University of Kentucky UKnowledge History in General History 1995 Tobacco Merchant: The Story of Universal Leaf Tobacco Company Maurice Duke Virginia Commonwealth University Daniel P. Jordan Click here to let us know how access to this document benefits ou.y Thanks to the University of Kentucky Libraries and the University Press of Kentucky, this book is freely available to current faculty, students, and staff at the University of Kentucky. Find other University of Kentucky Books at uknowledge.uky.edu/upk. For more information, please contact UKnowledge at [email protected]. Recommended Citation Duke, Maurice and Jordan, Daniel P., "Tobacco Merchant: The Story of Universal Leaf Tobacco Company" (1995). History in General. 1. https://uknowledge.uky.edu/upk_history_in_general/1 Tobacco Merchant Tobacco Merchant THE STORY OF UNIVERSAL LEAF TOBACCO COMPANY Maurice Duke Daniel P. Jordan THE UNIVERSITY PRESS OF KENTUCKY Copyright© 1995 by The University Press of Kentucky Scholarly publisher for the Commonwealth, serving Bellarmine College, Berea College, Centre College of Kentucky, Eastern Kentucky University, The Filson Club, Georgetown College, Kentucky Historical Society, Kentucky State University, Morehead State University, Murray State University, Northern Kentucky University, Transylvania University, University of Kentucky, University of Louisville, and Western Kentucky University Editorial and Sales Offices: Lexington, Kentucky 40508-4008 Frontispiece: A depiction of a tobacco plant published in 1796 by Smith, Reed, and Wayland, New York. Endpapers: (front) Universal's main office in Richmond, Virginia, in the early 1990s (photo by Maurice Duke), and (back) a North Carolina family gathered in front of a flue-curing tobacco barn around the turn of the century (photo courtesy of Universal Corporation). ISBN: 978-0-8131-5200-4 Library of Congress Cataloging-in-Publication Data Duke, Maurice. Tobacco merchant: the story of Universal Leaf Tobacco Company I Maurice Duke, Daniel P. Jordan. p. em. Includes bibliographical references and index. I. Universal Leaf Tobacco Co.-History. 2. Tobacco industry­ United States-History. 3. Conglomerate corporations-United States-History. I. Jordan, Daniel P. II. Title. HD9139.U63D85 1995 338. 7'6797'0973-dc20 94-26776 This book is printed on acid-free recycled paper meeting the requirements of the American National Standard for Permanence of Paper for Printed Library Materials. To the men and women of Universal Leaf Tobacco Company This page intentionally left blank Contents Preface ix Acknowledgments x1 1 The Heritage 1 2 Founding and Early Years 14 3 The China Company Strikes Gold 32 4 A New Profit Center to the North 46 5 Cigar Leaf Tobacco 53 6 The Depression and the Great War Years 60 7 Postwar Growth at Home 78 8 Postwar Growth Abroad 98 9 A Worldwide Company 112 10 Modern Foreign Operations 127 11 A Changing Industry 140 12 Diversification and Litigation 158 Epilogue: The 1990s and Beyond 174 Appendix 1: The History of Tobacco Consumption 182 Appendix 2: Universal Corporation Historical Data on Annual Earnings 186 Appendix 3: Tobacco Grades 189 Appendix 4: Company Officers 193 Bibliographical Note 199 Index 202 Illustrations follow pages 52 and 148 Where to? What next? -Carl Sandburg Preface Universal Leaf Tobacco Company (ULT) was formed in 1918 when six American leaf tobacco dealers consolidated and extended a leaf tobacco buying business originally established in 1888. Leaf tobacco dealers make no consumer products. Their business is selecting, purchasing, processing, and storingleaf tobacco for sale to manufacturers, who then make it into the various tobacco products used by the public. As South­ ern businesses go, Universal can be considered to be an old company. It is also largely unknown because Universal markets no products directly to the public, advertises little, and prefers a quiet approach to its busi­ ness. It is also an unusual company, and study of it reveals much about the United States economy as a whole, and about the economy of the South in particular. Universal is the largest independent leaf tobacco dealer in the world. It deals in tobacco grown in all parts of the globe for the manufacture of tobacco products. The company's ~rocessing plants are located world­ wide and employ over fifteen thousand people full time and season­ ally. Headquarters are in Richmond, Virginia, with facilities in other states as well as in Europe, Africa, Central America, South America, the Far East, and Southeast Asia. Universal buys for resale in excess of 35 percent of all the tobacco grown in the United States. To describe more precisely the company's function and purpose, some explanation of the leaf industry is required. Leaf tobacco is mar­ keted in different ways throughout the world, but in all instances the grade selection and establishment of price has to be done by a corps of experienced tobacco experts. Because tobacco is a perishable commod­ ity, it has to be quickly treated following its purchase to avoid deteriora­ tion. In order to understand the need for leaf dealers, one need only be aware of the fact that during the height of the tobacco buying season in the United States some fifty-six auctions are operating simultaneously. Only a few of the largest manufacturers have found it feasible or eco­ nomical to maintain a buying organization within the United States, much less worldwide, to cover such a vast market: but by using the X Preface services of a company such as Universal any manufacturer can be as­ sured complete market coverage. With few exceptions, the world's manu­ facturers of tobacco products leave the selecting, buying, and process­ ing to leaf dealers, who service huge accounts from country to country with tacit permission from the home office to rely largely on their own judgment. Universal's business takes different forms with different custom­ ers. In some cases Universal selects, buys, and delivers the leaf to the customer for an agreed-upon commission. In other cases, business in­ volves both the purchasing and processing of the tobacco based on a customer's pre-season order. On some occasions, immediate delivery and payment are made. In others the company finances the manufac­ turer until time of delivery. Finally, the company also buys for its own account for later sale. In such cases the tobacco is stored until needed. The process of turning raw tobacco leaves from the fields into a finished product such as cigarettes, cigars, pipe tobacco, snuff, and chew­ ing tobacco begins when the farmer harvests the crop and separates it into rough grades. According to government standards there are eight grades of tobacco, and six qualities within each grade. Also, there are eighteen different tobacco colors, plus several combinations of colors, making the various choices of coJors, qualities, and types of tobacco number in the thousands. Because they lack the knowledge to fine­ grade, farmers rough-grade only. They then take the tobacco to a ware­ house and consign it for sale. Universal's buyers acquire tobacco on the warehouse auction floors through the process of competitive bidding. After purchase, the tobacco is transported to Universal factories where it is cleaned, sorted, regraded, and blended. There its moisture content is stabilized and it is packed, either to be stored for future sale or to be shipped directly to the customer, a manufacturer who makes and sells tobacco products to the public. This book deals with all aspects of Universal Leaf Tobacco Company's history, including the purchase, treatment, storage, financ­ ing, packaging, and transportation of tobacco worldwide. The book also deals with the newly emerging Universal Corporation, a giant hold­ ing company whose interests are just now beginning to extend beyond tobacco into other commodities. Acknowledgments We owe a debt of gratitude to a number of people both in and out of the Universal Corporation, without whose assistance and cooperation this book would not have been possible. First and foremost, Thomas R. Towers, former president of Universal, gave generously, and with good humor, of his time and energy and was indispensable in helping to arrange interviews, sometimes having to put an extra twist of the arm on people who were busy in the day-to-day operation of the company. Although never dictating the content or format of the book, he made suggestions that made the finished product more accurate than it oth­ erwise would have been. In the early stages of the project, M. Norton Howe Jr. rendered similar services. Jan Laverge, Gordon L. Crenshaw, Wallace L. Chandler, Henry H. Harrell, James M. White III, and Betty P. Grosclose have read all or parts of the manuscript and offered help­ ful suggestions. A number of libraries offered assistance in the research stages of the book. Chief among them were those at Duke University, East Caro­ lina University, the University of North Carolina at Chapel Hill, the University of Richmond, the University of Virginia, Virginia Common­ wealth University, the Virginia Historical Society, the Virginia State Library, the Arents Collection of the New York Public Library, and the Library of Congress. For providing personal papers or other useful information, we would like to thank the following: the late E.D. Allen, Robert E. Bateman, Beverly B. Brookings, the late Don F. Bell, the late L.F. Cary III, the late Mrs. H.W. Davis, 0. Kemp Dozier, John C. Gorman, the late Rob­ ert M. Harrison, the late H.N. Howard Jr., Robert K. Krick, the late A.l. McOwan, Thomas D. Miller, Ann Morton, the late R.A. Noakes, Charles S. Norwood, Hunter R. Pettus Jr., WilliamS. Powell, R. Robert Sengstacken, Mrs. Helen Marie Taylor, the University of Virginia Alumni Association, Dennis Williams, and Fielding Williams. The following people offered special assistance during many on­ site visits to Universal facilities from Florida to Canada: T.B.