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The Macdonald Tobacco Company was founded in 1858 by William Christopher Macdonald and his brother Augustine. Initially called McDonald Brothers and Co., the company procured tobacco leaf from suppliers in the southern United States that was converted to pipe and chewing tobacco at their small Montreal facility. While the use of tobacco products was growing in popularity, the American Civil War afforded the fledgling company an opportunity that brought enormous financial success leading to Macdonald Brothers becoming the preeminent company in the field in Canada. Virtually all of the tobacco growers were located in U.S. states that were part of the Confederacy and with the onset of the war, the northern states faced a huge shortage of tobacco leaf. Because Macdonald Tobacco was a Canadian company, they were able to buy the tobacco leaf from the Southern United States and have it brought by ocean cargo vessels to Montreal. There, it was processed then the finished product was shipped to the tobacco-starved market in the northern United States.
At the end of the American Civil War, the company continued to prosper and by the early 1870s had more than five hundred employees. During this period, William Macdonald bought out his brother's stock position.
Deeply proud of his Scottish heritage, William C. Macdonald used the image of a Scottish Lass on the packaging of Macdonald tobacco products for nearly a century.
A lifelong bachelor who actually disliked tobacco, on his death in 1917 Macdonald bequeathed his company to Walter and Howard Stewart, the two sons of company manager David Stewart. Walter Stewart became president and under his guidance the company extended production to cut pipe tobacco and tobacco for "roll your own" cigarettes. In 1922, packaged cigarette production was added which quickly became the mainstay of the business. During the 1960s, David M. Stewart (1920–1984), expanded the business into the manufacturing of cigars.
The Macdonald Tobacco company remained in the Stewart family until 1974 when David M. Stewart sold it to the American tobacco giant R.J. Reynolds Tobacco Company who, in light of the uncertainty created by the Quebec separatist movement, relocated the head office to Toronto, Ontario. Most of those assets were later purchased by Japan Tobacco.