Thursday, December 8, 2005
Dr. Pepper Company Goes Broke in 1920
By ROGER M. GRACE
All was not rosey for the Dr. Pepper Company in its early days—contrary to the impression you’d gain from the Dr. Pepper/Seven Up website.
After recounting the birth of the drink in 1885 at Wade Morrison’s Old Corner Drugstore in Waco, Texas, telling of local beverage chemist Robert S. Lazenby becoming the bottler, and mentioning Lazenby’s son-in-law, J.B. O’Hara, having joined in hawking the drink at the 1904 World’s Fair, the website recites:
“In subsequent years, Morrison and Lazenby remained impressed with the growth of Dr. Pepper. They formed a new firm, the Artesian Mfg. & Bottling Company, which later became Dr. Pepper Company. Lazenby and O’Hara moved the company from Waco to Dallas in 1922 and opened their new operation in 1923.”
That glosses over the facts.
Actually, the Dr. Pepper Company went out of business in 1920, and a new corporation was formed in 1923.
Then on Aug. 5, 1924, the commissioner of Internal Revenue sued Lazenby, who held the assets of the defunct corporation, over an allegedly false tax return he had filed in 1919. A U.S. district judge for the Eastern District of Texas recited these facts in a 1925 opinion:
“The bill alleges that the Dr. Pepper Company, a corporation, was dissolved on December 15, 1920, at which time the defendant, R. S. Lasenby [sic], was the sole and only stockholder; that prior to the dissolution and dissipation of the Pepper corporation assets, it, the corporation, had on May 7, 1919, filed a corporation income profits tax return for the calendar year 1918, ‘purporting to be a true and correct statement of the gains, profits, and income from all sources received by or accrued to said company during the calendar year ending December 31, 1918’; that it showed a net income of $1,802.58; that such return was ‘incorrect, misleading, and false,’ in that it should have shown a net income of $12,802.58; that the Commissioner of Internal Revenue upon additional information and facts directed a review and audit, and ascertained that the tax due by the dissolved corporation was $3,550.15; that by reason of the defendant, sole stockholder, the company was left without money, assets, or property of any kind with which to pay the tax that was due to plaintiff; and that the defendant received such money, assets, and property charged with a trust in favor of the plaintiff to the extent of said due tax.”
Before the court was Lazenby’s motion to dismiss the action against him based on a statute of limitations. His motion was denied.
Jessica Harris, the Dr. Pepper Museum’s director of exhibits and collections, told me that Morrison had “bowed out” of the operations on April 11, 1896.
Despite financial troubles in the 1920s, she said, “they never stopped” making Dr. Pepper.
If that’s so, who manufactured the soft drink between Dec. 15, 1920, when the first Dr. Pepper Company dissolved, and July 6, 1923, when the new Dr. Pepper Company emerged? Cadbury Schweppes, owner of Dr. Pepper/Seven Up, has no response.
A good guess would be that it was the Circle “A” Corporation of America, which made Circle “A” Ginger Ale. Lazenby had been producing that beverage in Waco from a time prior to his teaming with Morrison in 1891.
Circle “A” went bankrupt on June 12, 1923. It was reorganized, and in making its comeback, took on the name, “Dr. Pepper Company.”
The infusion of cash from investors, extensive advertising, and the leadership of Lazenby’s nephew, O’Hara (vice president from 1923-33, and president from 1933-43), were factors in the company’s growth. Unlike Canada Dry Ginger Ale—which got a spurt from Prohibition, it being an ideal mixer for bathtub gin—Dr. Pepper, a cola-like beverage made from berries, was strictly consumed as a soft drink (its usefulness as a mixer being virtually nonexistent).
The Port Arthur (Texas) News on Nov. 22, 1929 quoted O’Hara, s reflecting that in 1926, the company had served but a “small area in Texas,” while now, “distribution has been obtained in 14 states.”
The stock market crash of October 24, 1929, did not stunt Dr. Pepper’s growth. O’Hara was quoted in the same newspaper on Sept. 14, 1930 as saying that “aggressive, merchandising and advertising” were “the answer to talk of business depression,” adding:
“It is obvious that the buying public has not ceased to purchase the things that it wants, and that are aggressively and convincingly advertised.”
He related that “[m]ore than 400 newspapers are carrying the advertising of Dr. Pepper this season,” noting:
“The Dr. Pepper company began advertising on a large scale in 1927, and our sales volume has shown a consistent growth each year since.”
Dr. Pepper became available in all states in 1973.
Copyright 2005, Metropolitan News Company
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