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Akron Industries Join Combines

AKRON & SUMMIT COUNTY

Karl H. Grismer,

Summit County Historical Society,

Akron, Ohio c. 1950 p 266-270

 Akron Industries Join Combines

      In Akron, industrialists were certain they had solved the problem of ruthless competition which had bedeviled them for several years. Joining with competitors, they had formed associations, or trusts, or cartels—whatever one might choose to call them—to control production, fix prices and assure themselves of profits. Congress had passed the Sherman Anti-trust Act in 1890 but no one believed it would be enforced.

     It is difficult to determine which local industry started the "asso­ciation" ball rolling. Quite probably it was the cereal industry.

      Ferdinand Schumacher's tight hold on the oatmeal business of the nation had started to slip during the 1880s. He was still the oatmeal king but there were many aspiring princes who sought his throne. Com­petition was tough—and getting tougher.

      Up in Ravenna there was a hustling young firm called the Quaker Mills, owned by James H. Andrews and Henry P. Crowell, which was getting an ever larger slice of the oatmeal business. Out in Cedar Rapids, Iowa, there was an even more formidable rival, the North Star Oatmeal Mill, headed by John and Robert Stuart and George Douglas.

      There were strong competitors right in Akron. The largest was the Akron Milling Company, headed by Albert Allen—an outgrowth of the Commins & Allen flour mills. This concern had just finished a fine plant near the Old Stone Mill at the foot of Mill Street and was becoming well established in the cereal business.

      Another active rival was the Hower Company, organized in 1880 by John H. Hower and his three sons, Harvey Y., M. Otis and Charles H. These men had purchased the old Turner Mill at Canal and Cherry, installed new machinery and started an aggressive sales campaign.

William H. Perrin, a careful historian, gave the Hower Mills credit for first manufacturing rolled oats, or rolled avena as it was then called, "avena" being the Spanish word for oats. Other historians, equally dependable, said Schumacher sold rolled oats before the Howers started in business. Probably no one can say for certain who first made this now most popular form of oat cereal. All that is known definitely is that after 1880 rolled oats and oatmeal became almost synonymous. 

     By the mid-1880s both cereals were being manufactured by a dozen concerns throughout the country. Prices had been cut in half and more price wars were in the offing. Clearly the time was ripe for organizing an association and remedying the situation.

      But Schumacher, a lone wolf and self-admittedly a "stubborn Dutchman," sat back and refused to become involved in any business-pooling deal, any association which could tell him how to run his busi­ness. He was the king and if others did not like what he was doing, they could manufacture something else.

      However, Schumacher had one trait, just as pronounced as his stubbornness, which old timers say forced him ultimately to fall in line. That was his frugality.

      Schumacher had no objection to donating large sums of money to temperance movements and churches but in other money matters he was parsimonious. He nursed his nickels even when he needed clothes—clothes which members of his family insisted he had to have.

      For years he wore no extra outer clothing in winter except a heavy woolen shawl which he draped over his head and shoulders. There came a time when his sons Adolph and Louis became convinced their wealthy father should cast aside this Old World garment and buy an overcoat. But Schumacher paid no heed—overcoats were too expensive.

      Knowing that their father could not resist good bargains, the sons worked out a plan. Stopping in at Jacob Koch's, one of the town's leading clothiers, they made a deal with him. The next time Koch saw Schu­macher pass his store, he was to call him in, show him a fine overcoat, tell him it had been ordered by a man who had paid half down and then left town, and offer the coat to the oatmeal king at a greatly reduced price. The sons told Koch they would pay the difference. 

     The plan worked. Schumacher got a splendid $70 coat for only $20—as his sons had figured, he couldn't resist a bargain. 

     On his way home, Schumacher passed Carl Bonstedt's Grocery. Bonstedt saw him, admired the coat, and told Schumacher it looked as though it had cost a small fortune. The proud owner chuckled and said it had cost him only $20. Coveting the garment, Bonstedt offered to buy it for $40. After some haggling, Schumacher sold it for $45.

      Days later the sons learned the painful story. Then they had to pay Koch the difference between the sale price of the coat and what Schumacher had paid Koch for it—$50. They made no further efforts to wean their father away from his outmoded shawl.

      Schumacher's frugality caused him serious trouble in the late winter of 1885-86. Because he so disliked parting with money he rarely bought insurance for his mills. As a result, he suffered a tremendous loss.

      Early Saturday morning, March 6, 1886, five hours before day­break, dust exploded in a grain drying house among his group of build­ings at Broadway and Mill. Within a few minutes the entire structure was in flames. Chief B. F. Manderbaugh and his force of twelve city firemen soon arrived but their efforts to control the fire were futile.

      It quickly spread to the towering Jumbo Mill and then other build­ings started blazing. A general alarm was sounded and volunteer fire­men began streaming in from all directions. But the fire increased in fury. Flames shot high in the sky, lit up the entire town and were visible from miles away. A great crowd gathered to witness the awe­some spectacle.

      Calls were sent to other cities for assistance. Kent sent down a fire engine and a force of men on a special train and so did Cleveland. Both reinforcements arrived about 7 o'clock in the morning. But the fire had gained such headway that nothing could stop it. All that day it raged, and all that night and all the second day. 

     When the flames finally died down, almost all of Schumacher's fine establishment lay in smoldering ruins. Only his Empire Mill and new office, on the southeast corner of Mill and Broadway, remained standing.

      Schumacher's loss was reported to be $600,000.

      He was still a wealthy man. Besides the Empire Mill, he owned the Cascade Mill at North Street and many other properties. He also had a fortune in mortgages and stocks and bonds. But he had relatively little cash money, by no means enough to rebuild his destroyed plants.

      Old timers say that Schumacher borrowed the money he needed from Cleveland financiers – men who were interested in the formation of an association or trust which would control the entire cereal industry but which could not be formed without Schumacher's participation. Their quid pro quo in the financing deal, it is related, was his cooperation.

      Be that as it may, Schumacher got the 'financing he sought and, just about the time his plants were rebuilt, a pooling company was organized with Schumacher as a member "to control production of its members and the price at which oatmeal could be sold."

      The financing arrangement provided for the merging of Schu­macher's interests with those of the Akron Milling Company in a new $2,000,000 corporation. Ferdinand Schumacher became president; Albert Allen and Louis Schumacher, vice-presidents; F. Adolph Schu­macher, secretary, and Hugo Schumacher, treasurer. How much stock was owned by the oatmeal king was not reported.

      When the Schumacher mills were rebuilt, they became connected physically as well as financially with the mills formerly owned by the Akron Milling Company at the foot of Mill Street.

      The latter mills at that time had no railroad facilities. Incoming shipments of grain had to be carted down to them by horse and wagon. This handicap was eliminated when new buildings were constructed on Broadway. Five large iron pipes, ranging in diameter from seven to ten inches, were laid from the Broadway structures under city streets down to the lower mill. Helped along by air pressure provided by a blower system, grain was thereafter carried down the hill from Broad­way. The pipes are still in use today.

      Almost simultaneously with the completion of the new mills, the Consolidated Oatmeal Company was incorporated in Illinois—on May 4, 1887. The Schumacher mills, along with twelve other oatmeal con­cerns, were listed as members. Fixed prices were established and each mill was allotted a specified portion of the total business. The Schu­macher mills were allotted 22 per cent. The Quaker Mills at Ravenna and the North Star Mills at Cedar Rapids each got 13 per cent. The share of the Hower Company, one of the smaller producers, was 4.42 per cent.

      The new association was viciously condemned by Eastern "anti­trust" newspapers. They branded it as another brazen attempt to rob the public. But the newspapers were unduly concerned—the Con­solidated collapsed within a year. Its members had boosted prices to make big profits possible and by so doing defeated their own ends.

      New oatmeal companies sprang up all over the country. They undersold the combine and still made money. Soon it became apparent that the Consolidated's production-pooling scheme was impractical.

     Financiers behind the Consolidated then decided to emulate Stand­ard Oil, Diamond Match and other successful trusts and organize a giant company with sufficient resources to buy out competitors—or freeze them out by introducing new production methods, decreasing costs and underselling them. So the American Cereal Company, predecessor of Quaker Oats, was incorporated, first in West Virginia on December 28, 1888, and then in Ohio, on June 1, 1891.

      Included among the concerns which were merged in the new com­pany were the Schumacher and Hower mills in Akron, the Quaker Mills in Ravenna, and the North Star Mills in Cedar Rapids. The Hower Mills and the Quaker Mills were closed, along with several other plants which were acquired.

      Ferdinand Schumacher headed the new company, which established its main office in Chicago. Other key men were Andrews and Crowell, of the Quaker Mills, and Robert Stuart, of the mills in Cedar Rapids. Andrews was made superintendent of the Akron mills. All capable men, they soon brought order out of chaos and the American Cereal made money from the start. Within a year it practically controlled the oat­meal business of the country.