Wednesday, February 12, 2014
The Whiskey Trust. Seemed Like a Good Idea at the Time
In 1881, Joseph Benedict Greenhut built the Great Western Distillery in Peoria, Illinois. The production of whiskey and neutral spirits was booming in Peoria and each new distillery was bigger than the last and, therefore, the biggest distillery in the world.
Six years later, Great Western and 65 other distilleries merged to form the Distillers & Cattle Feeders' Trust. Popularly known as the Whiskey Trust, Greenhut became its president.
The Trust used its resources to buy more distilleries, many of which it closed. The idea of the Trust was to limit production industry-wide to reduce competition and protect profits. Although the Trust was technically legal (it would not be today), it engaged in many illegal activities including the intimidation of distillery owners who did not want to sell.
The Trust rationalized its activities by saying it brought order and stability to an often chaotic and wasteful marketplace by eliminating the over-production that sometimes forced producers to sell below cost. Doesn't a 'free market' also give market participants the right to cooperate for the betterment of an entire industry?
Greenhut left the Trust in 1895 when legal and financial problems forced it into receivership. It was never the same but never quite went away either. It kept mutating into different corporate forms. It even survived Prohibition, coming back after repeal as National Distillers. It was no longer a trust, however. Those were now illegal.
By the time Prohibition shuttered the industry in 1920, the Trust or one of its spin-offs controlled every distillery in Peoria. It also owned distilleries in Kentucky, Pennsylvania, and other distilling states. After Prohibition, the Trust was supplanted in Peoria by Canada's Hiram Walker and Sons. Walker bought Greenhut's Great Western, tore it down, and built -- you guessed it -- the biggest distillery in the world. (Pictured above.) Today that plant makes grain neutral spirits for Archer Daniels Midland.