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Chapter 9

International passport

The purchase of Rothmans in 1954 launched Rupert internationally. At the age of 37 he found himself on a playing field where he faced the toughest opposition in the world.

Unlike many other successful South African business people he did not build his fortune on the base of the abundance of the country’s precious metals, raw materials and natural resources as he moved overseas. For this reason Bertie Levenstein, chairman of Rand Tobacco, regards Rupert as the most brilliant entrepreneur to have come out of South Africa. Despite the fact that he could not lay claim to any built-in advantage, the Rembrandt Group started excelling internationally as the only successful post-war cigarette company in the world. Peter Drucker, whom Rupert himself considers the best writer on business he has encountered, refers to this in his book Innovation and entrepreneurship.1 Rupert was driven by the firm conviction that ‘he who doesn’t believe in miracles, is not a realist’ – a motto based on the fund-raising appeal of a Jewish aid organisation he had read about in an American magazine in the 1950s.

At home his overseas ambitions were frowned upon by Sanlam, his biggest creditor. Sanlam was not keen that Rembrandt should have overseas interests; the Rothmans brands on the local market were considered sufficient. Apart from his lack of enthusiasm about overseas industrial involvement, Dr Tienie Louw of Sanlam was also dubious about the future of the British economy. Sanlam therefore requested Rupert to sell his assets in England and come home.

Rupert found this ‘hard to accept’ – he knew that unless his group operated worldwide, international competitors would swallow up his South African interests. But he agreed, and in January 1954 he and Huberte flew to London in one of the world’s first jet-propelled passenger planes, a BOAC Comet 1. On its next flight a few days later the plane crashed over the Mediterranean, killing allon board. The accident was caused by metal fatigue. After it happened twice more to Rupert that a plane in which he had travelled crashed on its next trip, he and his wife made it their policy never to fly together if they could help it.

In London he sought an interview with Sir Edward Baron, head of Carreras, the old, established British company that had wanted to buy Rothmans. The founder, Jose Joaquim Carreras, had opened a tobacconist in London in 1843 and later manufactured Craven A cigarettes. Rupert offered Baron the opportunity to market the Rothmans brands Rembrandt had bought: ‘I know that you wanted them, you negotiated for them and you are going to need them.’ Sitting in his splendid office, Baron heard Rupert out. He turned him down flat: ‘I don’t need you, Mr Rupert. I’ve got Dunhill.’ When Rupert predicted the demise of the brand within a year, the British businessman became so annoyed that ‘he more or less threw me out of his office’, Rupert relates.

From London he proceeded to Hamburg to try to arrange a similar deal with Wolfgang Ritter, head of the German tobacco group Martin Brinkmann AG. They talked amiably over drinks at Ritter’s home on Lake Bremen till three in the morning, but the German, too, declined. Later he was to describe that decision as the biggest mistake of his career. He wrote that Rupert, whose ‘incredible instinct for what the consumer wants’ he praised highly, laid the foundation for his international success with Rothmans King Size, which became the biggest Virginian filter-tipped cigarette in the world. Ritter also acknowledged that his wrong decision drove Rupert into the arms of Philipp Reemtsma, who would support him.2 Once again Rupert had reason to thank providence afterwards. As he puts it, ‘You shouldn’t always be grateful for what you get. Often you have to be grateful for what you didn’t get.’

Rupert’s control of Rothmans gave him a foothold in the British market, but more importantly, he now had a brand he could market internationally, a launching pad for the group’s expansion.

As entrepreneur, Rupert was also constantly moving, building networks, making contacts and keeping a lookout for opportunities. He is an example of what the famous Tom Peters would later say about successful entrepreneurs: You are MBWAs (Managing by Walking Around).

On his return to London from his first meeting with Reemtsma in Austria he was met by an urgent message from his brother Jan, Rembrandt’s production chief, who was on honeymoon abroad with his bride Ina (née Wiid). Jan warned him that one of their rivals might be launching a king-size cigarette with the new, improved cellulose acetate filter called Estron, hailed as the miracle filter and achieving success in the USA in cigarettes like Viceroy and Winston. Rupert realised he would have to move fast if he was to secure the rights to the new product. As at other times in his career when the stakes were high, he thought big, and reacted with incredible speed.

He asked Jan to fly to Tennessee at once and arrange a meeting with Eastman Kodak, the American manufacturers. Jan did the groundwork, but it took two days before Rupert and their youngest brother Koos, who was responsible for international marketing, also arrived to join him in America. Together with the group’s marketing expert Patrick O’Neill-Dunne they proceeded to the Kingsport factory for their meeting with Eastman Kodak’s top executive, William S Vaughan. The only reason why they were able to secure a meeting with Bill Vaughan was that he had been a Rhodes scholar at Oxford. Presumably he was well disposed towards South Africa where Cecil John Rhodes, founder of the Rhodes scholarship fund, had made his fortune. Nonetheless it took some hard bargaining before the deal was finalised on 28 June 1954. It was Eastman Kodak’s first contract with a non-American company.

Rupert was shown the machine that produced the miracle filter. It was a somewhat clumsy affair. Its designer, like Rupert himself, had studied chemistry and the two fell into conversation. The prototype had cost $10 000 to produce. Rupert was horrified. ‘Is that what you produce for $10 000? You ought to be ashamed of yourself!’ The man admitted that the first experimental effort had been too expensive. With that experience behind him, he said, he could produce a much better machine at half the price. Rupert, who realised how badly his group needed the machine, said ‘Done!’ and offered him $10 000, enough to build two new machines. The man had no option but to accept. ‘If I didn’t understand the psychology of the chemist,’ Rupert said later, ‘we wouldn’t have been able to obtain the machine, the only prototype.’ In addition, the chemist made a few thousand filter bars for another two million cigarettes that were flown back to South Africa.

Rupert had reached his goal to become the first manufacturer outside the USA with the innovation. ‘It gave us a huge edge over our competitors and was one of our best investments ever.’

They had the filters and the machine. But they still needed a brand name for the new product. The previous year, when New York was celebrating its tercentenary, Rupert had read in The New York Times about the city’s founding father Peter Stuyvesant. The Dutch governor, who established the town then known as New Amsterdam in 1653 (hence a contemporary of Jan van Riebeeck), had a wooden leg, which earned him the nickname Peg-Leg Pete. This was a legendary figure on which to build a legend.

Over dinner at O’Neill-Dunne’s home he tried out the name on two rivals, Gruber and Cramer, from P Lorillard Company. At the casual mention the one man was so stunned he dropped his fork, and both said there was something in the name. Rupert immediately phoned his trademark department in Stellenbosch and asked that the name Peter Stuyvesant be registered worldwide.

A few days later he had occasion to phone South Africa again, from the Berkshire Hotel in New York. His group was having a sales conference in Durban. ‘Have you registered Peter Stuyvesant?’ was his first question. No, came the voice over the transatlantic line, the meeting had decided the name was unpronounceable – nobody would remember it. ‘We must think of an easier name, like General Lee.’ Rupert hit the roof. ‘Lee Foo Yong, I suppose! If that brand name is not registered today you’re all fired!’

The worldwide registration of Peter Stuyvesant occurred without further delay, but Rembrandt had almost run the risk of not owning the trademark, which might have been snatched up by competitors. The new brand name that com-bined novelty with tradition would rapidly become the biggest international brand of all cigarettes in Europe.

The launching of Peter Stuyvesant makes a perfect case study of marketing ingenuity. With the choice of the name, the design of the packet, and the advertising and marketing the aim was ‘to create a youthful and dynamic image for a new, young international product at home in the whole world’. Rupert tells that a team of bright young salesmen, with the right appearance and dressed appropriately, were selected to sell the dynamic new product. For maximum effect, each new town and city was invaded by a convoy of panel vans emblazoned with the Peter Stuyvesant packet and the slogan that became world-famous: ‘International passport to smoking pleasure.’

The new cigarette was so popular that during the launch in the Netherlands, the vans were besieged in the street by customers begging for stock for their local tobacconist. And the marketing was so effective that the group even received letters from customers wanting to procure the ‘international passport’!

Timing played an important role in the success. Rupert’s view of business people as ‘cats on a hot tin roof’ created a spirit of urgency that could inspire miracles. Barely a month after the signing of the contract in America the new product was launched successfully on the Rand (the industrial heartland of South Africa) on 11 August 1954, backed by a massive advertising campaign in various media. At the planning meeting held fourteen days before, Rupert’s message had been brief and to the point: ‘The question is who is going to be first.’ Eighteen years later, in 1972, Rupert observed that, for all the money, technology and factories at their disposal today, they could never achieve what they did in those few hectic weeks in 1954 – ‘because necessity is the mother of invention. If one decides something can’t be done in a week, it can drag on for a year.’

The factory at Paarl was buzzing. It was a race against time. They had to be first on the market with the new miracle filter. Their competitors must get no inkling: the atmosphere was conspiratorial, the excitement palpable. It was teamwork like never before.

When the first Peter Stuyvesant cigarettes came off the conveyor belt in Paarl, two Rembrandt representatives travelled through the night to deliver them to Rupert, bringing to an end his much-needed holiday in the Kruger National Park. Initially the factory could not keep up with the demand. Rupert himself helped to pack packets into cartons. ‘During the day we worked in Stellenbosch and in the evening we went to Paarl to “catch” cigarettes,’ he relates. ‘The response of the smoking public was astounding.’ Smokers were kept informed by the media of when Stuyvesant would be available in their area, and the cigarettes were snapped up. Within three months sales had rocketed from 100% to 1 364%. Six months later it hit 2 066% and, nine months after the launch, 3 730%. Within just one year it was the most sought-after cigarette in South Africa, with sales having increased by a mind-boggling 4 758%.

Rupert had beaten British American Tobacco (BAT) in the South African race. BAT only managed to release its Rex King Size with the Estron filter on the market in October 1954.

Rupert was extremely proud of the new product’s design and on occasion referred to Peter Stuyvesant as the ‘elusive Pimpernel’ because the cigarette ‘reminds me of the well-known and charming young nobleman in Baroness d’Orczy’s works who saved so many lives during the French Revolution’.

Temperate in his habits, he himself smoked Peter Stuyvesant Extra Mild (or Dunhill Infinite) – mostly ten to twelve and at the utmost twenty cigarettes a day. The ‘myrrh and incense’ occupied his hands while pondering his next move, he said, and helped him concentrate during tense interviews. He refused to concede, however, that Peter Stuyvesant was his favourite. ‘I never discuss the relative merits of the brands we produce, and in fact I try not to tell my friends which brands belong to us. I want each of the brands to fly under its own merits, which is why we maintain a separate sales staff for each one.’3

Soon after the arrival of the first Peter Stuyvesants on the market Rupert sent a carton of the distinctive red, white and blue packets to Reemtsma in Germany. Reemtsma, accustomed to quick action, found the packaging amazing and congratulated Rupert in a cablegram: ‘Muster Stuyvesant angekommen stop Filter Mischung und Packung volkommen in Ordnung stop Meine Glück wünsche.’ This was followed by a letter in which he declared that nothing about the packet could be improved upon. He had had the cigarettes thoroughly tested by his own experts, including his brother Hermann, and the quality was excellent. He commented as follows on the impressive packaging:

‘You were wise not to use just the surname Stuyvesant but also the first name; it gives the product a far more personal character. White packets are highly problematic, since they can create an impression of coldness if not accompanied by warm colours. That is exactly what you have done here. The gold on the packet, which sometimes looks heavy, is used very subtly. You neatly circumvented the danger of black by using a paler shade that looks more like olive green. The asymmetrical red stripe running halfway round the packet creates a sense of quality and unique distinctiveness that I have never seen in any other packaging. This asymmetry imparts a dynamic vitality to the packet and a self-assured image, suggesting that this is an established brand and its manufacturer is definitely a company of stature.’ [Our translation.]4

Impressed as he was with Peter Stuyvesant, Reemtsma remained sceptical about the future of filter tips in Germany. On account of increased competition he made various attempts to subdivide existing brands; in Rupert’s views attempts that would not succeed, even though they were based on the accepted rules of the old ‘Markentechnik’ (the German marketing technique). ‘The consumer apparently regarded each brand as a separate personality, hence there was a strong need for new brands. The rest of the pre-war brands were practically dead and exhausted.’

The new cigarette was soon introduced successfully in South Africa, the United Kingdom, Belgium, the Netherlands, Australia and elsewhere.

The year 1954 in which they ventured on the purchase of Rothmans was also the year in which the Rembrandt Group took on the world market in earnest. By 1955 Rembrandt South Africa had a capital base of £1 000 000, while that of Rembrandt Beherende Beleggings was £750 000. In the same year Rothmans of Pall Mall was established in Australia. After initial losses Rothmans also started showing good results in Canada, with the first profit declared in 1960. Rothmans Canada operated with a very strong board after Rock City Tobacco Corporation had been sold to Rothmans in the Carreras deal. Rock City’s chairman was Louis Saint-Laurent, former prime minister of Canada, who was succeeded in the election of 1957 by John Diefenbaker, the Canadian leader who would agitate against South Africa’s continued membership of the Commonwealth a few years later.

When looking for a Canadian chairman for Rothmans Canada, Rupert was advised that no one was better suited for the job than Saint-Laurent. With his help Rupert appointed as directors the kind of distinguished people on whom he felt he could depend. One was Charles Massey, chairman of Lever Brothers, of whose Toronto family it was said that there were only two families in that city: ‘The Masseys and the masses.’ Another was Robert H (Bob) Winters, president of Rio Tinto Mining Company and a later minister of trade and industry, who subsequently only just lost out to premier Pierre Trudeau for leadership of the Liberal Party of Canada. Also on the board was a confidant of Rupert’s who provided important international contacts and advice, the British war hero Sir Francis de Guingand, who would become chairman of the South Africa Foundation.

Rothmans Canada turned into a profitable success story, like the South African operations, while the other overseas companies also started doing well. Rupert’s expansion abroad was stimulated by his experience in South Africa, where Rothmans – the ‘English’ cigarette – had the highest sales in the Afrikaans-speaking Free State, while Rembrandt – the ‘Afrikaans’ cigarette – sold best in Natal, often described as the ‘last outpost of the British Empire’. It convinced Rupert that patriotism counted for nothing when somebody took money from his pocket, and that he could fare as well internationally as at home, while simultaneously countering a possible local price war.

With time, it became evident that Rupert was achieving higher profits overseas than on the home front.

Everywhere Rupert stuck to his policy of working through partnerships. Rembrandt’s overseas investments took on a particular pattern. First, the best possible local partners were found and a new company established. In the initial phase and with the launching, advice and assistance were given from South Africa on an ongoing basis. Rembrandt would revitalise the new acquisition. Through cost-cutting and an emphasis on marketing and advertising the business would take off on its own steam. After the local partners had been trained and empowered, however, the Rembrandt Group moved into the background.

The United States was a case in point. Here Rupert obtained a foothold in the market through two small companies: Riggio Tobacco on Long Island in New York and, later, Larus Brothers in Richmond, Virginia, that concentrated on pipe tobacco. In 1954 Riggio was struggling. Rupert summoned Kotie Naudé, who headed his operations in the USA, and Paul Erasmus, then in charge of finance, to his Manhattan hotel. Erasmus, who would later succeed Hoogenhout as the financial head of the whole group and also become a director, relates that this was his first personal encounter with Rupert. When Rupert asked him if they had $22 000 to buy out Frank Riggio’s shares, he confessed somewhat sheepishly that their bank balance stood at $3 000. Rupert was flabbergasted: ‘How do you run your affairs?’ he wanted to know. Naudé had to take the young Erasmus aside and whisper to him that one does not actually say ‘No’ to Anton Rupert.

From Rupert’s bedroom, Erasmus phoned the vice president of finance of Universal Leaf Tobacco, the group’s tobacco leaf-supplier in Richmond. He explained that he had to ask a favour: Rupert urgently needed $22 000 to take over Riggio. The financial officer asked Erasmus to hold on while he consulted the tobacco baron Herbert W Jackson Jr, president of Universal. When he returned, he said: ‘Mr Erasmus, Mr Jackson is very impressed by your Mr Rupert. That young man is going places.’

The Americans, who by that time had got to know Rupert well, were especially impressed by his knowledge of the American Civil War. ‘He knows more about it than we do,’ they once told Erasmus. The good impression Universal Leaf’s bosses had of Rupert had its origin in an unannounced visit he had paid the company one Friday afternoon in 1954, when he met Jackson Jr and the chief executive officer, Gordon J Crenshaw, for the first time. ‘He said he intended to grow his company into a much larger one and to go into many other countries, and he would like to give us all his business,’ Crenshaw related. ‘Mr Jackson and I looked at each other and thought that it was likely that we were being offered 100% of virtually nothing.’

In retrospect, however, Universal Leaf Tobacco considered Rupert’s arrival one of the most important events in the company’s history. At first tentatively and then more and more extensively, Universal helped finance Rupert’s needs as he expanded internationally and became one of the world’s biggest cigarette manufacturers. A book on the American company’s history refers to the relationship as follows: ‘A man with a keen sense of loyalty to those who aided him along the way, he still gives public recognition to Universal (for whom he remains a key customer) for being willing to listen and then make a commitment to him on that Friday afternoon in 1954.’5

When Erasmus rejoined Rupert and Naudé after his successful phone call to Universal, he was congratulated on securing the money. Rupert put his hand on Erasmus’s shoulder as they left to go and have a meal: ‘You know, Mr Erasmus, the best training school for an accountant is poverty!’6

The money was transferred to Chemical Bank in New York on the same day, and Rupert could take over Riggio. They had to close down the factory a year later, however, though Rembrandt continued to market the Lexington brand successfully in South Africa.

Erasmus discovered that Rupert shared his interest in music and the arts and in time they became close friends. What often struck him about Rupert was his unflagging energy, one of his most distinctive characteristics. He could carry on working and concentrating for hours on end and even get up early on Saturdays and walk till late afternoon through the streets of cities like London, Rome and New York, keenly interested in exhibitions and window displays, always on the lookout for innovations and new developments in the industries in which he was involved. And then he could still attend concert performances at night.

Rupert prided himself on not having missed a single day’s lessons throughout his school career. Although he was never an athlete or a sportsman, he enjoyed excellent health despite the gruelling pace of his business activities that was not conducive to a balanced lifestyle – he often described aeroplanes as ‘flying hospitals’. But, as he himself pointed out in his book Leiers oor leierskap, health and physique are not preconditions for achievement. ‘A great mind can control a weak body. Roosevelt was a cripple, Julius Caesar an epileptic, and Napoleon had ulcers. Fat or thin is also of no consequence, because Bismarck was obese, Gandhi skin and bone. And yet they all had boundless energy.’

In 1958 Philipp Reemtsma visited South Africa and signed an agreement to market Peter Stuyvesant in Germany. ‘Peter Stuyvesant gave us the wings of Mercury and my men sold it across the world,’ says Rupert. ‘The airline labels on our briefcases not only reflected the spirit of movement, but also became the personification of our theme: “International passport to travelling pleasure”.’ On his South African visit Reemtsma also had a good look at Rembrandt’s advertising and noted the success of the ‘international passport’ slogan.

Before the launch of the brand in Germany at the beginning of 1959, Rupert made a thorough study of the post-war market. Apart from the preference for new brands, he identified three motives that were inherent in the ‘German character’: Heimweh (nostalgia for home), Lebenschmerz (lit. ‘existential sorrow’, melancholy) and Fernweh (longing for faraway places). Whereas the Peter Stuyvesant brand, with its cosmopolitan image, would clearly not appeal to Heimweh, it played right into the hands of Fernweh. Rupert emphasises that Stuyvesant’s theme radiated ‘joy of living’, something similar to the old motto Kraft durch Freude (Power through Joy).7

The German campaign linked the notion of pleasure with international travel. It was enthusiastically promoted by Fritz Bühler, a marketing expert from Basle appointed by Reemtsma to design a dynamic German version of the ‘international passport’ theme. He encapsulated it in the slogan ‘Der Duft der grossen weiten Welt’ (The aroma of the great wide world). It was dead right for Germany. Here was a nation hemmed in by other countries on all sides, with only a short coastline in the north. For their holidays they poured across their borders. ‘As an escape from unpleasant wartime memories and the unpleasant past, Peter Stuyvesant conveyed to young and old the idea of easily achievable affluence and hope beyond their borders,’ relates Rupert. Aeroplanes became a regular feature of Stuyvesant ads at a time when air travel was little more than a dream to impoverished Germans.

Other factors also helped to strengthen the campaign, like the new, distinctive and youthful image of the packet. Modern media like radio, television and the cinema were used for the first time. For the first time since the war march music was used in German advertising: the Sportsmaster tune became a hit. Panel vans painted with the logo were used by sales people whose appearance matched the brand.

The new cigarette eventually made history in the field of German brands. A long-time associate of Reemtsma, the marketing expert Hans Domizlaff, architect of Markentechnik, a focus on pre-war brands, had to admit: ‘It’s beyond my comprehension.’ Rupert explains that the older marketing experts were not enthusiastic about Peter Stuyvesant’s phenomenal growth rate – it was generally accepted that a fast-growing brand would also fade quickly. In his view, the ‘philosophy’ of the brand was such that it was planned from the first day to remain youthful and attractive to young and old. He has been told, in Germany and elsewhere, that Peter Stuyvesant confounded the expectations of many marketing experts and that the phrase ‘like Peter Stuyvesant’ often cropped up in marketing meetings. An important prerequisite for the brand’s success had been the fact that it was based on a sound marketing decision – giving the Germans something that appealed to them specifically. ‘But in the final analysis − even more important than advertising − success depends on giving value for money through constant quality control. A good product benefits from a brand and advertising; for a poor product, it can mean “sudden death”.’

Rupert’s passion for brands and marketing techniques has benefited from his keen eye for colour and composition. Ever since his boyhood visit to his uncle Fred Knoetze’s newspaper in Somerset East he had been interested in printing and colour. He actually made a careful study of colours, their qualities and effects. According to Hans Knoetze, public relations officer of the Rembrandt Group, Rupert’s exceptional feel for colours and textiles is reflected in the great quantity of ties and the metres of material for tailor-made suits he bought to share with people as gifts. Knoetze relates that on birthdays, people would often be called in by Rupert to choose a tie from an amazing collection. ‘But you weren’t supposed to take too long to choose; with his marketing instinct, he expected you to know instantly what you liked!’8

In 1959, a year after Peter Stuyvesant was launched in Germany, Philipp Reemtsma died. Rupert flew to Hamburg to visit him on his deathbed. He considered Reemtsma his ‘third father’, as Dr Stals had been a ‘second father’ – besides his own parents, the two older men had had a profound influence on his life and thought. At the hospital he was refused admission to the sickroom. He suspected Reemtsma’s wife Gertrud was behind it.

During his lifetime Reemtsma had exacted three promises from his ‘adoptive son’: Rupert was to take over his business, groom his nephew Hermann Hinrich to run it, and see to it that his own young son Jan Philipp went to a Swiss boarding school. Immediately after her husband’s death Gertrud Reemtsma called a directors’ meeting from which Rupert, waiting at the door, was excluded. When summoned at last, he was told that the group would continue without him. He offered to market their brands, but that, too, was refused. Leaving, Rupert declared in that case he could do nothing more for them. One man who tried in vain to have the decision reversed was Hans Domizlaff, the marketing expert who had helped Reemtsma to develop some of the most successful German cigarette brands and who had come to know Rupert well.9

Rupert was deeply disappointed by the decision, as an interest in Reemtsma would have made his group the second largest tobacco group in the world. He was also prevented from keeping any of his promises to his old friend.

Gertrud Reemtsma continued with the business until Reemtsma’s surviving son, Jan Philipp, who was more interested in academia, persuaded her to sell most of the family shares to the coffee company Tchibo. The young Reemtsma, who used his fortune to finance left-wing institutions, was kidnapped in 1996 and released after 33 days for a ransom of 15 million euros.