There was a businessman whose factories and warehouses were busy and his lorries ran day and night. Few could equal his business acumen or his imaginative solutions to problems. His offices bustled with typists and telephone receptionists; his clerks had adding machines. Everything that in the early 1930s was up to date, modern.
Times, however, were tough. As you will know, if you are selling a commodity, your business will be in trouble. My friend Hendrik’s brother in law is blaming his salesmen for their inability to offload any gear at all. When everybody has a smart catalogue and a dumb salesman turning the pages for the bored customer, there really isn’t much to choose between any of them. When there’s no business, you don’t need to buy anything. It’s why they’re all sitting on two years’ worth of funds: they’re waiting for better times.
It all comes down to price. When you start cutting prices, you know your business is going to die. If your margin is twenty percent, cutting ten percent from your price slashes fifty percent of your profits. You have to get imaginative – or angry – if you are going to make even on last year.
Our businessman had sorted out a way to keep his buyers in line. He offered them protection. Well, protection from the police, that is. If this wasn’t sufficient by way of persuasion, it was protection from his own bullies. This ensured that they bought from him again, and since he was selling alcohol, there was a healthy demand at the time. Even so, everybody else was at it, and the only way to expand was to sneak someone else’s territory.
Naturally there were what one might term ‘pecuniary allowances’ that found their way into the hands of regulatory officials, politicians and other authorities. Al Capone had tried practically every angle: there was nothing he could do. His business was in the doldrums. Sure, it was working, it gave men work and he made a profit. It’s more that he wasn’t making enough profit.
Now in business there’s an old saying, and it goes something like this: when you have a great idea, you’ll always want to have started it two years ago. I don’t know if this bright idea had Al Capone banging his own head on the desk in frustration, or that of the guy who had been standing next to him at the time. Whatever, it led him to say the unforgettable words, “honest to God boys, we been in the wrong racket all along.”
Racketeering is all in a day’s work for the working man in America. Regulations, such as they weren’t, weren’t enforced well at the best of times. That means the ban on alcohol that ran until 1933 was only a modest success. That this drained the US Treasury of much needed taxes in the depression years is not something that is discussed by those beloved of the free market.
As mentioned, this was no panacea for the likes of Al Capone. Do what he might, it was hard to expand the market. Which is why his bright idea was such a bombshell. “Do you know,” he said, “they got a bigger markup in legit fresh milk than we could ever get away with in booze?”
If there is anything more likely to annoy the annoyable, it is to know that you’ve missed out on some money. And this was one of them. Capone’s problem was that he didn’t have a dairy. He had everything else, the administrative systems, bottling plants, printing presses for the labels and an efficient delivery system all of which were just begging to be given more work to do.
But no dairy.
Not only that, but the local Teamsters – the trucker’s union that at the time had exclusive rights on delivering milk – were being a little uncooperative. Capone didn’t hold with unions, and his dairy would be union free. The problem was compounded by the fact that the Teamsters only delivered local milk. Capone wanted to bring in cheaper milk from Wisconsin.
This needed sorting. In classic Capone manner, a gentleman known to all as ‘The Hump’ was sent to visit Barry Sumner, the business agent for the local branch of the Teamsters. Sumner was offered a pension by way of a payment of $100,000 whereby Capone’s men would take over. Sumner, by the way, was 81 at the time. But Sumner said no.
Hump went home and the next morning Sumner had his home, offices and car armoured and fitted out with bullet proof glass. Sumner was no fool.
What Sumner hadn’t reckoned on was the kidnapping of the local Teamster’s president, Robert ‘Old Doc’ Richie. There are bullets that the thickest armour cannot stop. No doubt this was something Capone had planned earlier; whatever, in no time at all, the ransom of $50,000 was paid.
Two months later – roughly the time it takes to process the legal documents – Meadowmoor Dairies was chartered with the unsurprising sum of $50,000.
As you can expect with a gentleman of Capone’s nature, Meadowmoor Dairies began to use its muscle. If you’re in a commodity business, brawn beats brain every day. If any brain is employed, it’s employed in a way that will inevitably lead to stiffer competition. Smaller dairies saw what was happening on the South Side of Chicago and having given up all hope of redemption, closed their doors for good.
At this point, I’m going to overlook the fact that by this time Capone himself had been imprisoned, and that Murray ‘The Hump’ Humpreys had been forced to pay taxes on the fifty grand he extorted from Sumner. That the American legal system appears bat-shit crazy is because of the lengths it has to go to convict criminals. It’s the result of a society that is corrupt to its core.
This wasn’t enough, though. Milk may have a better markup than booze, it was still a commodity. Perfect for the businessman: sell it and make a profit. No questions asked, no trouble from bleating customers. Or worse, annoying customers. Either way, keeping customers at arm’s length is the order of the day for most businesses.
The trouble here is that if you’re not looking after the needs of your customers, all you can do is offer them the goods. All they can do is pay. When it only takes a bunny brain to do this, it means that everybody’s going to do it. The bunny brain customer still has one power left to them: muscle. They can choose the cheapest there is. Irrespective of how many years the businessman’s been working out how to cut his costs, it doesn’t take much bunny brain for the customer to do the sums.
But Capone had one last card up his sleeve. He knew that milk goes off. He knows that if somebody’s told something, they’ll usually believe the letters on the package than believe their own senses. He came up with the brilliant idea of printing a date on the label that told the shop when it could be sold by.
Some gentle arm twisting in Chicago’s legislature saw this regulation added to the law books.
You can imagine that this was a panacea! Sales spiked because good milk couldn’t be sold on account of the date that was stamped on the label. What’s more, all the customers could see if it was saleable or not. Furthermore, the dairies that had no date stamping machines were put out of business.
Nevertheless, everybody had to do it, which meant that within a few short years, everything was back to normal and their profits were being gnawed at.
To me it’s indicative that if you’re going to sell milk, do so by selling it with a coffee and make a decent profit when you sell it. Oh, and make sure your customers come back for more because they enjoy the ambience of your cafe. Because if you’re not dealing with your customers personally, you’ll find your profits being eroded.