The Whisky Trust: Making of a Monster (Part 1)

Transcript

East Meets West

Standing on the crowded deck of a steamship bound for America, Takamine (tah-kah-ME-nay) Jokichi (Joe-KEE-chee) was taking a moment to clear his mind as he stared out at the great and vast Pacific Ocean. But the more he brushed his thoughts away, the more they came rushing back to him. What future lay ahead for him, his wife, and their two young sons?

For many of the Japanese immigrants on this ship, there must have seemed a great irony to be escaping their homeland for a life in the very country that a generation before had brought great upheaval to their shores.

Isolated from the rest of the world for well over 200 years, through a policy known as Sakoku (ssssA-KO-ku), the Empire of Japan found itself ill prepared in 1853, when a fleet of American warships entered the waterway, then known as Edo-wan, but now as Tokyo Bay. Under the command of Commodore Matthew Perry, the mission, as provided by then President Millard Fillmore, was to utilize a terror tactic known as gunboat diplomacy, with the goal of forcing Japan to open their many ports to the west.

And thus began Japan’s industrialization and urbanization. And the poverty and social unrest it would bring, would lead to younger generations boarding boats for the United States, in hopes of finding a better life.

But for Jokichi, he wasn’t running for poverty or strife. He had a very different reason for taking his family to America.

Coming from a family of means, his father a doctor, his mother from a sake brewing family, he would spend his youth in Nagasaki, the one port city that had remained open to the west during Sakoku. 

He would feel a western influence from an early age. He was taught English by a Dutchman, attended school in Osaka and Tokyo, and was sent by the Japanese government to study the western ways of chemical engineering at two universities in Glasgow, Scotland. 

Jokichi’s prospects in his own country were solid, but for his wife Caroline - who was American, adapting to her new life in Japan wasn’t going so great.

A Unique Marriage

It was during a previous trip to America that the couple met. Traveling to the New Orleans Cotton Exposition in 1884 as a government commissioner, Jokichi had taken up lodgings with the family of a former Union Captain named Ebenezer Hitch. And it wasn’t long before 32 year old Takamine Jokichi became smitten with the captain’s 18 year old daughter. After gaining Captain Hitch’s approval for a union, he left New Orleans with a promise to Carrie he would return for her, once he had built a career and stable life in Japan. 

Upon his return to his homeland, he received an offer to take on the newly minted position of Chief of the Japanese Patent Office. His ingenuity would lead him to help establish Japan's patent system. 

But soon his skills as a chemist would return to the forefront and he would take the reins of the newly established Tokyo Artificial Fertilizer Company - Japan's first chemical fertilizer works. Business started slow, but with a few tweaks, the company took off. Soon he became confident enough in his standing to travel back to New Orleans - where he and his bride Caroline were married in a grand ceremony in the French Quarter. 

After honeymooning in Charleston, SC and Washington, DC the couple would make their way across the US - going coast to coast by rail before boarding a steamship bound for Japan. 

Back in his homeland, Jokichi would move his new bride into his mother’s home. For Jokichi this was a natural move, but for the two women, it became an uncomfortable situation. It seems that Jokichi's mother was not too excited about Carrie's liberal American ideals and she clearly let her feelings be known. 

Still, the little family thrived and within two years, Carrie would give birth to their two sons Jokichi (Joe-KEE-chee) Jr and Ebenizer. 

As for Jokichi’s work life, the return to Japan would get his creative juices flowing..

One of his most successful projects during that time was the isolation of an enzyme called takadiastase (tah-kah-DYE-ya-stayz). This enzyme has the power to break down starch into sugars - the sugars yeast feeds upon to produce alcohol. He developed the enzyme from koji, a Japanese fungus that is used in the production of miso, soy sauce, and saké.

His experience in the use of koji likely came both from his mother’s family business and his own studies in 1883 at the Japanese Ministry of Agriculture and Commerce. It was there that he had applied a combination of eastern and western philosophies to help improve the manufacture of saké. 

And for Jokichi, it was this desire to constantly improve production techniques that served as the inspiration for his life’s work. 

It wouldn’t be long before word of his experiments with enzymes reached across the ocean. And soon a telegram would arrive from Carrie’s mother, with an invitation for the Japanese chemist to come to America to meet with a distilling company in Illinois. A distillery that was keen on seeing if his enzyme could be altered to work with corn in the production of whisky.

If successful, it could replace the time consuming malting stage and could significantly cut the production time between grain and barrel.

For Carrie, who was fed up with the tensions with her mother-in-law, this invitation was a God send. 

The couple decided it was time to return to America for the promise of a profitable new life in the distilling industry. Jokichi’s next stop - the Phoenix Distillery in Chicago.

The Japanese Process

But the journey wasn’t as smooth as planned. Just after the boat docked in Seattle, Jokichi became quite ill from a liver ailment and was in such bad shape, he wrote out his will at once. 

But within days his health improved and the little family unit made their way down to San Francisco and then across the country to Chicago where Carrie's parents were waiting with open arms. 

With his experience in the Japanese Patent Office, his first thought was protecting the process he was bringing to the west from the east. With the financial support of his in-laws, he established The Takamine Ferment Company and in September of 1889, he applied for and was awarded U.S. Patent Number 411,231 under the title “Process of the Manufacture of Alcoholic Liquids.” His Taka-koji enzyme, would become the first microbial patent in the United States.

The next part of the story gets fuzzy. At some point over the next few months, Jokichi would make a trip down to Peoria, Illinois to meet Joseph Greenhut. 

Joseph was the president of the Distillers and Cattle Feeders Trust, an organization that was quickly expanding its influence over the whole of the whisky and spirits production industry. Most people just referred to it as simply “The Trust” or “The Whisky Trust.”

While the specifics of their union as future business associates isn’t clear - what is clear was Joseph’s desire to implement what was now being referred to as Jokichi’s “Japanese process” in the production of alcohol. 

The Trust’s goal was not quality, it was volume. And for a business organization looking to put its competition out of business, getting exclusive rights to this groundbreaking process would be a coup d'é·tat - and the rest of the industry knew it. It was estimated by the New York Times that Jokichi’s process could help the Trust produce $2 million more in revenue year over year. If consummated, the deal would find Takamine a very rich man, with the depositing of twenty percent of the savings in his own company’s coffers.

It would take a year from the time the patents were filed, but eventually on February 18, 1891, Greenhut would get Jokichi under contract.

In the same year the Chicago Symphony Orchestra would hold its inaugural concert, Jokichi would then move his family from Chicago to the southside of Peoria, near the Woolner Grove Distillery, where he would have a laboratory prepared for him in the old malting house. Greenhut wanted to keep the progress of work as much of a secret as he could - so this particular distillery was chosen because of the man who ran it, the Trust’s vice-president Adolph Woolner. During his time there, Jokichi would refer to the little malting house as the "White House." 

Once his process was perfected, the nearby Manhattan Distillery was outfitted for production and soon the Whisky Trust would have the perfect weapon to continue their dominance of the spirits industry in the United States. 

But just as soon as Jokichi's equipment had been outfitted, an unexplained fire erupted and began to tear through the distillery. Horse drawn fire carriages arrived at the scene. As the firemen unrolled the hoses, they soon realized the hoses they had weren’t long enough to reach the hydrant.  Then when a longer hose was procured, they opened the hydrant full bore, but it was dry as a dessert. All the Wollners and Jokichi could do was stand there in wretched agitation and watch as the structure - completely engulfed in flames - slowly reduced to a pile of charred timbre and smoldering ash.

Inquiries were made but the police found no definitive answers to the cause of the suspicious fire. Was it sabotage? And if so, what would drive someone to commit such a dastardly act?

Well, in the world of whisky, one of the darkest chapters in its history is the story of the Whisky Trust. A sometimes cunning and other times ruthless organization that used every legal and illegal tool in their arsenal to control and dominate its industry. 

Origins of the Trust

So where did this evil empire come from? Well, in part, you can thank John D. Rockefeller's great success as an oil man. 

Founding his business in 1870, he grew his company through the aggressive acquisition of smaller firms. Then, to consolidate his power, he would shutter the doors of the less productive entities. 

Once he had a firm grasp on the industry, he used his leverage to strike a deal with the Lake Shore Railroad that gave him a 71% discount on shipping. This allowed him to lower his prices driving even more of his competitors into his arms. 

To combat this growing power, state governments began putting caps on the size of companies within their borders. 

Undaunted, Rockefeller looked to his General Solicitor Samuel C.T. Dodd for his next master stroke. If a company's size was the issue, he would just litter a bunch of smaller companies across several states and have the shareholders secretly entrust their shares to nine trustees. 

This "corporate trust" system avoided both the state level regulations and gave them additional tax advantages.

Over the next decade, those nine men under Rockefeller's Standard Oil trust would put a stranglehold on the oil market, controlling 88% of the country’s output by 1890. 

To the millionaire titans of industry, John D. Rockefeller had created the blueprint for the ultimate power grab.  And soon, the umbrella trust system was catching on like wildfire. 

And initially customers didn’t seem to mind. During the early days of consolidation, the offending trust would lower prices, benefiting consumers, but in the meantime smaller businesses were being crushed. And once the competition was gone, the lack of friction would allow these huge trusts to charge whatever they wanted and produce however much they wanted. They could easily put the stranglehold on the American public.

For the world of American whiskey, the 1880s were a time of massive growth, but also a time of major uncertainty. A lot of the trouble was being stirred up by the federal government and its system of taxation. 

To the distillers, it must have seemed like taxes were being raised on liquor every single year. Because of the frequent hikes, distillers soon developed a pattern of handling them. Months before the tax would be implemented, distillers would be forewarned and so to get their profits in before the government increased their share, they would feverishly ramp up production. But in their haste to beat the taxman, they would flood the market with a gross oversupply of whisky. And so, while the country was prospering, distillers were being strangled by falling prices. 

Somehow someone needed to take control of this situation. 

Joseph Greenhut

Joseph Benedict Greenhut was born in 1843 in Bushop-Purnitz, Austria. Brought to America by his mother in 1852, he would settle in easily to his new home in Chicago. When he reached the age of 18, he saw his adopted country devolve into Civil War and when President Lincoln called for troops to put down the rebellion, Joseph enlisted without hesitation..

Fighting under the command of General Ulysses S. Grant at Fort Donelson, Sergeant Greenhut was seriously wounded with a debilitating injury to his right arm. The army sent home for six months to mend. Fully recovered, he returned to active service under General Joseph Hooker and was promoted to Captain of the 82nd Illinois Volunteer Infantry. He would serve honorably at Gettysburg, in Northern Virginia, and at Lookout Mountain in Chattanooga. He remained in the army until 1864.

During his time in the war he gained the respect of his fellow soldiers, one saying he should be “the subject of praise and admiration” and that he “showed himself as the bravest of the brave, calm, prudent, valiant.” In fact, in 1891, he would be chosen as one of three men appointed by the governor of Illinois to erect a monument to the 82nd Infantry on the hallowed ground of Gettysburg.

Returning to Chicago after the war, Joseph would start a family of his own, and took a job in the trade of metal-crafting. He also held odd jobs at some liquor houses around the city. And it was likely these dailiances into the world of liquor that drew his attention to a growing town down river called Peoria. Or “sin city” as some would call it. A town filled with saloons, a growing distillery industry, and godless free-thinkers like Robert Ingersoll. 

The Perfect Home For Whisky

Situated on the Illinois River, 150 miles Southwest of Chicago, Peoria had every resource necessary for a successful distilling business - a large supply of cold water, millions of tons of coal, ample supplies of grain, a hardened workforce, and easy transportation by either boat or rail.

The distilleries that sprung up around the town would combine cattle operations along with distilling to create a cost-effective eco-system where spent grains mixed with hay would supply the cattle with nourishment. 

These dairy distilleries would bring explosive growth to Peoria, feeding other industries like saw mills, barrel makers, and the burgeoning import and export trade.

And it would be the dairy distillery industry that would bring Joseph and his family to Peoria in 1879. His boss, a Chicago meat packer named Nelson Morris had sent him there to oversee cattle-feeding operations he was invested in. It was thought that Morris had created a secret agreement with the Western Export Association to take monopolistic control over the cattle at each distillery. 

For Joseph, a man who a local distiller’s son described as arriving with only $50 worth of property to his name, Peoria must have been a sight. With plenty of industry, a bustling population, and the smokestacks of 12 different distilleries pumping filth into the air. There were The Woolner Brothers Union No. 7 and No. 8, Zell Schwabacher & Co., the Clarke Bros., Peoria Distilling Company, G. T. Barker's, Fermenich Manufacturing Company, J. W. Johnson's, Bush, the Great Eastern, Standard Distilling Company, the Manhattan, and the two largest being the Monarch and Great Western Distillery. The Monarch was considered to be the largest distillery in the world.

While holding down his responsibilities for Mr. Morris, Joseph learned the art of coopering and befriended another cooper named John Francis. The two men would form a bond and by 1881 they had both risen up the ranks and soon partnered with Nelson Morris in ownership of the Great Western Distillery, where John Francis took the position of president.

The Pools

One of the first issues the two men would confront was the mass overproduction of spirits that was driving down prices, creating a whisky depression. There were so many distilleries, but very little organization and oversight.

In fact, the only oversight was coming through a voluntary organization known as a "pool." The aforementioned Western Export Association was that very pool. Its purpose was the illegal collusive control over each member distillery’s output and pricing. And nearly every distillery in the Midwest was part of it.

Nicknamed the "Peoria Pool" its president H.B. “Buffalo” Miller had devised the scheme in the 1870s. And in theory it should have worked. But the idea had one major flaw. Because the voluntary demands they were making were against the law, if one of the distillers in this "gentleman's agreement" decided to take matters into his own hands, there was no way to enforce the output mandates. 

Pools would rise up and then collapse with regularity.

During John Francis' time as president of the Great Western Distillery, he grew frustrated at the constant turnover of pools who were doing nothing to solve the over production and depressed price issues. And distilleries just continued to pop up one after another, exacerbating the problem. Men like Edward Spelman of the Enterprise and Great Eastern Distillery could build a new distillery in 90 days and be on to the next. Through its boom years, Peoria would see a total of 73 named distilleries - which would earn it the nickname "The Whisky Capital of the World."

Finally fed up, Greenhut and Francis decided it was time to seize control and incorporate the same successful strategies that Rockefeller's Standard Oil Trust, the American Sugar Refining Company, and the railroads had employed to tame their industries while securing major profits.

It was time to say goodbye to the pools and establish a whisky trust.

Closing of Part 1

Next time on Whiskey Lore. Greenhut begins a march through Peoria and the midwest, bringing distillery after distillery under the control of the trust. And meanwhile, the nation begins to stir when the titans of industry begin to get overaggresive - and soon the brother of a famous Civil War General will utilize his weapon of choice - legislation, in an effort to try to weed out those with the darkest monopolistic intentions. And later Whisky Trust will begin to show it’s true colors, stopping at nothing to feed it’s greed, including the use of threats, coercion, dynamite, and ultimately a headline grabbing plot filled with corruption, intrigue, and murder. That’s next time, on Whiskey Lore.

Whiskey Lore is a production of Travel Fuels Life LLC

Production, stories, and research by Drew Hannush

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And join me this week on the all new podcast, from the makers of Whiskey Lore, it’s Whiskey Lore: The Interviews. And my guests this week will be Andy Faris and Jeff Murphy of Peoria’s J.K. Williams Distillery - we’ll talk about Peoria’s rich distilling history and the distillery’s namesake, a Prohibition era bootlegger. Find Whiskey Lore: The Interviews on your favorite podcast app.

In the meantime, thanks for growing your whisky knowledge along with me, and until next time, cheers and slainte mhath.

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