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Annual Report • 1948

ANNUAL REPORT FOR THE YEAR ENDING DECEMBER 31, 1948' AMERICA'S OLDEST TOBACCO MERCHANTS officers HERBERT A. KENT - - GEORGE D. WHITEFIELD - TODD WOOL - - - - WILLIAM J~ HALLEY - - FRANK HOPEWELL - - IRVIN H. PEAK * - - - * Elected January 19, 1949. d1 recto3"s CLAUDE W. BERKLEY EDGAR S. BOWLING' JAMES A. GLASCOCK LEWIS GRUBER WILLIAM J. HALLEY DONALD A. HENDERSON 0 ESTABLISHED 11760 - - - - - President - - Executive Vice President Vice President and Secretary Vice President and Treasurer - - - - Vice President - - - - Vice President FRANK HOPEWELL HERBERT A. KENT IRVIN H., PEAK F. GLADDEN SEARLE HAROLD F. TEMPLE TODD WOOL GEORGE D. WHITEFIELD GENERAL COUNSEL-PERKINS, DANIELS & PERKINS' TRANSFER AGENT-THE NEW Y ORK TRUST CO., NEW YORK, N. Y. REGISTRAR-THE NATIONAL CITY BANK, NEW YORK, N. Y. Executive Office-119 West 40th Street, New York 18; N. Y. Corporate O/jrce-15 Exchange Place,, Jersey Cit,r, N. J. 1

To the Stockholder.r: . . Earnings THE MANAGEhtENT' is pleased to report that the Company was able, during 1948; further to increase the gratifying level of' earnings reachedl in 1947. Costs continued to rise, but were offset by an increase in the price of cigarettes, which went into effect in August and'i began to be reflected in earnings during the last five months. Sales for the year totaled $140,279;236.56;, the highest in the Company history. The net income of the Company available for common stock amounted to $4,958,939:23, equal to $2.21 per share on the common stock outstanding. These earnings compare with $2.15 per share in 11947 and $1.26 per share in~ 1946. . Dividends During 1948' the Company continued its policy of paying four interim dividends of 250 each on its common stock ands in addition, paid a year-end extra dividend of 50¢ a share, as it had in 1947. We expect to continue this dividend policy but, of course, the amount of any extra dividend will depend'upon the result of each year's operation. 3

Sales . . . . Selling and brand building activities for 1948 can be covered, for a change, without reciting the many retarding obstacles ever present during the adjustment period following the war. Our position today relative to merchandise is clean, and business has returned to a highiy competitive operation such as normal times always produce. It is, of course, a genuine pleasure to tell you OLD GOLD Cigarettes enjoyed a very substantial year, showing a consistent increase throughr out the twelve months in response-first, to superb quality-next, to our sound advertising policy which brightened the flame of prestige as it acquired new smokers and new momentum. Our enlarged program for 1949 will follow to a great extent the successful! pattern~ of the year covered by this report. Naturally, pro- motional costs will continue to be high, but we confidently feel new business will more than justify our investment in the future. Under the caption "Sales Promotion" you will find an outline of advertising implements to be employe& in making your Company's leading prod- ucts a greater competitive factor during the coming year. . DISTRIBUTION OF THE SALES DOLLAR FederalJ, State, amd locolTa.es. 47.97~ Cost.of Ieef tobacco, wrnpping, and othes meterlali and services (bought from othen) . \ Wages and safaries up to $5000 ~ (directly concerned with production) Salories of $5000 and over (manogeriol .and:oll'.offiders) Amount.set aside for machimes and plonM wearing out (i. e. depreciation). Amount p,aid'to the owners of the business (dividends to stockholders) Retained irn the buslness forr future needs ond'improvemenrs O8.SZQ ~ ~ - 0- 01060 M 4; 8Z 00 ¢ , . 00.3G¢I 9 s. ~ ~ ~ 0 0

In our last report we informed y= of our new king-size EMBASSY Cigarette. After a long period of pre-testing we are, as perhaps yow know, opening this brand to nation-wide distribution. Its availability; at least in the better stores, should be f'airly welli established by the time this report reaches you. King-size cigarettes last year showed a very substantial growth. We believe this classification will' continue to grow in importance and are determined to have a part in the expanding cigarette market represented by the long size. EMBASSY is a fine quality product, 5

packaged most attractively. Its eye-appeal easily translates into taste- appeal for those desiring a really mild cigarette. For the first time in several years our smoking tobaccos as a whole arrested their decline and produced a small increase. Principal brands are BRIGGS, UNION LEADER, FRIENDS and INDIA HOUSE. Loose-leaf chewing tobacco, while holding, our high percentage of the total business, produced a volume almost as great as in the pre- vious year. In this classification our brands are BEECH-NUT,, BAG- PIPE and' HAVANA BLOSSOM. The cigar business in general did not fare too well in 1948, ours being no exception: In our last report we informed youi that MURIEL SENATOR and HEADLINE' Cigars were still in short supply. Early this year and almost overnight this condition changed from one of scarcity to one of plenty. Study of the situation convinced us of the necessity of streamlining the shapes and sizes to meet the consumer economy trendl These changes are now being made, and are in some cases completedl Our distributors throughout the country are most enthusiastic in supporting the new program. With VAN BIBBER and ROYAL BENGAL we returned to the little cigar field, BETWEEN THE ACTS having been the sole sur- viving member of this once large group. Naturally, 1948 sales had practically no competing,figures;, therefore, sales represented an increase. Sales Promotion . . . . OLD GOLD CIGARETTES. During the entire year we continued in our advertising to recommend OLD GOLD Cigarettes to the con- sumer on the basis of interesting variations in the story of enjoying these fine cigarettes for the sheer smoking pleasure they provide. This logicali sales approach is summarized in the slbgan, "If you, want a treat instead of a treatment. ...

• "STOP THE MUSIC!" exclaims Master of Ceremonies Bert Parks during broadcast of Old Gold's top portion of this outstanding radio program. It has one of the highest listenerships on the air. December rounded out twenty-eight months of continuous and judicious use of this theme; and during the year our consistency paid off in the gratifying and steady increases in OLD GOLD sales men- tioned earlier in this report. Magazines. After an absence of severali years, we returnedl to the use of national magazines. A strikingly effective and concentrated campaign of full~color pages appeared throughout the year in every other issue of Life and Look magazines. A few typical, examples of our effective use of these media are reproduced in greatly reduced size in the center spread of this report. Newspapers and' Newspaper Supplements. In, the larger centers of population and in strategic OLD GOLD markets, an aggressive cam- paign, in daily newspapers was waged during the spring and! fall. Beginning in March, full-page advertisements appeared steadily and at freqpent intervals in leading groups of Sunday Supplements. Radio. In May your management foresaw an opportunity for buy- ing into the now sensational STOP THE MUSIC program; broadcast Sunday evenings over the American~ Broadcasting Company Network. 7

By the close of the year this franchise represented one of the most important "buys"' in radio advertising. Further to promote the brand via radio, we purchased advertising, rights to the nationally famous Originat Amateur Hour. This helpful and popular program we placed in a strategic Wednesday evening full-hour time spot on the American Broadcasting Company Network. By combining our purchases of time for both our shows on~ the same network important savings in radio time costs were effected' for your Company.. Television. During 1948 ' your management became convinced that this new medium had' progressed commercially to a point where a moderate investment in its use was warranted. Therefore, we supple- mented our radio play-by-play broadcasts of baseball in Brooklyn and Chicago with telecasts of many of these same games. During the last three months of the year the Original Amateur Hour has been telecast on Sunday evenings from seven, until! eight o'clock Eastern Time over the Dumont Television Network. It has • "ORIGIIVAL AMA- TEUR HOUR," with Ted Mack as master of ceremonies, wins many listeners and mrcc6 good will f or Old Gold ... over tlze ABC radio network.

OLD GOLD'S TELEVISIO N SHOW/ features the "Orig- inal Amateur Hour," and' the dancing cigarette pack'- age. Both are extremely pop'- ular with the telerieu•ers: become one of the most popular television shows and is now telecast in seventeen key cities. BRIGGS AND INDIA HOUSE SMOKING TOBACCO. Small unlti space' but continuous and effective national advertising campaigns were con: ducted for these brands in, the three largest weekly magazines. Advertising of OLD GOLD Cigarettes and! our smoking tobacco brands is placed by Lennenl& Mitchell, Inc. EMBASSY KING-SIZE CIGARETTES. Intensive advertising, and sales promotion of varied types were painstakingly pre-tested and then 9

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