Duke, James Buchanan
DUKE, JAMES BUCHANAN
James Buchanan Duke (1856–1925) was a driving force in the development of the U.S. tobacco industry. Through innovative marketing and production techniques Duke popularized cigarettes in the United States and abroad. He also made his mark in the electric power and textile industries. As a successful businessman Duke shared his good fortune through generous philanthropy, most visibly in his endowment to Duke University in North Carolina.
While his father was away fighting for the South in the American Civil War (1861–1865) Union soldiers destroyed much of the 300-acre Duke farm. The farm had produced corn, oats, wheat, and tobacco crops, but only some stored leaf tobacco escaped destruction.
The Duke family then turned to the tobacco crop and subsistence farming for their survival. Because so much tobacco was destroyed throughout the South during the Civil War, demand for tobacco skyrocketed once the fighting stopped. Sensing the demand for tobacco and its greater market potential, Duke's father sold the family farm in 1874 and set up business in a tobacco factory in downtown Durham. James joined the family business, W. Duke and Sons, after completing business training at a New York school. It was there that the younger Duke began to seek creative ways to promote and improve the family business.
James Duke developed innovative marketing and production techniques that helped propel his family business to success. One of these innovations was the 1884 acquisition of the Bonsack cigarette-rolling machine, which allowed mechanized mass production of cigarettes. Before the Bonsack machine was introduced cigarettes were hand-rolled and difficult to mass produce. They were not very popular. Once Duke set mass production in motion, he directed his efforts to capturing public attention. In 1884 he moved to New York City and opened a company office. He studied the operations of retail stores in the city and planned his strategy based on his findings.
As a promotional effort Duke offered free samples of his cigarettes to new immigrants, hoping they would come back for more as paying customers. He advertised on billboards and posters, as well as in newspapers and magazines. He used the Duke family name to support sporting events and included coupons inside packets of Duke cigarettes.
Duke's aggressive marketing techniques were unprecedented in his day and they paid off. By 1889 the business, now called W. Duke, Sons and Company, produced 45 percent of all cigarettes sold in the United States. Duke's attempts to win an ever-greater share of the growing tobacco market culminated in an 1889 merger with four other major tobacco manufacturers. The American Tobacco Company was thus born. It controlled 90 percent of all tobacco sales in the United States.
As president of the company, James Duke became the dominant leader in the tobacco industry. He was determined that the company retain market and industry superiority. Duke closed less efficient factories and discontinued unpopular cigarette brands. He undercut the retail prices of his remaining competition and hired non-union labor at low wages. He also signed a contract with the Bonsack Company to restrict its sales of the automatic cigarette-making machine to any company other than the American Tobacco Company. By 1898 the American Tobacco Company had almost eliminated its competition. In 1910 the company expanded to the overseas market.
The United States government watched the business practices of the American Tobacco Company for several years. As early as 1907 the company faced lawsuits alleging violations of anti-trust regulations. In 1911 the federal government charged American Tobacco with violations of the Sherman Anti-Trust Act, inhibiting fair and reasonable competition in the marketplace. Ultimately, the U.S. Supreme Court determined that much of the American Tobacco Company's business was pursued with illegal secret agreements and false public promotions. Its practices were "unreasonable" in the fair U.S. marketplace. To encourage competition, the Supreme Court ruled the tobacco giant be broken up into four smaller firms, the American Tobacco Company, Liggett and Myers, P. Lorillard, and R.J. Reynolds.
Duke remained president of the American Tobacco Company, now at 40 percent of its previous size. His attention, however, turned to more diversified business interests. He invested heavily in hydroelectric power plants, founding the Southern Power System in 1905. Southern Power built eleven plants (1907–1925). At the same time Duke invested in textile mills producing cotton and wool. The mills ran on power supplied by Duke's hydroelectric plants. The Southern Power System eventually became known as the Duke Power Company.
Duke shared his good business fortune with the public through his generous philanthropy. In 1924 he established the Duke Endowment with $40 million. A portion of the endowment went to Trinity College in North Carolina. The school was later renamed Duke University. The Duke Endowment was also established to support other educational institutions, health care organizations, children's homes, and churches.
James Buchanan Duke pioneered the development of the U.S. tobacco industry and made significant contributions to philanthropy and business. He died in 1925.
See also: American Tobacco Company, Mass Production, Sherman Anti-Trust Act, Tobacco, Tobacco Industry, Tobacco Trust
Armentano, Cominick T. Antitrust and Monopoly: Anatomy of a Policy Failure. New York: John Wiley and Sons, 1982.
Cox, Reavis. Competition in the American Tobacco Industry, 1911–1932. New York: Columbia University Press, 1933.
Durden, Robert F. The Dukes of Durham: 1865–1929. Durham, NC: Duke University Press, 1975.
Jenkins, John Wilber. James B. Duke: Master Builder. New York: George H. Doran Co., 1927.
Porter, Earl W. Trinity and Duke, 1892–1924: Foundations of Duke University. Durham, NC: Duke University Press, 1964.
Tilley, Nannie May. The Bright-Tobacco Industry: 1860–1929. Chapel Hill, NC: University of North Carolina Press, 1948.
Winkler, John K. Tobacco Tycoon: The Story of James Buchanan Duke. New York: Random House, 1942.
James Buchanan Duke
James Buchanan Duke
James B. Duke was born on Dec. 23, 1856, on a small farm near Durham, N.C., the younger son of Washington Duke. Union troops during the Civil War so ravaged their farm that at war's end, when Washington Duke returned from service in the Confederate Army, the family had to begin anew with total assets of 50 cents and two blind mules. The discovery of a small load of tobacco that had somehow escaped capture by Union forces triggered their rise to wealth. This supply sold so quickly that the Dukes began production and distribution on a large scale. By 1872, at the height of the South's impoverishment, the family was selling 125,000 pounds of tobacco annually.
When, in 1881, the Dukes began to manufacture cigarettes, business boomed. Three years later, with James in control, the company moved its executive offices to New Jersey to take advantage of that state's liberal corporation laws and to exploit the virgin markets of the North and West. Thereafter, the business grew into an international combine as Duke pursued monopolistic methods. Rebates, discrimination, a nationwide secret service, bulldozer tactics against competitors, and price manipulations marked the long "Tobacco War," by which Duke gained complete ascendancy over all rivals.
By 1904 Duke's American Tobacco Company controlled 90 percent of the national market and at least 50 percent of the foreign trade in tobacco. With unlimited power and a capitalization of over $500,000,000, the Duke trust was so powerful that a 1911 Supreme Court decree ordering their monopoly be dissolved had little effect on the company's prosperity.
Duke also developed an interest in the potential of electrical power. In 1905 he organized the Southern (now Duke) Power and Light Company. Within 25 years this utility was "capable of producing more energy than all the slaves of the Old South."
Duke contributed large sums to hospitals and churches. His last notable act was the establishment of the Duke Endowment on behalf of a small Methodist school, Trinity College. He donated more than $60,000,000 toward the creation of a new campus characterized by large buildings of Gothic design. The school was renamed Duke University.
The tall, rugged, redheaded industrialist died on Oct. 10, 1925. Once asked the secret of his success, Duke replied simply, "I had confidence in myself."
John W. Jenkins, James B. Duke, Master Builder (1927), and John K. Winkler, Tobacco Tycoon: The Story of James Buchanan Duke (1942), give sympathetic treatments of Duke. See also Meyer Jacobstein, The Tobacco Industry in the United States (1907), and Nannie May Tilley, The Bright-Tobacco Industry, 1860-1929 (1948). □