National Cigar Stands and the Tobacco Trust

Louis K. Liggett at 42.

Louis K. Liggett loved a good cigar. Most photos show him with a panatela or corona wedged between his fingers and several others stashed in a coat pocket. Like many men, he equated fine cigars with success, and by 1905 Liggett was unquestionably successful with performance of the United Drug Company. He was acutely aware, however, that neither he nor the majority of his drugstore-owning Rexallite partners would enjoy increased prosperity without expansion of cooperative enterprise—the heart of their burgeoning business. His proposal that year was to install attractive and efficient cigar stands inside drugstores, a radical idea for the time.

Cigar stands traditionally had been small, independently owned corner and sidewalk shops that as a group were poorly managed, poorly arranged, and produced marginal profits. In 1901, New York tobacco merchant George J. Whelan organized the first chain of cigar stands, known as United Cigar Stores Company. His standardized shops provided good pay and working conditions for employees, effective window displays and advertising, and an overriding work ethic that focused on selling cigars and related tobacco products. Although he didn't advertise the fact, Whelan had combined United Cigar Stores Co. with the “tobacco trust,” a sprawling conglomerate of some 80 manufacturing and distribution companies in the U.S., Porto Rico and Cuba. The trust was formally styled Consolidated Tobacco Co. from 1901 to 1904, then as American Tobacco Company.

Since Whelan had already adopted “United” as an appellation for his cigar stores, Louis Liggett incorporated his new enterprise as National Cigar Stands Company, “to operate cigar stands in drug stores and to import and manufacture cigars and other tobacco products.” He naturally antagonized the tobacco trust by competing with the combination’s retail stores (Whelan’s chain), but managed to appease the monster by becoming one of its largest private-label customers. Chartered in New Jersey in July 1905, National Cigar Stands Company leased offices the following month on East 21st Street in New York City.

J.A. Skinner's Drug Store in Cedar Springs, Michigan circa 1910. National Cigar Stores signage is visible on windows and below the display of cigars at left.

Liggett announced his plan for the newly formed company in late September at the third annual meeting of the United Drug Company in Boston. He explained that the purpose of the closely allied corporation was to give independent druggists collective buying power in the tobacco field, identical to what Liggett had accomplished a few years earlier with Drug Merchants of America, organized to buy drugstore proprietaries. National Cigar Stands Co. was to operate under the same cooperative principles as United Drug Co., charging its members a small percentage above cost to pay for administration, handling and advertising, while eliminating jobber and other middleman overhead. Liggett assured that in many instances the factory-to-retailer distribution system would result in cost savings of 30 to 50 per cent, and enable National Cigar Stands to sell quality cigars at prices the competition could not match. 

The 300 Rexall druggists at the meeting were enthusiastic about what they heard, and when stock was offered it was quickly over-subscribed. As president of the new firm, Liggett traveled to Cuba and arranged to take the entire output of several cigar manufacturers in Havana, then repeated the arrangement with a number of leading producers in the United States. Because American Tobacco Co. controlled most of these firms, Liggett was undoubtedly making supply (and credit) arrangements with full knowledge of tobacco trust officials.

Showcase pictured in 1905 promotional book.

Liggett vigorously promoted the idea of taking cigar business off the street and bringing it into the context of a larger store to increase foot traffic in front of other merchandise. Men in particular would become more familiar with their local drugstore. To solve the problem of displaying cigars yet keep them in ideal smoking condition, Liggett designed an attractive humidity-controlled showcase, constructed of ebony, gun metal, marble and plate glass. The National Cigar Stands registered trademark was a loose representation of the United States Capitol building, displayed on window signs and more dramatically as a 3-dimensional metal and glass chandelier suspended several feet above the showcase counter. The signs and hanging canopies were electrified to continually flash colored lights. 

Electrified chandelier

All this and much more was detailed in a 64-page prospectus—How to make the Cigar Stand support the Drug Store, authored by Liggett and published by his ad man at the time, Ben B. Hampton, who mailed copies to all Rexall agents in November 1905. The book was filled with illustrations and a convincing text urging future NCSCo agents to sell exclusive, competitively priced cigars from a scientifically designed showcase. They were assured that together with modern local advertising their cigar business would turn a better annual profit than all other departments—prescription, proprietary medicines, toilet articles, and soda fountain combined. Putting it in irresistible pecuniary perspective, Liggett emphasized that in 1904 $350 million was spent on cigars in the United States.

Keystone Pharmacy, The Rexall Store, Windber, Pennsylvania, circa 1915. A National Cigar Stands showcase has been positioned next to the soda fountain.

Patented paper sack for cigars.

Although the initial offer for National Cigar Stands agencies was made to Rexallites, non-franchise drugstores were admitted to the organization when local Rexall agents bypassed the opportunity. Company policy was to contract with one out of every four drugstores in a town or city, and a preliminary goal of 2000 National Cigar Stands in the United States was set. In July 1906, one year after incorporation, Liggett asserted that 1600 druggists had adopted the plan and installed stands in their stores. The magic “2000” was announced during the fourth annual United Drug meeting in Boston two months later. Established Rexall agencies such as the Cahoon-Lyon Drug Co. of Buffalo, Gray & Worcester in Detroit, and Scholtz Drug Co. in Denver were tasked as regional distributors.

Tobacco jobbers and the United Cigar Stores Co. didn’t react to the new competition quietly. Information was leaked to the media charging that National Cigar Stands was controlled by the “Tobacco Combination.” To their chagrin, it was soon made apparent that United Cigar Stores Co. itself was the major retail distribution arm of American Tobacco Company and the charge was a blatant distortion of fact. Liggett and other NCSCo representatives countered that their cooperative firm was formed to fight business methods of the trust rather than be part of it. What must have been confusing to observers, however, was the September 1905 migration of George M. Gales from American Tobacco to National Cigar Stands as vice president. Gales had been connected with the tobacco giant in New York City for eight years, most recently as secretary to John Blackwell Cobb, long time American Tobacco Company officer.

Blair & Brennan, The Rexall Store, Creston, Iowa, 1910.  Martin J. Brennan is standing at upper left, cigar in mouth.

When the U.S. Commissioner of Corporations submitted a report on the tobacco industry in February 1909, he included these candid remarks, “While the American Tobacco Company owns no stock in the National Cigar Stands Co., it is very heavily interested in it through loans.  Moreover…most of the brands of cigars bearing the name National Cigar Stands Company are manufactured by the Combination.” In retrospect, the trust obviously welcomed agreements with Liggett and his company to make private label merchandise as well as to sell American Tobacco brands like Bull Durham, Lucky Strike and Pall Mall, yet was ambivalent about how to deal with competition their new customer might present at street level.

Denver, Colorado agents, Feb 1907.

In spite of the brouhaha in the newspapers and trade press, Liggett was confident he would prevail. Making things easier was the antitrust action brought against the combine in 1907. It made its way through the courts until May 1911 when the U.S. Supreme Court finally ordered dismantling of the behemoth, a decision propelled by the conglomerate’s intimidating size and international scope, plus the determination it was restraining and monopolizing trade as prohibited by the first and second sections of the 1890 Sherman Antitrust Act. To promote market competition, four firms were ultimately created from its assets: R. J. Reynolds, Liggett & Myers, Lorillard, and another American Tobacco Co.

Tip tray displaying medallions for National Cigar Stands exclusive brands.

Private label cigars manufactured for National Cigar Stands ranged from inexpensive American Rule stogies that sold 3 for 5 cents, to fancy El Carvajal excepcionales imported from the Havana factory of H. de Cabañas y Carbajal and retailing at 25 cents each. New NCSCo agents could stock any popular brand previously sold in their store, but after a showcase was installed no new brands could be carried that might be confused with National Cigar Stands labels. Other NCSCo cigars that proved popular over the years were Don Bravo, Flor de Madrid (a “clear Havana” made in the U.S. from tobacco grown in Cuba), La Idalia, Louis K, Cuba-Roma, Lord Carver, and their strongest seller, Black and White, a domestic nickel cigar containing some Cuban leaf.

    Black and White cigar cutter and box for 5¢ Invincibles, circa 1926.

Company letterhead, 1912. By this time George M. Gales was president and National Cigar Stands Company had expanded to Boston and Chicago.

National Cigar Stands Company, initially financed by individual directors and Rexall agency stockholders, was acquired by United Drug Co. in 1913 in the wake of the American Tobacco Company dissolution. Loan obligations held by the tobacco trust were likely discharged by United Drug, and NCSCo stockholders promptly exchanged their shares for UDCo stock. The merger was finalized in March 1914.