industry in certain countries where the industry is not state controlled, by two great foreign inter-related camp~~~ the Imperial Tobacco Company of Great Britain and Ireland, Ltd. , and the British American Tobacco Company, Ltd. 

(*) Figures compiled from 1934 Year Book, Department of Agriculture. 

10691 

./ 
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.2. Foreign Production 

Foreign production of the :B'lue Cured types is confined almost entirely to the British Empffire and China. Geographical distribution of 

British Empire production is found in Canada, South Africa, and India. 

While no accurate or adequate figures are available covering the produc t~on of this type in India,:- there are, however, records of production 

in South P1rica and Canada for the past ten years. 

YEAR 

1927--8 

1928-9 

1929.,30 

1930-1 

1931-2 

1932-3 

1933 ... 4 

rrABLE V (*) 

:?LUE CURED PRODUCT ION IlT AFRICA 

(000 omitted) 

UNION OF SOUTH AFRICA SOUTH RHODESIA 

20, 579 

12,157 

11,962 

14,799 

20,700 

9, 265 

13,725 

24,263 

6,060 

4,887 

7,234 

12,687 

12,927 

23,737 

The South Rhodesian product is superior to that grown in the Union 

of South Africa. However, because of its distinctive flavor, which 

tends to limit its satisfactory blending with other tobaccos, it is much 

less desirable than the United States product. Nevertheless, its use is 

being exploited principally within the Empire, and may find wider acceptance. 

Canadian production of Flue Cured has increased to five times its 

volume in 1924, -at which time it was 5,479,000 pounds. The peak was 

in 1932 when 27,941,000 pounds were grown . The crop in 1934 decreased 

to 22,000,000 lbs. (*~ The ~ality of Canadian Flue Cured and Burley 

leaf is more nearly equal to that raised in the United States, than that 

grown in any other country, and hence offers greater competition in 

quality of leaf than other foreign sources. 

India offers greater potential competition than . other known Empire 

sources. Its tobacco production in 1933-1934 was approximately equal to 

the total United States production.(***) 

(*) Department of Agriculture, TeChni cal Bulletin 466. 

(**) Report of Commercial Attaehe at Ottawa, Department of Commerce, 

February 26, 1935. 

(***)Bureau of Agricultural Econo~ics, U. S. Department of Agriculture 

- Tobacco: Production in specified countrios, 1933-34. Issued 

10-15.35. 

10691 
-133-

In China, production of Flue Cured tobacco began in 1913 when the 

British-American Tobacco Company sent ·ther e a number of American experta 

to introduce its cultivation, and to ain natives in the p r 0per method 

of its curing. It soon developed that peri odic importation of American 

seed was essential for quality. :. 'I • 

Chinese production has i ncreased r ap i dly, · and has now approached 

the estimated Chinese domestic requirem·ents of 209· ~illion pounds. In 

1934 enough was planted to yield this amount, but·. unf~vorable weather 

reduced the yield to 155 million pounds. ( *) ... ,' . 

3. Summary: 

Irrespective of type of quality, the· duty on American leaf going 

into England is approximately $2.31 per pound. Tobacco imported from 

Empire coun t~ie s carri.es a tariff duty of 50¢ per .pound less than that 

on tobacco from the United States. 

Great Britain is the best customer of the United States for Flue 

Cured tobacco. · '· The type of cigarette popular in England requires a 

large production · of American grown Irigh t Flue Cured on acoount of its 

quality and cg~or. While it is impossible to d~termine to what extent 

substitut:i,.o~~ .. of Empire grown leaf can be safely made, without materially 

changing· ·the · t?-ste desired in the English market. it is probable that 

Great Britain ~ill continue to buy Bright Flue Cured tobacco from the 

United States i~ large qua ntities. 

Due, in p~r't, to readjustment in exchange rates between the two 

coun trie.s, e:xPorts froin the United States to Great Britain in 1933 and 

1934 averaged .l70 million pounds, larger than for any year since 1923, 

except the years of 1929 and 1930. 1935 exports to Great Britain 

totaled 209 million pcunQs, a larger volume than has eve r been exported 

in any one ~ear since export statistics have been broken down by types 

(1923). (**) This continued export to Great Britain is direct proof of 

the superior quality of American Bright Flue Cured. 

China has been and still is the second la!gE? ~t actual and potential 

customer for American Bright Flue Cured tobacco. However, American exporters are defini tely·_threa-teriBd· wi th·,:the. lq~~· .. of a large part of this 

important market' because ~f a· native .gtow.n type of Bri ght Flue Cured tobacco of sufficient volu.rile ·to· meet a large .:oart of. total requirements. 

The quality of this Ch:loose · tobacco . is inf~~ :i.. to :r~t of the American 

grown. However, it i.s ·suitable for cigarattes wh,ich,. are accE-ptable to 

the masses. The well.:.to:....do · Chinese and the forei~~}'S who reside · in 

China will probably 'continue to demand cigaret.tes. tbat ·~ ro:e. impor-ted or 

Chinese made from American tobacco. .· 

While the U~ited Kingdom imports the finer grades of American Flue 

Cured leaf, China imports the lower grades. 

(*) Report of Commercial Attache, Shanghai, Bureau of Foreign and 

Domestic Commerce, United States Department of, Commerce. 

(**) United States Department of Commerce, Bureau of· Foreign d Domestic 

Commerce, Tobacco Section. 

10691 
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Because of low constuner purchasing power, and substantial supplies 

of native leaf which can be bought at prices lower than those of comparable American loaf, the price of American leaf is an important factor. As export of leaf' to China is primarily to supplement the native 

supply, quality is not as important as quantity. 

In 1928, Flue Cured exports to China were 160 million pounds, representing 36.7% of total United States exports of this type. Since that 

date, except for the year 1931, there ha~ bqen a steady yearly decrease 

in exports of Flue Cured to China. In 1934 American Flue Cured exported 

to China totaled 53 million pounds, representing 17.5% of total exports 

of this type. In 1935 China took only 16 million pounds of a total of 

290 million, or 5.5% of American exports of this type. (*) 

The situation which is now developing in China is parallel in many 

respects to that which has taken ~lace within the last few years in the 

Dark Fired tobacco trade with Italy. 

A discriminatory excise has raised the price of cigarettes made 

from American leaf to a point a lmost prohibitive except as a luxury 

article for the well-to-do . But still more important, the illicit manufacture of hand made cigarettes evading the excise has spread to astounding proportions, estimated to be at least one-fourth the total 

production. These cigarettes contain no American leaf. 

Superimposed on these relatively simple and definitive factors is 

the much more general and aggravating condition of financial and industrial collapse resulting from the recent Chinese depression. 

Assuming no change in the grades of this type required for domestic 

consumption, the loss of Chinese business, unless elsewhere replaced, 

must of necessity reduce the American farmers' return on the lower 

grades of America~ Flue Cured. In 1935 there were but six countries 

taking more than 5 1:1illion pound~ each of :Bright Flue Cured. In addition to the United Kingdom and China, they are Austra lia, Japan, Germany 

and Canada, in the order of their importance. 

T~~en all .in all, the various reasons given for the sharp decrease 

in exports of .this type to China are as follows: Increased native production; relatively high prices for American Flue Cured leaf suitable for 

China; the Silver Purchas.e Act; illicit cigarette manufacturing in China; 

and a strong feeling of Chinese nationalizm. Over a period of time, increased Chinese production and high prices for American leaf will 

apparently have more weight than the other reasons named. 

The spread of cigarette smoking in China has been rapid. It is 

possible that improvement in econanic conditions will . increase the percentage of consumption of cigarettes containing American Flue Cured 

tobacco provided its price is not . too far above the .price of native leaf. 

(*) Unite~ States Department of Commerce, Bureau of Foreign and 

Domestic Cowaerce, Tobacco Division. 

10691 
-.J..JSA. GOVERNMENT ~I OPOLI ES 

Anotne:;. general i.:1flue:nce on United' States production and ex-port of 

tobacco, which is clearly reflected in the figu.res for Bright Flue 

Cured, is a combina tion of various na tional pressur es. These 

pressures ma;r be t he result of in~ nal ne ds for adu itional revenues , 

and express t hemselves in the f orr.i of monop olies. At present, t h irte en ciistinct European countries, t wo African colonies, t wo minor 

count~ie s in South Amer ica , and J apan, operate t he ir tobacco business a s a government monopoly. Although some of these countries are 

not natural markets for American toba cco, becaus e of na tional preferences for 'l1

urkish or· ~{go.r leaf ~,r:p , ;yet the power wh ich monopoly 

control m~ lies is not conducive to t he uninterrunted flow of toba c co - ~ 

from this country . 

The manufacture of different gr aees of tobacco products in monopoly 

countries affords a degree of choice t o the smoker, but the existence 

of int ernal pressm·e f or gr ee.t er revenues ·.vit hout t he stimulus of free 

competition tends t o .redu ce quality ana increase profits. Such bargaining power in th e hands of a goYernment agency caYl and doe s harmonize national desir es for exporta ti on of sur plus commodities in 

direct exchange for the toba c co surpluses of other countries, thus 

avoiding loss of gold in ma1:ing i nterna.tiona l settlements. In t h is 

respect t his country is hampered by i t s own good f ortune, because 

there are fer: comP:Jodit i e s f or ;;;h ich there is a vital need which in 

turn are surpluses in t hose countrie s off ering a substru1tial market 

for A11erican toba cco. Likewise in r espe ct to cou..'1tries which supply 

coffee, ruboer, tin, sisal, a:ncl_ cocoa , t he ne ed of t he United States 

for their p rodu cts so f a r surpass es the needs of thos e countries for 

American toba cco, tha t the Un ited Sta tes has comparatively little bargaining power to f orce t he exports of l ee.f, except where there are 

alternative sources for t hose commodities. 

Among other trade barr iers resulting in diminishing exports of 

American leaf, 1Je11tion must be made of the marked effect of t he h i gh 

tariff wall erect ed by t he United States against the free flow of 

commodities from foreign countries. This policy has distinctly encouraged other countries to i mpos e further restrictions against the 

use of Anerican-grown toba cco. 

B. PREFERENT IAL DUTIES 

~1 i. ,-?O:C't <: t:.'l t _co;._ e::. _-.,;:1 .9;0·..rer :J.."71<nt pol:Lc~- affe,;t n~ n"G.r forei12;n tr;.,;,de in 

leaf toba cco i s the British Prefer enti al Duty on Empir e grown tobacco. This import duty f irst caHJ.e i nto ef:fect in 1919, and has been 

raised from time to time . A pref re ti l of f ifty cents per pound 

was established July 1, 1925 , a n increa se from t he former preferential 

of thirty·-fou.r cents. At present, toba cco entering the United Kingdom 

carries a duty of $1. 81 a pound i f gro-;-m Y::i thin t he Empire, whil e 

f oreign tobacco must pay a duty o:f $2 . 31. This "9 refere_ltial advant age 

of · a s1.1.m gre(',ter than t he a ctua l averc;,ge cost per pound of United 

States leaf a cts a_ a nec id ~ i mpetus to production of Empire tobacco, 

10691 ' ) 
-136-

and directly affects our outlet for leaf in Empire markets. 

The British preferential duty has had a very interesting eff ect on 

est e.blishing definite markets for specific qua.li ties of Bright Flue 

Cured tobacco. It has t ended to force into the United Kingdom the 

highest grades of Bright Flue CQred Toba cco because the actual price 

per pound of the best quality leaf is rarely as much as this 

preferential. Whenthe duty plus the preferential is such a large 

sum, the difference in the warehouse price of various grades is so 

small that it is not \7 0rthwhile to take anything but the better 

grades. Of course, this cannot be said to be the only reason why 

the Imperial Tobacco Company, Ltd . . and other British companies have 

consistently bought the hi Gher grades of .~aeric n leaf, thereby putting millions of additiona l dollars into the hands of tobacco 

growers in the South Atlantic states, but it, nevertheless, has been 

a contributing f ac tor. 

In Great Britain it is not permissible by law to ad~ flavoring to 

cigarettes, nor has there developed as yet a taste for cigarettes 

made "·i t h a blend of Brignt Flue Cured a nd Burley tobaccos similar 

to t hose v1hich are popul 8.r in the United St a t es. The dema.nd is for 

a very 'rellow tobacco, lip·ht in color and in texture, and is so 

pronounced tha t the consumer in Great l3rita in 11 ill often examine 

the color of the tobacco in the cigare ttes befor e ·~mrchasing them. 

It has been mainly due to this demand for li§ht colored Flue Cured 

tobacco wh ich has caused tLe cultiva tion of tobacco in the New Belt, 

or Eastern Carolina sect i on, c).nd the emphasis llni ch has been placed 

on hibh color and t hin te.:<:ture. 

C. GOLD EMBARGOS Ai'ill QUOTA RESTRI cr IO i.~ S 

Other policies affecting eTport of American leaf have resulted from 

general financial distress e.nci. inability on the :9art of mc:my foreign 

buyers to make gold settlement 9ay~ents . This condition has created 

a scarcity of American exchange in the hands of f oreign buyers available for the purchase of American goods, and has resulted in the 

establishment of quotas and exchange restrictions designed to compel 

the lJurchase by· the "G ni ted States of foreign goods before the creation 

of credits for the purchase by foreigners of American products. As 

this has tended to narrow foreign trade to a bilateral basis, it has 

seriously impeded the free flow of ·American tobacco into foreign markets. 

D. Ii iPOnTAi~ CE OF DRITI SE COl1JiP .ANIES 

Overshadowing all these forces and influences on foreign trade in 

AIJerican leaf toba cco' and very accurately reflected in our trade 

in the Bright Flue Cured e, i s t he dominating power exerted by 

· two inter-related foreign cor-Jorations which together handle almost 

half the volume of our exports. 

10691 

Soon after the ·formation of t he tobacco tr-Qst in 1901 by the late 

Ja111es B. DUke, there· ·arose ver y serious problems of price cutting 

and severe competition in world markets, particularly in the United 
-137-

King dom. Af t er a f ew ye a r s of industrial wa rfare, a truce was made. 

Out or' t h e ensu i ne; agree r!lents t here we.s f o:rmed t h e British-American 

Toba cco Company , Ltd., to wh i ch w:-:J.S a lloca ted a ll world terri tory 

outside of t he United Kir;.gdom <.:.nd the United St a t e s with auth ority 

to us e istine; br&nds in t h os e for ei g n mark ets. As orig ina lly 

organ i 11 ed. , 8Wner sl i 9 wa.s held t wo-th irds by t h e Aner ican ·roba cco 

Corupany (Trust) :; d one- thir d. by the I:n)eric:J.l 'l1o.ba cco Comp any of 

Gre a.t Brit a in c>J.! d Ir el nn cl , Ltd . 

The dissolu tion SJ.it (* ) in 1911 sca t te red t h e A::a erican share s into 

the h and s of indiv iduals, bu t it is u ncierstood t i:1 8.t the one-third 

ownershi .9 of British American i s still h elcl by t h e I r.:perial Tobacco 

Company . The significance of t Lis corporate rel 9..tionship is that 

just a s the Impe ria l Tob a cco Compa ny domina tes t he tobacco business 

in t h e United Kingdom, so the J ri tish-Ara erice..n Tob a cco Company 

through its l at'g e number of su-bsidiaries, (Lamina tes the tobacco 

busines in the British Em.p ire and in certain of the oth er free markets of the world. 

The Eritish- b~erican ob c~o Company h as been 

for t ne lntroduction of AmericEJ.2l toba cco i nto 

world. Indiv idual exp orters o: kuerica11 l eaf 

wake in order to t ake dv nt E~ge of t he v.e rnand 

its products, a nd s e ll to cor.~p eting concerns . 

standing exaNpl e of t h is d ev elop:aent. 

l a r gel y r e sponsible 

many p arts of the 

h a ve followed in its 

crea ted by the sale of 

China is an outAs t h e Unit ed States is t h e most im-~ ort an t source of leaf tobacco, 

both t h e I m-oeria l Toba cco Conmanv a nd t he J ri t ish-.American -·- .l,. • • 

Tobacco Company h .e.ve in this cou ntry ex tensive f a cilities for purasin~ a nd handling t h eir requirements. 

In order to mai nt a.in _or incr ea se t he ir ~~:n~ofi ts, and in order not 

to be entirely cL e:pendent up on one source of suppl y , ea ch of these 

companies is uncier pre ssure .to substitu te Empir e or nG.tive leaf 

to th e ex t ent t h2.t its custo::ters r.- ill a cce·9 t the :_) reduct without 

complaint. The result i s t h c:.t ·Doth comDani es ar e active in the 

exploita tion of na tive g1·ovv-:1 to baccos to f m"th er their own fina ncial 

intere sts, and be u.ssure cl of a contimlity of supp ly. 

Thus it is t ha t 2.lmost one-ha.lf of the foreign tra cie of the United 

Sta tes in leaf tobacco is controlled by t wo-inter-related foreign 

corpor CJ.tions whose f inanc:i.a l interests are enha nced by the degree 

of their fre edom f r om the America n sou rce of supply. 

. . 

E. CONCLUSION 

It is unnecessa r y to do more tha n indicate t ile direct relation that 

United St a tes toba c c o ex-oorts bea::- to the industrial prosperity of 

other countries. 

The policies of t h e t wo me.jor for e i gn tobacco corporations .and their 

dominance in· world tr ade are conditions tha t must be faced by 

American x~ orters of . toba cco leaf. It must not be overlooked that 

both of these corporations are "u~ying, and will continue to buy, 

( * ) See Chapter I, t h is study. I 

10b9l 
--138-

large q~antities of American leaf. 

It is genera lly conceded tha t Bright Flue Cured tobacco grown outside of the United. St ates l acl-s the aronatic qualities chara cteristic of tha t grown in t his co1mtry. It is i mpossible to determine 

as yet to whet extent soil and climatic conditions are responsible 

for t his diff erence in qua lity , or wha t i mprovements in foreign 

Flue Cured tobacco may develop from an increasing _{nowledge of its 

cultivation and curing . 

As evidenceu i n tne United St ates by t he ang e in consumer habit 

to the cigarette, and i n consumer taste to t h e blended type of 

cigarette, there are d.istinct opportunities in world trade for the 

sale of mild tobaccos, such a s Bright Flue Cured and Burley. This 

particular subject needs t he joint coopera tion of the Department of 

Agriculture, t he Department of Commerce, and the exporters of leaf 

t obac co. 

A f a ilure to restore t he Chinese mar ket or to replace it cannot but 

result in a surplus of Fl u e Cured stock s of t he lower grad es. Problems of this chara ct er reflect the need of continued control of 

American production. 

On account of t he continued. replacement of na t ive by American seed 

in most foreign countries producing t he Flue Cured type, the suggesti on has been made that an embargo be pl a ceu on exportation of 

tobacco seed. HoTi ever, the seed is so small tha t it is hi hly improba.ble tha t its ex-9ort e.tion could be controlled by law. 

The Tobacco Associa tion of t he United Sta tes has never been conspicuously a ctive and unt il 1935 it nad g iven little attention to 

2nalysis of for ei gn trade in leaf t ooacco. As in so many other 

industries, prior to the norld depressi on and >7 i th out t he limi tat ions resulting t herefrom, the business of ex:s>Orting leaf tobacco 

was increa sing in size and generally p roducing a profit s a tisfactor.y 

to the ~J orters. The many probl ems tha t exporters of American 

leaf f ace today require complete analysis and research; other n ise, 

the economic prosp erity of those agricultural sections groning 

ex-port t ypes of leaf toba cco i s seriou sl;>r t hreatened. 

Some months ago, in cooperat ion with the Tobacco Division, Bureau 

of F·oreign and. Domestic Commerce, and a committee appointed by the 

Tobacco Association of the United St ates, the Toba cco Unit of the 

Industry Studies Section of the National Recovery Administration 

made statistical surveys of the toba cco industry in four South 

American countries. These surveys covered every phase of th e 

industry insofar as information was available, and included imports 

of leaf and manufactured tobacco products, as well as production 

of leaf and tobacco products and consumption of tobacco products. 

When this work was completed in December 1935, the committee appointed by the Tobacco Association of t he United States met in 

Washi ng ton, for t he purpose ·of going over and analyzing the r e surveys. Conferences were later held by the Committee with the 

10691 
-139-

Assistant Secretary of CoJilJlerce and the Secretary of State. .All of 

the ~embers of the Committee ere active leaf dealers with ~ort 

connections. Th ey were much interested in the trade agreements that 

have been and are being ne.goti a teci with certain forei g::.J. countries, 

and the cons id.er e.tion to be e-i ven the e:x.-port of leaf tobacco. 

The committee considered that these surveys were indicative of considerable possibilities of ex-port expansion, and at a later meeing 

of the Board of Governors of t h is .Association, a resulution was 

passed requesting that the Tobacco Unit be asked to make similar surveys for a large number of additional countries, inasmuch as information conta.ined therein had not heretof ore been compiled by any 

Governmental agency for reference use by the industry. The information contained· in these surveys could have been available to the 

trade by its own effort. It is, therefore, definitely recommended 

that the tobacco industry continue the type of analysis contained in 

these surveys &id carry on essential research work on a much broader 

scope. 

Elsewhere there has been discussed the limited scope of research on 

tobacco by the 3ureau of Agricultural Economics of the Depru·tmnnt of 

~ricul ture. , and. the reason therefor. Sums allocated to the 

Tobacco Division of the Bureau of Foreign and Domestic Commerce are 

equally inadequate, arid do not p ermit the widest CQOperation Ni th 

industry in the collection and d.issemina tion of data essential to 

development of foreign trace in toba cco. .An industry which contributes so large an amount to Government income should at least be 

compensated by liberal research facilities for the development of 

its trade. 

-oOo10691 
-140-

CHAPTER V 

THE CIGAR i·;iAXUFACTURING INDUSTRY 

SUivilvlARY 

This industry he"s suffered from a declining volume of production since 

1920 and a decrease in per capita consmrrption since 1905. Over-capacity, 

with its destructive competition, has been increasingly apparent. Since 

the amount of tobacco ;nanufactured into cigars and cigarettes combined 

has increased steudily during the period, it is apparent that the principal cause of the declining de~and for cigars has been a switch in consumer preference to the highly advertised cigarette. 

There has been a coutinuous increase in the relative proportion of cheaper 

grade cigars _produced since 1918 ~Jt the expense of the better quality 

groups. In 1918 cigars retailin~ c:Jt f ive cents, or under, amou11.ted to 

but 18 percent of the total production; ,in 1935, the proportion had risen 

to 87.5 per cent. It is estimated that this trend, coupled ui th the declining volume of p rociuction, has approxima t ely cut the total dollar 

volume of cigar sales in half in the last f ifteen years. 

The probabl~; cause of thj_s trend to low priced cigars has been an increasingly uctive competition first, amo ng cigar manufacturers, and 

secondly, with cigarettes. Competit ion has forced. a progressive improvement in the e.verage quali t~r of these cigars. This, in turn, was made 

possibl e by lower leaf tobacco prices and increased efficiency of manufacture due to the introduction of cigar-makine machinery. 

A machine whicl1 manufactures leaf tobacco into a finished cigar comparable 

to the hand-made ~roJuct was patented in 1Sl7. The increasing use of this 

machine since has revolutionized the industry. It has ca11sed displacement 

of older, skilled hand cigar-makers by ~ s~ ller number of younger machine ~'Je ators . It has r esulted i n a further displacement from the industry 

of men whose places hcve been to:.cen by women a t lower wage rates. Machine 

use has est ablished a standard of compe tition such that hand manufacturers 

can survive only by paying pitifully meager wages to their employees. 

Paralleling the problem of ';7ages pai d bJr hand-m2de cigar manufacturers, 

the wage rates in effect thro~ hout the machine-~ade cigar industry providci 

but a bare subsistence for the ...;:.-orkers. 

Because of its cost, the machine has been available only to the large manufacturer with ad.equate financi al resources. Sroall companies have been 

f orced to the w&ll , Since 1921, the number of pl~nts in oper ation has 

been reduced by more than half, H:1ile production in plants of over 

40,000,000 cigars annual c~pacity has more than tripled. 

It is estimated that about half of all cigars ? reduced in 1933 in the 

United States were machine-made. No obstacle to prevent 99 per cent of all 

cigars from being made by machine is apparent. Indeed, economies inherent 

in the use of the machine would seem to ma1<:e this step inevitable. 

Nearl y complete mechanization of the industry would probably result in the 

10691 
~141-

:further displacement of 15 ,000 more wag e earners, a.nd a further elimination 

of s;nall ent e r ·orisa s. 

The reduction in total employment since 1919 has been spectacular. In that 

~r ear, the Census re Jorted 1111: ,300 ':.fage earners in the industry; this number 

54,600 in 1933. About 45,000 ol ~1 se work ers were displa ced, it is 

estimated, becaus e of decreased volu.me of production ond ap roxim tely 

15, 000 because of t h e introduction of macl1.ines. 

The combined forces develop ed from i_nr!.ustry decline and· mecnanization have 

produced a distress from unemployment that start-ed almost fifteen years 

ago. These forces ~ill continue Ulltil the industry is co~ tely 

mechanized. Econo:n ic pres sur e from lessening volume e.nd lowe r profits is 

responsible for present wage levels in the mc..nufacture of the 2 for 5¢ and 

the 5¢ cigars. The wage now paid to l abor is indicative of lack of a 

sense of ... resnonsi bili tv in the industry as a whole. ,.t,; • "' c.; 

The surprising va ria tion in l abor costs bet'l7 een the "2 for 5¢" (Sectipn.D, 

p a.tt 2) _and higher priced g rades (T.able XIII) ma.l{ es this question pertinent--can a 112 for 5¢ 11 cigar be made and l abor receive a livirg wage? 

The ro er of cig ar le f tob cco has suffered from prog re ssively lowered 

prices· since 1919. In 1932, t he total revenue to g rowers in most districts· W2 s 2. small f r ac tion of . that in ma.:1y previous years. The price 

decline was p robably a reflex of .. the ebbing demand for cigars. A slight 

recovery was apparent in 1933 and 1934, presumably due to the operation 

of the Agricultural Adjustment Act. In the interest of the farmer , also, 

the right of the 2 for 5¢ cigar to exist must be determined. 

11Barn-buying" by large man.ufacturers ilas increased. How fa:r t his ha.s 

operated to the detriment of far ler~, uninformeJ of important market 

factors known to buyers, is not clear. The subject should be studied. 

The need of research i n to nll t he -problems present in the cigar making 

industry is emphasized on every- hand .. 

every branch. A few ~· ge, efficient 

above water; the bulk of' t h e industr y \,·· 

Th e industry is clemoralized in 

cor9ora tions have held their heads 

is on t h e verge of bankruptcy. 

A. DEFINITION A11JJ PI\ESENT POSI.TION OF IliJDUSTRY 

10691 

1. Defi ition of the I n4ustry 

The Cigar ·Manufacturing -L1d.ustry was described in t he Code of 

Fair Comp etition approved by the President April 23, 1935, as 

mea;.1ing 8-L"ld including lithe manufa cturiag into cigars of cured 

leaf tobacco, stemmed toba cco, scrap , a nd/or shredded filler 

for use in t h e lil:::nufact"Llie for sale of cigars 11 • 

The f irst step in t he manufacture of cigars is t h e a ssembly 

of the leaf tobacco. About 20 per cent of the tota l leaf 

tobacco useO.. in t he iila nuf~c tu:i..~e of cigars in the United States 
-· 

-142-

is imported, principally from Cuba, Puerto Rico, and the 

Philippine Islands. (*) 

A cigar is generally made from three types of leaf -- filler, 

binder and wranner. The filler, a clump of loose leaves or 

cuttings, constitutes the bcdyof the cigar and gives the smoke 

its aroma; the binder, a single leaf, holds together the filler 

leaves; while the wrapper, another single leaf, forms the outside covering and gives the cigar its color, and smoothness to 

the touch. Some cigars, such as the stogie and cheroot, are 

made occasionally without binder. In such cases only two types 

of leaf are used. 

Differences in quality and price of cigars are due principally 

to differences in quality of leaf used. A "long-filler 11 cigar, 

made of leaves of UJliform length and quality ·ri th shade-grown 

binder and imported wrapper, ma,y embody tobacco that cost fifty 

times as ::nuch as in a "scrap-filler" cigar, made of short 

leaves and "cuttings 11 and ciomestic binder and wrapper. 

Cigars may be made by hand or by machine. The first steps in 

either process are the same. The tobacco must be properly 

cured, strip:9ed (this involves removal of the hard mid-vein 

of the leaf), and "cased" (moistened to a degree where it may 

be ea sily manipulateti..) . After this, the hand cigar .... maker or 

the machine t akes over. 

(a) Description of Hand v1s.nufacture of Cigars 

The simplest and earliest method of making a cigar is still 

in use in some shops, partic~larly those making higherpriced cigars. It is referred to as an ttout-and-out" 

method. The workers use no tools except a knife with a 

curved blade and a board on uhich to work. The worker 

cuts a thin strip from a wrapper leaf, another from a 

binder, ru1d selects the right amount of filler leaves. He 

then fashions the filler into proper form and size in the 

palm of his hand, and wraps it in the strip of binder making the II bunch. tt This is t!len placed on the strip of 

wrapper which lies flat on the board, and with a deft 

rolling movement the ·.wrker fashions the cigar, beginning 

at the lighting and finishi~g at the end which goes into 

the mouth, called the "head II. It is necessary to tri~ the 

~rapper a trifle just before the head is formed; then, 

. with a bit of gum tragacanth, the last bit of wrapper is 

fastened securely, and the head is smoothed between the 

thumb and forefinger. The cigar is then put in a gauge 

which stands on the table in front of the ~orker and 

tria~ed to the proper length. 

( *) 11The Cigar Industry and the Tariff", United States Tariff 

Commission Report, No . 62, Second Series, 1933, p. 11. 

10691 
10691 

-143-

This "out-and-out" rnethod of cigD.r making prevailed generally 

until the introduction of the mold in 1869. The mold is a 

wooden block n i t h cigar-shaped groov-es carved in it, . 

generally fifteen in nurnber. Bunches of leaves are placed 

in these grooves, a duplicat e block is placed on top and 

the two are put under pressure for a few minutes. The 

blocks are then separated and the bunches are ready for 

wrap·9 ing . 

Tne mold made it possible to introduce division of labor into cigar-making , since one bunch-maker could supply bunches 

for two wrappers. This arrangement has come to be known as 

the "team-work" sys.tem. Whereas one "out-and-out" worker 

might average only t hirty cigars an hour, a 11 team11 of three 

workers using· molds might avere:ge 130 or more per hour. In 

additioil, a snorter training ~eriod was required, at least 

for- t he bunch-rnaker. 

Sever al decades aft or the :nold came into use, the suctiontable wa s introduced. This consists of a metal sheet with 

a perfoFated plate in the center, the plate bein~ just the 

right ··size· and shape for .the cigar wrapper. The wr apper 

leaf is placed on .the plate and held down firmly by air 

suction throu5h the perforations. A foot pedal raises the 

plate, and a roller is passed over it cutting the leaf on 

the plate 1 s sharp edges. 

Although the mold nd e sliction-table hav-e ch~~ged the 

cigar-maker' ·s tra<ie. considerably, these devices can hardly 

be called mach-ine.s, ·since they assist rather than displace 

the skilled hand. cigar maker. 

(b) Descrip tion of r.Iachine Manufacture of Cigars. 

Since 1900, cheap cigars ve been made by the use of the 

short-filler buncr1ing machine which rolls bunches automatically and requires no l abor excep t that neces ary to 

feed the hopper with filler ana. to :place the binders. These 

operations can be perfor@ed by unskilled labor. 

The superiority of the hand-made product was not threatened 

until 1917 when··a machine was p£~. tented that ·performed both 

the binding and wrapping operations and turned out a 

finished cigar comparable with the hand-made article. 

Four opera tors are required for each cigar machine, one to 

pla ce the filler on an endless feed belt, a second to 

place the binder leaf on the binder die, a third to place 

the wrapper leaf on a wrapper die, and a fourth to 11 catch11 

and inspect the finished cigar. In addition, a skilled 

mechanic is :required for every 11 battery" of eight or ten 

machines to make repairs and adjustments necessary to 

adapt the machine to different size s and shapes of cigars. 
-144-

The machine performs the operations of the hand cigar 

. maker me chanically. Ynives cut the filler to the proper 

length; corrugated rollers compress it and pass it to 

apportioning knives rrhe:c e just the right amount of filler 

is cut off to make a bunch. The bunch is tapered and 

rolled in the binder, and then passed to the wrapper, 

spirally wound, formed , sealed, and clipped to the right 

length. The head end is smoothed by a knurler, and the 

cigar is drop9ed on a table for ins9ection. One of these 

machines will produce about 480 cigars per hour (*). 

2. Present Po sition of the Industry 

(a) Humber of Establishments. 

The Census of i"anufactures of 1933 repol~ted 665 cigar 

ma.n.ufacturi:1g establishments maki ng products valued a t 

$5 ,000 per year or mo re. The Bureau of Internal Revenue 

re:·;JOrted 5 , 787 concerns making l ar ge cigars registered for 

purposes of taxation 0.t the end of t he sa111e year. The 

difference uas made up largely of small one-man concerns 

prouucin~ cigars valued at less t han $5,000 per year. At 

the end of 1934 , the Bureau of Interna l Revenue reported 

5 , 473 concerns registered. 

(b) Tota l Invest~ent. 

o figures as to total investment i n the cigar manufacturing industry are available. It was as cert ained from 

:Bureau of Internal .rtevenue f i gu:f es tha t at the end of 1933, 

twenty-ei ght concerns producing over 40,000,000 cigars per 

year a:.16. _9 roducing 50. ~ of the total number of cigars 

produced during the year r epre sented an investment of 

$103,300,000 . Since these concerns repr esent the more 

~nghl ;- mec a.a.~i zed plants, it Tiould seem probable that investment p er unit of _9 roduction i s smaller for the balance 

of the industry . o· the ab ove basis, total invest ment in 

the inl.ustry may be estimated at $150,000 , 000 to $200,000,0')0. 

(c) An~ual Production 

Accordi ng to t e Bureau of Internal Revenue, 4,300,000,000 

large ci gars were manufa ctooB ~ from 88,463 ,000 pounds of 

tobacco in 1933, and 4,525,800,000 l ar ge cigars we re manufactured from 94 ,686 ,000 nounds of tobacco in 1934 . 

The 1933 Census of l·anufactures listed the value of the 

·9r o.duct of t he industry at $139,373,000. 

For tax collection purposes the Bureau of Internal Revenue 

classi f ies cigars i n to five classe s according to their 

retail value. The classifications are arranged as follo s: 

( *)A mor e detailed description of the opera tion of the cigar making 

ma chi ne i s given on pp . 11-13, Eonthly Labor Review, Dec. 1931. 

1Go91 
-145-~ .. 

Ci gars which c:re manui c:.ctu recl to retail at: 

Hot more than 5 cents each are designated as 

Class "A". 

More than 5 cents and not more than 8 cents 

each, as Class 11B11 • 

More than 8 cents -and not more than 15 cents 

each, as Class "C tt • 

!.iore than 15 cents and. not more than 20 cents 

each, as Class 11D". 

ll;iore than 20 cents each, as Cla.ss "E". 

In 1935, Class 11A" cigars r epresented 87.5 per cent of the 

total number .of cigars :9 roduced; Class 11B" represented 

1.4 per cent;· Clas r' "C", 10.2 per cent; Class "D", 0.8 per 

cent; and Class "E", O:i.1ly 0.1 per cent. (*) 

(d) Er.J.ployment. 

The Census of 1\o~anu.factW:'es of ·.1933 listed 54,558 wage 

e a rners and l, 637 salaried employees in the Cigar i·A anufacturing Indus try. Wag es paid during the year were given 

as $30,061,000 anc. salaries as $2 ,802,000. 

A special tabulation as of July l, 1933 was made for the 

National Recovery Administration by the Bureau of the 

Census. Th1s tabul a tion covered 815 f a ctories and listed 

·52,273 Hage earners. The s e were composed of 10,927 men 

and 41,34 6 V'iOmen; 15,955 r1 ere machine -.vorkers and 36,318 

hand workers. The aver2.g e weekly payroll for the period 

January to July, 1933 was g iven as $474,041. 

B. DEVELOPlviENT OF TBE INDUSTRY 

Cigar manufacturing was introduced on a commercial scale in this 

country about the year 1800. It wc:.s in. g e;neral a small scale 

operation employing skilled hand l abor. The typical cig ar shop was 

the establishment of an owner-work er wh o bought his leaf, made his 

cigars, and sold them locally, perhays in the f ront of his shop. The 

tyyical method of manufac tUre has bee n de scri~ed in the preceding 

sect ion. 

Little change was apparent. in th e industry until 186 2 when the 

Internal Revenue Law imp osed ·a tax on cigar and re~uired the bonding 

of factories. The smaller shop s found this burden difficult to bear. 

( *) Com9ilation from figures of the 3ureau of Internal Revenue. See 

Ta.ble XXII, this chapter. 

10691 
-146-

The introduction of the mold in 1869 made division of labor in cigar 

making economical, and further increased the advantage of the larger 

over the smaller shops. During the decade that followed, the cigar 

industry experienced tremendous ro~th thro~gh tariff protection and 

the S"v7 ing of fashion toward cig2.r smoking, and in that period the 

factory system became firmly est8:blished (*). 

Increasingly bitter competition, described by the Supreme Court as 

"fierce and abnormal'' ( *""), had the effect of bringing about a combine.tion of five important cigarette and tobacco manufacturing concerns in 1890 by the forr!la tion of the American Tobacco Company. 

This trust, by acquiring other important concerns, est ablished its 

position so strongly that by 1901 its proportion of the country's 

output of plug and t v-i istwa s 68 per cent; and of smoking tobacco, 

nearly 60 per cent; of snuff, over 80 per cent; of cigarettes, 90 

per cent; and of ''little cigars", 73 per cent (y). The only important field that remained to be conquered was the manufacture of 

cigars, and to that task its energies were next directed (***). 

The A.l-rterican Ciga r Company was in·corpora ted in Januar~r , 1901. The 

trust subscribed to 70 per cent of the stoclc, tra~sferred to it the 

cigar _:JrO}?erties whi ch had previously be en acquired, and acquired 

or organized new companies (*~*"'). Between 1900 and 1903, the trust 

increased its proportion of the country's cigar production from 4.8 

per cent to 16.4 per cent, using the customary methods of cutting 

prices, g iving p remiums, and adv ertisin~ extensively. After that 

year, ho~reve r, its ·9roduction of cigars declined., while that of the 

independent manufacturers increased. At no tiQe thereafter did the 

trust make more than 15 per cent of the cigars produced in this 

country. It was ap~ar ent that the cigar branch of the industry 

could not be captured so readily as ha.d been t ne other branches of 

t he tobacco industry. 

The pri11cipal reason for the failure of the trust to establish 

itself i n a domin&nt position in the cigar industry lay in the fact 

that machinery for making cigars ~ad not been developed to such an 

extent a s to disqualify the small mc.1nufacturer from successful competition. Cigar factories could be started overnight with very 

little ca~ital, and could compete on fairly even terms with longestablished. concerns. It is worth noting that, whereas the trust 1 s 

profits from its cigar business ;,7 er e relatively low (~"'***), the 

trust held a position near to monopoly in the manufacture of 11 little 

cigars n where machinery ~?as successfully used. 

( *)Twelfth Census of the United States, Jol. 9, p .67l, et. seq. 

( **) 221 u. s. 157 (1911). 

( ***) Report of the Commissio::1er of Corporations on the Tobacco Industry, 

1909, Part 1, pp. 365,383, 399, 327. 

( ) Ibid, pp . 149,164, 28C-302, 416-430. 

( ~** *) I,iS . 11Labor in the Tobacco Industr,{, n by 

N2tional rtecovery Administration files: 

rr·obacco Study Unit, Labor. 

John P. Troxell, 1931. 

Study I(iaterials of the 

(~*"'"") Report of the Commissioner of Corporations on the Tobacco Indust~J, 

1915, part III, p. 195. 

10691 
-147-

The obvious way to establish supremacy in cigar oroduction ...-1as to 

develop machinery for making ciga rs. The trust endeavored to do so. 

It or ganized t he Ame1·ica n lviachine and .I!10undry Company in 1900 and 

l a ter acquired t:he Int erna.t iona.l Cig a r Machinery Company . The work 

plan.."led was sha r.i:JlY interrupted. The tobacco combination was 

decla red. to be in restra int of trade by the Supreme Court of the 

United States in 1911 (*), and it was not until 1917 that a satisfactory cigar-making machine was patented. 

During a ll . this Je riod, t he number of cigars produced annually has 

· been increasing. Cigar production rea ched an all-time high of 

,096~800,000 in 1920 • · Since t hen production h a s steadily decreased, 

drop :; ing to 4,300,000,000 in 1933, the lowest mark since 189'7. 

Me chanization became a n import c;.nt f a ctor. From its introduction in 

1918, the machine has been increa singly used. It has been estima ted 

that in 1931, . 2, 912 ,000 ,000 ciga r s , or 55 per cent of the total output, were machine-made (**). lvie chaniz,:..l tion has turned the scale 

against t h e sma ll companies to the benef it of l a rger concerns. The 

small shop 11ithout suff icient re s ources to install Machines has 

found it increasingly difficult t o compe te with the ~ighly mechanized 

factory. The result has been a h i gh mortality among small manufacturers and 9.n increasi ng conc entra tion of production in the l a.rge 

cigar manuf0cturing concerns. The following table m~es · this evident: 

1

ll.ABLE I 

lJumber of Factories Producing Lur g e Cigars and Percentage 

of Tot al Production, Classi f ied as to Output 

Ca lendar years 1921, 1926, a nd 1934 

1921 1926 1934 

: l\Tu.TJ1 b er Percent iJumber Per cent Number . 

. Percent 

Output of :of Fac-: of tota l: of :B,ac-: of total : of Fac-: of total 

Cigc.r s (l\\umber):tories Produc- tories Produc- tories Production tion tion 

Under 500,000 :13,149 13.7 9,281 8.0 5,708 5.9 

500,000 to 

40,000,000 1 ,418 70 .6 943 67.0 424 39.8 . Ove r 40,000,000: 11 15.7 23 25.0 28 54.3 . Total 14,578 100. 0 10, 247 100.0 6,160 100.0 

Source: Annua l n ep orts of the Commissionery of Int e rnal Revenue. 

In favor of the ma chine it must be s a id that it has made possible the 

manufa cture of a high er qu a lity product at a lower price. 

( ' *) 221 u. s. 106 (1911). 

( **) Lonthly Labor Review, De cember 1931, p. 13. 

10691 
-JAB- ·· 

The distress of the industry in the fac~ of declining total demand 

has been further accentuated by a shift of consumer preference from 

high to low priced cigars where prof it marg'ins ·are slim. In 1918, 

only 18 pe.r cent of the total production wa·s·· in the Class nAn group 

(reta iling a t five cents or less). By 1935,· this -oercentage had 

risen to 87.5 (*)': ·, ·· ·' 

Emploj~ent has falle~ off· steadily since 1921. In that year the 

Census of Manufactures reported 119,000 wage earners employed by the 

Indust~r. This number fell to 54,538 in 1933 . Already in jeopardy 

becaus e of decli ning production, em loym ent suffered further through 

the inroads of the macn1ne. It was estima ted in 1931 that 21,356 

employees had been dis:9 l a ced be tvreen 1917 and 1931 ·by machines (**). 

Manufa cturers have been orc e~ to make every conceivable economy in 

order to stay in business. The minimum wages negotiated in the 

National Recovery Administr c:_tion Code f or the Cigar l•.1anufacturing 

Industry were ex tremely low (from $9.00 to $13 •. 60 per week), but 

many manufacturers contended t hat they could not p~j even those 

rates and_ continue oper a tions. 

In the l a st decade the cigar manufacturing industry has been a demoralized and a declining industry. Public 'preference seems 

definitely to have swung aTiay fro m the cigar to the cigarette. 

Whether t his t endency has reached a sta tic level, ·.;rh ether it will 

continue, is i mpossible to say . Only in a r eturn of the cigar to 

public f avor is t here hope f or the cigar :Janufa cturing industry. 

( *)Computed f rom figures of the Bureau of Internal . rtevenue. See 

Table .XXII, this chapter. 

( **) ivlon.thly Labo·r Review, :December, 1931, p. 13. 

10691 
-149-

C. LABOR LJ CIG~~ LA1ITJ7ACTJRI NG 

1. Emplo:,~"T:en t 

A discusdion of l a-::>or in t his industry is handicapped. o~r a 

lack of current statistics • . ·In general, the most re cen t 

fi g~rres on emplo y~e~ t are those developei during a special 

survey undertaken in 1933 b~r the Cen su s of Manufactures at 

t he request of the National Recovery Ad:'linistration. 

It was originally con t empleted t hat the Bureau of Labor 

Statis~ics ':70uld c.onduct a s1.1.rve7 of labor in the Cigar 

Eanufactwing Industry in 1935 \';hich would be available to 

t h is stud<r • Unfortu .. ""la tely, this s-..rrvey has only recently 

been sta rted an·:l_ re turns are not now available . 

The iJor ks Progress .Ad.minist :.:e.tio:u. , in collaborat ion vrith 

the ,.B"w eau of Labor St &t istics, is a t present engaged in 

a natio:c.-'?Tid.e study of 11Ree:Jp2.o; :-:ent _Opportunities and Recent 

Chang es ,in Inciustr ial ec h.2 ques". The Tobn. cco Industry , 

including the Cigar <• amJ:[actu:ring Inc"cu.stry , is one of the 

indu stries to be studied.. ·.Then conp ie t ed, this s t udy should 

prove a va l uable ac.5_i tion to the b ibliography of this subject. 

(a) To tal Em~ lo yme at 

.The number of r:rage e arr..ers in the cige.r manufact u:-ing nci.ust l~ ~r L~ m 1919 to 1933 as g iven by t he 

Census of ~amuactures is shown in the foll owing 

taole . I t will be noted that_er~lo~ent has been 

cut in half d~ing the ?Jerio-d. A part of this decline has been d.ue to decreased demand for cigars 

&~d a ~art to the i ncreasing u se of mach ine s t o 

ma.:mf."lcb.rre cigars wi i~h a con se quent disp lacemen t 

of :i.~ke rs. Ti1e ctol~s lec.ding t o this decl ine 

i n em~ lo en t a r e i iscussed under the heading of 

11Mech@niza tion11 in this Cha·oter. 

TAEL~ II 

l U.'Ilber of >age Earners in t:O.e Cigar I ndustry 1919-1933. 

Year Wage 

EP.rners 

1919 114, 300 

1921 119,000 

1923 - 108 , 800 

1925 - 103,000 

+927 9<-1 ,60" 

1929 84,200 

1931 68 , 200 

192-3 54 , 600 

Som·ce: ·u. s. Census of lianufactures. 
I 

I 

10691 

-150-

(b) Division of :i!:Ll~J lo yne nt by Sex 

Comparabl e fi e;ures on d.i vision of employ:Jen t by sex 

ove :..~ a :oe:Aiod of years a:te not avail able . In 1925 

a questionnaire was sent t o all local unions by the 

-pre siclen t of the Cigar ::!al>.:ers' IntE)nnational Union 

of AL1erica (*). This survey indicated that there 

e~e approximately 100,000 persons employed in the 

incmstry , \7hich co~ared favorably in coverage Tii th 

the 103 ,000 est i mat e of the Census of l'Ianufa t~e s 

for the sa::1e year . About 79 , 000 of the 100,000 

'aorkers we:.."e cigar makers , and of the se 50 ,600 , or 

64 per cent , neTe men . 

These fi.~;ure s on cigar makers may be CO !i.pal~ed 

roughly u ith fi gures on picceVTorkers developed 

through a special survey undertaken in 1933 by 

the Bu=eau of the Census at the request of the 

National .:i.ec;ver y Adninist-cation (**). Of a t otal 

of 52 , 273 wage earners covered by the survey, 38 , 941 

we::.~e piece-:-1o r kers and of these 30 , 496 , or 78 p er 

cent , we r e -omen . 

Comparison of the u ercentage s given in the two 

above par agraphs confirLls ·che -;eneral impression 

tJ. a t relative e:r.p lo ~T'filen t of 'i'TOP.len by the industr~r 

is incre si . rhis tendency has been accele~ated 

by the i:1tro<iuction of :·2achines. O+:her figures 

deve loped dUY in~ t he ~e cial Census s~ve7 sustain 

this ob servation. Of 26 , 940 hand pieceworkers, 

8 , 422 ~e re men , but of 12 , 001 oachine pie ceuorkers. 

only 23 ere cen. 

(c) Division of ~~p lo ywent by Occupations 

1he firm of os smore , Robbins and Co ., Inc. of 

1:ew ·:o~l:: Cit:- r.c:-.de an invest i gation of the Cigar 

:a~nlfact rL12; Ins.ustry i::. 1933 at the request of 

a com:TI. t t ee of ci,gar :·Janufacturers ?.ho were seeking a Code under the l~at ional Industrial Recovery 

Act . This stud;r was based on answers to questionnaire s and covered manufa ctuu ers ~roducing 50. 6 

pe !' cent of a ll cigars ·made cl.u:·:-- ing the period, 

l.ay . June anC. ..J1.1l~r , 1933. The stud ,- covered 

machine rna.nufac t1.rrers :')a::· ticularly, but a fair 

~ple of hru1d m~1ufact urer s \7ere included. The 

f ollo•.-.r ir..g table is taken fro TJ this report . 

( *) Perkins, Ge orge .. . , 11 ~Vome n in t~e Cigar Industry", 

~he America n Fede ratio nist , September 1925, 

Vol ume 32, pp. 808- 810 . 

(**) 1-Tational 3ecovery Ad.r:inistration files; Studv 

:t.~ aterials of the Tobc;c co Study Ur..it, Labor. 
10691 

-151-

TABLE III 

Average Number of plo;~r s of Various Tvpes 

1929 and 1932 

Types of ".Vork 

HAND F ACTO:?.IES: 

Cigar Ma2::ers 

. St:;. ipper s 

1929 

5,921 

598 

1932 

4,223 

360 

- her Processors 220 213 

*Factory workers ~ot included above 

**Workers no t at ·factory· 

'1 ,103 

44 

663 

19 

To tal "7 ,886 5,478 

HACHINE FACTORIES: 

. Cigar Makers "8 ,212 9,182 

. Strip:pe:c s '4,118 3,103 

. Other Processors .. '2,009 1,896 

*Factory workers n.ot included above 

**Workers not at ~tor~ 

3,861 

334 

4,154 

276 

GP...Ai.m ·TOTAL 

To t al 18,534 18,611 

26,420 24,089 

The n rincipal i tem of interest in the above table 

is t hat worker s g~ed i~ t he cigar ~aking op eration accolti!t for only 44 to 49 per cent of all employees in the mechanized factori ~ while they 

r epresent 75 to 77 ·oe r cent in factories :producing 

hand-made cigars. 

(d) Sea sonali t ;;r of plo nt 

No monthly 'e::nplo:rment figures for this incLustry are 

available; h owever, · it Ea y be assumed t hat seasonality of lo ;men t .1.<7ill follo w, roughly , sea sonali r of produc t ion. The follon ing table list s 

indexes of se so~al production. 

* Included in th.is catego r y are a small number of emplo;rees not at t h e fac or r but engaged in work ap·?lica ble to facto:cy o-oerat ion.s, e.!. g., cost accmmting . 

** Employees (exclu ing officers) not embraced in any of 

t he above classification s. 

Source: Repo~t of Rossmore , Robb ins and Co., Inc., 

l:ovember 3 , 1933, on est ablishment of a Code of Fair 

Com::?e ti ti on . 
10691 

-152-

TABLE IV ~ 

SEASONAL Ii. DEXES OF PRODUC TI 01J , 1930 - 1935 §./ 

Month 

January 

February 

i•Iarch 

April 

ay 

June 

July 

Au..g,us t 

September 

October 

November 

December 

!!.vero.ge · 

1930 1931 1932 1933 1934 1935 

85.4 81.9 92.6 81.9 88.0 82.5 

82 .9 81 . 6 93 .9 99 .4 78.1 80.8 

92 .7 99 . 4 96.0 80.1 92.4 88.6 

95.8 103.7 94.5 88.7 90.0 94.1 

106 .7 105.4 10J.O 102.6 99.2 102.7 

105.9 116.7 108.1 115. 6 105.5 101.3 

108.6 108.0 97 . 6 110.6 98 .6 108 .8 

105.4 104 . 5 108 . 3 120 .1 111.0 106.4 

106.8 101.4 109.5 117.0 103.0 108.5 

127.2 120.G 118.0 112.8 1.89 .0 132.1 

107.6 107.7 113.2 114.7 121.6 115.2 

71 . 2 68 .7 68 . 9 76.4 82 .9 78.8 

lO'J. O lOC.O lOO.J 100.0 100.0 100.0 

A marked sea sonal pattern for this industry is 

ap]arent. The patt ern vaxies little from year 

to ~r a:c . ·:Iarimum production is usually reached 

in OctobeT and ninimum production in December. 

(e) ~e ional Concentration of Employment 

En~loyment in the cigar manufacturing industry 

is me rkedly regional in cl aracter. The greatest 

e~plo yment is found in Pennsylvania, fo lloued in 

order by .?lorida, . Ne';7 Je se~ , . Neu York , Ohio, 

l:ic'1igan and Louisiana. (Table V ) 

.§:./ Base : For each Jear, average :production ·oer month= 100. 

Source: Co:aputed from tax p_aid v•i thdrawals of large cigars 

as reported by the Bureau of Internal B.evenue . 
II 

T.A.BLE V 

Cig ar Workers - i;umoer as of July l, 1933, 

by Sta tes 

State 

United S~ate s 

Ca lifornia 

Connecticut 

Florida 

Illinois 

In<Uana 

Louisiana 

M9-ssachusetts 

Michigan 

Mi ssouri 

New Jersey 

. New York 

Ohio 

Pennsyl Ve.n ia 

West Virg inia 

Number of Workers 

52,273 

633 

467 

8,639 

401 

769 

980 

529 

2,965 

450 

6,965 

3,341 

2,981 

16 ,122 

711 

All o t her state s 6,590 

Source: S~eci l survey ade in 193 3 at the re quest of t he National 

Recovery Adii1 i ni s t rati on ·by the Bure a:u of t he Census. 

National P ... e covery ltfuli~.is :c c-. n f ile: St udy Ha teria ls 

of To-bacco u~;r Uni t , abo:. . 

(f) Distri-bu tion of Emp loyees b y Size of Co::npany 

Usi ng the number of workers employed. as the c:;,~iter1on of size, it ':ill ·oe s e en from t he fo1lm:ring t a ble that ':.lle gre a t bu l k of employment in 

t he industry is provi de d by t he larger facto ln i e s. 

Number of Wage Earners Cla s sified Accoraing 

to Size of Esta blishment, 1931. 

Cl a ss of establishment by lhmber of J a1!,e al~ ners 

nu_"'llber m l o;y: ed Establi sh::1en t s :I-Jur;tber . 

. Per cent of to -tal 

1001 to 2500 13 16,476 24.2 

501 to lOOO 24 16,984 24.9 

251 to 500 32 11,565 17.0 

101 to 250 70 11,333 16.6 

51 to ' 100 . ... .. 62 4,290 6.3 

21 to 50 l C1

7 3,570 5.2 

6 to 20 249 2,700 4 .0 

l to 5 . 48 8 1,264 1.8 

r o ~ag e earner 1 8 

Total 1,063 68,182 100.0 

iBEffirr= Furnished through t n e courte sy of t h e Censu s of I :anufac t ure s, 1931. 
- 1 54-

(g) Distribution of Eoployees by .Af:;es 

The Co de Au t h ority for che Cigcr L~ anufacturing 

Industry su bmitt ed a fre quenc~r istl ibution of 

ages of 1 , 908 hc:md cigar rolle s of Class ''All 

cigars in 78 f a c tori e s in the ork Co~~ty 

Pen..71sylvc;,n ia Di strict to t h e ational Re covery 

Administra tion on October 2 , 1934. This table 

follows. 

Freque n cy Distribu tion of d Ci gar Rollers of 

Cla ss 11A11 Ci gars in t l1e -:.-ork Coun ty Pennsy lvania District as to Age , August 1934. 

Ag es of Cigar 

2 ollers (in clu s i v e ) 

16 - 25 ~- al~ s 

26 - 35 

36 - 45 

46 - 55 

56 65 

66 ;::nd over 

lJumber of Ci gar 

::tellers in Each 

Age Cla ssification 

202 

382 

478 

528 

268 

50 

1 , 908 

So urce: :rte-por t of Code Aut h or i t y f or t h e Cigar l.iannfac turi nG I ad. ~s ry to 1 a t ion::ll Recovery Admini st r sti on , Oc t ober 2 , 1934, N?.A -"ile s . 

~anur of :. e l~ rake r s ':7eTG in c;.dvanced age 

gro1.::p s , t l:e ~:odal a ge be :.4.:; be t 1e en 46 and 55. 

Ho statist ics as to age s of mach ine cigar raalcers 

arc ava ilable to compare ith the a bove, but it 

is t h e op inion of field observe s of the National 

Recove ry Administration that aver age ages of ma ch ine 

r;orkers a re much lower than those hand '7Tork e r s. 

2 . Hours of Emolovr1Emt 

10691 . 

l:o lon:-: :;> eriod fi .g-..:res on hours of e i:1ployment in the Cigar 

hia-:::lfacturi ng Industry alone a l-e ava ilable . .?or the Census 

years 1914 , 1919 , 1921 , 1923 , 1929 and 1931 , t he Census of 

Manu£ac t ure s :9rese n ·' s a frequency t able sho•ring the numbe r 

of Vlage earners uork ing be tv.reen certain s:9ecified hours per 

weel:. From this t able an6. the Census of L:anufactures fi gw.:"es 

f or total ym , it is p ossible to derive estimates as 

to t he average nunber of h ours of employment ·oer week (ioll o-ring t able) . 
10691 

-155-

These figur es, it must be ~o oin tec_ out, re•rresent both the 

cigar and cigarette ind·ustries, bu·c since em:plo~rr,1ent in the 

for;-ner is g reater, tt.ey ma~r :9erhaps be relied on to indicate 

the s eneral trend. (*) 

T.:U3LE VII I 

Average Ho1-rrs j,.orked Per \!eek - Cigar a'1d Cigarette Industries 

1914 - 1931 

Ye8.r Average Hours u er Week 

1914 52.9 

1919 49 .8 

1921 4::1 .5 

1923 4° . 6 

1929 49 .0 

1931 47.1 

Source: Comp,.l.ted f:::-or.1 statist :..cs of Ce:usus of I1anu.:factures. 

A glance at t~1e ficu:-es in t he above table ·.1 ill s:!.1ow that the 

avera,c:e nu::..'1ber of h o,.rrs '.' Or~;:ed pel~ weel_c has been declining 

continuoD.sl~r. 

Tne Census of i.iC?:llufactlli·es , at the request of the Nati onal 

Recovery Ailinini strat ion , made e. com:9 ila tion of emplo:yment 

data as of Jul~.r 1, 1903 , covering a ll manu.facturers ma~dng 

$5 ,000 2~ more worth of ro~ cts p er y eCJr. The figi.l.I'es in 

the table be lo'7 a:;., e com}Ji l ecl fro:n this so-...1rce . 

According to the aoove compilation the \?age earners in the 

industry lir orked on the average 41.3 hours p er week . Machine 

v:orkers in every occu~Jat ion worked orr the average more h ours 

per week than did ha?Id. ·-;or~-;:er s, and time workers on the whole 

worked less h o-:.rrs than '? ieee workers. It is interest ing to 

note that wage earners we r e emplo:red on t he average less than. 

5 fu:ys :per week. 

Two o tl1.er sources of information as to ho1rrs per week are 

available . ftle follo\lin;,; tEt.ble was com·9ilec_ fror.:1 ii<1ta inclu.ded. in the :re·oort of ::lossr:o:re , ?.obbins and Co., I::c., 

of Novem"er 3, 1~33 ( f or descr:..p tion of this report see this 

section or.. 11 I;~'l•)J_o~-r.1en tn, under the heading of 11Division of 

Enplo:rcent by Occu·9ations 11 • 

( *) Em- :i.oy;.;ent , Cige.rette l,:fs. Inc_ . 

t h is report. E:mlo;_'Tnent , Cigar 

Census of !1innufac Lrre s. 

= 42 ,000, see Chapter II, 

1ffg. Ind . = 54,000, 1933 
t • 
'-156-

Number of Wage Earners, Average Hours -Norked 

Per Day ~d Per '\"leek, anQ. Average Days 

Worked Per Week, July 1, 1933. 

Average Hours 

:Number of Wage Earners Worked Per 

Occupation :Total Male : Female: Day Week 

Time Workers 

Packers 

Machine • • • • • 212 

Hand•••••••• 2,445 

Strippers 

:Machine ••••• 

Hand •••••••• 

Selectors •••• 

Miscellaneous 

2,048 

2,457 

451 

60 

466 

12 

107 

95 

Machine..... 694 120 

Hand •••••••• 2,239 1,217 

Total all time 

workers •••• 11,546 2,077 

' Piece Workers 

Machine •••••• 12,001 

Hand ••••••••• 26,940 

Cornbinatio~.. 1,786 

Total all 

piece workers 40,727 

Total all machine 

workers •••••• 15,955 

Total all hand 

23 

8,422 

405 

8,850 

215 

workers •••• !~ 3~,081 10,212 

,Total all' workers •••• ~ ••••• 52,273 10,927 

152 8.33 

1,979 8 

3,036 

2,350 

8,.33 

8 

356 8.5 

574 9 

1,022 · 8.5 

9,469 8.3 

]J.,978 

18,518 

1,381 

31,877 

15,740 

8.67 

8.25 

8.33 

8.38 

8.61 

23,869 8.23 

41,346 8.35 

41.6 

40.0 

37.5 

36.0 

42.5 

45 

42.5 

39.4 

43.3 

41.2 

41.6 

41.8 

42.2 

39.0 

41.3 

. . 

: Average Days 

Workefi Per 

Week 

5 

5 

4.5 

4.5 

5 

5 

5 

4.8 

5 

6 

5 

5 

4.96 

4.95 

Source: Computed from data co.mp.iled by the Census of Manufactures. 

10691 

. ' 

-157-

TA ~ X 

Average Hours Worked Per Tieek For Various 

of E:rr-1lo7ee s a nC. P erioc.s Indica ted 

Avor a;:,e Hours .Pe r . 1Jeel~ 

~ .9 e s of \7 o rk :Entire Ye~~- r Entire Year Th:;.~e e i1onth s 

· 1929 1932 endect Jul~r 31, 

1933 

Fi.AlTD FACTORIES 

Cigar Makers 

Strippe rs 

50 . 5 

50 . 1 

40 .6 37.2 

42 . 5 37 .7 

Other Proce ssors 

Fc.ctory· Workers 11ot 

50 .? 41 . 8 38 . 2 

included above 50 . 0 41 . 8 37 . 8 

i.!.ACHI i:JE ?ACTORIES 

Ci:;ar l"v1Dkers 

Strippers 

50 . 4 

51 . 8 

40 . 0 41.7 

41.3 42. 4 

Other Proc essors 

Fac tor3r Workers not 

51.1 41.4 42. 4 

included above 50 . 9 41. 9 41 .9 

Source: Report of Ro s smore , Rob bins Co. , Inc ., in re es n~ li shment of a 

Co de of Fa ir Compe tition, 'r ovember 3 , 1933 (see t e :t a bove .) 

10691 

It will. be no t ee. that the figures c.evelop e cl i n the :to ssmore, 

Robbins Co. re:1ort agr ee nj_ th those of the Census ,;;i v en in 

Table I :l. 

A survey of the Hancl- Mad.e Cigar manufactur ing L.1du s~ ry nas made 

Novembe r 11, 1933 f or 3. comr:; i t tee of hand- nade ciga:;.1 manufact urers seeking a code, by s. D. Li edesc1orf ana. Co., of £leu Yo rk 

City. This su ve~r coveP.e d. ap;1roxi ma tely 40 :;_)e rcent of a ll manufacturers of hnnd- maC:.e cir:_:;o..rs p roducing roo re tho.n 1 , 000 , 000 

cigv.rs :9er y ea r. The :p:ri nc i l)a1 coverage wa s in the Yo ~ck Count y , 

Pennsy l•rc.ni a , di strict. 

A frequenc:r di stri bution of np lo~ree s [l. S to numbe r of hours 

worl{:ed -:_Je r weel.: \7<:.s included in the Li ed.esdorf :c eport . Tile r;10da1 

munbe r of hours ':"Ior 1{eci lJer -.;:eel': : G.s shon'n to be bet 7ee::: 50 2.no. 

o:) . The ave r Ev;e hours r-;orl::ed ner r.'eel,.. ne r e com~0u ec. a~ ~7 . 6 •. 

A compari son of these fj_,:;u!:"'e s ' i th t h ose rleve1o L)et b7 the Census 

indice.t e s t hat honrs of l abo r i n t h ese ar ~ hc:.nd fn.ctories, 

p2.rti cul c.rl;y in the Yorl:. Count:r, Pen...1s3r1 va ni a , di strict, re re 

some11hat longer t han i n t !1e Uni ted Sta tes a s c:;, rrho1 e . 

3 . Wa.c e Rates r·.n<i Ea,..ni nr:s 

( a) Annual U 2r;e s anC: · Annu[>.1 Pa::n~o1l s 

The fo11oPi nc:; E~b1e shons the r-mm.,a1 p~r ro11 end the averac;e 

annual ~; e in the Ci co.r Hanu.f['..c turing Indt. st:r:' f rom 1923 

to 1933 . 
Year 

1923 

1927 

1929 

1931 

1933 

-153-

T10LE XI 

Ann1.1.al ? a_froll c.nc;_ Avera_;e _t._nnual rl age 

Annual Pay r oll 

( thousD.na.s of 

dollars) 

90 , 860 

76, 470 

67 , 220 

46 , 070 

30, 061 

Cigc:.r I nc:ustr-y1923 - 1933 

Averas e An1mal a/ 

-:ia€e };e r iJor:{er 

( dollr.rs) 

835 

809 

799 

676 

551 

Av c...~ e b/ 

-:7 eel:::ly ·---D....ge 

ue 1~ -::"or::er 

C. oll D. l~S 

16 . 06 

15. 55 

1 5. 37 

13. 00 

10 . 60 

§:} An;.-.ual pa;;rroll divided by numbe r of ·.1orke rs. 

2} Average annual wag e pe r \?Orker di vi dec'.. ~;- 52. 

Source: Census of I:anufactures 

Yea.r 

1921 

1923 

1929 

1931 

10691 

The am1unl nage l:>e r ~: orl~e r has de clinecl steao.il:r si nce 

1923. 

( b) rleel<:l :r c.nd Fo ~rl r Ec:.rnin;s i n t he Cicar Incl.ustry ConlX'.r ed 

to f)ther ~anu.:.~c. cturi nA: I nd.ustrie r. . 

J'ee~~l ' .o..ncl. hourl:r e;::.rni s in t he Cigc..r I nC:.ustr:r from 1921 

to 1931 &.r e cor.r.:_)D.red to :;,~nL1~ S in 24 oe1er p r inci:9al 

IDDJ'lufc.cturi116 i nd.ust1:ies selectecl b:.r t J: e liationD..l Industrial Conference ~rc in t he folloTiing t able . 

r.A.BLE ~II 

"'Jee:dy and Lonrl:r Earni ng s in the Ciga r Inciustr] Compared ri th 

Th ose i n 24 Principa.l Uanufacturing I no.1.,_stries 

1921 - 1931 

Avere€e Earning s in the 

Cig r ndustr~ a/ 

1Jeekl y Hourl:r 

(Dollar s) ( Cents) 

15.73 31.8 

16. 06 32. 4 

15. 37 31. 3 

13. 00 27 . 6 

_lv·erat,:e Ec.r nin.;s il"!. the 

24 Othe~ ~nYmfe.. ct ril1£ 

Industries b / 

\Yee~ly I-Io·L,_rl:r 

(Dol lt: rs) ( Cents)' 

23. 91 30 

26 . 93 54. 8 

28 . 31 59 . 2 

22. 64 5r.: ,.... o . 
-159-

a/ Census of I•,ianufact-;.lres - Tieekl:~ 6G. :CYii UGs ·: igures 0-...>t aiLec. o=- C:.ivi·-.i :i._b 

:.~eported annual payroll by number of workers and_ then by 52. ~I 01.1_ rl r 

eF.ri.1ing s estim tec~ by o.ivid.ing ';Ieekly earnings by estimated. c:.verage 

hours Dur:::eci Jer wee!;:. · 

b/ ComiJiled by National Industric.l Co~1ference Boa.rd. See 1t1Ja ges in t h e 

'Uni tee_ States, 1914-1930 ru::d l93l 11 ; Su:o~J J:ement to l-. I . C. 3 . , Se2.~vice 

Letters, April, 1933. 

Grc.e.e of 

Kincl_ of 

Class A 

Clc.~s B 

Cla ss c 

Class D 

CL:'.SS ,., .r:.. 

10691 

It will be observed thc.t ueekly uages in the ci _:;c..r inclustr:y thro'lJ€hout the period trere far beloiT t ;.1ose p::.id. 

in t~e other industries. 

Hourl ~ eG.rning s, o.l so,. shelled a decline from 1921 to 1931; 

the d~cline, ho~ever, ~as ~ot as consistent as in the c&se 

of Tieek l ::- r.rc:.ges. Eo-cu:lJ ea rning s IT ere fc.r belorr those 

paid i'n t l:e 24 otl1er ~:; ri 11 Ci Jal Mfll1Uf £'.cturing incJ.nstries 

cited a.bove. 

(c) 'Jage Rates c:>.li.d :Ea rning s b:;- Occupation, Sex and Gr2.de of 

Prociuct . 

The special su_'l"Ve · mo.c3.e by t h e Census in 1933 c:.t the req.ue st of the National Recovery Ad1:1ini strc:,tion sho:Ie cl. 

11 , 546 'R'age ea rr_ers comy en s.?.t eC. on an hourly E~ si s C'..no. 

40 , 727 co Jens tec"L on a ~J iece or~ basis. 

This pi ece'Wori{ g roulJ consi st ec. p rimari1;r of ci g<::. 1~ ma!:e rs. 

Sor:1 e 1, 706 of these ··ra . .;;e ec:.rne::!.'S worked on a combinatioil 

of hand r:.nd machine ;:or::, but there t1ere 12, 001 cigr.r 

make rs. Some l, 706 of these rrage e a r n ers n orlceo_ on <::. combination of h a nc. o..nd mac~ ine uork, b,.1t there n ere 12,001 

cigar mal<:ers engaged entirely in mac~1ine p roduction c:>.nc_ 

26 , 940 in :1e.nd :;;:>roc.uction. Data on these ·:rorkers a re :;_Jresented in the :fo1loTiing tz.ble. 

T_OLE XIII 

Average MaximuiTI and I.iinimum R2.tes of Earnings 

of Ci gRr I.TP.kers on Piece iiiork Basis 

Ju1y 1, 1933 

:.:ET 

Cig2rs a..:1C. ~t te -p er 1000 A e r at::e :ba :!.~ ::: i n~ s ? e r .. eek .'71 J... • ..I!E'.CvOrles Ug!.1 Lo\i ti' , ~ 1 :.'::.&. !. Low 

Hand 7 . 83 7 . 31 14.13 11. 86 

Ho.ncl 12. 38 1 2 . 02 1 6 . 78 1 ': .26 

Hand 18. 08 14. 92 1'3'. G.6 1 6 .92 

Hand 26 .. 68 24 . 01 22. 11 20-71 

Hand 44 . 83 33 . 0 6 25. 58 21.89 
, ,.. ' -..:...cl;-

Table alii (Cont'd) 

\J OUEF 

Gr.:-.d.e of Ci cars ana. 

Kind of Factories 

.::tat e per 1000 . Averc..ge EE'rnin-:;s Pe:t -. .,.eel: 

Hi :rh LoD 

Cl.:-.ss A 

L<:i.chin~. 

Han c. 

Cl c- ss B 

LD.chine 

Han C. 

Cla ss C 

I :c:\cl1i ne 

Hand. 

Clf'-ss D 

~::2.:1c~ 

Cl.:-.ss E 

Hanci 

. 8.5 

5. 73 

. 63 

9. 12 

1 . 54 

14. 70 

2 . 04 

39 . 22 

. 72 13. 62 10. 71 

4 . 88 . i ._ 11 . 60 8. SO 

. 63 10 . 89 9 . 75 

0. 3S 13. 57 11 . 11 

1 . 02 14. 76 13. 77 

11. 20 15. 34 12. 34 

19 . 94 18 . 07 13 . 22 

31 . 98 24. 64 18. 54 

Sm.:.rce: Co~pi le d f rom special surve~r mc:.e.e b7 Census of l."c;~ui'c ct1.u~es 

in 1933 c:t l~equest of t:1e :·ational :aecover·r Admini st1·c.tion. 

rtltiona l Recover:r _ cLmini str:--tion files: St'.lcg L2.t erit1ls of 

To b<lcco Stud;? U!!i t , LC'.bo :~ . 

Infornat ion on male mac:1in.e r:orl;::ers :1[l.s not baen c;iven since 

on:::..:r 23 -:-Jere covereC. b3r the s""J.rve~- . The:te ·uere 8 , 422 m2.le 

~l~"'lcl :ror:;:ers, 18, 518 female hand -rrorkers an& 11 , 978 :femc .. le 

machi ne ':7orke_s. 

The inconsequeiltial a1.10unt of Jroduction of Cln sse s 11 ::3 11 , 

11D ~ ai.1d 11E tr cigars ha s alreac,y bee:1 nentioned, th. e cor.'lbineci output in these classes forming less t han 2 p ercent 

of C'll ~J roductio i'! . Tl1e :'igures on Class HAn ~~Jror1u ctioi.1 , 

f orni 116 about 86 percent of the total in 1933 , c:.:re t: e 

most significc:J.nt . Cla.ss uctr, '7i tl1 12 percent of all ~J ro

ciuction in 1933, is to be cor:.si c_e re ci. 

Kee~1 1g i n oi r~C'. tl1.e pl·ec1oni aN: c e of Cla.ss 11A" :Jro C.1,_cti ~;. , 

it is evic':.ent t :1at , i n t:;enernl , t he c.v e r ace ec:-.1·ninGs ::_Je r 

Hee!: f or T£18. ~1 ine worke::cs '-rere hi gher t han those f or hc:.nd 

Tiorl:ers. T..lle ave r o.c; e ear11inc s of no.le or~:ers exceedeC:. 

t hose of femal es. r.'orkers '7ere better cor.n enso..tec c.c cording to the quali r of t he cit;a.rs, tr _t here acain t!1e sme.ll 

amo·.mt of ~J roc1uction of hig:1er p riced ci t;~. rs muut be !:e··Jt 

in minci. 

Hovr rel o.ti vel~ loTI the ea rni:ng s of these cit;[' r mal;:ers a :te 

P.lay be seen by. compa ri ng them 'l'i th those of Jo..,ge e<'.rners 

in m~ufacturinc i ndustries in g eneral. cc or ine to the 

:Bure.:m of Le.bor St D.t i sti e s, the per cap ita '7eekl;:r e['.r:1incs 

in 89 J:t£"',nufa cturing inc'.ustries, inclu in:~ cigars, C.uri:u::s 

the month. of June 1933, a date compar able to those above, 

uere $17 . 99 . ( *) 

( *) U. S. :aureau of La bo r Stati stics, 11 ~read of E mplo:rrne:1t 11 , June 1933, PP • 7- 8 . 

10691 
-161-

Com:._J!'I,ri son v1ill.. sho':"r th~ t aver<:'._:e Tieekl:" er- r~11<'1;s L~ a ll 

importa;.lt ma::crllfe.cturinc industries as a g roup i7 ere lli ;her 

t han the average ma:cim1:lr.l 11eekly ear i~s of cigar mal~:ers . 

Earni:r..;g s of other em lo ~r ee in t.he cigar industr;:r a s develop ed in the special Census s1lr'Ve::- of 1933 a:..~e <6i ven. i~1 

the following table. 

TABLE XIV 

FJJ.ill:SR OF WAGS EA1UTE3S, v-~::?..A GE l;I.iU(HJJl:i AliD Mil!IlJJLI RA::::'ES OF PAY 

AlJ) AV~?AGE HOU:i:tS ;;-l0rti2D ? :::;;~;, ":'!'~01( 0?- Til.iE 1J0lT( BASIS, 

Occu-

-,)e.tion 

Pacl:ers 

!'.'lachine 

Ha.ncl 

Stripp ers 

L1achine 

Hand 

Selectors 

Lii scellELneous 

i.iachine 

Hand 

Total time 

Tiorkers 

IlJ TEE UHI TED STATES, ·JUL? 19·33· 

liur:1ber of 

\7 e.ge Earne.r s 

I·ien 'Jomen 

60 152 

466 1,979 

12 3,036 

107 2, 350 

95 356 

120 574 

1,217 1,022 

2,077 9' .... :J:69 

A.verc-.g e Rates Per Hour 

(cents) 

41 .5 

47 

?8 

33 

57 

47 

4~ 5 

37 

41 

27 

01.5 

49 

29 

34 

Women 

32 28 

32 27 

27 .5 · 24 

25.5 23 

32 28 

. 29 24 

30. 5 24 

Average 

Eours per 

'Jee:: 

41.6 

40 •. 0 

37.5 

36.0 

42.3 

45.0 

42.5 

39 .4 

Source: Compiled from s:p eci a l survey made by Census o-: Uanufa ctures i n 

1933 ·at the req_uest of the Nationa l Recovery Admini stratioi'l. 

Yational Recovary Admi ni stre.tion files: Study J..iaterial s of Tobacco Stu~ Unit, Labors. 

10691 

The same differential as bet'.-re en the sexes is appare~t 

here. The c1iffarence i n TID.{;e rates b et Heen. hc:mct aac_ 1112-Ch ine woi·kers is not so co nsistent, but it is -p roba ble that 

ee1rnin.gs for the l atter g rourJ exceed. t h ose for the former 

since machine v!ork e:..·s average 2 to 3 hours per .7ee) ~ more 

employment. 

The follo~ing ble, cony iled from figures in the report 

of Rossoore, Robbins Gnd Co~oan7 (for description see this 

section, :pc.rt 1-c), illustrates the s&-ne trend to'P.2.rd 

better pD~' in mo..cl1ine '?reduction, as WCJ.s [!.p9arent fro!:l th.e 

Census stuClj'. 
- 1E2-

AV ~G::J JAG~ PE...~ HOUR Al:O ?=:ill 'WE?X FOR VARIOUS 

Trl?:::S OF =:r.tP~OT"'...3S Alill P:TI.I ODS Il~I GATED 

T.)'])es of Uo rl': 

Hand Factori es 

Ci gar llio}::ers 

Stri J?l)ers 

Entire Yea r 1929 Entire Year 1932 

Ave r ag e Avernge Ave!-age Average 

uage per '.7age p er uo.ge per uage p e r 

hour week ho~r week 

(cents) (dollars) (cents) ( O..olla rs) 

8. 39 

Three l~ ths Endeo. July 31 1 1933 

Averc.ge .Averc-e;e 

n ag e p er 1c:.::;e per 

1our eek 

( ce!lt s) ( dolla rs) 

OtDer Proce ssors 

:ii'c\ctory n orl:ers 

31 . 4 

22. 1 

37 . 6 

15. 87 

11. 15 

19. 08 

---

2l. 2 

17. 9 

"25- "6 

7 . 61 

10.70 

6 

19 . 9 

31.1 

8. 79 

7 . 51 

11 . 00 

;1ot i nclucled 

a bove 37 . 7 

. ~ 

18. 83 31.7. ·-· 13. 27 34. 1 12. 88 

i.l<.).chine F9-ctori e s: 

Cig2.r •i ~e rs 

St ri l) ~J er s 

27 . 2 

18. 4 

Oth er Processors 

Fc ctOI'iJ ~il orker s 

29 .9 

19.7 

37 . 6 

15. 09 

10 .19 

19.19 

23 . 4 

~4 

31 . 9 

10. 16 

7 . 59 

13. 21 

' 

35. 3 

11. 34 

7 . 79 

15. 03 

:1ot included 

above 47 . 9 24 . :34 41. 3 17 . 30 43. 6 13. 24 

Sou rce : Rep ort of Rossmo r e, :rt.obbi 11s ar;.d Co ., I:r.. c ., Eove1nber 3, 1933 , 

in · r a3st abli shment of a Co de of Fair Conp eti tion ( s ee t e::t 

e.bove) . 

10691 

The exce·_).tionally lo'.7 11age r c t es i r.. t his indus t~· mo..:r in 

p a rt be trc-.c ecl to t l:..e con ta.ntl~.r de clini;'!g C:.emand for 

cigars. While 1)ro duction in oth er 'manufa cturing inO..ustries from 1920 on":7a rd nn.s increa sil1g , cigar p ro duction 

drop:!eCl_ 40 pe rcent . 3" c.- c ed by loss of ma r k ets, comp etition betryeen ma."lufa ctu.re:cs oecame i ntense , a."ld. re}'> ea ted 

cuts uere mo.de i n Tiage r a tes. Coup leC. 1ri t h decreo.sL1g 

h ou rs of e~)lo~rm. ent, t l ese cuts seriou sl:r impaire ct the 

C~ verag e cigo.r Ti or cer' s e::.rning s. 

T:.'le sub st i tutio:c_ of -r ome:n a t loue'r u age r a tes for men hc='.s 

beerl a cor:rrnon phQnomenon in manufacturing ~d tries le

ever achine ~r requiring little muscular ex ertion h a s been 

devised. Employment of '.lomen exerts· a constantl;T dep ressing eff ect on '.7ege r o.t es. 

( d} Ea rnL1[;, S by Ste.t es 

The follouL'lg t able· gi ves data clevelop e d b;r the s::.)ecia.l 

Census surve of 1933 for ~ge r a tes by sex a nd ~e of 

p ro c3.uction bj:- states. · 

. ~ 
-163-

TA13LE X"l/1 

~r -::::'~ 0-E J'~~I ·- 1? ' .AYD II Ti l~Jl i "JEE'JCLY EA.tE·TI:!;JGS OF 

i.JJ. U.J-~...,.{ .. ~tt\. ~~-tS or PLEC~ ·::o:mc :aASIS Il ~ 

SPECIFIED STATES, JULY 1, 1933 

~!E~ T 

lJ1unber of Averc:.ge Ea:r:-nings pe r Week 

J,iale Bakers Hand- ma&e Cigars 

of All CPolle.rs) 

for 

Cigars Class A Class c 

Lo11 r,~ LoTI h 

California 162 11. 20 13. :I._9 15.31 17. 68 

Colorado 1 r-;" -0 12. 67 12. 67 E:.l a/ - · Connecticut 335 i6. 02 18. 27 19.04 21 . 58 

Florida 2, 958 . 

9. 63 12.07 "11.87 15.16 

Georgia 5 5 . 08 9.Z5 

Illinois 247 11. 80 l5.63 19.91 20.92 

I ndiana 43. 13. 81 14. 39 22.50 26. 40 

Iowa 42 11. 50 14.00 1'6 . 88 1 8 . 88 

· Louisiana 53 :il. 63 13. 50 13. 25 16.29 

Haine 42" 15. 33 17.;)2 14.59 19 .74 

· ar:~.r 1 and 36' 8.73 ~0 47 14.79 10.95 · l{.;;.ssacnuset t s· 169 1 5.94 16.64 20. 52 21.96 

Liicl1igan 33 15. 61 16. 07 21.28 21. 85 · iJiin:ne sot a 41 14 . 21 16.97 19. 29 26 .73 

Hi ssouri Gl 13.29 14:. 45 14 . 25 23 . 47 

Heu J ersey 42 13.30 18.41 ,17 .81 20 . 45 

:HeTI York 1, 071 14 .13 16.53 17.40 21. 49 

Ohio · 245 ·9 . 47 11.33 16.93 19 . 09 

Pen!1 s:;rl vania 2, 333 7.79 11. 36 11. 57 13. 56 

'Jest Virgi nia 197 14.93 15. 04 

Wi sconsin 164 1.5 . 22 16.19 20 . 04 20 .76 

Other State s 130 13. 30 16.16 17.91 21.79 

United Sta tes 8, 422 11.·86 14.13 6~ 92 19.66 

10691 
-164-

TABL.il: XVI ( Co:'.tL1ued) 

~l' 

.. :i~umber of 

Female ·,;ol~kers 

.Aver2;2:e Earnings Per 'Jeek (DolJ.e.rs) 

Cl8.ss A Cln ss C 

Co..lifornia 

Floric1a 

Georgia 

Illinois 

Indiana 

Iona 

Louisiana 

I• .. ;ar;r 1 and 

Hassachusetts 

Ih chi gan 

Ulnnesota 

L~i ssouri 

lJe":7 Jerse,i 

ew York 

Ohio 

Penns:rl vania 

TI'isconsin 

Othe1~ States 

of All 

Cigars 

361 

2 , 360 

119 

60 

520 

20 

582 

198 

20 

1 , 703 

34 

267 

. 3 , 049 

1 , 023 

999 

5 , 944 

68 

1,191 

I.:c:.cl ine 

10.00 

9 .97 

12.00 

10 . 50 

22.06 

10 . 99· 

15. 02 

10 . 08 

10 . 70 

12. 53 

9.03 

9 . 64 

11.93 

10.00 

12.57 

12.00 

11.50 

28. 00 

1 2. 60 

16. 60 

14 . 32 

14. 81 

15 . 49 

10. 77 

13. 67 

13. 27 

HEmcl 

10 . 60 

8 . 67 

5 . 45 

11.25 

9 . 47 

9 .76 

8 . 08 

11.37 

10 . 53 

9 . 79 

10 . 50 

7. 80 

9 .79 

12.80 

7. 60 

7. 50 

16 . 09 

10 . 45 

12. 37 

11.19 

7 . 85 

12.17 

9 . 83 

14.42 

9 . 29 

12.10 

10.87 

13.10 

11. 67 

10 . 07 

11.69 

15.82 

9 . 67 

11 . 23 

16 . 09 

11. 40 

Uachine 

9:.1 a/ 

13.73 14.78 

13 . 20 

16 . 49 

11.90 

13. 19 

14. 00 

16 . 42 

16.56 

11.90 

13 .70 

14 .65 

Lo .1 Eigh 

15. 85 

11.04 

a/ 

18.13 

10.02 

17.00 

12. 61 

12.50 

14.03 

11.93 

9:1 

a/ 

10.47 

13 . 30 

13.82 

11 . 43 

19 . 06 

10 . 50 

16.18 

13.78 

~I 21.46 

14.43 

17.00 

15.49 

18.50 

15.28 

15.38 

9:.1 

~I 14.02 

17.19 

15.31 

15.37 

19.83 

11 .90 

United States 18, 518 10. 71 13. 62 8 . 90 11 . 60 13 . 77 14.76 12.34 15.34 

~/' Incluc.ed ·in 11 0the r S.tates 1r to avoiCl. disclosing ti1e data for an individual 

e st2 bli s:1J'Ilent. 

Source: Compiled. from S3JeCial surve:/ macl_e b:r Census of Lianufactures in 

1933 at the r equest of the l~D.tional Recovery Acl.mini stration • 

.!.Jational Recov~r'J AdJTiini stl~ tion files: Study I.iateri a ls of 

Tobacco Study Unit , Labor. 

10691 

It tiill be observec. from the above t able tha t lou as 

'7e.ge :p~rmen ts seem for t:t.1e countr:r as a Tihole, the:r nere 

even lo;;rer for some of the principal cigar :pror~ucL--.g 

states. Attention is c.irected to Florida and Pennsylvania in particular. 
4. Mechanization 

As ment ioned_ before in this study, a machine tha t rrollic. sati sfactoril~r perform the cigar ma..:;::ir..g opera tio:'l and deliver a 

fini s...""led cigar compc;.rable to the he.nd made roduct was :9ate!1ted 

in 1917. This machine has "9:::-'acticall~r revolutionized_ t:1e ci{ e..r 

industry. Its effects on emplo3rment, on costs of ?l~oc uctio , 

and on the number of manufe.cturing concerns in t he inC..ustr y 

have been profound. 

The Bureau of Labor Ste..tistics in 1931 made a study of the effect 

of mechanization on t ).1e industr;:ro ( *) The Bureau obt E'.inect. from 

the manufacturers of t h e m.s.chines estimates o.s to the n1rr.1ber in 

use from 1917 to 1931. It i7as estimc;,ted that eac~1 machine uould 

produce 750,000 cigP.rs pe:>.:-' year using an avero. -;e of 4-1/2 employees per me.cTJ.ine . In CO!:lDin:::-.tion ':Ji th p roduction o.ata from 

the Bureau of I nternal Revenue ano_ em··)lo-vment ci..ata from the Cen- ... J 

sus of I• .. ial'lufo.ctures, _ it ':'ras lJossible to estime.te mE'.chine productior~, munber of machine -r:or~e rs, anC:.. the nUl!lber of hand \!orkers displaced. The follorring q_uoteo. l etter furnished b:r the 

Bureau of Labor Sto.ti sti c s more f-ully e~ lains the methociology. 

·iJ. S. DEPART ~:CT OF LABOR 

ButiliAU OF L1LBO~ STA~ISTICS 

Washi:2gton 

Co m~issioner of Le bar Sta tistics 

U. S. Dept. of Labor 

Wheelin~, W. Va., Jan. 25, 1936 . 

U<sDington, D. C. 

Dear Sir: 

I have •rour lette r of Jc:.n. 23rd relative to a reauec.t by Hr. i•.I ills of ' - J 

t h e r1 .R.A. for information in conr:. ection 1.1 i th Table 1 of my ci::;2.r 

article contained in t :'le Dec ember 1931 or~.thl y Labor Review. 

The following procedu.re ~as used in arrivin::; at the esti!7le.t e s e..s sh orrn 

in this table. 

1. To begin rri th I first obta i nee. f rom the mukers of the T:1D.chi1:e (The fl.~ • F ' " '' 1 • C -- "'• J.. -- ' 7 ) t" ' ,.. t l ,ti.J:lerlCal1 ouncLr:r & :1ac.:lne o ., '- • -• vl v7, .i:' . 1 . ne numoer o:.: 1.e se 

machines on lec>.se and i n operc..t ion, for ec.d1 of the years froT:l 1917 to 

1931, inclusive. 

2. The ave r ace estimated p roc.uction per ma.chine rras arrived a t after 

secu:-ing actual y ·early production fro;n cof"lpanies operatinc; ~he r:lacnines, throug~l di·scu.ssion 17i th the m2;n:lfucturers of the T'1DChines, 

t h rough l abor 1.11li0!1S, C!.lid frOM e1e Cib2.r nl8..l1ufacturers themselves. 

:Oue allonance uas· mac1e for the se~sonal che.racter of the inc'.ustry, 

VC'.riations in t~1e e:q_1erience of the ~Je at o:i.'s, and loss of time due 

to breakdonns of the machine . 

( *) ITTechnological Change s in t he Cigar In6.ustry and Their Effects on 

Labor 11 , Honthly Labor Review, Dec e.::~ber , 1931, pp. 11-17. 

10691 
Year 

1919 

1921 

•t 923 

1925 

1927 

1929 

1931 

1933 

-166-

Column II lfEstimated m.lJnber of machi r..e employees required" . These 

estimates Here based on the avrer.~.ge l1UJI'lber of emplo~r ees recp .. :Li ~ea .. 

per machine , and .. nere arrived a.t by a com~)a ri son of t:1e number of 

operators a11d maintennnce ei'i:!_) loye e s required in conjUJ.J.ction ni tl1 

the number of mc- chines Ol)erG>.ted b::- a cor1pany. 

Column III 11Estimc,ted number of :1.and ·ke1~s re~uired for so.me ? rodu~tion . 11 The estimated ~verag e yearl3r production of the hand :mo.cl .. e 

cigc:-.r maker Tias arrived at as the repul t of the checl~in~ of production records anc~ u..n,ys worked r1here availc:..ble fror.1 compm-zy- recol~ds . 

Also the securing of reli able estimc..tes from ole .. time }la:'H1 ,-;orkers, 

Eillcl officials of tl1e Ci.:;c.r l.!al~e rs Union . !Iere El.(;B.in it ':70. S ;.1ecessary- to r:1ake due a llotfa.J.ces for seasonal unemployme;.1t, other time 

lost, q_uali t~r of :1ork G.em~1ded , and .. va riations in ~rp es of cigars 

produced. 

I mi ght add that this st "'.ld-r '1'7as made in 1931 at the request of l:Ir. 

Ornburn, President of t he Ciga r I.iakers Union. 

I trust that this will g ive you the desir~d inforMation. 

fer:_r truJ .. ~ :rours, 

( si.::;ned) J smes P. Corker-r 

The :Bureau of Labor Statistics found 3 , 883 machines i n use in 

1S31 . Poor's I ndus Dr Service estimated 4 , 600 in use i n 1933. 

( *) In the t2.bles folloni11g , d.D.tt:' are g iven fron the :Burec:..u of 

Labor Stati sties stuc1y , broll.Ght through the ~rear 1933 by the 

application of sir.1ila.r ne t hods to the estimate of 4 , 600 ma chines 

in use during that ~rea r. ::for rec.sons ',7hich will be discussed 

in detail later, attentioJ. shou!.bd be g iven principn.lly to t:1e 

trend s app.::.rent in these tables r e.ther than to the magnitude of 

the effects &1oTin . 

a/ 

Tote.l 

r;a&e 

E2.rners 

114, 300 

119 , 000 

108 , 800 

103 , 000 

94 , 600 

84 , 200 

68,200 

54, 600 

TABL...J XV~I 

DI SP ..!...1AC:Si 3.TT 07 -;"QP .. KZ::-?.S sr-CE 1 919 

TiffiOUGH l.ibC~JIZ.Ar O~- P2~ TI20UG { OTR~ CAUSZS 

-.. , . 11.LB.Cr11ne 

or ers 

1 , 100 

2, 400 

3 , 800 

5 , 700 

10 , 900 

13, 700 

17 , 500 

20,700 

Q/ 

Ha2.1C1 .. 

Uor!;;:ers 

113, 200 

109 , 500 

105,000 

97 , 300 

83 , 700 

70,500 

50 , 700 

33 , 858 

o../ 

7ac;e Earners 

Di sy l c .. cec .. b~­

l:iachi ne s 

1 , 300 

2 , 900 

4 , 600 

7 , 000 

13, 400 

16 , 800 

21 , 400 

25 ,300 

!ll I} 

To tal "Jage Uage :Jar:;.ers 

~arners u lus Di S')laced. 

Enp1oyees Tl ro1:~ 1 Ot:· er 

Disp l a ced Causes Since 

115,600 

114, 800 

113, 400 

110 , 000 

108 , 000 

101,000 

89,600 

79 , 900 

1919 

300 

2, 200 

5 , 600 

7 , 600 

14, 600 

26,000 

35 , 700 

(*) Poor' s InfrQst~r Service , Tobacco Indust~J , 1933 . 

10691 
-167-

~I Cen!O-:J.s of ·Manufactures. 

b/ From estimated number of mc:.chines in op era tion. See text a bove. 

c/ Total wage ea rners minus ma chine workers. 

gj Obtained by deducting the number of machine workers from the m.unber 

of h2nd u orkers estimated to have been required to produce the same 

number of mC~ chine made cigars. 

/ Total TIB€ e earners lus work ers estimated to have been displaced by 

machines. 

f/ C~TI ul tive differences from preceding column. 

Source: 1919 to 1931 -- l:Ionthly Lc.bor Review, December 1931, p . 13. 

1933 calcula ted -b r analog ous ;ne t:1ods fran estimate of Poor's Indust~r Service, 1933, Tobc:..cco Ino.ustr;;r, of 4, 600 cigar machines in opera tion 

in 1933. 

From the D.b ove ta.ole, it is evident that the trend tov.rard. mechanization with c6 ns ue~1t displacement of hand workers ha.s 

been pe rsi ste~ t since introduction of the machine. 

It is· of int erest to ::..ote that displacement C.ue to causes other 

than mechanization has ap::_:> arently been the more potent f o.ctor 

'in creating UJ."'le plo rment. Two principal CC!J:t.ses of this disp lace!llent su.gsest t h ems elites: c.ecrease in· ~rolume of pl~ c: uction, 

and increo.se L.1 eff iciency of manufC1.cture vhe:i.~ than that due 

to introc.uction of ci,::;a r machines. The followi ng table compares t~:.e cLrO}! in emplo;:.rment noted above with the drop in ~) reduction since 1919. The general agreewent of the Wwo vari ables 

would seen to indicate decre~se in volume of production Q S the 

more important f c:..ctor in displacement. 

TABLE :i~vi I I 

DECREASE E ;· THEOUETIC.AL lflJLffiE...T{ mr HA1ill EL1PLOEES NECESSA:.l.Y TO PRODUCE 

ALL CIG.A?.S, CO :PJLttlBD TO DEC?.EASE HT PRODUCTIOlJ SilJCE 1Sl9 

Yee.r 

1921 

1923 

1925 

1927 

1929 

1931 

1933 

Per Cent Decrease i n Total 

Annual Production since 

1919 §;./ 

95.1 

98.3 

91 .4 

92.2 

92.2 

75.6 

60.8 

·Percent Decrease since 1919 in 

Theoretical 1Jumber of Hano. Empl rees 

·:rJe ce ssary to Prbc1uce All Ci a~s b/ 

99.3 

98.1 

95.2 

93.4 

87.4 

77.5 

69.1 

§:../ Computed from .An-'llual Rep or_t s of Commissioner of Internal Revenue. 

b/ From preceding table. 

10691 
Yeor 

1919 

1921 

1923 

1925 

1927 

1929 

1931 

1933 

.-168-

The folloning table com~0res total production from 1919 to 1903 

nith estimated mac:hine production as adduced from the Bureau of 

Labor Sta~ i sties su.rvey. The same trend. to;vard increasing ma.chine ~?reduction is evident. 

Toto.l 

Large 

r.i:.ABLZ XIX 

:i!:STII.IA.T.::;D l.:hCIIT NE Alill II.AED I :ADE CI JA:1 PTIODUCTI OlJ 

1919 - 1933 

i7umber of Estimated :Sstimated Per Cent 

Cigars l.:ac:·li ne :tic:.nc_ Pro- ~hac.e to 

i!c.chil1e 

Tot~ l 

Proo.uced Production duction Production 

(millions) a/ (millions)b/ (millions).£/ 

. 7' 072 182 6,890 2. 6 

6 , 726 ·101 G,025 6 . 0 

6 , 950 . S32 6 , 318 9. 1 

6,463 957 .5 , 506 14. 8 

6 , 519 1 , 825 4 , 694 28 . 0 

6,519 2 , 291 4 , 226 35.1 

5 , 348 2 , 913 2,433 54. 5 

4 , 300 3 , 450 850 80 . 2 

£J ALnual Re~ort of Conmissioner of I- ternal Revenue . 

b/ 1919 to 1931 -- -:ol1thl .. : Labor :ae ·i m-:- , December 1931 , p . 13. 1933 --

calculated b~r analogous methods from estimate of Poor ' s Inclustr 

Service, Tobrcco Industr;'r, 1933, of 4, 600 cigo.r machines in operatier: t~1at year. 

Q/ Total p roduction minus estimated machine pronuction. 

10691 

It has been re~ iouslJ sta t eel. in this report th.:t the s~.:>ecial 

survey of the Census of :l1anufactures in 1933 disclosed. onl-r 

12, 001 me.chine p iece \1ork emplo,_ree s in the industr'J. The o.·o ove 

study woulc_ seem to shon 17 , 500 in 1931 anc"J. 3J, 700 in 1933 . 

The Bureau of Labor Stati sties estimates for machine proo::.cti vi ty (750, 000 cigc.rs per machine per year) a.ncc hanC:. cigar 

maker ~Jroducti vi ~r ( 75, 000 ciga rs per Do rker lJer year) u ere 

a~.:>parently cal~e:ull:r cb.osen. It is raco ~::.: ized t h'"l.t the Buree.u 

of Labor StD.ti sties estim.::.tes ':7ere be.sed on an 2.verage of 4-1/2 

employees -;_Je r raachine , nhi1e t :1e Census figures I!Ol..lic1 :pro"'Jo.bl~r 

cover onl;,r the 4 no.chine peratol~s , but this factor alone is 

insUfficient to accom:.t for the di scre~Jancy . The explanation 

uouio_ appec:-.r to lie -ri th the estimates as to number of nncb.ines 

i n operation. 

Statements Tiere made b;,· mo.c~1ine cigo.r r1anufacturers, in con.n.ection ni th the Dromulgation of the Ci gar i,'Ianufacturing Inc.ust:ry 

Co de , tha.t oaey ma.chines ~ere idle or nere not operated to 

capaci t· • Tl1.i s fact Tiould ex-plain the difference betueen tJ.1e 

calculated number of machi~e employees and. the number disclosed 

by the Census. 
-169...! 

The 12, 001 macl!ine lJiece O::'!~ t1plo ees sr 11 ~.r t i!.G Ce::~::I.1S 

survey Tiould indicate 3 , 000 machines in operation (4 op erators 

p er machi::.1e) . Taking the Bureau of Labor St c~ tistics est.:.m2.te 

of 750, 000 cigars per machine lJer re r, t h ese 3, 000 Tll~chines 

should hilve roducec1 approxi:uately 2, 250 million cigars in l933. 

Tot e~ -

... 

.Jro cl:-u.ction in 1933 a s re-o- orted by ~ the Bureau of nterm::~ 

Revenue wa s 4 , 300 million cigars. Subtraction ind..ico.tes ~1 t 

2, 050 million ci..~ars ';7 ere hand ma.de in 1933. 

A check on the ve.li C:.i ~r of t he above figures is afforci eC. ~r 

dividin6 t h e estima te& 2 , 050 million p ro duction of ho.~~ ~ace 

cigars by the Bureau of Labo::c Ste.ti sti es estima te of 75, 000 

cigars p er· y e c::.r as the prod.ucti vi t y of the aver<:,ge cigo.r mal;:e r. 

This 11ould. tene_ to &'10":7 27 , 000 l1an0. workers mp lo~r ed in 1933 , 

a figure in ce~lent a g re e::ent Tiith the 26 , 940 reported b7 the 

Census. 

Accepting 2 , 250 milliQn cigars as the machine me.cte p ro duction 

in 1933 , 52.3 perce.?J.t of a ll ci ars 11ere na de on mnchi nes duri ng 

tha t year. 

Comparison of t he Poor1 s ncust ~r Service estima te of 4 , 600 

machines insta lled in 1S33 '.:i t h ~ e i ncH cc:,.ted m.unber of 3 , 000 

in opel"a tion, lioul d seen to S:.lo' : 1<: t the machine brancn of the 

industry 'i7C'..S erc: t::..r~g a t ebm.lt 65 pe,rcel1,t ap~ci t y . Thi s figure 

is in acreeme:."'.t '.7i th the estim8.te 0f J.ossn ore, Robbins .::nc. Co. 

in t h eir r eport of :i.i'ovembe:r 3 , l93J (see ~oa rt 1-c of tl ~i s section) 

t hat the mach ine m::muf ct rers co·..;e re d. b::r t heir surve~r '.7ere 

operating at 70 p ercent ['.~ ci t y . 

It sh01:uo_ be ~~ ointed out t l'lc::. t t h ese figures c1o not inva li C: . .s.te 

the treno.s s''lo't7n in Table s XVI I., XVI I I , nnc1_ XIX, but l~ [' i.:e r indicat e that t:1e mc:v;~ni tude of the effects sl1o-::n nc.s il1flated.. 

Thus total c"ti C~ cern ent of u.~ 10 re s bzr mach i nes -:-oul c. be less, 

and that by otl:e r cc::.uses ( e. :?::• decline i n volu.rne of proC..uction) 

\Voulc_ be mor e tha n c;i v en in Table J[IJI I. Total mc:>.c!line production cnc3. p ercent ·of machir.e ro du~.tion to tot2l 1.oul ci be less 

than &"lo't'Jn in Table XIX. 

Cigar banc3.irlg c:.nci TI~cc:.p~Jing machil':es he.ve rece tl~r been i ntrod.uce(l_ anc. pl a ced il1 o-y era tion. It is c.ifficul t .to me.::L su:.~e the 

di splaceoent of l['.oor r tl1e e m.: ~l ine s because: 

1. Cellophani ng o::.': cigaz-s is o. corripr:.ra tively ne'7 operation enC:. i s not Q_o n e b-r l1[tnc3_ . 

2. Pl a c i11..g cige.rs i n ~1e box is d.one b•r t he opez-ato .. of 

t lle D<:'Chine a n6. is rea lly a division of l abor from 

po.ck i ng ~r 1a:1d. 

Generall:r specldnc , one )erator of t h i s combined. rna.c.1i ne ':!ill 

t7rap, bal1d, a no_ pack thre e t i mes t:1e nunbe:r ·of cigars :;:'ormerly 

banded b~ the hand. operator. ( * i 

( *) I.:onthl;y Labor Revien , Deceml:Jer 1931, :?:;? • 14-15 . 

10691 
10691 

-170-

Th.e di splC'.cement of l o.bor b:r t41e "':-l l~a:9 :;? inc; nno. b21Hhn..; !'1::\C:lL:e 

is not incluc.ed in .the above treatment of the ciGar cl ~~g 

machine. 

The ~uestion e.rises as to 77hat may be ex-p ected of meche.ni zo.tion 

in the future? 

A survey of the costs· of p ro duction of five cent cigars ua s r.mde 

in 1933 b3r the Census of Hanufnctures at the request of the 

Nationa l Recove~r Administration. Eleven mEtnufa ctu.rers of machine made, conbination ha nc. and ma chine made, 2.ncl ha a c. !ilade 

cigars vrere covered. Th e s e eleven manuf.:.cturers l~o e.uc e0_ about 

24.4 percent of 2.ll cigars n.~. e in 1933 . Th e :i.~esul t s of t:1i s 

survey are i ven in Table 1 of Ap-pendix V of t h is re:_Jort. 

I nspection of tni s ta.bl e eli sclo ses t he startline fe.ct t :1.::-.t £',1-

t hou.gh. tobacco costin'"" $14 . 80 per 1, 000 cigars c.s used f or the 

me.chine- m"' de p roduct and to0acco costi n.::, only $11. 52 pe:~ 1,000 

cit;C'.rs wa s u s ed for t h e :1e.nd- rnaci..e p ro duct, the total co st p e r 

1, 000 of t he na e-nC~ d.e ~p roduct 1m.s ., 25.68 as compo.red to 

$26.66 for the e..nc. r:1c.C:. e p ro cuct. Th j_ s ·c.c1vantage in both ::_J rice 

an d qu.c'"l.li t ' i r:. fD.vor of u~e Bac::i ne-mo.de product u oulo. seeo to 

p rovi de suffici e1:t in e~1 ti v e for f u ture mechD...t"lization . 

HoTI f a r coul d nechaniza tion p roceec ? At p resent or.l 3r Cl c..sses 

11D11 allCc 11 ..!J 11 cigDTS CJ.r e e:-clu si-\el :r h a nci- nade, and. t h e se _::;rO'l':J?S 

corrrpri s e less t:1an one :9 ercent of the tota l al'll"lUD.l p ro duction. 

re n ould seem to be no t h i ng to vent 99 p ercent r1v.c:·li:1e 

made :9 roduction. 

The ef fect sUCJ a st ey u ou l & have is obvious. About 12 ,000 rnachii.1e 11ork ers would be r e ui r ed to d.i sp l a ce t h e remc.L1i nG 2:3 , 900 

han d. cige.r ·mn.ke:i.·s. Lost of t hese Ci.i spl a ced n orkers, pc..rtic1lie.rly 

t hose in e:.c.vo.nc ed o.-ge g roup s, 77 ould p ro b abl7 not ~) rov e <'-c~p ble 

a s me.chine u orkers. l:ale ci c:ar mel:ers 7ould 1)ro'bf'!_bl-r b e r..ee rly 

completel:r elimi nat-ed fror.1 t h e industry . 

On t h e oth er .si de of the ledge r, it is to be stated t hc:t t h e consumer \7ou l d robabl r be11efi t to t:1e e:;:tent of a bett er ci::;C'.r at 

a lo?.er p rice, anc. that t l-: e required new macl1ine YTor.:::ers '7ould 

probably ea.r n more per inC.ivio.u.al t han 1e displaceo. ha:.1c ',:ork ers. 

Honever, these &re m~ll consi de tio~s in the ce of t he ~stress t?hich ,..rould :._-J ro"unbly confront 14 ,000 or more d.i ~? ce c1 11age 

ea rners. 

Heche .. aization i n t e rms of its effe:cts on -orod.uction is c.i scussed 

in Section D, ]?o.rt 3, of t h is chapter. 

5 . Effect of tr..e Code on Lo.oor 

The Code of :?a ir Compe tition for t h e Cigo,r lJianufacturi ng I m,_ustr:r , app roved bz.r t h e President June 19, 19 34, p rovi cleC. t :1at 

hours for all n orkers be lini teci to 40 p er -vreelc, exce )t, among 

others, 11 pl~o c.ucti ve r_9lo re e s during t u o peak se2.sons p er :rea r, 
-169-

The 12, 001· mE!.chine p iece Forl,: r~flo:y · sho·.'n "b3r ti:·te Cer:r;us 

survey Tiould indicate 3 , 000 machines in operation (4 op era tors 

Jer ma chil1e}. Talcin...g the Bureau of Labor Stntistics estim2.te 

of ?50, 000 cigars j_Jer ma chine per rear , these 3, 000 mc::.chines 

should h :::tve 1Jroduceo. approxir.1ately 2, 250 million ciga rs ir:. 193:::J . 

TotC1.l -::n~o :uctio 1 in 1933 a s re·oorted b:r the Bureau of I l1terl1.&,1 .... . . - .., 

Revenue TI"o.s _4 , 300 million cigc:-.rs. Subtraction inG.ico.tes ~1.8. t 

2, 050 million _cigars ';7ere ha nd. made in 1933. 

A check o·n ~he ve.licli r of t he above :'igures is o..fforC..eC.. b3' 

dividing the estima ted. 2, 050 r.illion lJroc:l.uction of han c3. r'1ad.e 

cigars by tile ·Bureau of Labo1 .. Ste.tistics estim2.te Qf 75, 000 

cigars p er yee.r as the pro<iucti vi ,. of the averc-.g e ci{;c.r mal~er. 

T'ni s 11ou~d ten0. to shot: 27 , ')00 ~1ano. workers employed in 1933, 

a figure in e:..:ce::!.lent e.gree:-1 ent Tii th the 26,940 report eel. b7 the 

Census. 

Acceptir~ 2,250 million -cigars a s t he ma chine made production 

in 1933, 52; 3 percent of <'.11 cigars nere made on machines during 

that year. 

Cornpari son of t h e Poor 1 s InC..ust~r Service estimate of 4, 600 

machines instf!.llecl. in 19 33 '.7i t ::.:. ~he i no.i C<'.ted. number of 3 , 000 

in opel~ tion,_ rrould seer.1 to sho,:r thc:.t the machine branch of the 

industry-· was op era tir,g a t ebou t 65 p ercent capaci t~r. This figure 

is in fl.t;reeme:;.t r:i th the estimc.te ')f J.ossnore, Robbi::1s c.nc'. Co . 

in their repo:rt of :i.J"ovemb e r 3, 193:3 (see }Ja rt 1-c of tid s section) 

that the machine ma mJ..fc:-..cturers covered b:;- t h eir surve:r •.1ere 

operati11g at 70 p ercent c 2;;_Ja ci t y . 

It sho1-D.o. be l;ointecl out t l1c: t t h ese figures ci.o not inva li C:.ate 

the trer:c s shoDn in Table s XVII , XVIII, a no. JJ:X, but :: i~ er indica.te that t:1e DD/~ ni tude of the effects sho"':Tn •.;rc.s i:nflo.t e cl. 

Thus tota.l cl~ sp l c:-.cer:1ent of i"Jl~ lo rees o:r me.ch ines ...--oul c. be less, 

and thD.t by otl:er cc:u.ses (e . g . decline in volume of p rocl.u.ction) 

nou~c. be mo re th n c.;iven in Table x-vii . Total ffi['.c!line production anc. percent of ma.chi ne p roch-?-ction to tote.l l:"oulcl. be less 

than sho-wn in Table ,XIX. 

Cigo..r ban.d..il1g c-.nd. '.7 rc:.:p:)i ng nacb.i 2: e s he.7e l~ecentl~.r been introduced and. pla cet i~1 op era tion . It is c.ifficul t to ne..1 su::e the 

di spla cen ent of l <'.bor by t h e se .rrnc:1ine s because: . 

1 . Cel~o})hc::-nL1g of ga~s is c. compnr a tively ne'/ onera.-

tion c:>.nG. is no t 0.cne · i1o..I"2d . 

2 . Pl a c ing cigars i n L w box is done b3r the operator of 

t h e r: line 2.n0. is rea ll_,r a division of l abor f11om 

po.ck i n::; b=r ha~1d . 

Generall r S:i_Jeal::inc;, one Jer tor of this combined ~1 e ,_:ill 

urap, bai1d., a no. :?ack three times e1e m.li!ber of ciga rs formerl~r 

banded by the ha.l"ld. operator. ( *) 

( *) Lonthly Labor Revieu, December 1931 , :? . 14-15 . 

10691 
10591 

-170-

F: ' r,i S-:_11 ': ce !e:.t· o·"' lo.1"''J!" b::-r the ":"'}:-a1)'•)in- nnr_ bandin.:; !Tlf'.C:li7"!e 

is not incluc.ed in the above trea,tElent of the ciGar mddr_g 

machine . 

~~1 e c,uest: o:: E".:·i se s c'.s to .•~1a t may be ex-pecte~ of mechani z2.tion 

in the future? 

A survey of the costs of nroduction of five cent cigars uas r.1ade 

in 3.933 b:r the Census of I.~anufo.ctures at ti.1e request of the 

£Jational Recove~r .Administration. Eleven manufacturers of machine made , conbination han.Cl_ and machine made , :-.nd haac1. made 

cigars ·Here covered. These eleven na:1uf.: cturers yi..1oC.uceC. about 

24.4 percent of 2.ll cigars mac.e in 1933. The i..1 esults of 1is 

surve~r are z,i vei.1. in Table 1 of Appendix V of this re~Jort . 

Ins-pection of t b i s t 3.ble ai sclo ses tile startlint: fa.ct t:1ro.t althougb toba cco co stir...z $14. 80 per l, 000 cigo.rs G.s used for the 

n<:.chine- made product anc1 to "oacco co stinc: onl:r $11. 52 pe:~ }_, 000 

cigE'..rs Tins used. for the : a.nd- maCl.e product, the tot~l cost :per 

1, 000 of the nac'1ine- no.<ie :_')roduct 7D.s , 25.68 as corrrpo.red to 

$26 .66 for the ~1e.nc. mac~e proC.uct . Th is c..d.vantage in both :Jrice 

and q112-li t y L: fo.vor of tl:e El.s>.c:.:.ine-made product \7oulc1 seen to 

provide sufficiel':t ince:.1ti ve for future mecl1a.Ylization. 

Hon- far coul c. r:1echanization proceec7 At present onl: Clc sses 

11D11 anc"'. "..1. 11 cigD.i..~s D re e~clusi ~ el7 hand-nade , ancl these .:; rot·~s 

corrrpri se less t:1.an one percent of the totD.l annUD-1 productioi.1. 

:'here .ioulcl_ seem to be nothi:i1g to prevent 99 percent mac~dae 

made ~J roduction. 

The effect suc~1 a stelJ Tioulc1 have is obvious. About 12, 000 machil1e Porkers -rrould. be re _uired to <ii splace the reme.L1i:1G 25 , 900 

han(_ cig<:~. r mn.lcel·s. r:ost of these displaced ~:orkers , lJo. rtic1UD i..~ly 

those in e:.c.vancecl age a;roups, :1ould probabl~r not ~J rove .:-.cill.ptable 

as machine Tiorkers. ::ale cit::ar mBl'::ers nould ry:rob£~ bl:r be r..e" rl•r 

COI'Il]._Jletel .r eliminated fror., t h e ii.1dt::.stiJ'• 

On the other .side of the ledge r, it is to be stated t hat the consumer 17ould lJrobabl~r bei1efi t to tl1e e~tent of a better ci:;ar at 

a lm?er price, ancl_ that tl:e required new machine ~7or-'.:el~s \"JOuld 

probably e<:~ rn more per inG.i vidual than 1e displaced ha:c1c1 '.:orkers. 

However, these are small considerations in the f~ce of the c,.i stress 1.7hich "7ould ~J ro"oubl~r confront 14,000 or more displaced Tiage 

earners. 

Hecha:1i zation iL terr:1.s of its effects on -oroduction is c i scussed 

in Section D, po.rt 3 , of t' is chapter. 

5 . Effect of the Code on LD.bo r 

The Code of Fair Com-oeti tion for the Cigar Lianufacturing L1C'.ustr:y, a:!_Jprove<i b3r the President June 19 , 1934, provide6. tl-:at 

hours for all r;orkers be limi tad ·to 40 lJ er 1reelc, excelJt , a.iilong 

others, 11 proC'.uctiv:e erJ!,Plo~rees during tno peak see.sons per :reur, 
-171-

provide<i that the number of ·:re e::s aj_lo_ the l~unber ~ :lOlli"::; ·:Jc l' 

wee!~ in each season shall be c'..e terninec1 b:r the Code At.,_tnori ~r , 

subject to the p~o rovo.l of the Adnlini stra torrr. ( *) 

Wi th regarcl to wage rates f or p ::.·oducti ve employees, t he Co c"Le 

provided: 

11 1Jo J:>ro<iucti ve employee ent;a-ge cl' in the ~J ro ciuction of sto._; ies br 

ha.:1d macle cigars to retc:..il c;.t not more th...,.,n tuo fo:· f i v e cel1ts 

shall be pe.id less t han t~ent -s ven cents ( Z7¢) per ~1 ou.r ['..l1C. 

no machine cigar o:'Jerator engat;ed i:1 the p ro c1uction of cigars 

mc de to reta il a t not wore 12 n two for five cents sl12.ll b e lJa id 

less than tnenty-ni:(le _cents ( 29~) ··Jer hour. 

t11Jo cige.r makers in the Hc.:lC. i.:c.d.e L1clust ry-, exce~J t as Drovided 

in Section 5 , she ll be ~2 a at a r a te of less h~n t~irty cents 

( 30¢) p er hour; excep t in;; i n the South in w~1icl1 no ci::;c.r n:2ke r 

in the Hand l'.'i2.de I nd.ust ry shall be ;Jaid less than t iTe:1'l.jr-ei,:;llt 

cents (28¢) per £lour; p rovic1ec., w~ver, that cigar makers engaged in the p rocLuctio:a of cigars othe~· t lwn Cla ss A c.nc. l3 

cigars shall be pai c. a t a :c2.te of not less tl1an four c ents ( 4¢) 

per hour in addition to t :1e rr:te estc?.bli shed above. 

11 1Jo mc.c~nne ope r a tor e: cept as ·o:rovicle d. in Section 5 s.na ll be 

paid at 2. r c:.te of less than thirty-four ce:1ts (34¢) p er hm.rr 

excepting in the South, in t7hich no machine cigar maker sl1all 

be paid l ess th~1 t h irty-t17 0 cents (32¢) yer hour. 11 ( **) 

Provi sian ':l'as made that up to 25 percent of t h e total 1:umber of 

hand ":iork:ers and u-p to 10 y ercer:.t of t h e total numbe r of mc:.chine v.rorl>:ers might. -be c-l a ssed as tl slow Tiork ers 11 • Suc 1 e;7!;;>lo;;rees 

were exempt e o. from t h e ii1inimurn wage rate :vrovi sions of t~1 e Coc:te, 

provided they were paid the s<:.me p iece t:or:: r o.t es as oe1e:' ef.1.-

p loyees of the same cla ss. (***) 

Desp ite the relatively lo'.l vra..;es established by the Co cl.e , emp l0311:1ent concH tions ue r e ::.1uch c"!.i sturoed folloHin.,_; the 2.}J l~ov :--~ l 

of the Coc-:..e . From availC'.ble information, Yor~;: Count:.r , Pe:.:~J. lvani a , seems to h c.ve been t he most unsettled.. As a :ce s1.-:.lt of 

t:1is conch tion ~1 e Code Aut~1ori t~r was re que-steo. to make a survey of the si t1.1ation. A re:;_Jort uas suboi tted in Ausust, 

1934. ( ****) This rep ort s.ho'.led that of 2, 505 cig2.r rollers 

( *) Article III, Section 1 of the Cocte of i'c.ir Co r:me~i tion for t~1e 

Cigar ManufacturL1{; I: cl..ustr . 

(**) Article IV, Section s 5 , 6, c:"nd 7 of the Co o.e of :i?air Co ~peti-G ion 

fo1:' tl1e Cigc:.r l.ICJ.nufe.cturing :no:r:.str r. 

( ***) Article IV, Section 9, Cocie of ai:.~ Coop eti tion for the Cig2r 

1fanufacturing I nd.ustr'J. 

( ****) Re·.Jort of 0. R. Strad:bein ;:-:no. K. 1. Cox, Auz u st, 1934 -- Eational 

Recovery Adrti ni st1·o.tion files: Cigar i,Ianufc-\cturing Industry , Co o.e 

Authori ~,r . 

10691 
10691 

-172-

emploJ:ea in t:1at c.rec. on1;j~ 597 '.7ere c.ole to e£:l.rn the r:1L1imum 

permissi ble weekly Tiage at ti1e piece rates in effect. 

"'!or:.: Count ,.. TIC'.s 31robably 2.ffecteo. to such <?- degree bec£l.use of 

concentration on the cheap 2 for 5 cents c i gar i n that area. 

The entire sec t i on of the L1dustry producing thi s priced cig<:>.r 

was similarly affected. 

The I ndustrial Advisory Board of the NRA summarized the si tuation in a memorandum of October 19, 1934 as f ollows: 

11 The situation in the industry has been very- unsettlec1 for over 

a year. Substitutions to the P . R. A. vrage sccU.e nere lJrovic.ed 

for them, but this uc:.s unso.ti sfacto:r;:v. .At the time the Cigar 

Code 't7as a:p:yroved, June 19 , 1934, the manufactu:;.~ers o:Z 2 for 5 

cent ciga.rs in t :1e Yor~;: Cou..nt;;:- eli strict of Per~is:""l VC'.nia closed 

t~1eil· fo.ctories oecc>.use t:1ey coulG. not conform ui th the minimum 

nage ro.tes the Coo.e rovided.. Some plE'.nts reopened ant eL1-

ployed onl~r the fastest Tiorkers, w:1icn resulted in Cl. stril;:e. A 

·special exemption Pas ~rc nted t.::ese mc:.nufacturers as to rollers 

and bm1ch maJ:ers. A stu~y nras m2.de of conch tions; it Ylas found 

thc.t Tii th the maiJ.ufacturers p[>..:•ing \!ages belou tae Code tl1e3r 

nere still 1.mable to mo.J..>:e a profit, and some '.7ere lo sine mone:;-. 

· 1

1The Code :provides tha.t 25 percent of the Porkers in the ilc11G. 

division m~y be classified as slow ~orlcers and not receive the 

minimum hourly r a te , provided they are paid the same -_Jiece 

rate as other emplo rees of the srune cla.ss. .A hic;her r C':ce of 

ex.emption m21.;y- be asked by the ma 1ufacturer ancl can be gre.:.lted 

b~r the .Administrator. In tt.e Yorl:: County district tile original Order extenclecJ.. this exemption for 30 daJs, but no solution 

could be reached, so it uas extended to November 10, 1934, 

making 90 doys. A resolution 't7as dra~n by the Code Authority 

i:.1 a.n attemnt to correct t:1e si tua.tion. A hearing l!as hel0. 

but no agreement ne.s ree.ched. The average 11age paid_ ciga:c 

rollers is $9 . 00 a rreek, minimum ua~e i 1 the Code is $10. GO . 

l!ian~acturers are maldnG no profit and, if a higher '72.ge !1e.s 

to be paid, thef cannot stay in business and make 2 for 5 cent 

cigars. Tobacco should be aged for 6 months but tile ·orocessing tax is increasinG the cost of rc."R materials ancl. the base 

pri c e of tobacco it self i s higher and marry i rirproved machL1e s 

used are decreasiilg employees. If the Code is enforced, over 

8, 000 uill be t~ro~n out of work; if it is not enforced it nill 

have a bad effect on tl1e uages anc:. hours provisions of the Code. 

" I t is fel t there is no pract~cal solution to the problem; 

t here has been a decrease ii.1 consllinl'Jtion i n the pE'..st 10 - ears 

whicl1 , c omb i :ued 11i th the above. nentioned features, is almost 

certaiE to eliminate tl1e 2 fo.r 5 cent cig~r business. The orC..er 

wi ll effect c.. cor:tir.:ue.nce of t.~.1e tolere,!lce for 90 Cl.a•rs, .:-nc'. the 

. , -. 
-173 -

:::.esec- r cl <:',!ld Plar:. .... "1 i r:g :Div ision of the l'T .::.:l.A. 

···~1c- t sh:-.1}. ·oe c.one wh en the Ofder expires. 11 

s:1all deten11i :-1 e 

( *) 

Because of t ' ese con si dero.tion s, t h e l a bor p rovision s of the 

Code rele:cing to bu_11chers &.:10. roll e rs in this branch of t he 

I ndustr;y· -:-~ ere suspended. :t h roughout the effective life of tne 

Code . 

Conditions in the cigo.r ma nufa cturi1:g industry were n ever stable 

during t h e Co (.e ·o eriod.. Th ere is little to inP.,ica te t hat the 

wt:l€e r nte s 8..i1C. ee.,r ni ngs · ~ l abor in t h e inc.~ustry nere mate riall y 

change d from tl10se re!_)orteo. in 1933. ( **) 

( *) .~ morand.ur1 of L:.(cus·c ri&l Advi s or ;:,r Boa rd, Oc t ob e r 19 ; 1 9:34 . l~.J. tion

a l Recove:r;y" Ac ..rnirr sti ':' on f ile, Cigo,r :ianufactu rinz ndustr~, , 

( **) 

10691 

Ac3vi so iJ- :Boards. 

See Ad..r~ 1i st l'ati ve Orders 467-33; 

of Fair Com:·? e ti -~ o:1 , as a:pp roved., c l 9 ....--- /1 ." 7 ----- r o8 o_ ; A.J .. , pa,ge ...--= ; "''-'..1 , G..g e o ; 

457-40; 467-46 ; 457-48 i n Coce s 

re spec t ive l y Voh1JTie s ~ax , p ac:e 

x~-r I , pa e 580 . 
1. Declining Volume of Production 

The following table gives the total annual production of large 

cigars for the period .l919 to 1935. The peak production of 1920 was the 

culmination of a long, steady climb upwards from the time when cigars 

were first manufactured for sale in the United States. Production for 

the decade preceding 1920 average uneventfully around 7,100 million 

cigars per year. Production for the period 1921 to 1929 just as uneventfully varied between 6,400 and 6.900 million cigars per year. 

1919 

1920 

1921 

1922 

1923 

1924 

1925 

1926 

1927 

T-lillLE XX ( * ) 

m: I TED STATES, 1919-1935 

Annual Production 

of Large Cigars 

(millions) 

7,072 

8,097 

6,726 

6, 722 

6,950 

6,598 

6,463 

6,499 

6,519 

1928 

1929 

1930 

1931 

1932 

1933 

1934 

1935 

Annual Production 

of Large Cigars 

(millions) 

6,373 

6,519 

5, 094 

5,348 

4,383 

4,300 

4,526 

4,764 

The change began in 1930. From 1929 to 1933 p roduction dropped from 

6,519 to 4,300 million cigars per year. A slight recovery was evident in 

1934 and 1935. Per capita consumption figures are more significant 

(Table XXI) 

(*~ Source: Taxpaid withdrawals of large cigars as reported by the 

Bureau of Internal 3evenue. 

10691 
-175 -

TABLE pri ( * ) 

PER CAPITA CONSU1VIPTIO:N OJ' CIGARS, 

AT FIVE YEAR INTERVALS; . 1880-1.930. 

1880 

1885 

1890 

1895 

1900 

1905 

1010 

1915 

1920 

1925 

1930 

Consumption per 

Capita of Cigars 

49.9 

58.1 • 

67.1 

58.9 

73.1 

80.2 

73.~ 

66.4 

76.0 

56.3 

47.8 

It is apparent tbat consumption per capita reached its peak in 1905. 

Since then, -excepting a partia~ recovery in 1920 it has declined persistently. 

Not the least important result of declining demand is its effect on 

competition. Each manufacturer strives desperately to get a large enough 

share of the shrinking market to enable him to keep his .head above water. 

The individual producer feels that it is· better for him to accept orders 

at cut prices than to .have no orders at all. Ther·e is always the seldomrealized hope that ttthings will get better 11 • 

As a result, the consumer is frequently able to buy goods at a 

price under that which he would willingly pay. The total return to manufacturers decreases disproportionately to the decrease in demand. Labor 

rates are depressed. That these cond.i (i.ons have obtained in the cl..gar 

manufacturing industry will be developed . in succeeding sections of this 

report. 

For a comparison of production ~tatistics of the cigar manufacturing industry to production st·atistics relating to the tobacco industry 

as a whcle and to other branches of the industry for the period 1926 

to 1934 inclusive, see Table I of Ap end~x I to this report. 

2. Trend Toward Lower-Priced Cigars 

Of equal interest with declining prpduction as a factor causing the 

cigar manufacturer trouble is the decisive trend of demand toward lowerpriced cigars. In 1918, Class 11A11 cigars accounted for only 18 percent 

of total production; Class 11 13 1

.

1 prod.uct;ion a~counted for 58 percent; 

Class ncn, for -24 percent; and Class.es 1rD11 al'J.d 11 , combined, for less 

than o~e-half. of one percent. From 1918 to 1925, production ·of all other 

classes increased. at ·the expense of Class ff:B 11 • However, from 1925 to 

(*) U. S. Department of Agriculture Circular o~ 249, "American Tobacco 

Types, Uses and Markets", by Charles E. Gag~, ~age 63. 

10691 
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1935, promlction of all other classes has declined to the benefit of 

Class "A11 production, until today Class 11 C11 is the only one of the higher price groups to account for a significant proportion of total production. Classes 11 B11 , 11 D11 and "E" combined represent less than 2t percent 

of all production. The follo~ing table is self-explanatory. 

TABLE XXII ( *) 

PERCENT PRODUCTIOI~ OF LARGE CIGARS 

BY CLASSES, 1921-1935 

Year 

"Au 11BII 11 C II "DII "Ell 

1921 30.2 . 27.8 39.2 2.7 0.1 

1925 41.6 17.6 38.7 2.0 0.1 

1927 48.5 11.5 37.9 2.1 0.1 

1929 54.9 8.8 34.2 2.0 0.1 

1931 69.7 3.2 25.5 1.5 0.1 

1932 78.6 1.2 18.8 1.3 r).l 

1933 84.9 0.7 13.2 1.1 0.1 

1934 15.4 1.3 12.3 0.9 0.1 

1935 87.5 1.4 10.2 0.8 0.1 

This trend becomes im~ortant when its effect on dollar volume of 

sales is cons.idered. Assuming all Class 11 A" cigars sold at 5 cents each, 

Classes "1311 , 11 C", and "D" averaged sales prices of 7, 12, and 18 cents 

apiece respectively, and that all Class "E11 cigars were sold at 20 cents 

apiece, it may be calculated (using data in Tables XX and XXII) that 

sales returns for cigars dropped about 48 percent in the period 1921 to 

1935. 

Perhaps equally important is the fact that profit margins on Class 

0A11 cigars are much narrower than in the higher priced brackets. This 

factor must contribute to losses and general industrial uncertainty. 

A second trend has become apparent since 1933. A number of manufacturers of ten-cent cigars have reduced prices to two for fifteen cents. 

The results are apparent in an increase in production of Class 11B11 cigars 

at the ex.pense of Class 11 C11 (Table X.."<II). 

Any attempt to assign causes for this general movement of demand to 

Class 11A" cigars must be purely speculative. Low prices for leaf tobacco 

and the introduction of cigar making machinery have made possible the 

production of a low priced cigar of higher quality. Much of the loss in 

demand for cigars of Class 11B" and 11Dn grade must be attributed to this 

factor. 

It ·is probable that cigarettes have had a further influence. A 

. day's supply of cigarette~ for the average smoker costs about fifteen 

cents. Comparison of this with the costs of cigar smoking has undoubtedly had the effect of making many a smoker 11 price-conscious 11 , with a 

(*) Tax paid withdrawals · of large cigars as reported by the Bureau of 

Internal Revenue. 

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consequent swi t.ch to lower priced brands of cigars . . .. 

The trend :ls of interest ·to the . Goveril:IJMlnt. 

large cigars (~hough influenced by t~x reductions 

from_ $51,077,000 in 1921 to $11,693,000 in 1935. 

Tax receipts from 

in 1926) deereassd 

Ref~rence to th~ ~fferent wages paid to workers:producing the 

various grades of cigars has been made in a previous section of thi~ 

chapter.(*) It is evident that the increased relative proportion of 

production of Class "A11 yigars must have had a depressing influence 

on wage levels in the industry. 

The Code Authority for the Cigar Manufacturing Industry appoint~d a 

commission . of two ersons, one representing the Code AuthOrity and one 

representing the Cigar Makers' International Union, to iil!Vestigate cost~ 

of production of two for five cent cigars in Yvrk Countyl Pennsylvania. 

The report covered eight representative factories in the district using 

hand labor only. (~) It was shown that the cost of the tobacco used 

varied· from $2.50 to $3.91 per 1,000 cigars, but .a uniform labdr cost of 

$4.20 per .l,OOO for rolling and bunc4ing (composjtely) was in effect. 

The Bureau of Labor Stat~stics ~stimated that the average cigar maker 

produces approximately 75,000 cigars per year. (*~ On the basis of a 

50 work-week year and a 40-hour week, this would indicate a productiv~­

ty of about 37-1/2 cigars per worker per hour. Assuming that efficiency 

might be increased a third in these factories by use of the team-work 

system, the average output would be 50 cigars per worker per hour, or 

2,000 per 40-hour week. This would give the average worker in such a 

plant a weekly wage of $8.40. 

A further comparison is invited. The study of costs of production of five-cent cigars made by the Census of Manufactures iB 1933 ,indicated that the average cost of the tobaccos used per 1,000 five-c~nt 

cigars ranged from $11.52 for all-hand-made cigars to $14.80 for the 

machine-made product. This should be contrasted with the $2.50 to $3.91 

range per 1,000 cigars of the two-for-five cent cigars mentioned above. 

Informed observers of the industry have declared, and the facts developed.above .- woulQ. seem to bear them out, that as presently manufactured 

a cigar ·cannot ~e made profitaply to retail for under five csnts if the 

farmer is to receive a fair price fo~ his tobacco and the cigar worker is 

to be paid a fair wage. 

There is no evidence that the average· cigar manufacturer is deliberately exploiting his labor. Many manufacturers have -evinced a true 

interest in their workers' problems, but there seems to be inevitably in 

eve"T'J industry the cut-ra;te ·producer who will drive competition to its 

limit. The average manufac-turer has Hobson 1 s choice, to conform or close 

his shop. 

(*) Section C, Part 3-c. 

(**) Report of O.R. Stra9kbein and K.L.Cox, August, 1934: National Recovery Administr~tion files, Cigar Manufacturing Industry, Code 

Authority. 

(***)Monthly Labor Review, December, 1931. 

19961 
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The end of increasing Class "A" production is in sight. Much further increase could take place only with the virtual eliminat!orl of production ~f all higher priced cigars. A significant swing of public 

fayor "I?a<?~ to the better quality groups seems unlikely. The trend ove:r 

th~ last twenty. years has been too decisive to make this seem probable. 

3. £~ ~chanization and Concentration of Production. 

: The past and the probable future effects of mechanization on labor 

were. discussed in this cl~apter (Section D, Part 4). It was pointed out 

that in 1933 about 52 percent of all cig~rs were machine-made, and that 

machinery was in place to uroduce at least 25 percent more. No obstacle 

to further .mechanization is apparent; indeed, price advantages inherent 

' in the use of machinery are such that expa~sion seems inevitable. 

.i echanization has had as important an effect on production as it 

has. had on labor. . -

· )b~ use of cigar making machinery ,presupposes a considerable initial 

inve_~tment for equipment and royal ties. .An adequate factor~r locatio~ is 

re·quired. Overhead costs are high. More efficiency can be provided if 

machines are installed in .batteries; the skilled labor necessary to run 

t~n rriachiz:1es cos·ts but li.ttle more than the skilled la.bor cost to run 

one machine. Hand manufacture, on the other hand, requires little capi-

.. ta~; hand qperations can be started in almost any place where floor space 

is a:vailabl~ . 

All these factors combine to make the installation of machinery possible only to the manufacturer with considerable capital at his command. 

The small hand manufacturer, forced to compete against superior efficienCY.; has seen his profits dwindle. In many cases he has been obliged to 

go o~t of business. Table XXIII illustrates this in graphic fashion. 

The number of companies in operation has been cut more than half 

during the period 1921-1934. Of more importance is the increasing proportion of output of the larger plants. 

In 1921 there ~ere eleven factories producing more than 40,000,000 

cigars each per year (Table I, this chapter). These factor1es represented only 15.7 percent of all production, In 1934 the number of factories 

of this size had increased to 28, and they produced more than 54 percent 

of all cigars made during that year in the United States. The relative 

proportion of total output for every other factory group had decreased 

during the period. 

The position of the hand manufactufer is summarized in a report of 

the Labor Advisory Board after the final hearing on the proposed Code of 

Fair Competition for the cigar manufacturing industry. The Labor Board 

said: 

10691 

'

1A very· important factor in the situation is the ability of the machine manufacturers to force . the total mechanization of cigar production whenever the cost differential inclines sufficiently in their 

favor. Certain hand manufacturing centers, like York County, 
..., 

$ TABLE XXIII PERCENTAGE OF TOTAL PRODUCT! ON BY CIGAR .... l~UFACTURERS CLASSIFIED BY OUTPur, 1921-1934 

1921 1926 1927 1928 1929 1930 1931 1932 1933 1934 

Under 500,000 13.7 8.0 7.0 6.1 5.5 5.2 5.2 5.7 5.6 5.9 

500,000 to 1,000,000 5.3 3.0 2.6 2.4 2.0 1.8 1.6 1.9 2.0 2.1 

· 1,ooo,ooo-2,ooo,ooo 6.8 4.3 3.7 3.1 2.8 2.8 2.3 3.1 3.1 2.8 

2,000,00~~000~000 5.8 3.4 3.4 3.2 2.7 2.5 3.0 3.0 2.6 2.3 

I 

3,000,000-4,000,000 3.9 3.3 2.4 2.8 2.6 2.5 1.8 2.5 2.9 2. 8 ~ 

~ I 

4,000,000-5,000,000 4.9 3.6 2.9 2.8 2.1 1.9 2.0 2.0 2.1 1.9 

5,ooo,ooo-1o,ooo,ooo 18.4 15.6 13.3 9.4 10 .o 8.4 6.6 9.5 9.6 8.7 

1o,ooo,ooo-2o,ooo,ooo 16.0 15.5 15.0 14.7 13.4 11.4 11.8 11.5 10.9 10.8 

20,000,000-40,000,000 10.0 18.4 16.6 18.1 12.3 13.7 13.1 13.0 11.0 8.5 

Over 40,000,000 15.7 25.0 33.2 36.9 46.7 49.8 52.5 48.0 50.3 54.3 

Total number of 

factories operating 

during y_ear 14,~578 10!247 9,_312 8!753 8,~378 7,552 7~,138 6!952 6!620 6,160 

Balance in operation 

at end of y_ear 12~,105 8!427 7,974 7~,502 6,780 6!195 5,982 5, 787 5~,473 5!190 

j',(orta.l i ty 2,473 1,820 1,338 1,251 1,598 1,357 1!156 1!165 1,147 970 

Source : 1921-1930, · "Technological Changes i n Ci gar Indust ry", Monthly Labor Review, Department of Labor, 

Dacamber, 1931, P• 16. 1931-1934, compiled from reports of the Bureau of Internal Revenue. 

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Pennsylvania, and other isolated producers with an established 

local trade, might survive for a time, but the threat to the hand 

industry is a very r eal one. Meanwhile, the hand industry in 

general is able to continue ••• (only) ••• by kee~ing wages 

at a level below any .:-easonable living standards. II (*) 

The Code Authority of the cigar manufacturing industry submitted a 

.list of the 50 largest cigar manufacturers (**) known to that body. This 

Study was able to secure production sta.tistics on 49 of these corporations, divided into two groups as follows: corporations on which comparable financial information was available and corporations on which prouuction information alone was obtainable. A special gro~p of four was 

selected as representative of the position of the largest corporations 

in the cigar manufacturing industry. 

A group of less than 30 companies, including the four largest concerns manufactured 43.1 percent of all cigars in 1926, and 53.6 percent 

in 1934. The group of four companies made 2.5 percent of all cigars in 

1926 and 31.0 percent in 1934. The rest of the industry dropped from 44 

percent in 1926 to 32 percent in 1934. 

Cede authori t;r records uisclose the fact that production for all 

large corporations decreased 15.4 percent. Production for the remainder 

of the industry dron~ed 49.4 percent during the period. This is significant proof of the adva..11.tage of the large over the small producer. 

That the concentration of production in fewer, larger plants is due 

principally to mechanization c<m hardly be doubted. The old 11 tobacco 

trust 11 made determined efforts to capture the cigar markets from 1900 to 

1910 but was never able to advance beyond 16 percent of the total (Section B of this chapter) . Other efforts in other fields of tobacco manufacture where machinery was available at the time were almost entirely 

successful. The trend toward concentration has become predominant only 

since the development of satisfactory cigar making machines. 

This seemingly inevitable trend toward concentration suggests a 

possible if unpleasa..11t solution to many of the troubles that now beset 

the i~dustry. The ultimate result of the tendency would seem to be 

concentration of practically all production in a few large, completely 

mechanized n lants. 

The history of manufacturing industries controlled by a f ew large 

groups shows in general these extremes; ruthless, destructive price 

wars, or price leadership or agreement (not necessarily collusive). 

The former condition tends to burn itself out and give way to the latter. The iron and steel industry and the cigarette industry are mentioned as examules demonstrating marked p rice-stability. 

(*) National Recovery Administration files, Code Records For Manufacturing Industry, Volume E, Part 1, p. 9. 

(**) National Recovery Administration files, Cigar Manufacturing 

Industry, Code A11tho rity, letter of May 14, 1935. 

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1b'? c i o;e!' T"' -:. nn c t;uring Indus try may yet .become stabilized along 

sn -·:1 ~ ~ !" :: . ·.,., , \lot·! t~1 en be more chance o.f the worker receiving a · 

fair wage and the farmer a fair price for his · ·tobacco than under the 

present demoralizing conditions. The manufacturer, facing declining 

profits and vanashing business, usually considers no one's skin but his 

0' rr. 

4. Integration with Agriculture 

The various types of leaf tobacco are not interchangeable in prodct. n~ ·. ufacture. Cigar leaf' types are not used to any appreciable extent in cigarettes and cigarette ·types are not bought by cigar makers. 

Consequently, any reduction in demand for particular types of leaf 

.seriously affects farmers in regions predominantly producing such types 

of leaf. 

The revenue from the sale of cigar leaf has fallen drastic.ally. 

sinee 1919, to the detriment of many tobacco farmers. This crop represents a· large por~ion of the income to farmers in Pennsylvania, Florida, 

Georgia, iscon:~in,_ and the -Connecticut Valley. · 

The income of Pennsylvania filler-type cigar leaf growers reached 

$10,026,000 in 1919. In 1933 thi~ had fal~en to $1,024,000, a loss of 

90 percent. (*.) . The same story is repeated in Connecticut Valley production of binder and wrapper leaf. Income from the sale of binder 

leaf fell from $12,€32,000 in 1919 to $1,395,000 in 1933; income from 

wrapper leaf dropped from $6,090,000 in 1919 to $3,165,000 in 1933. (•) 

Total sales ~f the three classes of cigar leaf for the years 1925, 1933, 

and 1934 show that the decline was checked in 1933 and 1934, presumably 

by the Agricultural Adjustment Act. For these years production and 

revenue were as follows: 

TABLE XXIV 

PRODUCTION, PRICE AHD VALUE OF FILLER, 'BINDER 

AND ilRAPPE3. LEAF TOBACCO PRODUCED IN THE 

Ul~ITED STATES, 1925-1934 

1925 1926 1933 1934 

Filler lbs. 91,_ 7,51' 000 32,279,000 34,357,000 

Price per lb. 10.7 ~ 5.4 9.2 

Total value $9,809,000 $1,736,000 $3,165,000 

-Binder lbs. 95,159,000 37,565,000 26,328,000 

Price per lb. 15.3 20.2 8.6 12.1 

Total value $14,578,000 $3,232,000 $3,194,000 

Wrapper lbs. 7,538,000 6, 156,000 7' 048,000 

Price per lb. 93.8 83.3 57.7 68.7 

Total value $6,318,000 $3,552,000 $4,841,000 

Source: Tobacco Tax Division, Bureau of Internal Revenue. 

("') u. s. Department of Agriculture, 1935 Yearbook of Agriculture. 

(**) Ibid. 

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It is probable that a large part of the decrease in cigar leaf tobacco prices has been ocQasioned by the declining volume of cigar production. Another influence has been suggested. The increasing concentration of production in the hand$Of a few manufacturers has brought 

about certain chnnges in methods of buying tobacco. 

(a) Tobacco Buying Methods 

Three methods of selling cigar leaf now predominate . In certain 

districts (notably Wisconsin) farmers have formed "cooperatives" to 

dispose of their tobacco. In recent years, there have grown up in the 

Connecticut Valley regions, producer-wholesale organizations that do 

their own marketing of binder and shade-grown wrapper. Cigar leaf tobacco in most producing districts is sold on the farm. This process 

is known as "barn-buying", and is of special interest in view of the 

low prices paid for tobacco in recent years. (*) As the name suggests, 

"barn-buying" results from the meeting of the buyer and the grower at 

the latter 1 s farm. 

Large manufacturing establishments, leaf tobacco houses, and independent packers send buyers or "circuit riders" to the fields. These 

representatives form their own judgment of the probable size and quality of the crop. Upon these factors, coupled with knowledge of the trends 

and character of domestic consumer demand for manufactured tobacco products, the stocks of leaf tobacco already held by dealers and manufacturers, and the state of foreign demand for leaf tobacco, are based the 

purchasing plans ~1d price scales that uill govern the returns to growers when their roduct has finally been offered for sale. 

:rhe farmer is no match for the 11 circuit rider" in bargaining. 

Green tobacco is worthless for smoking. Three years is the avera~ 

curing and treating period before tobacco is ready to be rolled into 

cigars. The buyer has knoTiled~ of market factors such as stocks on 

hand and p roduction in other fields not available to the average gro~er. 

liioreover, the farmer has generally an inadequate knowledge of the grading of leaf tobacco. He is loath to trust his judgment against that expressed by a buyer. He is perennially in need of cash and cannot often 

afford to hold his stocks against the possibility of a ·better offer. 

riow far concentration of production has affected the market for 

cigar ~e leaf tobacco is not known. It is certain that fewer manufacturers means fewer buyers. There is inadequate knowledge concerning 

the who le field of tobacco marketing. An intensive study of the whole 

~bject here Opened to discussion should be made. 

(*) For a detailed description of methods of tobacco marketing, see 

U. S. Department of Agriculture Circular 1o . 249, "American Tobacco Types, Uses and Markets", by Charles E. Gage -- pp 70-82. 

10691 
691 

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CHAPTER VI 

~IS rRIBUT ION OF TOBACCO PRODUCTS 

PART I - CHANGES IN CHA1~~LS 

A. THE SITUA~ION IN GENERAL 

The distribution of tobacco products is like a spider's web in the 

intricacy of its opera ting lines. Apparently strong, its lines are 

readily broken and, like the spider web, apparently self-repairing 

as the volume of sales yearly reaches billion dollar totals. 

Manufacturers through sa.les and advertising policies weave the web. 

In it, the tobacco . wholesaler and the tobacco retailer are entangled , and, in th8ir struggles for survival, they tear the distribution pattern in t o recurrent states of disorder and confusion. 

1here is a problem here that the laissez faire economist has left 

a litt le worse than he found 'it; its solution awaits the economist 

who i s less stoic to the consequences of predatory competition. 

Since 1893, Hhen the industrial expansion of modern times first included tobacco -fJroduction, manufacture and consumption, the channels of distribution of tobacco products have undergone radical 

changes. Today, there is nation-wide ill-will toward the manufacturers of tobacco products among the traditional old-line tobacco wh olesale~s and retailers. In the last two decades, cigars, 

cigarettes and smoking tobacco h<:we found their way to the consumer 

through a score and more of new channels. In the last fifteen 

years, . the chain store system has spread throughout the country; 

there are some signs now that this development has reached maturity. 

Consumer-owned cooperatives buying a t wholesale prices and selling 

at low retail prices have appeared an.d are now prosper.ing. Department stores, although their relative sales volume is small, are 

nevertheless factors of wide-spread influence in the merchandising 

of tobacco. Cooperative buying through retailer-owned wholesale 

establishments is a significant new development. The small 

tobacconist's shop is no longer a neighborly social center; cigars 

and cig?Iettes are immediate conveniences at the soda fountain, the 

drug store, the grocery store, the roadside gas station and the 

humble sidewalk apple st and. 

The increase of ultima te consumer outlets, explclins· in part the 

situation threatening the toba cco wholesaler and the independent 

tobacco retailer in a market where margins are slender. In 25 

years time, cigarette consumpt ion in the United States has increased more than a thousand per cent. In reaching that result, 

these changes have taken place in distribution: 

(l) The tobacco wholesaler has been crowded into. an unsound 

economic position. Traditionally, he bought in large quantities, covered wide territories and developed markets as he 

served thousands of small retailers through his own warehouse, his jobbers and sub-jobbers. 
' '· · 

10691 

; ,· 

-1_ 34-

(2) lvianufacturers today sell direct to retail outlets of mass purchasing poTier, and grant these retailers equal, and in some 

instances greater, wholesale discounts. These sales are made 

to depa.rtment sto·res; national and regional chain systems; coO•)erat ives of va rious t)rpes. 

(3) In the retail tobacco trade, the tobacconist is being displaced. 

(4) 

Intense competition and narrow profit margins have forced him to 

add gum, candy, razors, blades, watches and novelty articles to 

his slender inventories. He does not lack competitors who can 

c..nd do sell cigarettes at cost or less ~7h enever they wish. 

Consu:ner-owned cooperatives now numbering thousands of units 

shrewdly exercise their unusual pooled buying power and are 

making significant inroais into the busine ss of tobacco wholesalel and retailer. 

(5) n.etail stores i n food products, household articles, drugs, etc., 

have developed significant technique in management efficiency; 

cooperative buying groups own the ir own holesale establishments supplying member retail units. In one such combination 

there are now more than 22,000 stores. 

(6) 'Ihe c~garette, because of nearly universal habit, is a natural 

los s-lead.er and is now so used by gr ocer~r and drug chains, although to a slllaller extent than befor e the 1:TRA Codes, and by 

department stores, hard~are stores, specialty shops and other 

outlets. The popularity of the cigarette has led to intense 

p rice ~ars i n tobacco retailing and wholesaling. This subject 

is discussed in Part ii and Appendix 7 of this Chapter. 

(7) Price discriminations in the foro of special allowances and discounts (both secret and auditable), granted to selected retail 

outlets by manufacturers, have adued disorder and confusion to 

the distribution plan, and constitute a ~roblem still engaging 

the a ttention of t he Federal Trade Com!uission and the Congress 

of the United States. 

The sales and the advertising uolicies of the manufacturers are not 

separable; they are, in practice, a joint f a ctor of distribution 

management. The effect of the advertising practices of manufacturers 

(other them ~o oy a.."lgles--which is oui te another story, indeed) with 

special refere; ce to the enormously grea ter expenditure of advertising 

dollars ?-£ compared with advertising ex_p endi tures for the sale of 

gasoline and oils, food products, drugs, cosmetics and motor cars, is 

presented in this Chapter in a series of interesting comparisons. A 

brief survey is made of the effects of to~~cco products as lossleaders. Attention is directed to the instances recently presented 

to the Congress and the Federal Trade Commission with respect to 

special advertising allowances and discounts allo~ed to chain store 

organizations. 

·.:bat of the consumer in this situation? He has gained a better 

cigarette and a better cigar at a lower price. His convenience and 
-185-

his pocket have been served as tobacco has found increasingly newer 

outlets. But the consumer is also a farmer .who raises tobacco, a 

-pro<iucsr who ui l~e ts goods' a wholes eler' a retailer; a work.er . depending upon wages earned in trades or industries. He has a br~ d 

and butter in teres\ in the social waste~ 'and economies (wheh' present) 

of competition ·in .production and distribution. Others must hav ~ the 

s~~e protection ttat he demands. 

What of the old-line tobacco wholesru.er, jobber and sub-jobber 

a.nd the retailer ? They have not seen the forest for tlie tr ee_s. On 

all sides, newer and differing wholesale and retail outlets f'or their 

produc·ts have developed and prospereci. They have protested, but they 

have not met the challenge. 

~hey have not been alert to the soci a l and economic significance of 

the management technique applied so efficientl~r by these newer 

competitions. Government and trade reports show that in retail 

sales, consumer cooperatives opera te on an average overhead of less 

than 12% (*). Chain store grocery outlets report average overhead 

operating expenses of a fraction as low as 14% of sales. All 

grocery stores selling 13.5% of toba cco sold havo an average expense 

of 17.5% (**). The average independent retail store (***) shows 

operating overheads of 27 ~ to as high a s 45~ for cigar stands. 

Efficien0y in store management -- better merchanciising methods are 

the only probleos involved in these handicaps that make worse the 

daily lot of the independent storekeeper. Something of the same 

condition is present in ,aholesaling. The'se are the challenges of 

the day that the ind.ependen t wholesaler end retailer ca:.r1not longer 

evade. 

Beyond the wl'wlesaler 1 s and retailer 1 s control ar e , of course, manufacturers' sales and distribution policies. As ~anufacturers have 

taken over more than half of their o1in normal 1.1holesale business, 

the independent has relaxed in enthusias1:1 alld aggressiveness for 

market development. With outworn order-taking methods, he has defended himself as Yi i th a wooden sword against his competition. 

Manufacturers, a s well as grea t na.tiona l chain and retail-owned 

hole sale buying organizations, have coricen trated more and more in 

the urban centers of densest population. But there are extensive 

areas of consump tion not only in metropolitan districts, but other 

areas widely scattered in many t housands of farmside and hamlet communities that must continue, without undue penalty to' the consumer, 

to depend upon V~h olesale houses. The a ctual effect upon all the 

elements in the tobacco industry of the present metropolitan concentration of distribution hc.>..s not been appraised; but tthe tendencies 

therein should not longer esc ~pe exhaustive investiga tion. 

One conclusion is clear. Manufacturer, wholesaler, retailer have 

been pulling apart; wrangling in recurrent antagonisms. Yet their 

interests in ctistribution are mutual. The interests there involved 

also concern the tobacco raiser, the Tiage earners of the In&ustry --

and the general ·public. There is needed a com.:1on meeting ground for_ 

( *) (**) (***) :i3ulletins 83 .:: dn 87 . Operating r..;argins , published by 

10691 

Harvard Uni verity , B1.1ret :u of Research 1929. See Also stuciies in 

Operating Results - 1933 - Du.~ & Bradstree t, Ind. 

. ... 
-186-

wholesalers and retailers a..r1d manufacturers to come to understand one 

another and to measure the trends a~d the consequences of their 

activities in distribution so that ~n answer in terms not only of 

price-and-profit economics, but of social economics, as well, may be 

resolved. Pressures and forces bear uponthe problems from every 

side, but as yet no research h&s been employed to measure these 

pressures. 

Wide areas of social waste -- directly concerning the responsibilities to t he national welfare of grower, manufacturer, nholesaler, 

retailer, consumer, demand complete exploration and appraisement in 

scientifically organized research. A solution in terms of a sound 

na tional economlf for the long pull can~ot much longer be deferred. 

The reasons are present in the following pages of this Chapter. On 

these pages have been spread the evidences of the seven distribution 

changes here outlined and the problems disclosed within the limited 

scope of this study. 

B. MANUFACTURERS 1 WHOLESALE BRA.N~IES 

The large manufacturers of tob2.cco p rodu cts, particularly cigarettes, 

have developed extensive marketing organ izations with a consequent 

increase in direct selling to retailers. These establishments often 

perform a. complete marketing function comparable to that of the 

tobacco wholesaler. In 1929, tobacco products distributed from these 

outlets amounted to more than $784,000,000 or 46.6% of the total 

sales, and in 1933 more tl1an $719,000,000 or about 56.9~ of the total 

sales. The decrec-.se in tot c.l s ales of tobacco products from 1929 to 

1933 amounted to 25 . 3%, but t.h.e manufacturers I establishments 

suffered a decline in sales of only $65,000,000 of 8.3~. (*) 

Sales by manufacturers usually include the most desirable accounts 

with the best cre.clit rating. The manufacturers 1 outlets did not 

suffer to the extent that the decline in the business of ilholesalers 

indicated. 1anufacturers actually increased the number of direct 

accounts at the expense of the wholesalers who could not meet the 

price competition. 

C. THE TOBACCO WHOLESALER 

The tobacco wholesaler performs extensive services to supply tobacco 

products to over 750,000 (~*) retail outlets on a very narrow margin 

of profit. The widespread use of tobacco products requires the constant delivery of small amounts even to the humblest merchant with 

his sidewalk stand. The wh olesaler services all but a few thousand 

of the total number of accounts which retail the bulk of all tobacco 

products. The small retailer is entirely dependent upon this wholesaler and his sub-jobbers for his supply of tobacco products. 

( *) Who lesale Distribution - Census of American Business, 1933. 

( **) Census of Retail Distribution 1930 gives 1,543,000 as the number of 

retail outlets. I t is estimated that more than half carry tobacco 

products. 

10691 
-1 87-

D. ~-CO ·;I1ITIONS ___ _ _ _ _.. I___ F TI{E RETAIL ___;;;.;;..;:_;~ TRADE .::::.._;;:=..= 

The retail tobc.cco trade has been subject to the fundamental economic 

changes in distribution experienced over the last two decades. The 

nature of the competition involves, pricarily, the economic conflict 

betwe en uni-_product and multi-product distribution. For many years 

the survival of the independent retail dealer merchandising tobacco 

products exclusively has been doubtful. The trend of gross and net 

margins in tob acco chains has been downward for many years, in sp ite 

of the l arge increas es in tobacco consum:9tion concentrated in 

ci .:; C~_ret tes. 

In 1926 and 1927, aggressivG competition in retail selling developed 

th rough the entrance of the chain grocery into the cigarette selling 

field. This was a nRtural cievelopment as cigar e ttes began to be 

smoked by women. The chain grocers made the appeal of price on a 

quantity basis to the barga in instincts of women shoppers. The tobacco chains and the independent tobacco retailers attempted. to 

mainta in a grea ter margin of profit and suffered a consequent loss of 

busine ss to other outlets. 

In vi en of t he grovi ng competition and the narrowness of the profit 

margin, cigar stores ret&iling only tobacco products became less 

profitable; they added su:p 9lementa ry products and increased diversification of mercha11Ciise such as razors, blades, candies, mints, 

clock s, watches, variety products and toilet goods. Cigar stores 

with fountains became sufficiently important to secure a separate 

cla ssif ication in the Census. In a review by an important authority 

on the tobacco indu stry for the year 1930 the following statement 

appears: 

"The method of retail distribution of cigarettes still 

reoains one of t he industry's big problems. With the demand 

f ir;nly establ ished , there remains the question as to whether 

a product hav ing such a universal appeal should be sold 

through specialized tobacco sh.op.s. The more logical development would seem to lie in making cigarettes available to the 

urch s~r in t he most convenient and perhaps in almost every 

convenient shop "Rhere everyday purchases are made. This 

tendency is a~p earing more pronounced, and there is every 

reason t o believe a wholly satisfactory and profitable distributing system will be evolved. II 

( *)The Tobacco Industry, Chas. D. Earney & Co., 1930, page 22. 

10691 
-188-

E. PRICE CONDITIOi:iS IN '.lEE T~Y:aACCO TRADES PRIOR TO THE CODE 

1. Vanishing ~i;a.rgins 

As indicated in Chapter 1, Section Z of this report, tne tobac- - - co indus tr;'r eme rged in J anuary- 1 :1~~4 from one of the fi Bx:cost 

price wars in its history. The tobacco distributing trades 

probably suffered one of their worst years in 1933. Margins , 

already low, hP.d been sque8zed to the vanishing point. It was 

not until the manufacturers raised their list ~rices from ~5 .50 

to ~6 .1 0 per tnousand tn8t retHil prices became fairly v,•ell established. 

Retailers, when appearing in ·;vashington at NRA Code hea ri~1gs 

· urged (1) the necessity of protection for the small merchant; 

(2) the benefits which they urged would accrue to labor through 

the maintenance of st~bilized prices; and (3) the assertion 

that price urotection had been accorded to practically all 

other retail grades and should be granted to the tobacco trades. 

They petitioned t he .1 Jational Recovery Administration to anprove 

Code provisions for res:3.le price maintenance . 

2. Retail Tobacco Chains in 1932 and 1933 ., 

The t wo lare;e retail tob;:tcco chains felt the crushing effect of 

financial difficulties i n 1932. Profit margins w1lted in the 

intense competition among r etail distributors. As a result, 

ti1e United Ciga r Stores Company of .America went into receivership in August, 1932 and the Schulte Retail Stores Corryor tion 

f aced an addi tiona.l onerating loss of more than ;;)2 ,000, 000 in 

1932 after a loss of $300 , 000 in 1931. These tob acco chains 

continued to be harassed by severe price comp etition from the 

selling by other r etailers of cigarettes and cigars as price 

leaders. United remained in banxruutcy , but the Schult e chain 

returned to a profitable basis of operation in 1933. 

F. P::liCE REGULATIONS IN THE 5.E·l'AIL TRADE 

The price regulation Code nrovisions (*) establishing m1n1rnum 

·retail prices for ci garettes were made effective through Office 

Order 228 since the rational Recovery Adnunistration policy opposed further pri'ce fixing provisions except in cases of emergencies. The Code proponents maintained that there was a constantly impending 11 emergency 11 within the industry and pointed 

back to the 1933 :price war when the so-called 11 fifteen cent" 

brends of cigarettes we re generally retailed almost at cost 

and were also sold below known costs by many chains and a few 

department stores. 

Minimum r etail prices for the four nonul pr br~ds and the ten 

cent brands were fixed 'Qy the emergency order (NRA Administrative Order l.Jo. 466-4) ;md ex tended. throughout the Code ue riod or 

(*)Administrative Order -~o. 466-4, July 12 , 1934, National Recovery Administration. 

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-189-

until May l, 1935, when a more 1)ermanent form of resale nricc 

inten G~ e L-1 t he form of loss limitation r egulations coverill , c i _: :1.ret t e s, smoking tobacco, chewing tobacco and snuff 

Her e adopted. ':lhese regul a tions, oecause of the Schechter decision, were neve r put into operation. 

In Admi ni stra .. tive Order No. 466-4 minimum retail prices of the 

most popular brands of small cigarettes were fixed a t 13 cents 

per singl e pack , two packs for 25 cents and $1.20 per carton. 

In the case of the ten cent · brands, minimum retail prices V'.r er~ ___ _ _ 

fixed at 10 cents per pack , ··two packs for 19 cents, and 95 cents 

p e r carton. These prices were fixed in conformity with the 

g~ nerally prevailing prices through the regular r e tail tobacco outlets .. 

The small independent, a s has been indicated, pays ap,)roximately ~1.11 -;;> e r c a rton for the popular brn.nds. The fixed ret ai 1 price of :,a. 20 per ca rton allowed him a gross profit of 

9 cents or about 8)b on cost. The direct buyer receiving t he 

ordina ry trade disco~~ts and paying 1.076 per carton made a 

gross profit of 12 .4 cents or about 11.5 per cent on cost. 

However., atten ~ion must be directed to the preferential discounts accruing to a numb er of these buyers. 

1. :.'~ ffects of Price Reglllations 

The Research ond Planning Division, l'ffi.A, sought to measure the 

effects of the Code p ric e reglllation ? revisions on independent 

retailers, department stores and various chains through personal int ervi ews a~d 'Ghrough questionnaires sent out in collaberation with t he Consumers Bureau of the National Emergency Council. The r e sults we r e su.rn.marized in a special ·study(*). 

(~) Ind~pendent Retailers 

A de-t a il ed analysis of ·the results secured from questionnaires which we re filled out in the presence of enumerators 

connect ed with the Consumers Bureau are included in Tables 

I to XII of the above menti-oned· report. In brief, only 

about :-~ of the independent retailers reported sales less 

than the minimum nrices established under the price r egulations in the Code. A few only admitted selling at a 

loss. The average weigh ted Drice -per single pack sales of 

popular brand. cigarettes before the Code regulation period 

was 13 .5 cents against 13.6 cents after the regul ations . 

In two-pack sales, the corresponding figures increased 

from 25 .9 cents to 26.2 cents.. The volume sold by independents increased 1.6> . In the cas e of the ten cent brands 

practically no ~rice changes were requ ired but the volume 

of sales of this t ype of cigarette showed an increa s e of 4 

per cent. 

--------------------------------------------------- (*) Specia1 ~ep ort. Effe cts of the Cigarette Price Regulations Under 

t he Emergency Declaration for t he Vfholesale and Retail Tobacco Trades, 

December 18, 1934. Yational Recovery Administration Files. 

10691 
.. 

I l 

The price re ul ;::~ tion ;rov1 s1ons of tne Code genera.lly req_uired ·.no nrice ch;mges in chain tobacco stores exceut 

u.:.: inc1•eq,se of onP. ce:1t on c·,r '"ons wnici1 had been retailin6 ~t $1.19. 1Pking into consideration the norm~u sales 

de~rease .for c:1~in ci ~fl. r sales for tile ;nonth durL1£!~ which 

the data .were SP.eur ed , the cl ain cig;Ar store s experienced 

an increase of o.l pe~ cent in sales. 

The chrdn cigar stores rob bl y secured the greatest bonefits from price regulations. They were relieved of the 

competi ti9~ of lowe r urices fr01:1 otner outlets. :£~heir 

gross nrofi t O ·l cigP.rett e s was o..bout 14) on known rel:)laceme1t cost without co'lsideretio::J. of any sueciel discounts , 

fr ee d ea1 s, or o.l lowances 'iich they may .have received 

fro1rr mvnufv.cturers of cigarettes. (*) 

(c) C~ n Dru~ St c ros I •• 

Renorts from c nin dr1g stcres i~dic ted tha t urices were 

rel a tively stabilized nt tbe prices ?rev~iling in chain 

toba cco stores, buli t 11r t this tvpe of store vJas inclined 

to lo'.'le r prices to mee t compPti tion. They were i:1 a better p osition to do so. Price s in some c a ses were as low 

as ten eents per pnck for the stnndard brnnds . Some 

cna ins favored the use of cigarettes as 11 loss leade rs 11 • 

However, from a ll t 1e dat~ s8~Qred, tho genera l o~inion 

favored "Jrice r egul:1.tions. Th.i s a~nenred natural since 

tobncco ·oroducts reDresented 14 ner nt of their total J. • 

sales in 1929~ Stabiliz~tio1 insured them a gross profit 

of ~bout 14 Der cent on rep l a cement cost, without taking 

into consideration a~ snecinl discounts, free deals, or 

allowances. 

(d) Chain Groce~ Stores 

Group I - Returns showing no significant price ch~1ges 

v1ere received fro n 14 grocer:r chains, renresenting cx-:rproximately 9,800 outlets in 10 states. 

A comnq,rison of tne av..; r age vol.ume of the 1934 Atlt,oustSen tember sales to th'3 May-June sales of 1934 showed n. 

decrease of b in volume of the populer brand cigc:..re ttes. 

However, a se;:1sonal study of chain grocery stores shO\!ed 

a. <±~ ryer cent decrease during the a~ne 'Jeriod. It may 

re~sonably be sta ted that cisarette s~Jes increased about 

6 9er cent in tnis group which n~turally favored price 

regulations since l?I'Ofi ts probably equP.lled tnose made 

(*) Cnain St ores, Allowances, etc. , :i:'oba cco Tr1.de Federal Trade Ccnmissian to Senate Resolution }\)o. 224, October 26, 1933. 
-191-

by the a for ementioned dr ug chai n s. 

Group II - A ou~ of 18 ,000 GroceDr outl e ts which we r e 

forced to make slight i ncrPases in their p rice s showed a 

volume decrease of 18 . 8 per cent by comp a rison of iv1ayJune 1934 sa l e s to Au t 1934 sales. However, ll per 

cent of t h is decrease mAy b e a ttributed to seasonal decrease which p robably r esulted in. a net decrease of 7.8 

per cent in sales for t he period .report ed. This group 

was noncommittal in resp ect to p rice r egul ations. 

(~) Department Stores 

Reports r eceived from t en of the largest department stores 

in the New York City metropolitan area showed that six department store s conf~n d t he sales of cigarettes to their 

restaurant departments." ·cigare tt e s we re carried merely 

a s a conveni ence "i t ern and we r e sold a t prices equal to or 

above the minimum established by the Code price reguladons. 

However, four depa rto ent stores which had sold cigarettes 

below p rices prev ailing i n t he r egul a r tobacco outlets 

showed large r evenu e decreases. ExaminC1.tion of Table XVI 

of t he Research and Pl anning re"?ort indicates that one department store s:1owed a volume decrease in excess of 75 

per c ent within t wo mon ths a fter the Code minimum price 

r egul a tions became eff ective. 

2 . Price Spread Bet ween Popula r Br ands and Ten Cent Brands 

10691 

~he price snread between the po~ul r brands and the ten cent 

brands under the mi nimum ,.)rice Code r egul a tions r e sulted in a 

differenti al of three cents in the case of single pack sales 

($ .13 v .. $ .10 ); six cents in sales of two packs ($ . 26 v. .19) 

and t wen ty-five cents in c a rton s a les 1~ 20 v. $.95). 

Int e rnal Revenue fi gur es indicated that the ave r age taxpaid 

withdrawals of t he compani es making t en cent brands for Ap ril, 

May , and June , 1934 equall ed .3 ~ of total withdr awals for 

small ciga rett e s and t hat t he August, Sep tember, and October, 

193~ average showed an increase to 18. 4)6. While these figures 

a re not conclusive, there i s no doubt that the p rice differentials between these t ypes of ciga r e tt e s during the period of 

Code regul a tion tended to improve the position of the cheape r 

ten cent brands. 

3 . The Cigar il1e rchandising Plan 

The Ci gar Me rchandising Pl an .was includ~d as Schedule 1 in 

t he Codes for the Cigar ivianufa:cturing Industry, the Wholesale 

Tobacco Trade , and the Ret ail Tob a cco Trade. The p rovisions 

we re staye d when the co des were ap-oroved but the stays we re 

lifted by Administra tive Orders on November 11, 1934 . 
G. 

-l";:;;-

The Cigar Ivierchandising Plan was an at;tempt by the industry 

to stop declining -,rices in the face of declining consu.mption 

and improved technology in uroduction . ~he distributing trades 

had been recipients of larger and larger discounts by the manufacturers in attempts to increase sales. As a result, sales 

were made be1ow the intended resDle prices which were stipulated ou cigars due to Internal Revenue Bureeu requirements 

~or tax ~urooses. 

The Cige.r Me rchandi sin[ Plan was designed to correct these 

difficulties by an elabor~te systeill of price fixing arrangements. The manufa.cturers filed the L1tended retail prices 

and discounts allowed wit a ~9 rice filing agency lmown as the 

National Tobacco Council, Inc. The wholesa ler also filed his 

discounts. The schedules of maximum discounts were complicated 

due to ttem~_)ts to distinguish between various types of distributors such as jobbers, s ervice jobbers, drop shi~ment purchas ers, a.."ld chain store accounts. 

The r e t Ailer w~s forc ed t o sell these cigars at the i~tended 

retail ~rice se t by the mRnufacturcr subject, of course, to 

specified discounts for qLtnntity purchases. 

(a) 0-oeration of the Plan 

~hen consideration is given to the large vari ety of 

cigars, it is easily recognized tnat difficulties arose 

in connection with the techni cal operC'I tions of t ~1e plan 

C'lnd with its enforcement. Retail prices increase~ generally ru1d a sharp decline in consumption of ciga's selling for ten cents and upwards 'as irrunediately ex-Jerienced. 

Con:pl i nnce ·.vas openly flouted. i/nen the NRA codes beC'~me inope r a tive a tent ? tive pl:--·1 of revision was under 

consider a tion . 

~LATIVE STABILI~I OF RETAIL PRICES 

While department stores we re t L1 e :nost serious Drice cutters, this 

competition Wf'lS often magnified through the sK:illful direction of 

publicity to obtain the full benefits of the 11 loss leader 11 practice. l o othe r consistent 11 loss-l eader11 outlets were re:~orted, althougn a few large chains re"D orted that 11 in isolated inste.nces 11 

cigarettes were sold at losses. 

It must be remembered that most of the chain outlets had secured 

a sufficient volume of the retail cigarette trade to make it logical to convert this item to the profit side of the ledger. While 

in some instances prices were slightly below these established 

under the Code, attention rnust be directed to the varying costs 

of cigarettes for different classes of retailers. 

10691 

{ 
-193-

H. PRIQ.B ~GULATIONS IN WHOLESALE ·I'OBACCO TRADE 

Cigar e tt e 1'Jrice r egulations on the four p opular brand-s and the 

ten cent brands were established by an emergency order under Office 

i\'Iemorandum No. 222 within a few days after the Cod¢ .was ap·oroved and 

extended throughout_ the life of the Code. 

' . ' ~ 

Minimum -resa le prices were esta.bli shed by markups -on the net 

price after deduction of the usual ·discounts; received from the manufacturers. The wholesale markup of 3.1 ~ on - th-e. mani:tfacturer's net 

price of $5.38 per thousand for tl:i-e· popular l:i·r ands· established a 

price of $5.55 per thousand in s a l e s · to' ~l'af1e rs !which was the generally p revailing s a les price ch0.r ge£ -- ~~ cr di ted jobbers. ·· .. ':.." - .. .. 

In the c ase of the ten cent brands, th corresponding 1'J rices 

were $4 .19 per thousand and ~4 .3 2 pe r thous and. This 3.1~ wholesale 

markup was divided in c ase s where both jobhe:r··s. and subjobbers n e r e 

involv ed , a llowing t he jobber d. l ·:_, and the subjobber . 

~ .... -.- :. 

1. Eff c~s on the Sub -jobb er 

The industry continual1y quest.ior1ed -t he right of the sub -

jobber to reco gnition within ·t he·· t1·e_'cle-: · Howev e r, -since t he subjobber 1 s only marke t for t he purcha se of cigare tt e s Vv8.S the jobber, it must be concluded t hat a sufficient number of j obbers 

must have us ed t his means of distribution to justify the subjobber's economic exist ence. 

Comp l a ints allegi ng injustice in allowing the sub-job-iJe r 

only ~ of the wholesale markup caused the Nationa l Re covery 

Administration to make t wo adjustmen ts in the partition of the 

wholesale markup, ultima tely a llowing the sub-jobber .1~:. ) and 

the jobbe r )~ which more nea rly conformed with the f ormer p r a ctice of the trade . 

The resu lts of the cigare tte p rice regul a tions caused conside rable h ardships to the sub-job-oe rs during practically the 

entire life of the Code. The final adjustments in his f avor 

was made only a month before the Sche cter de cision. 

2. Compliance with Wholesale Price Regulatiops 

Considerable difficulty was exoerienced wi t~ compli anc e 

with the cigarette p rice regulation p rovisions in the Whol esale 

Tobacco Tr ade due to t he existence of so-called "cash and carry" 

jobbers who cat e red to the su b-jobbe r trade and to ret ailers. 

In some c as es large ret a ilers were reclassified as sub-jobbers 

in an effort to circumv en t the prices fixed for s al es to the 

~e tail Trade . (*) 

(*) Transcrip t of Hearing , Wholes ale Tobacco Co de . March 8, 1935 . Nat -

ional Recovery Administration Fil es . 

10691 
-194-

l. SOLUTION OF CODE PROBLEMS 

1 - Possibili~ of Consolidation 

The Codes for the Wbolesale and Retail Tobacco Trades presented 

no problems that could not h;: ve been solved by A&ninistrative 

order had the Nationa.l Recovery Administration continued to 

function. Shortly before the Schechter decisiou, a plan was 

underway to create four master codes for all distribution functions, consolidating and simplifying the controls for all 

wholesale and retail trades. Under tnis plan, uniform labor 

and trade practice urovisions for wholesale and retail tobacco .. .); 

would ;Jrobably have solved all problems. 

2 - At te r;TI? t to secure Volu..r1.ta:r;.r Agreements 

10691 

Under t 1e voh~.n t a ry code ·)rogram at tempted b7 the revised NRA 

in June lqJ5, the Vfuol e s ale ~obacco Trade anplied for the first 

volunta ry agree::1ent. 'l'he Federal 'frade Corruni ssion approved a 

number of fair trade ,)ra.ctice provisions. The NRA could not 

come to agr eement on l nbor provisions; and the effort was abandoned. 
-195-

J - LABOR IN TOBACCO DIST?..I.BUTIO:'I 

l. Hours and Wages in the Retail To1;lacco T:rade. 

The labo::- provisions in t he Code for the Retail Tobacco Trade 

were Dare favorable than in many other retail trades, including the ge neral: code for the :retail trac1e • . \'Ji th relation to 

hours of ~mployment, the Code for Retail Tobacco rade was 

based largely upon store ho~s of the ~etail Code(*), classified a ccordins to oups A, B, ru1d. C of selected store ho1Jrs 

under the 3.et ail Code. The e!!lployer could select either d1e 

40, the 14, or the 48-hour week, thus. provided for his establishment, remainint,:· open up to 56 ho1..:rr·s, 63 hours , and over 

63 hours p er week, re~~ectively. The only deviation from 

these hours of emplovment found in the Code for t he Retail - < 

Tobacco Trade ~as a further classification designated as 

g roup D, whereunder r·etail tob2-c co establishments remaining 

onen 84 hou:-..~s or ::aore ·per week had to provide a maximum work 

week of 56 olli~s ·,)er ernployee. (**). 

1ii7ith respect to minimum -rrages, the ::te tail Tobacco Trade exceeded the seneral Code f o:- the 3.etail Trade by $1 .50 per 

week in each classification b.:1sed on comnarable sto:t e hours 

and population differentic>.ls. These higher minimum wae;es 

take on additional significance 'ifhen it is r emembered that 

keen com:9eti tion exists \·:i thin ti.1e drug trade which was subject to .t~:e lower wage ~ov 1 sion of the general B.etail Trade 

Code. j 

Furthermore, the beneral ab ~rov 1s1o~s applied only to 

re~ail tobacco establishr~en s in towns anct cities of 2500 

and more pop1..1lation and r1 ere not o.p-olicable to thousands of 

otl'E r reta il outle t s -r.ihose principal t rade was o ther than 

tobacco prod.ucts. 

During ti1e p eriod. of the rt.e tail Code's fornulatior.., it was 

estimated that a +O% increQse in ? ayrolls of reta il tobacco 

e stabli shmen ts 'Nou.ld result. To Tihat extent the increase 

was rea lized is large ly :conjectura l. 

Compliance 'l."Ii th the l1our a...'1d wag~ s provisions of the Retail 

Tobacco Code caused ver-'.T little diff iculty . The re-oort of 

the ~ Compliance Division on file in t he De:)uty Administrator's File indica te s t hat only fourteen COIJplaints were 

on file as of March ~~0, 1935 . 

2 . Hours and Wa 2: es in the Iholesale Tobacco Tl~a~e. 

(~) 

(**) 

10691 

Labor in the wholesale tobacco business, as in all wholesale trades, is enerally not a direct factor in competition. 

The labor supply- is not limit e cc nor hard to -r eplace and its 

services are 01:ly ind irectl;- related to the product offered 

for sale. The relationsh ip between wages and prices in the 

Code of Fair Competition :no. 60, Volume II, P• 32 , 

Articles V ~nd VI. 

rtetail Tobacco Trade, Code #466, Articles II, IV, P• 43 
A. 

1. 

-196-

w~olesaling b"u.siness is r_o ·J ::ts close as in o~:ler e:.:~e::-prises . 

Labor in the wholesale tobacco trade is as unorganized as 

practically all ot-her n~1olesale trr de labor. 

Con ,putations · f:i:om the C0nsus figu.res indicate that the number 

of full- time employees in 2 ,106 \7holesale tobacco establishments decreased from 13 , 177 in 1929 to 10 , 815 in 19M2 or 18%, 

the ~1.-run-oer of e stablish:cents (1 , 988 in 1933) showing only a 

slight decrease . This is of significance inasmuch as the sales 

reported fo1~ these -ears b~r these outlets showed a decline 

from $858 329 00~ to $526 , ,ill5 , 000 or _33 . 7% . However , these 

fi e:ures <i o not include htmd.reds of o+her 77holesale outlets 

distributine tob~cco ~rodTICts . The rynolesale Trade Code 

Autl1ori ty had a ;rtB.iling list of approximately 6 , 000 names. 

(a) I.'alaC!.justme:1.t n i th Other d'lo~esale Trades. 

There "ITcl':- a maladjustment in Tiages as compared 

-ri th t l1e -.:hole sale Food a"Tld Grocery Code and the 

Jholesale Cui f ectioners' Code . :Iinimum wages in. 

e ili1ole s'"'l e Foo<i :me. Grocery Corle were $14. 50 

a s corr"9a rc cl - l t h $16 in the ·Thole sale Tobacco 

Trad.e ancl t:1e na:dmum hours VTere 44 against 40 

holrrs. _he '.1lole sale Confectioners 1 Trade included ~revisions for mini~um wages equa~ to the 

wl1olesale tobacco trade but the oa-"'Ci:nw:1 honrs 

ere 36 instead of 40. These caladJustments are 

s::..gnificant in viev.=- of the fact t hat the comparisons 

here shor-•n , involve trades :hich <io a considerable 

volume in. .v~ olesaling tobacco products. 

PART II - A:JVE?.I'ISLI: P:ct.ACI'IC3S 

A.FE3C""L ·e- DI STRI:Bu riOlJ I.:.J _OB.ACCO • 

Good ill a~d Co~ etitive ~arfare . 

In considerinc: the q,.1estion: "Is Competition Getting Out 

of Hand" 1 Roy .Jic:~inson , o.n editor of Printers' Ink interviewed John j enso_ , the ~resident of the American Association of A<iverti sing A.:;~ncie s ( conr'only known as the 

11 4A1 s11-) and Cj_UOted !·,Ir .. 3enson in these '-vo r ds: "Unbridled and 

uncoordinated comuetitioa inte~sified under the stress of 

de:pression, may be the death of the trader. Attempts to 

get busL1.ess at an~ cost and in any w~r have led. t o uneconomi c e.lld unethical prac tices, -·:hi ch 1mless moderated, 

threaten to ~ut ·all business back to the dark ages in inclust rio.l st:;.~ife ". (* ) 

(*) I nt e rvieVT Tiith John Benson , presi~ent of the 4A1 s in arti c le 

--Is Competi tion Ge tti ns Out of~ and - Printers' Ink , ( . Y. ) , 

issue of April 30 , 1931. 

10691 
* 

** 

10691 

In qctob.er_ 1931, viT i ting to Printers' Ink, George '7. Hill, 

presiden t of tl ~e A::1eric;-,:1 c:.iobacco Cor>yan::, s.:dd·: " In the 

case Oi a cOJ r::")an~r such as the American Tol:>acco Company, 

men ufacturing anct e xploiting an art-icle o.f :1ational and 

i n ( e .::; d ~rorl·~-- ·ide ·b:.~an•2. lue, s ood.-vd11 is uarticularly 

ir.roo:.: tar:.t. In a:oract'ical sense c.nd wboll:r aside f:-om the ~ - u 

:orincipl.e.s p_f e.ccoun tine , ~~ he i tern of t:Y='d will on our balance sheet is tre!;·.enC..ousl;r import Elnt to the ~1a nage en t of 

this co:r:1pany ::...'t'J.d (for) •••.osustained ·effort or: se.les ••• 

I believe ".7i t h Robe:- Babso n !.;hat •••••• henceforth, it will 

-be t:!:1e on.l ~ t h ing of· >e rmanent ve.lue •••••••• If I wereasked 

what ts the most valuaole asset upon the balance sheet of 

the Arr.erican Tobacco Comp~~y c~ d the mo st conservatively 

val<..1ed., I oulc~ ,_w.l'1e sitc-.tii:J.g ly -:90int to the item of good 

vrill 11 • ( *) 

This co;: m~ent by i.Ir. :E-r'ill ua.s in ans'::rer to an article pub- t -

lishe d in Printers' Ink ti.1e weeK before in Hhich Andrew w. 

Howe had corr:pared good-1.rill v c:.lues of General Motors, the 

American Tobacco Coj:1:pany and -the R. J. Reynolds Company . 

Mr. Ho~-ve had "pointqd o•.lt that ·General £,1otors ( a s of that 

date) c8.rried the i t.em 'of g ood-1.-rill on its balance s·heet 

at $51,949 ,114.66; that othel;' motor car malcers c~ ied their 

:;ood-wfll as an item of $1; ~hat the .Ar'lerican To basco. Com-

:?any "estimates the v a lue of e;ooe.-will whi ch it has built up 

aro~"l.d Lucky Strike, Cre:wo, Bull Durham, etc., by investing 

'Tare;e S1J.ms in advertising at $54,099,430.4'1 11 and that the 

"millions of d.ollars that R. J. Reynolds has spent in advertising Camels, etc., have 1mdoubtedly created a good-will 

t.hat is vi"'rth many millions, yet thj,s company places a balance eet vallutio~ of $ 1 on its 1brands, trad~-nruaes, 

,sood-will.'" 

· Good..;willlapparentl;y- s1::.rv~ ve s some of its peculiar byproducts. Eugene Forker, generail advertising director of 

the International ~; agazine Coi!!pany, indicated this in a 

speech to business and. adve::;. tising fj;roups in April of 1931. 

He said: "A fe iT weeks ago, one of the execu tives of our 

company was t allcing to a Jrominent publisher about the pov:er 

of advertising and' '.ihat it had done for A.rnerican business. 

The publisher said: 1 Look a.t the cie arette fellows, that 

they have none ~ith advertising! •••••• Advertising can ma~e 

the public believe that ;·o·c.r proC.uct is a good product and 

P.ell worth the p rice asked. It cannot fix this belief and 

at the sa:1 e time r:1ake the public believe that all similar 

'J?rod·'.lcts are '?Ortbless." (**) 

Letter on Good-Will by eol~ge :::. Eill' Printers I Ink, ( xr . y .) 

issue of ·october 29, 1931. · 

Article - 11 rt.estrain Ycu.r Advertisin.~ or, It will be Restrained 

for ou." Byi Eugene Forker, Print ers' I~k (N.Y.), April 

30, 1931. 

I 
* 

10691 

-198-

This was in the year 1931. A two- rear retail price war and 

a~verti sing "~J ar among the cigarette · man~ac~·u.rer s had ended 

by Apri l 15, 1931 . :During the armistice, before the Big 

Three and the sr:1aller companies resuned t he artillery fire 

of ne~:spaper and maga zine oace ,, li. J . 1.ioffet, vice president of United (chai!l tobacco "';7holesalers and retailers), 

told Boy Dickinso:1. , an editor of , Print ers 1 Ink, as quoted 

in. the April 15 , l C} 3:)__issue : nr bellreve that it VTill be a 

long time before t here ll be anothe r "lJrice war of this kind. 

It is a nuch chastaneo. indu;try •••• Both chains lost :noney; 

many independents Tient broke; Hholesale::ts lost money 8.l1d so 

one of tl1e sil liest .:>rice wars i n hi stor r comes to 'a..n end. 11 

The strug6le for dominance and twisted cleverness in advertising cla ims rri th the artillery salvos of price cuts had. not 

been confined during this ~e riod to the tobacco companies 

alone . ~rom 1926, there was evident a idde spread breakdown 

of publ ic confidence in aevertising and in the business enterprises behinC:. t he claMoring words. 11 Ri ght now we are in the 

e r a of 1931 D.dve r tising , 11 Frank Brauche r, vice p resident of 

The C!'"o'·'ell Publi s! in:- Company , wrote in April of that a1~ . 

11 If 1931 advertisi 1.?" mea...'1s 1hat it appears to mean , it is 

hign l y competitive , ::-~ -:e xp losi ve adve rtising . The k ind of 

advertising 7hic!: it seems to me , . if carried to its logi cal 

conclusion , ·.rill destroy the eff ectiveness of advertising media. 

I t r,•ill dest:::-oy some thin:_" that the advert iser needs •••• the believability of advertisi:.1e-: . 11 (*) The conditions t h at for Mr. 

Brau che r 1 s warnin.g s be cane di sast::rously mrse in 1932 and 1933. 

Four years later - in J uJ.y 1935 , s. Clay illia.ms, of the 

.!t. J • .rte~molds _oba c c o Compan~r , filed a ~) rief with the 

United State s Senate A[;:- ic ~."'.lt1.u~e Committee , a.ttack:ing features of t l e AAA Amen~~ents nill then before the Senate. In 

h is b:;,~ied , :~r . -yil liams p ointed o·u.t that cigarett e advettisin.; h a o. :.1u~ tiy lied aD.les and tobacco consumption nore than 

a thou s and percer.t durir-g t he last .25 e~" s, ancl had brought 

incr e a sed returns to tob:tcco g roTiers , to workers in :fa.c tori es 

and to t he Federal Goverrunent , besides ivin~ the co nsu~e r 

more for h is money t han ever before. 

• ' • \ I 

Turnin ~ to the question of advertising , iiAr_. WilliaL1 S made 

com!:'lents 1~1 ich deri ve adc.itional si gnificance from the hea~J 

advertising eA~e nc itures of The 3e~molds Company and ot her 

cigarette r·1akei"S• He quoted Dr. l':iorciecai Ezeki e l of t 1e 

.AA.A, sp ea::.Cing on t 1e sa!:~e p rog ran •i th· Secretar:r W~lace, 

as having told. a f::TOup of proces9ors: 

•ri don't think any of u s feel t hat t 11ere is much 

that could be saved to t he farmeJ.1 or con.surner· by 

cutting down the cost of processing. I don't bebelieve, h or-;ever , t hat the same can be said, t o 

take one ecific example, about advertising. 

The Compe titive Cop~ Scourge . Article by Frank Braucher, vice 

p resi dent of The C:;.~o'" ell Puolishing Cof:_l_)any , Printers' I nk , 

May 7, 1931. 
10691 

There certainly cEn be~ a serious question whethe r 

tb..e total 0.moun t p~ nt ·for advertising in the tobacco 

indus t;ry is in t }J.e in te~est. either of the producer or 

the co~s~mer of tobacco products. 

11 Un:ier ,,h ateve r ClE,reeme~ts y ou, may discuss t he 

business of producing tobacco products, it se ems 

to nc I might co ceivabl~r ~ e..ise the (luestion, are 

t h e funds t hat axe spent for advertising necessary ? 

Is it corr:petitive advertising? Does one com::9any 

spend because the other corrpany spend? Could a smaller 

amount be spend for advertising, could a larger amo1.mt 

be returned to th8 producer, or a lower price set to 

the consumer ':hich ~v ould enable a larger quantity of 

prociucts to be i! oved in to t he consumer and so benefit 

the prod"LJ.cer?" 

Mr,. WilliaLls s a id. in his brief: "Almost unbelievable as it 

may be, it se E:ms t hat these, anC:. o t he:c ger:tlemen high in the 

com!cils of the AAA have never realized what business men, 

newspaper pu~lishers, magazine publishers, radio operators 

and others engaged in 'tihe various a!ivertising fields and 

activitiest know so well, aa el ~r , that it is possible through 

advertising eJ~enditpres to increase or naintain con~umption 

at such high rates as to put manufacturing on such volumes 

as Tiill permit bett~r wages for the worker, better prices for 

t he p roducer of the raTI waterial, and a lower, instead of 

a higher, price to the consumer. SuL "ice it to point to the 

record in the cigarette ind.us;tr:r. 

11 In 1911 - o::rhich was oefore advertising was used very extensively in that indus try -- the t ota l putput of ciga.rettes for cons:ump tion. in this country ·r.as less than 1~ 

·billion cigarettes. With t he manufacturers entering upon 

a policy of he.e :,~ ad.verti sil16 shortly thereafter, the figures on cigarette cons-:..~ption for the vear 1930 reach ed 

1 20 billions. -- more th.e.n eleve n tii'les the output of 1911. 

11Heanw:1iJ,e the ,cons1.unp tion of leaf tobacco in c~garet~es 

ha..d been stepped up from about 37~ million pounds in 1911 

to about 360 r~ illion pound.s in 1930. l·:Ioreover t he per 

pound retur·n to the ro e:i.~ had bee:.-1 increa sed as had wages 

of worke rs in thefuctories, and despite a n increase of 

$1~75 9er thousand in tr·.e Federal ta.x rate, the consUI!ler 

was getting r!lore for his money than eve r before. 11 

What wa s the total result of the enormous expenditures 

of money .for advertising, special allowances, free deaRs; 

of the competitive price wars; ano. of the policies of the 

manufacturers .e.s a whole? The question whether socia l t : 

waste i$ present in the se p olicies arises directly f rom 

the fact that once t 1e :Big Three had. a 96.8 percent control 
10691 

of ~1e cigarette market and in 1934 a wide gap has been 

opened; Lhat control had receded to 79 . 5 ~ercent; Good 

'7ill, bie-; space , the spending of ~o!'e !'Jillions are the 

outstandinu factors in the adverttsin§: story of the tobacco il'~ :U3 try. Behind t.h\.3 scene of tob occo advertising 

stan.J ir.roorta"lt socia.l and. economic determinants in tobacco 0.ist:cib·u..tion , the n::::nufacturers' policies. 

So fa:c as ~ati stics ar.::: available in a field of business 

where the- deta::.ls of a<ivertisin.; ex_pend.i tll:~es are alV7ays 

pet:'ul ie..:'ly ur-available , t his Cha:~t er novr turn::; its inq1.:tiry 

to the -: a c oL s making up advertising a~:"Ypr ~)r at ions; the 

advertising costs of tobacco co:nnarecl 11.:..th costs fo:;.· food •. 

oil 9 r-10 tor and .t.o 1.saholfl. p:.~oduc ts adverti sin ; the extent 

of ne'."'SUG.per, nagnzine 'mCJ.. radio · ad Jerti sing over certain 

~·ea· S fo:,: e C.:.Ch Of tho gr .U_)S ; the trends and nrhims of the 

picturesoue cisa.rette advel~tisin ; CO:?Y •·hich has· created 

somethi:v; of a bizar···e ne-:v literature in ·ousiness. The 

social responsibility of the toba cco manufacturer is the 

screei.: u_.ilm vri ich da:!.ce the shadorrs of his advertising 

approprie.tions. 

2 . T'ne A<iverti sing Appropric-.tlon. 

W'nen it is reported, as in 1931, that in a!q· one single 

ye::.:r .the four eadin s branc.s or' cit:;arettes have spent 

a~pro:r.:in,.tel;;r $25 , 00•:' ,co..:. f or advertising·, only a part 

of the story is told. ~1e ;!:25 , 0- · , 000 figure is concerned 

\'lith th:ree items only in a req ::.. i:i·eme~t of some 41 different 

i terns of exnen<ii tm·e ne cessarv fo:.~ t!le efficient manag3ment 

of adverti sin.; d.e~artBents as ~h r orc";c?.ni zed as t~1ose of 

the ALeric~-: ~ob~cco Corcpc:.r.,y , The 3.. J . J.ey:'lolds Tobo.cco 

Compan:r. Li 6gett & lh~re:;.~s Tobac.co Company ai''ld o t hers. 

In a series of six articles consi ~e ring t~e kee~ing of 

record.s for an ad.verti sing cle·oartnent , _..J_bert E. Haase , 

research counsel to t J.1e Association of .~:;a tional Advertise::-s, 

set dm7n in Print e rs 1 I 21k , July 18 , 1935 , the six ( 6) 

major g:-o1.1J)S ~1 te ::: ing into an advertising approp:-iation. 

These six .l.ou.ps f ollo r the soundest pre1.ctice in the advertising profession ~nd are the essential items of an 

advertising a ppropriation '7hich is hcmdled in part bv the 

ap:r;>ointed advertisinz aGency and in yart by tl1e advertising 

departments ...-rhi ch are intained ·oy the manufacturer in his 

arm administrative off ices. 

~1e backbone of an advertising a~~ropriation intended for 

nati onal c irculation is maQe up o: three cl a s ee s of expendi ture s: The first , for magazine , the se cond , for newspaper s; the third , for radio broadcasting. 
10691 

In cisarette advertising , it i s custom f or t he manufact urers to r un ca:rrpc:dgns in r:1et:copoli tan , s:Jall-tovm and 

rur~~ ~ews~ayers on schedule s callins for the use of 

from 200 to 2 ,0CO newspapers. In the last few yeeJrs, 

i t has been the custom t o carry the radio broadcasting 

.progr am over nat i on- ui d.e netii'Orks , for intervals var~• ing 

from daily annol.LrJ.Cements to elFtborate progr ams once a 

v-.reek. Usually these cig(l,rette campaigns reach intensity 

in a :9eriod of ten weeks in the newspa-9ers, and the special 

copy appeal is carried over in the magazines f or a eriod of 

perhaps f our Jonths 7Ji t hout substantial change in theme . 

The r adio broadcasting goes on f~o~ season to season and 

becomes ~ .. fixed vearl ~· featur e of toba cco advertising. 

( a) I terns 11 9 12 and_ 13. 

A. 

B. 

c. 

The six ro ~~ s of e~~enaitures entering into an 

adve:'tising appropriati on a:-e listed by Dr. Haase 

as follor?s: 

D. TR.4.DE CONTACT'S 

1. Salaries 29. Business Papers 

2. Traveling Expenses 30. House Organ 

3. ::lent 31 . Dire ct I.iail 

4. ·Heat, Light, Poqer 32. Postage & Express 

5. Telephone and Teleeraph 33. Ni i sce llane ous 

6. Off ice Equip . & Spl. 

7. Postage & Express 

B. Research , Service Fees E. EXPORT 

9. Asso ciation Dues 

10. Miscellaneous 

CONSUMER CO:i~TACTS 

11. t:agazire s 

12. }jewspalJers 

13. Radi o B:roaccce.s t ing 

14. Direc t Mail 

15 . Farm Papers 

16. Car Cards 

17. Outdoor 

18. Postage & E:\.'Pre ss 

19. 1-.;i scellaneous 

DEALER HELPS ·. : 

20. 

·21. 

22. 

23. 

24. 

25. 

26. 

27. 

28. 

Store & -Window Displ ays 

Dealer Si s 

Direct Mail 

Stationery 

Im::;>rinting 

Electros, Hats 

House Organ 

Postage & E~oress 

iii scella.'leous 

F. 

G. 

34. Space 

S5. Direct ~ail 

36. Miscellaneous 

LffiCEANI CAL 

37 . Artwork, Sketches 

38. Photographs 

39. Engraving 

40. I.H scellaneous 

L .. I SCELLANEOUS 
10691 

-202-

Und.er the i te:-1 of 11 G" ( t!i scellaneo-.J.s) , in Dr. 

Haase's outline, it is becoming the custom in 

modern advertising departments, '.7hich are working units as -oart of the Sales Department to 

list special advertising a llouances and the cost 

usually charged to the advertising deuartment 

of such free c oods as may be given i~ order 

to induce dealers to put in uindow and store 

dis:plays. 

What part items 11 1 12 and 13, in Dr. Haase 's outline, bear to the total adve tisin ~ e~oenditures in 

the distritution of cigarettes and other tobacco 

products remains a closely cherished administrative 

secret in each of the .manufacturers' organizations. 

How much of the 'York is d.one by the advertising 

agencies employed, is also u..r1disclosed but if the 

cigarette ~antuacturers folloTI usual praotice, 

all of the items unC:.e r "An (Administrative Expense, 

1-10); all of the i t erns UJ.!der "C" (Dealer Helps) -

exclusive of parts of i t ems 20 , 22 and 26; items 35 

and 36 under "E" (Export) are borne directlJr by the 

manufacturer. Items under "F" (Mechanical) are 

in usual pr ctice, divided. The art work and 

sketches for ·::.he photographs ar..d engraving required 

for national advertising in the newspapers and magazin'es and for the larger or elaborate pieces of 

dnect mail , are usually done the advertising agency 

employed, ct cost, plus a standard commissi·on of 15%, 

except ~here an agency may operate on a fixed com-

· mission based upon the net cost of this work. But 

all such art rrork and sketches a.'lG. all such engraving as mo.y be required for sales promotion purposes through -·rholesalers or retailers incident to 

factory-~ro duced direct mail , are direct charges 

against the _factory or manufacturer himself and are 

'not always covered by an agencJr agreement. 

(b) The Nation's Bill for Advertising-. 

n1e cost of e~vertising for manufacturers of all 

classes tl1roughout t he 0nited St a tes has an average 

total of approximately $1,700,000,000 a ye:1r. 

T:.l1is figure is based upon a st-;lily·rnde by the 

Association of l!ational Advertiser::;,. published in 

1934. This study was under the direction of 

Aroort E. Hae.se and made use a:9:_Jarently of the 

last available fi g~res with respect to the value 

in all classification. 

The items in the advertising appropriations analyzed fall into several classification. The 

first classification includes: magazines , national 
10691 

- 203-

newspaper ad-Terti sing, no.tiona l outdoor adverti sing , natidn:::.l radio b:ro&dcas t ing a.--:.d nati onal sectiona l and. state far:n journals. These are the 

me :lia generally :.w1.ovm a s c~ i scount media, meaning 

that they pa:r a ge ner:-tlly 1.m.iform 15% comiili sf'. i on 

to t he adve rtis:;.ng agenc7 as a · salesman 's comp ensation. The a .:;encie s are lJ:ce s::med also t o "be the 

:pro f essione.l a . .gent of t he manufe.ct"'}.rer usin,.,. the 

space. The clisco:mt medi D .. of t h is first classific a tion , b0.se G. u•Jon fi.;·c.res t ota lled for 1931 -

l S32 , a ccounted_ f o:r $373,800 11 000 ol· the nati onal 

advertising bill. 

There is a second classification which i ncludes 

business pa:pers , industrial pui)lic.:'.tions, o_i:rectories and. ca t a log s. Some of the se publica tions 

g ive a commi s sion to acivertising agencies; others 

do not. Si nc e the ordinQr y advertising agencies 

have no uersona.l O:i:' selfish inte rest in p lacing 

space from ·vh.ich they s ec"'c.1re no income, it follows 

that -::.he national ad.vettisins bill f or t hese publications ru . .ns to r :.t her low levels. Ac ;.:; ording to 

Dr. Eaase 1 s fi gu1·e s, these :ne d.ia re ce ive d $23 ,750 ,-

000 (in 1931) of na t iona l advertising . 

The third cla s si f ica tion includes ·:'_irect ma il, 

vrinc1ow anC. counter dis ~: s, ne,..·rspC'.:per advertising 

( loc.::lly p l a ce o. by ':-;-hole s a le:c s or :ce t ail ers), 

loce,l outdoor advertising , :premium advertising , 

loc::l radio Jl'oo.clcast ing and. locc-.1 stree tear E~Id 

advertising . Th e res~J.mption l1ere is t hat the 

cost is met, \7hether t he worl: i s orde re d by the 

manui'acturer h i mself or by B.J."l a d.verti sin.~; B.bency , 

It is quite usua l prac·cice for the manufactu.l er 

to handle t he i terns in t h i s classi f i cC'.t ion t hroueh 

h is Ovifil advertisine; de 1a:rt ent, 1.;orking in clo s e 

cooperation '.-rit:1 the E~. les de~o ar t in the dil~edtion of locc..l 021 re,c;iona l ca:npaigns. i?D.'len an 

a dvert ising agenc y is e~1 trusted '::ri th t he no:dc, 

several fo:!:ms of compe ns a tion in t he absence of 

T·1edia commi ssions are added to the cost of tthe 

nedia. 

In :Or. Haase 1 s SUll1J?B.. r y of AFlerica n advertising 

eA.-pendi t1 1Tes .. in t h is t ldrd classification , the 

f ollowing f i _;v.re s appe:'.r: 

Dire ct Mai l •••••••..............•••• $343,000 ,000 

':7indow, Cm .. mter ~ispla~r s •••••••.•••• 352,000 ,000 

Local" .l'J spa:~1ers ( not comn issionable) 450,000 ,000 

Premiums ••••••••••••• , •••••••••••••• 190,000 , 000 

Loca l Radio ••••••••••••••••••••. • • • • • 23 ,000 , 000 

Street Car Ca rds.................... 5,000, 000 
10691 

These figures added to the othe·r totals in comrai ss ionable nedia in e a.ch of the three classifications, just enumerated , make a gra.'1d total of 

$1 , 700 , 000 , 000 , as a fai~ sample of the nation's 

yearly advertising bill. 

(c) Is Tobacco ' s S~~ re 50 to 6~? 

Ite~s 11 , 12 and 13 of Group B of Dr. Haase ' s 

outline of elements of adve~t~sing cost are 

roughly represe11tative of 20% of this nearly 

h;o billio:r:. dollar total in the report of·' the 

Association of ~ational Advertisers. Can an estima t;e be jJ?..de for the tobacco industry? national 

circulation is the spe cial requirement of the 

tobacco r.ia....'1.ufacturer; that being so , it · ould follo 7 that tobacco e;:penditures for the same items 

'70ulcl cla im a much gre o.ter proportion that the 

national average of 20% . 

Let it be assumed, therefore ( "Ti th the spe cific 

·.mderst mding tl1at there a:·e no clisclosed statistics known to be avc:l.ilable to tell r:rhether the 

,.c;ue ss is near or fa:;.~ from the t :rut h ) , that in the 

instance of tobacco promotio::, the Haase i terns 

11 , 12 and 13 a."!l ount to 50% or even 60;1> of the total 

t oba cco L1<iustry appropria.tio:r:.s. On that assumption , the lL1age est i mates shown hereafter raal.>:::e 

cor:roa.ris.ons of unusual significance . 

Store eli s-r;>lays , coi.lll tei~ display s a:.1d window cd s-

-:9lays a re of the hit";hest ve.lue in the s a le of any 

product as iJmediately consumed as is tobacco. 

For a g ood :oan~r vears , the most valuable franchise 

in r!inCJ.ory di s-ola-r i n sta lla tion has been a cont r a ct - L 

with one of tl1e leadin~ cicaxet;El manufacturers 

for the preparation and the installation of window 

dis?lays ~ging ir~ediate purchase of cigar or 

cigarette . During the code hearings and t he code 

administration hearings on the code for tHe Adverti sing Displa~r Installation trade , evidence 

was off ered that, in conne ction with sach periodic newspaper cempaign for tobacco , supporting 

cam:9aigns \7ere i w'1ediately plnnned calling for the 

use of from S , OOO to 25 ,000 store windows throughou t the countr . Exclusive of the cost of lithographing these displays, the installation in each 

~tore represented·&~ ·average cost of $2. 50. (*) 

Evidence ·.c! as also · of.fered to sho'- that in the inte:q.l:jity .af competition·for nd.o sin excellent 

l oca4iQ.ns , .it was alwa~rs necessary to off er the 

'(*) Tr&'1.script of Hearing , Advertising Display Installation 

Code . NRA files. 
10691 

- 2Jo --

retailer free goods fo~ t he use of ~is windows 

and that it '.7as a com::1on practice to off er as 

man;;r ?-S a thous . .J.nd ·ci6arettes for a wee3:: ' s dis-

~) a;y- · The displa;;rs use d. b;y cigarette and. cigar 

manufacturers have r anc;ecl L-am silll}?le lithogr ..J.u}:ic p o sters rJou.:.1tecL an boards, to elabo::.~a §e 

mechanical ·wind ov7 ~- is"'9la ~' devices costing $35.00 

each to p::·oC.1.1.ce .. ~J o est imate is availe.ble to indicate w,1at other d.e o.ler helps such as electrot ype and. netv"spe.per stereot;r~J es may be used in 

tobacco distl~ih!.,_tion . It is probably no co!lsiderable amo:J.nt. 

L1ar g ins are too narrow to p err..i t indep8ndent advertising on t he part of :holesaler or retailer 

to promote £:.l1Y S!Je cio.l br er1.d. of ci ~arettes or 

c~ ars. This co~cl~s ion appears to @e valid in 

view of the investigation made by the United States 

Congress and. l;"'ederal Trade Co:tn!i1issi on into advertising allow:1nce s an c. special di scoo.:m t s. The p ractice accorclinf: to t he t e sti:::::x>;W before the Patmc..n 

Committee, is for the ~anufact ier to g ive retail 

chain stores• an allowance of $1•00 per store for 

window C:isplays, store displays nn:l local advertising. 

3.. The Ad.vertising Cost of Distri butio~. 

Gilbert Eodges, ·rnembe.r of the Executive 3oard oft he New 

York Sun, speaking before •: he co~1ve~1tion of the Arr.ericcm 

Home Economics Association in !Jew York, Jur..e 30, 1934, 

sought to dE?(termine tho advertising cost of distrib11tion 

throughout -~meric n industry . Mr. Hodges ~: hen s a id: 

"Let us t clce the year 1929, when aver~r th g was 

at the highest. :he advertising expenditure that 

year hes be er:. esti mated e..t $2,000,000,000. Now 

that 1 s a riuge sum. 

ltT'ile tot a l s 2.les in 1329· w·ere $14:2,000,000,000. 

~'T11is 111eans that $2,000,00G,OOO in advert·isir€ 

JTt.oved $142 ,000, 000,000 in merchandise ••• leps than 

1! -percent of our totc.l s a J.es. 11 • 

Mr. Hoo.ges 1 ll percent t akes into col'lsideration, of co·J..l~ se, 

the thou sands of ~an~factu~ers ~ho snend little or no money 

on advertising on ~heir om1 acco"'..mt but who C.h:'OlJ.[;h the 

me..m:tfacture of ar dcles s ir2ila..:r to nationally trad.e-marked 

and na tiona.lly advertised g oods, enjoy the benefits of all 

advertisi ng in their field. Tl1at 1;J- T)ercent is useful e.s 

a yardstick of c is·:. ri but ion eL:'iciency but is not enough 

sales leverq_;e to move such .~ oo s as c-:..:c~:; s, toilet articles 

and electrical appliances, to mention bu t a fe\7e 
10691 

-206-

.An e::C:ort ':12.8. e b~r t:le Associe.tion of Yational Advertisers in 1933 to d.eterrrdne the <:ist:cibution costs of 

312 ~anufacture~s in 29 leading industries of the ~nited 

States ~hose ags regate sales volune in 1931 was 0~e than 

:t l ,000 ,OCO , 000 . ( *) L1. this e.ne.l ysi s , the tot al costs 

of di stri b'.1.tion ·~ere di v:t'fted into the following cladsifications: 

1. Direct s a les costs. ( _hese costs included 

s alesmen's sa laries, bonus, commissions , 

traveling expenses or..r1. sales office expenses. ) 

2. .AdvertisinG an <i Sales PrOQOtion. 

a . Includinc costs of s:PCLce , mechanical 

pro· uctioa , sucl1 as art -;,rorl::: and en-

:;r aving . 

b . Salaries ar-d off ice e~~enses of inc~ir ect sellin6 , such a s advertisinG 

(le•Jartme.'1 t r;•o rl{e 

c . SaDples. 

3 . Transportation. ( Incl udin;; O'.lt- reight, 

c r ateage, e '"Y)ress , long distance truck.) 

4. . arehousing and Sto r age. 

a. This incl udes expense onl~r on furnished 

ds p roperly chargeable to manufact'ill'ers di stl i b.ution, exclusive of •::7holesa lers1 costs. ) 

5. C-edi t and CoLlection Expenses. 

6. Financial ::;;xpenses and Cash Discounts on Sa,les. 

7. G-enercl Ac1ili ni stra tive Expenses not ot herwise 

included. 

8 . All other distrib· tior.. costs. (.cot otherwise 

described. ) 

(*) An analysis of ist~ib tion costs of 32 manufacturers 

published by the Association of lTational Advertisers, 

Inc., 1933. 
- '2 7~ 

J3. ~rO BAGCO OOliPaARED ro OTrtER ~ND]S~~lES . 

In ·this .. .-analysis of d.istribl.lt ion costs, the resume presents some 

' ·· striking ,eompar~~ ons with particular· reference to the a'TIOunt of 

money spent in the tobacco industry for ·E3-dvertising and sales promotion. 

For instance·, taking the total c·;st··:of.'. distribution as 100 percent, 

advertising and sal0s promotion in ···Drugs ·a.nd Toil r~ t Articles was 

reported to be 49.8 :percent of the 1932 budge.t of the firms reporting. The direct selling cost stood at 24.67~ . 

In the Automobile ·field, direct selling- cost ·constituted 50.8% of 

the 1932 budget and advertising and sales promotion 16.6%. In grocery products advertising and sales promo't·ion costs take second rank 

to direct selling costs, being 23.47~ for···advertising and 36.5% for 

direct selling costs. Jewelry and silverware shows a like story; 

35. O% for direct ·selling costs and 26. 3i-; for advertising and sales 

promotion. 

In petroleu.'TI products, direct sell'ing costs are reported as 30.8% 

' the 1932 ludget and adve~tisin ~ sal,es promotion costs, 18.9 . 

10691 

The story changes immediate,ly upon ~xamining the tobacco products 

field. The 1932 budget taking the total cost of distribution at 

i001o was absorbed t.o the exte~~ of 48.6% in advertising and sales 

promotion efforts. Direct seii1~g. accounted for 16 .8%. The actual 

expenditures reported for 1931 -showed 45.0% for advertising and 

sales promotion in that year with 17.7~ going into direct selling 

costs. · · 

In relation to net sales volume, based upon budgets for 1932, tobacco 

products stood second highest for advertising. and sales promotion 

costs; drugs and toilet articles leading, of· course, r.ith an expenditure of 18.69%. 

Tobacco .............................•.. 

Grocery Products ................ . ..... . 

Petroleum Products .................... . 

8.84% 

5. 94% 

5.59% 

It is intPresting, therefore, to compare the cost of advertising and 

sales promo~ion efforts in moving tobacco products with the general 

average for .the United States as reported by Mr. Hodges of 1! per 

cent of total .pales. 

1. 1933-1934 Tobacco Linage. 

Another C'Omparison is available T.iThich shows how much more advertising effort is put behind the sale of cigarettes than is used 

for automobiles, foods, household a~pliances and oil and gasoline. 

The source of the figures which are quoted is Printers 1 Ink 

which makes regularly a six-month compilation and a yearly compilation of newspaper linage by. the country's 300 leading advertisers. 
10691 

.- 2.08 .. ·.: 

In 1933, Ligett & Myer U'sed 14··, 988 ,586 lines of newspaper display space in measure·d newspapers and in.creased that anioun't t o 

19,585,349 in 1934. 

R. J. Reynolds Tobacco Company used 17,159,797 lines of newsaper dis lay space in measured newspapers in t933 and .l5,875,-

063 in 1934. 

The American Tobacco Com any used 12,092,407 in measured newspa·9ers in 1933 and 15,475,371 in 1934. 

P. Lorillard Company us ed 1,267,351 line s in selected measured 

neryspapers in 1933 and increased that amount to 4,225,455 in 

1934. 

The total report ed linage for Chesterfield, Camels, Lucky 

Strike and Old Golds in this Printers' Ink compilation amounts 

to a total of 55,161,238 lines for 1934. 

But at the sBme time , General ~~otor s Corporation was advertis ing Chevrol e t , Pontia c, 1ic , Cadillac and its other prodiets in a t otal of ~,40 1,124 lines. 

Lever Brothers wer e s elline Lux, Rinsn, Life Buoy in 10 ,590,-

375 line s and Ford }~ot r Company us ed 9 ,660 ,719 lines ; the 

Chr'Jsler Co rpora t ion 3, 6~· , 157 . Standard :Srends required 

5, 843,671 lines t o a dvertise Fl eischman's Yeast, Chase & Sanborn Coff ee and Royal Dess erts; and the St erling Products 

Company 3, 964 ,496 lines to ma intain sal es of Bayers Aspir~n. 

Ca storia, Dr. Lyon's Tooth Powder and its other pro~ucts. 

General Electric us ed 1,327, 935 lines and Coca Cola 658,261 

lines of nat i onal ne ja~e r displ ay. The total for all ~s 

61, 916 ,016 lines. 

2. The Ten Magazine Leaders 

In any study of adv~rtising as affecting distribution of 

t obacco products, it is of singular significance to ~ind 

that in the list of the f irst ten .leading advertisers' of 

the United States in 1934, the highest rank · in. expend~tures 

in newspaper display was by the Liggett & Myers Tobacco Company. General Motors ranked second, R. J. Reynolds Tobacco 

Company, third; American Tobacco Company fourth; P. Lorillard 

Company tenth. 

With little difference in the products, w:ith' p'rice·s praqtically 

the same, with manufacturing costs practically equal: anq little 

variation in the cost of raw materials, the· competit1on am·ong 

these four tobacco companies ·limited· adverti.sing to ah intense 

competitive warfare for the establishment of a· brand name in 

customer preference. 
10691 

- 209 -

3. Comparison of ~dv~rtisinF: pe nditur s. 

A compe.rison follpws ~tt$mptine; so far a s estimates are available from Editor & Publisher and Printers 1 In:c , to show the 

excess of advert ising eff ort in t _he sal e of cigarettes as compared with the amount of money spent in nationa l display space 

and radio time by food :Products, gasoJ.incs and oil, a.nd of 

miscellane9'Us products for home consumption . 

:. ' .•. '' 

(a ) News:?aper Adv.ert i.sing . 

·The most compl ete comparabl e f i gures available for news-

.pa.per linage by nati onal a dvertisers covers the years 

1933 and 1934. Thes e ha_ve been taken from the compilations made at the end of each of t hese years by Printers ' 

Ink . ~1 e 1935 tot als are at this writing not y et available. The amounts spent year by y ear from 1911, when 

cigarette advertising began its dominance in newspapers, 

are not reliably recorded in any trade source. More ext ensive comparisons by dollar volume are, however, to be 

found in magazine exp enditures . 

There are significant com~arisons to be made from newspaper linage during 1933 and 1934. ·. One such comparison 

is immediately r.ecogniz ed. A new industry with a product 

of immediate consurrption came into ~e spa er columns in 

1933 and engaged in a brisk and clamorGus war for public 

.preference. AS in ci rettes, the manufacturers in this 

newly re- established industry -- that .of '1'1!hiskies --

fought for name and trademark accep tance . They had a 

problem, however, unusual to the whisky business; advertising , for instnnce, could not be done in states sp ecifically prohibiting such sales promotion. Where advertising was permitted, the citi~en found whisky ads on page 

-after page of his daily newspapers. The volume of space 

had all the appearance of a campaign involving millions 

. of dollar·s beyond other n~tionally advertised products; 

but, the total volume of the newspaper space used was 

a_t?pro xirnately only one-f ifth of that used by the four 

leading cigarette a~vertisers. The greatest amount of 

ne pape r linage used by any single whisky distiller in 

1934 was 2 ,599,668 lines . The greatest amount used by 

ru~ single cigarette manufa cturer wa s 19,000,000 lines. 

Where the lea st p rofit per unit of sa le was possible , the 

greater was the e xpenditure· for .advertising. 

Gasoline ·and oils · closely :parall el cigarettes i n stability 

of p rice and narrow p rofit margins; ea ch are p roducts for 

immediate consvmption. Here again the comparisons r a is e 

the question: If the linage used by gasoline and oil com-

. pani es is adequate sa les eff ort f or name prefer ence , goodwill maintenance and . des.ireEi volume of business, is there 

present in the total of cigarette advertising a component 

of surplus effort t.·hat can only be justifi ed in a warfa r e 
10691 

-210-

intended to achieve a monopolistic position? Or does the 

difference lie in the fact that motoring is a modern necessity -- and smoking a habit that needs extraordinary 

urge from without to maintain its place in consumption? 

In 1933, as in 1934, the largest user of newspaper linage 

in gasoline and oils was Socony -- 2,560,000 lines in 

1933; 2,940,938 in 1934. The second largest in 1934 was 

Sun Oil with 2,840,000 lines of newspaper display space. 

Standard Oil of New Jersey ran campaigns in 169 cities, 

using 1,474,313 lines to pursuade the motorist to look 

for Standard Oil Stations when his tank ran lo~. Shell 

oil got alo~~ with 1,720,503 lines in 70 cities. 

Food products offer another interesting comparison, An 

analysis is included showing the newspaper linage used by 

Standard Brands, the H.J.Heinz Com~any; Kellogg Company 

and General Foods Corporation. Stan~ard Brands shows a 

total newspa)er linage of 5,843,671 for its products. But 

American Tobacco used 15,000 ,000 in the same period for 

one product -- Lucky Strike Cigarettes. 

To conclude this consideration of newspaper linage, there 

follow tabulations from published reports taken from news-

~aper sources by Printers' Ink. The first table shows the 

eleven leading newspaper users on a national basis among 

all the corporations of the nation. Of the first eleven, 

four are the leading cigarette manufacturers. 

The next compilation refledts the competitive advertising 

in the sale of cigars -- relatively unimportant in the 

total. The next compilation is of whiskies; then gasoline 

and oil companies and finally food products. It has only 

been recently that newspaper linage has been checked and 

compiled for all ne~spapers throughout the country. Figures from 1935 on will be available in that completeness. 

The figu.res here shor,-•n are not ·for all newspapers in the 

United States, but rather for what is known as the 11A11 list 

of .essential newspaj_)ers in essential distributing of market 

centers. It may be presumed that the linage shown in these 

tables reaches a reader audience of more than 20,000,000 

persons daily. 

(b). Magazine Advertising. 

Cigarettes, cigars and smoking tobacco yield rank in the 

advertising pages of the magazines to motor cars, cosmetics, drugs·, food and soaps. 

No cigarett.e manufacturer was among the first ten or the 

11Blue Chip" magazine advertisers in 1930, 1931 and 1932. 

Camel Cigarettes .stepped into the 11Blue Chip" ranks in 

·· 1933 and ~934; maintained its place in 1935 when it was 

joined by Lucky Strike. 
-211-

TABLE 1 

NEWSPAPER LINAGE 

LIGGETT & MYERS TOBACCO CO. 

Chesterfield 

Granger Pipe 

Velvet 

Rank (1) 

GENERAL MOTORS CORPORATION. 

Chevrolet 

Institutional 

Pontiac 

Buick 

Oldsmobile 

Frigidaire 

LaSalle 

Truc s. Cadillac 

Air Conditioning -Delco, 

Rank (2) 

R. J. REYUOLDS TOBACCO 

Camel 

R.J.Reyno1ds 

Tobacco Pr.oducts 

Prince Albert 

Rank (3) 

AUERICAN TOBACCO COMPANY 

Lucky Strike 

Rank ( 4) 

LEV11t BROTHERS 

Lux 

Rinso 

Lux Flakes 

Lifebuoy 

(Rank (5) 

1934 

Lines 

19,585,349 

17,103,046 

2,319,001 

163,302 

19,401,104 

7,887,860 

2,537,126 

2,335,016 

1,890,283 

1, 377._.535 

1,182,084 

492,273 

) make up etc.) 

15,875,063 

.15. 397. 399 

389,604 

80,060 

15, 475,371 

10.,5~0,375 

- 1933 

Cities Lines Cities 

14,988,586 

86 13,584,340 81 

54 1,404,246. 32 

7 

13,202,769 

88 4,517,302 83 

72 871,534 61 

87 1,751,701 82 

85 1,235,43) 81 

87 1,018,635 82 

79 1,451,829 78 

77 1,451,829. 78 

the rest 

17,150,797 -

86 16,828,670 81 

83 322,127 80 

17 -

86 12,092,407 81 

412 11 .. 306,513 318 
FCIW MOTOR COL:?ANY 

Rank ( 6) 

CHRYSLER COP..PORA.T I ON 

Rank: (7) 

PROCTER & GJUABLE 

Carna.y 

Chi p so 

I vo ry ~p 

Cr isco 

Rank (8) 

STANDARD B~mS 

Fle i schman Yeast 

Chase & Sanborn Coffee 

Royal Desser t s, et c . 

Rank (9 ) 

P. LORILLARD CO.:PA-"'T 

Ol d Gold. 

Union Leader 

Rank (10) 

ERLING ?RODUCTS 

~-..v~r s Aspir in 

Dr. Llf s Tooth Powd~r 

Phil ips Milk of t!agne sia 

Californi a Syrup of Figs 

Uidol 

Casto ria 

Dia:J.onc. :We s 

(Rank (il) 

10{:!)1 

-212-

12. 

Lines 

9,660,719 

8,469,457 

6,525,930 

5,843,671 

4,225,455 

30,790 

3, 964,494 

1934 

Cities 

183 

133 

75 

4 

1933 

-Linea 

5,312,34£? 

7,057,967 

5,681,974 

5,296,955 

1,267,351 

4,641,578 

Cities 

187 

139 

183 

70 
CONSOLIDATED CIGAR 

CORPORATION 

Harvester 

Dutch Masters 

WAITT & :BOND, IUC. 

:Blackstone 

Totem 

G.H.P. CIGAR co •• INC. 

El Producto 

La Azora. 

CONGRESS CIGAR CO., INC. 

La Palina 

Recollection 

:BAYUK CIGAR, INC. 

:Bayuk 

Mapacuba 

GENERAL CIGAR COP~ORATION 

White Owl 

Robert Burns 

Van Dyck 

lOif;l 

;..213-

TABLE 2 

NEWSPAPER LINAGE 

TOBACCO PRODUCTS 

1934 

Lines Cities 

233,024 3) 

176,206 17 

283,387 22 

12,186 9 

664,478 47 

176,184 14 

302,782 24 

120,334 16 

1,260,259 40 

1,452, 084 

859,275 33 

396,560 21 

196,249 23 

1933 

Lines Cities 

56,205 15 

66,467 9 

117,865 5 

730,864 52 

30,222 13 

170,830 20 

109,291 9 

909,095 34 

39,342 4 

1,325,706 

857,251 62 

27,655 6 

440,800 27 
-214-

TABLE 3 

NEWSPAPER ADVE.RTISU~G - WHISKIES 

1934 

Lines Cities 

SCHENLEY DISTILLERS 

CORPORATION 2,599,668 53 

Golden 'tled.<ling 

Cream of Kentucky 

Mayflower , 

Jas. E. Pe:9per 

Old Quaker 

(And 16 other products) 

NATim.AL DISTILLERS PROD1!CTS 2, 360,201 53 

Crab 0t'ChElr d 

Brigr>di er 

Cld Overno1 t 

Tor.n Tavern 

(And 8 other products) 

CONTINE!TTAL LlSTILLING 

CORPORATI01~ 1,880,065 39 

Sweepstal:e ... 

D'xie ]1311 Gi n 

Snug Hr·rbor 

(And 5 othe r prod· cts) 

:'ILLERIES INC. 1, 542,953 47 

Pc?.ul Jones 

F Oll.T Ibs s 

( A..Tld 4 c-+hE:> r :)roduct s) 

SZA!!RA .:S DI S':' I ::.r.ER S 

CO?.P. PF:_O DTJC 't.~ 1,540,847 53 

- --- ---

R IRAl.: ?I ALICE?. & (":' T ..... .J. : ~ ·c 936,358 56 

C, "' ~"~ · n Club 

( Q.nd 4 ther ~:> '(j 1J(.1- . i 

1 

1933 

Lines Cities 

-- 68,582 16 

186,923 41 

33,481 11 

25,012 11 

263,602 38 
GOODERMAN & WORTS Ltd. 

G. & W. Whi sk:ey 

London Dey Gin 

G. & w. Liquors 

10691 

-215-

1934 

lines 

803,025 

1933 

cities lines c·t es 

34 38,999 5 
-216-

TABLE 4 

NEWSPAPE."tt ADn!RTISI:{G - OIL COMPAlliES 

ST~~DAP.D OIL OF NEW ~ER Y 

SHELL OIL 

CO!~ INE~frAL II.: 

AMERICAN OIL 

'I' I .Dr TER Oil 

GULF P.EFI! G co:WANY 

SI JC L~ IR RE.FI ~Ub OMPANY 

ST Ti.. D Oil, CO. ANY OF 

~ I ,t')RHIA 

TEXA.3 C'Q;,!PAliT PRO · ·1 CTS 

STAND RD OIL CO ·1P.A!IT OF 

INDIANA 

SOCOKY VACulJM Oil CO. , 

INC., PROJ1UC~S 

SUN OIL COHPANY 

10691 

Lines 

1, 474,313 

1, 730 ,503 

1,523,885 

1,462,336 

1,414,628 

1,291,505 

93),479 

561 , 422 

2,008,326 

2,940,938 

2,840,762 

1934 1933 

Cities Lines 

169 1,140,575 

70 1, 986,241 

49 1,655,041 

41 1,553,251 

45 1,028,830 

61 

60 1,098,436 

12 860,113 

77 1,441,475 

15 2,1S1,192 

67 2,560,840 

46 1,737,056 

Cities 

170 

40 

41 

38 

51 

54 

70 

12 

50 

42 

-
-217-

TABLE 5 

NE'/iSJ?APER ADVERTISING - FOOD .PRODUCTS 

- c 

1934 

Lines Cities 

STANDARD BRANDS 5,843,671 

Fleischman's Yeast 2,822,316 75 

Chase & Sanborn Coffee 1,700,712 50 

Royal Desserts 356,630 26 

Royal Baking Powder 150,668 18 

H. J. !JEINZ COMPANY 3,634,429 

Heinz Soups 1,242,162 66 

Ketchup 540,154 65 

Baked Bea..""ls 487,887 64 

Rice Flakes 403,741 44 

Condiments 75,796 51 

KELLOGG COMPANY 3,379,918 

Corn Flakes 1,015,806 78 

All Bran 993,595 86 

Rice Krispies 618,321 78 

Kaffee Hag 294,548 56 

Pep 271,26.2 70 

GENERAL FOODS COF20RATION 31 339,776 

Postum 713,290 49 

Grape Nut·s Flakes 483,948 80 

Post .Toast ies 453,064 66 

Calumet Baking Powd~r 412,092 65 

Bran Flakes 393,586 74 

Sanka 304,107 24 

Certo 217,151 72 

Grape Nuts 101,047 53 

Scattered space for 

eleven (11) other 

products. 

THE WAlDER CO?.n?lu'rr 

Oval t ine 1,757,529 75 

1933 

Lines Cities 

5,296,995 

2,794,703 71 

1,725,481 47 

316,401 33 

180,806 18 

1,977,622 

255,166 48 

110,361 47 

221,181 50 

120,417 29 

266,025 56 

3,959,838 - 1,084,412 74 

1,127;611 74 

678,707 74 

541,786 49 

78,579 27 

3,Z.06,421 

152,111 48 

182,537 75 

88.6·, 524 68 

553,814 65 

~79,317 ·ss 

284,695 22 

225,171 68 

"119,880 42 

1,042,345 56 
NATIONAL DAUY 

Shef f i el d Farms Milk 

Krafts' MiracleWhip Salad Dressing 

Breyer's I ce re ~ 

Other Prvduct s Include 

Kraft Cheeses 

Shred ;.ed ~n t 

Na t ijnal is ~ i t 

\7onde .... :Sr ~d 

THE Q.UAICER OATS COMPAJ.\fY 

aker Oats Cereal 

A~t J eroima Pancal:c p· 

~er Oats 

ur 

(Four other products uced 

p r est of t otal linage ) 

BEST ?OODS INC. 

Hel lman's nn ise 

Best Foods Mayonnaise 

!ucoa 

'1ustard 

'"'ond iment s 

SALADA TEA COMPA.t'rr 

10691 

-218-

n ~ 

.. 

l , 395, .:r ........ 

(±06 , 38 

210, 431 

_65 , 97 

1, 333, 156 

'63, 464 

. , 72 

1, ...~ , '.)74 

-----

J. 2~ 021 

70 . '2~7 

209 , 810 

42, 233 

900 ,331 

406,154 

322,754 

153,547 

17, '376 

822,090 

1934 

Oit t _ 

l '_ 

24 

11 

87 

·so 

44 

63 

65 

13 

44 

26 

16 

9 

42 

Li nes 

2. Z23, 51 J 

380.- :-

760, Gl " 

71,838 

1,557,992 

783,446 

776,291 

1,567,134 

759, 996 

652,614 

96,347 

860,514 

432,607 

424,874 

3,033 

694,283 

1933 

Citi e 

~0 

44 

lC 

82 

81 

39 

62 

50 

39 

21 

3 

38 
-219-

1/r3. 

1934 19~3 

Lines Cities Lines, Cities 

BORDEN SALES CO., INC. 848,993 1,114,921 

'Borden 1 s Milk 386,460 ro - - Condensed Milk 119,491 21 72,329 22 

Farm Products 97,053 25 · 451,886 16 

Cheeses 26,324 9 570,a>4 36 

(Six other products 

ACCount for rest of 

li&ge) 

CAMPBELL SOUP COMP.A1TY 560,615 65 522,023 

RECKER H-e CO. INC., 447,948 761,010 

10691 

- 220-

Of all American businesses advertising nationally, the sixteen 

which spent more than $1,000,000 each in 1934 and 1935 --as 

the country began to merge from the depths of the depression 

were the following as reported by National Advertising Records, 

Inc., in Editor & Pnbl isher (N , Y. ) , issue of January 18, 1936. 

General l~1 otors Corp. 

Chrysler Corp. 

Standard Brands, Inc. 

R. J. Reynolds Tobacco Co. 

Procter & Gamble Co. 

.Bristol-lAyers Co. 

Lever Bros. Co. 

Lambert Co. 

General Foods Corp. 

Campbell Soup Co. 

American Tobacco Co. 

General Electric Co. 

H. J. Heinz Co. 

Lamont Corliss & Co. 

Colgate-Palmolive-Feet Co. 

Sterling Products, Inc. 

1935 

$5,148,564 

2,501,131 

2,413,247 

2,268,316 

2,193,561 

1,793,155 

1,784,878 

1,780,415 

1,713,091 

1 , 711,235 

1,557,584 

1,428,046 

1,256, 314 

l, 140,229 

1,094,474 

1,089,322 

1934 

$4,569,644 

2,194,684 

2,710,843 

2,799,654 

2,936,182 

1, 390,898 

2,239,453 

1,965,819 

2, 248,592 

1, 929,433 

780,228 

1,628,630 

1,171,444 

1,177,044 

826,537 

917,787 

In 1928 , there were only eighteen manufacturers in the United 

States spending a million dollars or more in magaz ines of 

national circula tion. In 1929, there were 25 in the million 

dollar class. In 1930, there we re 29. In 1931, this number receded to 23. In 1932, only si xteen corporations remained in the 

million or more class. appropriations for national magazines 

were low again in 1933 -- national advertising showing a general 

decline of twenty per cent. (*) The records of expenditures in 

national magazine space to tobacco companies is shown as follows: 

American Tobacco Co. 

Axton-Fisher Tobacco Co. 

Brown & Wm. Tobacco Co. 

Liggett & Myers 

Lorillard, P. Co. 

Reynolds Tobacco Co. 

Ameri ce.n Tob2.cco Co. 

Axton-Fisher Tob. Co. 

.Brown & Williamson Tob. Co. 

Larus & Bros. 

Ligge tt & Myers 

P. Lorillard Co. 

R. J. Reynolds Co. 

1930 

$1 ,545 , 474 

367,164 

288,943 

1,376,910 

834,621 

1,425,975 

1932 

1,556,846 

525,200 

296,540 

144 ,073 

933,515 

133 , 193 

1,599,460 

1929 

$ 900,646 

292,959 

406,825 

1,378,718 

403,425 

1,031, 432 

1931 

1, 462,654 

532,253 

38,202 

121, 233 

1 ,614,833 

171 ,995 

1,508,770 

( "' ) Data from recorcis of Checkir!g .Bur eaus published in Printers 1 Ink -

1930, 1931, 1932, 1933, 1934 and 1935. 

10691 
., •r . . 
-221-

1934 

(First 6 

months only) 

1933 

(First 6 

months only) 

Liggett & Myers 

Larns & Bros. Co. 

273,268 

129,072 

353,565 

57,955 

959,555 

415,105 

137' 892 

254,790 

R. J. Reynolds Tob. Co.· 

American Tobacco Co. 

1·, 35?' 474 

346,359 

237,378 

275,360 

Brown & Williamson Tob. Co. 

Axton-Fisher Tobacco Co. 

10691 

Th e tei.l·l ee ~i i. f:: · n2gazi~e advej,'tism·s il1 1930 (re oor t ed. by 

Eri:u ters I Ink, i ss·ue of janua ry 22, 1931) were: . . . . . . . . . 

General Motors ccrp. 

Procter & Gamble Co. 

General Foods Corp. 

Standard Brands, Inc. 

Drug, Inc . . 

Lambert Phar. Co. 

Colga te-Palmolive-Feet Co. 

General El e ctric Co. 

Ford Motor Co. 

Lever Bros., Inc. 

$7,099,275 

4,512,500 

4,248,871 

3,400,181 

3,049 , 887 

3,027,892 

2,969,717 

2, 708,109 

2,224,855 

2,008,577 

11The tot al magazi.ne adv.ertising expenditure in 

the eighty-six magazines of the leading 150 advertisers in 1930 .was $116,435,914. The total 

expenditure for all magazine advertisers--in the 

eighty-six magazines checked for this survey--

was $201,854,510. The 150 leading advertisers 

spent 57. 69 per cent of the grand total. In 

1929, the 150 leading advertisers spent 

$108,649,113 in the publications checked or 53.31 

per cent of the total for 2,11 magazine advertisers, 

wh ich was $203, 776,077. " 

The list changed slightly in 1931 and for 1932, showed these 

leaders: 

General Motors Corp. 

Procter & Gamble Co. 

Drug, Inc. 

Standard Brands, Inc. 

Lever Bros. Co. 

General Foods Corp. 

Lambert Pharmacal Co. 

Colgate-Palmolive-Feet Co. 

Campbell Soup Co. 

General El ectric Co. 

Chrysler Corp. 

R. J, Reynolds Tob. Co. 

American Tobacco Co. 

H. J, Heinz Co. 

Swift & Co. 

Pepsodent Co. 

$5,221,786 

3, 389' 920 

3, 203, 750· 

2,702,764 

2,568,113 

2,471,373 

2,327,335 

1,934,251 

1,847,675 

1,684,145 

1,615,757 

1,599,460 

1,556,846 

1, 2.87,, 777 

1,307,984 

1,033 ,196 
-222-

For the year 1934 - continuing the comparison with tobacco companies-- the leaders in each of several fields were approximate lJ: 

G€neral Motors . . .•.••.....•....• $5, 446, 000 

Chrysler Corporation ..•....••..• 3,100,000 

~ord l~ otor Company.............. 328, 000 

Procter & Gamble ...•.•....••..•• 3,200,000 

Bristol-Myers Co ••..•.•.•••••..• 1,500,000 

General Foods ••••.......•...••.. 2,250,000 

Standard Brands ..•..•..........• 3, 150, 000 

Socony-Vaccmlm.................. 350 ,000 

Texas Company. . . . . . . . • . . . . . • . . . • 500, 000 

Standard Oil of N.J............. 450,000 

(c ) Radio Braodcast Advertising. 

A careful reticence meets the effort to secure like detailed expenditures by specific national advertisers for radio broadcasts. Cigarettes provide, however, a large and populnr part of the national entertair~ent over the air. The Bureau cf Advertising of the American 

Newspaper Publishers Association estim~ted in an analysis published in 

May, 1935, that, on the average, national advertisers were devoting 

23.4 percont of their total advertising apyropriations in 1934 and 

1935 for r adio prograns. Tobacco coopanies are, it is assumed, spending 

probably not to exceed 20% of their advertising budgets on the radio. 

If the figures are all-inclusive of radio costs, none of the tobacco comp~ies spent, individually, a million dollars for radio in 1935. 

National Advertising Records, Inc., in Editor & Publisher, January 18, 

1936, announced this following list of the million dollar radio campaigns of 1934 and 1935. 

The $1,000,000 Broadcasters. 

(Following is a list of broadcast advertisers spending 

more than $1,000,000 each on the National, Columbia and 

Mutual roadc~sting system in 1935, as reported by 

National Advertising records.) 

1935 

Procter & Gamble Company •....•••••.. $2,104,697 

G€neral Foods Corporation •....•••.•• 1,948,509 

Maxwell house Coffee · 

Post Toasties 

Grape-Nuts, etc. 

Standard Brands, Inc.. . • • • • . • • . • . . . • 1, 938, 577 

Chase & Sanborn's 

Coffee 

Fleischmann's Yeast 

And other products 

Ford Meter Company •••...•••.••....•. 1,928,860 

10691 

1934 

$ 969,236 

1,450,575 

1, 847,178 

1,191,577 
__ , __ _ ...___193 5 

Colgate-Palmnlive-Peet Co ........•. 

Sterling Products, Inc. . . ~ .. ~ .....• 

Ba rer .Asp irin 

Dr. Lyon's Tooth Powder 

And other products 

American Home Products 

Kolynos 

Bisoldol, etc. 

. . . . . . . . . . . . . 

Lady Esther Company ................ 

Pepsoden t Company •.......••..••..•• 

$1,679,037 

1,422,640 

1,211,568 

1,100,998 

1,098,996 

1934 

$1,333,873 

1, 448,651 

898,300 

963,836 

1,642,153 

Radio advertising showed a 20 ~ i_ncrease in 1935 over 1934 sales of 

time. Gross time sales were reported in February, 1936 issue of Broadcasting as $87,500,000. The depression low for radio programs was 

$57,000,000 in 1933. · How close a riva l radio hq.S become of newspapers 

and magazines ma.y be judged by CO::lparin g radialS $87, 500,000 With a 

·· total of $165,000,000 for na~i onal advertising in newspapers and 

$113,000,000 in magazines during 1935. Radio is constantly playing a 

more important part in tobacco advertising campaiens. 

~ed bn an anald{sis ma de of 367 national a.dverti sers. in 1934, the 

Bureau of Advertising ·'of the .American Newspaper Publishers' Association 

annoUnced th.ese comparisons iri Editor & Publisher, issue of May 18, 

1935: 

a. 367 ·national advertisers spent $223,216,520 in 1934 in newspapers, ma azin~~ and radio. 

b. 60 food companies spent $38,750,846 in the se three mediums. 

c. 13 ·motor car manufacturers spent $29,930,032 in the three 

mediums. 

d. Drug companies spent $15,691,671 ·in the three mediums. 

e. Beverage groups spen~ .$9, 1],.5, 279 in the three mediums. 

f. Ten tobacco companies spent $33,949,000 in the three mediums. 

The average exp enditure per advertiser in the three mediums in 

1934, was $608,219. 1rhe average expenditure per toba cco advertiser on 

this basis, was $3,394,000. 

Another basis of comparison claims consideration. The Bureau of 

Advertising of the American Newspaper Publishers' Association, issued 

an analysis of 357 advertisers spending a combined total of $121,195,000 

for the year 1932 (*). There was a sharp decline, all media considered, 

(*) Printers' Ink, ·-page 29, issue of June 8, 1933. 

10691 
-224-

of 2~ in 1932 from the expenditures of the year before . Thirteen automobile manufacturer~ are credited with an exoenditure of $21,915,000 in 

1931 - - an average for each motor car manufacturer of $1,685,789 . 

11 In the tobe.cco group 11 , says the survey, 11 nine companies spent 

$22~ 265,000 in 1932 compared to $28, 235, 000 in 1931." This gives an 

average of $2,473,888 per advertiser. The linage tabulations in this 

section have already shown that except for the intensive campaigns behind Camel, Chesterfield, Lucky Strike and Old Gold, the advertising expend_itures of other companies lllarketing 'dfgars, cigarettes, smoking tobacco are well below the average of moderate size national advertising 

campaigns. 

5. Estimating the Total Cost. . . . .. 

These statistics hint that one should perhaps lend a not too suspicious ear to the rumors of advertising agency executives ar-d special 

new~paper advertising representatives indicating that, at times, one or 

more of the Bi g Three has spent in excess of $18, 000_, 000 ·a. year in advertising of all kinds. Such stories are the .i,nspirational legends of + 

the advertising game; and they may merely indicate, to borrow a slogan 

from a · recent Came;L campaign, that: "It's fun (even for an advertising 

man) · to be fooled. t1 

Twenty million dollar campagns are, however, not wiknown to advertising. Exactly how much Camel or Chesterfield or Lucky Strike has 

spent in any one year is not verifiable. If the good-will of 

$54,000,000 in The American Tobacco Company's statement, earlier quoted, 

is made up largely of advertising values added to name-brands, it is 

certain th~t expenditures enormously in excess of all industry averages 

have been the rule among the ~ig Three, revealing perhaps not only an 

economically sound competition for consumer preference as among brands 

but, on top of that an exuberant inter-company competition in advertising, as ~dvertisin , for whatever rewards and glory there may be in advertising dominance through bigger snace and bigger and better claims. 

Then . it is considered that availabl'e statistics do not purport to 

cover more ·than 68 of the magazines published nor more than 300 of the 

1, 500-' or more dai~y, -semi-weekly and weekly newspapers of advertising 

worth, even after all rumors and advertising circle statements are dismissed, it is evident that the $33,940,000 does not represent the total 

of tobacco advertising. What part it does represent is as unknown as 

the exact position today of the flag that admiral Peary left on a cairn 

the day he discovered the North Pole. 

The annual report of S. Clay Williams to the stockholders of the 

R. J. Reynolds Tobacco Company in an ac~Junt of his stewardship for 

1932, as reported in Printers' Ink, called attention to a reserve of 

$8,149,445.72 for 1932 as compared with $2,403,710,79 for the year before. Four Million dollars of t'h is reserve was 11 money that the company appropriated fi!>r advertising in 1932 but which it did not spend. 11 ( •) 

(*) Printers' Ink, issue of January 19, 1933. ~ ... 

10691 
- -~::: 5-

Mr. Williams is furt:her quoted: 11 1his $4, f)r)r,, 000 of advertising accumulation charged. against 1932 ear:1i!lgs is carried forward as a reserve 

and represents e.n ddi tional amount available for advertising in 1932. 11 

C- WH.A'J.' IS THE COS'l'? 

Based on the assmrrption that the Haase items 11, 12 and 13 (*) 

are an actual 60% of the total advertising cost in the tobacco industry, 

rather than the national average of 201, the expenditures of ten tobacco companies in 1934 for these three items calcula.ted as $33, 949,000 

represented total advertising expenditures for the year of $56,580,000. 

(*) See Section ii, ·Jart 3 . t h i s ch a:pt er.! r 1 
Advertising is a busine ss and a profession of increasingly greater · im:?ortanCf3 i ·1 t!le Americ&'l. scheme of distribution. The gr aphic arts 

are in the ·main cl e1) endent U1)8l1 the volume of advertising in any one 

year for the opera.tion of printing, lithogr aphing and engraving 

pl ants. 

Advertising linage in increasing vol~~e h as results that reach out 

in many directions. Advertising begets advertising. It is the voice 

· of 'busine ss com::o eti tion . As t he l e?.ders begin to comoete for availabl e_ ·markets, t h e others fol l ow in l .ess conspicuous regional and 

looal c a.rrrnai ,gns. The ::oopular slogan calls forth a hundred echoing 

imit ations. Newspap ers, magazine9, r adio, lithographers, engr avers 

and pri nt ers acqn i re mor e business. Sa l e smen l)ack their sample 

grip s; and th e comba t forc es of comp etition a r e on the march . Employment of workers; gr eater ch ses of r aw ma t erials; brisker 

circula tion of money ar e attendant results. S. Clay Willi ams has 

poin ted out i n his bri ef on t h e AAA t he round of benefits that follow increa s ed factory uro duction t hrough consist ent advertising. 

1her e is no ins~ ing the si ess- roducing ow r of well-directed 

adv ertising. But t here ar e othe r questions in the problem of sales 

exploitation e~ ond t he me re volume of advertising as such. 

3 eyond that demonstrabl e r e sult, a s behind a curt ain, stands the 

que stion: How much soci al wast e is p r e sent -- if it be pres ent --

i n the se tobacco adv ertising campaigns i n t he light of the factual 

evi dence making up t he body of this Study? What is the ultimate 

economic r esult upon t he consume r, t h e growe r, the proce ssors of 

all kinds and sizes? Is advertising b eing u sed in its true power 

and strengt h in terms of t h e soci al and fin n~i l responsibilities 

of an mp ort ~t industry ? To day 's gain is some times tomorrow's 

sorrow. The answer t, however, await a full examination and 

appraisement of all t he component f actors of t he p robl em. 

Joru1 enso , p r e sident of the Ame rican Associ a tion of Advertising 

Agencies in 1931 (Print er s ' Ink , April 2 , 1931) states: 11 1'De future 

of advertisin& will be along the line of r educing the cost of distribution, a s well a s stimul ating sal e s, and t his will come about 

through making adv ertising more r eliably 1d informatively serve 

the consumer.u 

E. ADVERTISING ALLO'ifANC3S. 

To all advertising expenditure s should properly be added a s part of 

a manufacturer 1 s advertising and sales promotion costs, the special 

p rice concessions to favored wholesalers and r et ailers t hat business 

calls the advertising allowance. Til e advertising allo ~~ce ha s a 

t win of concealment and discrimination known a s the secret rebate, 

the secret discount --items not shown on auditable invoices. 

In the ~ob cco industry , advertising all01ivances and special discounts proceed from the distribution policies that tobacco manu10691 
- 227 -

· f a c t ur e rs ma ink d n in order to ·secu r e de:n a rtrnent st ore , ch a in s t ore , 

and o.the r f avored whol e s al e or r e t a il outl e ts. To j udge t h e soci a l, 

e conomic and financi al e f f e cts of di stri bution , adve rtising us t 

p r onerl y b e consi de r ed no t onl y in t e:i.'ms o f copy ap,) ec9.l, ?P. e an d 

medj:·a u sed. t n.lso i n t r:; r ru s of a llowanc e s and Sl)eci a l p romotion 

discoun ts >·· 'S".,he to tal is t he exnloit a tion cost. 

l. Tobacco p ro duc t s a s los_s-l eaders. 

~1 s ewhe r e t his Study hc.s p oi nt ed ou t t hat f ew p ro ducts 

l ·end t heos elve s so r ead ily t o t he loss-leade r forr·1 of 

ret ailinG c omT)e t.i t i .on as do ci garett e s and othe r tob a cco 

p roa.u cts. So wi de spre a d had. t he practice of loss l eade rs 

been followed. t h r oughout t he country tha t in maki ng ap -

p r a i s ement of t he r e sults u:_J on C~ il tra de , the Na tiona l 

'Co de A-u.th ority for Ret a il Trade Co de , No. 60, wr o te t his 

i ndictmen t: (* ) 

11 The ue riod endi ng i n 1933 S RVI the development of the soc all e d 'loss-l eader ' t o t he n oint of absurdity . 

11 A 'loss-leader' is an a rticle of merchandis e , os t ensibly 

desir abl e , p riced f a r belo'N a norma l fi gur e - a t time s 

below invoice cost - to entic e tra de , i n the e:>cp ectation 

t hat custome rs so a.ttra ct ed to t he store would pu r ch a se 

othe r and more profi t e.bl e me rchandis e . 

11 Some store s wh ic~ u sed thi s me t hod ext ensivel y r elied 

un on t he na ur .l wants of t h eir cust omers in othe r lil;le s 

t; stimul a.t e othe r s a l es an d. recomu ense them for the ~ 

loss enta iled i n t he p rofitles s s elling of t he llos sle r~. Othe rs used 'loss-leade r' me rchandise of so 

low a quRli t y thC~ t t he cus t ome r's own common sense could 

be r elief ~on (with subtl e stimul a tion of sal e smnnshi p ) 

to switch t h e purchase to b e tt e r - and more p rofit able 

goods. 

"One of t he inevit abl e r e sults of 'loss-lea de rs' me rchandising was 3. wave of p rice wars. The offe ring of such a 

l eade r in a community would inaugurat e a s e ri es of price 

cuts among t he comp eting stores, t e rmina ting , more often 

t han not, in s a les f a r be low co st. 

" ·r he r e sulting lo ss e s wrought unfair compe titive h a rdship un on speci al ty store s and small establishments 

c a rry ing a limited numbe r of line s, since such an e st ablishment mi ght be c aught up in a ric e war involvi ng one 

of i ts f ew . l i n es -per haps its only line . This was p a rticul a rly true b e c ause na tionally adve rtis ed branded lines , 

which form an i mportant part of the stock of man;y- such 

store s, we re the f avorite it ems of such 'loss-l eader' 

merchandising . 

( *) F.ep l y of Nati oi1?.1 :at :n 1 e .:\.llt ho r i t v , I·nc . : t o Li t i .::r0tj on Di ~: i or: , 

NFA , Ap r i l 1, 1935. · Liti gati on Di v i si o::. Fil es , NRA . 

691 
11 I'he obvious effect of the 'loss-leader' was to disrupt 

fair com11eti tion. Resourceful stores could, by judicious 

price-cutting, drive we~~er competitors out of businesspreparatory to raising prices when the com~etition had 

been disposed. of. 

11 This was particularly true whenever a new store utilized 

t ni s device to lure the _p3. tronage of a cornrrmni ty away 

from the established merchants. 

11 ••••••• The competitive ~ressure in retailing backed up 

against the manufacturer and wholesaler in the form of 

insistent demands for lower and lower nrices to meet or 

undersell competitive retail pricas. 

11 The m;:mufacturer or wholesaler not only watched his 

volume decline; in addition, he was forced to grant 

price concessions to absorb part of the loss that was 

being forced on the retailer. I'hi s wa.s one of tne factors whicr forced the manufacturer to drive dovm wages 

of his 0\7n lab~r, in orcier to meet the demand for cheaper 

prices. 

11 ••••• Further, t his nressure on manufacturers and wholesalers W".S &reRtest when it was exerted by ret;dlers 

and grou,s of retailers with large buying power and plent' 

ful ca.sh reserves, resulting in further incrertsing their 

cor:npeti ti ve a.dvan tage . 11 

2. Effect Loss-Leader Oil aetailers. 

restimony as to the direct effect of tobacco as lossleader advertising was presented to the House Ways and 

Means Committee in .1 ay , 1935 b:,r ,nany tobacco wholes alers 

and r et ailers. 

Addressing himself directly to the loss-leader provisions of 

the Retail Code, Siegfried F. H~rtm~n made this statement: 

( *) 11 Tne grocerj stores of this country, the food stores of 

this country, soln over $100,000 ,000 of tobacco products as 

loss-leaders. That tremendous sum of 100,00 ,0 0 re~resented 

only one per cent of the total volume of the grocery stores. 

So that ·they could well afford to sell those tobacco uroducts 

at invoice cost or less ..... . 

11 And yet, while that tremendous volume represented only 1. 3 

percent of their business, it represented over fourteen Cl4) 

percent of the total volume of tobacco products sold throughout the country viith these two results: fourteen (14) per cen 

of the gross business of the tobacco deP.lers was taJ en away 

~----------------------------------------------------------------------- ( ~') St a tement of Siegfried F. Hartman, Counsel for the Retai 1 I'obacco 

Dealers of America and Code Authority for the Retail :robacco Tr.3.de, before the House Ways and Means Committee R~cord of Hearing, page 557. 

10691 
10691 

- 229-

from ·Ghem, first; , and s e co11Cl, t hat wi th respe ct to t he r ef'laining 

tobacco p roducts t he r etail deal e r s Y'e r e ab l e to sell, t hey we re 

compell ed to sell ' t hem in comp e ·ti tion with the g roc e rs a t cost ~r 

l ess , and t he ir Jrofi ts we r e entirely eliminated . 

11 Now ;y-ou gentl emen c a n ap1J:reci a te t h?.t it does not mean much to a 

grocery store · to sell one pe r ce 11 t of its p ro ducts a t a loss, but 

it means a g reat deal to a tob accorti st to sell si.xty to seventy 

to eight y p er cent of his product at · a loss. And that is why t h is 

loss-leader pr actice which was so vicious particularly in the tobacco tra de, e~use of t he susc ep tibility of tobacco products for 

use as loss-l eaders, had such a demoralizing effect upon the industry, and tha t is why the s·tabiliza tion of tobacco prices as a 

result of ·these codes, worked such g reat b enefits . 11 

3. Advertising Allcwances to Chains, etc. 

The effect of advertising allowances on wholesaling and retailing in tob a cco end othe r fi elds has been unde r ·study in 

the Federal Trade Co nmissio n anc i n corruni tt ee s of the House of 

Representatives in iavesti g~tio s of chain stores and the activities of the Americ an Ret a il Federa tion. The story of 

a.dv erti sing a llowanc e s i n t he toba cco fi eld was p rominent i n 

the July , 1935 hearings. As summarized in Editor & Publisher, 

July, 27, 1935 , these facts emerge : 

'' :::.~ epresentative Wright Pa tm:1.n in inq_uiring into the advertising practices of chain-store organizations has estimated the 

advertising exp enditures of ten of the cha in-store systems, 

whose re !resentati v es were a ctive in orge.ni zing the retail feder a tion, at 40,0 00 000 a year. By exploring the operations 

of Atlantic & Pa cif ic, t he committ e e has a ccounte d for ~6,000 ,0 00 . 

11 The Commi t t e e cha irman says 11 Sditor and Publishe r" -p roposed 

to inqg.ire of the witnesse s whe the r the r e is an accounting 

to the firms from which advertising allowances are t aken. l~ o 

such a ccounting exi sts in the A. & P. System, it was disclosed. 

11 Cha rles 1

:"!. Parr, a ssistant to the ch ief buye r for A. & F.'s 

15, 200 stores , was the sourc e of t he committee 's information 

on much of w!1at has b een brought to light to date . The organiza tion's annual advertising bill, he said, i "s matched by 

the wnount which is collected from food manufa cturers, running 

about $6,0CO ,OOO a. year. 

11 F. W. Gundrey of the A. & P. purchasing staff stated t m. t the 

total of advertising allo1.-vances and sneci al quantity discounts 

for the year 1934 WCJ, S .. :6, 105 ,000 in r ound fi gures. 3rokerage 

allowances brought in $2,000 ,000 additiona l. These items a re 

unrelat ed to p rice s or invoices. 

U·Flat sums we re more common ai1:ons the biggest compani e s. I n 

various c ases also, the allovv ances went up by a . g raduated scale 
-230-

as volUllie incre~s d. ~or the Hershey chocolate line for instance, there was a fl~t allowance of $5,000 a month, or 

·:so ,ooo a year . Corn Products ~=iid the same , as did Gold 

?:iedal foods (Bi squick nnd t"'heaties). Gulden 1 s mustard was 

down for :,>3 ,000 Fl. ~nonth for six months . 

11 Liggett & ,~y ers (Chesterfield cigarettes) was listed at 

1 -oer store per month for seven months, which figures out 

to round 10 5,000 for the full A. & P. t-u~ of 15, 300 

stores. Luck;)r Strike s and CAmels were not listed . although 

seve ral less nopulr1.r cigare ttes contributed varying sums . 

"Wrigley 's c ewing gu.rn etllowed 7,000 C'l. ~nonth or ~84 000 a 

year. 

11 Ge:1e r al :::i'oods Conoration , Inc. , line , ;30 , 000 flat for adv e r ·"ising Pllo vpnc e a .r.ont , or 5 per ce t di scou..'1t for adv e rtising . 11 

Allowances run!1i ; as '_i ,.., ... J. '1.S ;yl ·~ ,000 a year for news-caner advertising we r e r ev ealed in ~ s t"teme 11t of ::tllov.. ances r eceived by 

Libgett :)rut:> Coffi"9:U1Y , I r1 c., filed v1 ith the specinl :-louse Com:nittee on The Inv es ti ~., tio n of t L e .Ai:1eric~..!l Retail Federation . 

~l1e tota l amount of ~llov. 1ces .nore than naid Li,_sLett 1 s full advertising bill , ano l eft A substantiA.! n ro f it, a ccording to fi gures furni s'1ed the comrni t tee in a lett e r from 7 . ·i:at t, executive 

vic resid en t of Li 5gett, bivin5 t1e followi n5 state nents: 

11 ( 1) Tae tot nl A..OOWlt 1·ec ei v ed by Liggett 1 s in the form of 

compen sation and allowances for window and counter displeys 

during tnc year 193£.!: ·1ere ) 797, 3t>5 . 5'3 . 

11 (2) The amount r e c e ived for the first six months of the 

year 1935 was ~3 941.2 . 

11 (3) The total amount expended for adve rtising during the 

;y-ear 1934 was ~538 544 .1 ; for t he first six months of 1935, 

320,530 03 . 

11 (4) So f a r a s we know , t h is company h as not received any 

other benefits or advant ge s from these manufacturers or 

sup' li ers not avail['lble to the trnde ~ene r~lly. 11 

A senara te Li g6 ett lette!". g<:~.v e the company 's tot a l sales for 

1934 as ~44 064 394 . 

Tl e a llowances for newsl!a~1e r adve rtisi ng a r e given in the accom-

~)anying tabl e , toget er vii th the trade and c ash discounts shown 

1 invoices. 

This is the evi ence from one g rea t chain. There are scores of 

o Jche r chains about which less is !mown . There are rnn.ny g reat dep a rtlnent stores which s e t the n.n.ce for selli'1g ·9 ractices and advertising methods in t~ ir w~ regions--some of nationetl influence . 

10691 
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TABLE 6 

"'PRINTERS' INK" 

Aug. 22, 1935 

LIGGETT DRUG CO •• INC. 

~------------------------------------ ----------

ligar department: 

A!rERIC.U! TOBACCO CO. 

AXTON-FISHER TOBACCO 

COMPANY 

BAYUK CIGARS, Inc. 

BROWN & WILLI~~SON 

TOBACCO CO?~OR~TI0 . 

CHRISTIAN PEPER 

TCBACCC CO. 

CONGRESS CIGAR CO. 

CONSOLIDATED CIGAR CO. 

DE I SE!.-W'EUtrER-GILBERT 

CORPORATION 

!JIAMOND ~.iATCH CO. 

Discounts Shown on invoices 

Additional compem::a.t ion end 

allowances for window and 

counter displays and advertieTrade Cash inc:: 

Per Cent 

Minimum 10 per cent 

ma;d.mdm 12 per cent 

10 per cent, denls net 

10 per cent 

do 

do 

Min~ 10 per cent 

maximum 12 per cent 

12 per cent 

~intmum 10 per cent 

maximum 11 per cent 

2 

2 

2 

2 

2 

2 

2 

2 

Uost items net; few, 15 per 

cent 2 

Herbert Tareyton cigarettes; 

5 ·oe!' cent of purchases for 

Lucky Strike cigare ttes; $25 

per store making wir:dow clisplay for 1 ·.veek; Cremo cigars, 

$25 per store making window 

displAY for 1 week 

Head Play cigarettes: 25 cents 

per thousand purchased. 

5 per cent purcha ses B?.yuk Phill . 

ies 

5 per cent purchases except 

Wings cigarettes. 

5 per cent purchases Listerine 

Cigarettes 

5 per cent pttrcil...:;es La Palina 

listed over $75 per thousand; 

3 per cent purcr~s es La Palina 

listed under $75 per thousand 

except Minutes. 

5 per cent purchases Dutch 

Masters 

5 per cent pUl'chases San Fel~c ~ 

de luxe and pc.netelas. 

62} cents case en some items 

$1.25 case on others. 
S. FRIEDER & SONS CO. 

GARCIA GRArD CIGARS, INC. 

I. LEiV I::> CIGAR .lFG. CO. 

LIGGETT & !.!YERS TOBACCO CO. 

P. LORILLARD CO., Inc. 

"\HILIP MORRIS & CO., Ltd. 

PENN TOBACCO CO . 

106) 1 

Discounts shown on 

invoices 

Trade. Cash 

Per Cent 

Net (1) 2 

Minimum 10 per 

cent, maximum 14 per 

cent 2 

Min~ 20 per cent 2 

and 12 per cent; 

max~ 22 per cent 

and 10 percent 

10 per cent 2 

do 

do 

Hiniz::rum 10 pe r ~en t 2 

maximum 10 per cent 

and 5 per cent 

2 

ADDITIONAL COMPENSATION 

ALLOWJU!CES FOR \YINDOW AND 

COUl~ER DISPLAYS AND ~ 

VERT ISING 

75 cents per thousand on 

purchases of Reynaldo 

Ban-'Iter~. 

7 ?er cent purchases 

Garcia Grande 

5 percent purchases 

John Ruskin and Flor de 

Melba cigars, $1.50 per 

thousand purchases of 

La Provedora Cigars. 

$3,300 per ~onth 

5 per cent purchases 

Old Gold cigarettes 

5 per cent purchases 

Muriel cie;ers 

5 per cent purchases 

Polar cigarettes 

92 cent s :;>er dozen · 

Union Leader humidor tin 

purchases. 

4 r cent purchases 

Oxf r d Blues cigarettes 

3 · € c nt purchases 

Engl 1sh nls, Pl~ers 

· Enblisa blend cigare-

. tes. 

' uer cent purchases 

·, 1.1 bo!'c and Cambridge 

_i.garet es. 

~ c ·nts ner t housand 

pur ~!:: s of Ti11e cie;arettes. 

5 per cent purcnases 

Xentncky Wir.ners. 
I!NARD SCRW.A.RTZ CIGAR CORP. 

SCHWARTZ 

& Horton 

Inc. 

STER EISENLOHR, Inc. 

10(1}1 

' 

-233-

f3 • . 

Discounts shown 

on invoices 

--------------------------~Additional Compen ~ti n 

Trade Cash 

on Allowances for Window and counter Displays 

----------------------------~an~d~Ad~v~e~r ti~s~i~ng~·~-----

Minimum net, 

maximum 12 per cent 

5 per cent 

10 per cent 

Minimum 10 per cent 

maxi.Jirwn. l2 per cent 

do 

Per Cent 

(1) ' 2 

2 ' 

2 

5 per cent purchases 

R.G.Dun cigars. 

3 per cent purchases 

La Primadora cigars 

2 per cent purchases. 

5 per cent purchases of 

BlaCkstone cigars listed 

over $?5 per thousand; 

3 per cent on Blackstone 

cigars listed 1m~er $75 

per thousand. 

5 per cent purchases. 

10691 

:'o judge t ·a e f ul l extent of t O.,:; p-ractice s r eveal ed, a f a r ider 

e..nd deeper rese2.rch is ne eded for the benefit of all distribution, 

i~ tobacco qnd othe r ro ducts. 

As illdica ted in point 6 of distribution tendencies (introduction 

to this chap ter), t he cigare tt e is a natur~l loss leader. But 

t he statement must be :rnc.e tha t in t he use of tobacco as loss leaders, the great c~ ins a re no t tocl;w the worst offenders. 'l'he 

ch2.ins have seen the profits -:;o ssi bl a from tobacco selling and. 

they have built now so lar :~ e a volume in tobacco that there is toda~7 a marked. ndenc~r o:a t:1e )art of t~ e na tior..al and regional 

cha ins to r equire their ma.nFl.gers to sh ow OD e rating profits in their 

tobacco departments. Tni s is, in lJ. likliho0d., another indice,tion 

that the national ch.::Lins h nve, in re a ching maturity in e:x-pansion, 

sought a r el e.ti ve st2.bili za tion in Drices. However in a rea s of 

keen competition, the chu.L1s vvrlile not initiating ti.1e tobacco loss 

leader, wi 11 meet loc .l price co::roe ti tion, producing temporary 

price demor,g,lizA.tion. This question of loss l eade r selling must _be 

considered ap art from tr1e p ractice and t he effects of special advertisL1g and sales allovrances. 

Tnroughout the distribution field, if an orcte rly and socially intelligent solution for the ills is to be found, t l:ere is great and 

pressing ne ed for a thorough exa.nination a.i'1.d ev aluation of sales 

and 3.dvertising methods. 

- 235-

CHAPTER VII 

~:H E I MPORTANCE OF J:HE TO:OACCO i\liA}JLJFACTt.JRING I NDUSTRY 

TO ::L1HE FEDERAL GOV3R.t~MEN .f AS A SOt.BCE OF 

TAX F.EVE1TUE 

It is no t the province of t his study to pass u oon t he v a rious problems 

. of taxation a s illustra ted. by t l1i s industry. Tobacco products, h ovvever, furnish t he Federe..l Government witrl so large a proportion of its 

excise recei·9 ts t hat c e rt a in facts On t axation eure furnished herewith 

for a bett e r corrrorehension of the industry- . 

The excise on manufp.ctu r ed tob a cco is one of t he oldest fonns 

of federal taxation. It has be en for ma~y years a ma jor source 

of i n t ernal revenu e . The hab it-forming chara cte ristics of al], 

tobacco products, and t he con stant growth i n ci garette s;:1oking 

among both s exes , ::tre r espon sible fo r a strikingly steady inc r eas e in t 8.:.;: r evenue since t he World War, a s evidenced in Te.ble 

I following , showi ng tota l r e c ei p ts from excise collections on 

tobacco ·products. 

I n 1917 t he excise per t h ousand on small cigarett e s was increased 

from 1. 25 to . 05 , or 54 , and age.in raised to $3 .00 i n 1 919, 

another i ncrease of 46~~ . The :orimary reason for the second increase was to comp ensat e the Gov e r nmen t for lo ss in liquor taxes. 

I n 191 8 at the higher tax r a te, production of small ciga rett8s 

i n creased 32 ~·.; over t he p r evious year. Simila rly , the il1crease 

in excise rate in 1919 (February ) did not p r event a 14(; increase 

in p roduction ove r 1918. 

The depression pe riod had rel a tively little effect (1 ) (*) on 

fede r al t nx r e turns from a ll tobacco products. I n 1935 , (f i s c a l 

;)' ear ending June 30th) toba cco taxe s totaled 459 million dollars, 

c nd the first ha lf of the 1936 fiscal year showed tax recei·.?ts 

from this source of 245 1nill ions, or a t the rate of about 500 

millions for the 12 months 1 period. It is safe to state that 

sma ll cigar e tte s, now taxed a t 6¢ p er package of 20 rep res ents, 

with a p ossibl e exception of tR.xes on liquor, the most ··?rofitai)l e sourc e of ~ revenue on any manufactured p roduct. 

e trade magazi ne TOBACCO LEAF, as of July 5, 1935 , quo l;es t he 

mon t h l y publica tion FORTillTE ns b eli eving tha t 11 not only is there 

an enormous unexploited field f or cigarette consump tion , but 

t hat we m;.\Y expect a mat hematical i ncrease as t he y oung er gener-

.s tion r eaches t :1e other side of 40 11 • It is unquestionable that 

p res ent per c ap ita consu..mr>tion represents in no s ense t he limit 

of g rowth in cigarette smoki ng . :r h is indu stry, t her efore , in 

al l p rob abi lity will continue t o b e a major source of i nco.ne 

to the federal government. 

(*) J3·;;- comparing the years of 1931 and 1932 . Se e Table I t l1is ch ap ter. 

1 06391 

-2-

TABLE I 

Receipts from Taxes Qri Major Classes 01' 'tobacco Products. 

For Fiscal Years ended June 30th, 1910, 1915, 1920, 

1925 to 1935 inclusive, and July 1 to Decemb_er·, 31;1936 • . 

: (:i.ioney figures expressed in thousan~s of dolle.r n) 

Tobacco 

Fiscal: Large Small Snuff '· .Chewing & 

Years Cigars Cigarettes : Smoking 

1910 4~ 

'ill 21,420 $ 7,921 ~L 

ojp 1,9_20 $ 2?,210 

1915 21,174 20,925 2,387 32,198 

1920 55,424 151,262 6,949 74,664 

1925 43,347 225,032 6,753 . 66,922 

1926 38,319 254,825 6,918 67., 711 

1927 23,544 278,928 6,907 65,070 

1928 22,879 301,752 7,461 62, 774' 

1929 22,548 341,951 7,127 61,159 

1930 21,141 359,816 7,542 q0,098 

1931 18,025 358,915 7,190 58,377 

1932 14,207 317,533 6,846 58,030 

1933 11,305 328,418 6;405 55,450 

1934 11,633 349,662 6,788 55,298 

1935 11,693 ~85,459 6,511 54,372 

Firtt 

half of 

' 1936 y 6,536 207,724 3,12~ 27,471 

1/ Ju~y 1, 1935 to Vecember ~1, 1935 

y' Includes also receipts from taxes on: Small Cigars, Large 

Cigarettes, Cigarette Papers and Tubes, Special Taxes, and 

l:iiscellaneous CollecticbDB. 

. . 

Source: -Annual -Reports of the . Commissioner of internal Revenue. 

lOC$1 

ot al y' 

$ 58,118 

79, 957· 

295,809 

345,247 

370,666 

376,170 

396,450 

434,444 

450,339 

444,276 

398, 578 

402,739 

425,169 

459, 178 

245,710 

- 20 '7-

In l9l·b , n 'v enue fr o;:n to·bR.cco· p roducts r eu r esent ed 10 . 9'-'b 

of t n<:J tot a l r ev enu e r e c e i pts of t he ni d St ate s Go v e rnment; ~na ~ 93~ . 12 . 1% (*) . 

3y furthe r r e ferenc e to Tabl e I 1 Aryl;)end.i x 4, the p rop ortion of i n come to t he g ove r mnent from toba cco a s com"?o.r e d 

to t h a G f :com inc ome t axe s, li quor and o·tihe r manuf::tcture r s ' 

excis e t axe s, bring s t :ne con tribution of tnis i ndustry into strong r e lief. 1~ o othsr i ndustry apu :i.~o ch d t he t;oba cco manufa ct u.ri.ng i ndu str;r in r evenu e r eceiT,HjS. 

Th e t a.x Oil motor V8nicJ. es , corr-rt;l ete or part s , and on lub -

ri e a ting oi 1 a.nd gasoline , tog ether, ::~moun ted to 266 million dollars for t he fi sc l ;rear of 1935, as compar ed with 

459 millions from toba cco. Li quor t ax e s in the s ame fisc a l yer.tr we r e 411 ~-::J illions . Re f e rrins ag 8.in to 1935, t he 

pe rcent age of tob a.cco t ax coll <:J ctions to tot a l int e rno.l 

reve nue collections wa s .6 . 

B . ADDITIONAL TAX REVEl\:rJE FR0Ni CUSTOMS RECEIPTS AND PROCESSING TAXES . 

Fo r the d~r year of 1934 , rnlst oms ~t s from toba cco, 

unmanufa ctured a n1 manufa c t ured, were 28 .:til lion dollars, or 

7. 3;b of tota l c a lcul a t e d customs r e ceijJts. I f this sum , to gether with 18 mi l lion doll a rs r e ceived from agricultura l adjustmen t taAe s (fiscal y ear ) on t n is commodity be a dde d to t he excise for t h e fiscal y ear of 1934 , ~e tot a l t ax paid by t he industry exclusive of its con tribution to inco;:ne t axes is 465 ;nillion · doll a rs, or 14. ~.:.> of t he tot a l r ev en'.le r e c e i p t s of the Unit ed 

St a t e s Gove rnment for tha t pe riod. 

Receipts from tob a cco agricultura l adjustment t axe s for t he 

fiscal ye ar 1905 were 36 mi l lion dolla rs. The c a lcul a t ed cuso~ s r e c e i p ts for the c a l endar y ear of 1935 are not yet av a ilabl e . Consi de ring t h e increas e in rece i p t s from excise t axe s 

on tobacco p roducts i n 193;) ( 34 million doll a rs), the tot al 

contribution of t he industry for tha t ye a r to the t ax income of 

t he United Sta'Ges is, with out que stion, cons'i de rably in exe e ss 

of t hRt of 1934 . 

C. STATE TAXATION ( **) 

At t h e p res ent time the re a re ~1 ot l e ss than 17 s.tates imposing 

a speci a l t ax on v a.rious tob a cco p roducts, all of them imp osing 

a tax on ci gare tte s. Thi s tax 8~g es from ~~ of t he r e t ail 

p rice in t he st a t e of Georgi a to 5¢ uer package of 20 in t he st a t e 

of Ark ans a s. Six of t he se 17 s tat e s imn os e a tax on t he r e t a il 

( * ) See Tabl e I, Appendi x 4 , sn owi ng r evenue r e c e i ·o ts from tob a cco and 

other sources for select ed y e a rs from 1914 to 1935 inclusive. Tabl e II, 

Appendi x 4 , sh ows change s ir.. rat e s of li axa tion for t he s arne '9eriod of years. 

( ** ):Based on information r eceived from t he r.r ob a cco \1e rchants Associ a tion of 

t he Unite d ate s. See a lso Tabl e 3 , A-pn endi x 4 . 

10591 
-238-

E:.< l <Js of smo:::inc tob acco, :C.~. ea 0 :1 c!wwL1g- tobacco, .::md three on 

snuff. 

The 1934 recei,)ts from ci garette taxes and per cani ta cigarette 

.:; 1 eti L . Bk.tes ·1x in ~ ciea:c~ litis alO!le are shown in Table 4 of App endi x 4. 

The per capita consumption of cigar e ttes in the United States for 

t he fi seal year of 193tt was 921. In cornpari son with this figure, 

t he Tobacco !:.1 erchants Associatior. of the United States estimated 

for the same year the -per capitA. cigarette consumption (as of that 

date) in fift een tobacco tax.i n,-; st'1.tes as 531.~. ·· 

While states taxing toba cco products are frequently subject to 

heavy losses of revenue by bootleg~ing of cigarettes from adjoini ng stqtes, there is no doubt that th.:>se fift een tobacco taxing 

states, as a gr oup, would show a l a r ge r :9er ca"'Jita consumption without t he addi tiona.l st:1te a.""~Ces i mpos ed. . Therefore, the irnposi tion 

of these sta t e t aAe s has a direct effect on the total number of 

cigarettes manufactu r ed and consequently on thd federal revenue 

from t his industry . Sales t axes , both state ru1d local, further 

complicate t he uroblem. 

D. DISPARITY I T TAX EETEODS 

Since 1917, cigars have b een subject to a. gradue.t ed tax (per t housMd) basect on int ei1ded r etail selling price ( *). Similarly, 0 large 11 

ci gare t t es , wei t?,hing mo r e than three nounds ner thousand , ca rl"'J an 

excise hi ghe r then t hat on small cigar e ttes . Small cigars and both 

small and large cigarett es ar e taxed ~e r t housand without reference 

to retail selling urices. Snuff, and smoking and chewing tob acco 

B.re taxed per pound . Whe ther for revenue pur.poses a graduated tax 

on cl a ss e s of cigarettes should be considered -- whe ther such tax 

woul d. benefit toba cco farmer, m:->nuf?..cturer, l EJbor, and t he volume 

of consumption -- cannot be deterrrined by rule of thumb. Scientific 

determination of a t axing batie must rest upon a full knowledge of 

many factors not heretofore disclosed to government -- such a s effect 0!1 growers of leaf tobacco, co sts of p roduction, acl verti sing 

expenditures, the r elationship of labor costs to manufacturers' 

net selling price. Here again -- in the intere st of nroducers Cl~d 

i n the public interest -- is t he re need for or anized research • 

..,.---..,.------------ - --- --. (*) See Tabl e II, A,!endi x 4 ; also Chapt e r V, The Ci ga r Manufacturing 

Industry. 

10691 
9 --

-. CHAPTE::.t VI II 

POSSIBILITIES FuR 3ESEA,.TtCH IN-.1RE TOBACCO INDUSTRY 

A. TIIE SCOP:u; OF RESEARCii IN T:;:-iE rroBACCO INDUSTRY 

:rtesearch in the ~obacco Industry has been confined to the relatively narrow limits established by the immediate objectives of the individual concerns which have undertaken independent projects for the solution of their problems, together with certain more general investigations conducted by agencies of the federal government. The lack of coordination in the different efforts that have been made makes it difficult to appra,ise the extent of the ground covered, or to obtain comprehensive, authentic data on the major problems of the industry as a whole. 

The work that has been done failed to produce the ' type of informatio~ 

necessary to the solution of certain industry-wide· problems which are 

comparatively new to the industry a.nd to the economic a:r:td social .structure of the country. Nloreover, the experience of othet• industries ·which 

have adopted broad-scale research programs indicates that there are advantages to be gained from such programs even in the field of individual management prdb~~ms. 

Prior to the depression, and during periods of large profits, indus try in general paid little a t _ten tion to problems involving the in ternal relationships of its various ftinctional 'sub-divisions. or its externa l relo.tic1 nships Tii th source s of · supply, c:1.annels Qf dis tri bu tion, and 

the general public. No realization exis.ted of the int egrated nature of 

these relationships, because the mechanism as a whole_ was working smoothly. It was Gnly when difficulties oc~urred that maladjustments became 

apparent. The Tobacco Industry was no exception. The diversity of 

interest, and in some instan~es, the active antagbn~sm· of interest between 

the component elements cf the Tobacco Industry has 'made it difficult to 

obtain cooperative action, even though the economic desirability of such 

action may have been a:pp_arent. 

.. 

In recent years the problems of management h~ ve become increasingly 

broad in scope, with· the result that a ·more comp:r~hensive knowledge of 

all operating factors is essential to effective pe-rformance, including 

knowledge of certain trends and forces that ma r _have pres.ented no problems a few years ago. In the ~obacco industry, there is good. reason. _to 

believe that · a well-planned program of general industrial research will 

not only yield tangible returns, but is also necessary to the successful guidance of the industry in the complexities of the economic, social, 

and political changes that have taken ·place and that have yet to take 

place. 

It is i'mpossible to enumerate all the specific areas in which re ... 

search of this nature would pr~ve valuable, but the following illustrations may indicate the extent of the territory open for exploration. 

10691 
-240-

B. THE ?IELD FOR COORDINATED INDUST?.Y TI.S~ftQH 

1. The Curing of Tobacco. 

Bright Flue-Cured tobacco, as the name implies, is cured in the 

farmer's barn by radiated heat. In the process of curing, the temperature is under more or less accurate control, depending on the past 

experience and skill cf the individual farmer. There is no attempt 

whatever at humidity control. Fine quality tobacco in the field may 

be ruined in the curing process. 

This Unit has been unable to discover any attempt at scientific 

research on this important problem. 

Burley and Maryland tobaccos are air-cured. 

tobacco are generally air-cured. The process of 

on in the barn where the tobacco hangs and there 

artificial heat. 

The cigar types of 

air-curing is carried 

is no application of 

The open-fire method. on the dirt floor of the barn is ueed on 

Virginia fire-cured tobacco and on certain types grown in western KentuCky and Tennessee. Virginia sun-cured (T~~e 37) is racked in the 

field for curing. 

While the cost of flue-curing is higher tha~ that of the other 

methods employed, the quality of the tobacco is decidedly improved by 

that method. Its better grades coornand a higher price for domestic use 

in cigarettes and for export trade than any other type of Americangrown tobacco leaf. 

Witnout questio~, proper ~esearch should result in a @eneral improvement in the process of flue-curing. It is also of e~al importance that research be used to deteruine what methods of during are 

best adapted to the other types, including cigar leaf. There is a real 

.possibility of improving the quality average of the tobacco crop, With 

the present trends in foreign markets, and the particular danger of 

less demand for the lower grades, quality constantly assumes more importance to the farmer. 

The general trend toward cigarette smoking, both at home and 

abroadt offers continuing op ortQ~ities for the use of mild American 

tobaccos. :Burley represented (1934) 1. 7% of the estimated value of 

leaf tobacco exported (*). It is well with in the range of possibilities that ·an improved Burley might find considerable demand abroad. 

Opportunity for research may be further illustrated in the case 

of cigar leaf, where the average large stocks of low grade lear over- r 

hanging the market might well be red-J.ced by a more exact chemical de- ' 

termination of the factors governing quality. 

(*) De9artment of Commerce, Bureau of Foreign and Domestic Commerce, 

Tobacco Division, Bulletin No. 521, July 2, 1935. 

10691 
- 24l-

· ·.2. ~ . : P.ri. mary~ Leaf Market ·-

' -

In Q~apter. III on INTEGRATION WITH AGRICULTURE, under the topic of 

"The Auction and Loose-Leaf Market 11 , there has been discussion of the 

problems developing from the short marketing season ·and the speed of 

sales, both of them detrimental to the price paid the farmer. The 

speed of sales also prevents close scrutiny of grades of leaf by buyers. 

Further research on these subjects, and a definite consideration of the 

other methods of marketing, far less satisfactory than the auction system, are of immediate interest to the Department of Agriculture and to 

manufacturers and exporters. 

3. By-Products. 

There is great need of experimental work in the manufacture of 

tobacco by-products. 

.. . 

4. The Aging of Tobacco. 

Immediately after its purchase on the warehouse floor, tobacco is 

put !lin ordern • . It is dried ancl a : definite aniount of m·ois_ture added 

prior to packing in hogsheads for storage. Twice each year, the tobacco "sweats" in the hogshead, once early in the summer and again in the 

early fall. This sweating process may take place for. three successive 

years. A considerable amount of tobacco used in manufa-cture both here 

and abroad is aged for improvement in quality in this way and for this 

period. 

A considerable amount of work has been done in the Department of 

Agriculture, sometimes jointly with_ state institutions~ covering the 

chemistry of the various types of _tobacco leaf in its green and dried 

forms, but scientific research to determine" the exact character of the 

sweating process as tobacco ages in the warehouses of the manufacturers 

and leaf dealers is de~idedly lacking. 

The inventories of the Big ~uree are said to approximate 

$300,000, 000. Other tha,j_'l the in-surance feature . of stocking tobacco against an occasional crop of poor .quality or small size, the amounts of 

these inventories are due to the aging c_f tobacco for improvement in 

quality. It is not improbable tha~ an exact determination of the 

changes taking place in ~he natural process of sweating would permit a 

real reduction in-s-tocks on hand, . by shortening the period now required 

for aging. Distinct changes of th~s character have been common in other 

industries. The possibility of temporary curtailment of' leaf purchases 

must be recognized in ~his connec~ion. 

5~ Distribution Problems 

In that section of Chapter I entitled "Cigarette Selling Prices 

and Policies", the influence of the manufacturer on specific problems of 

of distribution has be.en· outlined. The jobbers have emphatically expressed their belief that cooperation with manufacturers is essential 

to the solution of certain present difficulties . . It would be distinctly unfair, however, to lay all the troubles of tobacco distribution at 

the door of the manufacturer. 

10691 
-242-

A joint research consideration of this problem incluQign all distributing groups and the oarrQfacturers would, Tiithout q~estion, bring 

out information not now available, and of great value to manufacturers 

as ~ell as distributors. There is no more important field for cooperation between branches of the Industry. The wholesalers are ready and 

waiting. 

6. Labor 

The mechanization field study (*) conducted b,/ this Unit shows 

wide variation in technological displacemant. The problem of the relation of labor standards in this industry to those in other industries 

in the same areas needs further elucidation. 

7. Foreign Market.§. (**) 

The need for study of foreign markets for tobacco is evident. This 

Unit, working in cooperati on with the Tobacco Division of the Bureau cf 

Foreign and Domestic Commerce, has been of some assistance in pointing 

out to the Tobacco Association of the United Sta tes further possibilities 

of foreign markets, through detailed analyses of four European and four 

South Americau countries. 

B. Relationships with Jovernment 

Not only for the purpose of presenting an accurate picture of the 

Industry in co~~ecticn with taxation, but also in vie" of the desirability of working out an orde~ly anQ prac tica l adjustoent of relationships betriAen government and industry, it is necessary that industry be 

in a pos:i.- ~.o n to define accurately and in concrete terms its problems 

and re quir6~e nts. The uncertainties ~hich have existed for many years 

in the past with respect to what is permitted and what is forbidden 

under the .Antitrust ~a s, the question of the extent to which the 

federal government may be of assistance to industry in the solution of 

its problems, and the probabili ~r that further industrial legislation 

will aemand the fullest authentic industrial information, -- these co~­

siderations make it ev·dent that for its own protection, or for ~ore 

positive benefits to be received through cooperation with the federal 

government, industry is ~~der the necessity of exaoining its position 

in as comprehensive a manner as poss:i ble. Many of the mistakes made 

~~der NRA which were detrimental to the interests of industry, might 

have been avoided had adequate research rograms been established for 

some time before the advent of the codes. 

As stated in the Chapter on TaY~tion, tobacco tax collections represented 16.6% of total Internal Revenue collections in 1935. When 

compared with this contributi on of the industry to government income, 

the amounts expended in the tobacco divisions of the Bureeu of Agricultural Economics, Department of Agriculture and of the Department of 

Commerce, are pitifully small. The type and character of their work, 

insofar as it goes, is excellent. But the limitations imposed upon 

them by lack of available fu_~ds are most evident. Thorough exploration 

of all problems pertinent to the industr:r not only for the benefit of 

(*) See Chapter II, Section C. 

(**)See Chapter IV, Foreign Trade in Leaf Tobacco. 

10691 
- 34;.) -

government but for the grower a~d manufacturer, require greater appropriations in the public interest. 

C.- ASSOClAT:ONS ~ THE INDUSTRY 

1. Functional Organization and the elationshin of the Associations to Research. 

The ma jor functional divisions of the Tobacco Industry are repre-

.sented by trade associations whose objectives and activities are based 

upon the common interests of each group. Before proceeding to analysis 

of the method by which a joint program of general industry research may 

be established, it is necessary to outline br.iefly the existing status 

of trade association organization, in order to indicate, first, the 

specific fields of interest represented, and second, the mechanism 

through which research may ootain spons orship, direction, and support. 

(a) National Association of Auction and Looseleaf Tobacco Warehouse Associations. 

The association of the Auction and Looseleaf Warehouse group is concerned today with retaining as much as possible of the benefits of the 

NRA code period. 

(b) ~e Tobacco Association of the United States. 

The membership of this association is composed largely of dealers 

in smoking, cigarette, chewing and snuff types of toba cco, and warehousemen, with a sprinkling of bankers, steamship companies, railroads, 

and storage and forwarding companies. The headquarters of the association shift with the place of residence of its president. 

Because of the fact that the l arger American manufacturers have 

their own leaf buying organizations, the primary interest of this association is in the export trade. 

The Tobacco Association of the United States has never been consp icuously active, but in 1935, because of the drastic decrease in demand for American leaf in the Far Bast, the association became more .active and committe es were appointed t o study this and similar problems • . 

(c) et il Tobacco Dealers of America, Inc. 

Tiational Association of Tobacco Distributors, Inc. 

. . 

Both wholesalers and reta ilers have associations under effective 

leadership. They developed, durin~ the code period, into organizations 

of valuable help to their respective groups. They have continued the ir 

activities and. have ~a e p r og£ess in a study of their problems. 

(d) Toba cco Merchants Association of the United States. 

For many years the Tobacco Herchants Association of the United 

States ha s re resented the interests of the Cigarette, Snuff, Chewing 

and Smoking Tobacco Manufacturing Industry 
-2-'-~-

(e) Association o: Ciga:- Manufacturers alld Leaf Tobac co Dealers 

It will ~e noted that this g roup contains dealers interested in 

cigar type tobacco leaf and cigar manufacturers. This a~~ociation was 

very active during the lJP..d. code !-' eriod. :iot lone before: the termina-. 

ticn of the . conferences ~etqee~ that administration and a group 

representing this industry showeJ. them to be far apart on· such subjects 

as parity prices, processing tax levels, and quality of cigar leaf 

stocks on hand. 

The growth of mechanization and the steady trend toward concentration of prOQUCtion among a sma ll number of corporations has naturally 

developed friction between machine-made ~~d hand-made cigar manufacturers, insofar as common association interests are concerned. 

D.- COUCLUSI<f 

The weakness of these associations, individually and as a group, 

is evident fr om tl1e f a ct that there is no con:u:10n council table. Trade 

associations would be the natural channel, in self interest, for the 

research indicated and fer working out a comnon understanding of the 

broad problems underlying the indu stry. 

The outstanding need uf the tooacco indust~J is for the establishment cf a general program of research as broad Bnd thorough and as 

disinterested as has been suggested in these p~s, in order to place 

the industr7 on a scientific fo-.mdation. A way Dust be found to bring 

all the elements to@Bther in the pu blic interest. 

~at better solution of the problem could there be than the establishment of a ?obacco Researc' Foundation, to undertake not only 

the major problems, some of which have been here so briefly outlined, 

but all the hunQred and one auxiliary p roblems that organized research 

usually finds ~resent . Science, economics, ~d business would thus 

find a common meeting ground with government, grower, m~ufacturer, 

distributor. Exact :mo~7ledge \70uld Q.isplace· rule of thumb methods; 

the multitude of dark corners need ill~~ination. 

Into this research would go questions of taxation, problems of 

growing, curing a ging and g rading of tobacco, efficiencies of production methods, technological explorations and determinations, distribution and advertisi~g ? roblems, the development at home and abroad of 

new markets and the revivi~ g of old, the charting of future trends and 

future dangers that research foresight might uoint the way to avoid. 

These are the rcugh essentials of the wor k of a ~obacco Research Foundation. 

It is almost inconceivable tha t an industry of this ioportance 

should have gone so many years without some form of coordinated research. 

10691 
:::c-.ble !Jo. 

1 

2 

3 

4 

5 

10691 

TrlE rOBACCO SI'UDY 

(Taxation, Revenue Rec E:: i pt s , etc.) 

itle 

Tot al Revenue Receipts of the United States Governm8nt; 

Totg,l Internal Reve ... 1.11e Collections, (showing revenue 

frcm tobacco t 0xes and other major groups); and Total 

Cust oms Re ceip ts, (showing import dutie-s on tobacco 

ana. all other cornrnodi ti es) . 1'or Selected Years between 

1q35 and 1914 . 

Changes i n Rates of Taxation on Tobacco Products from 

1914 to 1935 (inclusive) . 

States Taxing Ci garettes Md their rnt es of Ge..xation 

' States Taxing Smoking Tob acco and t heir rates of taxatiol! 

St a t es Taxing Chewing Tobacco and t heir rates of taxation 

St ates Taxing Snuff end t heir rates of taxation. 

Receipts from Ci garette Ta:; ~e s and Per Capita Ciga rette 

Sal es in s·t a t es Taxing Cigar ettes Alone 

List of Stateillents 

TOTAL REVEJIHJE RECEIPTS OF THE UNITED STATES GOVERNMENT; TOTAL INTERNAL APPENDIX 4 

REVENUE COLLECTIONS, (SHOWING REVENUE FROM TOBACCO TAXES AND OTHER MAJOR 

GROUPS); AND TOTAL CUSTOMS RECEIPTS, (SHOWING IMPORT DUTI:SS ON TOBACCO TABLE 1. 

AND ALL OTHER COiviMODITIES). 

FOR SELECTED YEARS BETWEEN 1935 AND 1914 

(MONEY FIGURES EXPRESSED IN MILLIONS OF DOLLARS) 

1935- - 1934- - 19;3l ~ f9~21 - f9~o! ~ f926~ ~ ¥9~3Q - ~9¥1~ ~ I9~oQ 1 ¥9I9- - I9I7- - 1914 

(A) REVENUE RECEIPTS OF UNITED STATES GOVERNMENT .!±/ 3,790 3,112 2,042 1,982 3,905 3,751 3, 748 5,584 6,703 

(B) INTERNAL REVENUE COLLECTIONS: 

IN COAlE TAXES, (Individual and Corporation) 1,099 817 747 1,057 2,410 1,974 1,691 3,228 3,957 MISCELLANEOUS TAXF.S 1/ 462 410 179 83 152 276 366 741 687 

TOBACCO TAXES 4?9 425 4o3 398 450 370 309 255 296 

LIQUOR TAXES 411 259 43 9 11 26 30 82 14o 

MANUFACTURERS' EXCISE TAXES; 

MOTOR VEHICLES, (Complete or parte) 77 71 

14i 

138 144 115 144 

LUBRICATING OIL AND GASOLINE 189 228 - OTHER MANUFACTURES 

~ 91 ~ 11 __!I ___...5£ 82 -ill _ill_ TOTAL MANUFACTURERS' EXCISE TAXES 390 --rr 17 190 -m 2 9 327 

TOTAL INTERNAL REVENUE COLLECTIONS 2,773 2,301 1,620 1,558 3,040 2,836 2,622 4,595 5,407 

(C) CUSTOMS RECEIPTS: g/ J/ TOBACCO, (Unmanufactured and manufactured) 22 21 22 4o 38 36 36 33 ALL 

TOTAL 

OTHER 

CUSTOMS 

COMMODITIES 

RECEIPTS _If2. 

301 283 

262 ___ill 

259 ---zro2 

422 ___55.g 

590 

_5JQ 

566 ~ 

292 ~ 

325 

SOURCE:- (A) COMBINED STATEMENTS OF THE RECEIPTS AND EXPENDITURES, BALANCE~, ETC., OF THE UNITED STATES TREASURY DEPARTMENT. 

(B) ANNUAL REPORTS OF THE COMMISSIONER OF INTERNAL REVENUE. 

(C) ANNUAL STATISTICAL REPORTS OF THE BUREAU OF FOREIGN A1~ DOMESTIC CO~~RCE. 

FOOTNOTES:- .!/ INCLUDES COLLECTIONS FROM TAXES ON; CAPITAL STOCK, ESTATE AND GIFT, STAMP, AND !;;ISCELLANEOUS. ~ CUSTOMS RECEIPTS ON CALENDAR YEAR BASIS FOR YEARS 1919 to 1934 INCLUSIVE. 

1/ Ct.STOMS RECEIPTS FOR THE CALENDAR YEAR 1935 WERE NOT AVAILABLE AT TUdE OF PREPARATION OF THIS STATEMENT. !/ o:~ WARRANTS ISSUED BASIS. 

4,653 1,122 732 

2,601 359 61 

473 63 13 

206 104 so 

483 28 226 

49 

~ --- --

3,850 809 380 

27 30 27 

237 

210 __!.21 

221 ~ 2 3 

I 

~ 

rr-

.- 247-

lPPEN~~X 4 

TABLE I i. .:· ( *) 

CI-LA.NGES I.R_IlA'lES OF- ··r.A..x.ATION ON ·:rOBACCO PRODUCTS 

FRm~ 4 _to 1935 · ( inclusi v0. 

1926 1919 1917 

(A) (B ) (C) 

Large Cigars : ----- ----- ----- Class: A (Per thousand) $2 .00 ~~ .00 ~3. 00 ) 

B II II 3 .00 6.00 4.00 ) 

c II II 5 .00 9 .00 6 .00 ) 

D II II 10 .50 12.00 8.00 ) T'1 II II 13 .50 15. 00 10.00 ) .u 

Small Cigars (Per thousand) .75 1.50 1.00 

Large Cigarettes (Per thousnnd) (~o change)7.20 4.80 

Small C~g~rettes (Per t housand) ( ifo change)3.00 2.05 

Snuff (Per pound) ·(No change) .18 .. 13 

Chewing & Smoking(Pe r ound) (No change) .18 .13 

. .. 

Dates that rates became effective: 

(A) From March 29 , 1926 

(B) From Februa~J 25, 1919 

(C) Fro.n Novembe r 2, 1917 

(D) From July 1, 1901 

(E) From July 1 ,. 1910 

• 

(*) Source: 

1914 

-----

"3.00· (D) 

.75 (E) 

3.60 (E) • •• : I • 

1.25 (E) 

.08 (E) 

.08 (E) 

Revenue Acts as enacted by the Senate and the House of 

Representatives of the United States of America. 

10691 

. . . . . 
State 

Alabama 

Arizona. 

Arkansas 

Georgia 

Iowa 

Kansa.s 

Louisiana 

lvii ssissippi 

North Dakota 

Ohio .. 

Oklahoma 

South Carolina 

South Dakota 

Tennessee 

10691 

-248-

APPE~!X 4 

TABLE .·r II 

STATES TAXING CIGARETTES AND 

T~~IR RATES OF TAXATION 

Tax Rate 

1 cent for each 5 cent or fraction 

retail selling price. 

2 cents on each 20 cigarettes or 

fractional part thereof. 

$2.50 per thousand 

10 ryer cent of the retail price 

1 mill on each small cigarette 

2 mills on each large cigarette 

2 conts on each 20 cigarettes or 

fractional part thereof. 

2 mills on each cigarette sold 

1 cent for each 5 cent or fractional 

part thereof of the retail selling 

price. 

~ mills on each small cigarette 

2 mills on each large cigarette 

1 cent 01 each 10 cigarettes or 

fractional ~ert thereof . 

~1 50 per thousand . 

1 cent for each 5 cent or fractional 

part thereof of the selling price . 

~ c1ills on each small cigarette 

4 mills on each large cigarette 

For cigarettes intended to retail 

for not over 1 cent each - 1/5 cent 

on each cigarette . For cigarettes 

intended to retail for over 1 cent 

each - 2C per cent . of the intended 

retail sales price . 
Texas 

Utah 

Washington 

- 249-

1.50 per thousand for small cigarettes. 

$3.60 per thousand for l a rge cigarettes. 

1 mill on each small cigarette 

2 mills on each large ·cigarette 

l/20th of 1 cent for each cigarette 

unless intended retail sales price 

(before t ux) shall be more than 1 

cent each which event tax shall be 

10 per cent of intended retail sales 

price. 

Source: Tobacco Merchants Association of the United States. 

STATES TAXING SMOKING TOBACCO A.l"'D 

THEIR RATES OF TAXATION 

-----------------~~----------------------------------------------------

State I • • •. • 

Alabama 

Arizona 

Louisiana 

Mississippi 

South Carolina 

Tennessee 

, Tax Rate 

1 cent for each 5 cent or 

fraction retail selling price. 

1 cent per ounce or fractional 

part thereof. 

1 cent for each 5 cent or fractional pa rt thereof of retail 

selling price. 

1 cent for each 5 cent or fractional pa rt t~~~eof of the 

retail selling price. 

1 cent for each 5 cents or 

fractional part thereof of the 

retail selling price. 

io per cent of the intended 

retail sales price of each 

package of tobacco. 

Source: Tobacco Merchants Association of the United 5tates. 

10691 
-250-

STATES TAXING CHEWING TOBACCO AND 

THEIR RATES OF TAXATION 

---------------------------~------------------------------------~------

State 

Arizona 

South Carolina 

Tennessee 

Tax Rate 

Fine Cut Chewing Tobacco and 

Scrap Chewing Tobacco - 1 cent 

per ounce or fractional part 

thereof. Plug or Twist Tobacco 

i cent per ounce or fractional 

part thereof. 

1 cent for each 3 ounces or fractional part thereof. 

10 per cent of the intended retail 

sales price. 

Source: Tobacco Merchants Association of the United States. 

STATES TAXING Sl\TIJFF .AND 

THEIR RATES OF TAXATION 

-----------------------------------------------------------------------

State 

Arizona 

South Carolina 

Tennessee 

Tax Rate 

1 cent per ounce or fractional 

part ther(.:of. 

1 cent for each three ounces 

or fractional part thereof. 

10 per cent of the intended retail sales price. 

Source: Tobacco Merchru1ts Association of the United States . 

.. 

.· 

10691 

a) 
) ARKANSAS 

IOWA 

KANSAS 

NO. DAKOTA 

OHIO 

SO. DAKOTA 

TEXAS 

UTAH 

-251-

APPE_NDIX 4: . TAB:LE IV 

. . 

RECEIPTS FROM CIGARETTE TAXE;:> :: AND PER CAPITA CIGARETTE 

SALES IN STATES TAXING CIGARETTES ALONE 

POPULATION 

AlifNU AL l'H DYEAR 

ESTIMAT~ 1934 HO. OF CIGARETTES TAX PAID 

(U.S. BUREAU RECEIPTS .CAL. TAX PAID BASED ON CIGARETTES 

OF THE CENSUS) YEAR 1934 TAX HATES IN FORCE PER CAPITA 

l ,876,000 ~ 915,154.02 366,061,608 195.1 

2,485,000 1,259,969.71 l ,2_59 ,·969 '710 507.0 

1,905,000 678,209.36 _, .?7.8,209 ,~60 , . . 35 6~0 ' ·. -. 

688,000 238,113.54 158,742,360 230.7 

6,836,000 * 5,417,399.52 5 '41 7 '399 '520. 792.5 

705,000 398,396.11 265,597,407 376.7 

6,073,000 * 4,235,908.81 2,823,939,207 465.0 ., 

520!000 * 2352415.01 2352415,010 452.7 

212088,000 -·$1323782566.08 11!205,3342182 531.4 

NOTES: (a) Arkansas also taxes cigars, but the reports of the State 

authori ti.es show separately the receipts from cigars and 

cigarettes, and the above figure repr~sents the recei~ts 

from 11 cigarettes 11 alone, as reported by the State authorities. '· . 

* 

10691 

For the purpose of ascertaining the tot al sales in Ohio, 

Texas and Utah, we have used the gross collection figures 

before deducting the discount allowed on stamps. The 

actual collections after deducting the disco~nts on 

stamp sales were $4,881,173._4e., $4,026,292.61 and 

$215,343.98, respectively. 
-252-

X No rth Dakota also taxes snuff Rnd cigarette papers, but 

the r eports of the St.ate autho1·ities show separately the 

receh)ts from _the :oe it~ms 8.lld the above figure r epr ese:<1ts 

the receipts f r om 11 cigarettes11 a.lone , as reported by tile 

State authorities. 

United States 

TJ-IE EF:F'ECT OF STATE CIGARET'I'E TAXES UPON CONSm.PTION 

POPULATION ANllUAL MIDYEAR 

EST~MATE 1 934 PER CAPITA CIGA-

- (U.~. BuREAU RETTE CONSU~WI'IO N 

OF THE CEJSUS) ~34 --

TOTAL CIGBETTE 

COlJSUIAPTION 

1934 

126,425,000 993 . 6 125,617' 8~2 , 399 

X 15 Tobacco-Taxing States 35,815,000 * 531 . 4 19.032. 091 ·, 000 

33 Non-Tobacco-Taxing Stntes 90,610,000 1176 . 3 106,585,801,399 

NOTES : X This includes the States taxing cigarettes alone, as indicated 

in the ~bove statement, plus the following additional States 

in waich tob acco taxes we re in force in 1934; viz. I Aln.bama, 

Arizona, Georgia, Louisiana, Mississi pry i, South Carolina and 

Tennessee. In these States other tobacco products besides 

cigarettes arc taxes, and the r evenue r eceipts therefrom being 

grouped together, it is impossible to obtain figures showing 

tae collections from cigarettes alone . In fact , in Arizona 

and South Carolina items other than tobacco products are included in t heir tax receipts. 

* Average for cigarett e taxing States as shown above . It was 

assumed, however, that the 7 States mentioned in the foregoing 

note, whe r e figures r egarding revenue from cigarettes alone 

are unavailable , would show t he · same average consumption as 

tha t registered in the 8 States listed in the above table, as 

indicated b·y- the figures which they furnished to us. 

Source: Tobacco 14e rcharits Associatiou of the United States 

10691 
STATEMENT 

NUHBER 

- 253 -

.APPENDIX 4 

Frnllowing is a list of statements prepared from various 

~ources. Portions of the basic data contained in these 

statements have been used in preparat1on of certain Tables 

and p.ercentg.ges appearing in the text. 

SEC·riON NO. 1 

9 Comparison of the Rates of Taxation on Corporation Income; 

Capital Stock; .Tobac.co Products; and Manufacturers 1 Excise 

on s·elected Comrnodi ties. For Caiendar years 1935 to 1912 

inclusive. (2 sheets) 

Original work she t~ bnly. 

105 Comparative St,!'l.tement showing Int ernal Revenue Collections, 

by principal sources. For Fiscal years ended June 30th, 1934 

to 1912 inclusive. 

Original work sheet only. 

11 A synopsis of Federal Income and Profits Tax Rates, Estate and 

Gift Tax Rates, Credits and Exemptions, covering Revenue Acts 

of 1909 to 1935. (10 sheets) 

One photostat copy only. 

SECTION NO. 6 

1 Tobacco Unmanufactured; Manufactures of Tobacco, and All Merchandise imported; including entri e s for consumption and withdrawals f:' "'Ql Customs Warehouses for consumption, showing quantity, v~ amount of duty collected, value per unit of quantity, an~ uivalent ad valorem. 

2 

106 91 

Original work sheet only. 

Comparative statement showing Receipts, (Wa.rrants Issued Basis), 

of United States Government, by principal sources, for fiscal 

years ended June 30th, 1911 to 1934 inclusive. 

Original work sheet only. I 1 · 
STATEMENT 

NUMBER 

2 

3 

4 

6 

10691 

SECTION NO. 4 

Monthly receipts from taxes on Tobacco Products, for 

the years 1935 to 1926 inclusive. 

Original work sheet only. 

Internal Revenue tax receipts on Tobacco Products imported from the Philippine Islands, by classes of Tobacco Products, for the fiscal years ended June 30th, 

1934 to 1911 inclusive. 

Original work sheet only. 

Int ernal Revenue tax receipts on Tobacco Products imported from Puerto Rico, by classes of Tobacco Products, 

for tne fisc al years ended June 30th, 1934 to 1911 inclusive. 

Original work sheet only. 

Receipts from Int ernal Revenue Taxes on Tobacco Products, 

and Der capi tel tax based on the annual midyear estimated 

population of the continental United States, for the 

Fiscal years ended June 30th, , l926 to 1934 inclusive. 

Original work sheet only. 
-255-

AfPENDIX 5 ~ TOBACCO STUDY 

TABLE I 

Av~~§ge Cost of Pr9duction 

This report has been compiled from returns received from~ representative 

manufacturers of five~cent cigars, selected by the Natio~ Recovery Administration. 

The total value of five-cent cigars prod·nced in the last ac·countine; year by 

the 11 establishments was $35,270,823 representing production of approximately 

1,049,000,000 cigars, or 24.4 per cent of all production in 1933. 

Wrapper •••.••.. 

Binder ••••••••• 

Filler •...••••• 

Ma~_ip~ made . cige.rs 

Co.st .. Q-!31-J.yered at i'_l?:!l~_i ~~~~ q~~._i_!'ed 

fac_tog ~L .!990 cigars 

$?.847 per lb. 1.8B8 1bs. 

,511 " " 5.123 " e 419 II II 17 • 9 23 II 

Boxes • •••••••••••••.••..•••••••••••••••••••.••••• • ... • • • • • · • • • · 

La.bels .. ~ ~ ••.••..•............... · · •. • · · · • • · · · · · · · · · · · · · · · · · · · Cellopha.n.e ..................................................... . 

Ba.n.ds ••.••••••••••••••••••••••••••••••••••••••••••••••••••••• 

Wra9ping material 

Total material 

Less crecli t for 

•••••••••••••••••••••••••••••••••••••••••••• 

........................................... 

waste· ................... ~ ... .. ..... ; ......•. 

Net· materia.l ................................................. 

~o_r 

Strippers, wr~,pper •••••• $.114 per lb. 1.888 lbs. 

Strippers, binder ••••••.. .042 II II 5.123 II 

Strippers, filler .233 II II 17.923 " ....... 

Average for stripping ..................................... ( 

Selectots · •....... ._· .......•.•................ ~ .............. · · · 

Automatica-rna..chine onera.tors 4 ••..••••.•••••.•••••••••.••••••. 

Banding an. a:' celloph~i ng •• ·• •••••••••••••••••.•••.••.••.•. : ...•• 

Machinists a:Ild oilers .••••...••.•.........•.............•..... 

'Packers •........................................... · ... -..... . 

Other ........................... -· .......................... . 

Cost per 

100.9 ~_ig_~§ 

$5.088) 

2.416) $14.80 

7 .294) 

1.518 

.291 

.495 

.210 

. 0?4 

v 17. 315 

--· ~?:..8 

16.887 

.193 

.216 

.437 

.829 

.312 

2.874 

.099 

( ;;) 

.504 

1.133 

Total labor ........ ...... .•. . . . ........... .• . . . . . . . . . . . ... . .. . . . . .. 1/ 4.175 

Miscellaneo~s and burden 

Royal tr ... • .................................................. . Ma~ntenance .................................. • • · • • • • • • ... · • · • • • • · · 

.950 

.253 

10$)1 
Cost per 

l0_9Q_c_iK .._rs 

Po\\"er • • . • . . . . . .. . . . . . . . . . • . . •.•....... 

l!~ Orlr:, :-:- 'ti on . .. ........ ..... . ...... . . . . . 

Deprecietion •• • •••••••.•••.•••.•• ••. .. 

}.-tis cell ~ .. neo11s • ••••••••••. •. .••.•. • •• •• 

Otl1er ~.te l'heaci .... ......... .•...•...•. 

·'ot? ... l ...................... . 

t·''lteri ~ ••••.•...• . ..•..••. $16.tS 7 

Lao J r . . . • . . . . . . . . . . . . . . . . . 4 .1 7 :..,, 

isc l, "Tie':> lS ar.d bu!"aen .• • y 4_._§1.§ . 

Total • • ••••• $?5,67& 

AveuL~P. ivholesale selline or:!.ce $23.56 

AveFf.K.e_ ou~uu_t 

~ 

1/ 

Per _!wu..r Per day 

S rip..,ers, wr~.ppers (l bs. ) ••••••• 

Stri· 1:1e r , biDder (los. ) . ..• ••• . • 

Strippers, filJ e r (1bs. ) •.•.••••• 

,fe.chine opera t ors (cigars) ••.•••• 

B:::tl1C.ing ~Tld cellopnaning (cigars) 

Packers (cigars) •••..... .•••••••• 

Wreppe r ••••.... 

, Bi!·der • . ...... 

Filler • • ..... • 

Qo !'lt . .9 ~J__i_y_e_r~d 

~ _ _i§l.Ct_Q_r;;{ 

$1 . 827 per lb. 

.44 

. 394 

II II 

II II 

2. 663 

5. 35 

8.3 

403 

2778 

851 

22. 083 

49. 625 

71.9 

3599 

26617 

7634 

~uan t i ~- r~qu d; 

pe r 099_.f.~ a~ s 

2 . 75 l b5::. 

5.617 II 

16,333 II 

Boxes • ... .. . ..... .. ... .. .......... ... .................... 

Labels ..... . ... ................. .. ................. . 

Cellopha.r1 e • .. . ... ...................... .. ..... . . .. . .. 

Bands ... . ... ...................... .. ... . ............ . 

V/rallping rna. er i~l .................................. . 

$ .121 . 09? 

.614 

.5171 

2.536 

4.616 

Cost 

per J..OOp 

$ 4.3?.0 

2. '376 

6.137 

1.963 

.388 

.710 

(2) 

(41 

Total material •.•.•.•..••.••.•.•••••••••..• lJ 16.244 

Less credit for waste .•••••••.. .... .•••.•••. 

~T ct n1a terial •••••••••••••... , •.••••••••••.•••..... . ••... 

10~1 

.385. 

15.859 
-257-

Strippers, wr~p er 4/ .••...•• 

Str i~9e , binder gj •...... . Stripper s , filler 2/ •....... 

Avera.ge for strippint; •••.•••••••••••••...•• 

Selectors ............ ; ..........•...............• 

Bun.ch brenkern •.................................. 

Rollers ........................................... Pe er s ......................................... . 

Banding and cellophaning ••• · •.•.•.• ~ ••••••••••••.• 

Otner ··~··· ............................ ······ ···• 

Total a·bor ................. . 

!.!iscella.neous and burden 

Not reported separately for t h is method of production. 

Material ....................... . $15.859 

7.502 

(4) 

La-bor ••..•.•.. . ...............• 

Miscellaneous a nd. burden · ••••••. -

Total ...•............. ... ~3/ $23.361 

Avera.ge . whole sale selling price •••••••••..•• $32.42 

Wrapver-. ~· ...... . 

Binder ••••.•••• 

Fille·r •••••..•. 

·· Cost delj.ve_r~d 

&..factory _ 

$2.11 :rer lb. 

.618 II II 

.378 II II 

~_ll~j.j;y __ r~qui_r5Jd 

:2£lr 100_.9 ciga_r.§__ 

2.02 lbs. 

· 5.267 lbs. 

12.063 II 

Bo xe·s •••••••.••.•.••••• " .•.••••..•••••••••••• • • • ·. · • 

L a.b e 1 s ••••.•••••••••••••••....••••.•.•••.•.•••• ~ ••• 

CellophaJle •••.•.............•.•.••.....•.........•. 

Ban.ds . . ....................................... .. .... . 

Wrapping Ua,terial .................................. 

$ .502 

( 2) 

.892 

4-. 65:: 

~ 767 

(2) 

_121 

l/ 7.502 

Qo~.t ryer 

10Q_0 __ cj.g_?.~ s 

$ 3. 867) 

3.252) $11.52 

4. 397) 

1.967 

.417 

1~040 

(2) 

(4} 

Total material ••••••..••••.. 

Less credit for waste ••••••• 

1/ 15 .. 156 

-~ 

Net material ~ .................. " .................. . ll 15.006 

10691 
Labor: 

·-258-

-4-

Strippers, wrapper ) 

Strippers, binder ) Not reported separately. 

Strippers, filler ) 

Average for stripping •.•••••••••••......••• 

Selectors .•......................................... 

Bu.n.ch. breakers ...•.................................. 

Rollers .........•..•..............•..•.............• 

Packers ..........•.................................. 

Banding and cellophaning ••••••••••••••••.•.•..••••.. 

Tu.b illg an.cl. labeling ................................ . 

Other ............................................... 

$ .453 

.587 

3.093 

5.518 

1.10 

(2) 

(2) 

(2} 

To tal labor .........•......•...... JJ 11.658 

Not reported. 

Output 

Not reported. 

Summary of hand cigars 

Material ••••.•.•.... . ...• $15.006 

La--bor ••..••.............. 11.658 

Miscellaneous and burden.. (4) 

Total ••..•..•• 3~26.664 

Average wholesale selling price •••. . . $33.277 

1/ Because of d.ifference in method of proC.uction or reporting, 

average of totals is shown end not the average of items. For e~le, 

bands are not used in some cases. 

~ Can not be shown without disclosing data for individUal establishments. Y Exclusive of advertising, selling and shippin~ expenses. 

i/ Not reported. 

Source: 

Special survey by Census of Uanufact'J.l"es, 1933, made at 

request of Nationa~ Recovery Administrati·:>n. ,....~Ti •"'u\ Recore~ 

Ad~ i ~ isl:-.,-oT•o"' t•·~~! S1:'"'d'1 ~" 'lc:aiertdl~ ot _. 

To bc.c~c o .S t u.d} ll "' ( r J Ld bo .,.... 

10691 
- 259 -

APPENDIX V 

TA3LE · II 

The following list indicates unpublished materi als on which Chapter V of 

this report was ba~ed, and which are now on file as "Work Materials", 

Tobacco Industry Study Unit, Industri es Studies -Division of Review, 

Nati.onal Recovery Administration. 

A. Special survey by the Census of Manufactures made in 1933 at the request of the National Recovery Administration. The ~urvey covered 

52,273 wag·e earners. The following information ·was developed: 

(1) Cigar workers- number as of July 1, 1933, classified as pieceworkers of timeworkers ~~d as to sex, by States, and average 

weekly payroll for the period January to July 1933, by States. 

(2) Cigar workers - Numbers of pieceworkers as of July 1, 1933, 

classified as to machine or hand, sex, hours per day, days per 

week, and number of shifts per day, by St a tes. 

(3) Cigar workers -numbers of packers a s of July 1, 1933, classified 

as to machine · or hand, sex, average hourly wage ra.tes, average 

hours per day, and average days per week, by States. 

(4) Cigar workers - selectors, information simil ar to last above. 

( 5) Cigar workers - miscellaneous, info.rmation similar to last 

above. 

(6) Piecework rqtes per 1,000 cigars produced ~~d average earnings 

per week a.s of July 1., 1933, for men classi.fied as to machine 

or hand workers and class of cigar pr~duced, by States. 

(7) Same as last above for women pieceworkers. 

(8) Frequency distribution of numbers of male machine piecework 

employees and numbers of female machi 1e p.':l ocework employees by 

range of 11 low11 rates paid .per 1, 000 Class 11 A" cigars produced. 

(9) Breakdown of cost of production of five-cent cigars, machine 

made, hand-made, and .composite hand and machine· made. Included 

as Table I of this ·Appendix. 

E. Production statistics on the Cigar Manufacturing Industry as a whole for 

the period 1926 to 1934 from the Bureau of Internal Revenue. This is 

included in Appendix I. 

C. Production statistics for certain selected corporation groups in the 

Cigar Manufacturing Industry for the period 1926 to 1934, obtained 

from the Bureau of Internal Revenue. 

D. Financial information conc.erning certain selected corporation group~ 

in the Cigar Manufacturing Industry for the period 1926 to 1933, obtained from the Bureau of Internal Revenue. 

10691 
-260-

E. 11 Investigation of Cigar Manufacturing Industry in re Establishment of 

of a Code of Fair Competi tion 11 by Rossmore, Robbins and Co., Inc., 

Certified Public Accounta~ts, N. Y. C. November 3, 1933. 

T:his study was made for a committee of cigar manufacturers seeking a 

Code. It was based on (a) answers to questionnaries sent to all 

cigar manufacturing members of the Associated Cigar Manufacturers 

and Leaf Tobacco Dealers, and to certain non-member cigar manufacturers. 

and (b) figures published by the Bureau of· Ipternal Revenue. The 

answers received covered manuf acturers producing about 51 per cent 

of the total nurnber of cigars produced in 1933. The principal coverage (91 percent) was among macnine manufacturers. Information is · 

presented concerning number of cm~loyees , wages paid, hours worked , 

per cent capacity in operation, net tangible assets, weekly payrolls, 

and production costs. Tables containing the following information 

are included: 

(1) Total number of cigars by classes produced by reporting concerns, 

year 1929 , year 1932, three months ending July 31, 1929, 1932, 

and l<J33. 

(2) Net SC:l,le-s value of cigars produced by reporting concerns, by 

classes and b·r periods as indicated in last above . 

(3) Gross sales price per 1,000 machine-made cigars, totAl discounts 

alioYied, and net sales u rice, by classes and by periods as indicated in (1) abov e . 

(4) Tobacco consum~tion of reporting concerns, by types, for year 

1929, year 1932 , and three months ending July 31, 1933. 

(5) Total pounds of unsternmed t cbacco us ed p er 1,000 machine made 

cigars, by classes of cigars, for three month periods ending 

July 31, 1929, 1932, and 1933. 

(6) Average numb e r of employees of various types in hand factories 

and machine factories r eporting , periods as indicated in (1) 

above. 

(7) Average number of cigar makers , operators and other factory employees, hand or machine , by classes of cigars produced, for 

periods as indicated in (1) above. 

(8) Average wage per hour and pe r week and average r.ours worked per 

week for various classes of employees, hand and machine, for 

periods as indicated in (1) above. 

(9) Average total wage cost per 1,000 cigars produced, average wage 

per hour and pe r week, and average hours per week of cigar machine operators and cigar makers, by class of cigar produced 

and by periods as indicated in (1) above. 

(10) Average wage per hour and pe r week and average hours per week 

of all workers at fa.ctoiJr except cigar makers, cigar machine 

operators, strippers, or other processors, hand and machine, 

by classes of cigars Droduced and for periods as indicated in 

(1) above. 

10691 
-261-

(ll) Production costs ·per 1, 000 machine-mA-de cigars produced during 

three m·onths period ending July 31, 1933 by class l')f cigars produced, ·elements of cost in d.'etail. 

(12) Information similAr to last above for hand-made ~igars. 

(13) Comparative composi·te production costs per 1,000 machine-made 

five:....cent long filler cigars for May 1933 and Se-ptember 1933, 

based upon certified data from four leading manufacturers. 

F. 11 Statistical Survey of the Ha!ld-Made Cigar Manufacturing Industry 11 

by S.D. Liedesdorf & Co., N.Y. C., dated November 11, 1933. ' .. ~ I 

.· .1 

This study was made for a committee of hru1d-made cigar manufacturers 

seeking a Code. The report was based on (a) a questionnarie sent 

to 239 hand-made cigar manufacturers, (b) replies to telegrams sent 

to 75 c~mpanies and supplementing the previous questionnarie, (c) 

replies to questionnaries sent to its members by the York County 

Cigar Manufacturers Association·, and (d) government statistics con-

~ cerning the Cigar Manufacturing Industry. The coverage of the study 

was estimated as 40 per cen't of al·l hand.-ma_de cigar man:u:facturing 

concerns producing more than 1,000 ,000 cigars per year, 45 per cent 

of all hand-made cigar manufacture, cmd 45 per cent of all employees 

engaged in ha.1d cigar manufacture. The urincipal ·cov.erage was in 

the York County, Pennsylvania, district. 'I'he following· informati('n 

was presented: 

( l) Frequency dis tri but ion ··of workers by hours worked 'fB r week for 

a typical week in June 1933. 

(2) Fre-quency distribution of cigar-makers as to weekly wages 'during a .representative week in June 1933. 

(3) Frequency distribution of rollers of Class 11 A11 cigars as to. 

hourly ear.nings during a :t""epre.sentative week in June 1933. 

(4) Information similar to l ast above for bunchers. 

(5) Frequency distribution of rollers t:J,S to number of cigars rolled 

per hour during a typical week in June 1933 for the United 

States, the United States exclusive of York County, Pa., and 

for York County, Pa., by classes of cigars produced 

(6) Information similar to last above for bunchers. 

( 7) Information similar to last above for hand. cigar-makers. 

(8) Piece rates paid rollers and bunchers during a representative 

week in June 1933, by class of cigar produced. 

G. 11 Supplementary Schedule of Information Supplementing Complaint 

10691 

of Code Authority for the Cigar Manufacturing Industry .. (to the NRA) .. 

against Unlimited Importation of Cigars Manufactured to the Philippine 

Islands", dated September 12, 1934. Contains information concerning 
-262-

production, production costs, and wholesale prices of Philipnine 

Islands and Ameri9an ma~e cigars during the period 1932 to 1934, 

and sUmmarizes the position of the cigar mru1ufacturers in the 

United States. 

H. Statistics on hand rollers of two-for-five-cents cigars in the 

York County, Pennsylvania, district, submitted by M. D. Popovic, 

Chief Statistician of the . Code Authority for the Cigar Manufacturing 

Industry to the Research and Planning Division of the National Recovery Administration, .October 2, 1934. Coverage was 1909 employees 

in 78 factories. The following information was given: 

(1) Frequency distribution of hand cigar rollers as to productivity. 

(2) Frequency distribution of ages of hand cigar rollers by numbers 

and by productivity. 

I. Statistics of costs of p roduction of two-for-five-cents cigars made 

by hand in the York County, Pennsylvani a , district, submitted jointly by 0. C. Strackbein, Economic Adviser to the Cigar Makers' International Union of America, and K. L. Cox, representing the Code Authority for the Cigar Manufacturing Industry. The data related to 

the first six months of 1934 and was submitted to the National Recovery Administration on August 9, 1934. The survey covered eight 

companies, three large produc ers. two medium-size producers, and 

three small producers, and 497 employees. Tables give a detailed 

breakdown of costs of production by individual companies (not named), 

and average weekly wages per forty hour week paid to various classes 

of employees. 

J. Brief submitted to the President of the United States for consideration with the proposed Code of Fair Competition for the Cigar Manufacturing Industry by I. . Ornburn, President of the Cigar Iviake rs 1 

International Union of America, undated (late 1933 or early 1934). 

Information in this is taken principally from previous Government 

or industry service publications. It summarized the position of 

the Union on merchanization. 

10691 
-263-

TABLE I 

LIST 02!, 13ASIC ~ABLES RECEIVED FnGrA THE DEPARfMErJT OF LABOR 

ON NUMBER OF EMPLOYEES, HOURS, .AND EARNINGS IN THE CIGARETTE, 

SNUFF, CHEWHJG, AND SMOKI!iiG TOBACCO YLA.l\ilJ:B,ACTURING INDUSTRY 

(Note: These tables, (176· in Humber) existing in original photostat 

form are on File; Division o:f Review, To'Jacco Unit, National Recovery Administration.) 

Table l.A. -- Number of Employees, Hours Worked, and Weekly and nourly 

Earnings in 1933 ru1d 1935 by Industry and Company Groups, 

Color, and Sex. All Rcrporting Plants (simple averages). 

.c~b 1 e lB. Number of Em:;loyees, Hours Worked, and Weekly and Hourly 

Ear::1ings in 1933 and 1935 by Industry and Company Groups, 

Color, and Sex. Identical Plants (simple averages). 

Table lC. --Number of Employees, Hours Worked, and Weekly and Hourly 

Earnings in 1933 and 1935 by lndustry and Company Groups, 

Color, and Sex. All ReDorting P,lants (weighted averages). 

Table lD. -- Humber of Employee s, Hours Worked, and Weekly and Hourly 

Earnings in 1933 ro1d 1935 by Industry and Company Groups, 

Color and. Sex. Identicp.l Plants (weighted averages). 

Table 2 

Table 3A 

Table 3B 

Table 3C 

Number of Employees, Hours Worl--:ed, and Weekly and Hourly 

Earnings in 1933 and 1935 by District, Industry Group, 

Color and Sex. 

Number of Emnloyees, Hours Worked, and Weekly and Hourly 

Earnings in 1930, 19 33, and 1935, by Occu~ation, Industry 

Groun, a:.fld Sex. To t e.l Code Industry. 

Number of Employees, Hours Worked. and Weekly and Hourly 

Earnings in 1930, 1933 and 1935, by Occupation, Industry 

Group, and Sex. CigRrettes. 

Number of Employees, Hours worked and. We ekly and Hourly 

Earnings in 1930, 1933 and 1935 , by Occupation, Industry 

Group and Sex. Ch'ewing and Smoking Tobacco and Snuff. 

Table 4A, Part 1 -- NThnber of Employees in 1933 and 1935 by Occupation, 

Color, and Sex. By Industry ll!ld Company Groups. All Reporting Plants - Total Code Industry. 

Addendrun, Part 1 -- Number of ~nnloyees in 1933 and 1935 by 

Color, Sex, and Combined Occupations, ru1d by Industry and 

Company Groups. All Reporting Plants -- Total Code Industry. 

Table 4A, Part 2 --.Nuraber of Employees in 1933 ~1d 1935 by Occupation, 

Colo~, and Sex, by Industry Rnd Company Groups. All reporting Plan ts - Ci gar ett es . 
- 26-1--

Addendmn, Part 2 -- :,unioP.r of SrrLf)lOyPes in 1933 a.nd 1935 t>y 

Color, Sex and Combined Occupations and by Industry and 

Company Groups. All Reuorting Plants - Cigarettes. 

Table 4A, Part 3 -- Num-ber of Employees in lq30 and 1935 by Occupation, 

Color and Sex, and by Industry and Company Groups. All reportint; ?lants -- Smoldng and Cllewing and Snuff. 

Addendum, Part 3 -- Number of Emnloyees in 1933 and 193~ by 

Color, Sex and Combined Occupations and by Industry and 

Company Groups. All Reporting Plants -- Smoking and Chewing and Snuff . 

Table 4E, Part l -- Number of ~nnloyees in 1933 and 1935 by Occu~ation, 

Color, and Sex, ond b;r Industry a!1d Company Groups. Identical Plants - TotaJ Code Industry. 

Addendum Part l Jumber of Employees in 1933 and 1935 by 

Color, Sex, and Combined Occuuations, a.nd by Industry and 

Company Groups. I dentical Plants - Total Code Industry. 

Table Ll..J3, Part 2 -- Number of Employees in 1933 and 1935 by Occupation, 

Color and Sex, by Industry and Compan~/ Grou'?s· Identical 

Plants - Cigarett e !ndustry. 

Addendum, Part 2 -- Numbe r of Employees in 1930 and 1935 by 

Color, Sex and Combined Occupations and by Industry and 

Company Groups. I denti cal Plants - Cigarettes. 

·:fable 4B, Part 3 -- Number of Emoloyees i n 1933 and 1935 by Occupation, 

Color, and Sex and by- Industry and Company Groups. Identical Plants - Chewing and Smoking Tobacco and Snuff. 

Addendum, Part 3 -- Nur.1be r of EmployeF.lS in 1933 and 1935 by 

Color, Sex and Combined Occunations and by Industry and 

Company Groups. I denti cal Pl ants - Smoking and Caewing and 

Snuff. 

Table 5A, Part l -- Average Hours Worked in One week for 1933 and 1935 

by Occupation, Color, and Sex, by Industry and Company Grouns. 

All Re~orting Plants - Total Code Industry. 

Addendum, Part 1. -- AveraE;e Hours Worked in One Week for 1933 

and 1935 by Color, Sex, and Combined Occupations, and by 

Industry and Company Grou~s. All Reporting Plants - ~otal 

Code Industry. 

Table 5A, Part 2 -- Average Hours Worked in One \'Yeek for 1933 and 1935 

by Occunation, Color and Sex -- by Industry and Company 

Groups. All Reporting Plants - Cigarettes. 

10691 

Addendum, Part 2 -- Average Iiours ~Vorked in One Week for 1933 

and 1935, by Color, Sex and Combined Occupations and by 

Industry and Com~any Groups. All Renorting Plants -- Cigarettes. 
- 265-

Table 5A, Part 3 -- Average Hours Y.ior}.:ed i 11 One veek f or 1933 and 1935 by 

Occupation, Color, and Sex - bJ.· Industr;y and Company Groul)S . 

All Reporting Pl ants -Smoking , Ch ewing and Snuff. 

Addendum, Part 3 -- Av erage Hours Worked i n One Week for 1933 

and 1935, by Color, Sex a.nd Combined Occupations and by Industry and Comp any Groun s. All Reporting Plants - Smoking and Chewin.g and Snuff. 

Table 5B, Part 1 --Average Hours Worked in One week for 1933 and 19 35 by 

Occupa tion, Color, allC:l Sex - ~r Industry and Company Groups. 

Identical Plants - Tot al Code Industry. 

Addendum, P,!=t.rt 1. Av er age Hours Worked in One Week for 1933 

and 1935 by Color, Sex , and Combined Occupa tions, and by 

Industry and Company Groups. I dentical Plants M Total Code 

Industry. 

Table 513, Part 2 -- Average Hour s Worked in One We ek for 1933 and 1935 

by Occupa tion, Col or and Sex and by Industry and Company 

Groups. Identical Pl an ts - Cigar ettes. 

AddendTh~, Part 2 - - Av e r age Hours Worked in One We ek for 1933 

and 1935 by Color, Sex and Combined Occupations and by Industry and CoiTlpany Group s. I dentical Plants - Cigarettes. 

Table 5B, Pa rt 3 --Ave r age Hours Worked in One Week for 1933 and 1935 by 

Occu~ation, Color, and Sex. By Industry and Company Groups. 

Identical Pl ants -Smoking and Chewing and Snuff. 

Addendum, Pa rt 3 -- Aver age Hours Worked in One Week for 1933 

and 1935 by Color, Sex and Combined Occupations and by Industry and Company GrouD s . I dentical Pl ants - Smoking ru1d 

Chewi ng and Snuff. 

Table 6A, Pa rt l -- Av erage Ea rnings in One Week for 1933 and 1935 by 

Occupation, Color, and Sex , by Industry and Company Group s. 

All Reporting Pl ants - Total Code Industry. 

Addendu~, Part 1 -- Av er age Ea r nings in One Week for 1933 and 

1935 b;y Color, Sex , and Combined Occupations, and by Industry 

and CompallY Groups. Al l Reporting Plants - Total Code Industry. 

Table 6A, Part 2 - Average Earning s in One We ek for 1933 ·and 1935 by Occupation, Color and Sex; by Industry and Company Groups. Al l 

Re·porting Plants -- Cigarettes. 

10691 

Addendum, Part 2 -- Av er age Ea rnings in One Week for 1933 and 

1935 by Color, Sex and Combined Occupations and by Industry 

and Company Group s. Al l Reporting Plants - Cigarettes. 
/ -:or: -

Ta.-o le SA, Part 3; ~- Average Earninss in One v~ eek for 19.33 and 1935 by Occupation, Color And Sez; by Industry and Company Groups. All 

Reporting Plants -- Smoking and Chewing an'd Snuff. 

Addendurr. , Pr1rt 0 -- Average Earnings in One ' Week for 1933 and 

1935 by Color, Sex and Combined Occupation~ and by Industry 

and Company Groups. All Reporting Pl axits -- Smoking and 

Chewing !llld Snuff. 

Taole 63, Part 1 -- Average J!:prnings in One Week for 1933 and 1935 by 

Occupatio-1, Color, and Sex ; by IndustiJ' and Company Groups. 

Ide·1tic al Plants -- Total Code I ndustry . 

Addendum , Part 1 -- Av~~age Earnings in One Week for 1933 and 

1935 by Color, Sex, and Combined Occup~tions, and by Industry and Company Gr oups . Identic~l Plants -- Total Code Industry . 

Table 6B, Pa rt 2 -- Avera;;e =:arnings in One \'ieek for 1933 and 1935 by 

Occupation, Color and Sex; b~r I ndustry and Company Groups. 

Identical plants -- Ci58 rettes. 

Addendum, Part 2 -- Avera&e Ear ninbs in One Week fo~ 1933 and 

1936 by Color, Sex A.nd Combined Occup.q, ions a"lc'l. l.Jy Industry 

and Company Groups . I dentical ";)lants -- Cigarettes . 

Table 6B , Part 3 - -Aver age bP rnings i n One Week for 1933 and 1935; by 

Occupation, Color and 'Sex ; by Industry and Company Group. 

Identicrtl Plants - Smoking and Chewing and Snuff . 

Addendum , Part 3 -- Average Earni ·1gs in One Week for 19 33 and 

1935 by Color , Sex and Combined Occupations and by Industry 

and Company Groups . Identical Plants - Smoking and Chewing 

and Snuff . 

Table 7A, Part 1 -- Average Hourly ~arnings in 193~~ and 1J3b bv Occupation, Colo:i~ and Sex ; by Industry and Crnn<:JllY CT•)UDS . All 

Reporting Plants -Total Code IndustrJ· 

Addendum, Part 1 -- AverAge Earnings Per Ho·ur f''r 1:133 and 

1935·, by Color, Sex , and Combined Occupations , and by Industry , and Company Groups. All Repo rting Plants -Total 

Code Industr-J. 

Table 7A, Part 2 -- Average Hourly Ear nings in 1933 and 1935 b;y Occupation, Color and Sex; bv I ndustr y and Company Groups. All Reporting Plants - Cigar ettes. 

10691 

Addendum, Part 2 -- Average Earnings Per Hour for 1933 and 1935 , 

by Color, Sex C'..nd Comb ined Occupntions and by Industry and 

Comp any Groups• All Reporting Plants -- Cigarettes. 
- 26 7-

iabl e 7A, Pa rt 3 -- Av er age Hourly Ear ni ngs in 1933 and 1935 ; by Occupation, Color and Sex ; by Indust17 and Company Group s . Al l 

Reporting Pl ant s - pmoking ru1d Ch ewing and Snuf f. 

Addendum, Pa rt 3 _..:. :... Average arnint~ s Per Hour for 1933 and 

1935 by Color, Sex and Combined Occupations and by Industry and Company Groups . Al l Reporting Plants - Smoking and 

Chewing and Snuff. 

· Table 7B, Part 1 -- Av er age Hourly Ear nings in 1933 and 1935 by Occupation, Color, and Sex -- by "Industry and Company Groups, Identical Pl an t s -- Tot al Code Industry. 

Addendum, Part 1 -- Av erage Earnings Per Ho ur for 1933 and 

1935 by Color, 'sex, and Combined Occupations, and by Industry and Comp any Group s. Ide;.1tical Plants -- Total Code 

Industry. · 

Table 7B, Part.- 2 _:__ Average nourly Earnings in 1933 and 1935 by Occupation, Color and. Sex; by Industry and Company Groups. 

Identical Plants -- Cigar ett es. 

Addendum, Part 2 -- .Av er age Ear nings Per Hour for 1933 and 

1935 by Color and s·ex and Combined Occupations and by Industry and Company Groups . Identical Pl ants -- Ci garettes. 

Table 7B, Part 3 -- Average Hourly Ear nings in 1933 and 1935 by Occupation, Color and Sex; by Indust ry and Company Groups. Identical Plant s -- Smo king ru1 d Chewing and Snuff. 

Addendum, Part 3 -- Av er age Ear nings Per Hour for 1933 and 

1935 by Color, Sex and Combined Occupations and by Industry and Company Group s. I dentical Plants -- Smoking and 

Chewing and Snuff. 

Tabl e 8 , Pa rt 1 -- Di stribut ion of ploy ee s in 1933 and 1935 by Numb er 

of Hours Worked in One We ek for all Occupa tions Combined 

and for Selected Occupations. Tot al Code Industry --All 

Reporti ng Plants. (In BLS Files). 

Tabl e 8 , Pa rt 2 -- Distribution of Em-oloyee s in 1933 and 1935 by Number 

of Hours ·worked in One Week for All Occupations Combined 

and for Sel ected Occupations. Cigarette Industry -- All 

Reporting Plro1ts. (In BLS Fil es) 

Tabl e 8, Pa rt 3 --Distribution of Emp loyees in 1933 and 1935 by Number 

of Hour s ·v·v orked in One Week for All Occuoations Combined 

and for Selected Occupations. Chewing and Smoking Tobacco 

and Snuff Industry -- All Rep orting Plants. (In BLS Files) 

10 691 
-263-

Table 9, Pa:ct 1 -- Distribution of imployees in 1933 and 1935 by Amounts 

Earned in One Week for All Occupations Combined and for Selectad Occ~pations. Total Code Industry -- All Reporting Plants. 

(In BLS Filr3S) 

Table 9, P8.rt 2 --Distribution of hmploye es in 1933 and 1935 by Amounts 

Ea rned in One Wee:ic for all Occupations Combined and for Selected Occupations. Cigarette Industry -- All Reporting Plants. 

(In ELS Files) 

Table 9, Part 3 --Distribution of Employees in 1933 and 1935 by Amounts 

Earned in One We ek for all Occupations Combined and for Select ed Occupations. Chewing and Smoking Tobacco and Snuff Industry -- All Reporting Plants. (In BLS Files) 

Table 10 , Part 1 -- Distributi on of Employees in 1933 and 1935 by Average Hourly Earnin6s for All Occup~tion s Combined and for Sel ect ed Occuuations . Total Code Industry -- All Reporting 

Pl ants . (I ~ BLS Fil es) 

Table 10 , Part 2 -- Distribution of Emp loyee s in 1933 and 1935 by Average Hourly Earnings for all Occupations Combined and for 

Sel ect ed Occupations . Ci gar e tt e I ndustry -- All Reporting 

Pl ants . (Ll BLS Fil es) 

Table l Q, Part 3 --Distribution of zroployee s in 1933 and 1935 by Av erage Hourly Earnings f or All Occupations Combined and for 

Sel ect ed Occunations . Chewing and Smoking Tobacco and Snuff 

Indu stry All Reporting Plants . (In BLS Fil es). 

10691 
- 269-

Appendix 7 : ... 

D I SfTlRI 3UTI 01!'. 

,. 

A. PRICE DISCRH1IlJATION 

10691 

1. Specic=tl Discounts and Allowances 

(a) --~ General . ! • . 

,. . ~ ... 

Throughout the history of the tobacco industry, it has 

been rep~atedly asserted that the r etail chains and other 

sel !3 cted outlets possessed an importe.nt advantage over independent ret ni l ers becc:mse they receive l arge discounts 

and allowances not obtainabl e ~:r their independent competitors. It ·i.las bean claimed that these allowances m::llce it 

possible for t r.'.e chains and. other outl ets to sell tobacco 

products as 11 leade r.s 11 • at prices ·which cannot be met b7 independent tobacco retailers without loss. There is thus 

created in ·tqe minds of t he consuming ryublic the impression 

that similar low 0i'ices n reva.il ·on all merchandise which, 

it is alle~ed, is r arely justified by actual facts. 

Retail tobacco me rche.n ts, particularly the chain tobacco 

stores and the independent cigar stores have made vigorous 

protests .-::gainst tne practice, claiming that . the large manufacturers thereby actively encouraged price cutting and "lossleader" selling. T!1e;>7 point to the extremely low margins on 

tobacco products and their inability to meet .the resul~ing 

price competition and still r emain in business. 

(b) -Definition 

As used in this r eport and by . the Federal Trade Commission, 

special discounts and allowances are · defined as all those 

forms of discounts, exclusive of cash discounts, which are 

not shown by thE3 manufacturers on the face of tneir regul ar 

invoices. but which are subsequentls· paid or allowed by the 

manufacturers to chain stores, wholesalers or other outlets. 

(c) General Charadteristics 

All such price concessions :nay be divided in:to three general 

categories: (1) volume or quantity; (2) advertising and 

promotional; and (3) all others. Vnriations in ty:>e s of allowances extend from progressive discounts increasing with 

vo:).urne purchased, to straight cash refunds for which no explanrtt~.on'need be glve:n.. Credit and merchandise allowances 

are C0111ii10n. 
-.::;70-

~. Extent of Special Allowanc es 

(a) Cigarettes and Tobacco 

In a study made by the Federal Trade Commission, it was shown 

that, in 1929, twenty manufRcturers of cigarettes and tobacco 

from a total of 32 re1)orting made allowances of about !,>1,578,000 

or 2.66~ on total sales of ~59,315,000; and in 1930, 21 of 

these manufacturers made allowances of more than $2,330,000, 

or 1.~; on their total sales. However, on the total sales of 

all 32 reporting cigarette and tobacco manufacturers (amounting 

to $181,525,000 in 1929 ~nd $219 ,934,000 in 1930), it was shown 

that .87,~ and 1. 06~ for 1929 and 1930 r espectively, represented 

the percentages given in special allowances. 

(b) Cigars 

In the Federal Trade Commission study, it was shown that in 

1929, 51 manufacturers of cigars from a total of 77 reporting 

made allowances of more than ~1 ,515,000 or 4.45~ on total sales 

of $34 ,029 , 000 ; and. in 1930, 55 of t hese manufacturers made 

allowances of about 2,330, 000 or 5.15% on their tot al sales 

of $26 ,997, 000 . However, when the total sales of all reporting 

cigar manufacturers 45,451, 000 in 1929 and 43,358,000 in 

1930) we r e given consideration, it c~ s shown that 3. 33;~ and 

3.21:0 for 1929 and 1930 respectively, r ep r esented the percentages given in allowa..."l ces . 

3. Accounts with Chains and ~nolesalers 

10691 

(a) Cigarett es and Tobacco 

In 1930 , 31 cigarett e and tobacco manufacturers reported a 

total of 410 accounts wi th chains with 105 or approximately 

25.6~b r eceiving allowanc e s. From a tot nl of 790 wholesalers, 

only 101, or l ess than 3~ , rec eived these allowances. 

In 1929, from tot al allowances of $1,577,897 over $932,215 or 

59% of the allowances given went to chains and about $645,681 

or 41%, to wholesalers. In 1930, from total allowances of 

$2,330,034, the chains r eceived mo re than $1,914,000 or 82~; 

of the allowances and the wholesalers only $415,838, or about 18(~ . 

(b) Cigars 

In 1930, seventy-four (74) ciga r manufacturers reported a total of 386 chain accounts with 133, or 34.46;~ , receiving allowances. Seventy (70) cigar manufacturers reported a total 

of 386 accounts with wholesalers; of these 125, or 32.38%, received allowances. 
-271-

4. Rates of Special Allowances ·~ .i ' ~ 

:_. · ~ ,. · : ( a)- ·CL<;arettes and Tobacco -·-

In 1930, sixteen (16) cigarette and tobacco manufacturers making allowances to a total of 105 chain store accounts reported 

that 73 received allowances under ; 20 from 5% to 10,~ to 15%; 

2 from 15~~ to 20% and 4 accounts received in excess of 30;.L In 

the same year, 20 cigarette and tobacco manufacturers making 

allowances to a total of 101 wholesalers reported that 87 received allowance s under ; 13 received from 5)o to 1orb and only 

1 received allowances ranging from left; to 15)L All customers 

accounts carrying allowances from 15;s up, with the one exception, 

were chain store accounts. 

A large percentage of accounts carrying allowances are in the 

group carrying under ~. About ~'; of the chain accounts and 

84j.b of the whole sale accounts are in this group. 

(b) Cigars 

In 1930,: 49 - cigar manufacturers making a.llovtances to a total of 

133 cha~n accounts z:eporte<J.. that 77 cha~ns rec i ved allowa:;ces 

under ~:~ ; 39 from 5/o to lO~b ; 13 from lOy to 15 o; 1 from 15;o to 

201o ; 1 from 20% to 30? , and 2 received 30% or more. In the 

same year 39 ciga r manufacturers malting allowances to a total 

of 125 wholesalers report ed that 100 received allowances under 

5~ ; 16 received from ~~ to 10); ; 8 received from 10% to 15;1, and 

only one received 15~~ to 20%. 

Eighty per cent of the wholesaler accounts rece1v1ng allowances 

are in the 11 under 5% group11 against only 59("~ of the chains. 

5. Special Allowances to Different Chains 

10691 

In 1930, the ciga rette and tobacco manufacturers and the cigar manufacturers gave their largest discounts to the tobacco chains. The 

general conclusion drawn by the Federal Trade Commission was that 

11 the highest r ates of allowances are obtained by the chains with 

relatively small volume. 11 This comment follows: 

11 Among th e 23 chains with the lowest volume of purchases in 

1929, there are 7 r eporting allowances of over ·5 :9er cent on 

sales, whereas amons the larger chains, there are only 2 reporting as high a. r a t e . The r ates of discount secured by some 

of the larger chains are v ery low. Of the 12 chains with 

over $1, 000 , 000 worth of purchase s in 1929, there· were 4 showing allowances of l ess than six t enths of l per cent. The allowances of The Great Atlantic and Pacific Tea Company, aggregated slightly over 1 per cent of the total sales (33 million) 

made to i't b;/ the s e manufacturers, and thore of the Kroger Grocery & Bakint; Co., with $10,000 ,000 worth of purchases were 

only a trifle high er than those of The Great Atlantic & Pacific 

Tea Co.******* 

11 In 1930 ther e we re 13 chains with ove r $1,000,000 worth of 
-272-

purchases reported, as compared with 12 in 1929. Six of these 

13 chains obtained allowances of less than 1 per cent and 3 of 

them of less than three tenths of l per cent." (*) 

A story different 'i ·n detail appears in the report of the House of 

Renresentatives' Special Committee on the Investigation of the 

American RetDil Federation in reference to H. R. 8442. This Committee secured other testimony which indicated that in 1934 the 

Liggett Drug Company, Inc. received allowa~ces from twenty of the 

largest manufncturers of tobacco products. (**) 

This drug store chain received special allowances of ~~ on purchases 

of the following brands of cigarettes: Lucky Strike, Old Gold, Wings, 

Listerine, Polar, Marlboro , Caobridge, Time and Kentucky Winners. 

The same chain received ~; on purchase of the following brands of 

cigars: B~yulc Phillies, La Palina, Dutch Master, San Felice, John 

Ruskin, Flor de r.i: elba, Muriel, R. G. Dun, Blackstone ; and 7/o in the 

case of Garcia Grande cigars and ~- in the case of La Primadora 

cigars. 

Moreover, the American Tobacco Co.-man.y , in addition to the 5~ on 

Lucky Strike, also allowed the chain $25.00 per store for making 

window displays for one week . The Li ggett & Myers Company allowed 

the chain ~3 ,300. 00 per mo:'lth for displays. This same chain was 

also granted special allowances ranging from 2:P to 9); by several 

other mru1ufacturers )f tobacco products . The great preponderance 

of special allowances received by the Liggett Drug Company, Inc., 

amounted to 5'~L 

The testimony of the Great Atl~ntic and Pacific Tea Company showed 

that they had received $1 . 00 per store per month for seven months 

in 1934 , from the Liggett & Mye rs Tobacco Company -- an amount computed to be in excess of $100 ,000 (***) 

6. Spcical Allowances on Miscellaneous Me rchandise and Smokers' Accessori• 

As ~eported by the Federal Trade Co~nission, manufacturers of miscellaneous merclandise such as cand.y, chewing gum and sundries, represented lesti than 13~ of the total manufacturers reuorting and also of the total manufacturers making allowances in 1929 and 1930. 

These allowances also accounted for less than 9% of the sales of 

all reporting manufacturers and less than 16% of the total sales of 

manufacturers mc>Jdng allowai ces . __ Ho\Jey~r, they represented mo_~ 

( *) Federal Trade Cor:ll i ssion report on Special Discounts and Allowances 

to Chaili and Independent Distributors, Tobacco Trade, October 26, 

1933, Page 92. 

( **) Hearing~ before the S1)ecial Committee on the investigation of the 

American Retail Federation, H. R. 8442 , 74th Congress, first session, 

Vol. ·1\io . 2, July 31, August 8-9, 193b, nP..ge 75. 

(***) rtemarks of Ron. Wright Patman, Congressional Record, 74th Congress, 

First Session, July 29, 1933. 

10691 
-273 -

than h alf of the ·total allowances ~3 ,305,2 66 from a total of 

.)6 ,417,1 2) given by al l. reporting manufacturers in 1929 and slightly more than ~b of the tot al in 1930 3, 196 ,581 from a total of 

~ 6 ' 928 '992) . ' 

Th e group of manufacturers of smokers' accessories making allowanc es 

reported tot al allowances of $18,774 in 1929 and of $12,487 in 1930 - t(,' 

sums, however, that amounted roughly to ~ of sales to these tobacco di~tributor outlets in both y ears. 

7. Special Allowances to Select ed Ret ailers not ~1rchasing Directly 

from Ma.nufactur~ rs. 

Spe·cial allowances by the manufacturers to ret ailers are by no means 

limited to direct buyers. Ma~ufacturers' agents attempt to secure 

promotion of their products at point of sale and often show a willingness to contribute towards the expenses of a wide variety of possible services. Tobacco retailers are constantly attempting to secu re special allowances for advertising a manufacturer's goods 

either by window, floor, or counter displays. Evidence tends to 

indica te t hat these advertising services are often only vaguely related .to any me a surable work or effort on the part of the retailer. 

Such allowances . therefore usually involve discrimination and become 

powerful weapons in unfair competition with other members of the 

trade. The extent of free de als .and allowances made by tobacco 

manufacturers to non-direct buyers is not known, but the practice 

h a s been prevalent in varying degrees for many years, depending 

upon the· sev.eri t y of the competi tipn between manufacturers and their 

· efforts to maintain their own indivi dual co ~p etitive position. 

· B • LEADE~S AND LOSS LEADERS 

l1. Definitions { . 

Few factors bea ring upon ·t h e distribution of tobacco products are 

of more general interest thah the. 11 leade r 11 and 11 loss leader 11 practices. 

Th e t wo terms are loosely' \ls ed a:.'ld h ave indefinite meanings but 

t h ey are variously consi er d in the distributive trades to describe merchandis e sol~ beipw net invoice cost; or goods sold at 

net purchasing cost "P,lus o-p erating CQst, or simply goods sold at 

prices below 11 regu.lar prices."-

The term :tloss l eader11 as applied in t h e tob acco industry relates 

to s ale.s below 11 lo.west rea onao~e co st, which is tal<:en to mea;."l the 

cost for an import 8nt portion of the retail distribution of tob acco products showing an average cost lower than for any other significant portion of retail distribution on which the usual s ervices are given .'' (*) 

Throughout the NRA Code experience, the industry usually took the 

position that retail s al e s below the 11 regular prices'' charged by 

the tobacco chains and the independent tobacco retailers were· 11 loss 

(*) Cost of Retail Distribution of Toba cco Products published by Merchandising Fact, Inc., 110 E. 42nd St., N. Y. C., 1934, page 2. 

10691 
r o•t 

lead9r11• · sc:.J.e s; end in the ca se of wholesalers, that the same definition applied to sales made belor1 prices charged by the accredited 

wholesale tobacco de~lers. 

2. Adaptability of Tobacco Products as Loss Leaaers 

Tobacco products, particularly the popular brands of cigarettes, 

make excellent 11 co nvenience i terns" wi.1ich can 'be purchased at the 

most convenient outlet without need of shopping around for the types 

and qualities desired. Cigarettes are sold in small units and the 

· · stock turnover ia very high. Small capital investment is involved. 

Ci gerettes C8n be handled in any ty~e of retail outlet since little 

space, no special equipment, no skill in selling are required. 

Hence tobacco p roducts, garticularly cigarettes, rank with tooth 

pastes, soaps, razor blades, canned soups and vegetables as excellent 11 loss leader11 items (*). 

3. liistory of Loss Lead.er Selli:t:!,g 

~ o information has been secured o:1 the n.i story of 11 loss leader" 

selling in the tobacco trade earlier thar. 1911. Immedi<ttely after 

the dissolution of tile American Tobacco Company in that year, the 

' United Cigar Stores CompBny led the wey in "price wars" a.l though 

some nrice-cutting had. occurred i n other branches of the retail 

trade. In 1913, the d.rug chains started a "price war" aimed at 

the United and the indenendents. During t 1e Wo rld ··var prices rer.1ained stabilized but p'rice-cutting was resumed at intervals 

t he reafter. 

I n 1927 the Great Atlantic tr.. P:~ cific Tea Company introduced popular 

brands of cigarettes for sale at cut prices in its 15,000 stores 

and other chain grocers followed. Intcrmi tt4}nt o,~tbursts of extreme pricecutting by department stores and other outlets followed. 

In 1928, for various periods of time , prices of "fifteen cent" 

brands sold at two packs for twenty-on~ cents in some sections of 

the country. Price-cutting by various outlets has been recurrent 

in the histo~J of the industry, particularly since the dissolution 

of the American Tobacco Comuany. That the manufacturers have instigated and participated in price-cutting is unquestionable. The 

price war of 1933 when the popular "fifteen cent" brands sold down 

to ten cents per '9ack at tne r egular cigar stores was accompanied 

by e. decrease in the manufac turers' list price from $6.85 to $5.50 

per thousand. Authorities agr ee that this was an attempt by the 

large ma..."lufacturers· to regain their competitive position against 

the progress being made by the ten cent brands then gaining foothold in the cigarette market. 

Retailers using tobacco products, particularly cigarettes, as 11 loss 

leaders", are motivated by the effectiveness of nrice apueal . In 

many ret~il establishments where tobacco products are only a small 

fraction of total sales, the loss cru1 be more easily absorbed by 

wider margins on other products. The nature of the competition in-

(*) See Chain-Store Leaders and Loss Leaders, Report of the Federal T~ade 

Commission to Senate ·committee. Document No. 51 - 1935 . 

10691 
-275-

valves primarily the economic conf],ict between uni-product and. 

multi -product di stri b·u.tion. Chain cigar so tres a.nd independent 

cigar stores, [tlthough they have chanc;ed character somewhat by 

the addition of other lines of merchandise, trap themselves when 

attempting to follow a 11 1oss leader 11 policy. Frequently bankruytcy has been the result. 

4. Effects of Loss Leader Selli~ 

The experience resulting from the 11 loss leader" selling of cigarettes has not shown the same characteristics of other 11 loss leader 11 

merchandise; with other merchandise, the consumer liru s price-cutting with deterioration in quality. Cigarette manufacturers have, 

however, maintained quality and have forced the distributing outlets to absorb the ill effects of price-cutting. In the case of 

cigc:trs, loss lead.er selling has been more vulnerable and has occasionally resulted in a decre~se in size of cigars and a depreciation in quality. 

Ivianufacturers of cigars often grant .exclusive franchises to wholesalers in certain territories . The wholesalers, in turn, grant exclusive rights for ·:sale of the particular manuf?.cturers' brands in 

the territories allotted to them. It frequently happens tha t some 

retail trade pira tes who do not have the privilege of selling the 

particular brands but who are oper.::tting within t.he ~ erri tOIJ7 secure 

small quantities of the cigars through round-about methods of their 

own, and advertise them for sale at cut prices. 

Obviously, i rrrmediate re~ercussions are felt by all other retailers 

v.:ho regularly sell these brands, anC. pressure is brought upon the 

wholesalers for lower prices. As n.n instance of the pressure, some 

cases, wholesale:c·s have sold ciga rettes a t a markup of only; 5/8 of · 

one per cent. (* 1 

11 Now and again11 says .Reavis Cox, 11 t he jobbers in a city get together 

and more or less tacitly agree to do CJ}Nay with some disliked practice or institution. For example, they may decide to do away with 

sub-jobbers by iving them a discount no greater than that allowed 

retailers; or they may decide simpl y to keep all prices up to agreed 

levels. 

11 Ordinari lJ' , ho· I'P ver, the principal purpose of such organizations 

seems to be to goad tne manufacturers into taking action to maintain resale -prices. At times, they content themselves with repeated 

demands for the elimination of persisitent price cutters from the 

direct lists of manufacturers; at other times they demand the elimination from t he direct lists of distributors who, they maintain 

justly or not, a re not really entitled to the designation 'jobber'"· 

(**) 

(*) Effect of Cigarette Price P.egu.lations , Division of Rese~rch and 

PlanninE,, 1-JRA, Dec . 18, 1934, Appendix A-7, page 2. 

(**) The Tobacco Inm1 t~J, Reavis Cox, Columbia University Press, 1933, 

page 258 

10691 
-2?6-

APPEliDIX 8 -.. 

TABLE 1. · -- LIST OF CODES IN T1fE TOBACCO INDUSTRY 

References are to Codes of Fair Competition, as ap;roved: Government 

Printing Office. 

Code of Fair Com?etition for the Auction and Loose Leaf Tobacco Warehouse -Industry, ·volume XVIII, Page . 694. ' ' . -- - . 

Code ' of Fair. Competition for the Cigarette, Snuff, Chewing, and Smoking 

Tobacco Manufacturing Industry, Volume XXI, Page 95. 

Cude of Fair Competition for the Retail Tobacco Trade, Volume XII, Page 

35. 

Amendment to the Code of Fair Competition for the 

Retail Tobacco Trade. Volume XII, Page 35. 

Code of Fair Comp'eti tion for the Cigar Manufacturing Industry, Volume 

XII, Page 61. 

Amendment to Code of Fair Com~etition for the 

Cigar Manufacturing Industry , Volume XVII, Page 155. 

Amendment to Code of Fair Competition for the 

Cigar Manufacturing Indust!'1J, Volume XXII, Page 451. 

Code of Fair Com~ tition for tne Wholesale Tobacco Trade, Volume XI. 

Page 275. 

Amendment to Code of ir Competition for the 

vVholesale Tobacco Trade , Volume XVI, Page 283 . 

TABLE 2 . FINISHED CODE HISTORIES I N THE ·rOBACCO EIDUSTRY. 

National Recovery Administration files: 

Auction and Loos e Leaf Tobacco Warehouse Industry. 

Cigar Manufacturing Industry. 

Cigarette, Snuff, Chewing, and Smoking Tobacco Manufactur1ng Industry. 

Wholesale Tobacco Trade. ,• 

, 

10691 
A~~endix 9. - Foreign Trade in ~obacco 

Table Number 1. A series of charts and tables in photostat form 

(58 photostatic sheets1, covering the exports 

of leaf tobacco and tobacco products from the 

United States to each of seven foreign countries. These photostats are in National Recovery Administration files, Tobacco Unit, Exports. 

10691# 

The countries covered are: 

Switzerland 

Sweden 

Mexico 

Nicaragua 

Brazil 

Argentina 

Denmark 

?or each country named, the following information 

is shown (each subject comprising a separate 

chart): 

Statement of rates of imports 

Unit values and ad valorem equivalent 

~uantities in metric tons, with values 

in francs 

An analysis of imports from years 1926-

1934 inclusive, for each type of leaf, 

namely Burley, Dark Fired, Maryland, 

etc. 

001") 
I •,. '·· . 
OFFICE OF THE NATIONAL RECOVERY ADMINISTRATION 

THE DIVISION OF REVIEW 

THE WORK OF THE DIVISION OF REVIEW 

Executive Order No. 7075, dated June 15, 1935, established the Division of RevieN of the 

National Recovery Administration. The pertinent part of the Executive Order reads thus: 

The Division of Review shall assemble , analyze, and report upon the statistical 

information and records of experience of the operations of the various trades and 

industries heretofore subject to codes of fair competition, shall study the effects of such codes upon trade, industrial and labor conditions in general, and 

other related matters, shall make available for the protection and promotion of 

the public interest an adequate review of the effects of the Administration of 

Title I of the National Industrial Recovery Act, and the principles and policies 

put into effect thereunder, and shall otherwise aid the President in carrying out 

his f unctions under the said Title. I hereby appoint Leon c. Marshall, Director of 

the Division of Review. 

The study sections set up in the Division of Review covered these areas: industry 

studies, foreign trade studies, labor studies, trade practice studies, statistical studies, 

legal studies, administration ·studies, miscellaneous studies, and the writing of code histories. The materials which were produced by these sections are indicated below. 

Except for the Code H~stories, all items mentioned below are scheduled to be in mimeographed form by April 1, 1936. 

THE CODE HISTORIES 

The Code Histories are documented accounts of the formation and administration of the 

codes. They contain the definition of the industry and the principal products thereof; the 

classes of members in the industry; the history of code formation including an account o! the 

sponsoring organizations, the conferences, negotiations and hearings which were held, and 

the activities in connection with obtaining approval of the code; the history of the administration of the code, covering the organization and operation of the code authority, 

the difficulties encountered in administration, the extent of co~pliance or non-compliance, 

and the general success or lack of success of the code ; and an analysis of the operation of 

code provisions dealing with wages, hours, trade practices, and other provisions. These 

and other matters are canvassed not only in terms of the materials to be found in the files, 

bu~ also in terms of the experiences of the deputies and others concerned with code for~atioo 

and administration. 

The Code Histories, (including histories of certain NRA units or agencies) are not 

mimeographed. They are to be turned over to the Department of Commerce in typewritten form . 

All told, approximately eight hundred and fifty l850) histories will be completed. Thi$ 

n~~ber incl udes all of the approved codes and some of the unapproved codes. (In !Qrk Mate-

!1.~~ tlQ_,_ l§, Contents of Cos;!2 Histo~ . will be found the outline which governed the 

preparati on of Code Histories.) 

(In the case of all approved codes and also in the case of some codes not carried to 

final approval, there are in NRA files further materials on industries. Particularly worth: 

of mention are the Volumes I, II and III which constitute the material officially submitt ~ 

to the President in support of the recommendation for approval of each code 

9768-1. 

.. uese Vl)lumes 

-ii -

set forth the origjnation of the codes, the sponsoring group, the evidence advanced to support the proposal, the report of the Division of Research and Planniny on the industry, the 

recommendations of the various Advisory Boards, certain types of official correspond&nce, 

the transcript of the formal hearing, and other pertinent matter. There is also much official information relating .to amendments, interpretations, exemptions, and other rulings . The 

materials mentioned in this paragraph were of course not a part of the work of the Division 

of Review.) 

THE WORK MATERIALS SERIES 

In the work of the Division of Review a considerable number of studies and compilations 

of 4ata (other than those noted below in the Evidence Studies Series and the Statistical 

Material Series) have been made. These are listed below, grouped according to the character of the mate rial. (In Work Materials li.Q . 11, Tentative Qut.lines S&nd fu!m!!!~ 21. 

Studies in Process, the materials are fully described) . 

.In1ustry Studies 

Automobile Industry, An Economic Survey of 

Bituminous Coal Indust~y ~nder Free Competition and Code R~gulation, Ecnomic Survey ,ot 

Electrical Manufacturing-Industry, The 

Fertilizer Industry~ The 

Fishery Industry and the Fishery Codes 

Fishermen and Fishing Craft, Earnings of 

Foreign Trade under the National Industrial Recovery Act 

Part A - Competitive Position of the United States in International Trade 1927-29 throu~h 

1934 . 

Part B - Section 3 (e) of NIRA and its administration. 

Part C - Imports and Importing under NRA Codes. 

Part D - Exports and Exporting under NRA Codes. 

Forest Products Industries, Foreign Trade Study of the 

Iron and Steel Industry, The 

Knitting Industries, The 

Leather and Shoe Industries, The 

Lumber and Timber Products Industry, Economic Problems of the 

Men's Clothing Industry, The 

Millinery Industry, The 

Motion Picture Industry, The 

Migration of Industry, The: The Shift of Twenty-Five Needle Trades From N~w York State , 

1926· to 1934 

National Labor Income _by Months, 1929-35 

Paper Industry, The 

Production, Prices, Employment and Payrolls in Industry, Agrioul ture and Railway Transportation, .January 1923, to date 

Retail Trades Study, The 

Rubber Industry Study, The 

Textile Industry in the United Kingdom, France, Germany, Italy, and Japan 

Textile Yarns and Fabrics 

Tobacco Industry, The 

Wholesale Trades Study, The 

Women's Neckwear and Scarf Industry, Financial and Labor Data on 

9768-2 

- iii -

Women's Apparel Industry, Some Aspects of the 

Commodities, Information Concerning : A Study of NRA and Related Experiences in Control 

Distribution, Manufacturers' Control of: Trade Practice Provisions in Selected NRA Codes 

Distributive Relations in the Asbestos Industry 

Design Piracy: The Problem and Its Treatment Under NRA Codes 

Electrical Mfg. Industry: Price Filing Study 

Fertilizer Industry: Price Filing Study 

Geographical Price Relations Under Codes of Fair Competition, . Control of 

.Minimum Price Regulation Under Codes of Fair Competition 

Multiple Basing Point System in the Lime Industry : Operation of the 

Price Control in the Coffee Industry 

Price Filing Under NRA Codes 

Production Control in the Ice Industry 

Production Control, Case Studies in 

Resale Price Maintenance Legislation in the United States 

Retail Price Cutting, Restriction of, with special Emphasis on The Drug Industry. 

Trade Practice Rules of The Federal Trade Commission (1914-1936): A classification fo.>r 

comparision with Trade Practice Provisions of NRA Codes. 

Labor Studies 

Cap and Cloth Hat Industry, Commission Report on Wage Differentials in 

Earnings i~ Selected Manufacturing Industries, by States, 1933-35 

Employment, Payrolls, Hours, and Wages in 115 Selected Code Industries 1933-35 

Fur Manufacturing , Commission Report on Wages and Hours in 

Hours and Wages in American Industry 

Labor Program Under the National Industrial Recovery Act, The 

Part A. Introduction 

Part B. Control of Hours and Reemployment 

Part C. Control of Wages 

Part D. Control of Other Conditions of Employment 

Part E. Section 7(a) of the Recovery Act 

Materials in the Field of Industrial Relations 

PRA Census of Employment, June, October, 1933 

Pu~rto Rico Need~ework, Homeworkers Survey 

Administrative Studies 

Administrative and Legal Aspects of Stays, Exemptions and Exceptions, Code Amendments, Conditional Orders of Approval 

Administrative Interpretations of NRA Codes 

Administrative Law and Procedure under the NIRA 

Agreements Under Sections 4(a) and 7(b) of the NIRA 

Approved Codes in Industry Groups, Classification of 

Basic Code, the -- (Administrative Order X-61) 

Code Authorities and Their part in the Administration of the NIRA 

Part A. Introduction 

Part B. Nature, Composition and Organization of Code Authorities 

9768-3. 

Part C. Activities of the Code Authorities 

Part D. Code Authority Finances 

Part E. Summary and Evaluation 

Cvde Gompliance Activities of the NRA 

- iv -

Code Making Program of the NRA in the Territories, The 

Code Provisions and Related Subjects, Policy Statements Concern~ng 

Content of NIRA Administrative Legisl3tion 

Part A. Executive and Administrative Orders 

Part B. 

'Part C. 

Labor Provisions in the Codes 

Trade Practice Provisions in the Codes 

Part D. Administrative Provisions in the Codes 

Part E. Agreements under Sections 4(a) and 7(b) 

Part F. A Type Case: The Cotton Textile Code 

Labels Under NRA, A Study of 

Model Code and Model Provisions for Codes, Development of 

National Recovery Administration, The: A Review of its Organization and Activities 

NRA Insignia 

President's Reemployment Agreement, The 

President's RJemployment Agreement, Substitutions in Connection with the 

Prison L~bor Problem under NRA and the Prison C~mfact, The 

Problems of Administr~tion in the Overlapping of Code Definitions of Industries and Trades, 

Multiple Code Coverage, Classifying Individual Members of Industries and Trades 

Relationship of NRA to Government Contracts and Contracts Involving the Use of Government 

Funds 

Relationship of NRA with States and Municipalities 

Sheltsred Workshops Under NRA 

Uncodified Industries: A Study of Factors Limiting the Code Making Program 

Legal S~udies 

Anti-Trust Laws and Unfair Competition 

Collactive Bargaining Agreements, the Right of Individual Employees to Enforce 

Commerce Clause, Federal Regulation of the Employer-Employee Relationship Under the 

Delegation of Power, Cerbin Phases of the Principle of, with Reference to Federal Industrial 

Regulatory Legislation 

Enforcement, Extra-Judicial Methods of 

FeJeral Regulation through the Joint Employment of the P~wer of Taxation and the Spending 

Power 

Government Contract Provisions as a Means of Establishing Proper Economic Standards, Legal 

Memorandum on Possibility of 

Industrial Relations in Australia, Regulation of 

Intrastate Activities Which s~ Affect Interstate Commerce as to Bring them Under the Commerce Clause, Cases on 

Legislative Possibilities of the State Constitutions 

Post Office and Post Road Power -- Can it be Used as a Means of Federal Industrial Regulation? - State Recovery Legislation in Aid of Federal Recovery Legislation History and Analysis 

Tariff Rates to Secure Proper Standards of Wages ~nd Hours, the Possibility of Variation in 

Trade Practices and the Anti-Trust Laws 

Treaty Making Power of the United States 

War Power, Can it be Used as a Means of Federal Regulation of Child Labor? 

9768-4. 
) 
- v -

!Hi EVIDENCE STUDIES SERIES 

The Evidence Studies were originally undertaken to gather material for pending court 

cases. After the Schechter decision the project was continued in order to assemble data for 

use in connection with the studies of the Division of Review. The data are particularly 

concerned with the nature, size and operations of the industry ; and with the relation of the 

industry to interstate commerce . The industries covered by the Evidence Studies account for 

more than one-halt of the total number or workers under codes. The list or those studies 

follows: 

Automobile Manufacturing Industry 

Automotive Parts and Equipment Industry 

Baking Industry 

Boot and Shoe Manufacturing Industry 

Bottled Soft Drink Industry 

Builders' Supplie~ Industry 

Canning Industry 

Chemical Manufacturing Industry 

Cigar Manufacturing -Industry 

Coat and Suit Industry 

Construction Industry 

Cotton Garment Industry 

Dress Manufacturing Industry 

Electrical .Contracting Industry 

Electrical Manufacturing Industry 

Fabricated Metal Products Mfg . and Metal Finishing and Metal Coating Industry 

Fishery Industry 

Furniture Manufacturing Industry 

General Contractors Industry 

Graphic Arts Industry 

Gray Iron Foundry Industry 

Hosiery .Industry 

Infant's and Children's Wear Industry 

Iron and St~ei 'Industry 

Leather Industry 

Lumber and Timber Products Industry 

Mason Contractors Industry 

Men's Clothing Industry 

Motion Picture Industry 

Motor Vehicle Retailing Trade 

Needlework Industry of Puerto Rico 

Painting and Paperhanging Industry 

Photo Engraving Industry 

Plumbing Contracting Industry 

Retail Lumber Industry 

Retail Trade Industry 

Retail Tire and Battery Trade Industry 

Rubber Manufacturing Industry 

Rubber Tire Manufacturing Industry 

Shipbuilding Industry 

Silk Textile Industry 

Structural Clay Products Industry 

Throwing Industry 

Trucking Industry 

Waste Materials Industry 

Wholesale and Retail Food Industry 

Wholesale Fresh Fruit and Vegetable Industry 

Wool Textile Industry 

THE STATISTICAL MATERIALS SERIES 

This series is supplementary to the Evidence Studies Series. The reports i nclude data 

on establishments, firm~, employmen\, p~yrolls, wages, hours, pro~uction capacities, shipments! sales, consumption, stocks, prices, material costs, failures, exports and imports. 

They also include notes on the principal qualifications that should be observed i n using the 

data, the technical methods employed, and the applicability of the m~terial to the study of 

the industries concerned . The following numbers appear in the series: 

9768--5. 

Asphalt Shingie and Roo~ing Industry 

Business Furniture 

Candy Manufacturing Industry 

Carpet and Rug Industry 

Cement Industry 

Cleaning and Dyeing Trade 

Coffee Industry 

C~pper and Brass Mill Products Industry 

Cotton Textile Industry 

Elect rical Manufacturing Industry 

- vi -

Fertilizer Industry 

Funeral Suprly Industry 

Glass Container Industry 

Ice Man facturin~ Industry 

Knitt~d Outerwea t Industry 

Paint, Varnish, ana Lacquer, Mfg. Industry 

Plumbing Fixtures Industry 

Rayon and Synthetic Yarn Producing Industry 

Salt Producing Industry 

THE COVERAGE 

The original, and approved, plan of the Division of Review contemplated resources sufficient (a) to prepare some 1200 histories of codes and NRA units or agencies, (b) to consolidate and index the NRA files containing some 40,000,000 pieces, (c) to engage in extensive field work, (d) to secure much aid from established statistical agencies of government, (e) to assemble a considerable number of experts in various fields, (f) to conduct 

approximately 25% more studies than are listed above, and (g) to prepare a comprehensive 

summary report. 

Because of reductions made in personnel and in use of outside experts, limitation of 

~ccess to field work and research agencies, and lack of jurisdiction over files, the ~rejected plan was necessarily curtailed . The most serious curtailments were the omission of 

the comprehensive summary report; the dropping of certain studies and the reduction in the 

covera~e of other studies; and the abandonment of the consolidation and indexing of the 

files. Fortunately, there is reason to hope that the files may yet be carec for under other 

auspices. 

Notwithstanding these limitations, if the files are ult'imately consolidated and indexed the exploration of the NRA materials will have been sufficient to make them accessible 

and highly useful. They constitute the largest and richest single body of informati on 

concerning the problems and operations of industry ever assembled in any nation. 

9768-6. 

L. C. Marshall, 

-Director, Division of Review . 


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