Henry Osborne Havemeyer

views updated May 23 2018

Henry Osborne Havemeyer

The dominant figure in the sugar-refining business of the late nineteenth century, Henry Osborne Havemeyer (1847-1907) controlled the so-called "Sugar Trust." He was also known for his extensive art collection, assembled with the help of his second wife.

Henry O. Havemeyer was born on October 18, 1847, in Commack on Long Island. He was the youngest of four sons born to Frederick Christian Havemeyer and his wife, Sarah Osborne (Townsend) Havemeyer. The Havemeyer family had been in the sugar-refining business for two generations in the United States. Havemeyer's grandfather, a German immigrant who came to America in the early 1800s, had established a modest sugar refining business with his brothers. This eventually made him a wealthy man. Upon his death, when Havemeyer was 14 years old, he left an estate worth $3 million. Partnering with his cousin William F. Havemeyer, who also was a three-term mayor of New York, Frederick Havemeyer further built on his father's success in the sugar-refining business in the firm Havemeyer & Elder.

Entered Family Business

Though Havemeyer was raised amid a life of privilege, his schooling left him less educated that a typical high school graduate of the period. What he lacked in formal education, however, he gained in practical experience by working in the family business. Beginning as an apprentice at Havemeyer & Elder. Havemeyer spent time working in the refinery and as an assistant sales agent, then headed the buying and selling department. Havemeyer also gained experience in the transforming technology of the industry, especially the refining process. The sugar-refining business was undergoing a massive change and expansion in the late nineteenth and early twentieth century.

At the time, the sugar-refining business was centered on imported sugar and companies like Havemeyer & Elder maintained large waterfront plants. When he had received enough training, Havemeyer partnered with his elder brother, Theodore, and began to run the family's sugar refineries in Brooklyn, New York. The brothers began working to expand and consolidate their controlling interest by 1887. Though Havemeyer was against such consolidation at first, this position soon changed and he eventually led the charge.

The Havemeyer brothers eventually merged all 15 of their major refineries in New York, including the Havemeyer & Elder plant located in Brooklyn, then the biggest, most cost-effective plant in the United States. They then formed the Sugar Refineries Company, which included all 15 sugar refining plants. Havemeyer, the company's president, became something of a financial expert. Over the next few years, he garnered made the contacts on Wall Street that would prove important in his business's future. Havemeyer became known for his strong, if not dominating personality, and his enthusiasm for taking risks.

Early Legal Problems

After the Havemeyers' aggressive consolidation, the Sugar Refineries Company found itself under investigation by legislative bodies and taken to court. Many considered the company a trust, some even dubbing it "the sugar trust." Corporate trusts such as Standard Oil were being attacked on such fronts because they controlled industries, fixed prices, and engaged in other monopolistic practices thought to inhibit free trade. In 1890, after many months of legal wrangling, Havemeyer's sugar trust was deemed illegal and dissolved as a result of the case of State of New York vs. North River Sugar Refining Company.

Despite this dissolution and the setbacks accompanying it, Havemeyer remained in the sugar-refining industry. The Sugar Refineries Company was reorganized as a holding company named American Sugar Refining Company and chartered in New Jersey. Havemeyer was appointed the holding company's financial head. Though the company faced no further legal hassles, Havemeyer continued to engage in business practices similar to those of a corporate trust. Essentially nothing changed about the way Havemeyer ran his company.

Using his economic contacts and clout, Havemeyer sought to eliminate competition and ensure his company's control over the sugar industry in the 1890s. He wanted to regulate both the price of refined sugar and the wages of those workers who labored in the factories. Among several questionable strategies, he created rebate arrangements with wholesalers, manipulated suppliers, and took advantage of railroad rebates. On the political/legal front, he argued for tariffs to be lowered on imported raw sugar and convinced Congress on this front. However, he also wanted his product, refined sugar, to be protected from competing imports.

Price cutting and price wars were also part of Havemeyer's tactics in the early 1890s. One such war was with Claus Spreckels, the dominant sugar refiner on the west coast. To gain ground in the east, Spreckels built a plant in Philadelphia. Havemeyer won this war, however, acquiring sugar-refining firms in Philadelphia, including the Spreckels Sugar Refining Company. Within several years the American Sugar Refining Company controlled about 90 percent of the industry.

Competition from Arbuckle and Others

Havemeyer's business strategies worked in the short term, but his company's market share continued to fall as the end of the 19th century neared. By 1894 the American Sugar Refining Company controlled only 75 percent of the sugar refining market. This drop was due in part to the emergence of at least two significant competitors just prior to 1900. One was a new concern founded by a former customer of the American Sugar Refining Company named John Arbuckle.

Arbuckle had made his start in business as a wholesale grocery salesman and coffee merchant; he bought refined sugar from Havemeyer to resell via his companies. Arbuckle questioned why the price of refined sugar sold by Havemeyer stayed high when the price of raw sugar fell. Havemeyer responded to Arbuckle's inquiry by raising the prices charged to Arbuckle's company. Because of the disagreement, Arbuckle founded his own sugar-refining company. Both companies suffered financial losses and caused each other long-term legal problems as the result of this competitive stance. They sued each other repeatedly, and both lost as much as $25 million. Arbuckle was almost destroyed, while the resilient Havemeyer survived and pressed forward.

Engaged in Risky Ventures

Though he suffered such financial losses, Havemeyer continued to look for ways to stay innovative in the sugar-refining business. He continued to chart a course of horizontal combination. In the late 1890s and early 1900s, sugar beets began to be used as a source of sugar. In response, Havemeyer acquired a controlling interest in the biggest sugar beet companies for the American Sugar Refining Company. By investing in the industry's development, he had the power to control it. One such company that he had control over was American Beet Sugar, founded in 1902.

Another significant investment by Havemeyer during this time was in the Cuban-American Sugar Company, which he bought into in 1906 with other partners. This expansion did not pay off in the manner that he wished: that is, industry dominance. The expansion into the sugar beet market and Havemeyer's investment in the Cuban-American Sugar Company were costly to Havemeyer's company to the tune of $20 million.

Despite such losses, Havemeyer continued to control the sugar-refining industry in other ways. Using his business savvy, he orchestrated the consolidation of American Sugar Refining Company's primary competition into one company, the National Sugar Refining Company, which was secretly controlled by Havemeyer's company. The buyouts cost American Sugar Refining $20 million between 1902 and 1907. Havemeyer also influenced the means through which refined sugar was marketed throughout the United States. In a 1903 article in Cosmopolitan, Robert N. Burnett wrote, "In business circles he is regarded as one of the most brilliant men of this generation."

Despite his stature as a businessman, Havemeyer made some costly missteps. The sugar beet investment never paid off, and while American Sugar Refining survived the war with Arbuckle, it was weaker for it. There was evidence of regular cheating on customs duties. In 1906 Havemeyer refused to raise the wages of striking workers to 18 cents per hour, though his company posted profits of $55 million. In 1907, the year of Havemeyer's death, the American Sugar Refining Company was found guilty of taking railroad rebates that were illegal. Most of these actions were taken by Havemeyer in an attempt to raise his company's profit margin, in part because the price of sugar for consumers had fallen significantly since the last quarter of the nineteenth century. The market for his product was also smaller.

By the time Havemeyer died on December 4, 1907, American Sugar Refining had only 49.3 percent of the United States' market despite its 25 plants. Havemeyer had been frustrated in his efforts to control the industry as fully as he wanted to. For example, he was unable to takeover sugar-refining enterprises in Baltimore, Maryland; New Orleans, Louisiana; California; and Hawaii. Upon his death it was revealed that he ruled American Sugar Refining by the brute force of his personality; the family really owned less than 1,000 of the company's 900,000 outstanding shares, though Havemeyer gave the illusion that they controlled much more. From its position as the sixth largest industrial corporation in the United States, the market share would continue to fall. After his Havemeyer's death, the American Sugar Refining Company changed strategies to vertical integration and soon sold off a number of holdings. Eventually the company developed its own brand of sugar for the consumer marketplace, Domino.

Significant Art Collection

A legacy of Havemeyer's life was his art collection. Throughout his life, he bought art, primarily with his second wife, Lousine W. Elder, whom he married in 1883 and with whom he had three children. Many of the couple's purchases were made under the guidance of Mary Cassatt, a significant painter in her own right. Their collection consisted of thousands of works, including at least 100 paintings by Monet, Degas, Rembrandt, Cassatt, and El Greco; ceramics from Asia; armor from Japan; and bronzes, Egyptian figurines, and textiles. During his and his widow's life time, the Havemeyer collection was housed at their mansion in Manhattan. The home itself was a work of art, featuring interior design by Louis Comfort Tiffany. After Lousine's death in 1929, the collection was donated to the Metropolitan Museum of Art.

As in his sugar refining business, Havemeyer was aggressive and sometimes made bad decisions. He once tried to buy Botticelli's "Birth of Venus," but was refused by Italian officials. Many of his purchases also turned out to be fakes, and therefore bad investments. Only three or four of the 16 paintings by Goya that he bought were real, while 12 of the 15 works by Renoir were fakes. Summing up the contradiction that was Havemeyer, Paul Richard of the Washington Post wrote, "Though a cultivated fellow—he played a Stradivarius and pored over rare books—he was easily cartooned as a capitalist class enemy. He had the black frock coat, the black silk hat, the bluffness and the paunch—and the requisite monopoly."