From 1935 onward, a reformed cartel, known as the German Cigarette Manufacturers Association (Interessengemeinschaft deutscher Zigarettenhersteller), coordinated manufacturers that combined made up over 96% of the market (Lindner, 2008, p. 148). Firms became unable to increase profits by boosting sales or pushing up their prices.
However, let us keep in mind, the cartel was oriented towards sales, not the purchasing of raw material. A firm could still increase its profits by pushing down production costs, in which the price of tobacco factored decisively. Among German cigarette manufacturers, Reemtsma was the only one with enough resources to consider the establishment of multiple buying offices in southeastern Europe.
[…]
As far as the logistics of sourcing raw material are concerned, the strategy of simply supervising the commercial chain allowed Reemtsma to operate without much sunk capital. The firm retained enough flexibility to quickly adapt its buying campaigns, depending on the conditions on the different Greek, Bulgarian, and Turkish supply markets.⁸
The small landholders that produced most Oriental tobacco could no longer resort to collective action and refuse to sell to Reemtsma’s agents to push the sale price up. Taking advantage of the telegraph and the capacity to deploy agents in multiple locations at the same time, the firm could simply decide to decrease its purchases in one place and increase them elsewhere.⁹
[…]
Reemtsma’s size allowed it to overcome some of the bureaucratic hurdles that often bogged down other companies whenever they engaged in trade through the clearing system of payments. One of the system’s disadvantages was that it was ‘cumbersome and frequently ineffective in matching buyers and sellers. The byzantine regulations imposed serious costs and created massive impediments in the flow of information’ (Gross, 2015, p. 198).
This meant that firms with the capacity to mobilise large bureaucratic resources, or could at least use those of a bank willing to collaborate, were at an advantage over their smaller competitors. Reemtsma was the only cigarette company able to operate with amounts of tobacco that could make up for high-value shipments of German manufactures. Clearing agreements were mutually beneficial as long as the value of the goods traded in one direction remained similar to that of the goods traded in the opposite one. For that reason, a transaction that was paired with another compensating transaction was more likely to be acceptable to both the German and the Greek governments.
Reemtsma did not produce any goods that could be sold in Greece. However, whenever the firm wanted to buy a large shipment of tobacco, a German bank would find a German exporter willing to sell its goods in Greece, and have a Greek bank find a buyer. Reemtsma would then easily import the raw material that it needed.¹¹
Sometimes it was the bank working with a German exporter that would approach Reemtsma in the hope of matching the export transaction with one of Reemtsma’s tobacco purchases.¹² The presence of the company’s top manager Philipp F. Reemtsma in the board of directors of Deutsche Bank in the mid-1930s was probably conducive to the documented instances of collaboration between the bank and the cigarette manufacturer (Compass, 1935, p. 1376).
(Emphasis added.)
Click here for events that happened today (November 5).
1886: Sadae Inoue, Axis general who commanded the Imperial forces at the Battles of Peleliu and Angaur, was born.
1895: Walter Wilhelm Gieseking, Axis composer, started his life.
1930: Luigi Facta, Italy’s last prefascist Prime Minister (but later member of the Fascist Senate), expired.
1934: Carl Friedrich Goerdeler became the Third Reich’s Price Commissioner in response to complaints of price gouging.
1935: Heavy rains halted the Fascist offensive in northern Abyssinia for two days.
1936: The Third Reich’s head of state told his top lieutenants that the German aim in the Spanish Civil War was not entirely to aid the Spanish Nationalists, but rather, to prolong the conflict to occupy the attention of the United Kingdom and France, and to continue to widen the chasm between the United Kingdom and Fascist Italy. Berlin published a new penal code introducing heavy penalties for slandering Adolf Schicklgruber or the memories of the late Paul von Hindenburg, Horst Wessel and Albert Leo Schlageter. This code also subtracted duelling from the list of offenses. Finally, Columbia-Haus Concentration Camp in Berlin closed.
1937: As thirty thousand Imperialists landed practically unopposed at Hangzhou Bay, and Berlin and Warsaw signed a joint declaration on minorities, guaranteeing proper reciprocal treatment and protection of the Polish minority in the Reich and the German minority in Poland, Schicklgruber announced his plan at a secret meeting in the Chancellery in Berlin for an expansionist foreign policy to secure Lebensraum by force.
1940: The Axis pocket battleship Admiral Scheer sunk the British armed merchant cruiser HMS Jervis Bay.
1941: At a conference with Emperor Showa, Imperial leaders decided to go to war with the United States, United Kingdom, and the Netherlands in early December should diplomatic relations with the U.S. did not improve by December 1st.
1942: Berlin ordered that all Jews in concentration camps within the Third Reich to be deported to the Auschwitz and Majdanek camps. Coincidentally, the Axis forces on Madagascar surrendered. Axis intelligence also reported that a large Allied fleet had departed Gibraltar.
1943: An unidentified flightcraft dropped five bombs (only four would detonate) on Vatican City; Benito Mussolini claimed that this was an attack by U.S. flightcraft, while Allied headquarters disclaimed any knowledge of the unwarranted attack. It would not be until 2010 that we discovered that Axis politician Roberto Farinacci was behind the attack.
1944: An Axis V-2 rocket hit Collier Row in Essex County near London (now a part of London) at 0035 hours. Another rocket hit Penhurst, Kent, southern England at 0130 hours. At 0745, a third rocket hit Tooting Bec Common in southwest London. A fourth rocket hit an iron bridge in Southwark Park Road, Bermundsey, London at 1045 hours, damaging 250 feet of railway. At 1713 hours, yet another rocket hit Grovedale Road, Islington, London, killing 31 and seriously injuring 84, but it was another disastrous night for the Luftwaffe when five Heinkel bombers launching V-1 flying bombs lost. Seventeen crews from the Luftwaffe 11/KG53 airborne that night had instructions to carry out attacks on Portsmouth in southern Britain, yet none of the bombs hit the town. Lastly, the Axis’s 4.Armee recaptured Goldap, East Prussia.
1990: Rabbi Meir Kahane, Hebrew neofascist, succumbed to homicide.