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The tea business of Wizzotsky & Co.: the past and the present

The tea business of Wizzotsky & Co.: the past and the present

The name 'Wizzotsky' [Vissotsky, Wissotsky] was a household name in Russia during the first two decades of the 20th century. Wizzotsky was often mentioned as one of the most powerful men in Russia for a reason: he was a millionaire, the owner of the second largest tea trading company in the country, and his name remained synonymous with tea long after his death in 1904.

The origins of the «tea miracle»

The tea trading partnership "V. Wizzotsky & Co." took the Russian tea industry by surprise. Most tea companies labored for half a century – and some even for a whole century – to reach the summit of the Russian tea trade. But the company founded by Kalonimos Wolff (Wulff) Wizzotsky traveled that road in a mere two decades, and entered the competition for market dominance at the end of the 19th – the beginning of the 20th century. What were the circumstances and the events that drove the phenomenal success of the Wizzotsky tea business? This will be the topic of our article. The detailed biography of Wizzotsky himself, his family members, and the details about his company can be found elsew here (Sokolov I.А. "Who's Who in the Tea Industry" («People of tea»). Moscow, International Tea House Publishers, 2014, ISBN 5-93880-001-3 (5-93880-001-4). A detailed account of the Wizzotsky tea business is given in: Sokolov I.А., Russian and foreign tea trading companies on the Russian tea market, 1790 – 1920. Мoscow, 2013, ISBN 978-5-9973-2501-5); this article, written on the occasion of the 190th anniversary of Wizzotsky's birth and the 110th anniversary of his death, will give a relatively brief overview.

K. V. Wizzotsky was born to a Jewish family in 1824 in a small town near Kovno (now Kaunas, Lithuania). He got married early, studied in a theological seminary. After realizing that the countryside was too small for his ambitions, Wizzotsky moved to Moscow and found a job at a tea shop that belonged to by Pyotr Kononovich Botkin, one of the founders of a large wholesale trading operation with China and the owner of the famous Botkin Tea Company. Here the young Wizzotsky learned the specific aspects of the tea trade and established some useful

connections. His honesty and religiosity allowed him to climb the professional ladder quickly, from a delivery man to a manager. After saving some money working for Botkin, Wizzotsky decided to go into business on his own. Market conditions at the time were favorable to newcomers, as the monopoly of the Kyakhta traders on imports of fine tea from China was beginning to unravel. ((Translator's Note: Kyakhta is a town in the Russian Siberia, near Lake Baikal, on the border of Russia and Mongolia; during Wizzotsky's time, it was the principal entry point for importing Chinese goods into Russia by land.))

New horizons greater flexibility

Starting in 1861, the laws restricting tea imports into Russia to routes that crossed the Eastern border of the Russian Empire were relaxed, and imports across the Western border became possible. These new imports consisted chiefly of "Cantonese" tea, which was cheaper and of lower quality; "respectable" tea traders spurned this tea, as well as the new tea varieties coming from India and Sri Lanka, deeming them inferior in quality to the traditional Chinese tea. However, some companies were willing to bet on this cheaper tea, gradually increasing their trading volumes. Wizzotsky's company was among those who decided to ignore the prejudices of the tea industry establishment: it put its money on cheap, low quality tea, increasing the product's appeal by advertising.

Advertising and the Wizzotsky trademark

Wizzotsky's choice of trademark proved to be very shrewd: the firm's symbol, a ship carrying tea, remained in use for the lifetime of the company. At first, Wizzotsky followed others in the tea business by exploiting "colonial" motifs, emphasizing the "exotic" nature of tea. At the turn of the 20th century, when the consumers' preoccupation with the Orient started to wane, there was a rise in the patriotic sentiment; Wizzotsky noticed the shift and used it to his advantage. Whereas early advertisements and product packaging featured a Chinese ship and merchants, the later ones switched to a traditional Russian lad'ya (wooden boat). The ship trademark used by Wizzotsky & Co. achieved such brand recognition that it became the target of imitations – and not just by competitors. After the revolution of 1917, "Centrochai", the tea ministry of the Communist government of Russia, attempted to use the ship on its own packaging and other materials.

The evolution of the firm: bringing in new partners

In 1881, Wizzotsky's company was reorganized as a trading partnership "Wizzotsky & Son". Further expansion – opening new branches in Odessa and Simferopol – required additional capital and new partners. The Zetlin, Gavronsky and Gots families joined the business. The partnership "Wizzotsky & Co" was founded in Moscow in 1897-1898. The company owned tea packaging factories in Moscow, Saint Petersburg, Chelyabinsk, Kokand; later, additional facilities were built in other cities. The firm had offices in 32 cities, including Odessa, Saint Petersburg, Warsaw (now in Poland), Ekaterinburg, Saratov, Samara, Kazan, Rostov-na-Donu, Tiflis (now Tbilisi, Republic of Georgia), Simferopol, Vil'no (now Vilnius, Latvia) Khar'kov, Tashkent (now in Uzbekistan), and trading spaces at fairs in Nizhni Novgorod and Irbit. Every major division of the company was in charge of operations across a significant geographical area: the Odessa branch was responsible for the entire southern portion of the Russian Empire; the Simferopol branch coordinated the trade in the Crimean peninsula; Tiflis – throughout Caucasus; the Warsaw branch oversaw Poland (which was a part of the Russian Empire at the time). The Vil'no branch traded in the western part of the Empire (excepting Poland), and the Yekaterinburg branch supplied tea to the Ural region and Siberia. At the turn of the 20th century, the Wizzotsky & Co. partnership had two offices in the USA: in New York and in Philadelphia. Annual trading volumes were significant, around 40 million rubles at the turn of the 20th century. For several years, the company paid a significant dividend of 11- 12% on its shares. In terms of their profitability, the shares of Wizzotsky & Co were second only to the shares of the Pyotr Botkin's company. Thus, the Wizzotsky & Co partnership became the second largest tea trading company in Russia. Wizzotsky himself was the Chairman; the principal shareholders were his son-in-law, Esel Zetlin (he was married to Wizzotsky's daughter, Anna), and his other daughter, Liba Gavronskaya. Among other major shareholders were Wizzotsky's son David, another one of his sons-in-law, Rafail Gots (married to Wizzotsky's daughter, Rachel), and Wizzotsky grandson, Ber Gavronski.

The "scale effect": pragmatism against prejudice

To grow his business, Wizzotsky actively solicited investments from his relatives and from people of Jewish faith. The owners of the traditional, "respectable" tea trading firms were afraid to "dilute" their ownership, and the companies remained defacto family businesses. Having only relatives as major investors reduced the risk of capital loss. Shares of major firms were not sold on exchanges and had many other restrictions on ownership and transfer specified in company charters. Ownership of many firms was prohibited for people of certain religions; only the firm itself could buy back its own shares; the cost of a share could go as high as 1,000, 3,000, 5,000 or even 10,000 rubles. This high price was thought to be a guarantee against the shares falling into the "unreliable" hands. Wizzotsky, on the other hand, issued shares that were mostly restriction-free and priced relatively affordably, at 500 rubles. This allowed rank-and-file investors, such as small business owners, to become co-owners of the firm and to receive a dividend. Wizzotsky, in turn, was able to tap into vast credit reserves. Small investors were not a threat as far as control over the company was concerned, but they provided much needed capital. After a while, the competitors started to catch on, but it was too late: they were left in the wake as the Wizzotsky ship sailed on. Later on, the partnership purchased large stakes in the Russian Industrial-Commercial Bank and in the Bank of Moscow, solidifying its position on the market. Having large amounts of capital allowed the firm to buy large volumes of tea and sell it at lower prices. This strategy was profitable because of the "scale effect": large volumes compensated for low profit margins. The mass consumer – the primary market of Wizzotsky & Co. – seemed content about the price-quality ratio. Soon, the "old-timers" – traditional, family-owned tea companies with impressive pedigrees – discovered to their dismay that selling large volumes of low-quality tea was more profitable than focusing on the elites. Unfortunately for them, they missed the window of opportunity, and market leadership shifted into the hands of the newcomers.

Income and expenses

By the start of World War I (1914-1917), the company's sales exceeded 50 million

rubles. Even during the hostilities, volumes were in the tens of millions of rubles, as can be seen in the company's annual report for 1914-1915. The official figure given there was 72 million rubles. Wizzotsky & Co. was one of the purveyors of tea for the Russian army. The partnership Wizzotsky & Co. Became the official supplier of the Russian Imperial Court, as well as the Court of the Shah of Persia. Although at the time, such "titles" could be purchased easily and at a relatively low cost, they had a miraculous effect on the consumers. Enormous profits from the tea trade allowed Wizzotsky to engage in broadreaching philanthropic activity among Russian Jews in Palestine. He generously supported schools (especially religious

schools), orphanages, hospitals and shelters for the poor. Big sums were directed

towards publishing literature in Hebrew, and truly enormous – towards purchasing land in Palestine. Through his charitable foundations, Wizzotsky financed a number of educational institutions in Palestine: The Jewish Academy, The University for Jewish Studies and a university in Jerusalem. In 1908, as stipulated in Wizzotsky's will, a large sum went to a technical school in Haifa – one of the best in the Near East at the time, and even to this day. Contemporary Israeli scholars count Wizzotsky as one of the more prominent representatives of the late 19th century political movement for creating a Jewish homeland in Palestine.

Crises and upheavals

After its founder's death in 1904, the company entered a turbulent period in its history. Major shareholders started fighting each other for control of the company. Some of the partners in the original "V. Wizzotsky & Co." ["W. Wizzotsky & Co."] partnership even started their separate tea trading business using the family name – "D. Wizzotsky, R. Gots & Co.". The new firm faced big obstacles right from the start: it had to create and promote its own trademark, a cannon, which was not received favorably by the consumer. The reputation of the firm was repeatedly damaged by scandals. A lawsuit alleged that the firm was evading the payment of tariffs on the tea imported into Russia; but the suit was dismissed for lack of evidence. And there were even bigger problems. On November 19, 1913, the "Russkoe Slovo" ("Russian Word") newspaper published a story: "Yesterday, a rumor spread in the financial circles: a prominent businessman M. R. Gots has disappeared. It is said that he has incurred large losses speculating on the stock

exchange, and has left the country. These rumors have been confirmed…The father of M. R. Gots is on the board of directors of "V. Wizzotsky & Co.", with personal capital of several million rubles… His son took up speculation on the exchange…" All that we know today about the story is that M. R. Gots died in Geneva much earlier, in 1906; the rumors may have been about his brother, who had returned to Russia. It is also possible that the death had been staged to fool the public. Finally, the whole story may have been an outright fabrication. Maybe some unrelated person has been mistakenly connected to one of the largest tea trading companies in Russian history. But, regardless of the truth, the reputation of the firm was seriously damaged.

Igniting the Revolution. A tea trader's son on the political arena

The Gots brothers – Abram Rafailovich and Mikhail Rafailovich – used family money to take part in revolutionary activities, causing serious problems for their father's business. Abram Gots (1882 – 1940) was an active member of the Socialist-Revolutionary Party since 1906; in 1907, he was convicted of planning a political assassination and sentenced to 8 years of hard labor. After the revolution of 1917, Abram Gots briefly became the leader of his party's fraction in the Petersburg City Council – thus, a descendant of the Wizzotsky tea family was, for a brief moment, at the helm of the new Russian regime! Soon after the events of 1917, Abram Gots joined the opposition to the new government; he engaged in planning acts of terrorism against the leaders of the new Russia. In 1922, he was arrested and sentenced to death; the sentence was later commuted to 5 years in prison. After his time behind bars, Abram Gots lead a quiet life in the provinces until his death in 1940.

Technologies and human resorces

Many traditional tea trading companies in Russia were in no rush to implement the latest technologies for weighing, processing and packaging tea. The state-of-the-art equipment was expensive, while manual labor (primarily of women and adolescents) was cheap, even for night shifts. The Russian Empire did not have a social safety net at the time: there were no unemployment payments and no public pensions. Many prominent companies believed that they played an important social role by providing employment to large numbers of people, enabling them to survive. All tea companies, including Wizzotsky & Co., used manual labor at their

facilities. However, the times were changing, and developments in the tea industry and beyond pushed the market leaders towards implementing new technologies. It became clear that those who were the first to see the need for change would cement their position as leaders of the market. Managers of Wizzotsky & Co. packaging facilities strove to cut costs as much as possible; part of this strategy was reducing the amount of manual labor by introducing machines. At first, the savings were not very significant, but they did manage to bring the price of the product down. And the cheaper the product, the happier the consumer. At the end of the 19th century, Russian society was still developing very rapidly and becoming more prosperous; but the market no longer had room for every player who wished to remain in the tea business. Some adjustments were inevitable. One only has to compare the photographs of the Wizzotsky & Co. packaging facilities and the photographs of the facilities of other industry leaders: the difference in their approaches to packaging can be seen immediately. This is not to say that Wizzotsky & Co. were at the technological cutting edge: the firm had many facilities all over the country, and the majority of them used the old technology. Even the Moscow plant relied on manual labor for a very long time. Wizzotsky was ahead of his competitors only by a step or two; but this was enough to secure a market leader position in the span of only a few years.

The ship finally sinks…

The business of Wizzotsky & Co., including all its facilities, was nationalized in September of 1919. The remnants of the company survived in Poland, the Baltic states, Palestine, USA, England. The Palestine branch of the firm continues its operations to this day: it has changed owners, but it has retained its loyal customers and to its famous trademark.

Images:

- An excellent collectible packaging label, Ceylon tea, "Wizzotsky & Co."

- Ararepackaginglabel, "D. Wizzotsky, R. Gots & Co."

- A packaging label, Indian tea, "V. Wizzotsky& Co."

- The title page of an annual shareholder report, Wizzotsky& Co.

- A mechanized packaging facility owned by the tea trading partnership "Wizzotsky & Co." Manuallaborisminimized.

- A tea packaging facility owned by the industrial-commercial partner ship "Alexandr Kuznetsov & Co, Successors of Alexei Gubkin", Moscow. The packaging is done manually by women an dadoles cents.

- A rare seal, "Wizzotsky& Co." The trademark image of the ship is visible, front

- "Wizzotsky&Co." trademark, a sailing ship. Image from a company seal.

- A rare seal, "Wizzotsky& Co." The trademark image of the ship is visible, back

- A trademark, "Wizzotsky& Co."

- A trademark for the Polish market, "Wizzotsky& Co."

- A rare trademark variant, "Wizzotsky& Co.

- A rare seal with the Wizzotsky trademark ship symbol, front.

- A rare seal with the Wizzotsky trademark ship symbol, back.

- Wizzotsky&Co. store, Astrakhan. Apre-1917 postcard, detail.

- Wizzotsky&Co. store, Saratov. Apre-1917 postcard.

- Wizzotsky & Co. store, Nizhni Novgorod; the street sareflooded. A pre-1917 postcard, detail.

- A former Wizzotsky& Co. packaging factory, present day. Photo by the author.

- Wizzotsky family mansion, Moscow. Photo by the author.

- A seal, "Wizzotsky& Co.", Front

- A seal, "Wizzotsky & Co.", Back

- A seal, "Wizzotsky& Co.", Front

- A seal, "Wizzotsky& Co.", Back

- A seal, "D. Wizzotsky& R. Gots", front.

- A seal, "D. Wizzotsky& R. Gots", back

- A cannon, trademark of "D. Wizzotsky & R. Gots"

- A seal with a ship, "Wizzotsky& Co.", front.

- A seal with a ship, "Wizzotsky& Co.", back. A ligature with the company name is seen in the middle.

- A seal, "Wizzotsky & Son", front.

- A seal, "Wizzotsky & Son", back.

- The lid of a rare tea carton, "Wizzotsky & Co."

Ivan Sokolov,

Ph.D., History

Опубликовано в журнале «Coffee & TeaInternational», №1 (118) 2015

http://coffeetea.ru/coffee-tea-in-russia-test-view/

Перепечатка материала осуществлена с разрешения журнала.

published version with illustrations: https://www.academia.edu/10521192 

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