The Great A&P and the Struggle for Small Business in America (8 page)

Gilman died at Black Rock on March 3, 1901. Despite his ample firsthand experience with the difficulties of settling estates, he left no will.

Even in death, Gilman was surrounded by a circus. The bank named as administrator of his property, Bridgeport Trust Company, was unable to take possession of Black Rock until it sneaked two officials into the mansion at night. Hundreds of people came for the auction of Gilman’s horses and carriages, and the auction of household goods drew more than five hundred people, who rode out to Black Rock on extra trolley cars laid on for the occasion. Some just picnicked on the lawn, while others wandered about eyeing the furniture as they consumed sandwiches and lemonade sold by vendors roaming from room to room. The two “adopted daughters,” both much younger than Gilman, each came forward to claim he had promised her his entire estate. As the newspapers filled article after article with family gossip, Frazier Gilman, one of the two half brothers who attacked him in 1877, asked a court to declare his sister, Anna Gilman, incompetent. Anna, who was committed to an insane asylum in England, had spent four decades fighting with and suing her brothers, half brothers, and brothers-in-law to get more money from the estate of Nathaniel Gilman, but she was too ill to join in the battle that followed the death of George F. Gilman.
5

Many others did join in. George Gilman had no children, but at least sixteen nieces and nephews and two surviving half brothers sought part of an inheritance that was rumored to be worth $40 million. The children of Gilman’s full brothers and sisters wanted the case heard in Connecticut, where the law entitled only whole-blood relatives to inherit from a person who died without a will. The descendants of Nathaniel Gilman’s second wife, including Frazier Gilman, wanted the matter heard in New York, where the law recognized the rights of half-blood heirs. The wife of a newspaper publisher, Helen Hall, one of Gilman’s “adopted daughters,” sued to claim all of Gilman’s assets. Then, unexpectedly, the estate was served with another lawsuit. The plaintiff was George H. Hartford.
6

In papers filed with a Connecticut court, Hartford revealed a previously unknown secret: on April 15, 1878, he and Gilman had formed a partnership to own the Great Atlantic & Pacific Tea Company and the Great American Tea Company. The agreement was unwritten, but Hartford asserted it had been made in the presence of Henry E. Knox, Gilman’s attorney, in New York City. The agreement purportedly gave Hartford full management control of the tea business and ownership of its assets. The two partners supposedly agreed to share profits and losses equally. The bank account was to remain in the name of George F. Gilman, to avoid alerting the claimants to Nathaniel Gilman’s estate that George Gilman had given up a stake in his business, and Hartford agreed to use Great Atlantic & Pacific’s profits to help Gilman satisfy those outstanding claims. Hartford won an injunction to keep the Gilman executors from interfering in Great American and Great Atlantic & Pacific while a court heard his claims to a half interest in the unincorporated businesses.
7

The executors and some Gilman relatives had fancied that Hartford was merely the hired manager of Gilman’s business. Hartford, though, presented strong evidence to the contrary. On March 4, 1901, the day following Gilman’s death, he had incorporated the Great Atlantic & Pacific Tea Company in Jersey City, New Jersey. The timing suggests that even before Gilman’s death, Hartford had been in discussions with some of the Gilman heirs about the future of the business. No one could dispute that he had worked with Gilman for more than forty years and had exercised management control since 1878. All of the store leases were in Hartford’s name, indicating that he had personally been at financial risk in the business. With Hartford’s assistance, Gilman had in fact bought out some of the competing claims to his father’s estate. Hartford had also achieved a greater stature in the business world than one would expect of a mere employee. The Home Insurance Company of New York and the Second National Bank of Orange had named him a director. A carefully groomed man with a well-trimmed beard, he had the demeanor of an executive.
8

As the accountants plowed through Gilman’s records, they discovered that his $40 million estate was a mirage. Aside from the mansion at Black Rock, all of Gilman’s wealth was tied up in the tea companies. The heirs realized that a struggle over ownership, as often occurred in businesses upon the death of a partner, could destroy the value of their inheritance. They were dependent upon George H. Hartford.
9

On February 20, 1902, less than a year after Gilman’s death, a deal was struck. The New Jersey corporation Hartford had set up in 1901 would buy the assets of the Gilman-Hartford partnership. The company’s capital would be raised to $2.1 million, including $700,000 of common stock and $1.4 million of preferred. The Gilman heirs would receive $1.25 million of the preferred shares paying a 6 percent annual dividend, giving them a priority claim on roughly half the company’s annual profits at the time. George H. Hartford would control some of the preferred shares and all of the common stock. The preferred shareholders had the right to vote on any change in capital stock, mortgages, pledges of assets, and purchases of other businesses, but otherwise Hartford had uncontested authority to manage the business. He also agreed to buy back as much of the preferred stock as the heirs wished to sell. Despite judicial skepticism about Helen Hall’s assertion that Gilman had promised her everything, she was awarded four hundred shares of preferred stock in return for dropping all claims to the Gilman estate.
10

In June 1903, a federal court approved the transaction. George H. Hartford, after more than four decades of collaboration with George Gilman, became president and sole owner of the Great Atlantic & Pacific Tea Company. George L. Hartford, still single and living in his parents’ house at age thirty-seven, was named treasurer. The middle brother, Edward Hartford, thirty-three, was named secretary, despite his college degree in engineering and his avowed disinterest in the retail trade. John A. Hartford, the youngest of the brothers, did not immediately become a corporate officer, but that was of little significance. More outgoing than his brothers and the only one to have married, John was frequently on the road, visiting stores, meeting store managers, talking with suppliers. George H. Hartford was sixty-nine years old by the time he assumed full control, and George L. and John—one the numbers man who shied away from people, the other the extrovert who was always looking for new opportunities—were preparing themselves to take on much of their father’s responsibility.
11

6

GEARING FOR BATTLE

The Great Atlantic & Pacific Tea Company was already a substantial business when the Hartfords took ownership in 1903. The messy litigation over George Gilman’s estate lifted the lid on the company’s secrets, revealing that in 1900 it turned a profit of $125,000 on sales of $5 million, a none-too-shabby rate of 2.5 percent. Its capitalization of $2.1 million was puny by the standards of heavy industry—United States Steel Corporation, formed in 1901, was capitalized at $1.4 billion—but among grocery retailers the Great Atlantic & Pacific was one of the largest in America.
1

Being among the country’s biggest grocers was not much of a claim to fame. Food retailing at the start of the twentieth century was a very primitive industry, conducted on a very small scale. The Great Atlantic & Pacific Tea Company’s $5 million of revenue came from 198 stores, thousands of wagon routes, and a mail-order tea business. The Hartfords’ success depended upon collecting small sums from a large number of widely dispersed sources. The same was true of their competitors. Even the country’s largest food stores were tiny by later standards; the floor area of the new wood-paneled emporium of Goldberg, Bowen & Company, heralded as “San Francisco’s Finest Grocery,” was not much larger than a basketball court. Almost all food shops offered a very limited selection of merchandise, rarely more than a couple hundred items, most of them purchased from wholesalers in hundred-pound sacks and wooden barrels and then doled out to individual customers. As it had for three decades, the front page of the leading trade newspaper advised grocers: “Count, Measure, Weigh or Gauge Everything You Buy.”
2

For consumers, the daily trip to the grocery store could be a risky venture. Many independent grocers did not post prices, forcing the housewife to haggle over the cost of each item. And shoppers rarely received what they paid for. When investigators visited 549 grocery stores in New Jersey, they discovered that 63 percent of the weights and measures were incorrect, with only one store in twenty employing strictly honest weights. Sanitary conditions were often unhygienic at a time when electricity and refrigeration were uncommon. Produce was sold from open bins or bushel baskets exposed to dust and flies. In 1903,
American Grocer
found it necessary to remind readers to cover the bungholes of barrels to keep mice and rats from falling in. The social reformer Albion Fellows Bacon encountered a grocery in Evansville, Indiana, around 1906 that lacked even a sewer connection. “It was a wonder to me then, and is still, how a good housekeeper could buy groceries in that filthy place, and in scores of others, little better, scattered over our town and other towns,” she wrote. The brand-name packaged goods stacked behind the counter were no safer than the bulk products. Lemon extract often contained no lemon. Bottled soft drinks used coal tar, a carcinogen, as a colorant. Some ketchups used saccharine, even then suspected as a hazardous adulterant, as a preservative. The “tin” in tin cans contained as much as 12 percent lead, which leached into the fruits and vegetables. Zinc chloride, used to prepare the tops for soldering, often ran into the cans during the soldering process, poisoning the food inside.
3

Scandals involving short-weighting, adulteration, and contamination were frequently in the headlines around the turn of the century. In an environment rife with mistrust, the Hartfords understood how to extract advantage from the Great Atlantic & Pacific brand. “Teas and coffees bought at any of our stores are warranted
strictly pure
,” the company advertised. The numerous federal and state investigations into food purity appear not to have snared any Great Atlantic & Pacific products. Even
American Grocer
, which already regarded it as the great enemy of independent merchants, never accused Great Atlantic & Pacific of adulterating any of its products during this period. On the contrary: while criticizing its “supreme selfishness” for stealing business by underpricing competitors, the publication had to admit that the company’s low prices were attributable to its ability to buy in volume without middlemen, not to inferior products. “They retail some goods sometimes at less than most small storekeepers pay; and worst of all, they advertise the fact far and near,”
American Grocer
complained.
4

It is not clear how George H. Hartford and his two sons divided up their responsibilities in this period. George H. was still involved in the company on a daily basis. Statements by John, years later, suggest that the three men spent much time discussing business and that important decisions would be taken only if they all agreed. But as the Hartfords came into full control, the grocery trade was changing rapidly. A decade earlier, as its tea stores had begun to develop into grocery stores stocked with canned goods, butter, and soap, the Great Atlantic & Pacific had been the only grocery chain of note. The other chains around the United States all had been tiny enterprises, operating a handful of stores that sold little but coffee, tea, and baking powder. By the early years of the twentieth century, the competitive situation was much tougher. The government would not collect data on retail stores until the 1920s, but the economist Harold Barger estimated that grocery chains accounted for 4.5 percent of food sales in 1899. Admittedly, “chains” was a generous term, encompassing many firms that owned only two or three stores. Even so, Barger’s estimate was noteworthy, because his estimate of grocery chains’ market share a decade earlier, in 1889, was zero.
5

Great Atlantic & Pacific was no longer the only player in the chain grocery business. It had opened only four or five stores per year over the course of the 1890s, while other companies had expanded in a big way. In New York, the Grand Union Tea Company, formerly the Jones Brothers Tea Company, owned 140 stores and two thousand delivery wagons by 1901, served by a huge warehouse in Brooklyn, and in 1905 the Irish-born grocer James Butler opened 40 stores in just four months. In Philadelphia, where Great Atlantic & Pacific had been the only chain in 1889, Thomas P. Hunter’s Acme Tea Company was opening a store every few weeks and would have 169 by 1908, while William Butler, James Butler’s brother, would have 117 by mid-decade. In Chicago, Great Atlantic & Pacific had been the biggest chain in 1895, but it ranked fifth a decade later. In Boston, three local chains surpassed it. In Cincinnati, the Great Western Tea Company was renamed B. H. Kroger’s Tea and Grocery Stores and had thirty shops by 1902.
6

Some of these aggressive chains even outdid the Hartfords when it came to advertising. A few years earlier, Great Atlantic & Pacific had been unusual in calling attention to its prices at a time when grocers, if they bought newspaper space at all, tended merely to list their new goods. By the early twentieth century, advertising had become far livelier. Price promotions were standard, and in some cities shoppers were learning the new custom of cutting coupons from the newspaper to receive special bargains. Great Atlantic & Pacific’s newspaper ads, one column wide and filled with dense text, looked old-fashioned at a time when other retailers were running half-page ads with fancy graphics. Although Great Atlantic & Pacific still staged the occasional stunt, such as putting “the Champion Whittler of the World” to work in the show window of a new store in New York, George Gilman’s marketing flair was sorely missed. The company did not even have a standard way of presenting itself to the public. In some places, it used an Art Deco logo with the letters
A
,
P
,
T
, and
C
intertwined. In others, the streamlined words “Atlantic & Pacific” were superimposed in bold sans-serif type on a globe turned to the Western Hemisphere, with the words “Tea Co.” tucked beneath. A third variant presented the name in varying type sizes set in a single row:
Great
Atlantic & Pacific
Tea Co.
7