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Up in smoke: a history of Gallaher

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

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.

With £200 he borrowed from his parents, Gallaher 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.

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

A new £100,000 factory was established in Belfast in 1897. The seven-acre site 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 the working week from 57 to 47 hours. The company employed 3,000 people by 1907.

Gallaher determined to focus on the Park Drive brand from 1907. Sales were supported by national advertising.

Gallaher acquired the six-acre Great Brunswick Street premises of the Dublin City Distillery for £20,000 in 1908. He used the site to build a large tobacco factory.

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

Extensive tobacco plantations had been acquired in Virginia by 1914, and Gallaher was the largest purchaser of tobacco in the world.

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

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 a highly talented businessman. His plain ways endeared him to people. He left an estate valued at £503,954.

His stake in the company was largely passed to his nephew, John Gallaher Michaels (1880 – 1948). Michaels had worked for his uncle for many years, and had managed 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 he may have simply wished to retire.

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

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

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

Gallaher acquired Peter Jackson in 1934. The company manufactured Du Maurier cigarettes, which was the first popular filter-tip brand in Britain. Gallaher also acquired the International Tobacco Company, which brought the Nelson cigarette brand.

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 manufacturer of Cardiff, was acquired for £680,000 in 1947 in order to gain access to the machine-made cigar market.

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

Tobacco rationing ended in 1955, and was to prove an impetus 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. Other leading brands included Nelson, Du Maurier and Olivier cigarettes, Old Holborn and Condor tobacco and Manikin and King Six cigars.

De Stein retired as chairman in 1960.

Gallaher acquired J Wix & Sons, the fast-growing manufacturer of Kensitas cigarettes, from the American Tobacco Company for £13 million in 1961. The deal boosted Gallaher’s share of the British tobacco market from 30 to 35 percent.

A major new factory was established at Ballymena, Northern Ireland, in 1961.

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

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

Gallaher employed 15,000 people in 1965.

Benson & Hedges was the leading king-size cigarette brand in Britain by 1966. However king-size cigarettes only held four percent of the total cigarette market.

Sales of unfiltered cigarettes, such as Park Drive, plummeted in the late 1960s. Gallaher was slow to address the new demand for filtered cigarettes, and its share of the total cigarette market had dwindled to 27 percent by 1968.

American Tobacco, the second largest cigarette manufacturer in the United States, acquired control of Gallaher after Imperial Tobacco divested most of its stake in the business in 1968.

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.

American Tobacco acquired full control of Gallaher in 1974.

Du Maurier cigarettes were discontinued in 1979.

Declining domestic market and overseas acquisitions
800 production jobs were lost in 1982 due to falling sales.

The Belfast factory was closed with the loss of 700 jobs in 1988. Production was relocated to Ballymena.

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 1997.

Liggett-Ducat, a Russian cigarette manufacturer, was acquired for £298 million in 2000. Gallaher invested a further £40 million in the business.

The Manchester cigarette factory was closed with the loss of nearly 1,000 jobs in 2000-1. Production was transferred to Ballymena, where 300 extra jobs were created.

Austria Tabak was acquired for £1.4 billion in 2001. The purchase brought with it market leading positions in Austria and Sweden.

Gallaher became the fifth largest cigarette manufacturer in the world.

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

European headquarters were relocated from Britain to Geneva, Switzerland, in an effort to reduce tax, in 2008.

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

Senior Service cigarettes were discontinued in Britain in 2020. Kensitas cigarettes remain available but with limited distribution.

Japan Tobacco held 45 percent of the British tobacco market in 2021.