Friday, 19 April 2013

David Stewart's first presidential report.

For information on accessing documents, see note at the end of this post

As the Montreal tobacco trial coasts to the end of the "plaintiffs' proof," a miscellaneous assortment of documents have been put on the trial record. Many of them are worth a second look.

Exhibit 1485.15
Among those deposited earlier this month were short corporate histories written by each of the defendant companies at the request of Justice Brian Riordan. These documents can be found as Exhibit 40000 for JTI-Macdonald, Exhibit 30000 for Rothmans, Benson and Hedges and Exhibit 20000 for Imperial Tobacco

But don't look to these court filings for anything other than dry dates and dull accounts of reporting structure!

Cast your eyes instead on a colourful history of Macdonald Tobacco written by one of its principal actors during a pivotal moment in the history of the company - and a key moment in public health policy development.

The time was January 1969. The author was David Stewart. The moment was the very day this 49 year old man had been promoted to the position of president the Macdonald Tobacco company. It was almost exactly a month after the death of his father, Walter Stewart, who had ruled the company for 50 autocratic years.

Exhibit 1485.15 is David Stewart's first "report of the president" in which he reflects on the state of the company at the moment he took control of its helm. In discussing the "Past, Present and Future Aims of the Company" he records the challenges he saw facing the company and his leadership.

Macdonald tobacco factory
at its official opening in 1878.
135 years later, it is still
the manufacturing
base for JTI-Macdonald
He begins by recording the history of the firm, noting that he is only the third company leader in over a century."Since its beginning one hundred and ten years ago, there have only been two captains, Sir William [Mcdonald] during 60 years, and WMS [Walter Stewart] for 50 years."

He writes with pride of the initial success of the company created to manufacture and sell plug (chewing) tobacco. Chewing tobacco is a neglible part of the tobacco market in Canada today, but in those days it was enough to keep this company and its 1,500 workers fully occupied. "The amazing point is that in 20 years he [William Macdonald] was able to build the very large and very well equipped factory on Ontario St, our present works."

David Stewart admired the philanthropic mindset of the founder, which resulted in most of the company's profits being distributed to English Quebec institutions. "By a singleness of policy, McDonald succeeded, and by the turn of the century became Sir William Macdonald, and built his own monument in McGill's three buildings, Engineering, Chemistry and Physics, followed by the entire Macdonald College."

The death of William Macdonald in 1917 coincided with the beginning of a new business environment and a changing tobacco market. "World War I brought new income and business taxes, and new habits of cut tobaccos (Sir William had only made plug) and the cigarette" he reports.

Soon after, the company began to manufacture cigarettes, and oral tobacco soon faded from view. "We stopped making plug tobacco in our 99th year, still with over 1/3 of the business. But it was declining surely and swiftly, so it was a sound decision in the long run."

David Stewart saw World War II as the source of the company's success."During the war our troops appreciated the qualities of Export - by the war's end we had about half the military market, and when the troops came back this brought our domestic figure up each year to the maximum of 36% of the Canadian market in 1954." 

Macdonald's war-time efforts included encouraging Canadians to send cigarettes to the troops -- "smokes from home". A series of vintage clips for such war-time efforts can be seen here.  About 19 years old at the outset of the war, David Stewart did not enlist, but was instead conscripted into the family business, where he served as works manager for 30 years until his father's death.

David Stewart - 1968
Exhibit 540
In his analysis of the post-war environment, David Stewart blends business competition, health concerns and his father's changed behaviour. "After the war, in the face of fantastic competition of Imperial, Rothmans, and B&H, Macdonalds began to slow down. We did not keep competitive with regards to brands, merchandising, or factory equipment. And WMS [Walter Stewart], who lost his competitive spirit in 1958, took sick in June of 1968. This date is the point at which the anti-cancer campaign really began."

His father's death was only one of the destabilizing events of 1968, David Stewart writes. "Cigarette smoking has been linked to lung cancer since the 1950s - but in November 1968 the Canadian government launched a major attack. To Macdonalds, it was like Pearl Harbour."  In the government's first list of tar ratings, Macdonald cigarettes had come out worst. "All the other companies had been planning for this, all had cigarette brands in the low tar area."

Immediately following what he saw as a surprise attack on his business, David Stewart had sought a meeting with the Minister of Health, during which he tried to discourage further such tests by appealing to philanthropic role the company had played "I met the minister before Christmas and assured him that if we had donated millions over the past few years to McGill, now we would have to begin a new research policy "what colour package of cigarettes do you prefer" instead of McGill's Research Biology building!" (A similar message was conveyed in his letter to the Minister requesting the meeting - Exhibit 4010)

David Stewart articulates his challenge: "So we began 1969 a bit shaken by the government action, harassed by a terribly powerful and active competition and with our whole organization a bit rusty, dusty and not too well trained."

His solution is to "set long range sights, a 5 year plan." He identifies the need to modernize the plant, use sheet tobacco to lower the tar content, develop king size cigarettes and other brands oriented to women, start selling pipe tobacco and cigars... and to diversify.

"We need 5 years to consolidate our position as the second major company in the Canadian Tobacco Industry" he concludes 

At the end of the 5 years, however, David Stewart and his family were getting out of the tobacco business. At the end of 1973 the business was sold to RJ-Reynolds. Reports of the amount paid vary -- from $75 million (according to JTI-Macdonald's filing with this court - Exhibit 40000) or $50 million (according to contemporary news reports).

The proceeds were reported to have been assigned to the Macdonald Stewart Foundation for the continuation of its philanthropic efforts. Almost 30 years later, the Macdonald Stewart Foundation's assets are still over $45 million.

The next hearing of the Montreal tobacco trial is on April 23rd.

Note on accessing document
The documents are on the web-site maintained by the Plaintiff's lawyers. To access them, it is necessary to gain entry to the web-site. Fortunately, this is easy to do.

Step 1: Click on:

Step 2: Click on the blue bar on the splash-page "Acces direct a l'information/direct access to information" You will then be taken to the document data base.

Step 3: Return to this blog - and click on any links.