Whiskey Men Who Fought the “Whiskey Trust”

Foreword:  A prior post was devoted to whiskey men who, one way or another, contributed to the success of what became known as the “Whiskey Trust,” an organization with headquarters in Peoria, Illinois, that was organized in the late 1800s to control multiple distilleries and thereby drive up the price of whiskey to the American consumer.  Officially it was known as the Distillers and Cattle Feeders Company.  The Trust was known to use coercion and even violence to get its way.  A few distillers, rectifiers (whiskey blenders) and liquor wholesalers boldly risked opposing this monopoly and in so doing helped to bring it down. 

It was fairly obvious that the best way to defeat the Whiskey

Trust was to start up new distilleries — but that was an expensive and potentially risky strategy.  From St. Louis to Philadelphia to Buffalo, a handful of whiskey men understood the challenge they faced and met it to the detriment and eventual defeat of the Trust. 

In 1891, William H.”Billy” Lee with four other St. Louis whiskey wholesalers decided to break with the Trust.  With an established reputation for rectitude, it is not clear what motivated Lee initially to agree to its monopolistic terms for providing him with whiskey.   A likely rationale was the stranglehold that the Trust held on whiskey supplies, essential to the many brands Lee was rectifying and selling under his own brand.  With time and experience, however, Lee and other wholesalers found strong objection to Trust financial dictates.  By yielding they seemingly had placed themselves, as the Chicago Tribune put it, “hopelessly in the grasp of the Trust.”

Lee and his colleagues made their move in April of 1891, as reported in the New York Times, a strong opponent of the cartel.  Headlining “REBELLING AGAINST A TRUST, the Times wrote:  “For some time there have been rumors of discontent among the whiskey dealers of St. Louis, and rumors of rebellion have been rife.  Many wholesale dealers and jobbers were quite free in  their expressions of dissatisfaction with the manner in which the Trust was managing the whiskey-making business of the country, practically controlling it and dictating to the dealers.”

In retaliation, Lee and the others collaborated on building a whiskey plant of their own, calling it the Central Distilling Company.   At the cost of $400,000 (equivalent to $10 million today) they constructed their distillery at a premier site just outside of St. Louis.  The plant came on line late in 1891 with a daily mashing capacity of 4,000 bushels of corn.  This was enough for the partners to satisfy their own requirements and to have additional supplies to sell.  Initially Central Distilling kept sales prices at levels comparable to those set by the Trust.  By the following year, however, the new corporation announced it would reduce the price of spirits to $1.10 a gallon, undercutting the Trust significantly.  If there had been an unspoken truce, this move broke it.

While Trust officers were furious, there was little they could do.  The St. Louis action had begun a downward slide for the monopoly.  In May 1892, owners of the cartel’s five best paying houses announced that, because none of them had been paid the rent required for Trust control, they would repossess their plants at once and put whiskey on the market independently.  Opined the New York Times:  “It looks as if the Whiskey Trust is doomed.”

Meanwhile, during the same year across the country in   Philadelphia a group of liquor dealers announced the purchase of 103 acres in Bucks County to build “an enormous distillery for the production of rye whiskey.”  Their leader was James Edward Maguire, an Irish immigrant whose “Montezuma Rye” was a nationally recognized brand.  Although vigorously denied, this project was a direct challenge to the Trust.  The monopoly had driven up prices for “raw” whiskey used by wholesalers, like Maguire and his allies, for blending their proprietary brands.  By creating their own source of supply these Philadelphia whiskey men were striking a blow to end their dependency on the cartel.

The new facility, organized with capital of $3 million (equivalent to $60 million today) was titled the Pennsylvania Pure Rye Whiskey Distilling Company.  “Nearly every large liquor dealer [in Philadelphia] holds stock in the company,” said one press account.  A prominent member of the venture noted:  “I suppose those 40 firms represent about $30,000,000.  All the subscriptions have been paid in.  The plant, shown below, eventually had a capacity of producing 30,000 barrels of whiskey a year.

Mcguire was quick to disavow any intent to be antagonistic to the Whiskey Trust.  The reasoning behind the new distillery was to established an industry close to home, he contended, economizing on shipping and by buying local grain.  He added:  “Then too, we are going to try some new experiments in the manufacture of whiskey which are entirely original, and which, if successful, will have a tendency to revolutionize things.”  

Nonetheless, alarm bells must have gone off in the Trust’s Peoria headquarters.  Not only would they lose the Philadelphia houses as customers, members of the new distillery were being encouraged to promote sales of excess whiskey stocks to dealers outside the membership.   According to the press account: “Each stockholder will virtually be an agent, and will use extra efforts to sell the whiskey, because he will reap a decided benefit from it.”   And the Trust would be the loser.

Meanwhile, resistence was mounting elsewhere.  Beginning in 1901 Moody’s corporate digest included a business “incorporated under the laws of New York State for prosecuting a general distilling and wholesale business in cologne, spirits, alcohol, whiskey, medicinal preparations, etc.”   Henry M. Naylon of Buffalo was among its founders and later its leader.  Moody’s did not mention what the liquor industry knew:  This organization represented a backlash to the Whiskey Trust -- and was succeeding.  

Walter B. Duffy, owner of two distilleries in Rochester, New York, in 1900 had organized three major Kentucky distilleries and five New York liquor manufacturers into the New York and Kentucky Company.  The idea was strength in numbers to prevent the Whiskey Trust from threatening them.  A chief Duffy ally in this gambit was Naylon who owned three distilleries in Buffalo under the name, The Erie Distilling Company. 

The New York and Kentucky Company, with main offices in Rochester, subsequently found success as it defied the Whiskey Trust.  The capital stock of the company consisted of $1,000,000 in preferred stock and $1,000,000 in common stock, about 25 times that in 2018 dollars.  It was paying dividends of 7% on the preferred stock and 6% on common.  Moody’s listed the assets as “real estate and appurtenances (conservatively valued at upwards of $850,000), fixtures, machinery, brands and good will of said concerns, all absolutely free from mortgage, debt or other liability.”  

The company’s real liability was Walter Duffy, its president.   Duffy ran one of the most notorious whiskey operations in the country, criticized for his outrageous advertising,  blasted in the press for shoddy products, and hounded by Federal and state officials for selling his liquor as medicine.  When Duffy died in 1911, the directors took no time in naming Henry Naylon the president and chairman of the board, likely because of his “squeaky clean” business reputation and clear leadership qualities.  

Under Naylon’s leadership from his Buffalo offices, the New York and Kentucky Company continued to thrive and to pay handsome dividends to its stockholders.  Meanwhile its despised Trust rival, officially the Distillers & Cattle Feeders Company,” was falling apart, reputedly because of its weight of debt and reputation for violence.  

As fast as the Trust shut down distilleries, new ones like those in St. Louis, Philadelphia and Rochester had sprung up.  Price fixing in the whiskey industry had proved to be elusive.  Meanwhile Naylon’s organization rolled on until its operations and those of its member distilleries, including the Erie Distilling Company, were forced to shut down by National Prohibition.  That event also forever killed off what remained of the Whiskey Trust.

Note:  More complete information on each of these three whiskey men can be found on this blog.  The posts are Billy Lee, March 22, 2017;  James McGuire, November 18, 2017, and Henry Naylon,  February 14, 2014.  More information on Walter B. Duffy can be found in a post devoted to his colorful career, May 31, 2011.

Henry Naylon and Thwarting "The Whiskey Trust”

In 1917 Moody’s list of “Industrial and Miscellaneous Corporations” included a organization known as the New York and Kentucky Company “incorporated under the laws of New York State for prosecuting a general distilling and wholesale business in cologne, spirits, alcohol, whiskey, medicinal preparations, etc.”     Henry M. Naylon of Buffalo, New York, was listed as both president and chairman of the board.   Moody’s failed to mention what the liquor industry knew:  Naylon was leading the backlash to the notorious Whiskey Trust -- and succeeding.

Twenty years earlier as number of Midwest distillers had turned their plants over to a board of trustees who were to control the liquor trade through the kind of monopolistic cartel that had developed in oil, sugar, steel, beef and other commodities.  Officially named the “Distillers and Cattle Feeders Trust,” it was popularly known as "The Whiskey Trust.”  The organization, based in Peoria, Illinois, gathered in more than 80 distilleries, often using tactics like dynamite to convince holdouts.  Most of the plants the Trust procured were shut down. The idea was to control supplies and drive up whiskey prices.

That tactic did not sit well with other American distillers who feared being muscled out of the market.  This antipathy was strongest in New York and Kentucky.  In 1900 Walter B. Duffy, owner of two distilleries in Rochester, New York, organized a group of three major Kentucky distilleries and five New York alcohol manufacturers into a stock company.  The idea was strength in numbers to prevent the Whiskey Trust from threatening them.  A chief Duffy ally in this gambit was Henry Naylon.

Naylon like Duffy was a native of Rochester. He was born 1870 into a family of native New Yorkers with ancestral origins in Ireland.  Little of Naylon’s early life is recorded but at least one account indicates that he may have been involved in real estate as a young man.  That pursuit may have led him into the field of distilling.   In the late 1800s the Federal Government had, in effect, shut down several small distilleries in Western New York.  Naylon apparently saw an opportunity,  moved to Buffalo, bought three plants and about 1897 consolidated their production under the name, The Erie Distilling Company.

Naylon’s first business address was on Genesee near Ellicott but by 1900 he had moved to a spacious five-story building at 141 Seneca Street, shown here.  The address also appeared on a cobalt jug produced for him by the Lyons Stoneware Company of Lyons, New York.  Naylon’s company adopted a number of proprietary brand names for its whiskeys, none of which the owner bothered to trademark.   They included  “Clover Dry Gin,” “Lafayette  Special,” “Maryland Flower,” “Orange Blossom,”  “Society Cocktails,”   and “Yankee Club.”   His flagship label was “Erie Club Whiskey,” advertised as “It Is the Best!”  As many whiskey men, Naylon gifted favored customers,  saloons and public houses featuring his brands.  He furnished them with advertising wares such as shot glasses and serving trays featuring Erie Club.   For retail customers he provided inexpensive, celluloid-backed pocket mirrors. 

Naylon also was having a personal life.  In 1881 he married Ellen (called Nellie) A. Corcoran.   Like himself, his wife was native-born New Yorker.   The 1900 Census found them living in Buffalo with three children,  William, 7; Loretta, 5, and Ethel, 4.  Henry would take William into his liquor business as the boy matured.

Meanwhile the New York and Kentucky Company, with main offices in Rochester, was thriving while it defied the infamous Whiskey Trust.  The capital stock of the company consisted of $1,000,000 in preferred stock and $1,000,000 in common stock,  about 25 times that in  2014 dollars.  It was paying dividends of 7% on the preferred stock and 6% on common.  Moody’s listed the assets as “real estate and appurtenances (conservatively valued at upwards of $850,000), fixtures, machinery, brands and good will of said concerns, all absolutely free from mortgage, debt or other liability.”  

One major liability was Walter Duffy,  president  and organizer of the combine.  Duffy ran one of the most notorious whiskey operations in the country, criticized for his outrageous advertising,  blasted in the press for shoddy products, and hounded by Federal and state officials for selling his liquor as medicine. [See my post on Duffy, May 1911.]  Duffy’s leadership of the New York and Kentucky Company particularly incurred the wrath of Col. E. H. Taylor Jr., considered the Kentucky high priest of straight bourbon.  Taylor earlier had lost distilleries through debt to George Stagg, a Kentuckian who was part of  the New York and Kentucky Co.  Even though a court had ruled 1894 that Taylor’s name could no longer be used in connection with his former distilleries, the ban was ignored by Duffy.

Outraged that someone whom he considered to be so disreputable had come to control his previously owned and prized whiskey operations,  Col. Taylor minced no words:  There are people who do not know the difference between a jumping-jack and a jackass, and a composite photograph of the two would look so much like him that his nearest friends would call it an excellent portrait of Mr. Walter B. Duffy, President of the "New York and Kentucky Company," owner and great promulgator of  “Duffy's Malt Whiskey.”

When Duffy died in 1911, the directors took no time in naming Naylon the president and chairman of the board, likely because of his good business reputation.  Henry’s son, William, also was named to the board and eventually would be moved up to the position of corporate secretary.  At the same time Naylon was branching out into other enterprises.  He was president of Naylon Securities Company and a founding director of the Lafayette National Bank of Buffalo, a member of the Federal Reserve System.  He also was a power on the Buffalo political scene and eventually became chair of the Erie County Democratic Party.

During this same period Naylon found his own liquor business in need of expansion and in 1915 he moved to an eight-story building at 154-156 Eagle Street.  As shown on his letterhead of that period, not only was he featuring his own brands but had become the sole agent for such national and regional labels as “O.F.C. Whiskey,” “Carlisle,”  “McGinnis Rye,” “Walnut Hill,” “Seneca Chief,” and “Burke Hollow.”  Naylon’s new quarters were very up-to-date, featuring both telephone exchanges and solid-tire trucks to make deliveries.  Naylon issued jugs with the new address.

Increasingly Naylon was being heard as a spokesman for the liquor industry.  In a 1916 letter to the Brewer’s Journal, he opined that the lack of revenues from whiskey taxes was shifting the burden of taxation to real estate and incomes.  “Many of the Prohibition States are bankrupt today because the fanatics fear that if their controlled legislatures increase taxation upon citizens who have ignorantly assented to the destruction of lawful revenue, the whole fabric of deception will tumble down,” he wrote.   He predicted that politicians kowtowing to the Prohibition “fanatics” would lose their jobs if taxation was visibly shifted.

In 1903 Naylon bought a house, shown left, at 361 Pennsylvania Avenue in Buffalo.  It had been designed and built in 1875 by an internationally known Philadelphia architect named Richard A. Waite who had made it his own home for many years.  As Naylon’s millions accrued, however, the family decided a much larger and fancier house was required.  The result was the mansion below on Buffalo’s then fashionable North Street.  Son William, a bachelor, continued  to live his with parents as part of the household.

Under Naylon’s leadership, the New York and Kentucky Company continued to pay dividends to its stockholders.  Meanwhile its despised rival, the “Distillers & Cattle Feeders Trust,” was falling apart, reputedly because of its weight of debt and reputation for violence.  As fast as the Trust shut down distilleries they sprang up elsewhere.  Price fixing in the whiskey industry had proved to be elusive.  In place of the Whiskey Trust a number of smaller, more regional combinations emerged.  Meanwhile Naylon’s organization rolled on until its operations and those of its distilleries, including the Erie Distilling Company, were forced to shut down by National Prohibition.

Naylon emerged unfazed.  He began to devote himself full-time to real estate, in which he previously had been an investor. His real estate empire grew extensively, with properties located throughout Buffalo and across New York State.   The 1930 census found him, now age 60, living in his mansion with wife Nellie and son William.  Naylon gave his occupation as “capitalist-real estate.”   William was listed as “salesman - real estate.”  The family was out of the whiskey business for good.

Henry Naylon died at age 69 in June 1939 and was buried in Mount Olivet Cemetery located in the town of Tonawanda,  a cemetery of the Catholic Diocese of Buffalo. Both Nellie and William had preceded Naylon in death, both passing in 1935.  The Naylons lie together in a striking mausoleum, a hewed granite structure that today stands tall and solid in the graveyard.  Meanwhile the Naylon mansion on North Street long since has been demolished to make way for new development.