With his aquiline nose, receding hairline, and large bushy brown mustache, Percy Morgan was definitely the odd man out at the table. Unlike his new CWA colleagues, he had never planted a grape or fermented a batch of wine in his life. But Morgan was a number cruncher, a man who brought a clear eye to the profit and loss statements of the various wine houses. He could see that consolidation was the only answer to the problem. Perhaps his distance from the wine business gave him an advantage over those mired in its details.
There was no doubt of Morgan’s brilliance. He had passed Oxford University’s junior candidate scholarship examination at the age of thirteen. In 1881, at just nineteen, he was sent to America to work as a bookkeeper at the Kingston Mine in Austin, Nevada. The change from crowded cosmopolitan London to a silver boom town on the high desert must have been jarring. But Morgan embraced the opportunities available in the developing West. He would spend the next few years as an accountant for various mining firms in some of the most isolated and mountainous territory around.
A photo taken of Morgan in 1885 shows a fresh-faced young man with a mild countenance and a calm demeanor. Morgan, who was then twenty-three, is standing in a snowy field on a snowy day, wrapped in a huge overcoat that reaches down almost to his ankles and envelops his slim frame. His face is open, unconcerned, and he stares off into the horizon. He looks like an innocent abroad.
Behind the boyish exterior, however, was a man who refused to be intimidated. That same year, after two “miscreants”133 known as Red River Dick and “Dunk” McGregor terrorized Cooke City, Montana, by shooting their way through town, Morgan organized a vigilante committee to send a posse after the bandits.134 Morgan also possessed the presence of mind to once find his way home through a raging blizzard by following a telegraph line.135
Morgan moved to California in 1886, an experienced accountant who intended to branch out into advising businesses. After working for a time in “steam boating” on the Sacramento and San Joaquin rivers, he joined companies that were developing electrical devices, telephones,136 and a water system in Berkeley.137
Morgan would be best remembered for his key role in the birth of the California Wine Association. Although he initially focused on the company’s accounts, he soon became general manager.
The CWA set up its headquarters in the Kohler & Frohling wine house in San Francisco. It was a building designed to wow. Built in 1890 by the sons of Charles Kohler, the musician and wine merchant who started the Anaheim wine colony and who was the first to market California wine in New York, the brick building on the corner of Second and Folsom streets stood three stories tall and was capped by a tower with a cupola. One newspaper called the structure “the finest in San Francisco”138 and another complimented it for its “harmonious proportions.”139 Inside, hundreds of oak casks were lined up on the main floor. Four 18,000-gallon redwood casks stood in the basement for blending, as did a cooper shop where workmen made casks and barrels. Hydraulic elevators lifted grapes and wine to every floor. The large building radiated strength, confidence, and, perhaps, the ability to crush smaller rivals.
It’s no surprise that not every one was pleased by the formation of the CWA, which trade papers began to refer to as “The Syndicate.” If growers had difficulty getting a decent price for their grapes in the past when the wine houses competed with one another, what would happen now that seven had merged into one? There were still some independent wine houses remaining, but growers were worried.
So the growers formed their own large entity that November, the California Wine-Makers’ Corporation. The grape growers intended to use their collective might to insist on higher grape prices. Within a few months, more than 160 grape growers had signed up to join the Corporation, as they referred to it.140
One of the driving forces behind the Corporation—and a man who would soon face off against Morgan—was Pietro C. Rossi, a thirty-nine-year-old university-trained chemist and pharmacist who immigrated to San Francisco in 1875. Within six years he found himself overseeing the wine operations of an agricultural cooperative called the Italian Swiss Colony located in Asti in northern Sonoma County. Rossi, like Morgan, had no previous experience making wine. But he understood chemistry. Using his laboratory skills as a guide, Rossi soon insisted on clean vats, controlled fermentations, and temperature control, efforts that propelled Italian Swiss Colony into the forefront of winemakers in California. Under Rossi’s leadership, the company expanded its vineyards, established its own storage cellars in San Francisco, and set up wholesale accounts with merchants across the country. No wonder, then, that he bristled at the threat posed by the humungous CWA to his and other growers’ financial independence.
While the Italian Swiss Colony and a few other vineyardists, like Isaac de Turk of Santa Rosa, were large and powerful, most members of the Corporation were small farmers with modest vineyards, men who had struggled to survive the ravages of phylloxera and prices that dropped to six dollars a ton for grapes. When they had negotiated over the years with the powerful wine merchants in San Francisco, they found they had no leverage. Many wine men were frustrated that they saw little profit for their work. That led them to join forces with the Corporation.
At first the two sides seemed well matched. After an intense negotiation, the CWA agreed in 1895 to pay a decent price: twelve and a half cents a gallon for the 1894 vintage. The CWA even proposed a long-term contract guaranteeing to purchase 5 million gallons of wine a year in the next three years at a price to be mutually agreed upon. The CWA also announced it would stop making wine and focus instead on sales and marketing. An ecstatic Corporation agreed, in exchange, to lease the CWA’s vineyards and wineries. The deal meant that the CWA would get the wine it needed to sell, and the grape growers would get the prices they needed to thrive.
“It pays to organize,” an exultant Rossi told the newspapers. Rossi, with his brown hair and mustache and soulful brown eyes, had worked harder than anyone else to bring the grape growers together. “We know our power and so did the wholesale men. We can understand and respect each other and as a result we can do business on an equitable basis. It is no longer a fight, each trying to get the better of one another.”
Soon prices for both wine and grapes increased substantially. Winemakers who had only gotten seven cents a gallon for their vin ordinaire in 1893 realized twenty cents a gallon in 1896. Those selling Cabernet saw their wine sell for twenty-five cents a gallon, up from twelve cents. Grape prices went from $6 to $20 a ton, and up to $25 or $26 for the best grapes.141 “After a long period of depression, of overproduction, of pest-infected vineyards, mortgages and of low prices, better times have come,”142 read one editorial.
But cooperation soon faltered. Three months after signing a contract, the CWA and the Corporation started fighting again. The two sides couldn’t agree on a price for the next vintage. When the Corporation demanded fifteen cents a gallon, the CWA turned it down. The Corporation retaliated by cancelling its contracts to rent the CWA’s vineyards and wineries.
By early 1897, the CWA and the Corporation were battling in court and on the shelves of markets and streets of cities around the country. Each side looked for every opportunity to squash the other. “The war has begun and will be carried out to the bitter end,” said Morgan. “There will be no compromise.”143
One of the most heated battles took place in New Orleans. The Louisiana city had always been cosmopolitan. Founded by the French in 1718, settled by many Jews and Germans in the 1840s, the city had a polyglot population that loved wine. New Orleans’s love for the beverage had deepened in 1878 when yellow fever ravaged the area, killing more than 180 people and as many as 20,000 in the lower Mississippi Valley. Panicked inhabitants blamed the disease on the city’s inadequate sewer system, which allowed mosquitos carrying the disease to breed. People turned from drinking water to drinking California wine. By the late 1890s, New Orleans was the second largest export market for California, consuming almost as much as New York. Wholes
ale grocers and San Francisco wine houses with branches in New Orleans sold 90,000 to 110,000 gallons each year. That was around one barrel for every three inhabitants.144
The New Orleans market was lucrative, and the CWA had no intention of losing its dominance there. Morgan, in his most aggressive tactic to date, wanted to make sure the Corporation couldn’t afford to sell its wine there. He reduced the price of the wine the CWA sold in New Orleans by five cents, to twenty-two cents a gallon. That price would be disastrous for members of the Corporation.
The Corporation refused to be bowed. If it couldn’t sell its wine to the CWA, it would find other buyers, merchants who weren’t embroiled in the war. Rossi and other leaders struck a deal with the A. Marschall Company of New York. The company agreed to purchase 2 million gallons of wine for eighteen cents a gallon—more than the Corporation had wanted from the CWA. A. Marschall also took out an option to purchase 1.5 million gallons more.
The CWA retaliated. It started to sell wine on the East Coast for less than the eighteen cents A. Marschall had paid. That meant the New York firm had no incentive to exercise its option and get even more wine from the Corporation.
What followed was a race to the bottom with the CWA and Corporation rushing to offer the lowest prices in a dangerous gambit to capture the largest market share. With millions of gallons of wine stored in its warehouses, and the financial backing of the powerful wine houses, the CWA could afford a price war. The Corporation, in contrast, still had to pay its growers for the wine they produced, which became increasingly difficult as prices declined. Prices dropped to seventeen cents a gallon. Then fifteen cents. Then thirteen and a half cents. Then ten cents a gallon.
“There seems no longer any doubt whatever but that the present wine fight will be one to the death,” read one editorial.145
Throughout the war, Morgan denied that the CWA was attempting to crush its rivals, although, that, in fact, was exactly what it was doing. “We haven’t done any cutting, are not doing any cutting, and don’t propose to cut. We do make cuts but we meet those of our competitors.”146
The Corporation decided the only way it would survive was to become more like the CWA. Rossi conceived a plan to allow the Corporation to store more of its members’ wine in bulk, which would give it time to find new markets in which to sell. It took out a lease at the Pioneer Warehouse on Eighth and Bryant streets in San Francisco and converted it into a storage facility that could hold 1.5 million gallons.147 In August of 1897, Rossi announced that the Italian Swiss Colony would build the largest wine storage tank in the world at its property at Asti: a 500,000-gallon concrete storage tank, which could hold an equivalent of 2.5 million bottles of wine. The tank was twenty-four feet high, eighty feet long, and thirty-four feet wide, with a glazed surface to prevent the wine from contamination.148 That fall it was filled with a bumper crop of wine.
The next spring, after the red wine in the vat had been shipped to stores, restaurants, and grocers, Rossi threw an elegant party inside the vat to advertise the Italian Swiss Colony’s recent successes. He chartered a train to carry 100 guests from San Francisco north to Asti. The partygoers, who included some State Supreme Court justices, members of the San Francisco Board of Supervisors, and foreign officials, boarded the train at 7:30 a.m. for the two-hour ride. When they disembarked, they were led through a grape arbor that stretched a quarter mile to eat lunch among the vines, sitting at tables decorated with white linen and crystal.
Then they went to the aboveground storage vat, which one newspaper said resembled “one of the Pyramids of Egypt with the top sliced off.” Four sets of concrete staircases led to a roof garden with meandering gravel paths, a stone fountain, and flowerbeds. Guests descended into the vault via a spiral staircase to a dark and cool interior with walls stained a dark red from the wine once stored inside. One paper described the atmosphere as “lurid.” A band played Strauss waltzes and the celebrants danced away deep underground.149
Elegant luncheons among the vineyards may be commonplace in the twenty-first century, but they were unusual when Rossi wined and dined many of the city’s opinion makers. He may have earned their gratitude, but the party did nothing to lessen Morgan’s and CWA’s determination to smash the Corporation and seize control of the California wine industry.
* * *
It took the courts to settle the bitter and protracted fight. In October 1898, Judge George Bahars of the San Francisco Superior Court ruled on competing lawsuits that the California Wine Association and the Wine-Makers’ Corporation had filed against each other in early 1897. The judge split his ruling, declaring that the CWA and the Corporation had both violated their contracts with each other. Although the judge levied a heftier fine on the Corporation, his ruling gave each side a win, so they both saved face. It was enough to prod them to settle their differences.
On December 15, 1898, after the two sides reached a private agreement, order was restored. The CWA agreed to buy 5 million gallons for 12.5 to 15 cents a gallon—a price the growers could live with.
“After a two years’ contest, marked by the use of every weapon known in commercial warfare, and by bitterly fought litigation, the end has come,” remarked the Pacific Wine and Spirit Review.
The wine war was over.
The Corporation went out of business a short time later. The CWA had won.
CHAPTER FIFTEEN
EARTHQUAKE AND FIRE
The jolt on April 18, 1906, came at 5:13 a.m. Deep under the ocean, miles off the coast of San Francisco, two massive tectonic plates slipped past each other, letting loose shock waves that traveled 7,000 miles an hour through rock and dirt, swamps and hills. Seconds later, the tremor reached San Franciscans as they slumbered. The first shock lasted forty seconds and threw people out of their beds. Then came a ten-second pause. The second spasm lasted twenty-five seconds and it sent pictures, chimneys, and brick facades crashing to the ground. After a series of shudders, the earth went still again.
In the south of Market area, the earthquake shook loose tens of thousands of oak wine casks stored in the wine houses that crowded the area. Some casks had been stacked as high as the ceilings, yet they tumbled down like a house of cards, spilling their vinous contents. Large tanks holding thousands of gallons of wine cracked open as well, sending red rivers of wine into the streets.
Percy Morgan, like most everyone living in San Francisco, was shaken by the temblor and must have rushed from his home on Buchanan Street to survey the damage.150 When he reached Third and Bryant streets, Morgan would have seen that the facade of the California Wine Association headquarters, with its proud tower, was damaged. Bricks lay in a heap on the sidewalk below. Dust from falling debris obscured the rising sun. But while many barrels had busted open, the majority of the wine stored in the Association’s storage cellars was unharmed.
But what the earthquake had left untouched, the fires would destroy.
* * *
By early afternoon on Wednesday, April 18, 1906, San Francisco was an inferno. For the next three days, as shocked city dwellers wandered, dazed, through the parks, dragging their meager possessions, or rushed to the ferry building to get on a boat out of town, the city burned. There was no water to fight the fires, since the underground pipes of the Spring Valley Water Company had broken in soft ground. No amount of dynamiting by troops seemed to stop the fire’s progress. The industrial area south of Market went first, followed by downtown with its massive banks, office towers, and hotels. Flames obliterated the Nob Hill mansions of the men who had built the railroads, as well as the ornate homes of the lesser merchants lining tony Van Ness Avenue.
There was little water, but there was wine. Up on Telegraph Hill and in North Beach, some determined Italian immigrants used the barrels of their homemade wine to stave off the flames.
The Italian Swiss Colony was able to save its three-year-old brick cellar at Battery and Greenwich streets through ingenuity and muscle. There was a spring on the property and the company’
s founder, Andrea Sbarboro, an Italian from Genoa, rushed down from Asti after the earthquake. When he arrived, he ordered his workers to jury-rig a hose to pump water from the spring-fed well. They sprayed the cellar’s walls and laid down a puddle on the roof.
“We fought unceasingly for three days and three nights,” Sbarboro later recalled. They managed to save the two million gallons of wine in the cellar.151
Most other wine houses were not as lucky. By Saturday, when the flames were finally extinguished, twenty-eight of San Francisco’s thirty-one wine houses were smoldering wrecks of twisted metal and blackened bricks. The remains of the huge tanks that had held the 1905 vintage lay underneath feet of debris. About 12 to 15 million gallons of wine had been ruined. Sbarboro told the newspapers that the lost wine was worth about $3.5 million,152 equal to about $93 million in 2013 dollars. It was the largest natural disaster ever to hit the wine industry.
* * *
The California Wine Association bore the brunt of the loss. The company had expanded considerably since the wine war of the late 1890s. In 1900, it acquired a half interest in three of the state’s largest wine concerns: Lachman & Jacobi,153 C. Schilling wine company, and Italian Swiss Colony, whose leaders eventually concluded it was easier to join the CWA than fight it. Then in 1901, three prominent bankers, Isaias Hellman, whose Cucamonga Vineyard was already under the CWA’s management, Daniel Meyer, and Antoine Borel invested $1 million in the CWA, allowing them to assume a controlling interest in the organization. Henry Huntington, the nephew of one of the Big Four builders of the transcontinental railroad and a tycoon in his own right, would also soon invest. The capital infusion allowed Morgan to go on a buying spree unseen in the history of the business. The CWA would eventually control fifty-two wineries and vineyards spreading out over 100,000 acres—half of the vineyards in the state. By 1902, it produced 30 million gallons, or 68 percent of the wine made in California.154 Its storage facilities were vast.
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