Tag Archives: history of Gallaher of Belfast

Up in smoke: a history of Gallaher

Gallaher became the largest buyer of tobacco in the world. Its cigarette brands, such as Benson & Hedges and Silk Cut, remain widely sold today.

Establishment
Thomas Gallaher (1840 – 1927) was the son of a prosperous Protestant miller who owned the Templemoyle Grain Mills in Eglinton, Londonderry, Northern Ireland.

Gallaher served an apprenticeship with Robert Bond, a general merchant on Shipquay Street, Londonderry, in the early 1850s.

Gallaher borrowed £200 from his parents and opened a tobacconist business at 7 Sackville Street, Londonderry, in 1857. He manufactured and sold Irish roll pipe tobacco.

The expanding business was relocated to York Road, Belfast from 1863. A five-storey factory was built on the site in 1881. 600 people were employed.

A factory was opened at 60 Holborn Viaduct in London in 1888, followed by a Clerkenwell factory a year later.

The firm was converted into a limited liability company with a capital of £1 million in 1896.

A new £100,000 factory across seven acres was opened in Belfast in 1897. It was probably the largest tobacco manufacturing plant in the world.

Thomas Gallaher disliked machine-made cigarettes, but eventually relented to market pressure, and began to produce the Park Drive brand from 1902.

Thomas Gallaher declined to join the great tobacco combines of the age, Imperial Tobacco and the American Tobacco Company. Consequently, he controlled the largest independent tobacco company in the world by 1903.

Gallaher bought his raw materials directly, and by cutting out the middleman he was able to keep his costs low. He was the largest independent purchaser of American tobacco in the world by 1906, and bought only the highest grade of crop.

The atmosphere at the Belfast factory was described as familial. Midday meals were served at cost-price. Gallaher was the first man in Belfast to reduce working hours from 57 to 47 a week. The company employed 3,000 people by 1907.

Gallaher acquired the six acre Great Brunswick Street premises of the Dublin City Distillery for £20,000 in 1908. There, he built a large tobacco factory.

Extensive tobacco plantations had been acquired in Virginia by 1914.

Gallaher established bonded warehouses in Belfast, and was credited with helping to transform the city into a major shipping port.

Gallaher was the largest buyer of tobacco in the world by 1914.

At York Street, Belfast, Gallaher established what was the largest tobacco factory in Europe by 1920. The Belfast site could produce 40,000 cigarettes an hour by 1927.

gallaheryorkroad
The York Road, Belfast site

Gallaher continued to work at his desk every day until a few months before he died in 1927. He was remembered as a courteous, kindly man, a generous employer, and an extremely talented businessman. His plain ways endeared him to people. He left an estate valued at £503,954.

The company was principally inherited by his nephew, John Gallaher Michaels (1880 – 1948). Michaels had worked for his uncle for many years, and had been manger of the American operations.

Public offering
The Constructive Finance & Investment Co, led by Edward de Stein (1887 – 1965), acquired the entire share capital of Gallaher for several million pounds in 1929, and offered shares to the public.

Why Michaels divested his stake in Gallaher remains unclear, but he, his uncle and his brother all lacked heirs, so perhaps he simply wished to retire and pass on management of the company to others.

A new factory was established at East Wall, Dublin for £250,000 in 1929. The East Wall factory was closed with the loss of 400 jobs, following the introduction of a tariff on businesses not majority-owned by Irish residents, in 1932.

In order to forestall a potential bid for Gallaher by the American Tobacco Company, Imperial Tobacco acquired 51 percent of Gallaher for £1.25 million in 1932. Gallaher retained its managerial independence.

Acquisition trail and subsequent growth
Gallaher was the fourth largest cigarette manufacturer in Britain by 1932.

Gallaher acquired Peter Jackson in 1934. The firm manufactured Du Maurier cigarettes, which was the first popular filter-tip brand in Britain.

E Robinson & Son, manufacturers of Senior Service cigarettes, was acquired in 1937. Senior Service had been highly successful within the Manchester area, but Robinson’s had lacked the capital to take the brand nationwide.

A 1955 advertisement for Senior Service cigarettes

J Freeman & Son, cigar manufacturers of Cardiff, was acquired in 1947 in order to gain access to the machine-made cigar market.

Gallaher acquired Cope Brothers of Liverpool, owners of the popular Old Holborn rolling tobacco brand, in 1952.

Tobacco rationing ended in 1955, and was to prove a spurt for the growth of Gallaher. Benson & Hedges was acquired, mainly for the prestigious brand name, but also to provide a further manufacturing site for Senior Service, in 1955. The acquisition also brought with it the Hamlet cigar brand.

Gallaher became one of the fastest-growing companies in Britain during the 1950s, largely due to its encroachment upon Imperial Tobacco’s market share. Senior Service and Park Drive had become respectively the third and fourth highest-selling cigarettes in Britain by 1959, and Gallaher held 30 percent of the British tobacco market.

Gallaher acquired J Wix & Sons Ltd, the fast-growing manufacturer of Kensitas cigarettes, from the American Tobacco Company in a share exchange that valued the business at £13 million in 1961. The deal boosted Gallaher’s share of the British tobacco market to 35 percent. The deal reduced Imperial Tobacco’s stake in Gallaher to 37 percent.

A large factory was established at Airton Road, Dublin in 1963.

Silk Cut was launched as a low-tar brand in 1964.

Company president Sir Edward de Stein died in 1965.

Gallaher employed 15,000 people in 1965.

Benson & Hedges was the leading king-size cigarette brand in Britain by 1966.

Gallaher was slow to address the increasing demand for filter cigarettes, and its share of the British market had dwindled to 27 percent by 1968.

Imperial Tobacco divested most of its stake in Gallaher in 1968, and the company was acquired by American Tobacco.

Sales of Silk Cut began to grow rapidly in the early 1970s as increasing health concerns regarding tobacco led consumers towards the low-tar and reduced nicotine brand.

Du Maurier cigarettes were discontinued in 1979.

Declining market and acquisition by Japan Tobacco
The Belfast factory was closed in 1988. 700 jobs were lost, and production was relocated to Ballymena in County Antrim.

A cigar factory in Port Talbot, Wales was closed with the loss of 370 jobs in 1994.

American Tobacco listed Gallaher on the London Stock Exchange from 1996.

The Manchester cigarette factory was closed in 2000-1. Nearly 1,000 jobs were lost. Production was transferred to Ballymena, where 300 extra jobs were created.

Gallaher became the fifth largest tobacco company in the world.

Gallaher was acquired by Japan Tobacco for £7.5 billion in cash in 2007.

The Ballymena site, the last remaining tobacco factory in the UK, was closed in 2017, with the loss of 860 jobs. Production was relocated to Eastern Europe.

Japan Tobacco holds 40 percent of the British tobacco market as of 2018.