The Great A&P and the Struggle for Small Business in America Page 5

  Hartford hewed firmly to Gilman’s strategy of aggressive growth. By 1884, Great Atlantic & Pacific stores could be found as far west as Kansas City and as far south as Atlanta, in small towns as well as major cities. For rural customers, a network of wagon routes radiated from the stores, serving farms and villages across the eastern half of the country. A four-by-six-inch trade card of the sort widely used for advertising in the 1880s attests to the company’s geographic reach. It shows a straw-hatted black man, driving his family down a dirt road in a rickety mule cart, pulling the mule up short to read a signboard proclaiming, “The Great Atlantic and Pacific Tea Co’s Teas & Coffees are the best”—an indication that the company was marketing its wares even in remote corners of the South. That image, and others featuring bicyclists, baseball players, and inebriates who should have stuck to tea and coffee, may well have been selected by young George L. Hartford, who seems to have taken on such responsibility during a brief stint as a marketer in the early 1880s.5

  Beneath the surface, though, a problem loomed. Great American and Great Atlantic & Pacific depended almost entirely on two commodities, coffee and tea. Sales of both had mushroomed after the Civil War, aided by repeal of the high tariffs enacted to finance the war. In 1864, Congress, desperate to raise revenue, had raised the duty on tea to twenty-five cents per pound—a tax roughly equal to the value of the tea itself—and the duty on coffee to five cents per pound. The tariffs were finally slashed in 1870 and eliminated in 1872, providing an enormous stimulus to consumption. In the 1870s, the average American drank one-third more tea each year than at war’s end, and coffee imports set new records. This tea and coffee boom must have been highly positive for A&P, helping the company reach $1 million in sales in 1878. But in the early 1880s, prices collapsed. The value of U.S. tea imports fell 40 percent in three years as import volume dropped by one-fourth. The average price of imported coffee plummeted from thirteen cents per pound in 1880 to eight cents in 1883. Although the company tried to promote its coffee with the claim that “by their new process of roasting, cooling, etc., the flavor is retained as it is by no other process,” it must still have faced the same uncomfortable economic facts as its competitors. Falling prices must have devastated all tea companies’ sales and profits, including those of the Great Atlantic & Pacific.6

  * * *

  George H. Hartford seems to have responded to the tea and coffee crisis in the only sensible way: by broadening the product line.7

  The 1880s may have been terrible years for selling coffee and tea, but they were fabulous years for selling sugar. Previously, Americans had consumed little white sugar. Its high price had made refined sugar a luxury, so most people had used brown sugar, molasses, or sorghum syrup to sweeten their drinks and preserve their foods. As tariffs fell and new technology drove down refining costs after the Civil War, refined white sugar became all the rage. U.S. imports doubled between 1865 and 1869, and then, as tariffs fell away, rose by half during the 1870s. But it was only in the 1880s that Americans fully developed a sweet tooth. Through the decade, the federal government paid growers a bounty of two cents for every pound of sugar they produced in an ultimately unsuccessful effort to create a domestic industry that could meet the soaring demand for white sugar. Average consumption went from thirty-six pounds per person in 1877 to fifty-seven pounds in 1886.8

  Great American and Great Atlantic & Pacific began selling sugar around 1880 and had an immediate hit. Sugar would have been an easy product for store clerks to sell; they would have handled it much like coffee or tea, pouring the bulk product from large bags into shop-floor bins and then serving customers by measuring out the desired quantity on a scale. It is likely that sugar helped the company survive the downturn in tea and coffee sales that killed off some of its competitors. At the Port Chester, New York, store, sugar accounted for about one-fourth of sales in 1882.9

  Yet George H. Hartford would have been fully cognizant of sugar’s limitations. Like coffee and tea, sugar was just a commodity. Great Atlantic & Pacific’s fancy red stores were selling precisely the same product as every other grocery or general store. Gaining protection from changes in commodity prices would require something special, an exclusive brand similar to Thea-Nectar. That special product seems to have been baking powder. According to company tradition, George L., still a teenager, asked a chemist why baking powder was so expensive. Young Hartford had assumed the ingredients must be rare, but when the chemist explained otherwise, George suggested to his father that the company make its own. The back of one of the buildings on Vesey Street was soon curtained off, and a chemist was hired to mix the ingredients.10

  Baking powder was a very controversial product in the 1880s. Invented in the 1850s, it allowed bakers to produce lighter cakes and faster-rising breads. This was an important innovation in a world in which most households did their own baking, and by the 1880s Americans were using an estimated fifty to seventy-five million pounds per year. All baking powders worked by inducing a chemical reaction between common baking soda and an acid to release carbon dioxide gas into batter, but they used different types of acids. The costliest powders contained acid tartrate of potassium, known as cream of tartar, a substance derived from grape juice. Cheaper powders used phosphoric acid or alum salts containing sulfuric acid, and usually produced less carbon dioxide per tablespoon of powder. The cream of tartar interests and the alum interests waged open warfare for four decades, with each side accusing the other of making impure or unsafe products.11

  As food safety became a prominent issue, chemists started testing the composition of baking powders and found none that were what they claimed to be. Almost all powders contained starch as filler, and many contained a variety of salts as well. Consumers were justifiably frightened. “There appears to be ample ground for requiring that the makers of baking-powders should publish the ingredients,” New Jersey’s dairy commissioner opined in 1888. “At present, the only guaranty of an undoubtedly wholesome and efficient article appears to be the name of the brand.” George H. Hartford had reached the same conclusion several years earlier. Although the Great American Tea Company had started selling unbranded baking powder by mail as early as 1883, it was in 1885 that one-pound tins of baking powder, bearing red labels, became the first product sold under what would soon become a powerful brand name: A&P. To promote the new brand, the company printed cards carrying the endorsement of Professor R. Ogden Doremus of Bellevue Hospital Medical College. “I find on chemical analysis that your Baking Powder is composed of pure materials,” the famed chemist attested.12

  A&P Baking Powder was an important product in the history of retailing. With it, the Great Atlantic & Pacific Tea Company, and many of its competitors, began a transition from being tea merchants to being grocers. It was a transition that would dramatically change Americans’ daily lives.

  George H. Hartford did not race into the grocery business, because the grocery business held little prospect of profit in the early 1880s. Most Americans, even in cities, still raised at least some of their own food, growing vegetables or keeping animals. The shops where families bought what they could not raise “contained a bewildering assortment of anonymous goods,” the historian H. Allen Smith wrote later. “The pickle and molasses barrels stood side by side in sullen antipathy, while the open shelves and bins were an Elysian playground for mice.” The inventory was typically heavy on bulk products, such as crackers sold from a barrel, slabs of bacon hanging on hooks, a wheel of cheese beneath a glass bell, a barrel of washing powder. The produce was mainly vegetables that would stay fresh without refrigeration, such as potatoes and cabbages, along with whatever fruits and vegetables were in season locally. Each week, American Grocer preached to its readers, “Count, Measure, Weigh or Gauge Everything You Buy,” and the same advice was applicable to shoppers: almost every item had to be sliced, poured, or spooned, then measured and wrapped in paper by the store clerk.13

  The most important feature of grocery stores in the 1880s
, from the perspective of a chain-store merchant considering the pros and cons of selling groceries, was the near-total absence of brands. Without brands, stores were limited to selling generic products indistinguishable from what was for sale down the street. Competition was based almost entirely on price: a store’s advertising circular might tout molasses at sixty-five cents per gallon, leaving shoppers no way to know whether the store was offering a better deal or just a lower-quality product than a competitor with a higher price. Brands would eventually offer consumers at least the promise (often unmet) of consistency and quality. They would allow market segmentation, enabling grocers to offer higher-priced products targeted at more affluent consumers alongside lower-priced versions aimed at the mass market. Over time, brands would permit major economies of scale in food processing as national companies manufacturing millions of units of well-known products supplanted small firms making small quantities for purely local markets.

  In the early 1880s, though, name-brand groceries still lay in the future. Their arrival, and the spread of retail food chains that would follow in their wake, awaited two inventions so prosaic they were quickly taken for granted: the cardboard box and the tin can.

  The cardboard box was the result of an accident at the Metropolitan Paper-Bag Manufactory in New York. The paper bag had been invented to replace cotton bags unavailable during the Civil War, and Metropolitan’s founder, the inventor Robert Gair, developed the earliest method of mass-producing bags printed with the name of a retailer or manufacturer. By 1878, Metropolitan’s eighteen-page catalog included such offerings as oyster-fry boxes and candy boxes, all of which were meticulously folded by hand and were far too costly for general use. Early the following year, one of Gair’s workers ruined a print run of paper bags by placing a rule too high above the plane of his printing form, so that instead of printing a line it cut clear through the paper. The mishap led to an inspiration: Gair realized that if he arranged blades at different heights, some could slice through cardboard to create the template for a box while others could simultaneously score the cardboard, without cutting through, where folds were required. In addition to providing a cheap, convenient form of packaging, Gair’s boxes offered surfaces that could be decorated with pictures, logos, and brand names. Instead of asking the grocer for a pound of soap powder, the shopper could now request a particular variety by name.14

  Canned goods, like cardboard boxes, were an old idea that became economical only in the 1880s. Canned goods were first used to feed Napoleon’s army in 1795, and the first U.S. canning plant was established in 1819. But cans were expensive: each was made of tin pieces individually cut with shears and then soldered together, with a skilled can maker turning out a hundred cans per day. The industry got a boost from military orders during the Civil War and the start of salmon canning on the Pacific coast in 1864, and by 1870 the United States had over a hundred plants canning fruits, vegetables, fish, and oysters. The key inventions came in 1874, when two Baltimore men, A. K. Shriver and John Fisher, found alternative ways of controlling temperature to avoid explosions during the canning process. A new machine to cap cans was introduced in the mid-1880s, reducing the need for skilled cappers, and the first successful labeling machine was invented in 1893. Automation made canning cheap: one man could cook five thousand cans of tomatoes a day in 1865 but four times that many in 1894, at a lower daily wage. More than a thousand canneries were operating in 1890, and expansion was so rapid that by 1900 food processing accounted for one-fifth of all manufacturing in the United States. Cheap canning provided grocers a wide assortment of branded merchandise to sell.15

  Cardboard boxes and tin cans appealed to a public increasingly concerned with hygiene and sanitation. The use of sealed containers alleviated at least some of the worry that the flies constantly buzzing about grocery stores would contaminate food and spread disease. Canned goods were often insalubrious—“the consumers thereof are exposed to greater or less dangers from poisoning from copper, zinc, tin and lead,” a government study warned in 1893—but for many consumers the risks of metal poisoning from poorly made cans were minor compared with the advantages of being able to buy peaches or tomatoes any time of year. And as George H. Hartford quickly recognized, the new packaging made it possible for the Great Atlantic & Pacific Tea Company to carry branded products that were on sale nowhere else. The A&P brand was soon applied to condensed milk, then to spices and flavorings, then to butter. By the early 1890s, Great Atlantic & Pacific was making the shift from tea company to grocery chain.16

  As the business changed, two things remained constant: the reliance on extensive marketing and the lavish use of premiums. Just as it was in the days of George Gilman, a store opening was the occasion for a visit by a wagon such as City of Tokyo, pulled by a team of eight horses in gold-plated harnesses hung with gold-plated bells, with the driver seated beneath an ersatz pagoda. Now, though, those who came into the store were as likely to be awed by the rewards on open display as by the merchandise for sale. “Greatest inducements ever offered to tea and coffee drinkers,” the advertisements touted. Glassware, vases, crockery, lamps: all could be had by purchasing coffee and tea at the Great Atlantic & Pacific. Such offers were especially enticing to women who may have controlled little of their family’s spending except the food budget. By collecting coupons or stamps each time they bought groceries, they could hope to acquire goods that their husbands would refuse to purchase with cash.17

  The firm, though still half owned by Gilman, was George H. Hartford’s to run, and the senior Hartford clearly meant to keep it in the family. George L. had been gaining experience on the financial side of the business since 1880, serving as cashier in a Newark store in the late 1880s. Edward, the middle son, chose college instead of the grocery trade, but the youngest Hartford son, John, joined when he turned sixteen, in 1888. John had already shown a flair for earning money, making an impression at Orange’s St. Patrick’s Day parade in 1887 by parking his father’s dray at a strategic location and charging parade goers to clamber up for a better view. He began at Great Atlantic & Pacific in the stockroom at the Vesey Street warehouse, sweeping floors and cleaning inkwells for $5 per week. To teach her son the value of money, his mother took $1 of each week’s pay for board.18

  All three sons still lived in the family home in Orange, where George H. Hartford repeatedly won reelection as mayor. A Democrat, he enjoyed support from both Democrats and Republicans from 1879 through 1888. By all accounts, he was a progressive mayor, building schools, installing electric streetlights, and starting construction of a municipal water system. But there was one issue on which he could make no headway: temperance. In 1888, Hartford bowed to the complaints of temperance advocates and shut down saloons operating illegally on Sunday, drawing outrage from Democratic Party leaders who backed the saloon keepers. “A strong opposition to the reelection of Mayor Hartford has during the past year developed in his own party,” The Orange Chronicle reported early in 1890. Hartford initially declined to run for reelection, then was renominated by a raucous party convention over heavy opposition. Local Republicans promised to support him, then changed their minds. On Election Day, March 15, anti-Hartford Democrats joined their partisan opponents to oust the twelve-term mayor and give the heavily Democratic city a Republican leader. The election, said the newspaper, “will go down in local history as one of the most remarkable ever held in this city.”19

  The tumultuous mayoral election of 1890 gave the entire Hartford family an understandable aversion to politics. For the next four decades, they would avoid it like the plague. Only the threatened destruction of their company would force George L. and John Hartford to become involved in political life once again.

  5

  THE DEATH OF GEORGE F. GILMAN

  It was not boredom with the retail trade that caused George F. Gilman to hand management of his tea companies to George H. Hartford in 1878. His concern was rather more pressing: he was afraid for his life.

  In Dece
mber 1859, upon the death of his father, George Gilman became one of several executors of the estate of Nathaniel Gilman. This was not a simple assignment. Nathaniel left a widow, Joanna, whom he had married in 1836, and two adult and two minor children, plus George and five other surviving children by his first wife. Nathaniel’s children did not get along, and he left his affairs in a state that was bound to add to the rancor among them. Among other things, he avoided declaring a legal residence in order to evade state taxes; as the Maine Supreme Court observed in 1863, “He evidently belonged to that class of men, fortunately small in number, who have no stronger desire than to avoid the payment of taxes anywhere.”1

  When he died at the family homestead in Waterville, Maine, the children of his first marriage claimed the body, brought it to Brooklyn, buried it in Green-Wood Cemetery, declared that Nathaniel had been a New York state resident, and filed the will with a New York court. Joanna and her children, Brooklyn residents all, objected that he had been a Maine resident and filed a purported copy of the will in Maine—not least because Maine law allowed a probate judge to increase the stingy inheritance Nathaniel had left Joanna. Courts in each state appointed executors, competing for control of a sizable estate. Decades of legal battle ensued. George Gilman and the other New York executors took control of Nathaniel’s properties in New York, including the buildings in the Swamp that housed the leather business. When the Maine legislature enacted a law allowing a probate judge to increase Joanna’s inheritance from $15,000 to $75,000, George Gilman unwisely asked the Maine Supreme Court to block the award; that court, recalling that Joanna was a descendant of the state’s first chief justice, instead increased the payment to $85,000, whereupon Joanna and her daughter, Anna, seized George Gilman’s property in Maine to satisfy their claim. Anna, acting on behalf of her mother, filed suit after suit against her half brothers and her half sisters’ husbands: Maine’s supreme court was called upon to hear four different cases styled Gilman v. Gilman between 1863 and 1867. The temporary disappearance of one of the husbands in 1870, after he embezzled $300,000 from the estate, did not make relations any better.2