Chapter 1, Part 1

By Frank Tursi, Susan E. White and Steve McQuilkin
JOURNAL REPORTERS
© Winston-Salem Journal

Bowman Gray Jr. stood at the window of his office on the 19th floor of the Reynolds Building and stared down at the tiny cars slowly making their way through the tangle of traffic on Main Street. He inhaled deeply from his cigarette and expelled a stream of smoke that slowly engulfed his head in a pale blue cloud. Gray rolled the cigarette in his fingers. He had been selling cigarettes all his life. This one, he knew, was a winner.

Journal Photo By Charlie Buchanan

The sales numbers that came in from Boston that May day in 1954 confirmed what his gut was telling him: The gamble was paying off. Though it had been on the market in New England for less than two months, R.J. Reynolds Tobacco Co.'s first filtered cigarette was already outselling the other, more established filter brands. Some of the old-timers at Reynolds said they hadn't seen such demand since Mr. R.J. introduced Camels more than 40 years earlier.

Gray was just a kid then, but he remembered the old man visiting his house on Sunday afternoons to talk business with his father, who, as head of the company's sales department at the time, orchestrated the rise of Camels. The men would sit on the porch for hours, near a convenient set of bushes that would be on the receiving end of the steady stream of tobacco juice produced by Reynolds' ever-present chew. Sometimes, Reynolds' brother Will -- known as ''Uncle Will'' to every kid on that block of West Fifth Street -- would join them. Though he and his brother remained at a respectful distance, young Bo Gray could overhear the men talk excitedly about the prospects of Camel, the company's first cigarette.

This one could be bigger, Gray thought, as he took another drag and let the smoke linger in his mouth. It certainly tasted better and was easier to draw than the other filter brands. Smoking them was like sucking air through a mattress. This cigarette would not only allay the health fears some smokers were beginning to have, but with the right advertising campaign and slogan it might propel the company to the top of the industry again. Gray's father had directed the company's first rise to the top in the 1920s, but Reynolds had not occupied that spot for the past 14 years. Like his father, then, Gray could lead RJR to the top again.

The R.J. Reynolds Tobacco Co. was once the largest cigarette company in the United States with a powerhouse of best-selling brands: Winston, Salem and Camel. But times changed, and as the case against smoking became more pronounced in the 1960s, RJR failed to adapt to the marketplace. Its rivals would eventually rush past it, and RJR's efforts to catch up would have a profound impact on the company and the cigarette industry.

He crushed the stub of his Winston in an ashtray on his desk and slowly hobbled over to the table in his office where men from the William Esty Co. huddled over advertising copy. Their task was to come up with a Winston slogan. The future of RJR depended upon it.

Gray insisted that the ad campaign center on the cigarette's taste. That's what separated it from the other filters on the market, he repeated over and over.

One of the admen, reading over the copy, was struck with an idea. ''I've got it,'' he announced, perhaps a bit too triumphantly. ''Winston Tastes Good Like a Cigarette Ought to.'' (Business Week footnote; How the Winston slogan was devised.)

The Making of a Cigarette

Gray's father, Bowman Gray Sr., came to a similar crossroads in the early 1900s. He clearly saw the future, and it dismayed him because the chewing and smoking tobacco he was hawking for RJR in Baltimore weren't part of it. Everywhere Gray went, people were smoking cigarettes, and he kept urging his bosses in Winston to come up with one.

Ready-made cigarettes had always been considered the smoke of effeminate Europeans or illiterate immigrants who crowded into Northern cities. Even as late as 1910, smokers in New York bought a quarter of all cigarettes sold in the United States. Real men smoked cigars or, if they had some money, pipes. John L. Sullivan, the heavyweight boxing champion, spoke for most American smokers when he said that only ''dudes and college misfits'' smoked cigarettes.

But as the second decade of the 20th century began, anti-smoking groups in cities and states across the country clamored for a ban on malodorous pipes and cigars in public places. The aroma from a cigarette, on the other hand, was relatively benign. And it didn't take an hour to smoke or require any special skill or equipment. In an increasingly urbanized society, the cigarette was compact, mobile and less obtrusive and objectionable than other forms of smoking.

Richard Joshua Reynolds could see the trends as clearly as his young salesman, whose opinion he valued, could. He had offered Gray the sales job in the company's ''northern territories'' in 1895 because he thought the boy had determination and grit. Plus, he came from good stock. Gray's grandfather had bought the first lots in Winston and his father had helped start Wachovia National Bank, the town's biggest bank. That's where Gray was working as a 21-year-old teller when Reynolds offered him the tobacco job. There was really no reason why Gray should have taken it. Reynolds' company had been in business 20 years, but it made only chewing tobacco and didn't sell anything north of Washington. It wasn't even the largest of the 30 or so tobacco companies in Winston. That honor belonged to P.H. Hanes & Co. (Tilley footnote; The early days of cigarettes and the development of Camel.)

Dick Reynolds was a big, rawboned farm boy from a place in Virginia called No Business Mountain. But he could be right persuasive. People who first met him often underestimated his intelligence because of his lifelong stammer and his inability to spell, a symptom of what is now known as dyslexia. Reynolds' father became rich making and selling tobacco plugs and twists. The son was attracted to Winston because of the little town's railroad spur to Greensboro and its location in the middle of farm country that grew the best tobacco in the world. He arrived in 1874 and built his first tobacco factory a year later on a lot no bigger than a tennis court.

''He was a strange man, Dick Reynolds was,'' Josephus Daniels, the publisher of the Raleigh News & Observer, said of his old friend. ''A bold, daring and audacious man with little education and little polish. . . . North Carolina has not produced another merchant of such vigor and success.''

Gray apparently saw those qualities also, because he quit a secure bank job that paid $1,500 a year for a precarious future at $5 a week. Reynolds first sent his new salesman to Georgia to help him overcome his shyness and to develop some selling skills. Then it was on to Baltimore, which Reynolds envisioned as the gateway to the Northern markets. That he would entrust such an important post to a relatively inexperienced salesman was an indication of Reynolds' high regard for Gray.

So he didn't dismiss Gray's urgent pleas about cigarettes. He agreed that they represented the tobacco industry's future. Yet, there was little he could do about it. Since late 1899 his company had been part of James Buchanan Duke's trust, the American Tobacco Co. Though he used Buck Duke's money to build modern plants and to crush competitors of his chewing tobaccos, Reynolds couldn't venture into the cigarette market, which American controlled.

The U.S. Supreme Court provided the opening when it dissolved the trust as an illegal monopoly in 1911 and gave Reynolds control of his company again. ''Watch me and see if I don't give Buck Duke hell,'' he wrote in a letter to Daniels.

Reynolds did well under Duke's benign dictatorship. His company emerged from the trust as the largest in North Carolina. Its sales exceeded $12 million, a fourfold increase since Reynolds willingly joined with Duke. RJR was the undisputed king of chewing tobacco, and its Prince Albert, which was introduced in 1908, was the most popular pipe tobacco in the country.

Producing cigarettes, though, would be a direct challenge to Duke. He and his Wall Street cronies still held the largest block of voting shares in Reynolds Tobacco, and they weren't likely to sit quietly on the sidelines if the company ventured into cigarettes. But Dick Reynolds had a plan to solve his chronic cash-flow problems and reduce the influence of the ''New York crowd.''

Maybe Duke didn't consider RJR big enough to be much of a threat, because he offered no objection when in 1912 Reynolds suggested increasing the number of shares of outstanding stock by 25 percent. The former trust insiders, by the rules of the breakup, couldn't own any of the new stock, and Reynolds actively encouraged his employees to buy as much as they could, often lending them money to do so.

The trust group's hold on Reynolds was further reduced six years later when the company offered a ''B'' category of common stock that came with hefty dividends but no voting rights. The new stock, which could be swapped for the old issue, was eagerly snapped up by these outsiders, who found it more attractive than the regular common stock. Before long, Reynolds, his employees and their fellow North Carolinians had control of the company.

The difficulty in wriggling free from Buck Duke's grasp might not have been the only reason for the delay in entering the cigarette business. Will Reynolds later claimed that his brother believed the common canard, voiced most notably by inventor Thomas A. Edison, that cigarette paper released toxic substances when burned. Dick Reynolds, it is said, decided to proceed only after three laboratories he hired analyzed the paper and reported it to be harmless. Showing such concern for customers would have been laudable and, considering later history, quite unusual, but the fact that Reynolds included cigarette papers with his Our Advertiser smoking tobacco as far back as 1898 casts doubt on this bit of company lore.

No doubts existed in November 1912 about the company's direction. Reynolds that month began negotiating contracts for cigarette machines. Three months later, a company executive announced at a meeting of the Winston Board of Trade that RJR planned to make cigarettes.

But what kind? At least 50 prominent brands already flooded the market, ranging in price from a nickel to a quarter for a box of 20. Each region of the country had its favorite. Fatima, a blend of Turkish and domestic tobacco made by Liggett & Myers, was the leading seller and was most popular in eastern cities. Home Run, made entirely of burley tobacco, was a hit in New Orleans. Cigarette smokers in the Southeast preferred the cheaper brands made of all bright-leaf tobacco, which dominated the region.

Reynolds had a broader market in mind. Though he took specific aim at Fatima because it was the leading brand, Reynolds wanted a cigarette that would appeal to smokers across the country. He tried various tobacco blends, finally settling on an adaptation of popular Prince Albert _ a mixture heavy with burley tobacco with a generous amount of bright leaf and 10 percent Turkish leaf. The result was a cigarette with a distinctive taste and a smoke that was easier to inhale than the straight Turkish blends then on the market. The uniquely American cigarette was born.

Because of Prince Albert's success, Reynolds considered naming the cigarette after another member of a foreign royal family. Company executives discussed putting Germany's Kaiser Wilhelm on the pack atop a white horse, but naming the brand after a living person carried some risks. ''You never know what the damn fool might do,'' Reynolds explained. The outbreak of World War I a few years later justified the caution.

Reynolds wanted a simple name that evoked the Middle East, because Fatima would be the brand's main competition. He also knew that many of the brand's customers would be illiterate and he wanted a name that could easily be depicted by a picture on the pack. Company legend has it that he settled on a camel because it was his favorite animal while growing up. The camel of Reynolds' boyhood memories, however, was nothing like the pathetic figure that appeared on the first pack in the fall of 1913. It had one hump, a drooping neck and an unkempt shaggy coat. All in all, it was a rather lackluster creature that suggested the same was true of the cigarettes inside.

As luck would have it, and as company legend insists, the Barnum & Bailey Circus was in town, and Reynolds sent his secretary, Roy Haberkern, to the circus in search of a zippier camel. Haberkern found two to his liking, but the animal boss _ a disagreeable fellow named Patterson _ refused to allow his camels to be photographed, citing the animals' notorious temperament. Patterson found out something that late September day that many RJR employees would learn during the 42 years that Haberkern was with the company: He could be just as ill-tempered as any beast of burden or its handler. He reminded Patterson that Mr. Reynolds closed his factories for a day to allow employees to attend the circus. That could change, Haberkern noted ominously.

Such a threat coming from a lowly secretary didn't carry much weight with Patterson, who insisted that it come from Reynolds himself. Haberkern rushed back to the office, which had already closed for the day. He climbed through a window, wrote it all down on company stationery and signed his boss's name.

The forgery fooled Patterson, who trotted out a two-humped camel and a one-humped dromedary that Haberkern had chosen. The camel behaved for the picture-taking, but Old Joe, the dromedary, snorted, kicked and generally refused to cooperate. Patterson gave the animal a stout whack on the nose. An astonished Old Joe threw back its head, closed its eyes and raised its tail. The ungainly pose was captured by the photographer and faithfully copied by the illustrator.

That was the Old Joe that found its way on the front panel of the Camel pack. He was surrounded by a desert and flanked by two pyramids and three palm trees. The obligatory mosques and oasis covered the back. Everything was bathed in a soothing reddish brown tint.

The package pleased Reynolds, who committed $250,000 to Camel's initial advertising. Preceding the new brand's release on Oct. 19, 1913, a series of teaser ads began appearing in selected newspapers across the country. The first pictured Old Joe and simply read, ''Camels.'' It was followed a few days later with one that noted ''The Camels Are Coming.'' The final ad promised that ''Tomorrow there'll be more Camels in this town than in all Asia and Africa combined.''

The ads were met with snickers at the Fifth Avenue offices of industry leader American Tobacco. ''I thought it was a joke. I thought they were wasting their money,'' George Washington Hill, then the company's sales director, recalled years later. ''It was not any joke. In town after town, when they introduced Camels, other cigarette brands were swept to one side.''

RJR made a little more than 1 million Camels that first year. By 1916, its factories churned out 6.5 billion, and RJR surpassed Liggett & Myers as the country's second-largest tobacco company. By 1918, as Dick Reynolds lay dying of pancreatic cancer, 14 billion Camels stampeded across America. His company had earned $10.3 million the previous year and was closing in on his hated rival, Buck Duke and his American Tobacco.

When Reynolds died on July 29, at age 68, not everyone who worked for him mourned his passing. The old man could squeeze a dollar and was something of a slave driver. Everyone, though, admired what he had accomplished. As Camel had shown, he wasn't afraid to take risks and relished competing against the other, stronger tobacco companies. In the process, he had devised a simple, yet successful, formula: Keep costs low and production centralized and concentrate on a few good brands.

When he died, Richard Joshua Reynolds _ described by the epitaph on his tombstone in Salem Cemetery as a ''workman of the world'' _ left an estate of $100 million, or about $1.2 billion in today's money. The small company he started along the railroad siding on Depot Street was on its way to becoming the dominant force in its industry.

The Making of a Salesman

Camel would take the company to the top, and directing the rise was Reynolds' trusted lieutenant, Bowman Gray Sr. Reynolds had brought him back from Baltimore in 1912 and made him his vice president for sales.

Gray had left as a young bachelor, but came home with a family. Nathalie Fontaine Lyons, an Asheville native, was a beautiful, dainty woman who in surviving photographs has an almost wistful look. She, her husband and their two boys _ Bowman Jr., 5, and Gordon, 3 _ lived in the Zinzendorf Hotel downtown before buying the old Chatham house at 630 W. Fifth Street. (Linn footnote; Description of Gray's personality and home life.)

Fashionable houses lined that section of the street, Winston's first ''Millionaires' Row.'' The Grays lived a half-block from Dick and Katharine Reynolds and their four children. Doors away were the Bittings, the Whitakers and the Haneses, families who had built the town's tobacco industry. (Tursi footnote; Winston-Salem history.)

Young Bowman and his brother skated on the sidewalk in front of the house and played football in a large lot across the street, which was dirt for most of their childhood. On summer weekend evenings during their early teens, the boys walked with their father the three blocks to the Hotel Robert E. Lee, which opened in 1921 and was a source of great pride to everyone in town. Gray liked to stand on the sidewalk in front of the hotel and gaze up at the lighted rooms to judge the hotel's occupancy and thus its success.

A two-block walk in the other direction brought the boys to the West End School, perched on a hill on the corner of West Fourth and Broad streets. The city's first public school, the two-story red brick building was encircled by a low wall and topped by a bell tower that offered a commanding view of downtown. Teachers at West End gave Bowman the rudiments of history and civics, algebra and arithmetic, geography and physiology. Calisthenics were a regular part of his day, as were singing hymns and reading Scripture in the school's chapel. Bowman and the other children ate lunch under the trees in front of the school, swapping pickles for ham biscuits, layer cake for fried pies.

Bowman finished the elementary grades at a private school and then it was off to Woodberry Forest, an exclusive prep school in northern Virginia where the moneyed men of Winston-Salem usually sent their sons. While at Woodberry, Bo showed that he had some of his old man in him by persuading fellow classmates to smoke Prince Albert after discovering that cigarettes were forbidden.

By then, Winston-Salem's rich were abandoning their downtown homes for more spacious spreads in the country. Reynolds, for instance, moved his family in 1917 from the big Victorian house on West Fifth to the ''bungalow''called Reynolda that his wife built on 1,000 acres on the outskirts of town. Uncle Will left in 1921 for his estate on the Yadkin River that he called Tanglewood.

Bowman Gray Sr. remained in town until the fall of 1932, when the stone castle across from Reynolda was ready. ''My grandmother actually built Graylyn,'' Lyons Gray explained. ''My grandfather merely paid for it.''

Mrs. Gray broke ground for the Norman Revival house on Jan. 15, 1928, her older son's 21st birthday.

''It is to be the handsomest home in North Carolina,'' the Winston-Salem Journal had predicted a few days earlier.

It certainly was one of the most controversial. An army of carpenters, stone masons, painters and landscapers was kept busy building what, to many during the depths of the Depression, seemed to be an ostentatious monument to excess. The Venetian glass chandeliers cost more than most people made in a year. As the bread lines formed, Mrs. Gray's interior designers spread out across Europe. They removed Louis XIV paneling from the Salon of Paintings in the Hotel d'Estrades in Paris for Graylyn's library. The pine paneling for the boys' sitting room came from an 18th-century building in London.

Amid the whispers, the house slowly took shape. After four years of overseeing the construction, Nathalie Gray waited excitedly with everyone else who had worked on the house on the morning of the final inspection. They lined the driveway as Bowman Gray Sr., who by then was the chairman of Reynolds, drove up. He got out of the car and approached his wife.

''My dear, are you pleased with this house?'' he asked.

''Yes, Bowman, I'm pleased,'' she replied.

''Well, if you're pleased, I'm pleased,'' Gray said.

He got back in his car and returned to work without going inside.

''He came out there that night for the first night, but he really didn't have much interest in it,'' Lyons Gray said. ''It was hers. If she was happy, he was happy.''

Gray's older son would later write that his father never really cared about money or the trappings it could buy. In fact, he was an austere man by nature, preferring to wear the same suits and ties and use the same pencil until it had been worn to a stub. ''He had only two interests in life,'' Bowman Gray Jr. wrote, ''one was the company, the other his family.''

He epitomized the breed of leader who ruled RJR after Reynolds' death. Gray became company president in 1921, succeeding Will Reynolds, who had taken over for his brother. He became chairman 10 years later.

Like the other company leaders of his day, Gray wasn't as imaginative as RJR's founder, and he didn't have his flair for advertising. He made up for those failings with a tireless capacity for work, often leaving the house before his sons awoke and returning after they had gone to bed.

Even during his summerlong European vacations, Gray visited tobacco shops to persuade the owners to sell more Reynolds products. Some wags at competing companies at the time joked that Winston-Salem's initials stood for Work and Sleep.

Young Bo may have fondly recalled accompanying his father on those jaunts to the tobacco shops in the great cities of Europe as he and the rest of the family settled into their staterooms aboard the Kungsholm in late June 1935. The freckle-faced 27-year-old had a history degree from the University of North Carolina, but there was never any doubt what he would do with his life. For the past five years, he had been selling cigarettes for R.J. Reynolds Tobacco Co. Like his brother, Gordon, he had been looking forward to the annual family vacation. The Kungsholm, a Swedish liner, was bound for a cruise through the North Atlantic. Tragedy struck nine days out of New York. Bowman Gray Sr. had a massive heart attack on July 7 and died at age 61.

He had always told his family that, if he died at sea, he wanted to be buried there. Under the bright rays of the Arctic Circle's midnight sun, an honor guard of sturdy Viking sailors lowered Gray's flag-draped coffin from the ship's after-deck and into the frigid Atlantic.

Published October 24, 1999

• Coming Monday: The making of a company.