The Story of the Menominee River Sugar Company 1903-1955
Menominee, Michigan, situated far from the world's financial centers a hundred years ago, much as it is today, nevertheless placed itself directly in the middle of one of the hottest business booms of the early twentieth century – sugar. The small community that dared to plant a footprint in world commerce occupies a slivered point of land that dips into Lake Michigan at a point so close in proximity to Wisconsin that had a cartographer's finger twitched at a crucial moment, Menominee would be in Wisconsin instead of Michigan.
Menominee is bordered on the east by Green Bay, an arm of Lake Michigan, and on the south-west by the Menominee River. In 1903, many investors in the beet sugar industry had a timber background and had thus come to believe that the same rivers that had once delivered logs to sawmills in abundance could also serve the needs of a beet sugar factory where massive volumes of water are used for fluming beets into the factory, washing them and then diffusing the sugar from them. A sugar factory could easily put three million gallons of water to use every twenty-four hours. Barges can carry sugarbeets from the farm fields and freighters can carry products to market. The presence of the Menominee River convinced investors that Menominee could compete with the nation's sugar producers despite negative comments from naysayers who said Menominee was too far north to successfully grow sugarbeets.
The naysayers had a point. Menominee, Michigan is an unlikely place to construct a beet sugar factory. Situated at the western end of Michigan's Upper Peninsula, the growing season is about forty days shorter than the prime beet growing regions in the state's Lower Peninsula. The short season can prevent the ripening of beets which will then lessen sugar content of immature beets ill prepared for the stress of the milling process. Severe frosts in early spring are not unusual and are almost always fatal to a crop of young beets. Frosts can come early in the fall, too, which can make it impossible to harvest a crop. A farmer stood to lose his entire crop either early in the growing season or near the time of harvest after he had invested heavily in bringing the sugarbeet crop to term. Investors, however, in Menominee, as in many of Michigan's cities, tended to discount input from farmers before building a factory and would frequently interpret exaggerated enthusiasm from a handful of growers as representing the broader farming community. Quite often, as in Menominee's case, as it would turn out, the handful did not represent the whole.
Official recognition by the United States Department of Agriculture in 1898 of the importance of the sugarbeet industry sparked the construction of beet sugar factories across the nation. One year earlier the nation could boast only ten beet sugar factories, four of which were in California, one in Utah, two in Nebraska and three in New York. The construction of seven sugarbeet factories in 1898 brought into focus for the first time the stirrings of a rush not unlike the dot-com boom that blossomed nearly one hundred years later. The idea that sugar produced from sugarbeets could compete with sugar produced from sugarcane expanded into a full-fledged boom by 1900 when the nationwide count of sugarbeet factories stood at thirty-two in eleven states.
Nowhere was the blaze hotter than in Michigan where nine factories followed the successful start up of a factory in Essexville, Michigan, a suburb of Bay City. A burst of cyclonic enthusiasm caused a mad scramble when investors, constructors, bankers, and farmers combined energies and skills to bring to life eight factories in a single year! They were in Holland, Kalamazoo, Rochester, Benton Harbor, Alma, West Bay City, Caro, and a second factory in Essexville. Despite the paucity of factory constructors and the engineers to operate them, fourteen additional factories rose on the outskirts of Michigan towns during the next six years, one of which appeared in Menominee in 1903.
In Menominee, a group of investors undeterred by the natural disadvantages and buoyed by encouragement from influential investors and knowledgeable experts, set a plan in motion to maintain the economic viability of their city after the approaching demise of the lumber industry, which had until then provided the underpinnings of Menominee's economy. The plan included the design of one of the largest and most modern sugarbeet factories to appear in America up to that time.
As the lumber era petered out at the beginning of the 20th century, railroads that had come into their own because of timber, sought new sources of revenue. Principal among them was the Detroit and Mackinac Railroad whose land agent, Charles M. Garrison, collected and distributed information about the potential of the sugarbeet industry. While Garrison spread word among Detroit's financiers about prospective profits in sugarbeets, communities affected by the decline of lumber looked to area resources for ways of replenishing wealth. They had plenty to work with. The state was crisscrossed with rail lines and rivers and some left over cash from the lumber era. With Garrison leading the way, investors perked up. Communities eager to find a quick replacement for lumber hastened to attend meetings sponsored by Garrison and quicker yet to bring their towns into the fold. All that was needed was to persuade the farmers to grow the beets. That is where the Michigan Agricultural College (Now Michigan State University) stepped in.
Upper Peninsula farmers, encouraged by Michigan Agricultural College to plant sugarbeet test plots, received an even greater shot in the arm by the visit of Secretary of Agriculture James Wilson, in 1902. He expounded the advantages of sugarbeets and discouraged the notion that the Upper Peninsula's climate wasn't up to the task of producing profitable crops. Wilson served in three presidential cabinets, McKinley, Roosevelt, and Taft, serving longer (1897-1913) than any other cabinet official. He encouraged modern agriculture methods, including transportation and education as they applied to agriculture. His word carried a lot of weight. When he spoke of sugarbeets, some farmers listened and when his department avowed that the cold northern temperatures would not inhibit the development of the industry in their neighborhood, investors, farmers, and manufacturers lined up to begin the industry in Menominee.
Optimism rose to new heights when the United States Department of Agriculture (USDA) announced favorable results of the sugarbeet plot tests. The Sugar Beet News of December 15, 1903, reported test results from beets delivered by approximately 140 farmers. The test runs revealed 15.6 to 19.9 % sugar, which meant a cash value to the farmers per acre of from $5.70 to $7.13 per ton ($135-$169 inflation adjusted to the current period). At those projected prices, no crop in human history had held the potential for creating such a high return from so few acres.
In the Lower Peninsula, a farmer with above average ability who placed fifteen acres in sugarbeets could earn more than $800 and if his family provided the bulk of the labor, the net profit would more than take care of a family's needs for a year, which, including food, was less than $800. After adding revenue from crops in rotation and revenues from milk, eggs, and poultry, the farm family's standard of living advanced from a subsistence level to one that compared favorably to those who held mid-management positions in industry. USDA figures supported belief that Upper Peninsula beets would exceed by two per cent the average for all the other 18 sugar beet factories in the Lower Peninsula.
If the tests proved reliable indicators, Menominee region beets were worth up to $10 more an acre than Lower Peninsula beets, assuring an income of nearly $1,000 per year just from sugarbeets.
Although enthusiasm was on the upturn, something more was needed to seal the deal. To instill confidence in prospective investors that technical expertise lay near at hand, Benjamin Boutell, who won fame as both a tugboat captain and as a captain of industry, arrived in Menominee from his Bay City, Michigan headquarters for the single purpose of conveying interested investors to Bay County where they could see groomed beet fields and efficient factories spinning out white crystalline sugar. Eleven prospective investors accompanied Boutell to Bay City where convincing evidence lay at hand. Four beet sugar factories, more than in any other city in the United States, had been constructed in that city's environs. Bay City virtually hummed with economic activity because of the presence of sugar factories. Mansions peopled by former lumber barons who had transformed themselves into sugar barons, lined the city's prestigious Center Avenue.
Boutell announced he would become one of the investors, providing the other investors had no objection to having a factory designed and installed by Joseph Kilby who was according to Boutell, the finest constructor of beet sugar factories in the United States. Many others agreed with Boutell's assessment; Kilby built nine of the eventual twenty-four factories built in Michigan. Local investors lined up behind Boutell to organize the Menominee River Sugar Company. A half dozen important backers came forward, each of whom subscribed to more than $25,000 in stock of the Menominee River Sugar Company.
Heading up the list of local shareholders was Samuel M. Stephenson, a former lumber manufacturer and native of New Brunswick, Canada who had made a home for himself, his wife, Jennie and their four daughters and one son, in Menominee. He was then seventy-one years of age but in no mood for retirement. Following a successful career in lumber and banking, he served three successive terms in Congress (Michigan's 11th District 1889-93 and the 12th District 1893-97). He invested $100,000 ($2 million by modern standards) in the beet sugar factory, taking heart in not only favorable test plot results and the enthusiasm of his neighbors but also interest shown by the American Sugar Refining Corporation, generally known by its then popular sobriquet, the Sugar Trust. Some years later the Sugar Trust would fall into disfavor as a result of charges of unfair business practices, but in 1903, it had the confidence of the general public and investors alike and controlled the manufacture and sale of 98% of sugar consumed in the United States. Trust Executives, Arthur Donner and Charles R. Heike, invested $300,000 to acquire 36% of Menominee River Sugar Company's stock.
All the members of the board of directors and roster of officers apart from Bay City resident, Benjamin Boutell, listed Menominee as their home of record. Menominee residents made up 74% of the shareholders. Together, they controlled 53% of the shares. In addition to Stephenson, other major shareholders who also accepted positions as either officers or directors were: William O. Carpenter who invested $55,000 and served the sugar company variously as president and vice-president. Gustave A. Blesch invested $15,000 and served as treasurer. John Henes, a brewery owner, invested $25,000 and served as a director. Augustus Spies was the second largest investor after Stephenson and the Sugar Trust. He, too, served as a director.
Spies provide an excellent example of the hardy pioneering spirit that prevailed in Menominee. He was a native of the grand duchy of Hessen-Darmstadt, Germany where fertile soils and a mild climate allowed the production of grain and wine. He participated in the founding of the Stephenson National Bank in partnership with future U.S. Congressman Samuel M. Stephenson and Samuel's brother, future U.S. Senator, Isaac Stephenson. In addition, he owned the Spies Lumber Company and several large tracts of forest; he was an investor in the First National Bank of Menominee, the Marinette and Menominee Paper Company and president of the Menominee Light, Railroad and Power Company. When the fledgling sugar company got under way, he stepped forward with $75,000 ($1.5 million in current dollars).
Support from Menominee's wealthy class, who also shared distinctions of making good business decisions and rising on their own merit rather than inherited wealth, was so great that there was no need to solicit funds from the public at large. With its shares over-subscribed by $35,000, the Menominee River Sugar Company was in the enviable position of having adequate capital for its venture. Not only was it possessed of sufficient capital but also it enjoyed the added benefit of the experience of Benjamin Boutell and representatives of the Sugar Trust. Menominee would not want for technical or business expertise.
Gustave Blesch, like Augustus Spies, owed his success to the inherited qualities of hard work, honesty and the respect of his peers. He would become the sugar company's first treasurer. He was born in Green Bay, Wisconsin in 1859, the son of Francis Blesch, a native of Germany and Antoinette Schneider, a native of Belgium. Gustave became an office boy in the Kellogg National Bank of Green Bay, rising to teller by the age of twenty. Five years later, he moved to Menominee to help establish the First National Bank of Menominee where he began as cashier before becoming the bank's president. He became president of the Menominee Brick Company, vice-president of the Menominee-Marinette Light & Traction Company, and treasurer of the Peninsula Land Company.
In January, 1903, the newly elected board of directors approved an $800,000 (nearly $19 million in current era dollars) construction contract for a Kilby designed and built factory that would slice 1,000 tons of beets per day. Of the 48 beet sugar factories in operation in the United States in 1903, only two were larger than Menominee's new factory, one in Salinas, California and another in Fort Collins, Colorado.
The average sugar factory in Michigan in 1903 could slice six hundred tons of beets in a twenty-four hour period. Four thousand acres of beets would easily supply a season's factory run. Had the investors surveyed the farmers first, surely they would have been advised to build a smaller factory, and perhaps would have been persuaded to build none. Farmers delivered beets from approximately 1,500 acres, well short of the 9,000 acres the investment demanded.
The Menominee factory's first factory run (referred to as a "campaign" in the sugar industry) ended quickly, having received only 14,263 tons, enough for a production run of fourteen days for a factory the investors planned to operate at least one hundred days. However, the farmers had submitted beets containing the highest sugar reported of any company during its first campaign, 15.04 percent – about 20 percent more than average and enough to allow for a small profit from a meager beet supply. Like nearly all the factories, records that would inform us of profit, if any, earned during that first campaign, did not survive the passage of time. However, it would be reasonable to estimate, based on the known cost of supplies of coal, coke, limestone and the cost of labor, that a profit of $36,000 was achievable, especially under a management style that paid close attention to expenditures and especially in light of the very high percentage of sugar in the beets.
The second campaign was better with enough beets for a full month, still well short of a supply needed to generate profits enough to justify the investment. By 1911, the local supply reached a level that allowed steady profits but was insufficient to encourage expansion, a condition that persisted until 1926 when grower apathy fell to a level that required closing the factory until 1933 when it reopened for a final run of twenty years during which the factory lagged behind the industry in technology and growth. Year in and year out, because of an inadequate supply of beets, mostly grown in Wisconsin, the underutilized factory ended its campaign weeks earlier than was needed to produce healthy profits which then could have been reinvested in the factory. Menominee investors learned, as did many other sugar factory investors, that the mantra, "build it and they will come" fell on deaf ears among farmers who often displayed a better understanding of sugar economics than did investors.
The passage of time brought neither harm nor good to the Menominee factory as it was unable to expand or modernize. It settled into the process of graceful aging. Profits awaiting opportunity gradually accumulated thanks to the company's penurious management style and a dedicated cadre of farmers.
George W. McCormick, the company's first manager, inaugurated a careful management style that went a long way toward keeping the company profitable despite annual shortfalls in the beet supply. He managed the company during its first thirty-two years of operation, beginning when he was twenty-four years of age. He met Benjamin Boutell in Bay City when he moved there to take a job as a district manager for Travelers Insurance Company. Boutell thought the young man belonged in the rapidly developing sugar industry and encouraged him to help in the establishment of a sugar factory in Wallaceburg, Ontario. After completing the assignment with success, Boutell recommended him for the manager's job in Menominee.
Menominee was the most difficult place in the United States to process sugarbeets. The low temperatures took a heavy toll on workers, machinery and beets that usually went through the slicing machines like boulders, damaging equipment that robbed the factory of slender resources. It was difficult to find replacement parts because of the distance separating Menominee from suppliers and from Lower Peninsula sugar factories where it was common for factory managers to lend spare parts to one another.
The company's diligent attention to cost control paid off in 1924 when sugar factories located in Green Bay and Menominee Falls, Wisconsin went on the market. Menominee River Sugar Company purchased both and then invested significant sums in restoring the Menominee Falls factory that had been shut for three years immediately preceding its sale.
The renovated Menominee Falls factory combined with the Green Bay and Menominee, Michigan factories created more capacity than was needed for the available acreage. One of the factories would have to close. Menominee won the noose after the accountants counted up the freight costs for hauling beets to each factory. The Menominee factory remained closed until 1933 when Michigan's farmers relented and agreed to return to sugarbeets, a decision that came too late to save the hides of the sugar company's owners who had lost the company to defaulted bonds three years earlier.
Disruptions in Europe beginning in the early part of the 1930s brought a new name to Michigan's beet sugar fields and corporate offices – Flegenheimer. Albert Flegenheimer was the son of Samuel Flegenheimer who had immigrated to the United States in either 1864 or 1866 and became a naturalized citizen in 1873. The next year, however, he returned to Germany, settling in Wurttemberg. He lived out his life there, dying in 1929 at the age of 81. His brief sojourn in the United States and his U.S. citizenship status, however, would one day save his descendants from German death camps.
In February 1939, Albert Flegenheimer carried his family to the safety of Canada and then to the U.S. claiming nationality as the son of a naturalized citizen. He planned to raise his family and devote his time to the sugar industry in both the United States and Canada. His plans met with considerable success and by 1954, he controlled the sugar factory in Menominee and the one in Green Bay, Wisconsin.
Despite Albert Flegenheimer's efforts, a lack of interest on the part of farmers kept the factory small and outdated. It struggled year by year until finally in 1955 with its equipment exhausted, its buildings in tattered repair and its farmers pursuing other crops, Menominee River Sugar Company, built on hopes and dreams and operated with fortitude and persistence for more than a half-century, closed its doors forever.
GUTLEBEN, Dan, The Sugar Tramp-1954- Michigan, Printed by: Bay City Duplicating Co, San Francisco, 1954
1962 TWIN CITY COMMUNITY RESOURCES WORKSHOP, section entitled Famous Leaders Who Helped Build Menominee, prepared by Irene Swain, Dr. Leo J. Alilunas, Director.
HENLEY, ROBERT L., Sweet Success . . .The Story of Michigan's Beet Sugar Industry 1898 – 1974, Michigan Historical Center, Department of History, Arts and Libraries
INFLATION ADJUSTMENTS: The pre-1975 data are the Consumer Price Index statistics from Historical Statistics of the United States (USGPO, 1975). All data since then are from the annual Statistical Abstracts of the United States. Recorded at http://www.westegg.com/inflation
MICHIGAN ANNUAL REPORTS, Michigan Archives, Lansing, Michigan
©2009 Thomas Mahar
About the Author:
Thomas Mahar served as Executive Vice President of Monitor Sugar Company between 1984 and 1999 and as President of Gala Food Processing, a sugar packaging company, from 1993-1998. He retired in 1999 and now devotes his free time to writing about the history of the sugar industry. He authored, Sweet Energy, The Story of Monitor Sugar Company in 2001.