The Koh-i-Noor pencil was launched in 1889. It was named after a well-known Indian diamond, Koh-i-Noor (the Mountain of Light). In 1852, the diamond was included in the Crown Jewels in Great Britain, becoming a symbol of beauty and wealth.

That was also the reason why the pencil was three times more expensive (it cost 20 kreuzers in the era) than competitive products. It was characterized by an atypical surface finish, which, in combination with black lead, was a symbolic expression of loyalty to the House of Habsburg.

It was sold in seven degrees of hardness invented by Franz von Hardtmuth. Unlike competitive products, it used letters to mark hardness (while the competitive products used numbers from 1 to 6). To make things simpler, the letters were later replaced with a combination of numbers and letters.

Another thing that was new was that the letters stood for English terms (not French ones as until then).
As a result, soft pencils bore the marking of 6B–2B, with letter B referring to black but at the same time to Budweis, pointing out to its origin from the Czech town of České Budějovice.
Medium pencils were marked starting with the softer pencils and continuing to harder ones, i. e. from B to HB (the HB abbreviation referring to the trademark HB).

And finally, hard pencils formed the second half of the hardness scale from H to 6H, with “H” standing for hard but also reminiscent of the name Hardtmuth).
Despite the resistance of the competition, this marking system became generally used.

Source: Exhibition of the National Technical Museum in Prague, Hardtmuth: From Charcoal to a Pencil Empire.