3 August 2022

Laurits Andersen - the Bonsack Years 1890-1902

Original draft of the Bonsack machine

The Danish entrepreneur Laurits Andersen (1849-1928) lived most of his life in China, where he became one of the leading figures in the establishment of the country’s modern tobacco industry. This blog post series will tell the story of Laurits Andersen’s life and relationship with China. It is based on Peter Harmsen’s PhD thesis from 2021 named “Resourceful and socially connected. The business biography of Danish tobacco entrepreneur, Laurits Andersen in treaty-port China, 1890-1922”

Peter Harmsen is an author and has been working as a journalist in East Asia for more than 25 years. In 2020 he published the book “Laurits Andersen – China Hand, Entrepreneur, Patron.” This blog series is published courtesy of Laurits Andersens Fond.

Read the first blog post about Laurits Andersen here.

1890-1895: Tobacco Industry 

More than any other company, the American firm Mustard & Co. pioneered the introduction of machine-produced cigarettes in China, with Laurits Andersen at the centre of its efforts to open up the giant Chinese market for the product, which was already achieved enormous popularity in other parts of the world. There is a straight line from Andersen’s first cumbersome attempts at mass-producing cigarettes on the first floor of Mustard & Co.’s building on Nanking Road to the modern Chinese tobacco industry, a global leader with an annual production of more than 2,500 billion cigarettes.

The development of the tobacco industry towards the end of the 19th century was characterized by a deliberate endeavour to speed up technological innovation, motivated by the fact that cigarette manufacturing was an extremely labour-intensive activity. Even a trained worker could roll no more than 3,000 cigarettes in the course of a 10-hour workday, and the typical daily output for the average worker was closer to 2,000 cigarettes. There were obvious savings to be made if the production could be automated, and since the production process itself was not particularly complicated, it was widely assumed that a machine could be developed to replace humans.

The American businessman Richard Harvey Wright

The American businessman Richard Harvey Wright.

Only in the early 1880s, after several years of frantic technological development, did the American machine engineer James A. Bonsack succeed in developing a machine that was applicable in the mass production of cigarettes. “This wonderful machine,” a newspaper reporter exclaimed, going on to describe its smooth work: “It is fed with tobacco at one end, and perfect cigarettes drop rapidly out of it at the other, apparently all ready for packing in the boxes.” The economic advantages of the machine were evident from the outset. With a crew of three – one worker to operate the machine, and two others to see to it that it was fed with tobacco and paper – one Bonsack machine could produce 120,000 cigarettes a day. This meant that while the labour cost associated with the production of 1,000 cigarettes had been 96.5 US cents before the introduction of the machine, it dropped to 8.1 US cents afterwards.

In the course of a lengthy tour of Africa and Asia aimed at selling the machine to local entrepreneurs, Richard Harvey Wright, the American travelling representative of the Bonsack Machine Co. arrived in Shanghai in late winter 1890. He approached the two owners of Mustard & Co., Robert West Mustard and Charles Carroll Bennett. The two American merchants subsequently reached out to Andersen and asked him to join, possibly motivated by Dane’s background in mechanical engineering. “They were convinced that there was an enormous market for a stimulant such as this, and of course, they proved to be right,” Andersen said later. “I immediately accepted the proposal and assumed one-third of the risk, even though I couldn’t help thinking that once again I was embarking on something that I didn’t have the slightest idea about.”

Ban on Manufacturing in China’s Foreign Enclaves

Mustard & Co. were entering into the cigarette-making business despite a general ban on manufacturing in China’s foreign enclaves. The rule was widely known, and it is the likely reason why the only other foreign attempt at making cigarettes in China at the time – a factory for hand-rolled cigarettes established by the Shanghai capitalist E. Jenner Hogg – was placed in Pudong, outside Shanghai’s foreign-ruled concessions. Still, there is no indication in the extant sources that Andersen or his colleagues were concerned about the possible consequences of violating the Chinese regulations since they do not mention the rules at all. Moreover, there was no attempt whatsoever by Mustard & Co. to conceal the production of cigarettes. Rather, there seems to have been a steady stream of visitors to its building who wanted to see the new wonder machine. The ban against manufacturing was not lifted until the Treaty of Shimonoseki in April 1895, which marked the end of the First Sino-Japanese War, as the treaty gave Japan the right to manufacture goods in certain zones inside China, and the same right was extended to other countries as a result of existing practice. This event is not mentioned in any of the sources related to Wright or Mustard & Co., suggesting that the practical significance was zero.

1896-1902: Andersen’s business trip to America

With his special engineering background, Andersen had headed the operation of the Bonsack machine in Shanghai from the start, and at some point, during the first couple of years, he realized that there were so many practical challenges associated with the new technology that a visit to the United States was needed to solve all the problems once and for all. At the end of May 1893, he left Shanghai on board the steamship Empress of Japan headed for London. Mustard described the purpose of the journey in a letter to Wright: “This trip is to find out certain things and pick up ideas so we can make a success out of this cigarette speculation. We don’t seem to get on. Always something wrong with our tobacco or the cigarettes.” Andersen arrived in Chicago at the end of June, visiting the World’s Columbian Exposition, a world fair organized by the city to mark the 400th anniversary of Columbus’ discovery of America.

Alexander Cameron's cigaret factory in RichmondAlexander Cameron's cigaret factory in Richmond.

There was no doubt, however, that Andersen’s journey to the United States primarily had an educational purpose, and that he wished to gain a deeper understanding of the tobacco industry, bringing him to the main tobacco-growing regions of Virginia and North Carolina during the summer. Still, the major tobacco producers zealously protected their patents, and Andersen had no success in gaining access to any of the large plants. For instance, an acquaintance attempted to intercede on his behalf to get permission for him to tour a tobacco plant in Richmond run by Alexander Cameron, one of the most prominent businessmen in Virginia but was turned down. After he toured the American South, Andersen spent two days in Baltimore, looking at dryers and coolers. He thought the prices were excessive but thought Mustard & Co. had no other option but to buy them, since he now received news from Shanghai that, similar to the previous summer, the cigarettes had once again been spoiled by moisture. “I don’t quite understand this,” Andersen wrote in a letter to Wright. “The tob[acco] was dry and in good order when they were made. Must I dry the cig[arettes] after being packed and before being put into the cases on a rainy damp day?”

Andersen returned to Shanghai on board the Empress of Japan from Vancouver on September 16, 1893. He had bought various cigarette brands during his tour of North America in 1893 and brought them home across the Pacific. They lasted through the long trans-oceanic voyage, but after six days in Shanghai’s humid climate, they had turned white with mildew. “It seems now as [if] we shall never get over our trouble with this beastly weather prevailing here during the summer. I am almost losing heart and confidence that this business will ever be a success,” he wrote to Wright. In the same letter, he considered whether certain chemicals could help preserve the cigarettes in Shanghai’s special climate, pointing out that cigarettes he had bought from a factory in Liverpool had remained fine even after three or four years in Shanghai’s humid weather.

Cameo - cigarette brand sold by Laurits Andersen

Cameo - one of the cigarette brands which Andersen sold for Duke in China.

Immediately upon returning home, Andersen and his co-owners at Mustard & Co. established a new company, Mercantile Tobacco Co. The tour of the United States had consolidated Andersen’s position as Mustard’s tobacco specialist, and as a matter of course he was installed as the new company’s managing director. The sources do not motivate setting up the new company, but it is possible that its main objective was to remove or at least mitigate the contradiction inherent in the fact that on the one hand, Mustard & Co. was the agent for several leading American cigarette brands, while on the other hand, it constituted a rival for the same brands due to its involvement in the production of cigarettes. If so, it was all about appearance, since the sparse extant sources suggest that Mercantile Tobacco Co. was 100 per cent owned by the main shareholders of Mustard & Co. Andersen approached his new responsibilities with great enthusiasm and energy. In common with other tobacco pioneers such as James Duke, he had a deep appreciation of the importance of advertising, which he described in an interview several decades later: “Now everyone knows our world-famous brands, and selling them is a piece of cake. But back then you had to work for it! We spent a lot of money on advertisements, and to always be ahead of newly emerging competitors, I travelled all over and made sure the cigarettes became well-known, first in the Chinese market, then in Japan, and then in Manchuria.”

It appears that Andersen’s efforts bore fruit and that his America tour was a turning point for Mustard & Co. in its effort to introduce machine-produced cigarettes into the Chinese market. In 1894, the company produced and sold 4.63 million cigarettes. The number was roughly stable in 1895 at 4.53 million cigarettes but dropped to 3.95 million in 1896. A new, larger boom seemed on the way in 1897 when during the first four months alone Mustard & Co. produced 5.55 million cigarettes. Less than two years after Andersen’s return from the United States, Mercantile Tobacco Co. had carved a position for itself and risen to a status that by the summer of 1895 led China’s main English-language newspaper to declare that “Mercantile Tobacco Co. of Shanghai are now well established, and under good management are doing a business the extent of which is not dreamt of by the great majority of residents of the port, and the Company are thereby developing a very important Shanghai industry.”