Jones Rexall

Jones Rexall

Preface:

Thousands of Rexall Drug Stores fronted Main Street in communities throughout the nation for eight decades of the 20th century. Most were locally owned, and all possessed an exclusive franchise for Rexall brand merchandise in their town or section of a city. Actively supporting Rexall Stores were the management and advertising departments, factories and distribution networks comprising the vast corporate body of United Drug Company and its successor, Rexall Drug Company. Followers of this Blog will see gradual publishing of histories, vintage photographs and memorabilia acquired during twenty-five years of research and collecting—glimpses of the Rexall phenomenon and personalities that drove its creation and success.

Tuesday, June 14, 2011

History of Rexall - the short version

Rexall was the brainchild of Louis Kroh Liggett, a Detroit patent medicine salesman who created a manufacturing cooperative for franchised drugstores at the turn of the 20th century. Liggett's marketing genius enabled independent druggists to profit from enhanced store and product identity combined with national advertising. While the cooperative venture endured for decades, the brand name survived even longer. Today, many bright orange and blue Rexall Drug signs remain on buildings across the U.S. because of their iconic appeal.

In 1898, 23-year old Liggett was working out of Boston, Massachusetts, urging the retail drug trade to sell a bottled tonic called "Vinol" made from wine and cod livers. The nostrum had been sold on the open market with only fair success until Liggett fielded the idea for a limited franchise plan that would help eliminate the self-destructive practice of price cutting. Approaching the leading druggist in each town, Liggett offered an agency contract for Vinol. In return, the drugstore would enjoy company sponsored local and national advertising as well as a monopoly on repeat sales in his area. The plan was well received and proved to be a winner.

Dealer promotion for Vinol, 1912
As Vinol sales soared, instilling confidence in the new method of distribution, Liggett proposed forming an organization to manufacture and distribute a broader range of products. Each shareholder would participate in profitability, both from the manufacturing division as well as retail sales. Discussions centered around formulating drug items from quality materials, labeling with a uniform trade-name, and selling under a “money-back” guarantee. The products would be sold to stockholders at a modest advance over cost that included ample margin to secure advertising. Liggett was encouraged by the responsive chord he struck in the minds of druggists he surveyed, and his new cooperative plan was soon presented for capitalization.

In the fall of 1902, a group of drugstore owners and other investors met in Chicago. Forty of them, including Liggett, agreed to purchase stock in the amount of $4,000, creating $160,000 capital to launch the new company. The organization was chartered as United Drug Company, and “Rexall,” signifying “King of all,” was registered as the primary trademark. A small factory building in the Roxbury district of Boston was leased, production and printing machinery installed, and amazingly, the first orders of Rexall proprietary medicines were shipped in mid-March 1903.
Original factory, Boston 1905
 A candy making department was the next installation, followed by one for perfumery in 1905. Stationery and fountain supplies were added in 1910, rubber goods in 1912, brushes in 1913 and hospital items in 1919. Following World War I, sales greatly exceeded the Boston plant’s production capacity, leading to construction of new factories in St. Louis, Missouri that were opened in 1920. That same year United Drug Company expanded their business in the United Kingdom by purchasing Boots Pure Drug Co., Ltd. for $10 million. With laboratories and main offices in Nottingham, the deal also included 627 “Boot’s Cash Chemists” shops and four manufacturing plants in England and Scotland. Ownership of these stores and factories continued until 1933 when British interests repurchased the Boots stock for $32 million.

Louis K. Liggett in 1920.         Photo by Paul Thompson
Rexall’s version of the "One Cent Sale" (two items for the price of one, plus 1 cent) was introduced nationally in 1915 (see more here); and by late 1920 the number of Rexall agents worldwide reached 10,000. The famous One Cent Sales and other unique promotions helped the company and most of the franchised dealers survive the depressed economy during World War I and throughout the 1930’s.

Justin W. Dart 1952
Photo by Curtis Studios, Los Angeles
Justin Whitlock Dart became president of United Drug Company in 1943. Within four years he moved headquarters from Boston to Los Angeles and altered the corporate name to Rexall Drug Company. His plan embraced three far-reaching objectives: modernized packaging, improved Rexall store and product identification, and augmented national advertising. Rexall-sponsored radio shows such as Jimmy Durante, Amos 'n' Andy, and Phil Harris & Alice Faye, along with television specials and full-page magazine and newspaper ads contributed greatly to Rexall achieving immense popularity and patronage. The hearty greeting, “Good Health to all From Rexall” was a standard on radio and TV programs. All points of Dart's plan were gradually achieved and “Rexall” became a household word that equaled “drugstore” in common usage.

Christmas 1949 Rexall Radio Show
In the 1950's many large companies began to diversify with the growing economy, and Rexall Drug was no exception. Primary acquisitions were in chemicals and plastics, including the purchase of Tupper Corp. in 1958 for $16 million. A corporate name change to Rexall Drug and Chemical Company took place in 1959, and expanding interests prompted yet another metamorphosis ten years later to Dart Industries, with Rexall Drug Company organized as a division.

In 1977, Dart Industries sold Rexall Drug Company to a group of private investors that eventually eliminated the franchised dealerships. Rexall products were promoted to a larger market, including super drugstore chains, and the original character of the Rexall manufacturing/distribution system vanished. The drastic change in marketing policy didn’t last long. By 1986 the Rexall Corp. factory in St Louis closed and remaining assets were sold to an investment group in Ft. Lauderdale, Florida that specialized in vitamin supplements.

In retrospect, the corporate philosophies that guided Rexall over the decades were of two schools, each reflecting leadership of the men that successively charted the firm’s course. Louis Liggett focused on cooperative manufacturing and distribution of drugstore merchandise to his own chain and to franchised independent dealers. Justin Dart, consistent with the times, saw the need for diversification, and eventually regarded the retail sector as burdened with profit-eating overhead. He eliminated company-owned stores and personnel that were judged to be of marginal value. Dart also ventured into new manufacturing and distribution areas such as plastics and direct sales that were sometimes phenomenally successful, such as Tupperware, and sometimes not, like the Vanda Beauty Counselor enterprise that failed to rival Avon.   

7 comments:

  1. From Bob:
    I'm writing a book on independent retailing, and would like to know more specifics about the Rexall franchise. United Drug Company is often described as a retailer-owned cooperative, which it appeared to be when the original 40 investors contributed $4000 each to form the cooperative in 1903. When the franchise was created did it involve stock ownership? It appears that the company was gradually taken over by non-franchisee investors, but I'd like to know in more detail how that came about and when. Can you give me any background on this? Have you seen one of the franchise documents? I'd appreciate anything you can tell me on this subject.

    Response:
    The following details were gleaned from company literature, trade journals, etc:
    Rexall agency contracts or agreements basically gave the independent retailer exclusive right in a named territory (usually a town or small city) to distribute products manufactured and branded by United Drug Co., later known as Rexall Drug Co. The earliest signed agreement I've seen is dated July 1908, and specifically states that the agent has purchased from United Drug Co. "a portion of its Capital Stock." The purchase requirements were as follows: at least 1 share in a town of 10,000 pop. or less, 2 shares up to 20,000, 3 shares 20-50,000, 5 shares over 50,000. These minimums were generally in effect until 1928 when United Drug Co. temporarily merged with several other corporations to form Drug, Incorporated (see below).
    1914: Taking the lead of other large corporations like U.S. Steel and National Biscuit Co., United Drug first enabled employees of Rexall agents to buy preferred stock, with an option to purchase on a time payment plan—$10/month for ten months to acquire a $100 share.
    1916 Sept: United Drug applied for listing on the NY Stock Exchange—the first time company shares were offered to the general public. Per president Louis Liggett: "private bankers have asked for all of the $2.5M first preferred stock issue that remains unsold after present stockholders purchase what they want." October: United Drug Company stock was being bought and sold by brokers Webb, Levett & Co. in NYC—"Common, Second Preferred, and First Preferred."
    1920 August—Application to list Liggett's International Ltd., Inc. preferred stock on the NY Stock Exchange. Liggett's was a holding company that owned common stock of the Boots Pure Drug Co. Ltd. of England, and controlled the Canadian and English business of United Drug Co.
    1928 March: United Drug Company and Sterling Products, Inc. were the first to merge their stock to form a holding company known as "Drug, Incorporated." There was to be no alteration in the contracts, principles and methods of either of the two corporations, but investors who desired an interest in United Drug Company had to purchase stock in Drug, Inc. Capital stocks of the five corporations that eventually formed Drug, Inc., including United Drug Co., reverted back to individual units on NYSE in August 1933 when the holding company was dissolved.
    1948: about 10% of Rexall franchised agents were still stockholders in what was then called Rexall Drug Co.

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  2. Any idea who handled their advertising and such over the years?

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    1. James T. Wetherald, one of Liggett's closest advisers and treasurer of United Drug until 1906, was an experienced ad man. See my July 1, 2011 blog post about Wetherald's work on the Captain Rexall campaign of 1903. Other agencies known to have been employed by United Drug are Ben B. Hampton (NYC) 1905-09, Wood, Putnam & Wood (Boston) 1908, Street & Finney, Inc.(NYC) 1917-40, Rusling Wood Inc (NYC) 1928-30, and BBD&O (NYC) 1940s-60s.

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  4. I am interested in the history of soda fountains at Rexall locations. I am planning on opening a coffee shop in a building that used to have a Rexall store, and I would love to be able to tie that aspect of its history in to what we are doing.

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  5. I have a very old photograph with two men walking under an umbrella on a street showing part of a Rexall Drug sign and "SODA" below it. There are old autos in the street as well as a horse-drawn carriage. I'm trying to date the photo. What is the earliest that there were stores that had a Rexall sign?

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    1. Logically not before 1903 and probably not after 1920, but I would have to see the photo to give you a more accurate estimate. If you wish, please send 300 dpi or better scan to fsternad@sonic.net
      Frank

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