Free Ashes to Ashes by Richard Kluger Page B

high profits—$2.5 million after the first year of its joint operation—amounting to 58 percent on tangible assets and a 27 percent profit margin on net sales, and served to feed Buck’s autocratic tendencies. These were rarely exhibited demonstratively, for all his forbidding physical presence; rather, he maintained remarkable self-control and a calm manner behind those chilly blue eyes. “Don’t ever ask me for a raise,” he would tell his subordinates. “I know what my people are worth, and when they earn a raise, they’ll get it.” He rarely squandered his emotional reserves on personal confrontations and never reprimanded an offending employee in public; you were simply dispensed with if you disappointed the boss one time too many.
    Despite the great and rapid success he had achieved with cigarettes, Duke calculated early in 1891 that they were not enough to sustain the enterprise he now envisioned. The little smokes were a relatively small piece of the whole tobacco business. He would use them as the lever to move into the much larger and potentially far more profitable sectors of the business, even as his social ambitions were being propelled upward. The overgrown country boy was now received with outward respect by New York’s café society and financial community; further advancement required new initiatives and a clientele beyond the déclassé.
    There were twice as many chewers as smokers of tobacco in America, and so Duke summoned to his office the head of the substantial Louisville firm of Pfingst, Doerhoefer & Company, purveyors of several leading brands of Burley-based chewing tobacco, including Battle Ax and Newsboy. Duke painted a rosy picture for the Kentuckian showing what would happen if he joined forces with American Tobacco. The deal, soon consummated, was marked by three features that would come to characterize so many of the transactions that followed. First, the price of nearly $2 million was paid for with only one-third cash and the balance in American Tobacco stock. Second, Doerhoefer and his colleagues were to be retained to operate their beloved business. And third, if any of the principals chose to resign from the Louisville operation or in the unlikely event that they were asked by their New York overseers to step aside, none of them would be allowed to engage in the tobacco business for at least the next ten years.
    Two months later, under similar terms, Duke bought a Richmond company that was the leading maker of cheroots. Then Duke added two Baltimore companies with strong lines of plug and snuff, paying for all but 5 percent of the $5 million purchase price with American Tobacco stock and, following the patternhe had initiated upon merging his cigarette-manufacturing units, he closed down the smaller Baltimore acquisition. Now American Tobacco salesmen had a much broader line of merchandise to peddle, and fewer of them were needed. By 1894, company profits had surged to $5 million.
    But as the 1890s lengthened, the cigarette business began to tail off perceptibly. Reformers and moralizers routinely referred to cigarettes as “coffin nails,” distinguishing them from other forms of tobacco mainly on the ground they were all too accessible to boys and damaging to their health. By 1893, agitation had reached the point where the state legislature of Washington outlawed the sale of cigarettes, and other states were considering similar action. Plainly American Tobacco had to expand its other tobacco lines at an accelerated pace. Duke proposed a compact of leading plug makers along the lines of the cigarette combination he had forged, but when they declined the honor, he declared war on them and waged it with a ferocity that made his campaign to dominate the cigarette business look tame. Jobbers were given big rebates to push the American Tobacco line of chews, and those who did not were likely to find their cigarette orders going unfilled. The company spent lavishly on premium giveaways