North Atlantic Trading Company Inc.

International Directory of Company Histories, Volume 65 (1994) by Ed Dinger

North Atlantic Trading Company Inc.

257 Park Avenue South New York, New York 10010-7304 U.S.A. Telephone: (212) 253-8185 Fax: (212) 253-8296 Web site: http://www.zigzag.com

Private Company Incorporated: 1988 as National Tobacco Corporation Employees: 89 Sales: $101.6 million (2003) NAIC: 312229 Other Tobacco Product Manufacturing

North Atlantic Trading Company Inc. is a New York City-based holding company for several subsidiaries involved in the tobacco industry. National Tobacco Company, L.P. is the third largest loose-leaf chewing tobacco company in the United States. Its most famous brand is Beech-Nut. North Atlantic Operating Company, Inc., under an agreement with Bollore, S.A., sells cigarette papers, tubes, loose tobacco, and cigarette-making machines under the world famous Zig-Zag brand. North Atlantic Cigarette Company, Inc. markets and distributes Zig-Zag Premium Cigarettes. North Atlantic's chairman and chief executive officer, Thomas F. Helms, Jr., owns 49 percent of the privately held company.

Formation by Helms in 1988

Helms started his business career at Revlon Inc. He held a number of sales and marketing positions from 1964 to 1979 before becoming general manager of Revlon's Etherea Cosmetics and Designer Fragrances Division. In 1983 he was named president of Helme Tobacco Company, the smokeless tobacco subsidiary of Culbro Corporation that manufactured and marketed Navy and Railroad Mills dry snuff; Gold River, Wilver Creek, and Redwood moist snuff; and chewing tobacco under the Mail Pouch, Chattanooga Chew, and Lancaster brands. Two years later, in September 1985, Culbro announced that Helme was up for sale. Several weeks later Helms resigned in order to put together a leveraged buyout proposal. In the end, however, the business was sold to Swisher & Son. Inc., the cigar subsidiary of American Maize-Products Co.

Despite failing to buy Helme, Helms decided to remain in the tobacco business. In 1988 he and an investor group led by Lehman Brothers formed National Tobacco Corporation to acquire the smokeless tobacco division of Lorillard Tobacco Company. Lorillard was the oldest tobacco manufacturer in the country, launched in 1760 by French immigrant Pierre Lorillard in New York City to make pipe tobacco, cigars, plug chewing tobacco, and snuff. The company would become a pioneer in marketing, paying farmers for painted signs on the sides of their barns, initiating the use of trading cards, and according to some, introducing the cigar store Indian. In the 1890s Lorillard introduced Beech-Nut chewing tobacco. It was also during this period that it became part of American Tobacco Co., the massive tobacco trust created by legendary James Buchanan Duke, who parlayed the rights to a cigarette-making machine into the creation of a corporation that at one point controlled 90 percent of the U.S. market in cigarette sales. In 1911 the trust was ruled in violation of the Sherman Anti-Trust Act and dissolved. Lorillard along with R.J. Reynolds and Liggett & Meyers became products of the breakup.

While Helms remained in New York City to manage the company, National Tobacco took over Lorillard's manufacturing facilities in Louisville, Kentucky, where it produced looseleaf chewing tobacco under a variety of labels. The next major step for the company came in 1997 with the acquisition of North Atlantic Trading Co. Inc., which had been formed by investors in 1993 to make the $39 million acquisition of Zig-Zag's distribution rights from UST Inc. To finance the Zig-Zag purchase and restructure its debt, National Tobacco negotiated a $300 million high-yield bond issue and loan package assembled by a group of European Investors with Natwest, the U.S. investment branch of Britain's National Westminster PLC, leading the effort. Upon completion of the acquisition, National Tobacco gained the exclusive rights to market and distribute Zig-Zag cigarette papers in the United States, Canada, and other international markets. It also took on the North Atlantic Trading Company name as part of a plan to invest in other tobacco-related areas. The Louisville facility was using only about one-third of its capacity, leading management to think about taking on new product lines. The most likely addition was dry snuff, but there was also talk at this stage of introducing a new blend of loose-leaf tobacco for "make-your-own" (MYO) cigarettes, and even the possibility of applying the Zig-Zag name to a new brand of cigarettes.

Zig-Zag Origins Dating to the 1890s

The Zig-Zag brand had strong name recognition, although generally associated with marijuana use in the 1960s and 1970s. In fact, Zig-Zag rolling papers had been in the marketplace since the 1890s. According to lore, the cigarette was conceived by a French soldier during the battle of Sevastopol in the mid-19th century, at a time when tobacco smokers used a pipe. Because the soldier's clay pipe was shattered by a bullet, he rolled some loose tobacco in a scrap of paper torn from a bag of gunpowder. This makeshift way to smoke tobacco was improved upon by Maurice and Jacque Braunstein, who in 1894 perfected the process of interleaving papers in a zig-zag manner to produce a slower, smoother burn; hence they called their papers Zig-Zag. In 1900 the rolling papers gained international fame when they were awarded a gold medal at the Universal Exposition in Paris. UST obtained the distribution rights to Zig-Zag from French manufacturer Bollore in 1938.