B.G. Arnold, the first, and Hermann Sielcken, the last of the American "coffee kings"—John Arbuckle, the original package-coffee man—Jabez Burns, the man who revolutionized the roasted coffee business by his contributions as inventor, manufacturer, and writer—Coffee-trade booms and panics—Brazil's first valorization enterprise—War-time government control of coffee—The story of soluble coffee
In the history of the coffee trade of the United States, several names stand out because of sensational accomplishments, and because of notable contributions made to the development of the industry. In green coffee, we have B.G. Arnold, the first, and Hermann Sielcken the last, of the "coffee kings"; in the roasting business, there was John Arbuckle, the original national-package-coffee man; and in the coffee-roasting machinery business, Jabez Burns, inventor, manufacturer, and writer.
The First "Coffee King"
Benjamin Green Arnold came to New York from Rhode Island in 1836 and took a job as accountant with an east-side grocer. He was thrifty, industrious, and kept his own counsel. He was a born financial leader. Fifteen years later he was made a junior partner in the firm. By 1868, the bookkeeper of 1836 was the head of the business, with a line of credit amounting to half a million dollars—a notable achievement in those days.
Mr. Arnold embarked upon his big speculation in coffee in 1869. For ten years he maintained his mastery of the market, and in that time amassed a fortune. It is related that one year's operations of this daring trader yielded his firm a profit of a million and a quarter of dollars.
B.G. Arnold was the first president of the New York Coffee Exchange. He was one of the founders of the Down Town Association in 1878. The president of the United States was his friend, and a guest[Pg 518] at his luxurious home. But the high-price levels to which Arnold had forced the coffee market started a coffee-planting fever in the countries of production. Almost before he knew it, there was an overproduction that swamped the market and forced down prices with so amazing rapidity that panic seized upon the traders. Few that were caught in that memorable coffee maelstrom survived financially.
Arnold himself was a victim, but such was the man's character that his failure was regarded by many as a public misfortune. Some men differed with him as to the wisdom of promoting a coffee corner, and protested that it was against public policy; but Arnold's personal integrity was never questioned, and his mercantile ability and honorable business dealings won for him an affectionate regard that continued after his fortune had been swept away.
After the collapse of the coffee corner, Mr. Arnold resumed business with his son, F.B. Arnold. He died in New York, December 10, 1894, in his eighty-second year. The son died in Rome in 1906. The business which the father founded, however, continues today as Arnold, Dorr & Co., one of the most honored and respected names in Front Street.
Hermann Sielcken, the Last Coffee King
If B.G. Arnold was first coffee king, Hermann Sielcken was last, for it is unlikely that ever again, in the United States, will it be possible for one man to achieve so absolute a dictatorship of the green coffee business.
There never was a coffee romance like that of Hermann Sielcken's. Coming to America a poor boy in 1869, forty-five years later, he left it many times a millionaire. For a time, he ruled the coffee markets of the world with a kind of autocracy such as the trade had never seen before and probably will not see again. And when, just before the outbreak of the World War, he returned to Germany for the annual visit to his Baden-Baden estate, from which he was destined never again to sally forth to deeds of financial prowess, his subsequent involuntary retirement found him a huge commercial success, where B.G. Arnold was a colossal failure. It was the World War and a lingering illness that, at the end, stopped Hermann Sielcken. But, though he had to admit himself bested by the fortunes of war, he was still undefeated in the world of commerce. He died in his native Germany in 1917, the most commanding, and the most cordially disliked, figure ever produced by the coffee trade.
Hermann Sielcken was born in Hamburg in 1847, and so was seventy years old when he died at Baden-Baden, October 8, 1917. He was the son of a small baker in Hamburg; and before he was twenty-one, he went to Costa Rica to work for a German firm there. He did not like Costa Rica, and within a year he went to San Francisco, where, with a knowledge of English already acquired, he got a job as a shipping clerk. This was in 1869. A wool concern engaged him as buyer, and for about six years he covered the territory between the Rockies and the Pacific, buying wool. On one of these trips he was in a stage-coach wreck in Oregon and nearly lost his life. He received injuries affecting his back from which he never fully recovered, and which caused the stooped posture which marked his carriage through life thereafter. When he recovered, he came to New York seeking employment, and obtained a clerical position with L. Strauss & Sons, importers of crockery and glassware. In 1880, married Josephine Chabert, whose father kept a restaurant in Park Place.
Sielcken had learned Spanish in Costa Rica, and this knowledge aided him to a place with W.H. Crossman & Bro. (W.H. and George W. Crossman) merchandise commission merchants in Broad Street. He was sent to South America to solicit consignments for the Crossmans, and was surprisingly successful. For six or eight months every South American mail brought orders to the house. Then, as the story goes, his reports suddenly ceased. Weeks and months passed, and the firm heard nothing from him.
The Crossmans speculated concerning his fate. It was thought he might have caught a fever and died. It was almost impossible to trace him; at the same time it distressed them to lose so promising a representative. Giving up all hope of hearing from him again, they began to look around for some one to take his place. Then, one morning, he walked into the office and said, "How do you do?" just as if he had left them only the evening before. The members of the firm questioned him eagerly. He answered[Pg 519] some of their questions; but most of them he did not. Then he laid a package on the table.
"Gentlemen", he said, "I have given a large amount of business to you, far more than you expected, as the result of my trip. I have a lot more business which I can give to you. It's all in black and white in the papers in this package. I think any person who has worked as hard as I have, and so well, deserves a partnership in this firm. If you want these orders, you may have them. They represent a big profit to you. Good work deserves proper reward. Look these papers over, and then tell me if you want me to continue with you as a member of this firm."
After the Crossmans had looked those papers over they had no doubt of the advisability of taking Sielcken into partnership. He was admitted as a junior in 1881–82 and became a full partner in 1885. For more than twenty years Hermann Sielcken was the human dynamo that pushed the firm forward into a place of world prominence. He was the best informed man on coffee in two continents; and when, in 1904, the firm name was changed to Crossman & Sielcken—W.H. Crossman having died ten years before—he was well prepared to assert his rights as king of the trade. He proved his kingship by his masterful handling of valorization three years later.
Sielcken was many times credited with working "corners" in coffee; but he would never admit that a corner was possible in anything that came out of the ground; and to the end, he was insistent in his denials of ever having cornered coffee. As a daring trader, he won his spurs in a sensational tilt with the Arbuckles in the bull campaign of 1887. Because of this, he became one of the most feared and hated men in the Coffee Exchange. For a while, coffee did not offer enough play for his tremendous energy and ambition. He embarked in various enterprises—among them, the steel industry and railroads. No one was too big for Sielcken to cross lances with. He bested John W. Gates in a titanic fight, in American Steel and Wire. He quarreled with E.H. Harriman and George J. Gould over the possession of the Kansas City, Pittsburgh, and Gulf Railroad, now known as the Kansas City Southern, and, backed by a syndicate of Hollanders, obtained control.
While still busy with the Kansas City Southern enterprise Sielcken began work on the coffee valorization scheme that he carried to a successful conclusion in spite of the law of supply and demand and the interference of the Congress of the United States. Valorization by the São Paulo government, and by coffee merchants, having proved a failure; Sielcken showed how it could be done with all the American coffee merchants eliminated—except himself. In this way, he secured for himself the opportunity he had long been seeking—the chance to bestride the coffee trade like a colossus. The story is told farther along in this chapter.
When his partner, George W. Crossman, died in 1913, it was discovered that the two men had a remarkable contract. Each had made a will giving one million dollars to the other. Then Sielcken bought his late partner's interest in the firm for $5,166,991.
His first wife having died at Mariahalden, his home in Baden-Baden, seven years before, Sielcken married at Tessin, Germany, in 1913, Mrs. Clara Wendroth, a widow with two children, and the daughter of the late Paul Isenberg, a wealthy sugar planter of the Hawaiian Islands. At[Pg 520] that time the coffee king was dividing his time between the Waldorf-Astoria, New York, which he called his American home, and his wonderful estate in the fatherland. This latter was a two-hundred-acre private park containing four villas and a marvelous bath-house for guests besides the main villa; a rose-garden in which were cultivated one hundred sixty-eight varieties on some twenty thousand bushes; a special greenhouse for orchids; and landscaped grounds calling for the service of six professional gardeners and forty assistants. Here he delighted to entertain his friends. Frequently, there were fifteen to twenty of them for dinner on the garden terrace; and, as the moon came up through the tall hemlocks and shone through the majestic pines brought from Oregon, a full military band from Heidelberg, adown the hillside among the rose trees, mingled its music with the dinner discussions. There was nothing at that dinner table but peace and harmony, although every language in Europe was spoken; for Sielcken knew them all from his youth. Sometimes he entertained his guests with stories of his California life, and sometimes with those of shipwrecks in South America.
All the post-telegraph boys in Baden knew every foot of the sharply winding road up the Yburg Strasse to Villa Mariahalden; and the guests therein have counted more than eighty cables received, and more than thirty sent in a single day. And those daily cable messages were to and from all quarters of the globe, and to and from the master, who handled them all, without even a secretary or typewriter. Nowhere in the entire establishment was there even an appearance of business, except as the messages came and went on the highway. Sielcken manifested his greatest delight in showing his friends his orchids, his roses, his pigeons, his trout, and his trees.
Like Napoleon, this merchant prince required only five hours sleep. It was his custom to go to bed at one and to be up at six. Did he wish to know anything that the cables did not bring him, he jumped into his eighty-horse-power Mercedes with a party of guests and was off with the sunrise, down the Rhine Valley, on his way to Paris or Hamburg; and before one realized that he was gone, he was back again.
In 1913, Sielcken admitted to partnership in his firm two employees of long service, John S. Sorenson and Thorlief S.B. Nielsen. He went to Germany in 1914, shortly before the beginning of the World War, and remained at Mariahalden until he died in 1917. Sielcken never would believe that war was possible until it had actually started. Up to the last moment in July, 1914, he was cabling his New York partner that there would probably be no hostilities. He lost a bet of a thousand pounds made with a visiting Brazilian friend a few days before war was declared. The guest believed war inevitable and won. A few days before Sielcken's death the old firm was dissolved under the Trading with the Enemy Act, being succeeded by the firm of Sorenson & Nielsen. The former had been with the business thirty-four years, and the latter thirty-two years. The alien property custodian took over Sielcken's interest for the duration of the war.
Rumors in 1915 that the German government was extorting large sums of money from Sielcken brought denials from his associates here. After the war, it was confirmed that no such extortions took place.
Sielcken always claimed American citizenship. There was a widely circulated story, never proved, that he tore up his citizenship papers in 1912 when the United States government began its suit to force the sale of coffee stocks held here under the valorization agreement. The Supreme Court of California in 1921 decided that he was a citizen, and his interests and those of his widow, amounting to $4,000,000, held by the alien property custodian, were thereupon released to his heirs. It appeared in evidence that he took out his citizenship papers in San Francisco in 1873–74, but lost them in a shipwreck off the coast of Brazil in 1876. The San Francisco fire destroyed the other records; but under act of legislature re-establishing them, the citizenship claim was declared valid.
Hermann Sielcken never liked the title of "coffee king." He was once asked about this appellation, and turned smartly upon the interviewer.
"Nonsense," he said. "I am no king. I don't like the term, because I never heard of a 'king' who did not fail."
Sielcken had no use for titles. T.S.B. Nielsen says that at a dinner party in Germany[Pg 521] in 1915 he heard Sielcken explain to a large number of guests that the United States was the best country because there a man was appraised at his real value. What he did, and how he lived, counted—not birth or titles.
While his greatest achievement was, of course, the valorization enterprise, he played a not unimportant rôle in the Havemeyer-Arbuckle sugar-trust fight. He aided the late Henry O. Havemeyer to secure control of the Woolson Spice Co. of Toledo in 1896, so as to enable the Havemeyer's to retaliate with Lion brand coffee for the Arbuckles' entrance into the sugar business. The Woolson Spice Co. sold the Lion brand in the middle west, and the American Coffee Co. sold it in the east. That was the beginning of a losing price-war that lasted ten years. At the end, Sielcken took over the Woolson property at a price considerably lower than originally paid for it. In 1919, the Woolson Spice Co. brought suit against the Sielcken estate, alleging a loss of $932,000 on valorization coffee sold to it by Sielcken just after the federal government began its suit in 1912 to break up the valorization pool in the United States. The Woolson Spice Co. paid the "market price", as did the rest of the buyers of valorization coffee; but it was charged that Sielcken, as managing partner of Crossman & Sielcken, sold the coffee to the Woolson Spice Co., of which he was president, "at artificially enhanced prices and in quantities far in excess of its legitimate needs, concealing his knowledge that before the plaintiff could use the coffee, the price would decline." Sielcken collected for the coffee sold $3,218,666.
When the United States government crossed lances with Sielcken in 1912 over the valorization scheme, it looked for a time as if he would be unhorsed. But men and governments were all the same to Sielcken; and at the end of the fight it was discovered that not only was he undefeated—for the government never pressed its suit to conclusion—but that his prestige as king and master mind of the coffee trade had gained immeasurably by the adventure.
Hermann Sielcken typified German efficiency raised to the nth power. He was a colossus of commerce with the military alertness of a Bismarck. His mental processes were profound, and his vision was far-reaching. He was a resourceful trader, an austere friend, a shrewd and uncompromising foe. Physically, he was a big man with a bull neck and black, piercing eyes. His policy in coffee was one of blood and iron. He brooked no interference with his plans, and he was ruthless in his methods of dealing with men and governments. Usually silent and uncommunicative, occasionally he exploded under stress; and when he did so, there was no mincing of words. He knew no fear. Newspaper criticism annoyed him but little; and he had a kind of contempt for the fourth estate as a whole, although he knew how to use it when it suited his purpose. He avoided the limelight, and never courted publicity for himself. Socially he was a princely host; but few knew him intimately, except perhaps in his native Germany.
Sielcken's widow was married in New York, February 11, 1922, to Joseph M. Schwartz, the Russian baritone of the Chicago Opera Company.
The Story of John Arbuckle
John Arbuckle, for nearly fifty years the honored dean of the American coffee trade, pioneer package-coffee man, some time coffee king, sugar merchant, philanthropist, and typical American, came from fine, rugged Scotch stock. He was the son of a well-to-do Scottish woolen-mill owner in Allegheny, Pa., where he was born, July 11, 1839. He often said he was raised on skim milk. He received a common school education in Pittsburgh and Allegheny. He and Henry Phipps, the coke and steel head, are said to have occupied adjoining desks in one of the public schools, Andrew Carnegie being at that time in another grade of the same school. He had a strong bent for science and machinery; and, although he chose the coffee instead of the steel business for his career, the basis of his success was invention. He also attended Washington and Jefferson College at Washington, Pennsylvania.
The Arbuckle business was founded at Pittsburg, in 1859, when Charles Arbuckle, his uncle Duncan McDonald, and their friend William Roseburg, organized the wholesale grocery firm of McDonald & Arbuckle. One year later John Arbuckle, the younger brother of Charles Arbuckle, was[Pg 522] admitted to the firm, and the firm name was changed to McDonald & Arbuckles. McDonald and Roseburg retired from the firm a few years later, leaving the business in the hands of the two youthful, hopeful, and energetic brothers, who under the firm name of Arbuckles & Co., soon made their firm one of the important wholesale grocery houses in Pennsylvania. Although little thinking at the time that their greatest success was to be achieved in coffee, and that a new idea of one of the partners—that of marketing roasted coffee in original packages—would make their name familiar in every hamlet in the country, yet the first two entries in the original day-book of McDonald & Arbuckles record purchases of coffee.
Prior to the sixties, coffee was not generally sold roasted or ground, ready for the coffee pot. Except in the big cities, most housewives bought their coffee green, and roasted it in their kitchen stoves as needed. John Arbuckle, having become impressed with the wasteful methods and unsatisfactory results of this kitchen roasting, had already begun his studies of roasting and packaging problems, studies that he never gave up. How, first to roast coffee scientifically, and then to preserve its freshness in the interval between the roaster and the coffee pot, continued to be an absorbing study until his death. The range of his work may be illustrated by reference to his first and his last patents. In 1868, he patented a process of glazing coffee, which had for its object the preservation of the flavor and aroma of coffee by sealing the pores of the coffee bean. Thirty-five years later, he patented a huge coffee roaster in which, more closely than in any other roaster, he felt he could approach his ideal of roasting coffee—that ideal being to hold the coffee beans in suspension in superheated air during the entire roasting process, and not to allow them to come in contact with a heated iron surface.
By 1865, John Arbuckle had satisfied himself that a carefully roasted coffee, packed while still warm in small individual containers, would measurably overcome the objections to selling loose coffee in a roasted state. So in that year (1865), although not without the misgivings of his elder brother, and even in the face of the ridicule of competitors, who derided the plan of selling roasted coffee "in little paper bags like peanuts", Arbuckles & Co. introduced the new idea, namely, roasted coffee in original packages. The story of the development of that simple idea, which soon spread from coast to coast, and of how it laid the foundations of a great fortune, is one of the romances of American business.
Although Osborn's Celebrated Prepared Java Coffee, a ground-coffee package, first put on the New York market by Lewis A. Osborn, and later exploited by Thomas Reid in the early sixties, appears to have been the original package coffee, much of the fame attached to the name of Arbuckle comes from its association with the Ariosa coffee package, which was the first successful national brand of package coffee. It was launched in 1873. The Ariosa premium list (premiums have been a feature of the Arbuckle business since 1895) includes a hundred articles. Almost anything from a pair of suspenders or a toothbrush, to clocks, wringers, and corsets may be obtained in exchange for Ariosa coupons.
The common belief that the name Ariosa was made up from the words Rio and Santos (said to be the component parts of the original blend) is erroneous. It was arbitrarily coined, though it is not known what considerations prompted it. One story has it that the "A" stands for Arbuckle, the "rio" for Rio, and the "sa" for South America.
Early in the seventies, the great business opportunities of New York City had attracted the two brothers, and a branch was established in New York in charge of John Arbuckle, the main business in Pittsburg being left in the care of his brother Charles. The growth of the New York branch soon made it necessary for Charles Arbuckle to leave the Pittsburg business in charge of trusted employees, and to come to New York. In time, the coffee business of the New York house overshadowed the grocery lines; and the latter were abandoned there, so that the entire energy of the firm in New York might be devoted to the coffee business, which thenceforth was operated under the firm name of Arbuckle Bros. The Arbuckle coffee business, which began with a single roaster in 1865, had eighty-five machines running in Pittsburg and New York in 1881.
Charles Arbuckle died in 1891, and John Arbuckle admitted as partners his nephew,[Pg 523] William Arbuckle Jamison, and two employees, William V.R. Smith and James N. Jarvie, the business continuing under the former name of Arbuckle Bros. The most important step taken by the firm while thus constituted was its entrance into the sugar refining business in 1896. That entrance had to be forced against the bitterest opposition of a so-called sugar trust, and brought on a "war" signalized by the most ruthless cutting of prices of both coffee and sugar. This war was costly to both sides; but when it had ended, Arbuckle Bros. remained unshaken in the preeminence of their package-coffee business and had acquired also great publicity and a fine trade in refined sugar.
Arbuckles were always large consumers of sugar in connection with their coffee glaze, and having introduced the package sugar idea with their customers some years before, they at last made up their minds to refine for their own needs and thus to save the profits paid to "the Havemeyers". It is generally conceded that John Arbuckle's shrewdness and business sagacity in having previously acquired the Smyser patents on a weighing and packing machine, and his control of it, really led to the coffee-sugar war. "This packing machine", said the Spice Mill, when Henry E. Smyser died in 1899, "puts him [Smyser] with the greatest inventors of our day."
The sugar trust met the Arbuckle challenge by invading the coffee-roasting field. This they accomplished by securing a controlling interest for $2,000,000 in one of the largest competing roasting plants in the country, that of the Woolson Spice Co., of Toledo, Ohio, that had in the Lion brand, a ready-made package coffee wherewith to fight Ariosa. The re-organization of the Woolson Spice Co. in 1897, when A. M. Woolson was relieved of the office of president, disclosed, among others, the names of Hermann Sielcken in close juxtaposition to that of H.O. Havemeyer on the board of directors. Both men helped to make coffee-trade history.
The trade found the coffee-sugar war the all-absorbing topic for several years. Hot debates were held on the question as to whether, on one hand, the Arbuckles had the right to enter the sugar-refining business and, on the other, as to whether the sugar-trust had a right to retaliate. The answer seemed to be "yes" in both instances.
In two years, John Arbuckle's model sugar refinery in Brooklyn was turning out package sugar at the rate of five thousand barrels a day. The Woolson Spice Co. was credited with spending unheard-of sums of money in advertising Lion brand coffee. The eastern newspaper displays alone exceeded anything ever before attempted in this line. However, many people are of the opinion that it was a tactical error on the part of the sugar interests to spend so much money advertising a Rio coffee in the central and New England states, while John Arbuckle was confining his activities to the south and the west, where there already existed a Rio taste among consumers.
The legal fight which the Arbuckles carried on with the Havemeyers for the control of the sugar business in this celebrated coffee-sugar war is said to have cost millions on both sides.
Eventually, the Havemeyers were glad to be relieved of their coffee interests, but John Arbuckle continued to sell both coffee and sugar.
Mr. Arbuckle married Miss Mary Alice Kerr in Pittsburg, in 1868. She died in 1907. His many charities included boat[Pg 524] trips for children, luxurious farm vacations for tired wage-earners, boat-raising and life-saving schemes, a low-priced home for working girls and men on an old full-rigged ship lying off a New York dock, which he called his "Deep Sea Hotel," and a vacation enterprise for young men and young women at New Paltz, N.Y., which was known as the "Mary and John Arbuckle Farm." A magazine for children, called Sunshine, was another benevolent enterprise of his.
When John Arbuckle died at his Brooklyn home, March 27, 1912, he had been ill only four days. The New York Coffee Exchange closed at two o'clock the day following, after adopting appropriate resolutions and appointing a committee to attend the funeral. His estate in New York was valued at $33,000,000.
W.V.R. Smith and James N. Jarvie retired from the firm in 1906; and John Arbuckle and his nephew W.A. Jamison continued it as sole owners and partners until Mr. Arbuckle's death in 1912. Mr. Arbuckle died childless and a widower, leaving as his only heirs his two sisters, Mrs. Catherine Arbuckle Jamison and Miss Christina Arbuckle. Mrs. Jamison is the widow of the late Robert Jamison, who had been a prominent drygoods merchant in Pittsburg. William A. Jamison is her eldest and only living son. Following the death of John Arbuckle, a new partnership was formed in which Mrs. Jamison, Miss Arbuckle, and Mr. Jamison became the partners and owners, and that partnership, without change of name, continues. Probably there is no other mercantile establishment of similar size in the country that is carried on as a partnership, and none which after more than sixty years is so exclusively owned by members of the immediate family of its founders.
The Arbuckle business, as it is today, is John Arbuckle's best monument. All that it is he foresaw; for behind those keen, penetrating eyes, there was wonderful vision. Simple in his tastes; democratic in his dress, in his habits and his speech; he was one of the most approachable of our first captains of industry. Many of the younger generation in the coffee business have found inspiration in contemplating John Arbuckle's achievements. As represented in what has been called "the world's greatest coffee business", these include other package coffees, such as Yuban, Arbuckle's Breakfast, Arbuckle's Drinksum, and Arbuckle's Certified Java and Mocha. The pioneer Ariosa brand is still being sold; although it is interesting to note that the demand for ground Ariosa is increasing, marking the swing of the pendulum of public taste away from the original bean package to the so-called "steel-cut," or ground, coffee package. Will it swing back again, some day? Many coffee men believe it will. If it does, good old Ariosa, with its coating of sugar and eggs, will no doubt be on the job to meet it.
Yuban was launched in the fall of 1913. It is a high-grade package coffee, whereas Ariosa is popular-priced. In addition to the package coffee business, Arbuckle Bros. have many other activities. They deal in green coffee as well as roasted coffee in bulk. The wholesale grocery business in Pittsburg continues under the old name of Arbuckles & Co.; while in Chicago, Arbuckle Bros. have a branch equipped with a coffee-roasting-and-packaging plant, also spice-grinding and extract-manufacturing plants, and do a large business in teas. A branch in Kansas City distributes the products manufactured in New York and Chicago. In Brazil, offices are maintained at Rio de Janeiro, Santos, and Victoria, as Arbuckle & Co. In Mexico, Arbuckle Bros. are established at Jalapa, with branches at Cordoba and Coatepec. In season, the warehouses and hulling plants at those points employ as many as 650 hands preparing Mexican coffee for shipment to New York.
Arbuckle Bros. are direct importers of green coffee on a large scale, and are known also as heavy buyers "on the street." The roasting capacity of their Brooklyn plant is from 8,000 to 9,000 bags per day. The cylinder equipment of twenty-four Burns roasters is supplemented by four "Jumbo" roasters of Arbuckle build, each capable of roasting thirty-five bags at one time. The Ariosa package business grew from the smallest beginnings to more than 800,000 packages per day. Individual brands have not held their lead of late years; but the volume of package-coffee business is greater than ever. Many jobbers now pack brands of their own, besides handling the Arbuckle brands.
Distribution of roasted coffees outside Chicago and Kansas City is accomplished[Pg 525] through the medium of more than one hundred stock depots in as many different cities of the United States.
To operate the world's greatest coffee business is no small undertaking; and when this is coupled with an important sugar-refining business and a waterfront warehouse-and-terminal business, plenty of room is needed. So we find the plant along the Brooklyn waterfront occupying an area of a dozen city blocks. An idea of the extent and diversity of the activities of the plant may be gained from a brief reference to the utilities, and the trades, and even the professions, that are required to make the wheels go round.
To ship more than one hundred cars of coffee and sugar in a single day calls for shipping facilities that could be had only by organizing a railroad and waterfront terminal, known as Jay Street Terminal, equipped with freight station, locomotives, tugboats, steam lighters, car floats, and barges. City deliveries of coffee and sugar call for a fleet of thirty-five large motor trucks that are housed in the firm's own garage and kept in repair in their own shops. Although motor trucks are fast replacing the faithful horse; and the time will never come again when Arbuckle Bros. will boast of their stable of nearly two hundred horses that were generally acknowledged to be the finest string of draft horses in the city, some fifty or sixty of their faithful animals still are in harness; and so the stable, with blacksmith shop, harness shop, and wagon-repair shops, are serving their respective purposes, though on a reduced scale. A printing shop vibrates with the whirr of mammoth printing presses turning out thousands upon thousands of coffee-wrappers and circulars; and doubtless it will be news to many that the first three-color printing press ever built was expressly designed and built for Arbuckle Bros. Then there is a sunny first-aid hospital on top of the Pearl Street warehouse where a physician is ever ready to relieve sudden illness and accidental injuries. On the eleventh floor there is a huge dining room where the Brooklyn clerical forces get their noonday lunches. This feeding of the inner man (and woman) is matched by the power-house where twenty-six large steam boilers must be fed their quota of coal. In the winter months, when Warmth must come for the workers as well as power for the wheels, the coal consumption runs up as high as four hundred tons per day.
The barrel factory, with a daily capacity of 6,800 sugar barrels, is located about a mile away, where barrel staves and heads are received from the firm's own stave mill in Virginia, made from logs cut on their own timber lands in Virginia and North Carolina. A more self-contained plant would be hard to imagine, and so we find that even the last activity in its operations—that of washing and drying the emptied sugar bags—is also provided for. That this is "some laundry" goes without saying, when it is recalled that in the busy sugar season the firm dumps from eight to ten thousand bags of raw sugar per day, and that these bags are washed and dried daily as emptied. A huge rotary drier of the firm's own design does the work of about three miles of clothes lines.
Even after the coffees have been sold and paid for, there still remains an important task, and that is to redeem the signature coupons which the consumers cut from the packages and return for premiums. Lest some regard this as an insignificant phase of the business, it may be stated that in a single year the premium department has received over one hundred and eight million coupons calling for more than four million premiums. These premiums included 818,928 handkerchiefs; 261,000 pairs of lace curtains; 238,738 shears; and 185,920 Torrey razors. Finger rings are perennial favorites, and so insistent is the demand for the rings offered as premiums, that Arbuckle Bros. are regarded as the largest distributors of finger rings in the world. One of their premium rings is a wedding ring; and if all the rings of this pattern serve their intended purpose, it is estimated that the firm has assisted at eighty thousand weddings in a year.
Turning from the utilities at the plant to the trades and professions represented, other than the trained sugar and coffee workers, the following are constantly employed: physicians, chemists, mechanical engineers, civil engineers, electrical engineers, railroad engineers and brakemen, steamboat captains and engineers, chauffeurs, teamsters, wagon-makers, harness-makers, machinists, draughtsmen, blacksmiths, tinsmiths, coppersmiths, coopers, carpenters, masons, painters, plumbers,[Pg 526] riggers, typesetters and pressmen, and last but not least, the chef and table waiters.
One of the most remarkable things about the growth of this business enterprise is that it is not the result of buying out, or consolidating with, competitors; but has resulted from a steady wholesome growth along conservative business lines. Consolidations are often desirable and effective; but when a great business has been built without any such consolidations, the conclusion is inevitable that somewhere in the establishment there must have been a corresponding amount of wisdom, foresight, energy, and honorable business dealing. Those were the things for which John Arbuckle stood firm, and for which he will always be remembered.
Jabez Burns, Inventor, Manufacturer, Writer
Jabez Burns was a person of real importance to the American coffee trade from 1864, when he began to manufacture his improved roaster, until his death, at the age of sixty-two, in 1888. His success depended more on unusual character than unusual ability, although he was really gifted as regards mechanical invention. He loved to acquire practical information, and arrived confidently at common-sense conclusions; and he exercised a wide and helpful influence, because he liked to give expression to opinions that he considered sound and useful.
Mr. Burns was born in London in 1826. The family moved soon after to Dundee, Scotland, and came to New York in 1844. They were people of small means and independent thinking. The father, William G. Burns, had been more interested in the Chartist social movement than in any settled business activity. An uncle, also named Jabez Burns, became a popular Baptist preacher in London.
The first winter in America found youthful Jabez teaching a country school at Summit, N.J. Then he began in New York (1844–45) as teamster for Henry Blair, a prosperous coffee merchant who attended a little "Disciples" church in lower Sixth Avenue where many Scottish families congregated. There also Burns met Agnes Brown, daughter of a Paisley weaver, and married her in 1847. A brave young pair they were, who found all sorts of odd riches—just as if a fast-growing family could somehow make up for a slow-growing income. There were hopes, too, that the contrivances Burns kept inventing might bring wealth; and some extra money did come from the sale of early patents, including one in 1858 for the Burns Addometer, a primitive adding machine.
But Mr. Burns had continued regularly in the employ of coffee and spice firms, and at one time he was bookkeeper for Thomas Reid's Globe Mills. He advanced slowly, because he lacked real trading talent; but he was learning all about the handling of goods, from purchase to final delivery; and when he quit bookkeeping for the old Globe Mills, and began to build his patent roaster, he could advise clients reliably about every factory detail.
He was soon looked on as an authority. He wrote some articles for the American Grocer, a series on "Food Adulteration" being reprinted; and in 1878, he began the quarterly publication of his thirty-two-page Spice Mill, which soon became a monthly, and gained the interested attention of practically the entire coffee and spice trade.
Through the columns of this paper, in circulars, by letters, and in a pocket volume called the Spice Mill Companion, he distributed information on coffee, spices, and baking powder, and gave valuable advice to beginners in the coffee-roasting business. Not a few coffee roasters were started on the way to fortune by the counsel of Jabez Burns. He died in New York, September 16, 1888.
Jabez Burns founded the business of Jabez Burns & Sons in 1864, beginning the manufacture of his patent coffee roaster at 107 Warren Street, New York. Since then, there have been four removals. In December, 1908, the business moved to its present uptown location, at the northwest corner of Eleventh Avenue and Forty-third Street, occupying a six-story building which was doubled in size in 1917. This Burns factory has been referred to as "the unique coffee-machinery workshop", the greatest establishment of its kind in the United States.
Upon the death of its founder the business was continued; first, as the firm of Jabez Burns & Sons, composed of his sons, Jabez, Robert, and A. Lincoln Burns; and later, in 1906, incorporated as Jabez Burns & Sons, Inc., with Robert Burns as president,[Pg 527] Jabez Burns as vice-president, and A. Lincoln Burns as secretary and treasurer. Jabez Burns died August 6, 1908. The present officers are: Robert Burns, president; A. Lincoln Burns, vice-president; William G. Burns, general manager; and C.H. Maclachlan, secretary and treasurer.
A. Lincoln Burns succeeded his father as editor of the Spice Mill. William H. Ukers was made editor in 1902, and he continued until 1904, when he left to assume editorial direction of The Tea and Coffee Trade Journal.
Coffee-Trade Booms and Panics
In the last fifty years there have been many spectacular attempts to corner the coffee market in Europe and the United States. The first notable occurrence of this kind did not originate in the trade itself. It took place in 1873, and was known as the "Jay Cooke panic", being brought about by the famous panic of that name in the stock market.
As a result of the Jay Cooke failure, it was impossible to obtain money from the banks. Hence buyers were forced to keep out of the coffee market; and as a consequence, the price for Rios dropped from twenty-four cents to fifteen cents in the course of the trading period of one day.
Another interesting development during that year was of foreign origin. A coffee syndicate was organized in Europe, financed by the powerful German Trading Company of Frankfort, with agencies in London, Rotterdam, Antwerp, and Brazil. For more than eight years this proved to be a highly successful undertaking, largely controlling the principal producing and consuming markets.
As far as the American coffee trade is concerned, the first sensational upheaval took place in 1880–81. This period witnessed the collapse of the first great coffee trade combination in this country—the so-called "syndicate", comprising O.G. Kimball, B.G. Arnold, and Bowie Dash, sometimes known as the "trinity".
The period of high coffee prices, commencing in 1870, had greatly stimulated production in many Mild-coffee producing countries, as well as in Brazil, and as a consequence the syndicate found its burden becoming extremely heavy early in 1880. In January of that year our visible supply amounted roughly to 767,000 bags. While this was reduced to about 740,000 bags in July, the latter likewise proved to be decidedly burdensome, especially as another liberal crop was beginning to move in producing countries. The excessive volume of supplies was especially marked, because distributing trade during the summer was strikingly dull, as the majority of buyers were holding off, in view of the prospective liberal new crops. At that time Java coffee was a big item in American markets, whereas Santos was just about beginning to be a factor.
The syndicate found that it had its hands full supporting the Brazil grades, and hence had to let the Javas go. As a result, the latter, which had sold at twenty-four and three-quarters cents in January, 1880, fell to nineteen and one-half cents in July, to eighteen cents in November and to sixteen cents in December. As a matter of fact, the syndicate was practically the only buyer of Brazil coffee during the fall of 1880; and as a consequence, Rios, which had started the year at fourteen and one-half[Pg 528] to sixteen and one-quarter cents, were down to twelve and three-quarters cents in December, 1880, and had dropped nine and one-half cents when the break in the market culminated in June, 1881.
The first whispers of financial troubles growing out of these adverse conditions were heard in October, 1880; and on the 27th of that month the first failure was announced—that of C. Risley & Co., with liabilities placed at $800,000 and assets at $400,000. This firm had been doing business in the local market for about thirty years. The efforts of the receivers to dispose of this company's large stock naturally served to accelerate the decline; and the final impetus came on December 6, when the New York trade heard of the death, two days previously, of O.G. Kimball, of Boston, one of the most prominent merchants there. This precipitated the big crash of December 7, when B.G. Arnold & Co., the largest New York firm, suspended with estimated liabilities of $750,000 to $1,000,000. The official statement later placed the liabilities at $2,157,914, and assets at $1,400,000, of which $884,198 were secured. Within three days this failure was followed by the suspension of Bowie Dash & Co., with liabilities estimated at $1,400,000.
For weeks thereafter there was virtually no market. With all of these distress holdings pressing for liquidation, buyers, as was natural, were extremely timid. In the meantime, the import arrivals showed further enlargement at various southern ports, as well as at New York. Total arrivals at this port during 1881 were almost 12,400,000 pounds heavier than for the preceding year. The growing importance of Santos as a market factor was demonstrated by the fact that shipments from there in 1881 were 1,198,625 bags, compared with about 628,900 bags in 1876–77. According to the best informed members of the trade at that time, the losses sustained by the various firms that were forced to the wall aggregated between $5,000,000 and $7,000,000.
The utterly demoralized conditions prevailing while this collapse was in progress, and the practical elimination of a market in the true sense of the word, furnished the principal impetus for the organization of the New York Coffee Exchange. At that time, the Havre market was the only one with an exchange. The local body was organized in December, 1881, and started business in March, 1882.
The Cable Break of 1884
The second noteworthy movement, embracing an advance of four to four and one-half cents and a recession of slightly more than three cents, covered a period of about eight months shortly after the Exchange was organized. Various local and out-of-town firms were interested in the bulge which carried Rio coffee in this market from about seven cents in July, 1883, up to eleven and one-half cents late in November. By the middle of December, the price had fallen to nine and one-quarter cents, the final break to eight and one-quarter cents occurring late in March of the following year. At that time, there was no direct cable communication with Brazil; and as a result of a temporary break in the roundabout service by way of Portugal, the New York and Baltimore agents of the Brazilian syndicate were unable to put up additional margins in this market, and their accounts were closed out. This happened on a Saturday; and by the following Monday, partial cable remittances arrived and all accounts were settled in full with interest from Saturday to Monday.
The Great Boom
What is generally described as "the great boom" of the coffee trade occurred in 1886–87, and had its inception in unsatisfactory crop news from Brazil. The crop of 1887–1888, it was estimated, would be extremely small; and it turned out to be only 3,033,000 bags. These advices and low estimates led to the formation of a "bull" clique, comprising operators in New York, Chicago, New Orleans, Brazil, and Europe, who set a price of twenty-five cents for December contracts as their goal. Toward the end of June, 1886, when this campaign started, No. 7 Rio in New York was worth about seven and one-half cents, with June contracts on the Exchange quoted at seven and sixty-five hundredths cents. With Brazilian crop news still more discouraging, the advance thereafter was almost continuous, and on June 1, 1887, December contracts sold at twenty-two and one-quarter cents—a new high price record, that was not exceeded for thirty-two years, when twenty-four and sixty-five hundredths cents were paid for July contracts[Pg 529] in June, 1919. After reaching twenty-two and one-quarter cents, prices suffered an abrupt reversal. Ten days later the closing price for December was twenty-one and four-tenth cents. Then the real crash began. On Saturday, June 11, the panic started with another claim of cable trouble; and in the short session, December coffee broke from twenty and fifteen-hundredths to eighteen and sixty-five hundredths cents, closing at a loss for the day of 275 points. The first sale of December on Monday was at seventeen and four-tenths cents, or 125 points lower; and after numerous erratic variations, the price broke to sixteen cents, a drop of six and one-quarter cents in less than two weeks. Business on that day was of enormous volume, in round numbers 412,000 bags; and approximately $1,500,000 was put up in margins. For the next three days the decline was temporarily halted, and December, at one time, was up three and one-quarter cents from the bottom (nineteen and one-quarter cents). On June 17, another battle commenced, December dropping back to seventeen cents. Then came a rally to eighteen and one-tenth cents, a drop to sixteen and one-half cents; another rally to eighteen and one-tenth, and, on June 24, another break to the previous low level of sixteen cents for December. This sharp reversal in less than a month was traceable largely to more favorable news from Brazil, the 1888–89 crop being estimated at 6,827,000 bags.
Following a rally to nineteen and six-tenths cents during the next month (July, 1887), the pendulum again swung downward. The climax came with the culmination of the "European fiasco" of the spring of 1888. Reports were received that various European coffee firms had failed; and future contracts in the American market sold as low as nine cents in March.
A Famous European Bull Campaign
The next campaign of interest lasted more than two and a half years. In September, 1891, there was a corner in the local market which forced the September price up to seventeen and one-quarter cents. George Kaltenbach, a wealthy speculator living in Paris, combining with three operators in Havre, Hamburg, and Antwerp, succeeded in breaking the corner, forcing the price down to ten and eight-tenths cents. They then changed to the bull side, buying heavily in all markets of the world. This was continued until early in 1893, bringing the price back to fifteen cents. Although his associates then returned to the bear side, Kaltenbach kept on buying; and aided by bad crop reports from Brazil, he worked the price up as high as seventeen and seven-tenths cents. At one time it was said that his profits were more than one million dollars. The collapse of this deal occurred in May, 1893, involving thirty firms in Hamburg, Havre, and Rotterdam. As Kaltenbach could not keep his large New York holdings margined, they were thrown on the market, bringing about a sharp break, and causing the failure of his New York agents, T.M. Barr & Co.
The present era of large crops began in 1894, Brazil's production for 1894–95 being placed at 6,695,000 bags. Nevertheless, Guzman Blanco, a former president of Venezuela, then living in Paris, and said to be worth about $20,000,000, attempted to run a corner in April, 1895. He bought 200,000 bags of spot coffee in Havre warehouses and accumulated a big line of futures in various markets. Assisted by reports of cholera in Rio and some reduction in Brazilian crops, he enjoyed temporary success, the price of Rio 7s in New York rising to fifteen and one-half cents in October, 1895. Thereafter, there was an almost continuous decline. In the spring of 1898, a vigorous bear campaign was conducted, largely in the form of market letters; and by November, Rio 7s here had dropped to four and one-half cents.
The Bubonic Plague Boom
The so-called "bubonic plague boom" halted this prolonged downward movement for a time in 1899–1900. The boom derived its name from the outbreak of bubonic plague in Brazil, as a result of which the ports of that country were quarantined. In addition, Brazilian steamers arriving at New York were placed in quarantine; and the impossibility of unloading their cargoes caused a temporary shortage. As a result, prices rose from four and one-quarter cents in September, 1899, to eight and one-quarter cents in July, 1900. The quarantine being lifted, the bears again became aggressive; and by April, 1901, they had forced the price back to five cents.
There was another short-lived attempt to establish a corner in September, 1901. Receipts at Rio and Santos had been running light, encouraging a local clique embracing Skiddy, Minford & Company; W.H. Crossman & Bro.; and Gruner & Company, to endeavor to gain control. The arrivals at Brazilian ports suddenly increased to the largest volume ever known up to that time; and, with vigorous opposition from operators in Havre, the corner here was speedily broken.
The opening of the new century witnessed the beginning of another new coffee era, Santos permanently displacing Rio as the world's largest source of supply. The figures for 1900–01 were: Santos, 2,945,000 bags; Rio, 2,413,000 bags.
Huge crops then became a regular thing in Brazil. That of 1901–02 was far in excess of estimates, being 15,000,000 bags; while 20,000,000 bags were produced in 1902–03. As a result, the world's coffee trade became completely demoralized for the time being. In August, 1902, contracts for July, 1903, delivery sold at six and one-tenths cents. By June, 1903, they had fallen to three and fifty-five hundredths cents, the lowest price ever recorded for coffee.
The Southern Boom
As is invariably the case when prices reach extreme levels, either high or low, the pendulum swung back rapidly in the other direction. Based on the unprecedentedly low prices, the so-called "cotton crowd" started what was generally known as "the southern boom". Various cotton traders in New York and the South, under the leadership of D.J. Sully, the one-time "cotton king", and ably assisted by prominent local coffee firms, became extremely active on the buying side; and by February, 1904, they had forced the price up to eleven and eighty-five hundredths cents. This figure, the highest since 1896, was reached on February 2, which proved to be another day of enormous speculative dealings, involving roundly 462,000 bags. This marked another turning point; the three succeeding days of record-breaking operations on the Exchange witnessing a break of roughly two cents. Mr. Sully went on a vacation on February 3, and the Sielcken interests sold on a large scale. Business for that day was placed at 555,000 bags, closing prices being about one-half cent lower. This brought on enormous liquidation by western bulls on the following day, approximately 500,000 bags. As a result, prices lost twenty-five to sixty-five points on a turn-over of about 642,000 bags. All records for business were smashed on the following day, February 5. The official record was 689,000 bags, but trade estimates made it more than 1,000,000 bags. On that day, southern interests liquidated heavily, causing net losses of eighty to ninety points. Doubtless the break would have been more severe had it not been for buying by the Sielcken people and several other strong interests at and below seven and one-quarter cents for September contracts.
The Story of Valorization
The valorization, or equalization, of coffee originated in Brazil. When the original plan was threatened with disaster, Hermann Sielcken stepped in and saved the Brazil planters from ruin; the Brazil government from possible revolution; and, incidentally, won for himself and those who were his partners in the enterprise much unenviable notoriety.
The principle of valorization is generally conceded to be economically unsound, because it encourages overproduction. And valorization in Brazil would have been a failure, had it not been for a fortuitous combination of short crops, Hermann Sielcken's genius, and the World War. Because of the lessons learned in this experience, Brazil's subsequent valorization enterprises have run more smoothly.
A rapidly increasing world demand, a wonderfully fertile soil, and cheap labor kept the Brazil coffee industry in a flourishing condition nearly to the close of 1889. Coffee consumption was increasing, especially in the United States. By April 1890, the average import price per pound of Rio No. 7 in this country was nineteen cents; and Brazil was supplying only about half our needs. Virgin soil was still available in Brazil, and immigration furnished all the needful labor. Easy profits led to increased investment and careless methods. Her planters were drunk with prosperity. For six years, nearly all the three million inhabitants of São Paulo, Brazil's largest coffee producing state, "entirely gave up planting corn, rice, beans, everything they[Pg 531] needed. They bought them because coffee was so immensely profitable that they put all their labor in coffee."
Brazil had been going through a period of low exchange. Paper money fell below par. The exaggerated issues of it, which provoked the collapse of exchange, suddenly endowed Brazil with an abundant circulation of money. Production was enormously stimulated. New undertakings sprang up on every hand. Armies of agricultural laborers were recruited in Europe and shipped into the coffee districts. And then, to make the story short, supply passed demand, surplus stocks began to appear, prices began to fall, and fell until they dropped below the cost of production.
It was in 1896–97, when the new trees came into bearing by the tens and hundreds of thousands, that São Paulo's folly began to tell. By October of that year the price of Rio No. 7 in New York had fallen to about seven cents. The decline continued, until, in 1903, it hung around five cents. Then began the winter of São Paulo's discontent. Too late, the state government tried by taxing new coffee estates, to force the planters to raise crops to supply their own necessities. The times grew harder.
Mortgages held by large coffee houses and bankers were being foreclosed. The industry was passing into European hands. The smaller planters were becoming desperate; and desperation is only a step from revolution. The government of the state of São Paulo knew this; and to save the state, it finally promised it would buy the next coffee crop, and would hold it for the planters at such a price as would be necessary to continue the industry. The protagonists of this plan to valorize coffee were Dr. Jorge Tibiriçá, Dr. Augusto Ramos, and Dr. Albuquerque Lins.
During all the period covering São Paulo's rise and fall in coffee, the financial genius who was to lead her again into the land of plenty had been quietly acquiring a knowledge of her problems—also, the ability to make money out of their solution.
Valorization was undertaken to save the coffee industry. Its intent was good, even if the theory was bad. The scheme was not new, and there were no encouraging precedents to augur its success. The situation was desperate and seemed to justify the trial of a desperate remedy. São Paulo attempted to carry the load; but her resources were insufficient.
The bumper world crop of 19,090,000 bags in 1901–02 was followed, in 1906–07, with another extraordinary yield of 24,307,000 bags, of which Brazil alone produced 20,192,000 bags. To make good its promise to the planters, ready cash was needed; and so the São Paulo government sent a special commissioner to Europe to get it. For sixty years the Rothschilds had acted as Brazil's bankers. The commissioner went to the Rothschilds first. He was flatly refused. After that, he was turned down by practically every bank on the continent. It looked as if the bankers had entered into a gentlemen's agreement to make it unanimous. Then the commissioner bethought himself of the coffee merchants; and that thought naturally suggested Hermann Sielcken, who, singularly enough, happened to be conveniently resting at nearby Baden-Baden. In August, 1906, the commissioner waited upon Mr. Sielcken and begged his aid.
It was Sielcken's hour of triumph. For years he had been soliciting Brazil. Now the tables were turned, and Brazil was asking favors of Sielcken.
The rest of the story is best told by Robert Sloss, who wrote it for World's Work from information furnished by trade authorities—and even by Mr. Sielcken, himself, in various speeches, newspaper articles, and on the witness stand. It is presented here with certain minor corrections by the author:
"Well, what do you want me to do?" asked Hermann Sielcken of the commissioner from the state of São Paulo.
"We want you to finance for us five to eight million bags of coffee," said the commissioner blandly.
Here was an adventure. Here was a proposition to lift bodily out of the market half as much coffee as the world's total production had averaged for the ten preceding years when prices had been so low. Presumably, if this were done, prices would be doubled. But Hermann Sielcken shook his head.
"No," he said, "there is not the slightest chance for it, not the slightest." And then he pointed out that there would be "no financial assistance coming from anywhere" if the São Paulo planters kept on raising such ridiculously large crops of coffee.
The commissioner assured him that the prospect was for smaller crops in future. Hermann Sielcken was not so sure about it "At a price low enough," he mused, "I might be able to raise funds to pay eighty percent on a value of seven cents a pound for Rio No. 5."
The commissioner was dismayed. His government had already promised to take coffee from the planters at about a cent a pound above the market, and the market then stood at nearly eight cents. The government would have to dig to make up the difference. Hermann Sielcken's terms were the best that could be got, however, and the commissioner accepted them.
From that time forth Hermann Sielcken was the head of the movement. He approached a few large coffee merchants, including his former rivals, Arbuckle Brothers, and drew up a contract. The merchants agreed to advance eighty percent of the sum required to buy two million bags of coffee at seven cents a pound. If the market went above seven cents, the government was to make no purchases. If it fell below seven cents, the government was to make good the difference to the merchants by cable.
Before the season was well advanced the unexpected happened. Brazil was reaping the largest coffee harvest in the history of the world. The two million bags of coffee purchased by the government were as a drop in a bucket. Financed by Hermann Sielcken, Schroeder, the great London banker, and a few prominent European merchants, the government was forced to buy almost nine million bags. Toward the end of 1907, the government had lifted half of the world's visible supply of coffee, but the market stood only a trifle above six cents a pound. The government was practically bankrupt.
Hermann Sielcken now enlisted the Rothschilds on his side, and shifted the financial burden from the shoulders of the coffee merchants to those of the Paris bankers and their American associates. Then the Rothschilds imposed their conditions on the government of Brazil. A national law was passed determining a heavy penalty for any one who planted a new coffee tree in Brazil. The government guaranteed that not more than mine million bags of the next coffee crop and not more than ten million bags of any succeeding crop should be exported.
By the end of 1911, the coffee market stood well above thirteen cents. Here was a rise of more than one hundred percent in two years, more than sixty percent in six months. Evidently, valorization coffee in the hands of the bankers' committee had become a gilt-edged security. But how?
During the five crop years since the "plan" was launched on the heights above Baden, nearly 90,000,000 bags of coffee had been raised in the world. The bankers' committee still held 5,108,000 bags of this. At the highest estimate, consumption had exceeded production by only 4,000,000 bags. Here was a shortage of only a little more than ten percent in supply as against demand, so far as crops go. Yet there had been a rise of more than one hundred percent in two years in the price of coffee on the New York Coffee Exchange.... Upon the merchant's ability to deliver coffee on the New York Coffee Exchange depends the price of coffee in the world. That explains why the bankers' committee from the beginning refused absolutely to sell valorization coffee on the public exchanges of the world. In Europe, they put it up at auction; and when it didn't go, it was bought in for them. In America, they announced in a printed circular that valorization coffee would be sold only on condition that the purchaser would not deliver it on the New York Coffee Exchange.
Hermann Sielcken absolutely refused to sell coffee to the merchants on the Exchange. Arbuckle Brothers kept on buying coffee heavily, as if they would corner the market. They resold the coffee, however, at private sales, exacting a written contract from the buyer that he would not deliver the coffee on the New York Coffee Exchange, or resell it to any one that would so deliver it. The Coffee Exchange began an investigation, but nothing ever came of it.
Shortly after the valorization committee had apparently cleared up $25,000,000 in one year, the restriction as to the delivery of valorization coffee on the New York Coffee Exchange was officially removed. Yet neither from Hermann Sielcken nor from Arbuckle Brothers, it is charged, could one buy any coffee to deliver for that purpose. In 1911, coffee rose to sixteen cents per pound.
At the end, it was found that the committee's holdings had been marketed at the various sales on a basis, for Santos 4s, from eight and five-eighths cents minimum, to the final sale here forced by the United States government, at which time the price realized was sixteen and three-quarter cents for Santos 4s, and fourteen cents for Rio 7s.
The one fly in the valorization ointment was Senator G.W. Norris, of Nebraska, who early in 1911 called for a congressional investigation of the operations of the valorization syndicate, which he said was costing the American people $35,000,000 a year. The attorney-general was instructed to report as to whether or not there was a coffee trust. It was a leisurely investigation, which encountered many snags placed in its way by those who believed it would be against international policy to question too closely the participation of the Brazil government in the enterprise. Politics played no inconsiderable part in the investigation, which dragged along until May 18, 1912, when an action was begun in the Federal District Court for the southern district of New York, alleging conspiracy in restraint of trade on the part of Hermann Sielcken; Bruno Schroeder, of J. Henry Schroeder & Co.; Edouard Bunge; the Vicomte des Touches; Dr. Paulo da Silva Prado; Theodor Wille; the Société Generale; and the New York Dock Co.; also praying for injunction and receivership of the valorization coffee then stored in the United States, and amounting to 746,539 bags. The injunction was denied.
Immediately thereafter, rumors began to circulate that the government's coffee[Pg 533] suit would never be tried. The Brazilian ambassador threatened diplomatic interference, and Attorney-General Wickersham let it be known that a friendly settlement might be effected. Sielcken boldly challenged the authorities to prosecute the case, and even seemed to invite criminal proceedings against himself. Saving the government's face, and Brazil's face, at one and the same time, proved to be a long and tedious process.
Meanwhile, Senator Norris introduced in Congress a bill designed to give the government power to seize importations of coffee when restraint of trade was proved. It was vigorously opposed by many prominent green-coffee men and roasters; but in February, 1913, it became enacted into a law. It effectively killed all future valorization schemes in so far as direct participation by this country is concerned.
About December 1, 1912, Attorney-General Wickersham accepted good-faith assurances from Mr. Sielcken's attorney—who represented also the Brazil government—and agreed that if the valorization coffee stored here was sold to bona-fide purchasers before April 1, 1913, the government's suit would be dismissed. In May, 1913, the attorney-general of the new Wilson administration, which came into office in March of that year, issued a statement saying that, good-faith assurances having been received from the Brazil government that the understanding was fulfilled in letter and spirit before the date set by the previous attorney-general, and the entire amount of coffee disposed of to eighty dealers in thirty-three cities, the suit would be dismissed.
In the United States Senate about the same time, Senator Norris renewed his attack on "the international coffee trust". He charged that the coffee sale was not as represented, but merely a transfer, and called upon the Department of Justice for the facts, with names of the alleged purchasers.
Attorney-General McReynolds, on May 7, 1913, declined to send to the Senate the official correspondence in regard to the Brazil coffee-valorization matter, because it was "incompatible with the public interests." He did, however, send other papers on the subject. The secretary of state sent copies of some correspondence; but the documents were not made public. This ended the matter, although Senator Norris called for a congressional investigation, charging that the attorney-general had been handed a "gold brick".
Sielcken contented himself with remarking that the suit was a mistake in the first place, and that it was a foregone conclusion the government would be defeated. Also, he offered $5,000 to any one who could explain the Norris bill.
Valorization, then, was started by the state of São Paulo in 1905, when a law was passed authorizing the state to enter into an agreement with the other Brazil states and the federal government for the adoption of measures which would assure the valorization of coffee and facilitate a propaganda abroad for increased consumption.
The states of São Paulo, Minãs Geraes, and Rio de Janeiro proposed, early in 1906, to withdraw from the markets such quantities of coffee as would keep down exports and maintain profitable prices. The plan comprehended the interested states borrowing about $75,000,000 from European and United States bankers with which to buy up the surplus coffee. To take care of interest and amortization, a tax of three francs per bag of 132 pounds (about 57 cents) was to be levied on all coffee exports, collectable at Santos and Rio de Janeiro. Further coffee-planting was to be checked by enforcing the law which carried a tax sufficiently high to operate toward restriction.
When it was understood that Brazil's federal government would not endorse the plan in toto, it was abandoned by Rio de Janeiro and Minãs Geraes. However, the state of São Paulo in the course of the next two years borrowed some $30,000,00 on its own account for valorization purposes, obtaining half the amount direct from foreign banking interests, and the remainder, through the Brazilian federal government, from London sources.
This first valorization was abandoned in favor of the Sielcken plan, which the federal government ratified in July, 1908. By this new plan São Paulo borrowed $75,000,000 from the syndicate composed of American, English, German, French, and Belgian bankers. Out of this it repaid the $30,000,000 loan. The 1908 loan was to expire in ten years, in 1919. Under the plan of the new loan, it was agreed that certain amounts of the valorized coffee should be stored as collateral in warehouses in New[Pg 534] York and Europe in charge of a committee of seven, who were authorized to sell the coffee in the market in specified quantities and at prices that would not disturb the price of other coffees. The composition of the committee was as follows: Dr. Francisco Ferreira Ramos, of São Paulo and Antwerp; who was succeeded by Dr. Paulo da Silva Prado; the Vicomte des Touches, of Havre; the Société Generale, of Paris; the firm of Theodor Wille, of Hamburg; Hermann Sielcken, of New York; Edouard Bunge, of Antwerp; and Baron Bruno Schroeder, of J. Henry Schroeder & Co., of London.
Brazil agreed to purchase 10,000,000 bags and to hold them off the market until conditions warranted their sale. It was also agreed that the total exports of unvalorized stocks from Brazil would be restricted to 10,000,000 bags for 1907–08, and to 10,500,000 bags for 1909–10. In addition, a surtax of five francs gold per bag (961⁄4 cents) was placed on every bag exported to pay carrying charges. The management of the government's holdings was placed in the hands of the international committee. This committee issued bonds which were quickly subscribed for; and because of its efficient handling of its huge holdings, prices held steady in spite of the record-breaking Brazilian crop of nearly 20,192,000 bags in 1906–07, and a later one in 1909–10 of about 15,000,000 bags. Indeed, there was an advance of about ten dollars a bag between 1904 and 1911.
Valorization had the effect of stabilizing the Brazil market, and giving the planters and allied interests the assistance they needed to ward off the disaster that threatened them through overproduction. The United States government action in 1912 forced the sale of the valorized stocks held in this country, and the Congress passed the law making it impossible again to offer for sale in America stocks of coffee held under similar valorization agreements.
The coffee situation became so serious in 1913, that São Paulo again entered the money market for another loan, borrowing $37,500,000 through the good offices of the Brazilian federal government, following this up two years later with another loan of $21,000,000. According to a semi-official statement issued in Brazil early in 1919, the status of valorization at that time was that the first loan of $75,000,000 of 1908, had been entirely liquidated, and the two later loans were greatly reduced. At the same time, it was announced by the president of the state of São Paulo that the surtax of five frances would be withdrawn as soon as the liquidation of the loans had been completed. This surtax, however, is still in effect. In 1919, the São Paulo government proposed advancing the pauta, or export duty, very materially. A strong protest was made by all the exporters; and a compromise was at last effected by which the proposed increase in the pauta was canceled, and the existing surtax of five francs per bag continued as an offset.
The valorization project just described was the second of its kind, a former attempt having proved a failure. At that time (1870), the Brazilian government had been a large purchaser of Rio coffee, buying it in lieu of exchange, as it had large remittances to make. The coffee was sold through G. Amsinck & Co., and it is believed that heavy losses were sustained.
Since the Sielcken valorization enterprise, the Brazilian government has promoted two more valorizations, one in 1918, another early in 1922.
War-Time Government Control of Coffee
The board of managers of the New York Coffee and Sugar Exchange, Inc., had realized, late in 1917, that war-time government control of coffee trading was likely in view of the government's activities in other commodities. To guard against the danger of a sudden announcement of such action, the president of the Exchange was empowered from month to month, at each meeting of the board, to suspend trading at any time that conditions warranted; so that, when President Wilson announced, on January 31, 1918, that all dealers in green coffees were to be licensed, the Exchange was fully prepared. Trading was suspended pending further information, and owing to the farsightedness of the board of managers, all danger of a panic in the market was averted.
By 1917, the allies had stopped shipments of coffee to Germany through neighbors who had been her sole source of supply. Stocks in all the producing countries were accumulating, and São Paulo had embarked on another valorization scheme to protect her planters. The markets of Europe were[Pg 535] entirely controlled by the governments; and the United States was practically the only free and open market. The market here was steady and without particular animation, and showed none until the end of November, 1917. At that time, speculation activities, steamer scarcity, and the steady advance in freights, became decided influences in the market; and prices began to advance.
Freights on shipments from Brazil had advanced from one dollar and twenty cents per bag early in the year to unheard-of prices; and, before the bubble burst, had reached as high as four dollars per bag. With this steadily advancing freight, speculation in coffee became more active; and prices naturally began to rise. The relative cheapness of coffee compared with all other commodities; the fact that coffee here had shown very little advance; the prospect of an early peace; the large European demand to follow; were favorite bull arguments. The market became excited; speculative buying was general, every one, apparently, wanted to buy coffee; and twenty cents per pound for Santos 4s in the near future was a common prediction.
The United States food administrator had shown his antipathy to uncontrolled exchange operations by his action on sugar, wheat, corn, and other commodities, dealt in on the exchanges; consequently, the proclamation of President Wilson regarding coffee was not a surprise to those who had been watching the situation closely, especially as on January 30, 1918 (the day before the proclamation) the president of the Coffee Exchange was summoned by telegraph to appear in Washington to discuss ways for a proper control of the article, and the best means to bring about such control. As a result of this summons, a committee of the entire trade, representing the Exchange, the green-coffee dealers and importers, the roasters, and the brokers, was appointed by the Exchange to confer with the food administrator at once, in order to work out a plan whereby the business could be kept going. After a long conference, rules agreed upon were approved that became the basis on which business was conducted until the withdrawal of all regulations regarding coffee in January, 1919. Much trade criticism followed the publication of some of these rules.
George W. Lawrence, president of the New York Coffee and Sugar Exchange, was called to Washington on February 28, 1918, to take charge of a newly created coffee division under Theodore F. Whitmarsh, chief of the distribution division of the food administration. In this position he rendered a signal service to the trade and to his country. Although subjected to a cross-fire of criticism from many green and roasted coffee interests, he never wavered in the performance of his full duty; and his good judgment, tact, and loyalty to American ideals, won for him a high place in the regard of all those who had the best interests of the country at heart. He was ably assisted in his work by Walter F. Blake, of Williams, Russell & Company, New York; and by F.T. Nutt, Jr., treasurer of the New York Coffee and Sugar Exchange.
A coffee advisory board was appointed in June 1918, to serve as a go-between for the trade and the food administration. Those who served on this committee were: Henry Schaefer, of S. Gruner & Co., New York, chairman; Carl H. Stoffregen, of Steinwender, Stoffregen & Co., New York, secretary; and William Bayne, Jr., of William Bayne & Co., New York; S.H. Dorr, of Arnold, Dorr & Co., New York; A. Schierenberg, of Corn, Schwarz & Co., New York; Leon Israel, of Leon Israel & Bro., New York; Joseph Purcell, of Hard & Rand, New York; B.F. Peabody, of T. Barbour Brown & Co., New York; J.D. Pickslay, of Williams, Russell & Co., New York; Charles L. Meehan, of P.C. Meehan & Co., New York; B.C. Casanas, of Merchants Coffee Co., New Orleans; John R. Moir, of Chase & Sanborn, Boston; and B. Meyer, of Stewart, Carnal & Co., New Orleans.
Others in the trade who served the food administration during the period of the World War were George E. Lichty, president of the Black Hawk Coffee & Spice Co., Waterloo, Iowa; and Theodore F. Whitmarsh, vice-president and treasurer of Francis H. Leggett & Co., New York.
The visible supply of coffee for the United States on January 1, 1918, was 2,887,308 bags. The world's visible supply was given as 10,012,000 bags; but to be added to this were more than 3,000,000 bags held by the São Paulo government. Thus there was little reason to fear a coffee[Pg 536] shortage. That coffee should be permitted, with this large amount in view, to run wild as to price, was certainly not the intention of the food administrator, whose purpose was to keep foods moving to the United States forces and allies, and as far as possible, to keep reasonable prices for the United States consumers. Steadily advancing prices of foods meant increasing cost of labor, general unrest, and a difficult situation to meet at a period when the situation as a whole was most critical.
Trouble for the coffee trade was imminent early in 1918, when the shipping board, backed by experts, decided, or attempted to decide, that coffee was not a food product; that no vessels could be had for its transportation; and that it must be put on the list of prohibited or restricted commodities. Mr. Hoover, however, insisted that coffee was a very necessary essential, and that tonnage must be provided for an amount sufficient at all times to keep the visible supply for the United States up to at least 1,500,000 bags of Brazil coffee; and this figure was ultimately accepted and carried out by the shipping board.
These figures, based on the deliveries of the two preceding years, and with dealers limited to ninety days stock in the country, were deemed ample to care for all requirements. It was figured that by November 1, 1918, the freight situation would be relieved to such an extent by the new vessels building, that the amount could be increased should it be found necessary. The food administration, through the war trade board, offered steamer room to importers of record of the years 1916–17 at $1.70 per bag. The first few vessels were promptly filled on a basis of nine and one-quarter to nine and five-eighths cents, c. & f., for Santos 4s, well described. About the same time, our army and navy were able to buy at eight to eight and three-eighths cents f.o.b. Santos, for shipment by their own vessels. After the first few vessels offered by the War Trade Board were filled, the trade became indifferent. The warehouses in Brazil were loaded with stocks; vessels to carry coffee were assured buyers at a fixed rate (profits limited); and, as there was no apparent reason for an advance, buyers were willing to let the producing countries carry the stock.
The last week in June brought very cold weather in São Paulo, and cables reported heavy frost. The news was not taken seriously by the trade at large. "Frost news" from Brazil was no novelty, and in the past had always been looked upon as a regular and seasonable method of bulling the market. This year, however, the frost was a fact, and the market began to move upward with surprising speed. Reports of the damage to the trees varied from forty to eighty percent. Quotations from Santos advanced two cents per pound in as many days. United States buyers were not disposed to follow the advance; offerings of steamer room were declined; and boats booked for coffee, owing to the lack of cargoes, were transferred elsewhere. Meanwhile the market continued to advance rapidly. The allies were holding the enemy, and peace prospects were brighter. From September 1 to November 15, the records of the food administration showed very small purchases. The buyers did not believe in the frost. With the news of the armistice, Brazil markets went wild; and Santos 4s, which had sold at eight and one-quarter cents in May, were quoted at twenty and one-half cents by December 10.
The food administration had decided, on February 6, 1918, after consulting the committee appointed by the Exchange, and on their advice and recommendation, to permit trading in futures on the following plan: a fixed maximum price of eight and one-half cents per pound for the spot month, with a carrying charge not to exceed fifteen points per pound for delivery for each succeeding month. Thus the price for March delivery was fixed at eight and one-half cents, while July delivery could be sold at nine and one-tenths cents; but when July arrived, it became the spot month, and eight and one-half cents was the maximum at which it could be sold.
This rule effectively stopped speculation, but failed to work out satisfactorily to the trade. Experience proved that a maximum fixed price at which coffee could be traded in would have produced much better results. Business on the Exchange followed its usual course, and the customary hedging of purchases was done by dealers. The indifference of buyers, already referred to, had resulted in a heavy decrease of the United States visible supply; and it had shrunk to 2,445,000 bags on September 1; to 2,173,098 bags on October 1; to 1,857,260 bags on November 1. Included in these[Pg 537] amounts were at least 500,000 bags, held in New York by foreign owners, which could not be sold; and of the balance left, there was undoubtedly a liberal amount sold against on the Exchange for future delivery. By October, the situation had become acute. Dealers who had classified themselves as jobbers or importers had gone into the retail classification in order to evade the limitations of profit allowed jobbers, and were limiting their sales to lots of twenty-five bags or fewer. Dealers who had legitimately hedged their holdings were unable to buy in.
The Exchange officials showed no disposition to relieve the situation; and as all prices had reached the maximum price for every month permitted, the food administration, on November 1, 1918, ordered the liquidation of all contracts outstanding, bought or sold, by not later than November 9. This was done; and the coffee covered by such contracts was released to the trade.
The regulations governing transactions on the Exchange were withdrawn on December 5, 1918; and, after a long argument, the Exchange decided to re-open for trading on December 26, 1918. Opening transactions amounted to 25,000 bags on a basis of seventeen and one-half cents per pound or nine cents over the prices at which contracts had been liquidated. On December 28 the price had declined to fifteen and one-half cents. In the opinion of many of our best merchants, the Exchange should have been closed during the war, as it failed to be of any real service. That it was operating at a fixed price for the spot month only, made it of no value to the trade during this period. Of its loyalty to the government, and its evident desire to assist there can be no question; but its cheerful acceptance of the burdens laid upon it proved largely futile.
The action of the food administration in confining the coffee business solely to licensed dealers and to a fixed profit on actual cost; in limiting dealers to ninety days stock; and in prohibiting resales, was the cause of much unjust criticism. The regulations were based on the general rules of the food administration, and applied to coffee quite as equitably as did the regulations governing other food commodities under control and license. As a matter of fact, they were much less rigorous in some ways than the regulations applying to many other articles. For example, ninety days stock based on sales for 1916–17 was allowed on coffee. There was no other article on the food list to which this liberality was permitted. A forty to sixty days stock would probably be found to be the maximum permitted to be carried of other food products.
The general proclamation of the food administration of November 1, 1917, declared:
These general and special rules and regulations are promulgated by the President to accomplish three principal objects, viz: 1st, to limit the prices charged by every licensee "to a reasonable amount over expenses and forbid the acquisition of speculative profits from a rising market"; 2d, to keep all food commodities moving in as direct a line as possible and with as little delay as practicable to the consumer; 3d, to limit as far as practicable contracts for future delivery and dealing in future contracts.
From the foregoing it will be apparent that a profit to be allowed based on "market value" for coffees was an impossibility, unless this law had been altered to allow all licensees of other commodities to share. Coffee profits were fixed by the food administration on the advice of, and with acceptance by, the coffee committee. They started too low; and were made more liberal, when the first figures were shown to be impossible. George W. Lawrence reports a conversation that he had with the food administrator on this particular subject, and that was characteristic of his broadness. Mr. Hoover said, "The coffee dealers are complaining of the profits permitted them. I want them satisfied; and if the profits are not reasonable, I shall put them where they will be. This war is not going to last always; and at its conclusion I want every American merchant in a position to be able to continue his business and be no worse off than when the war started."
Resales were prohibited, or limited to one transaction, in order to prevent an accumulation of profits, that, added to each transfer, would result ultimately in higher prices to the consumer.
The fixing of profit based on cost, and not on market or replacement value, is a thing that is impossible in normal times. Carried to the last degree, it would mean ruination; for no provision is made for declines in the market, and resulting losses. As a war measure it was inevitable, and so endured. In normal times it is like trying[Pg 538] to make water run uphill. With a united people, it worked; but one can not have a World War always to unite the people. It has been said that government regulation of coffees caused a large increase in price to the consumer. This would be hard to prove. The trade, generally, that refused to buy at ten to twelve cents per pound because it did not, or would not believe the reports of frost damage, and thought prices too high, was frantically bidding up to twenty and twenty-two cents for 4s in March and April, 1919. According to the ideas of some enthusiasts, fifty cents was not an impossibility. Naturally such a bubble must burst eventually. Government control had nothing to do with such natural conditions as frost, or as the buyers' indifference. Expansion and inflation were in the air, and had to run their course. The year 1920 brought the aftermath; and in the deflation, coffee, with all other commodities, went down to prices far below its intrinsic value. The expected European demand did not materialize; the interior buyer was overloaded with stock; and the losses of the coffee trade in 1920 will, it is to be hoped, never be repeated.
The Story of Soluble Coffee
For nearly two decades, many coffee men and chemists have been seeking a soluble coffee, or dried coffee extract, that would simplify the preparation of the beverage. Thus far, all the products that have appeared on the market are somewhat deficient in aroma and in the more delicate flavors of coffee. A satisfying average cup of coffee can be prepared from the better brands; the chief advantages of which are rapidity of preparation, absence of any grounds, and uniformity of drink.
Considerable progress has been made in certain directions; enough to warrant telling here, though briefly, the story of soluble coffee to date.
Some there are among trade experts and coffee connoisseurs who maintain soluble coffee is an ignis fatuus; that it can never be manufactured without destroying the aromatic principle; that at best it is a delusion and a snare. Certainly, many absurd claims have been made for some of the soluble coffees on the market. However, there are others that are not without their merits; and the story of their introduction to the trade and the consuming public is entertaining and instructive.
Dr. Sartori Kato, a Japanese chemist, of Tokio, brought a soluble tea to Chicago about 1899. It was not a commercial success; but it served to bring him in touch with some coffee men and chemists, for whom he produced a soluble coffee in the same year. A company was organized to promote the product. It was called the Kato Coffee Co., and included, in addition to Dr. Kato; Fillip Kreissel, a chemist; W.R. Ruffner, a green-coffee broker; and I.D. Richheimer, a coffee roaster. Kato's soluble coffee was first sold to the public at the Pan-American Exposition in 1901. The first quantity order was received from Captain Baldwin and by him used with satisfaction on the Ziegler Arctic expedition. United States patents on a coffee concentrate, and process for making the same (soluble coffee), were granted to Sartori Kato of Chicago, assignor to the Kato Coffee Co., of the same place, on August 11, 1903.
G. Washington, who was born in Belgium of English parents, and who was living temporarily in Guatemala City, invented about 1906, a soluble coffee that was made ready for the market in 1909.
The George Washington Coffee Refining Co. was organized in 1910 to put the Washington product on the market, which it did first under the name, Red E coffee. This was later changed to G. Washington's Prepared Coffee, as an alternative to Washington's Coffee Extract, a name which was favorably regarded by all except certain authorities at the national capital. Associated with Mr. Washington at the start of the enterprise were: E. Van Etten, former vice-president of the New York Central Railroad; W.J. Arkell; Bartlett Arkell, of the Beechnut Packing Co.; C.M. Warner, of the Warner Sugar Refining Co.; and Charles E. Proctor, of the Singer Sewing Machine Co.
The G. Washington Coffee Refining Company has its coffee-roasting and preparing plant in Brooklyn; but its process is a secret one, and has never been patented.
F. Lehnhoff Wyld, who was the Washingtons' family physician when they lived in Guatemala City, and with whom Mr. Washington had discussed his work in soluble coffee, duplicated the Washington product in 1913; and, with E.T. Cabarrus,[Pg 539] he organized the Société du Café Soluble Belna, Brussels, Belgium, to put on the European market a refined soluble coffee under the brand name Belna.
Eight or ten United States patents have been granted on soluble coffees that have never been applied commercially.
Nowhere has soluble coffee met with such success as in the United States, where a number of brands followed the Kato and G. Washington products. Among them, mention should be made of the C.F. Blanke Tea & Coffee Company's Magic Cup, afterward Fairy Cup, and later, Faust brand, brought out in 1912; the Baker Importing Co.'s Barrington Hall Soluble Coffee, brought out in 1917; and the Charles G. Hires Co.'s brand, introduced to the trade in 1918.
It was the World War that brought soluble coffee to the front. E.F. Holbrook, formerly in charge of the coffee section, subsistence division, United States War Department, said, "The use of mustard gas by the Germans made it one of the most important articles of subsistence used by the army." Early in the war, soluble coffee was added to the reserve ration, three-quarters of an ounce being considered at first the proper amount per ration. After trying to put it up in sticks, tablets, capsules, and other forms, it was determined that the best method was to pack it in envelopes. A month before the signing of the armistice, the New York depot was notified that after January 1, 1919, the requirements of soluble coffee were to be 25,000 pounds per day in addition to quantities packed in reserve rations, bringing the total daily output to 42,500 pounds per day. Arrangements were made to have the total output of the New York zone, 40,000 pounds per day, packed in quarter-ounce envelopes, twenty-four to a sealed can.
I.D. Richheimer, promoter of the original soluble coffee of Kato and the Kato patent, organized the Soluble Coffee Co. of America in 1918, to supply soluble coffee to the American army overseas. After the armistice, the company began licensing other merchants under the Kato patent or offering to process the merchants' own coffee for them if desired.
William A. Hamor and Charles W. Trigg, Pittsburgh, assignors to John E. King, Detroit, were granted a United States patent in 1919 on a process for making a new soluble coffee. Their process consists in bringing the volatilized caffeol in contact with a petrolatum, or absorbing medium, where it is held until needed for combination with the evaporated coffee extract. The King Coffee Products Corp. of Detroit was organized in 1920 to manufacture this product, known as Minute coffee, and a coffee base for soft drinks, the latter being marketed under the name of Coffee Pep. Mr. King had believed for many years that soluble coffee was destined to solve many of the vexations of the coffee business, and had been experimenting with the idea since 1906. To facilitate his investigations, he established a fellowship at the Mellon Institute of Industrial Research, Pittsburgh, in 1914, in charge of Charles W. Trigg. This chemically controlled research evolved a product which, after passing through the laboratory stage, was placed upon a small unit plan basis, and then patented. Five additional patents on the product were granted Messrs. Trigg and David S. Pratt in 1921; and all were assigned to John E. King.