Type: Wholly Owned Subsidiary of British American Tobacco plc
Address: 200 Brown & Williamson Tower, 401 South Fourth Street, Louisville, Kentucky 40202, U.S.A.
Telephone: (502) 568-7000
Toll Free: 800-341-5211
Fax: (502) 568-7107
Web: http://www.bw.comEmployees: 6,600
Sales: $4.54 billion (1998)
Incorporated: 1906 as Brown & Williamson Tobacco
CompanyNAIC: 312221 Cigarette Manufacturing; 312229 Other Tobacco
SIC: 2111 Cigarettes; 2121 Cigars; 2131 Chewing & Smoking Tobacco; 2141 Tobacco Stemming & Redrying
Brown & Williamson Tobacco
Corporation,
a subsidiary of British American Tobacco plc, is the third largest
manufacturer of cigarettes in the United States. The company possesses
about 16 percent of the U.S.
cigarette market and sells an
assortment
of cigarette brands, including Kool, GPC, Carlton, Lucky Strike, and
Viceroy, as well as loose and specialty tobacco products, such as Kite
and Sir Walter Raleigh Bloodhound. Brown & Williamson has overseas
operations in Japan and South Korea. The company battled smoking-related
lawsuits and negative publicity in the late 1990s.
Brown & Williamson (B & W) was founded in 1894 in the tobacco
heartland
of Winston-Salem, North Carolina. The business was started by George
Brown and Robert Williamson, who formed a partnership before
incorporating the company as Brown & Williamson Tobacco Company in
1906. In the beginning, B & W concentrated on specialty products
including Bloodhound, Brown & Williamson's Sun Cured, and Red Juice
chewing tobaccos. After establishing those successful brands during the
early 1900s, B & W assumed a leadership position in the pipe tobacco
segment when it purchased the Sir Walter Raleigh brand. That brand had
been marketed on a regional basis by the J.G. Flynt Tobacco Company
since 1884. B & W purchased it in 1925 and began distributing it
nationally. Sir Walter Raleigh eventually became one of B & W's
hallmark brands.
About
the same time that it began marketing Sir Walter Raleigh pipe tobacco, B
& W moved into the burgeoning cigarette market. Cigarettes had been
a relatively small segment of the tobacco market prior to the turn of
the century. They had first become popular with women during the 1800s
as an alternative to cigars and plug, twist, and pipe tobacco. After
cigarettes were issued to U.S. soldiers during World War I, though,
demand began to
escalate. B & W launched an aggressive drive into the cigarette
industry
following the war. Strong sales of cigarettes and other tobacco
products created healthy profit growth at B & W, which caught the
eye of outside investors. In 1927, London-based B.A.T. Industries PLC
purchased B & W to operate as one of its subsidiaries. B.A.T.
expanded B & W's name to Brown and Williamson Tobacco Corporation in
1927, and in 1928 and 1929 added extensive manufacturing facilities in
Louisville, Kentucky. At that time, B & W moved its headquarters
from Winston-Salem to Louisville.
B & W made its mark
on the cigarette industry during the 1930s with a number of brands and
products. Importantly, B & W introduced Kool brand cigarettes, which
were the first
menthol
cigarettes marketed nationally in the United States. B & W also
began selling Viceroy cigarettes, which were eventually credited with
popularizing the filter-tip. Both Viceroy and Kool became
mainstay
brands for B & W and helped to make it a growing force in U.S.
tobacco. Besides those brands, B & W brought out Bugler and Kite
cigarette tobacco in the mid-1930s. B & W's Bugler Thrift Kit was
the first roll-your-own kit sold in the country. B & W achieved
another first with the introduction of the economy-priced pack of
cigarettes. Dubbed Wings, the brand sold for just ten cents per pack
(compared to 15 cents for most other brands at the time), making it a
big hit during the Great Depression. Wings was also the first cigarette
package to utilize an outer wrap of moisture-proof
cellophane.
Innovation
and market growth buoyed B & W throughout the 1930s and 1940s. In
fact, the legion of smokers in the United States spiraled upward after
World War II and during the 1950s. At the same time, new influences
began to shape the tobacco industry. Reports citing potential health
risks associated with smoking cast a shadow on the industry. The results
of the reported health risks were that tobacco taxes were increased,
advertising channels for cigarette marketers were reduced, and smokers'
preferences began to change. Among the most notable changes in
preferences during the 1950s and 1960s was the switch to filter-tipped
cigarettes. B & W, a pioneer in the filter-tip segment, responded
with filter-tip versions of most of its cigarettes. Furthermore, B &
W introduced the first filter made of
cellulose acetate, which became a feature of its Viceroy Kings brand.
Despite
negative health reports, smoking increased throughout the 1950s and
most of the 1960s. By the mid-1960s more than 40 percent of the entire
U.S. population was smoking cigarettes regularly. B & W benefited
not only from increased smoking, but also from market share gains. Its
most successful brand was Kool, which had struck gold in certain market
niches, becoming the 'king' of the menthol market. Studies also
indicated that Kool dominated the African American market, about 70
percent of which smoked menthol cigarettes. By the early 1970s, Kool was
controlling a
whopping
ten percent of the entire U.S. cigarette market. Augmenting the highly
successful Kool brand during the early 1970s was a lineup of new low-tar
brands, including Kool Milds, Viceroy Extra Milds, and Raleigh Extra
Milds. Those brand introductions helped B & W grab a 17 percent
share of the entire U.S. cigarette market by the mid-1970s.
Although
B & W enjoyed some significant successes during the late 1960s and
early 1970s, it also began to face some serious internal and external
challenges. Importantly, in the late 1960s the percentage of Americans
who smoked began to decline. The descent was largely a
corollary
of a 1964 federal government mandate that required manufacturers to
post health warnings on cigarette packages and advertisements.
Subsequent government controls, most notably the 1971 ban on television
advertising, exacerbated the
dilemma
and the share of smokers began to decline gradually; by the early
1990s, the percentage would fall to about 25 percent. Another blow came
in 1983, when cigarette taxes vaulted 100 percent. That increase,
moreover, was followed by a string of tax increases that devastated the
domestic cigarette industry.
Although the share of the U.S.
smoking population declined during the late 1960s and early 1970s, the
actual number of cigarettes sold continued to grow at a
heady clip. Total U.S. cigarette consumption grew from about 500
billion
in 1965 to nearly 650 billion by 1980. Unfortunately, according to some
critics, B & W failed to take full advantage of the increased
industry volume. The problem was largely attributable to stalled growth
of its core Kool brand. In 1975 B & W's Kool began to lose market
share to such rivals as Salem. Importantly, B & W had failed to
translate its successful 'Come to Kool' advertising campaign from
television to print following the federal ban on cigarette television
advertising. B & W tried during the early 1970s to attract younger
smokers to Kool by associating the brand with jazz music, but kids were
favoring rock `n roll. Meanwhile, competing brands such as Newport
employed more successful marketing tactics and managed to steal Kool
market share.
Between 1975 and 1985, Kool's share of the
total cigarette market plunged from 10.3 percent to less than 7 percent.
B & W tried to
supplant
lost sales with other products, but it achieved only moderate success.
In 1981, for example, B & W introduced a new low-tar cigarette
called
Barclay,
investing $100 million in the product launch to get Barclay off to a
good start. Unfortunately, B & W had understated Barclay's tar
content, and the Federal Trade Commission forced the company to revise
the ads. Barclay's growth stagnated following the ad change. B & W's
successes during the early and mid-1980s included product introductions
geared for the value segment of the cigarette market, which began
surging following big tax increases in the early 1980s. But gains in that
niche
failed to generate growth. In fact, B & W's total share of the U.S.
cigarette market toppled from 17 percent in 1976 to about 12 percent
ten years later.
For the first time since the turn of the
century, cigarette purchases began declining in the early 1980s. Indeed,
sales volume in the United States slipped steadily during the 1980s
from nearly 650 billion cigarettes in 1980 to about 500 billion in 1990.
That trend, combined with
lagging
market share gains at B & W, mandated a new strategic direction for
the company. To that end, B & W promoted Thomas E. Sandefur, Jr.,
to president of the company in 1984. The 45-year-old Sandefur was a
tobacco industry veteran, having worked for R.J. Reynolds Tobacco Co.
from 1963 to 1982. He joined B & W with the understanding that he
would eventually become head of the company. From 1982 to 1984 Sandefur
worked to grow B & W's international operations as senior
vice-president of international marketing. Sandefur worked under CEO
Raymond J. Pritchard (a native of Wales and a former B.A.T. Industries
executive) but was a major influence on the company's strategic
direction.
Sandefur was known as capable, demanding, and
shrewd. He grew up in Perry, Georgia, and earned a business degree at Georgia Southern College. Recruited by R.J. Reynolds as a
salesman,
he moved quickly up the corporate ladder on the marketing side of the
business. Among his successes at R.J. Reynolds was a line of hugely
successful low-tar brands including NOW and Camel Lights. Impressed by
his success at Reynolds, B & W lured Sandefur away in 1982 and began
grooming him for
the top spot. Sandefur was also known as a tobacco hard-liner who
vehemently opposed government regulation of his trade. Yet he tried to
keep a very low public profile, despite occasional appearances (in
caricature) in the
Doonesbury
comic strip. Even in his work for civic organizations--he was active in
a number of civic organizations, particularly the Boy Scouts--Sandefur
tried to minimize his public exposure.
When Sandefur took
the helm in 1984 he initiated his drive to turn the company around.
Specifically, he launched an aggressive bid to increase B & W's
shipments overseas, where cigarette sales were growing, and to boost B
& W's efforts in the surging U.S. low-priced cigarette segment.
Toward the latter goal, B & W began marketing as value-oriented
brands Viceroy, GPC Approved (a plain label brand), Raleigh Extra, and
Richland, among others. On the international front, B & W moved
aggressively into cigarette markets in Asia, Africa, South America, the
Middle East, Europe, Japan, and Puerto Rico. Meanwhile, Sandefur and
other B & W executives continued to battle the army of federal
bureaucrats assaulting the tobacco industry. In April 1994, Sandefur and
other tobacco industry executives were brought in front of a Senate
subcommittee, interrogated, and lambasted for their role in promoting
smoking. Sandefur and other executives reportedly denied that cigarettes
were addictive at the hearing.
Despite government
entanglement, Sandefur managed to boost B & W's performance during
the late 1980s and early 1990s. International sales, for example, bolted
150 percent between 1986 and 1991 and B & W's control of the U.S.
cigarette export business surged to 20 percent. By 1991, in fact, B
& W's
international business
represented a full 45 percent of the company's total sales volume. B
& W also assumed a leading role in the value-priced cigarette
segment, with 21.2 percent of the total market in 1991. Meanwhile, B
& W continued to innovate by introducing the first super-slim
cigarette--Capri--in 1988. Throughout the late 1980s and early 1990s,
moreover, B & W restructured its operations and management as part
of an overall effort to cut costs and
streamline operations. The net result was that B & W managed to
hoist revenues to about $3.5 billion by the early 1990s and to increase profit margins.
When CEO Pritchard retired in 1993, Sandefur assumed full leadership of the company. He continued to
restructure,
expand internationally, and chase the value market. In 1994, in a major
industry merger, B.A.T. (B & W's parent company) acquired The
American Tobacco Company and integrated its operations into those of B
& W. American Tobacco, which was once the
unmitigated
behemoth of the U.S. tobacco industry, controlled about seven percent
of the U.S. cigarette market. Thus, the acquisition gave B & W a
total of more than 18 percent of the U.S. market in 1995, making it the
third largest cigarette manufacturer and marketer in the United States.
American Tobacco owned well-known brands including Lucky Strike, Pall
Mall, Misty, Montclair, Tareyton, and Private Stock. Those bolstered B
& W's successful brands, which in 1995 included Kool, GPC, Capri,
and Viceroy. In addition to cigarettes, B & W marketed loose
cigarette tobacco, pipe tobacco, plug
chewing tobacco, and
snuff.
The increasing anti-smoking climate of the 1990s affected B & W in a number of ways.
Lawsuits
grew in number in the late 1990s, and in 1996 a Florida jury awarded
$750,000 to a former smoker who had filed a suit against B & W. B
& W appealed the case, but it was one of many the company faced.
Other cases included lawsuits filed by state governments to recover the
costs of treating poor people with smoking-related health problems. In
1997 B & W joined with three other major tobacco companies to try
and reach a national tobacco agreement. Negotiating with a group of
state attorneys general and lawyers of plaintiffs, the purpose was to
settle legal claims. After several failed attempts, the group finally
reached an agreement, called the Master Settlement Agreement, with 46
states, the District of Columbia, and five U.S. territories and
commonwealths in November 1998. Under terms of the settlement, the major
tobacco companies agreed to pay more than $200 billion over a 25-year
period to finance healthcare costs. The tobacco companies also became
limited in the scope of advertising--billboard advertising of tobacco
products was prohibited, the use of cartoon characters in marketing was
not allowed, restrictions were placed on the distribution of free
tobacco samples, and more. Also as part of the settlement, the involved
states agreed to dismiss existing claims against the tobacco companies
and not to refile the lawsuits.
Though B & W dedicated
many resources to handling legal claims and negative publicity, the
company continued to strengthen tobacco operations to
secure
its market leadership position. In 1997 the company reported revenues
of $4.38 billion. U.S. sales accounted for the largest segment, reaching
$3.11 billion. B & W's share of the U.S. market was a solid 16.1
percent, and international operations grew, particularly in Japan, where
Kent cigarettes became the leading import brand in 1997. The following
year, B & W faced a price increase of ¥20 per pack in the Japanese
market. Still, market share for brands marketed in Japan--Kent, Lucky
Strike, Kool--all increased in 1998. The brands were available in 84
percent of onsite vending machines in Japan, which numbered more than
420,000. About 67 percent of B & W's sales in Japan were attributed
to vending sales.
In 1997 and 1998, B & W faced
increasing competition and heavy discounting, which cut into the
company's market share. To combat the stiff competition, B & W
implemented repositioning and modernization strategies for the Kool and
GPC
brands, which were suffering from tired brand images. The efforts
included new packaging, marketing campaigns, and brand extensions. B
& W introduced Kool Natural, an all-natural menthol product, and
three additional Kool products in order to attract Kool's target
audience of adult smokers under the age of 30. In addition to new
packaging and the 'B Kool' advertising campaign, B & W sponsored a
Kool Champ Car in the FedEx Championship Series, a race car series.
According to B & W, Kool's market share in the U.S. increased from
3.39 percent to 3.43 percent in 1998.
B & W hoped to
enhance the image of traditionally low-priced GPC. The company felt the
mainstreaming of GPC would help boost sales, which were suffering as a
result of heavy discounting by other tobacco companies. Lowering the
price of GPC, B & W believed, would prove
unprofitable, and thus the company resisted lowering the price, but the brand's market share began to decline as
consumers
opted for discounted brands perceived to be higher quality. B & W
fought back by initiating a marketing campaign designed to position GPC
as a high-quality brand that also happened to be a good value. GPC also
became the sponsor of the George Strait Country Music Festival in 1998.
Another brand B & W sought to
reposition
in the late 1990s was Carlton, a brand B & W gained from the 1994
merger with The American Tobacco Company. Carlton was an ultra low-tar
brand, and among brands with up to one
milligram
of tar, Carlton commanded a 78 percent market share. B & W created
new packaging and advertising for Carlton, boldly pushing its ultra
low-tar feature to attract the target age group of smokers between the
ages of 35 and 50. Other brands promoted by B & W included Lucky
Strike, which was promoted in metropolitan markets, the value-priced
Misty, and
Capri. Despite such efforts, B & W's share of the overall U.S. market dropped to 15 percent in 1998 from 16.1 percent in 1997.
At
the beginning of 1999 British American Tobacco, B & W's parent and
the second largest cigarette manufacturer in the world, and Rothmans
International BV, the fourth-largest cigarette maker in the world,
merged.
Rothmans,
based in the Netherlands, was a unit of the Swiss Compagnie Financiere
Richemont AG. Among Rothmans' cigarette brands were such premium labels
as Dunhill, Cartier, and Rothmans. The deal was valued at $8.67 billion
and created a global cigarette giant second only to Philip Morris. In
October B & W consolidated its specialty tobacco units with those of
Rothmans, which were located in Georgia. The combined division would
supply 42 percent of the U.S. pipe tobacco market and about 62 percent
of the roll-your-own cigarette segment. B & W planned to close its
specialty tobacco plant in Winston-Salem, North Carolina, in 2000 or
2001 as a result of the consolidation.
In November 1999 B & W faced some excitement when
The Insider,
a major motion picture, was released nationwide. The film, though
fiction, was based upon the true story of a former B & W executive,
Jeffrey Wigand, one of the most well-known whistle-blowers of the
tobacco industry. Wigand claimed that B & W withheld
information from the public about the hazards of smoking. B & W sued Wigand in 1995 for violating
confidentiality
agreements but agreed to dismiss the lawsuit in 1997. The film
chronicled the life of a tobacco industry whistle-blower, who was
threatened by his former employer after publicizing his experiences.
The
1990s was a challenging era for B & W, one that forced the
century-old company to reevaluate its traditional practices and adjust
to new beliefs. The company withstood countless lawsuits and suffered
through extremely negative publicity. For 1999, earnings in the United
States were predicted to be six percent lower than 1998 revenues, and it
was estimated that B & W's U.S. market share dropped another 1.5
percentage points during 1999. As B & W looked toward the next
century, however, the company hoped to build its market share, both in
the United States and abroad. To accomplish this, B & W planned to
move away from value-priced cigarette brands and promote premium-priced
brands more heavily.
Principal Competitors
Philip Morris Companies Inc.; R.J. Reynolds Tobacco Holdings Inc.; Lorillard Tobacco Company.
Further Reading
Beck, Ernest, 'Deal Would Create Tobacco Powerhouse, May Signal Consolidation Wave,'
Asian Wall Street Journal, January 12, 1999, p. 1.
Broder, John M., 'Tobacco Industry Makes a Deal the Deal: Money Will Be Earmarked for Anti-Smoking Campaigns, Health Care,'
Portland Oregonian, June 21, 1997, p. A1.
The Brown and Williamson Story: A Retrospective, Louisville: Brown and Williamson Tobacco Corporation, September 1995.
Fitzgerald, Tom, 'Brown & Williamson Announces Changes Relating to American Tobacco,'
PR Newswire, December 22, 1994.
Louis, Arthur M., 'The $150-Million Cigarette,'
Fortune, November 17, 1980, pp. 121-22.
Otolski, Greg, 'Sandefur to Succeed Pritchard As Chief of B & W Tobacco,'
Courier-Journal, January 13, 1993, p. B10.
------, 'The Tangled Trail of B & W's Documents,'
Courier-Journal, April 2, 1995, p. A1.
Pomice, Eve, 'Kooling Off,'
Forbes, November 17, 1986, p. 230.
Rhyne, Debbie, 'Brown & Williamson Official Says Movie Unfairly Trashes Tobacco Company,'
Macon Telegraph, November 11, 1999.
Ward, Joe, 'B & W Throws Monkey Wrench into Tobacco Negotiations,'
Courier-Journal, June 12, 1997, p. A1.
Wessel, Kim, 'B & W Dismisses Lawsuit Against Wigand,'
Courier-Journal, August 1, 1997, p. B3.
Wolfson, Andrew, 'B & W Chairman Little-Known, and Likes It That Way,'
Courier-Journal, June 19, 1994, p. A1.
— Dave Mote; Updated by Mariko Fujinaka
Alfredo Enrique Perez Mujica NO HACEN COLAS PARA OBTENERLAS O COSECHARLAS, APRENDAN CHABURROS DE M..........A.
Carlos E. Rios-Scharbaay Nora muy interesante tu imagen y para mi lo más importante es el mensaje que logras transmitir. Cuando viví en Suiza en el jardín de la casa teníamos hasta lechuga algo muy normal. Pero observo que la gota política es parte de la idiosincracia de algunos en nuestro país; lo que respeto igualmente.
Alex Rojas Riva En en Aeropuerto de Barajas en Madrid, los taxistas mientras hacen cola para esperar un nuevo cliente, cuidan su huerto en las inmediaciones del parking del Aeropuerto. Al final, la cosecha la reparten entre todos los que ayudan.
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