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CIG009 - Edition 2,000

Park Drive

So how did Gallaher, now the largest manufacturer of tobacco products for the UK market, get to where it is today?

Its founder was Thomas Gallaher, born in 1840. He was one of a family of nine children, whose father was a prosperous farmer and corn mill owner from Templemoyle, near Londonderry, in Northern Ireland.
Tom, as he became known, had a keen eye for business. Whilst apprenticed to a tea merchant, he quickly spotted an opportunity in the tobacco leaf which clippers brought in from America.
He started his business making Irish roll tobacco at 7 Sackville Street, Londonderry, with a single hand-spinning machine which twisted the tobacco leaves into thin ropes. These were cut into different lengths and thicknesses as indicated by their names: cord, twist, plug, rope and so on.
Working all hours, his business prospered and he became a familiar figure as he travelled around the streets with his products displayed on a cart.
The burgeoning city of Belfast next attracted his attention. He opened there in 1863 in Hercules Street, perhaps an appropriate address for a man of fairly large stature.
His next move took him to York Street, Belfast, where the introduction of power-driven machinery was instrumental in a rapid expansion of the business.
By now his fame was spreading far and wide. He travelled unfailingly each year to the United States to buy leaf and gained a reputation as one of the shrewdest buyers in the business. He continued to work hard and was quoted as saying "I worked harder myself than I ever asked anyone to work for me."

In 1896 Gallaher moved to new premises at 138 York Street, a five-storey building hailed as the largest tobacco factory in the world. The same year Gallaher became a limited company with a capital of £1 million, earning Tom Gallaher the sobriquet of 'Tobacco King.'
He was a tough, but benevolent employer, much admired and respected by his employees, although they came to fear a prod from his ever-present blackthorn stick.
Branches were also opened in London and Dublin to cope with demand for the company's plug tobacco and the growing interest in cigarettes, which had been given added impetus by troops returning from the Crimean War.
Even so, cigarettes did not become particularly popular until the arrival on the scene of an American, James Buchanan Duke. He was born in 1856, the very year when Tom Gallaher first started making his tobacco products. Duke's parents grew tobacco and that ambitious young man decided that his fortune lay in cigarettes.
By perfecting the Bonsack cigarette making machine he turned out tightly-rolled cigarettes in such quantities that he revolutionised their manufacture. Employing fiercely competitive means, he so undermined the competition that the result was that five major companies in America merged to form the American Tobacco Company, with Duke in charge.
He then cast his eyes across the water to Britain and in 1901, to overcome tariff barriers and other restraints on trade, he bought tobacco-makers Ogden of Liverpool.
That brought him into contact with Tom Gallaher, and with it, an offer for his business. There are conflicting accounts of what was said at their meeting, but one thing is clear: Tom Gallaher rejected Duke's bid.
Other British tobacco companies, some 13 in total, alarmed at the threat from Duke, immediately announced they were to merge and become The Imperial Tobacco Company. Duke realised he had little hope of breaking into the UK market and sold Ogden's to Imperial
Gallaher's first successful cigarette brand was Park Drive, which helped drive the firm's continuing prosperity and independence in the early part of the 20th Century.
At the beginning of World War I there was a boom in production but it proved somewhat transient. Tobacco import duties were raised by 50 per cent in 1915 in a bid to reduce home consumption. Six months later, as U-boats threatened British shipping, a proclamation was signed prohibiting the importation of tobacco, except under special licence.
In 1917, duties were again increased, a move that met with opposition among smokers. Consumption dropped and Government revenues fell so dramatically that the Chancellor changed tack and halved the increase.
Eventually, time caught up with Tom Gallaher and he died in 1927, aged 87. The reins of power passed to his nephew John Gallaher Michaels. A year later Gallaher passed into the control of a company headed by London financier Edward de Stein, who was later knighted.

Two important acquisitions were made in the Thirties, that of Peter Jackson, whose brands included Du Maurier, and J A Pattreiouex, makers of a localised cigarette called Senior Service which, under Gallaher, went on to become a market leader in the 1950s.
During the 1941 blitz of Belfast the York Street factory was badly damaged and many employees were killed. To escape the bombing, the company set up production in Lisnafillan, a small hamlet on the outskirts of Ballymena, some 30 miles from Belfast.
Two years after the end of the Second World War, Gallaher defied the gloomy portents of the time and purchased J R Freeman, manufacturers of small and inexpensive cigars. It was an inspired move as it was to lead to Gallaher's leadership of the UK cigar market.
The next acquisition, that of Cope Brothers and Richard Lloyd, brought the Old Holborn brand name, among others, into the Gallaher fold.
The most important and far-reaching acquisition came in 1953 when the house of Benson and Hedges joined Gallaher. It marked a milestone in the company's history. Not only did Gallaher acquire brands with a prestigious heritage, it paved the way for new brands to be launched onto the UK market from the 1960s, such as Benson and Hedges Special Filter and Silk Cut.
Demand for Senior Service cigarettes and other brands led to the acquisition of a factory in 1959 at Hyde, Greater Manchester, in addition to one already operating at Middleton, near Oldham, Lancs, but which closed in 1985.
In 1962 the company acquired the cigarette makers J Wix & Son, manufacturers of Kensitas, from the American Tobacco Company in exchange for a 13 per cent share holding in Gallaher.
Gallaher also acquired, in the early 1960's, a small tobacco company in the Republic of Ireland. Gallaher now trades in Ireland as Gallaher (Dublin) Limited.
The late Sixties were to prove momentous times for Gallaher. In 1968 the company fended off a bid from the American tobacco manufacturer Philip Morris for a 50 per cent stake in the company before, in the same year, accepting a higher offer from the American Tobacco Company.
Gallaher became a wholly-owned subsidiary of American Brands, Inc., formerly the American Tobacco Company, in 1975. It was to remain in American ownership until May 1997, when it demerged from the corporation, now known as Fortune Brands, to become an independent company listed on the London and New York Stock Exchanges.
Rationalisation of production within Gallaher resulted in the decision to concentrate cigarette production in the UK at Lisnafillan, where some of the world's fastest cigarette machines make up to 16,400 cigarettes a minute. The Hyde factory was run down over a three-year period, closing in 1999. Hand rolling and pipe tobaccos are also manufactured at Lisnafillan; cigars are produced in the J R Freeman Cardiff factory; and distribution in the UK is via a state-of-the-art centre at Crewe.
In April 1999, Gallaher's newly built factory in Kazakhstan was officially opened. Gallaher's acquisition of Liggett-Ducat, Russia's largest tobacco manufacturer, in August 2000 further strengthened its international presence.
The Gallaher story is one of hard work and an ability to embrace change; of far-sightedness and seizing the right opportunities throughout its history; of building a portfolio of powerful brands; and of a commitment to excellence through all areas of the business.

 

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