Top Shelf Tesco, (Super)Market Leader: The Irresistible Rise of Britain’s Leading Grocer

Posted on by E Curb Nottus
Commerce & Business, Regional History, Retailing history

In the UK’s highly competitive retail world Tesco plc is the kingpin grocer, at the top of the tree of Britain’s supermarket chains. With over 3,400 stores across the UK and a presence in around a dozen countries worldwide✱, Tesco pulled in revenue in 2017 to the tune of £55.9B. The retailer’s origins though, way back at the end of the Great War, were of course much more humble. Like fellow high-flying UK retailer, Marks and Spencer, it began with one man and a market stall operation.

Jack Cohen got the business ball rolling in 1919 with a basic stall✥ in the Well Street Market, Hackney, London…for start-up capital Cohen (born ‘Jacob Kohen’) had a £30 stipend from his recent WWI service. From his barrow and stall operation, the antecedent of Tesco, the 21-year-old started off selling matzos (unleavened Jewish crisp bread) and other army surplus food he had purchased. On opening day Cohen made a princely £1 profit from a grand total of £4 in sales [‘A History of Tesco: The rise of Britain’s biggest supermarket’, by Tim Clark and Szu Ping Chan, The Telegraph, 04-Oct-2014, www.telegraph.co.uk].

Genesis of the business name
In the early days, a big-ticket item that Cohen sold was tea from T E Stockwell (in fact the first product sold by Cohen under the Tesco brand). From the Stockwell name Cohen simply took the first three initials ‘T E S’ and added the first two letters of his own name ‘C O’ on to the end of it – thus forming the business’s famous name, ‘TESCO’ (and unsold “Stockwell Tea” got repackaged and rebranded as “Tesco Tea”).

From North London to the nation
Cohen opened his first shop in Burnt Oak, near Edgware, North London, in 1931. Within a short period he had built the company headquarters and a central warehouse also in North London (Edmonton). The London retailer’s strategy was twofold – to expand by gradually buying out smaller grocery stores, and to buy the unsold merchandise other grocers couldn’t sell, which he would repackage and rebrand and then on-sell it to the public cheaper than anyone else (earning himself the nickname ‘Slasher Jack’) [‘Tesco UK, brief history and overview’, www.eeph.org.uk].

Cohen’s business motto, and therefore the company’s motto, was “pile it high and sell it cheap”, a straight-forward business philosophy of “low cost and high volume”✪ along the line of the large Woolworths chain. One of Cohen’s “bargain basement” product mainstays was ‘Snowflake’, a New Zealand canned milk which accounted (together with Tesco Tea) for much of the early Tesco sales [Sarah Ryle, The Making of Tesco: A Story of British Shopping (2013)]. By 1939 there were in excess of 100 Tesco shops all round the United Kingdom. Where Cohen chose to locate a Tesco, seems according to his daughter (the future Conservative MP Dame Shirley Porter) to have been something of an intuitive hunch. As she later explained, they’d be driving around town and “he’d suddenly say ‘this looks like a good place for a shop’ and he’d leap out and chat a few people up”. This was the very hands-on way Cohen would conduct market research [Ryle, op.cit.].

First with self-serve
Jack Cohen’s introduction to the idea of self-service grocery outlets came on a visit to the US in 1935…Cohen was initially not impressed. The immediate postwar period in Britain was characterised by a hike in wholesale costs of goods, which could not be passed on to customers due to the burdens of postwar austerity. Cohen made a return visit to the US at this time, accompanied by his son-in-law Hymon Kreitman who was enthusiastic about the American self-serve concept as typified by the pioneering Piggly Wiggly supermarkets. Cohen, influenced by Kreitman, eventually opened Tesco’s (and Britain’s) very first self-service shop at St Albans (Herts.) in 1948 as a way of countering the rising costs of commodities. Another first for Tesco was the first supermarket in the UK, opened in 1958, located in Maldon, Essex (it featured separate counters for meat, butter and cheese) [‘Jack Cohen (businessman)’, Wikipedia, http://en.m.wikipedia.org].

Maldon supermarket (interior) ⬇️

Expansionary growth
The 1950s and ’60s for Tesco was marked by unbounded expansion through the acquiring of many smaller grocery shops. Among the scalps of small retail outlets claimed by the burgeoning company were Burnards stores, Williamson’s shops, Harrow stores, Irwin’s shops, Charles Phillips’ shops and the Victor-Value chain (this last concern was unloaded by Tesco in the Eighties). Between 1955 and 1960 alone, Cohen bought over 500 new shops across the country [‘Tesco: How one supermarket came to dominate’, (Denise Winterman), BBC Magazine, 09-Sep-2013, www.bbc.com].

After Jack died in 1979 Tesco’s expansionary trajectory continued unabated…there was a hostile takeover of Hillards supermarket chain in 1987, the acquisition of William Low shops in 1994 gave them a greater market concentration in Scotland, as did the snaring of Associated British Foods three years later for Ireland and Northern Ireland. The Safeways/BP shops, and a move into convenience stores T&S Stores and Adminstore followed. The opening of Tesco’s Leicester “super-sized” store in 1961 made it, at that time, the largest grocery store in Europe. By the 1990s Tesco had overtaken Sainsbury’s as Britain’s largest food retailer. So extensive has been the spread of Tesco shops, it is thought that only one postcode in the entire UK – Harrogate in North Yorkshire – doesn’t have a Tesco in it! [Clark & Chan, op.cit.].

Diversifying Tesco
From the Sixties Tesco started to diversify in a big way! To the traditional staple of grocery lines were added clothing, books, furniture, software, internet services and in 1974 the sale of petrol. The Tesco Bank (financial services) was launched in a joint venture with the Royal Bank of Scotland, and later gained a foothold in the communications field with the advent of Tesco Mobile [‘Tesco’, Wikipedia, http://en.m.wikipedia.org].

Diversification also meant a dilution of Slasher Jack’s traditional retail philosophy of providing only the cheapest of the cheap. This change-up saw Tesco for the first time add upmarket quality items to its catalogues. The physical nature of Tesco’s retail outlets diversified during this period. To the standard supermarket format was added hypermarkets (called Tesco Extra) at one end of the spectrum, and “one stop” shops/neighbourhood convenience stores (Tesco Express) at the other. In between these polarities were Tesco Metro and Tesco Superstores. Such market manoeuvrability by Tesco has drawn praise from business analysts – Citigroup’s David McCarthy acknowledges Tesco’s capacity to “appeal to all segments of the market” [‘Tesco: Supermarket Superpower’, (Hannah Liptrot), 03-Jun-2005, www.bbc.com]. It has also been (reluctantly) commended by a critic of the grocery Goliath for its “clinical efficiency with which it carries out its business plan” [Andrew Simms, Tescopoly: How One Shop Came Out on Top and Why it Matters, (2007)].

Tesco Malaysia

Internationalising Tesco
Inevitably, growth and profitability at home meant external expansion for Tesco, a move towards globalisation. The company acquired various overseas market footholds with majority stake holdings in established Turkish supermarket chain Kipar and in Polish Leader Price wspanialy-rynki (supermarkets), among others. The overseas results however have tended to fall well short of Tesco’s stellar domestic performance. A 2006 move into the US market with the Fresh & Easy chain was unsuccessful, resulting in a £1.2B loss and in 2013 Tesco completed their pull-out from North America [‘Wikipedia’, op.cit.].

Inverness high street

Too big, too damaging?
The phenomenal retail success of Tesco ⌖ is encapsulated by the popular phrase in Britain, “£1 in every seven went into a Tesco till!” Inverness in the Scotland Highlands (known locally as ‘Tesco Town’) personifies the dominance of Tesco – 50p in every £1 spent on food, it is calculated, is derived from one of Tesco’s three shops in the northern city [Liptrot, loc.cit.; ‘The supermarket that ate a town’, (Lorna Martin), The Guardian, 01-Jan-2006, www.theguardian.com]. Other cities and towns across the UK share Inverness’ concerns of urban domination by the retailer…Seaton in Devon’s east is staring at the prospect of becoming another “Tesco Town”. Tesco has flagged plans to build a superstore, hundreds of ‘Tesco’ homes and a hotel in the small town, triggering determined local opposition to the scheme [‘This town has been sold to Tesco’, (Anna Minton), The Guardian, 05-May-2010, www.theguardian.com].

Ultimately, it is Tesco’s size that courts the company’s most strident criticism and opposition. Increasingly, the sheer size and scale of the supermarket empire gives it a disproportionate degree of bargaining power with manufacturers. Since 2000 the British authorities have sought to address the uncompetitive nature of the status quo, a code of practice was enacted in that year to try to curb Tesco’s (and other large retail players’) market dominance to the serious detriment of small traders in the UK (the National Consumer Council has described Tesco as “the Marmite of British business”). Interestingly, consumer surveys in the UK point to the consumer public’s “Janus-headed” take on Tesco, it ranks as both the “most trusted” and the “least trusted” of companies in the country! [David Gray (Analyst, Planet Retail), quoted in Winterman, op.cit.]. The recent Tesco takeover of Booker Wholesale Group (2017/18) for £3.7B, given the green light by the UK’s competition watchdog (CMA), has however provoked widespread disquiet within those in British society concerned at what they see as yet another monopolistic move for the retail behemoth [‘Tesco’s £3.7bn Booker takeover waved through by competition regular’, (A Armstrong & J Torrance), The Telegraph (UK), 20-Dec-2017, www.telegraph.co.uk].

Ripples in the Tesco ocean
The hostility of small retailers at Tesco’s strangulation of competition in the supermarket field❅ is not the only discordant note in Tesco’s recent history. Its high public profile has prompted at least two attempts at extortion using the threat of letter bombs…in 2000-2001 an individual tried to extort £5M from the supermarket giant (he was subsequently caught and jailed for 16 years); later a former tax inspector demanding £1M from Tesco, tried the same method (also apprehended and imprisoned). Tesco has tended to court controversy on occasions, eg, quantities of horsemeat were discovered in burgers and spaghetti sold by Tesco, and of course almost a by-product of runaway commercial success, there has been a slew of charges over the years that Tesco was engaging in tax avoidance schemes, tax minimisation, etc. Tesco was heavily criticised by the CEO of UNICEF UK in 2009 for appropriating the children’s charity’s slogan “Change for Good” and crassly using it for commercial advantage in company advertising [‘Unicef accuses Tesco of misusing charity slogan’, (Marie O’Halloran), The Irish Times, 25-Jul-2009, www.irishtimes.com]. As well there have been isolated incidences of individual Tesco shops discriminating against blind people (especially barring entry) [‘Tesco’, Wikipedia, op.cit.]. Tesco’s corporate response after such periodical outbreaks of bad PR has been to launch charm offensives aimed at the public (such as its “Good neighbour” policy in the 2000s) [Simms, loc,cit.].

Until very recently Tesco has experienced seemingly unstoppable success. However things troughed for the retailer during financial years 2013-14 and 2014-15, in the latter year Tesco lost £6.4B, its worse fiscal performance in 20 years! [Clark & Chan, op.cit.]. Since then the supermarket chain (boosted by acquiring the Booker cash and carry group) has to no one’s surprise bounced back, in 2018 recording its strongest growth in seven years (UK and Irish sales rose 3.5%). It has also just introduced Jack’s stores which it hopes will wrest back losses in the discount store market from front runners, German supermarket heavyweights, Aldi and Lidl [‘Tesco posts highest growth in seven years’, (Sarah Butler), The Guardian 15-Jun-2018, www.theguardian.com].

PostScript: Tesco to (super)market leader
What makes Tesco a cut above its rivals? Enormity of size and utter ruthlessness and aggression in business dealings has been a factor, but according to some observers, the key to its success has been its ability to read customer behaviour: going way back Tesco has been meticulous about collecting raw data on what consumers were buying, invaluable information for anticipating future patterns, staying ahead of the curve! Tesco introduced loyalty schemes, personalised discounts and rewards for its customers, above all the Tesco Clubcard (“Every little helps”) – the card was an immediate hit, within a year of its debut (1995), Clubcard holders were spending 28% more at its stores and Tesco was number 1 with a bullet in the rankings of British grocers [Winterman, loc.cit; ‘The card up their sleeve’, The Guardian 19-Jul-2003, www.theguardian.com].

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✱ including stores in Ireland, Poland, Hungary, the Czech Republic, Slovakia, Malaysia, India, South Korea, Japan, Taiwan and Thailand (and previously in the US)
✥ his precise start in the world of retail sales was in fact as a barrow boy
✪ to which he added an internal one, actually a motivational pitch for sales staff, “YCDBSOYA” (You Can’t Do Business Sitting On Your Arse”) [‘Shirley Porter: Rich, flashy and corrupt with it. She’s nothing like a Dame’, (Sean O’Grady), The Independent, 16-Dec-2001, www.theindependent.co.uk]
⌖ fifth biggest grocery chain in the world, biggest UK retailer by sales, biggest UK employer (>330,000 staff) [Winterman, loc.cit.]
❅ for instance, the Office of Fair Trading investigated the company for allegedly forming a cartel of supermarkets (with Safeway, Asda, Morrisons and Sainsbury’s) to fix the price of dairy products

The United Fruit Company: Neocolonial Elites, Banana Monopolists and Oligarchs in the Tropical Americas, Part 2

Posted on by Sloane Snodgrasse
Economic history, International Relations, Popular Culture, Regional History, Social History

In Part 1 we saw how robust intervention of the United Fruit Company and other commercially aggressive American companies in Central and South America brought about the socio-economic conditions that led to the characterisation of some of the countries therein  as “banana republics”. This second part will focus on the experience of one particular country in the region, British Honduras (modern-day Belize), which, although a different type of polity to the other neighbouring states at the time, nonetheless exhibited the same or similar patterns of disruption and exploitation from the North American banana barons.

Pre-conditions for the banana importers
British Honduras in 1900 was a British crown colony, a status it had since 1862✱. At the head of the colony, the Crown’s representative, was the governor [‘British Honduras’, Wikipedia, http://en.m.wikipedia.org]. Before bananas, the prized commodity in BH was timber – logwood, cedar, chicle, and above all mahogany✪. Moberg notes that despite the abolition of slavery in 1838, the conditions peculiar to British Honduras (BH) continued to perpetuate a debt servitude of rural workers to an oligarchy of local and immigrant land-holders. Nineteenth century BH economy was dependent on mahogany exports, a situation which created what has been described as an elite ‘forestocracy’ made up of timber companies and merchants (both domestic and foreign) [CH Grant]. This bound generations of forestry workers in BH to the powerful employer-class…one resident colonial secretary described the plight of the workforce as being “virtually enslaved for life”. Moberg’s case study describes the role of the British authority in this status quo as one of aiding and abetting the goals of the timber and mercantile elites [Moberg 1996].

Br.Honduras mahogany exports ▸

The debt peonage that the unskilled BH farm workers were forced into (known locally as the “advance-truck” system), helped create a climate favourable to industry (ie, cheap and docile labour force) in the later American intervention by banana companies. Banana industry workers on plantations inherited similar harsh working conditions, including being subjected to the draconian ‘Masters and Servants’ Acts. Checks on what the United Fruit Co (UFCo) could do within British Honduras resided at least on paper with the colonial chief official, the governor (after 1884), (formerly the lieutenant governor 1862-1884, who during which time was subordinate to the governor of Jamaica). As Moberg’s study shows, the will to resist United Fruit’s incursions into the colony varied considerably from governor to governor. Early governors like Goldsworthy earned the ire of the resident elites who agitated for more political power. Under pressure from the business elites and oligarchs, the Colonial Office (in London) was forced to curb the power of governors in the 1890s and give the Legislative Council (and especially its five ‘unofficial’ members) a right of veto over the governor. In the 1900s governors like Sweet-Escott and Swayne made token efforts to dilute the members’ clout on council (with minimal success), but most governors ultimately conceded power to the elites [ibid.].

Acceding to the demands of big foreign capital
The governors discovered that the interests of foreign capital in British Honduras  – initially through British mercantile and timber firms but increasingly through a burgeoning of US investors❅ – could not be ignored. By around 1900 bananas represented 71% of the value of exports to the US✥. It amounted to increasingly significant revenue for the colony’s coffers. The British Honduras government saw it as vital to the colony’s economy. Moberg indicates that “despatches from the governors to the Colonial Office reveal an eager accommodation to the banana multinational”. One of the most compliant, Governor Wilson, proposed to his masters in London that the government build railroads in the colony as an incentive for United Fruit to invest. Governor Swayne, undergoing a 180° turn from his earlier opposition to UFCo, started to act like a “virtual agent for the company in London”, negotiating the approval of incredibly generous land concessions to UFCo…under its terms United Fruit was asked to pay only $1 an acre compared to between $3 and $8 an acre required of small landholders (and UFCo was largely exempted from standard land tax). Sometimes UFCo received land gratis or for virtually nothing in exchange for the company’s promise to build railroads in the tropical lowlands (which of course benefitted UFCo’s business!) [ibid.].

United Fruit Co’s corporate muscle-flexing
On the rarer occasions that the BH government were reluctant to automatically lay down and do the American banana giant’s bidding, UFCo’s immediate reflex was to engage in bullying tactics against the government and threaten retaliatory action. When United Fruit asked the government for the unprecedented control of the British Honduras wireless (a very “banana republic” situation by which the British Central American colony’s entire radio communications would be held in foreign hands!), the Colonial Office declined its request. UFCo responded by withdrawing its steamship passenger line from service until the Colonial Office finally caved in to its demands for control of the radio system in 1911. UFCo took the same measure with its service on another occasion (which deprived the colony of mail delivery for over a month) in order to extract a higher subsidy payment from the government [ibid.].

United Fruit Co’s strategy in BH: Beginnings of the ‘Musaocracy’
When it commenced business as a buyer of bananas in Central America (1899/1900), UFCo embarked on a strategy that envisaged a monopoly situation end-game. One of the first moves was into transport. In 1900 UFCo acquired majority ownership of six Caribbean coast steamship lines⌖, this also gave it the government mail contract as well (the Belize Royal Mail). The strategy to maximise its stake in the colony’s bananas was clinical and precise: UFCo first raised the price it was paying to independent growers, this allowed it to eventually crush all competition from other buyers…a monopoly of the market achieved, the company was now free to “dictate ruinous prices and conditions to private growers”. At the same time United Fruit thwarted the marketing efforts of independent growers, thus denying them alternate sources for the sale of their produce [ibid.].

Restrictive competitive practices 101: United Fruit achieves vertical integration in bananas
After securing a stranglehold over the exporting side of the banana game in Belize and having established its own rail network to transport the produce, UFCo’s next step was to create its own banana plantations in the colony’s south at Stann Creek and Toledo. As a major BH producer United Fruit consolidated its position in several stages, it set about monopolising the land available for cultivation. By 1930, the land area of Belize cultivated by the company comprised 139,000 acres, but UFCo also held over 20 times this area of unused land in BH, seriously limiting the area of cultivable land available to competing planters. United Fruit’s price-fixing had the ultimate effect of decimating the local banana growers✧ [ibid.]
Fusarium wilt (‘Panama disease’) ⬆️

Industry reversals and exit strategy
In the 1910s the banana business in British Honduras was hit by a series of natural and climatic disasters…heavy rains causing flooding with loss of 90% of banana crop; infectious diseases especially the Panama disease (a soil-borne fungus), particularly devastating to UFCo’s Middlesex and Stann Creek estates; poor cultivation techniques exacerbated the losses (reliance on primitive milpa cultivation). The persistence of Panama disease⊠ further depressed production and United Fruit gradually reduced its banana operations in BH and in some cases, in locations like South Stann Creek, eventually replaced banana cultivation with citrus fruit [ibid.].

⬇ UFCo promotional booklet (Source: JJ Burns Library, Boston College)

Successive Belize colonial governments were repeatedly outwitted by United Fruit negotiations leaving it in a default position vis-á-vis the US company that was inferior and subordinate. One weakness stemming from the contractual arrangements was the governors’ abject failure to make UFCo keep its side of bargains. When things started to go “belly-up” for United Fruit in the banana colony, UFCo in imperious contempt of their contractual obligations simply pulled the plug. To compound the folly, subsequently, the colonial officials meekly bought back the key Middlesex estate from United Fruit✜, incredibly and bizarrely on terms which allowed the withdrawing company to make a profit! [ibid.].

United Fruit’s activities in British Honduras were typical of its approach throughout the Caribbean littoral. Large-scale integration into the local economy with massive infrastructure, using its economic clout to manipulate the local authorities into making advantageous concessions banana market…control of the market in bananas allowed it to set artificial low prices which Belize suppliers were obliged to accept because they were bereft of alternate viable markets. BH, being a colony of the British, varied from the prevailing pattern in other Central and South American countries in only one respect, a lack of personal graft. Unlike the banana republics, UFCo had no recourse to bribery with the colony’s British career diplomats, but bluff and intimidation usually produced the results it sought. As Moberg noted, “Colonial officials acted on behalf of the multinational not from venality or corruption…rather (it) reflected an ascendant US political and economic influence…one that officials found increasingly difficult to resist” [ibid.].

Tentacles of ‘El pulpo’ (“the octopus”)
United Fruit was particularly adept at playing one country off against another. When British Honduran officials kicked back against the demands of the company, UFCo would make clear that not acquiescing to what it wanted, had serious consequences. A standard ploy was to pit British Honduras against neighbouring states. On the occasions that the BH governor would deviate from his default submissive position to UFCo demands, the company manager in Belize Town would drop none-too-subtle hints about moving the centre of United Fruit’s Central American banana operations to Puerto Cortés in Hondurus. Similarly, United Fruit would also periodically issue threats to both Guatemala and British Honduras that it would switch its investments from one to the other [ibid.]

PostScript: Modern Belize
Tiny British Honduras was one of the last crown colonies in the Americas to shed the shackles of European colonialism. It achieved self-governing status in 1964, renamed Belize in 1973, it finally gained full independence from Britain in 1981. Mestizos, Creoles, Maya and Garifuna make up around 90% of the population. Belize’s much delayed passage to full independence largely stems from its neighbour Guatemala’s long-standing claim on the territory of Belize (or part thereof). Guatemala’s largely military regimes have aggressively pursued its claim (including making a number of threats to invade Belize and border-massing of troops since the 1940s), with Guatemala refusing to recognise the new nation in 1981. Accordingly the UK maintained armed forces in Belize after independence (till 2011) [‘Belizean-Guatemalan territorial dispute’, Wikipedia, http://en.m.wikipedia.org].


—————————————————————–——————————-———–
✱ although as far back as 1783 a local British presence had existed following the Treaty of Versailles which gave them the right to cut logwood between the Hondo and Belize Rivers
✪ the following, outlining what transpired in British Honduras in particular between 1900 and 1920, is heavily based on a case study by Mark Moberg [Moberg, Mark. “Crown Colony as Banana Republic: The United Fruit Company in British Honduras, 1900-1920.” Journal of Latin American Studies, vol. 28, no. 2, 1996, pp. 357–381. JSTOR, JSTOR, www.jstor.org/stable/157625]
❅ by the early 1900s US capital had attained a hegemonic position in BH (overtaking British capital) as it was in the rest of the Caribbean littoral
✥ at the same time the Belize mahogany trade was starting to taper off
⌖ UFCo’s passenger and cargo ships were known as the Great White Fleet. The ships were painted white apparently to keep the shipment of bananas cooler! [‘United Fruit Company: The Great White Fleet’,https://visitpuertoarmuelles.com]
✧ tactics replicated elsewhere in the region with similar results – the independent Jamaican growers, the Jamaican Banana Producers’ Association, resisted the United Fruit Co dominance of the Caribbean island’s market for a time but in the end couldn’t compete in a price war
⊠ United Fruit established very large plantations in different countries (known as ‘divisions’), when Panama disease hit, it would abandon the farm and relocate…each time UFCo would “systemically destroy the infrastructure (railroads, bridges, telephone lines, etc) to prevent competitors from being able to renew production on a smaller scale” [PI Bourgois, Ethnicity at Work, cited in Moberg]
✜ these days United Fruit Co goes under the banner of ‘Chiquita Brands International’ (still extensively in bananas)

The United Fruit Company: Neocolonial Elites, Banana Monopolists and Oligarchs in the Tropical Americas, Part 1

Posted on by Sloane Snodgrasse
Economic history, International Relations, Popular Culture, Social History, Society & Culture

Banana republic: In politics the term “banana republic”✱ describes a politically unstable country with an economy dependent upon the exportation of a limited-resource product such as bananas or minerals. The term was coined in 1901 by American author O. Henry as a depiction of Honduras and neighbouring countries under intense economic exploitation by US corporations as typified by the United Fruit Company of Boston [‘Banana Republic’, Wikipedia, http://en.m.wikipedia.org]

❖❖❖ ❖❖❖

When I first heard the saccharine, content-lite melodies of “Bubblegum Pop’s” 1910 Fruitgum Company, I didn’t realise that the name of this innocuous, syrupy 1960s musical group was a corny pun on a historic commercial entity that I did not know of at the time…this commercial enterprise was in fact something much less edifying and infinitely more sinister and consequential – the United Fruit Company of Boston, Mass. As the following will show, the United Fruit Co would come to epitomise the high degree of hegemony established by US business interests in the tropical regions of the Americas after the late 1890s.

Boston Fruit C°’s ‘Golden Vale’ plantation, Jamaica ⬇ From railroads to plantations
The United Fruit Company had its origins in 1899 from a merger of various fruit exporting concerns (including the Boston Fruit Company which had already embedded itself in the banana trade in Jamaica) controlled by American railroad constructor and entrepreneur Minor Cooper Keith. Earlier Keith stumbled into the banana trade virtually by accident. In 1872 Costa Rica defaulted on it’s bank loans and was unable to pay Keith for constructing the country’s railroad. In lieu of part of what it owed Keith, he was granted over 5% of vacant Costa Rican land. Accordingly the American used the land to establish banana farms alongside his newly finished railroad. The crops when yielded had a ready-made, on-the-spot transport line to carry the produce to port. Keith’s early banana experiments in Costa Rica proved a lucrative earner and paved the way for United Fruit’s later role as producer and exporter of the fruit. From that base in Costa Rica Keith the banana trader looked further afield in Latin America for other openings.

Monopoly, oligarchy? Other players in the tropical banana trade
Although classically monopolistic in its practices, United Fruit Co (UFCo) was not the only player (American or foreign) in the Central American/Caribbean banana game. In fact at the turn of the 20th century there was plenty of competition in bananas, in 1899 some 114 firms were engaged in importing bananas to the US via New Orleans [Davies 1990, cited in S Striffler et al, (Eds.), Banana Wars: Power, Production, and History in the Americas, (2003)]. UFCo grew by acquisition, quickly adding 20 smaller banana export firms to its list of business holdings.

United Fruit’s main rival during this time was the Standard Fruit Company. This company was first known as the Vaccaro Bros & Co✧. The Vaccaros began by importing fresh produce – initially coconuts and then bananas – from Honduras. After establishing a beachhead in the region the company diversified into operating steamships✪ and eventually provided the ice for onboard refrigeration❅. In 1924 Vaccaros Bros reformed into the Standard Fruit Company (in 1926 renaming itself ‘Standard Fruit and Steamship Co)…during this period Standard Fruit and United Fruit maintained competitive relations with each other for the lucrative banana trade in New Orleans – the principal marketplace in the US for banana sales. Like its gargantuan rival United Fruit, Standard Fruit’s profound impact on the economies of Latin American countries like Honduras courtesy of the high degree of control it was able to exert over the supposedly sovereign governments, contributed to the perception of these nations as banana republics. Hondurus was particularly vulnerable to the Banana barons with its banana monoculture and economic reliance on a single export crop. In the 1960s Standard Fruit was acquired by the Castle & Cooke Corporation (which in 1991 was renamed the Dole Food Company). [‘Standard Fruit Company’, Wikipedia, http://en.m.wikipedia.org; [‘Vaccaro brothers’, Wikipedia, http://en.m.wikipedia.org]

United Fruit Co soon extended its tentacles (the Latin American press was fond of labelling the firm El pulpo – “The Octopus”) beyond the Caribbean littoral, establishing banana exporting concerns in Columbia, Panama, Spanish Honduras, British Honduras (Belize), Jamaica and elsewhere in the region. Everywhere it invested, UFCo would rely on its famous “dollar diplomacy”  to induce the local elites to grant it concessions which allowed the company ever increasing  monopoly control over the banana trade.

Rivalry with mutual benefits
In addition to Standard Fruit, another US rival of United Fruit was the Cuyamel Fruit Company. Cuyamel started in transportation as the Hubbard-Zemurray Steam Ship Co and morphed into a large New Orleans-based agricultural corporation (see ‘Sam the Banana Man’ below). The three American companies in the Central and South American banana business (United Fruit, Standard Fruit and Cuyamel) were separate business entities, each in competition for bananas et al products from the same tropical region. And yet there was something slightly schizophrenic about the relationship between the three…concurrently with the earnest rivalry was the existence of a cartel-like cooperation between the companies – which was of mutual benefit financially, eg, being able to launch joint business efforts in advertising and in increasing banana agricultural outputs in Honduras. United Fruit Co’s dominant position in the triangle (always the senior player) facilitated this arrangement…it had both a 60% stake in Cuyamel and a 50% stake in Vaccaro Bros⊠ [Ralph Lee Woodward Jr, Central America, a Nation Divided (3rd ed. 1999), cited in ‘Cuyamel Fruit Company’ (Wikipedia entry].

‘Sam the Banana Man’
Schmuel Zmurri was an immigrant from the Russian Empire (born in Bessarabia, in modern Moldova) who changed his name to Samuel Zemurray after coming to the United States. Zemurray was to become a major player and shaper in the banana republic phenomenon, a seminal figure who contributed to the massive imprint left on the tropics by American banana barons.

Zemurray, establishing himself in Honduras around 1908, was to have a career as a “recidivist Yankee intervener” that made him one of the most controversial figures in the Central American banana republics’ tainted and sorry history. When the current Honduran regime favoured the rival Vaccaro Bros over Cuyamel, Zemurray agitated to foment a series of coups against President Dávila. The first coup failed but Zemurray in 1911 having chosen former president Manuel Bonilla to replace the elected Dávila government, bankrolled two Americans (“soldier of fortune” Lee Christmas and New Orleans gangster Guy “Machine Gun” Molony) to overthrow Dávila. With the malleable Bonilla back in charge, Zemurray’s Cuyamel was soon the beneficiary of generous land and tax concessions [‘The ousting of the president of Honduras, 1911’, (Stephen Kinzer), www.libcom.org]. Zemurray’s unconscionable incursion into the domestic politics of an independent state by hijacking its political process was to set a dangerous precedent for other banana republics.

Zemurray’s company made deep inroads into the Honduran banana trade (Zemurray became universally known as “Sam the Banana Man”), but at great cost to the national sovereignty of the country and to the detriment of the local economy✥. In 1930 Zemurray was able to sell his company to United Fruit for $31.5M in stock, after a short retirement he returned to active banana involvement, managing to join the board of UFCo and eventually take the helm of it (CEO and president until retiring for good in 1951) [K Norsworth & T Barry, Inside Honduras, (2nd Ed. 1994), cited in ‘Cuyamel Fruit Company’ (Wikipedia entry)].

United Fruit “a state within the state” of Guatemala: another intervention by Zemurray in the banana republics
Although no longer UFCo president, Zemurray wasn’t quite finished meddling to gain a financial advantage for United Fruit, he had one last contribution to the destabilisation of Central American regimes. The Guatemala banana trade had long been one of United Fruit’s most prized possessions…from the early 1900s President Manuel E Cabrera’s cosy relationship with UFC saw him grant the company a 99-year concession in Guatemala. United Fruit’s role in Guatemala has been described as “a state within a state” [William Blum, cited in ‘1954 Guatemalan coup d’être’, Wikipedia, http://en.m.wikipedia.org]. In 1953 Zemurray enlisted UFCo in a US State Department propaganda campaign to overthrow the left-leaning but democratically elected Guatemalan government of Colonel Jacobo Arbenz. The campaign together with the active intervention of the CIA paved the way for a coup the following year which ousted Arbenz and replaced it with a military junta which immediately reversed Arbenz’s decision to expropriate a portion of the unused land owned by the United Fruit Co [‘Sam Zemurray’, Wikipedia, http://en.m.wikipedia.org]. The fallout from the 1954 coup – for which the contribution of Zemurray and UFCo was no small part – was long-term destabilisation for the Guatemalans. The country, through a succession of military rulers, descended into three decades of civil war, 200,000 deaths including genocidal outrages against the native population [‘Ghosts of Guatemala’s Past’, (Stephen Schlesinger), New York Times, 04-Jun-2011, www.nytimes.com

United Fruit thrives in neo-colonial conditions
UFCo and Zemurray’s banana export and production triumph in the equitorial Americas owed in no small measure to the compliance of the countries’ political elites. In some instances, compliance, especially from right-wing authoritarian/military regimes, was bought. The neo-colonial charge against the banana republics and against UFCo as an employer, also concerned a claim of exploitative treatment of its labour force. In Part 2 I will focus on a case study of the United Fruit Company in one country which is instructive in detailing the pattern of how United Fruit went about securing and consolidating its “banana hegemony” in much of the region in the period.

PostScript: Banana Wars
The banana as a metaphor for the region lends itself to the pattern of American imperialist intervention in Latin America over the course of the 20th century. Coined by Lester D Langley in the early 1980s, the “Banana Wars” descriptor has been applied collectively to a sequence of ‘backyard’ US military occupations and police actions – these include the ‘1000 Days War’ (American intervention in support of Panamanian independence from Columbia/protection of US future interests in construction of the Panama Canal); the Spanish-American War (US invasion and occupation of Cuba and Puerto Rico); Dominican Republic (ongoing and intermittent occupations between 1903 and 1924); Nicaragua (an in/out pattern of occupation 1912-1933); the Border War with Mexico (1910-1919, including the occupation of Veracruz 1914); Haiti and the 1st and 2nd Caco Wars (occupation 1915-1934); and Honduras (seven interventions between 1903 and 1925). Aside from that, between 1869 and 1897 the US sent it’s warships a total of 5,980 times into Latin American waters to protect its national commercial interests [Greg Grandin, Empire’s Workshop: Latin America, The United States and the Rise of the New Imperialism, (2005)].

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✱ in political taxonomy, ‘republics’ they may (nominally) be, but in practice most so-called banana republics are grotesquely dysfunctional ‘republics’, typically, thinly masking what effectively are dictatorships and or regimes of ruthless military juntas
✧ the founders being three Italian-American businessmen brothers from Sicily (and their brother-in-law)
✪ expansion of fleet ownership was achieved by buying surplus steamships at a discount…by 1935 Standard Fruit had 35 ships in operation
❅ ultimately earning company president Joseph Vaccaro the sobriquet “Ice King”
⊠ this was a characteristic stratagem of United Fruit’s upward trajectory in Central America…the stake-holdings in Cuyamel and Vaccaro’s enterprises in Honduras were an initial import foothold on the path to becoming a direct producer in its own right – when United Fruit later acquired its own Honduran plantations in Trujillo and Tela [Woodward]
✥ as a disadvantaged party in its business dealings with UFCo, Honduras was worse off than all other banana republics in that it was unable to either urbanise or diversify its economy beyond the banana industry (for which its equatorial location was ideal) [Norsworth & Barry]

Marks and Spencer: From a Kirkgate Penny Bazaar to London High Street Heavyweights

Posted on by E Curb Nottus
Commerce & Business, Local history, Retailing history

Before the principals of Marks and Spencer teamed up, the entity was singular, just the one aspiring retailer, Michael Marks, and of material necessity he started very small. A late 19th century immigrant refugee from the Russian Empire’s Byelorussian region, Marks launched his first penny bazaar stall in Central Leeds’ Kirkgate Market with start-up funding amounting to one £5 note – which he had borrowed! Marks met his future partner at this time, Thomas Spencer, and eventually went into business with him after the latter, a Yorkshire cashier, invested £300 for a half-share in what became Marks and Spencer✱.

Early days: Establishing a chain of “penny bazaars”
Michael Marks kicked off with a very basic business model: his initial stall in Leeds was a “one penny stall”, hence the business’ motto, “Don’t ask the price, its a penny”⊡. The early stall commodities focused on household goods, haberdashery, toys and a sheet-music business (note the early spelling of the store name with an errant plural ‘s’ in ‘Spencer’ in the photo at left). Marks (the more dynamic and “hands-on” of the partners) immediately set about expanding the business, first up establishing a shop in Manchester. By 1894 Marks and Spencer had graduated to a permanent stall in Leeds’ covered market (in 1904 they opened their first Leeds shop) and in 1901 concentrated its open market operation in Birkenhead on Merseyside.

Forging a regional retail identity
The two partners initially focussed locally, concentrating on Yorkshire and Lancashire, a new warehouse in Manchester (1897) became the early centre of the M&S business empire which numbered 36 branches by that time…the firm accumulated stalls (later on, shops) in towns and cities across the North of England (Manchester, Liverpool, Hull, Sheffield, Middlesbrough and Sunderland) as well as further south (Birmingham, Bristol, Cardiff, Swansea, etc) [‘The History of Marks and Spencer’, (h2g2, 2008/2012), www.h2g2.com].

Spencer
Marks

By the early 1900s Marks and Spencer was starting to yield a very tidy surplus, becoming a limited company in 1903. At this juncture Thomas Spencer decided to cash in and retire from the partnership with a nice “nest egg” of £15,000 (for his initial outlay of £300) [‘Thomas Spencer (Marks and Spencer)’, Wikipedia, http://en.m.wikipedia.org]. Sadly for both Spencer and Marks, neither got to enjoy their monetary success long – Spencer died in 1905, followed by Marks in 1907. Nonetheless the prestigious company name has long outlived the two founding principals, thriving into the 21st century.

The end of “British-only” and “home-brand only”
In the early 20th century M&S, entering into long-term relationships with British manufacturers, emphasised a policy of selling only British-manufactured goods, clothes and food were sold under the famous “St Michael” brand (named after founder Michael Marks). The fluctuating commercial fortunes of the company in the 1990s led to M&S relenting somewhat on this policy.

Textiles and food
By the Twenties M&S had moved into the sale of textiles in a big way (launching its own laboratories to commercially produce new fabrics for the British market). In 1931 it added food to its portfolio of products…M&S’s own food technology department (from 1948) allowed it to offer chilled poultry to customers, instead of the hitherto frozen or pre-cooked options (courtesy of a new technology it called “cold chain distribution”) [‘What 130 years of M&S history can teach us about innovation”, (Hannah Jenkinson, 2018), www.about.futurelearn.com].

By the 1960s these two commodities, textiles and food, were firmly ensconced as the staples of Marks and Spencer. M&S were forerunners in introducing retail practices that enhanced customer satisfaction, such as the “money-back, no questions asked, no time limit” policy.

Marble Arch – M&S flagship store ⬆

In 1930 Marks and Spencer established itself in the United Kingdom’s financial capital, opening a mega-sized London store at 458 Oxford Street, W1. The Marble Arch store which was to become the company’s flagship store, would go on to compete with those other leading retailers of quality merchandise already with abase in Oxford Street, Selfridge’s and John Lewis’. Marble Arch wasn’t in fact M&S’s first retail outlet in London, that honour went to the one in nearby Edgware Road (which is actually closer to the Marble Arch monument than the Marble Arch M&S!). The Edgware Road store began as a penny bazaar in 1912 with additional floors added in the 1920s. During World War II the building was damaged by German incendiary bombs (as was Marble Arch tube station in an earlier Nazi air raid). In 1959 the original store at Nº228 Edgware Road was closed and replaced by a new, much bigger store at 258-264 Edgware which opened just six days later [‘The History of Marks & Spencer Edgware Road’, (Jan. 2017), www.marble-arch.london].

Nº228 Edgware (Source: M&S Co Archive) ⬇

M&S shift of strategy in an increasingly volatile retail market
At the turn of the 21st century Marks and Spencer’s prospects appeared fairly sanguine…in 1998 it became the first British retailer to achieve a pre-tax profit of over £1B.

But in the first decade of this century, M&S, sensing the need to compete for more of the market, made some seismic changes. The standard–bearer St Michael’s brand was dropped, other longtime lines were rebranded. The company moved away from its emphasis on “British quality goods”, starting to sell big-name grocery lines like Marmite, Kellogg’s Corn Flakes and KitKats in its stores [‘Marks and Spencer to start selling top brands’, (G Hiscott), The Mirror (UK), 04-Nov-2009, www.mirror.co.uk] (previously it had concentrated on ‘luxury’ food products exclusively). This marks the recognition by Marks and Spencer that the falling trend of clothing sales needed to be heavily supplemented by popular food items.

Marks and Spencer (colloquially and affectionately known on the street as “Marks and Sparks”) as at April 2017 could list a total of 959 operating stores across the UK✣, 615 of which traded in food only (the “Simply Food” label), evidence of how food products had come to prop up the other traditional areas of the business. Future prospects for the major British retailer remain somewhat nebulous after the company signalled in 2018 its intent to close around 100 M&S stores in the country by 2022. Retail finance watchers have also questioned, with such a reliance on food items, whether M&S can ultimately match it with the UK’s food and groceries powerhouse Tesco [‘M&S online food delivery service will be no piece of cake’, Robert Plummer, BBC News, 28-Apr-2017, www.bbc.com]. Still, Marks and Spencer remains in majority British hands (unlike its rival heavyweights Harrods and Selfridges).


⬆ Commemorative M&S clock in Leeds market

━━━──━━━━──━━━━──━━━━──━━━━──━━━━──━━━
✱ the foundation date for the company is traditionally given as 1884, however the exact date the partnership began between Marks and Spencer seems conjectural – other candidates are from 1894 (the Leeds permanent stall) or from 1901 (the Birkenhead market)
⊡ product inexpensiveness was not to stay the M&S catch cry – by the late 1920s Simon Marks (the founder’s son who had assumed the reins) placed a 5/- limit on items. Long before this M&S had made the store focus one of quality over cheapness
✣ plus over 200 overseas stores in at least 40 countries