Whiskey Trust

from Wikipedia, the free encyclopedia

The Whiskey Trust (officially Distillers & Cattle Feeders Trust from 1887 to 1890 , Distilling and Cattle Feeding Company from 1890 to 1895 ) was a trust that existed from 1887 to 1895 and at times controlled 87% of whiskey production in the United States.

history

The whiskey trust already had some short-lived precursors. The Peoria Pool, founded in 1870, brought together whiskey distilleries that were located in central Illinois. In 1881 the Western Export Association was founded. As a result of an economic depression, this was supposed to reduce excess capacities in the market by obliging the members to produce a quantity that they were not allowed to exceed. The Western Export Organization failed because many members did not adhere to these limits and other distilleries that were not members of the Trust expanded their production. The Western Export Association dissolved again in 1882. These were all founded in Peoria , Illinois , the city with the largest whiskey production in the world at the time. From 1882 to 1887 there were several attempts to limit production by ceasing individual distilleries entirely and being compensated for it by the others. This was also not a permanent success. Especially since distilleries continued to undercut prices and failed to get a higher price on the market.

In 1887 the Great Western Distillery and several other local distilleries merged to form the Distillers & Cattle Feeders' Trust . Cattle Feeders came into the name because the mash residues from whiskey production were used as animal feed. The Trust was based on the Standard Oil model . All members gave complete control of their operations to the board of directors of the trust. The first president was Joseph B. Greenhut .

After the reorganization in 1890, the trust was legally a company that held a majority stake in all subsidiaries - previously the members of the trust. At about this time, US federal and individual state agencies began cracking down on the Trust. In 1893, the United States went into recession that lowered both the sales and price of whiskey. The whiskey price was relatively inflexible as much of the price consisted of the tax on the whiskey, so sales continued to plummet. In addition, with the recession, more fraudsters began to force their way onto the market, paying no tax at all and thus being able to undercut the trust. From 1893 the trust began to run into financial problems. At the time of the compulsory dissolution by the court in 1895, the trust had already been in insolvency proceedings for several months.

Business model

The Trust used its funds to buy up numerous other distilleries, most of which it closed. Overall, never more than twelve distilleries produced for the Trust, most of which were in Peoria. At the time of its greatest expansion, 86 distilleries had joined the trust. The Trust's whiskey market share at its greatest expansion in 1893 was 87%. The market share for drinkable alcohol, however, never exceeded 45%.

The trust began operations with a low-cost strategy. This lasted until 1890 and served to gain market share and to force non-members out of the market or to induce them to join the trust because they could not keep up with the low prices.

From 1890 onwards, the Trust worked with an exclusivity clause that encouraged dealers and resellers to only sell the Trust's whiskey if they wanted to receive the whiskey. If a dealer entered into the trust exclusively, they received a discount on the prices.

The Trust had to contend with several problems that did not exist in the oil industry, for example. The trust never managed to exercise any real control over the whiskey market. There were numerous black markers at the time who were beyond the control of the trust. It is estimated that a third of all whiskey produced in the United States by the late 18th century came from these illicit distilleries. The opening of a distillery was possible with comparatively little effort, so that there were immediately new competitors as soon as the trust raised prices. In addition, customers could easily switch to other spirits and beer should the trust increase prices too much. The attempt to gain control of the market and prices with the trust never succeeded.

Public persecution

If trusts were still legal when it was founded in 1887, the Sherman Antitrust Act , passed in 1890, changed this. Officially, the Whiskey Trust had to reorganize. The Trust was renamed the Distilling and Cattle Feeding Company, and was legally organized as a company under Illinois law.

Both the American federal authorities and the authorities of individual states took action against the trust. The US government investigated the trust for violations of the Sherman Antitrust Act. The authorities considered the discount program in particular to be an obstacle to competition. Courts, however, regularly upheld the trust in the respective proceedings.

Several traders also sued the trust because the trust refused to pay out the agreed discounts. The Trust argued that these traders later also traded whiskey from other vendors, thereby violating the terms of the discount program. The courts regularly sided with the dealers, robbing the trust's exclusive discount program of its impact.

The authorities of individual states were more successful. In 1890, the Supreme Court forced Nebraska , the Nebraska Distilling Company excrete out of the Trust. The legal basis was the allegation that the Nebraska Distilling Company had violated its founding charter by joining a monopoly organization. In 1893, the Illinois Attorney General began investigating the Trust for having been guilty of prohibited monopolitical activities. Several courts upheld this, and in 1895 the Illinois Supreme Court dissolved the trust.

resolution

By 1895, the trust's financial and legal problems had increased so much that Joseph Greenhut left the trust. A short time later, the Illinois Supreme Court declared the trust illegal and broken it up into several successors. Several parts came together again a little later. In 1902, the Distillers Securities Corporation - a successor to the Trust - was again the largest spirits manufacturer in the USA. After further regroupings and rearrangements, the Trust successors became National Distillers .

literature

  • Peter Caldwell: Amalgamation or Trust: Anglo-Scottish and American Comparative Legal Institutions and How They Shaped the Nations' Whiskey Industries, 1870–1900 in: Business and Economic History Vol. 26, No. 2, Selected papers presented at the forty-third annual meeting of the Business History Conference held jointly with the Association of Business Historians (Winter 1997), pp. 476-490
  • Werner Troesken: Exclusive Dealing and the Whiskey Trust, 1890–1895 in: The Journal of Economic History / Volume 58 / Issue 03 / September 1998, pp. 755–778

Remarks

  1. ↑ a b c Karen Clay and Werner Troesken: Strategic Behavior in Whiskey Distilling, 1887–1895 , May 6, 2002 p. 4
  2. ^ Jeremiah W. Jenks: The Development of the Whiskey Trust Political Science Quarterly, Vol. 4, No. 2 (Jun., 1889), p. 301
  3. ^ Jeremiah W. Jenks: The Development of the Whiskey Trust Political Science Quarterly, Vol. 4, No. 2 (Jun., 1889), p. 302
  4. ↑ a b Chuck Cowdery. The Whiskey Trust. Seemed Like a Good Idea at the Time , The Chuck Cowdery Blog February 12, 2014
  5. ↑ a b c d e Karen Clay and Werner Troesken: Strategic Behavior in Whiskey Distilling, 1887–1895 , May 6, 2002 p. 17
  6. ^ A b Karen Clay and Werner Troesken: Strategic Behavior in Whiskey Distilling, 1887–1895 , May 6, 2002 p. 5
  7. ↑ Karen Clay and Werner Troesken: Strategic Behavior in Whiskey Distilling, 1887-1895 , May 6, 2002 p 14
  8. ^ A b Karen Clay and Werner Troesken: Strategic Behavior in Whiskey Distilling, 1887–1895 , May 6, 2002 p. 19