Cigarettes and Candy

If you’re not from North Carolina, you might not have heard the name Richard Reynolds before. But if you’ve ever smoked a cigarette, you’ve probably seen the words “R.J. Reynolds Tobacco Company” on the side of the pack. And there’s a lot about the Reynolds story that’s interesting.

Richard Joshua Reynolds was born on July 20, 1850 in Patrick County, Virginia. I don’t know how wealthy the Reynolds family was, but they were prosperous enough to own several slaves and send their son to nearby Emory and Henry College in 1868. Reynolds returned to the family farm after graduating, but Richard, always restless and ambitious, sold his share of the family farm back to his father and struck out on his own.

One of the fundamental problems with his family’s farm was that it was nowhere near a railroad depot. So tobacco had to be put on horse-drawn carts and sent far away for sale. Richard knew he’d get better prices at a better location, so he set out for the nearest town that did have a depot: Winston, North Carolina. So the story goes, Reynolds rode in to town on horseback, reading a copy of The New York Times and dreaming of one day building a golf course somewhere in the area.

If you know anything about North Carolina, you probably know how huge tobacco was for most of the state’s history. And even though there were already fifteen other tobacco companies in Winston, Reynolds managed to sell 150,000 pounds of tobacco in his first year. Reynolds was a savvy businessman, always open to new ideas. One of these ideas – adding saccharin to chewing tobacco – made his products insanely popular. By the 1890s, the R. J. Reynolds Tobacco Company was selling millions of pounds of tobacco a year.

But Reynolds’ most famous – or infamous – invention came in 1912. Before this, almost everyone who smoked cigarettes rolled their own. The idea of buying pre-rolled, packaged cigarettes was just… weird to most people. Reynolds tinkered: tinkered with machinery that could make cigarettes by the millions, and tinkered with several tobacco blends to create the one with the best flavor. The result was Camel cigarettes, the first pre-packaged cigarette brand in the United States. Sales were slow for the first few weeks, but Reynolds cut the price to near cost and ended up selling 425 million packs of cigarettes that year. Not bad for a product that didn’t even exist a year before!

One of the people who made Camels such a success was Richard S. Reynolds, Sr., nephew of Richard Joshua Reynolds. He’d dropped out of the University of Virginia in 1903 to go to work for his uncle, and much of the research and development of Camels was done by him. When the product appeared to be a complete success he, like his uncle, felt the need to strike out on his own. So, only a few months after Camels hit the market, Reynolds, Sr. left the company.

Shortly after World War I, Reynolds, Sr. moved to Louisville, Kentucky where he founded the U.S. Foil Company. Going from cigarettes to aluminum foil might seem odd, but it makes more sense than you might think: foil was popular in candy packaging, and those newfangled cigarette packs also used foil – and were selling by the millions. And since candy and cigarettes have always been close business partners, the new company wasn’t as off the wall as it might seem.

U.S. Foil bought Fulton Sylphon, Robertshaw Thermostat and part of Beechnut Foil in 1928, and the combined company was named Reynolds Metals. The company was the second-largest aluminum company in the United States and the third-largest in the world until the company merged with Alcoa on May 3, 2000. And yes, “Reynolds Wrap” was developed by the company in 1947 and became an overnight world-wide success. And, just to show you how odd life can sometimes be, the former headquarters of Reynolds Metals – a circa 1958 building in Richmond, Virginia and one of the few 20th century buildings on the National Register of Historic Places – is now the headquarters of the Altria Group… formerly known as Philip Morris Companies Inc… the makers of Marlboro and Virginia Slims cigarettes… the main competitor and sworn enemy of R.J. Reynolds.

In what might also seem to be an odd move, the U.S. Foil Company bought the Eskimo Pie brand in 1924. But once again it kind of made sense: Eskimo Pies were slices of ice cream coated in chocolate and wrapped in foil. In fact, Eskimo Pie was one of U.S. Foil’s largest customers.

The tasty treats were dreamt of by a Danish immigrant named Christian Kent Nelson. Nelson was a schoolteacher who also owned a candy shop in Onawa, Iowa. One day in 1920, a young boy came in the shop and simply could not decide whether to get ice cream or chocolate. As he agonized over the choice, Nelson wondered… “why can’t the kid have both?”

But finding a blend of chocolate that would adhere to frozen ice cream was harder than you might think. Seven different companies rejected his idea, because they found that either the chocolate didn’t stick to the ice cream, or that the bar melted too easily. But in 1921 the determined Nelson filed for a patent for his new “I-Scream Bars”. He then got in touch with a little-known local chocolatier named Russell C. Stover, in hopes of mass producing the bars. However, Stover didn’t like the “I-Scream” name, and his wife Clara suggested the name “Eskimo Pie” instead. Thanks to production complications, Stover also suggested that the trademark stick be removed… thus turning the treat from a iced lollipop to a sandwich. Which is where Richard S. Reynolds, Sr. and his foil comes in.

Eskimo Pies were such a huge success that Nelson and Stover were overwhelmed with orders. They decided that there was simply no way to keep up with demand, so Nelson came upon the idea of franchising the brand. Nelson soon signed up over 1,500 ice cream companies nationwide to sell Eskimo Pies in exchange for 4¢ for every 48 bars sold. In the first year or two, The New York Times would claim that Nelson and Stover were clearing $30,000 a week in sales, which is nearly $400,000 a week in 2011 dollars.

But there was a problem. Nelson’s patent, number 1,404,539, was issued on January 24, 1922, and it essentially covered any candy-coated ice cream product. And companies all over the country were making both knock-off Eskimo Pies and their own candy-coated ice cream products. Nelson and Stover were spending $4,000 a day in legal costs (around $53,000/day adjusted for inflation) to defend their patent. The legal and financial troubles soon became too much for Stover, and he sold his share of the company back to Nelson in 1924 for the fire-sale price of $30,000 ($390,143). It was pretty good timing, too: in 1929 their patent was ruled invalid as being entirely too general in scope. But by that time, Reynolds Metals had terminated many of Nelson and Stover’s franchise agreements, and their new “Eskimo Pie Corporation” started manufacturing the treats by the millions, slowly reclaiming market share.

Nelson made a bunch of money and retired. But he couldn’t stay away: he rejoined the board of Reynolds Metals and worked on improving Eskimo Pies until he retired for good in 1961. He died in 1992, coincidentally just a month before Reynolds Metal spun Eskimo Pie off as a separate company. Nestlé had approached Reynolds about buying Eskimo Pie in 1991, but the deal fell through, so Reynolds announced an IPO for the soon-to-be-independent company. But Nestlé didn’t forgive or forget: a year later, Nestlé bought the Heath toffee bar brand from Leaf, Inc. and yanked its licensing agreement with Eskimo Pie (Eskimo Pies with Heath toffee bits accounted for 10% of Eskimo Pie’s total sales). Eskimo Pie would have a small bit of revenge, however: in 1997, the company poached David B. Kewer, one of Nestlé’s most experienced ice cream executives.

Stover moved to Denver, Colorado, where he and his wife started selling “Mrs. Stover’s Bungalow Candies” out of the kitchen of their home. It was a big success, and within a year they’d opened a factory in Denver, and another a few years later in Kansas City. In 1943 the company was renamed “Russell Stover Candies”, the brand we all know today. By the time Russell died in 1954, the company was producing 11 million pounds of candy a year, which was sold in the company’s 40 retail stores and more than 2,000 department stores across the country. Although the brand has lost some of the cachet it had in its early years, Russell Stover remains the third largest candy maker in the United States, behind only Mars and Hershey, and remains the largest maker of boxed chocolates by far.

Stover’s family held on to the business until 1969, when it was purchased by Louis Ward. Ward, born in Lenora, Kansas, returned to the area after serving in the Navy in World War II. He bought a factory that made small paper boxes, and soon Stover walked in his door needing boxes for his candy. Stover quickly became Ward’s biggest customer. And just as Reynolds bought an important customer, Eskimo Pie, so too did Ward buy his biggest customer, Russell Stover.

For the most part of Ward’s reign, he concentrated exclusively on expanding the Russell Stover brand. But in 1993 he decided to buy Whitman’s, manufacturer of the Whitman’s Sampler.

Whitman’s was started in 1842 by Stephen F. Whitman. His shop was on the Philadelphia waterfront, and sailors would often return from faraway voyages with exotic fruits and nuts, which Whitman would cover in chocolate. Whitman created the first packaged candy in the United States in 1854: boxes of sugar plums decorated with sugar rosebuds and curlicues. In 1877 the company developed the first pre-packaged chocolates, and the famous (if oft-maligned) Whitman’s Sampler hit store shelves in 1912. The Sampler was the first candy product to make use of cellophane packaging, and in 1946 Whitman’s worked with GE to invent refrigerated coolers, allowing the candy to be sold year-round.

Guess what happened to Whitman’s? Well, the company made a lot of milk chocolate, which required a lot of milk. And guess who had a lot of milk? Pet, Inc, which bought Whitman’s in the early 60s, only to sell it to Russell Stover in 1993.

Let’s review, shall we? The company that made the first packaged candy in America was bought by another candy company, which had been taken over by the company that made the paper boxes the candy came in. But that candy company was founded by a man who made a mint selling an ice cream confection, which was bought by the company who made the wrapper the ice cream came in. And the foil company that bought the ice cream company was founded by the nephew of the man who founded the company who invented America’s first packaged cigarettes.

Easy!

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