Claus Spreckels (1828–1908) was perhaps the most successful German-American immigrant entrepreneur of the late-nineteenth century; he was one of the ten richest Americans of his time.
The career of the “sugar king” of California, Hawaiʻi and the American West consisted of building and breaking monopolies in sugar, transport, gas, electricity, real estate, newspapers, banks and breweries.
The first industry in which Spreckels succeeded was quite typical for German immigrants: beer brewing. In the spring of 1857, together with his brother Peter Spreckels and Claus Mangels, among others, he founded the Albany Brewery, the first large-scale producer of beer in San Francisco.
Though profitable, he sold his beer operation in 1863 and switched to a new field that would make him rich: sugar. That year, he started the Bay Sugar Refining Company, but sold it three years later.
He then constructed the California Sugar Refinery in 1867 to process sugar. While grocers, then, sold “sugar loaves,” Spreckels introduced the European process of packaging granulated sugar and sugar cubes (so customers could more easily divide the portions.)
Spreckels came to Hawaii in 1876 on the same ship that brought favorable news of the Reciprocity Treaty with the United States. In effect, the treaty gave Hawaiian sugar planters a price increase of two cents a pound and thus set off an economic boom in the island kingdom.
Spreckels had originally opposed the treaty; but after it passed, he quickly made up his mind to take advantage of it. He decided that the arid central plains would be suitable for a sugar plantation if he could get water. Two years later he returned to Hawaii accompanied by a well-known California irrigation engineer, Hermann Schussler. (Adler)
In 1878, through his friendship with King Kalākaua, Claus Spreckels secured a lease of 40,000-acres of land on Maui and by 1882 he acquired the fee simple title to the Wailuku ahupuaʻa.
That same year, Spreckels founded the Hawaiian Commercial Company, which quickly became the largest and best-equipped sugar plantation in the islands.
As a vehicle for carrying out his plans, Spreckels incorporated the Hawaiian Commercial Company in San Francisco on September 30, 1878. The authorized capital stock was $10,000,000, represented by 1,000 shares having a par value of $10,000 each. Claus Spreckels was the majority stockholder. At par, his holdings amounted to $5,200,000.
His interest and investment prompted the Hawaiian Gazette to say, “With an aggregation of brains, business enterprise and capital, this new company will infuse new life and health into the great sugar industries of Hawaii. …”
“It is more than probable that the Island production can be increased six-fold.” (Hawaiian Gazette. October 30, 1878) (The six-fold increase in production was realized in 11 years. (Adler))
In 1880 Spreckels engaged Joseph and Andrew Moore of the Risdon Iron Works, San Francisco, to build a mill with a capacity of about twenty tons a day. Construction of three more mills got underway the next year, with improved design based on experience with the first mill.
These mills were completed by 1882, and capacity was thus increased to about 100 tons a day. The crop for that year was estimated at 12,000 tons, a four-fold rise over the yield for 1880. (Adler)
The Hawaiian Commercial and Sugar Company was incorporated (1882) in San Francisco and went public; it took over the assets of the Hawaiian Commercial Company. Capital stock of the new company consisted of 100,000 shares of $100 par value. Purposes of the company as stated in the charter were much the same as those of Hawaiian Commercial.
After the incorporation of the Hawaiian Commercial Company, Spreckels moved swiftly to make his plantation the most modern and the most productive in the kingdom. (Adler)
Spreckels was the first island planter to achieve nearly complete control of sugar from growing to marketing. In this he set the pattern which the Hawaiian sugar industry.
The plantation, with its vast fields of cane irrigated by the Spreckels ditch, was the first link in the chain of vertical integration. The second link was the Honolulu firm of William G. Irwin and Company (Spreckels and Irwin), which acted as agent for the Spreckelsville plantation and also for others.
In the 1880’s and 1890’s it was one of the leading sugar agencies of the kingdom. The Irwin company also acted as agent for the Spreckels Oceanic Steamship Line, which during the last two decades of the nineteenth century dominated the transport of Hawaiian sugar.
Oceanic thus formed the third link in the chain of control. The last link was the Spreckels refinery in San Francisco, where most island sugar was refined.
Besides setting the pattern for vertical integration, Spreckels made many pioneering contributions to Hawaiian sugar technology.
Spreckels was the first to use a five-roller mill, instead of the usual three-roller of the time. (This increased the percentage of juice extraction from the cane, that also resulted in better drying of the bagasse (which could then be used for fuel)). (Adler)
Spreckels was the first to use electric lights in the mill. (Electric lights permitted the mills to operate night and day, and thereby avoided the expense of shut-down during the height of the grinding season. His use of electric lights in 1881 preceded the lighting in Iolani Palace by five years.) (Adler)
Spreckels was the first to use rail in hauling cane. (An ingenious system of permanent and portable track connected up with the existing railroad running to the port of Kahului.)
(At Spreckelsville, rails radiated in all directions from the mill buildings and also connected them with each other. Thus Spreckels found a solution for intra-plantation cane hauling, inter-mill and intra-mill transport, and for getting sugar directly to the wharf at Kahului.) (Adler)
Spreckels was the first to use a steam plow. (Among the advantages of the plow were that a greater area could be plowed per day than with oxen or mule teams; more effective plowing increased the sugar yield per acre; and there was a saving of man power.) (Adler)
Spreckels knew water was key to growing sugar and he built the largest irrigation ditch that had ever been undertaken in the islands. On his last trip to Spreckelsville, in August, 1893, Spreckels was making plans for an electric power plant to operate pumping stations. This would enable him to increase the water supply and hence the acreage in cane. (Adler)
The Advertiser observed, “The company means business. … A vast improvement will be noticeable in the commerce of this kingdom, and ere long, these islands so little known beyond the Coast states will be distributing their staple products all over the American continent.” (PCA, April 2, 1882)
The Gazette agreed, “Claus Spreckels has certainly made out of what was once considered worthless land a waving plain of cane. One must ride through these acres and acres of cane to fairly understand how great the enterprise is …”
“If this is gathering wealth to the owners and projectors, it is also scattering money among the Hawaiian people. We learned that during the construction of the mills the payroll of the plantation rose … A large portion of this must find its way into the pockets of the Maui people, native and foreign, another portion must come to Honolulu.” (Hawaiian Gazette, August 23, 1882)
In 1892 the plantation was called “the largest sugar estate in the world.” It contained 40,000 acres, of which 25,000 were good cane land. Twelve thousand acres were under cultivation. The fields extended for fifteen miles and were several miles wide.
The mills had a capacity of 30,000 tons a year, and were “fitted with the most perfect machinery and appliances which the ingenuity of man has yet devised.” (Adler)
But all was not rosy for Spreckels and his sugar plantations.
Upon public issue in 1882, the stock sold around $60. By the fall of 1884 the company was deep in debt, and the price was down to 25 cents. A personal loan by Spreckels of $1,000,000 and authorization by the directors of a bond issue moved the price up again. Good crop reports in 1885 reinforced this upward movement.
Then, in 1890, the U.S. Congress enacted the McKinley Tariff, which allowed raw sugar to enter the United States free of duty and established a two-cent per pound bounty for domestic producers.
The overall effect of the McKinley Tariff was to completely erase the advantages that the reciprocity treaty had provided to Hawaiian sugar producers over other foreign sugar producers selling in the U.S. market. The value of Hawaiian merchandise exports plunged from $13 million in 1890 to $10 million in 1891 to a low point of $8 million in 1892. (La Croix)
In the 1892 report of the board of directors, the stockholders were told in effect that the stock was valueless and the corporation deeply in debt.
The depressing effect of the McKinley bill on the price of sugar and the lack of water (no rain having fallen on the Hawaiian islands in a long period) were the main reasons given as an explanation for the disastrous turn which affairs had taken. (Adler)
“Fifteen gentlemen representing over eight thousand shares of stock in the Hawaiian Commercial and Sugar Company met yesterday (17th inst.) in the law offices of Blake, Howison & Williams and expressed themselves very freely concerning the board of directors, who had permitted the affairs of the great corporation to become badly entangled”.
“It appears that at a meeting held when the report was ready for presentation several of the stockholders declined to accept the situation and suggested that an assessment might be levied and tile money thus raised be used to carry the corporation through the financial breakers.”
“This was agreed to and it was anticipated that the assessment would be about $1 a share. The good people who had invested their wealth in the Hawaiian Commercial Company were horrified by an invitation to come forward and yield up $5 a share.”
“This, the directors argued, would bring $500,000 into the treasury and would be needed, every cent of it. The date on which the assessment became delinquent was fixed at January 27th.”
“The levy was considered exorbitant, and a few days ago a number of stockholders, representing 10,000 shares out of a total of 100,000, met and appointed a committee to wait on Claus Spreckels, who is popularly supposed to have possession of 60,000 shares, or a controlling interest in the corporation, and ask him to withdraw the assessment altogether or reduce it to $1.”
“As Attorney Williams explained to the meeting yesterday: ‘Mr. Spreckels declined to listen to a paper which I had drawn up with care, and after investigation of the situation, politely requested them to vacate his office. They left.’” (Hawaiian Gazette, January 31, 1893)
Then, “a bitter family feud erupted, pitting Spreckels and his sons Adolph and John against his sons Rudolph and Claus A. ‘Gus’ Spreckels.” (Hamilton)
“There is litigation in the family of Claus Spreckels, the sugar king.”
“C. A. Spreckels, the youngest son, has begun it by filing a complaint against his father, Claus Spreckels, charging that the latter has conspired with John D. and A. B. Spreckels and other directors of the Hawaiian Commercial and Sugar Company to crowd the plaintiff and other stockholders out of the corporation.”
“Allegations of fraud to secure the desired end are made, with various revelations in connection with the business of the sugar company.”
“Claus Spreckels and the two elder sons are asked to pay $2,500,000 to the corporation as damages for their fraudulent conspiracy, and a demand is made upon the Court for an injunction to prevent the carrying out of the plans.” (Hawaiian Gazette, December 12, 1893)
An out-of-court settlement of the suit in January, 1894, gave Gus Spreckels control of Hawaiian Commercial and Sugar Company. His brother Rudolph became a director. Claus Spreckels and his other sons, John and Adolph, were ousted.
Hackfeld and Company replaced Irwin and Company as Hawaiian agent for the Spreckelsville plantation. Control of the Hawaiian Commercial and Sugar Company and of the Spreckelsville plantation thus slipped from the hands of the elder Spreckels. (Adler)
The upstart triumph was short lived, however, for in 1898 a competing firm bought out the company and ousted the brothers from its management. (Hamilton)
The buyers of HC&S included James B. Castle, S. N. Castle estate, William R. Castle, Henry P. Baldwin, and Samuel T Alexander. The firm of Alexander and Baldwin became Honolulu agent for the plantation in place of Hackfeld and Company.
“Stock once 25 cents, is up from $28 to $34 and over and will go to $50.” (PCA, October 13, 1898) “The stock of the company now passes largely into the hands of residents of Honolulu.” (PCA, October 15, 1989)
At the time of these last events Claus Spreckels was 70 years old. In his declining years, then, he saw the magnificent plantation which he had founded slip not only from his grasp but from that of his family. (Adler)