Cigaret Peace

No Damoclean sword has been hanging over the tobacco industry. Instead, two keen blades have been slashing away at it. Last week there were indications that firm hands had reached out, stopped one blade and grasped at the other. First and most destructive of the industry's two menaces has been the price cutting war between manufacturers, begun in April, 1928 when the R. J. Reynolds Tobacco Co. reduced the price of Camels from the long established rate of $6.40 a 1,000 to $6. Quick to follow were Liggett & Myers with Chesterfields and Piedmonts, and the American Tobacco Co. with Lucky Strikes. The Lorillard To bacco Co., faced with the heavy expense of introducing Old Golds met the reduction only partially, cutting its price to $6.10. During the intervening months the costs of the feud were heavy and many a rumor spread that an agreement for its termination had been reached. Last week from the Winston-Salem (N. C.) offices of the R. J. Reynolds Tobacco Co. came an unexpected telegram that Camels had been boosted to their old price of $6.40. Chesterfields, Piedmonts, and Lucky Strikes followed immediately. From Lorillard came a statement that there were not enough officials in town over the weekend to do anything about it, that an announcement would be made soon. With the 1929 output of cigarets estimated at the new high figure of 120,000,000,000,* the rise in price, if maintained for the rest of the year, will mean in- creased profits of $40,000,000.

Of these added profits, the greatest share will probably go to the American Tobacco Co. Forced to segregate many of its properties in 1911 under the anti-trust law, American Tobacco still holds a dominant position in the trade, is said to handle one-third each of the cigaret and smoking tobacco business, and one-fourth of the plug business. Besides Lucky Strike, its brands include Sweet Caporal, Pall Mall, Lord Salisbury, Bull Durham, Tuxedo, Half and Half, Blue Boar, Cremo. But the American Tobacco Co., as all the world knows, has concentrated on Lucky Strikes, for which most of its 1929 advertising budget of $12,300,000 was spent. The campaign was directed almost entirely by the company's President George Washington Hill. Born of rich parents, Mr. Hill is regularly mentioned by Hearst Columnist Arthur Brisbane as one case where a rich man's son has not been a loafer. Silent, clever, he has originated many an advertising idea. Last year he saw a fat woman munching what he presumed to be either a sweet or a pickle while nearby was a slender girl smoking a cigaret. Thenceforth came a sales-slogan ("Reach for a Lucky instead of a sweet") on which millions were spent. Whether or not Mr. Hill is personally responsible for the newest Lucky Strike campaign ("An ancient prejudice has been removed") is not known. One explanation of the end of the $6 cigaret price was that leaf tobacco is more expensive this year. Another suggestion is that the move was originated by the Brothers George Kenan and Frederick Morrow who recently entered the tobacco industry (TIME, Sept. 2) by acquiring control of the United Cigar Stores of America, the Tobacco Products Co. and the Union Tobacco Co. While the Morrows are not identified with the large manufacturers, their position in the distributing end could make their influence mighty. If the raise in the wholesale price presages a return to the strict 15-c- retail price (now two for 25-c- in most places, 23-c- in large chain systems), the second menace to the tobacco industry will have been removed. Although chain stores can afford to sell cigarets at no profit, or even a loss, the war has been expensive to smaller merchants. With cigarets costing them $6 per 1,000 the package price has been (allowing for discount) 10.58-c-. Selling at two for 25-c-, the package profit has been only 1.92-c-, while at two for 23-c- it has been .92-c-. Since the package price is 11.28-c- at the new wholesale price, by selling cigarets at 15-c- again the merchants would make their former margin of 3.72-c-, which is 2.5-c- more than they will make if they continue to offer packages at two for 25-c-.

* Of these 120,000,000,000 a large proportion will be exported, China buying more than any other single country. The French Government, indignant at the popularity shown by U. S. cigarets over its own products, last week gave its factories instructions how to duplicate U. S. brands. These directions read: "... Soak the wet leaves in rum for 24 hours, add some brown sugar, some glycerine, chop up the leaves, dry them, pulverize them, add perfume to taste.