Week 4 Blog: James Kraft and Canned Cheese

 

Week 4 Harold Allen Skinner’s Applied History Blog: Kraft Cheese

Abstract:

This blog discusses research into the early entrepreneurship of James Lewis Kraft, the founder of what was to become Kraft Foods. The blog will discuss Kraft’s humble beginnings, and the early entrepreneurial decisions that set his company on the path to controlling a large segment of the American processed food market.  Research and analysis was conducted using information gleaned from available primary and secondary sources. The blog will conclude with a summary of findings and potential future threads for research.

Article

            According to the popular History Channel series, “The Food that Build America,” the video segment entitled American Cheese credited Canadian entrepreneur James Lewis Kraft in transforming a $65 investment in a cheese reselling business into a “$45 billion food empire.”[1] The truth is a bit more involved, but in this blog, I would like to discuss Kraft’s early, innovative entrepreneurship and trace the growth of his company through his leadership tenure.

James Lewis Kraft was born in 1874 in Canada into a strict Mennonite family, where he learned the value of discipline and innovation. After completing high school, and a stint in clerking, Kraft moved to Buffalo, New York in 1903. There, Kraft attended business school while making ends meet by selling various commodities, including cheese.[2] Kraft left school to work full time in the cheese business, and in 1911 Kraft moved to Chicago. After an earlier partnership collapsed, Kraft bought his way into a cheese distributorship, buying and repackaging cheese for resale to smaller vendors. Kraft’s business model was popular with local grocers as smaller portions meant less waste from spoilage of large cheese wheels. In time, Kraft’s middleman business model proved profitable enough to bring on his brothers and incorporate the cheese enterprise.

However, Kraft’s net profits often suffered from premature spoilage of the cut cheese wheels. So, Kraft set out to develop a method for preserving cheddar cheese from spoilage. The technique of pasteurization, sufficiently heating food to kill dangerous microorganisms, was already in common use: “It is common knowledge that various food products may be sterilized by the application of heat and then hermetically sealed and so rendered permanently keeping. But the attempt to apply such treatment to cheese of the Cheddar genus has invariable resulted in failure...disintegrating and permanently losing its true cheesy character.”[3] After much experimentation, Kraft developed a process of gradually heating small cubes of cheddar cheese in a steam boiler to 175° F for 15 minutes, all while keeping the cheese “actively stirred or agitated.” Once heated sufficiently to kill bacteria, the liquid cheese was sealed in sterile cans or jars: “As a new article of manufacture, a hermetically sealed completely sterilized package of non-liquid homogenous cheese of the Cheddar genus.”[4] 

At the time, Kraft’s new cheese product drew little attention by American consumers outside of the Chicago area.  However, in April 1917 the United States declared war on Imperial Germany. From a prewar army of 200,000 men, the United States rapidly mobilized more than 2 million men to fight in France, a vast army that required combat rations. Kraft’s canned cheese proved a safe and tasty addition to reserve rations issued to soldiers in combat.[5]

By the end of the war, American soldiers (doughboys) had developed such a taste for Kraft’s cheese that they naturally wanted to buy the cheese back in the United States. Homemakers quickly grew to appreciate Kraft’s canned products, due to the convenience and safety associated with packaged cheese. [6] With his fortunes firmly established with processed cheese sales, Kraft’s entrepreneurial energies were unleashed, particularly in the growing field of advertising and marketing.  To exert better control over his processes, Kraft purchased a string of dairies and cheesemakers, created an in-house laboratory for cheese research, and developed additional patents for products and packaging. Kraft vigorously challenged competitors, and in 1927 won the landmark Kraft Cheese Co. V. Pabst Corp., firmly establishing the right of patent holders to obtain royalties from all competitors using a previously patented process.[7]  Afterwards, a Washington Post article noted approvingly that due to Kraft’s savvy management, net company sales had risen from $1.2 million in 1919 to $60 million in 1927.[8] In 1928, Kraft scored a major coup by acquiring his chief rival, the Phenix Cheese Company. Besides expanding the manufacturing and distribution network, the merger provided Kraft with addition lucrative patents, and new products to diversify the company portfolio. [9]

  In 1930, Kraft-Phenix was acquired by the National Dairy Products Corporation, a holding company seeking to dominate the dairy industry. At the time, Kraft’s company was valued at $50 million, with annual sales of $86 million, a 43% improvement from 1927 levels.[10] Kraft stayed on as chief executive of Kraft-Phenix and apparently enjoyed a great deal of autonomy in running his business segment, with a stream of new products and innovations to his credit. In 1945, the company’s name was changed to Kraft Foods, and James Kraft continued as chairman of the board until his retirement in 1951.[11] Today the Kraft-Heinz Company generates net sales of $25 billion, a vast improvement in growth from James Kraft’s modest $65 investment in his cheese business back in 1916. [12] Unfortunately, the lack of digital primary sources, and time to conduct archival research, will leave unresolved the new question of how James Kraft’s processed cheese product was adopted by the War Department – arguably the pivotal event that set Kraft’s company on the path to economic greatness in the following decades.

Sources   

"BIG MERGER VOTED IN DAIRY PRODUCTS: NATIONAL TO ACQUIRE KRAFT-PHENIX CHEESE THROUGH EXCHANGE OF SECURITIES." New York Times (1923-Current File), Apr 18, 1930. 47, http://ezproxy.liberty.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Fhistorical-newspapers%2Fbig-merger-voted-dairy-products%2Fdocview%2F99017373%2Fse-2%3Faccountid%3D12085. Accessed 10 April 2021.

Haddix, Carol M., et al. “Kraft Foods,” in The Chicago Food Encyclopedia. Chicago: University of Illinois Press, 2017.

Hanson, Eleanor. ”Kraft, James L.” in The Chicago Food Encyclopedia, edited by Carol Mighton Haddix, et al. Chicago: University of Illinois Press, 2017.

"Kraft-Phenix Cheese Co." The Washington Post (1923-1954), Jun 15, 1928. 20, http://ezproxy.liberty.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Fhistorical-newspapers%2Fkraft-phenix-cheese-co%2Fdocview%2F149822317%2Fse-2%3Faccountid%3D12085. Accessed 10 April 2021.

Nicholls, William H. “Post-War Concentration in the Cheese Industry.” Journal of Political Economy 47, No. 6 (December 1939): 823-845.

Ruff, John. “The Globalization of a Food Processor.” Food and Drug Law Journal 51 No. 4 (1996): 727-734.

Sponholz, Lloyd. “Kraft, James Lewis (1874-1953). American National Biography. February 2000. https://doi.org/10.1093/anb/9780198606697.article.1000942. Accessed 11 April 2021.

United States Patent and Trademark Office, James Lewis Kraft, of Chicago, Illinois, Process of Sterilizing Cheese and an Improved Product Produced by Such Process. Patent 1,186,524 patented 6 June 1916.  https://pdfpiw.uspto.gov/.piw?Docid=1186524&idkey=NONE&homeurl=http%3A%252F%252Fpatft.uspto.gov%252Fnetahtml%252FPTO%252Fpatimg.htm. Accessed 10 April 2021,

            Notes

[1] “The Food that Built America: American Cheese,” 28 February 2021, https://play.history.com/shows/the-food-that-built-america/season-2/episode-4. Accessed 10April 2021.

[2] Lloyd Sponholz, “Kraft, James Lewis (1874-1953), American National Biography. February 2000. https://doi.org/10.1093/anb/9780198606697.article.1000942. Accessed 11 April 2021. 

[3] United States Patent and Trademark Office, James Lewis Kraft, of Chicago, Illinois, Process of Sterilizing Cheese and an Improved Product Produced by Such Process. Patent 1,186,524 patented 6 June 1916, line 35-45.

[4] Ibid, 75.

[5] Brown, W.C., Colonel (Ret.), “The U.S. Army Emergency Ration,” U.S. Army Infantry Journal 16, No. 2 (February 1920): 656.

[6] William H. Nicholls, “Post-War Concentration in the Cheese Industry,” Journal of Policial Economy 47 No. 6 (December 1939): 823-4.

[7] Nicholls, 827.

[8] “Kraft-Phenix Cheese Company: What’s Behind Your Stock?” The Washington Post (1923-1954), 15 June 1928, ProQuest Historical Newspapers: The Washington Post, 20.

[9] “Kraft and Phenix Cheese Merged,” New York Times (1923-Current File), 10 January 1928, Proquest Historical Newspapers: The New York Times, 50.

[10] ”Big Merger Voted in Dairy Products: National to Acquire Kraft-Phenix,” New York Times (1923-Current File), 18 April 1930, ProQuest Historical Newspapers, 47.

[11] Eleanor Hanson, ”Kraft, James L.” in The Chicago Food Encyclopedia, edited by Carol Mighton Haddix, et al  (Chicago: University of Illinois Press, 2017), 154-55.

[12] https://ir.kraftheinzcompany.com/company-profile.  Accessed 14 April 2021.