The trek back to Orange County following the Civil War marked the beginning of Washington Duke's rise to prominence in the tobacco business. He gathered his family and returned to his virtually barren homeplace. Having been unable to make the proper payments in tobacco during his absence, the tenants had been forced to abandon the farm to its rightful owners. Once again in full control of the property, Duke and his children began their smoking tobacco operation in a small log structure--now known as the first factory. Though a good part of Duke's stored leaf had apparently been confiscated by soldiers while he was away, the family members were able to fashion the remaining portion into smoking tobacco, which they could trade readily for needed supplies and sometimes cash.
The First Factory
Washington took the manufactured leaf on a peddling trip into eastern North Carolina, using a broken-down wagon and two blind mules to transport him. The trip was a success; merchants in small towns and villages were the best customers. Money realized from the sale of the tobacco was used to purchase family necessities such as lard and bacon--and a surprise bucket of sugar for the children.
The hamlet of Durham, a few miles from the Duke home, already had achieved recognition for its enjoyable smoking tobacco, a fact which may have contributed to Washington's initial success on peddling his product. As the result of the coming of the railroad in 1854 and a southern shift in bright tobacco production, a few residents of Durham had begun the manufacture of tobacco products prior to the Civil War. The first production facility was opened in 1858 by Robert Morris and his son who sold a brand called "Best Flavored Spanish Smoking Tobacco." During the proprietorship of John Ruffin Green, who bought the business a few years later, Durham emerged as a post-war tobacco manufacturing center. Green, aware of the growing importance and popularity of smoking tobacco, was careful to produce a superior product, utilizing only the best grades of leaf available. By the close of the war, Green's pleasant tasting tobacco had achieved fame. Former soldiers, who had availed themselves of Green's stock of tobacco while encamped in the area, were sending requests from all over the United States for additional supplies of the brand. Green further popularized his product by adopting the bull as his trademark, an idea he borrowed from the celebrated English Colman's Mustard, whose label also bore the bull's head. In addition he renamed the brand "Genuine Durham Smoking Tobacco," which later would become known simply as "Bull Durham."
Following his profitable sales trip, Washington Duke began to manufacture smoking tobacco on a part time basis. Though farming tobacco, wheat, corn, oats, and other subsistence crops took up much of the family's time, the Duke's were able to manufacture 15,000 pounds of their product, "Pro Bono Publico," during the year 1866. This increase in production necessitated the utilization of other outbuildings on the farm, including an old stable--known as the second factory. Soon, in order to lessen the heavy workload and keep production up, Duke began buying additional tobacco from neighboring farmers.
Though it was difficult to make a large profit on manufactured tobacco, because of the high federal revenue tax placed on it during this period, the Duke country enterprise continued to grow steadily. In the late 1860s the market for Duke's tobacco expanded and subsequent peddling journeys were launched from the homestead. Prices for "Pro Bono Publico" increased but fluctuated over the next few years.
The Third Factory
In 1868 Brodie Duke tried to persuade his father to move the manufacturing operation to Durham. Though Washington Duke decided to continue at the rural location, he provided funds for Brodie to establish his own factory in Durham, where he began production in 1870. Around that same time, Washington began to concentrate more heavily on the manufacture of tobacco. He constructed a two-story frame building--the third factory--and hired additional workers to handle the increased production. Still, the homestead tobacco business retained its simple, family-oriented manufacturing processes. By 1873, the Dukes were producing around 125,000 pounds of smoking tobacco annually.
As the enterprise steadily expanded, and the number of customers outside of North Carolina increased, Washington Duke began to consider the advantages of moving his business into town. Conditions in Durham in the early 1870s were very favorable for the manufacture of tobacco. The location of the North Carolina railroad station was convenient for shipping, and a warehouse for the sale of leaf tobacco had been opened in 1871. Durham was rapidly becoming a major tobacco center. In April 1874, Duke purchased two acres near the railroad where he built a new factory.
The shift to Durham and construction of a new factory there marked the beginning of a large-scale tobacco company which climbed gradually to the top of the industry. At first, many of the basic hand methods used at the homestead were employed at the new factory. Washington Duke's sons took a more active role in the family establishment. Brodie, who had gained experience and become moderately successful as a manufacturer during his four years in town, moved his business into one wing of the new town factory. Benjamin and James Duke were given equal partnerships and assumed much of the responsibility for company operation. Washington travelled throughout the country, concentrating his efforts on promotion of the company's products.
By now Washington Duke had established himself as one of the wealthiest men in Orange County and was fast emerging as a leading citizen of Durham. Affiliated with the Republican party, Duke participated as a candidate in several local and state elections.
Aside from his interest in politics, a much greater concern of Duke's was the stiff competition from other tobacco operations in the town. The old established leader was John R. Green's successor, W. T. Blackwell and Company, with its "Bull Durham" smoking tobacco, which became for a time the largest firm of its kind in the world. The Dukes invited a new partner, George W. Watts of Baltimore, to join the firm in 1878 and renamed the business W. Duke, Sons and Company. The move was significant because Mr. Watts's investment broadened the company capital, enabling it to be more competitive with the older, more established firms.
Although W. Duke, Sons and Company enjoyed a healthy trade in smoking tobacco, the keen rivalry with W. T. Blackwell and Company finally prompted the Dukes to begin the manufacture of cigarettes in 1881. The practice of using cigarettes had spread from the European countries to the United States around 1860. The manufacture of cigarettes extended southward to Virginia and North Carolina in the 1870s and 1880s.
Early hand methods used in cigarette production were slow and tedious. An expert could roll only about four per minute. W. Duke, Sons and Company and other firms hired immigrants from eastern Europe who were skilled in cigarette making. As cigarettes grew in popularity, tobacco companies began the search for a mechanical method of manufacturing them rapidly. Around 1877, the Allen and Ginter Company of Richmond, Virginia, offered $75,000 to any person who could invent a practical cigarette-making machine. Such a machine was developed in 1880 by eighteen-year-old James Bonsack. Allen and Ginter installed the machine in their factory, but discarded it as a failure after several trials.
In 1884, however, the Duke company decided to take a chance on the imperfect Bonsack machine, leasing and installing two of the devices in the Durham factory. When working properly, the machine could perform the work of forty-eight hand rollers. When the Dukes encountered mechanical problems with the machine, The Bonsack Machine Company of Virginia sent a mechanic, William T. O'Brien, to Durham to refine the apparatus. O'Brein and James Duke were finally able to make the equipment work more smoothly, cutting the cost of cigarette manufacturing in half.
Believing that the new Bonsack machine eventually would eliminate hand processing of cigarettes, James Duke, in the spring of 1884, went to New York to establish a branch of the company there. This relieved the overburdened Durham factory and enabled the firm to gain a foothold in the national center of commerce and world trade.
W. Duke, Sons and Company was becoming the leading cigarette producer in the country. Increased advertising efforts enabled the firm to outsell its competitors. One journalist later noted that James B. Duke "was always an aggressive advertiser, devising new and startling methods which dismayed his competitors and was always willing to spend in advertising a proportion of his profits which seemed appalling to more conservative manufacturers."
By the mid-1800s, James Duke felt that a merger of all large-scale tobacco manufacturers would be a practical way of reducing selling and advertising costs as well as improving overall organization. The four most important competitors of the Duke firm at that time were the Allen and Ginter Company of Richmond, the F. S. Kinney Company and the Goodwin Company of New York, and William S. Kimball and Company of Rochester. These and the Duke company manufactured 90 percent of the nation's cigarettes in the 1880s. After discussing the merger, and following a period of excessive spending on advertising, the large rival firms agreed that the Dukes' plan of merger was the most sensible proposal. In 1890, the five principal companies united to form the American Tobacco Company. This combination quickly became known as the "tobacco trust" because of its almost complete monopoly of the tobacco trade.
James B. Duke in 1890 controlled the largest tobacco industry in the world; the combined firms continued to grow in the next two decades. However, by the turn of the century, anti-trust sentiment was increasing rapidly in the United States. The prevailing feeling of the public that monopolies were harmful concentrations of power resulted in the dissolution of the American Tobacco Company by a ruling of the United States Supreme Court in 1911. Four major tobacco corporations were among those companies which emerged from the separation of the trust: a new American Tobacco Company, Liggett and Myers, P. Lorillard, and R. J. Reynolds.
Following the court action, James Duke carried on his tobacco business abroad and invested money in the development of hydroelectric power. Later, Duke was to follow in the footsteps of his father and brother in distributing his fortune for the benefit of religious, educational, and medical institutions. Washington and Benjamin had established a pattern of giving money to support the Methodist school, Trinity College, in Durham. James continued the tradition when, in 1924, the Duke Endowment was created for the benefit of his native region. In addition to the establishment of Duke University, formerly Trinity College, the multi-million dollar indenture provided funds for educational institutions, orphanages, hospitals, and the Methodist Church in the Carolinas.