Charles Pfizer

Introduction

Together with his cousin Charles Erhart, Charles Pfizer (born Karl Pfizer on March 22, 1824, in Ludwigsburg, Kingdom of Württemberg;[1] died October 19, 1906, Newport, RI) founded Charles Pfizer & Company, initially compounding a pharmaceutical product sold to retailers, a toffee-flavored sugar-cream cone containing a deworming agent. The company soon shifted to the production of specialty fine chemicals, pure chemical substances which were produced in relatively small quantities and sold for relatively high prices. Frequently crossing the Atlantic to Europe for business and social purposes, Charles Pfizer maintained transatlantic connections that helped him expand the firm and maintain its profitability. Establishing a reputation for high quality (“Pfizer quality”) and taking advantage of favorable tariffs which discouraged foreign competition, Pfizer & Company expanded steadily to become one of the largest specialty chemical manufacturers in the United States by the beginning of the twentieth century, and Charles Pfizer retired a wealthy and successful entrepreneur.

Family and Ethnic Background

Pfizer was the only son of Karl Frederick Pfizer. His family had deep roots in his birthplace of Ludwigsburg, approximately nine miles north of Stuttgart, and appears to have been among the middling rank of society, neither rich nor poor but well respected. One notable forebear was Johann Jacob Pfizer, his paternal great-great-grandfather, born in Ludwigsburg in 1684 and a doctor of theology. Pfizer’s father was a grocer and confectioner, evidently of some means since he was able to bankroll his son’s early business activities, and his older cousin Charles Erhart was also a confectioner who had been trained by Karl Frederick.[2] After a standard common school education, Pfizer was apprenticed to an apothecary and thus acquired a practical training in chemical preparation and compounding.[3] He also had some business training and studied the theory of chemistry in his spare time.

According to his daughter Alice, his motivations for immigrating to America were similar to those that prompted many ambitious young men to make the voyage: a greater opportunity to advance faster and further in his profession and a desire to live in a land of freedom and liberty. As she wrote in a memoir, “To my father, young and enthusiastic, brimful of ideals which were moving the souls of his contemporaries, nothing in Europe seemed worthy of the tremendous efforts required to reform and renew, and upbuild the land of his birth. But there, on the other side of that great Atlantic Ocean, was a new country not only full of countless opportunities but also opening its arms to all those who would come and help upbuild it… Was it not therefore natural… that the thought of making a new life for himself, in which he might gain everything he admired and cared for, would become an obsession?”[4] Pfizer prepared extensively for the move, learning English and studying the history of the United States and its laws. He and his cousin Erhart made a partnership to immigrate to America and open a chemical manufacturing business there.[5] The time was right for such a venture since although the United States had a rapidly-expanding population and a rising demand for chemicals, chemical manufacturing in America was in its infancy. (In 1850, barely one thousand persons were employed by the U.S. chemical industry.)[6] The Pfizer operation would therefore have little domestic competition and would avoid tariffs on imported goods. The Pfizer–Erhart partnership was a close-knit one, particularly after Erhart married Pfizer’s sister, Fanny, in 1856. Erhart’s son William (born 1868) would later join the company. Although his cousin was co-owner of the company, Pfizer was recognized as the senior partner.

Business Development

The exact date of Pfizer’s arrival in America is uncertain and generally has been reported as 1848, although a date as early as 1845 has been considered possible.[7] However, in his passport applications, Pfizer stated that he emigrated from Bremen in October 1849.[8] He and his cousin opened a business office for Charles Pfizer & Company, Manufacturing Chemists in Williamsburg, New York (near Brooklyn) in 1849, although they lived at first in Hoboken, New Jersey.[9] Williamsburg had obvious attractions to German businessmen, since it was occupied largely by German immigrants such as themselves. Charles Pfizer & Company did not begin selling its first product until the following year, when Pfizer received a $2,500 loan (approximately $74,000 in 2011$) from his father and bought a brick building in Brooklyn carrying a $1,000 mortgage (approximately $29,700 in 2011$).[10] This building would be Pfizer’s manufacturing plant and research and development facility for many years. The first product was a preparation of santonin, a drug used to eliminate intestinal worms, a common ailment in the nineteenth century. Since the compound was bitter and a typical treatment regimen called for three doses a day for several days, Pfizer combined his chemical talents with those of his confectioner brother to devise a palatable means of administering it: dispersing the drug in a toffee-flavored sugar-cream cone. Their santonin cones were an immediate success.

Details of Pfizer’s earliest operations are sketchy but he and his cousin most likely came to New York with their santonin idea already in place, opened their office in Williamsburg, and spent several months making contacts among the druggists of the area, distributing samples of their product and gaining commitments for future purchases. Only when he had established a distribution network and generated sufficient interest in the product did Pfizer obtain a loan from his father, buy a factory building, and begin manufacturing on a large scale. This scenario is certainly in line with Pfizer’s later business development, which was characterized by steady but conservative expansion.

Despite the success of the santonin candies, Pfizer did not thereafter market medicinals in the form of pills and lozenges, choosing instead to manufacture pure chemicals for sale to wholesalers and retailers. By 1855 Pfizer was producing iodine and iodine compounds such as potassium iodide and iodoform, which were widely used as medicinals or disinfectants. Mercury compounds such as calomel were also produced and by 1860 Pfizer’s list of products included borax, boric acid, and refined camphor. The last product became so important to the company that Pfizer was known as “the camphor factory.” Pfizer products were principally but not exclusively used by the medical and pharmaceutical industry. For example, borax was used as both a cleaning agent and a food preservative, and potassium iodide had many uses ranging from medicine to photography.

In 1854 Pfizer began expanding his operations by purchasing additional land adjoining his factory. By 1888 he had bought 72 lots of land for a total of $50,000 (approximately $1.2 million in 2011$). In 1857 the company opened an office in the drug and chemical district of downtown Manhattan, an office that was moved ten years later to the Wall Street area. In 1860 sales are estimated to have been $700,000 (approximately $19.5 million in 2011$).

The outbreak of the Civil War gave a boost to Pfizer’s business. The horrendous death toll from battle wounds and disease caused a surge of demand for antiseptics, disinfectants, and pharmaceuticals, all of which were products Pfizer made. For example, the company manufactured the disinfectants iodine and iodoform, the expectorant potassium iodide, and calomel (mercury (I) chloride) which was widely used as a laxative and a treatment for syphilis. A further boost was given by the high tariffs enacted during the war (reaching an average rate of forty-seven percent by 1864) which discouraged foreign competition.[11] Pfizer saw an opportunity to break the European monopoly on refined tartars. These tartrates had a variety of uses. Tartaric acid itself was a flavoring agent in the beverage industry and an ingredient in leavening agents for baking. Cream of tartar (potassium hydrogen tartrate) was also a component of baking powders and had many other uses such as a household cleaning agent and a mordant in the dye industry. Rochelle salt (potassium sodium tartrate), similarly had diverse applications, for example, as a laxative, diuretic, and cathartic in medicine and as a component in the manufacturing of silvered mirrors. These chemicals were manufactured from the residue scraped from winemaking casks, and a ready supply and low labor costs had heretofore given France and Italy a dominant role in producing them. From the beginning of their company, Pfizer and Erhart had made frequent trips to Europe to establish contacts with exporters of raw materials they needed and to investigate products of interest. In 1863 Pfizer began importing crude tartars from his European contacts and refining them in his own factory. The crude tartars were cheap, essentially waste materials, but could be processed into a product which commanded a premium price. The high wartime tariffs were maintained after the conclusion of hostilities, assuring Pfizer a continuing competitive advantage. By 1871, sales had reached about $1.4 million (approximately $26.6 million in 2011$), double that of ten years before.

Obviously, the issue of tariffs was important to a manufacturer such as Pfizer. In 1872 Pfizer and thirteen other chemical makers organized the Manufacturing Chemists Association, the oldest trade association still operating in the United States. The association added its voice to those of many larger industries supporting protective tariffs — textile manufacturers, iron makers, copper miners — and high tariffs were maintained throughout the remainder of the nineteenth century and the early twentieth century. This trade organization also provided opportunities for social interaction among its members and professional networking.

In 1880 Pfizer began to manufacture citric acid from concentrated lemon juice and citrate of lime imported from Italy and Sicily. Citric acid became one of Pfizer’s largest selling products, particularly in the growing soft drink industry which used it as a flavoring. Assuring a steady supply of cheap raw materials for his refineries was a continual problem for Pfizer. In the 1890s the Japanese began restricting the export of crude camphor from territories under their control to support their own refineries. Pfizer responded by forming the Oriental Importing and Manufacturing Company, a partnership with two other businesses which obtained camphor from alterative sources. Pfizer presumably financed the steady expansion of his company by reinvestment of profits, since banks were notoriously reluctant to give loans to the chemical industry, wary of the rapid obsolescence of chemical processes and equipment.

The growth of Pfizer was made possible by the company’s obsession with the quality and purity of its products, making “Pfizer quality” a by-word as early as the 1860s. The company was recognized for quality by the American Institute in 1867 and again in 1872 by the Cincinnati Industrial Exposition. At the 1876 International Centennial Exposition in Philadelphia, Pfizer was awarded a Centennial Award for quality and excellence, the only chemical manufacturer to be so honored. The company recognized the importance of the western markets by opening a sales office in Chicago in 1882 and began to export chemicals outside the United States a few years later.

As a company, Pfizer’s specialty was taking a crude product and refining it to a high purity product, sometimes on a considerable scale, as in the case of tartrates and camphor. The company did synthesize some chemicals, but these were products such as iodoform, for which demand was modest and which could be prepared on a small scale. Under Charles Pfizer’s leadership, the company kept to this business model, although beginning in 1886 it did make licensing agreements with two other chemical companies (Albany Chemical Company and Roessler & Hasslacher Chemical Company) relating to improved methods to synthesize chloroform, an anesthetic and a solvent for which demand was rising. In 1905, after Pfizer’s retirement, his company formed a joint venture — the Chlorine Products Company — with the two aforesaid companies to manufacture chloroform. Hardly had manufacturing gotten underway, though, when the company found itself undercut in price and bested in quality by Dow Chemical, which had discovered a superior process for making the compound. The Chlorine Products Company shut down its manufacturing operation in the 1920s.

In 1891 Pfizer’s partner Charles Erhart died. Their partnership agreement stipulated that upon the death of one partner, the surviving partner could buy the other’s share of the partnership for half its inventory value. Pfizer promptly exercised this option, paying his partner’s heirs $119,350 (approximately $3 million in 2011$) for Erhart’s half of the business. He was now sole owner of the company. His oldest son, Charles Pfizer Jr., had joined the company in 1880, and his younger son, Emile, joined in 1887. Charles Erhart’s son, William (Pfizer’s nephew), joined the company in 1888. However, in 1892, the year after Charles Erhart died, Pfizer appointed long time employee John Anderson as general manager. Anderson had risen through the ranks at Pfizer, starting as an office boy at age sixteen and running the Chicago office since its opening. After Anderson’s appointment as general manager, the seventy year old Pfizer increasingly withdrew from active management of the company. In 1900, Pfizer had the company incorporated with an authorized capital of $100,000 (approximately $2.76 million in 2011$) represented by 1,000 shares of stock with a par value of $100 a share and $1.1 million (approximately $30.4 million in 2011$) of debentures. The stock was distributed as follows: Charles Pfizer Jr. (334 shares), Emile Pfizer (333 shares), William Erhart (333 shares). At the first meeting of the board of directors, Charles Pfizer Jr., the company’s president, transferred one share of his stock to John Anderson, giving him the right to sit on the board. Such was his value to the company that in 1901 Anderson negotiated an agreement that gave him twenty-five percent of the company’s profits, an amount equal to the share received by each of the other board members.

Charles Pfizer Jr. soon proved himself unfit to be president of Pfizer.[12] He enjoyed the good life and was more apt to be found fox hunting or hosting lavish parties than working in his office. He was also an avid and unsuccessful speculator in real estate, said to have lost $2 million (approximately $48 million in 2011$) on his transactions between 1900 and 1912. In December 1905 a special meeting of the board of directors was held at which Charles Jr. was forced to resign from the board and “to cease and desist from in any way participating in the business and affairs of said Charles Pfizer & Co.” His brother Emile took his place as president and William Erhart kept his own position as vice president. Anderson was appointed senior director, treasurer, and chairman of the executive committee and was given a free hand to run the company.

Less than a year after this reorganization, Charles Pfizer fell down a flight of stairs while vacationing at his Newport, Rhode Island, home. Complications set in and the eighty-two-year-old Pfizer died of pneumonia on October 19, 1906. His estate included his house and grounds in Brooklyn, which his wife inherited, and $2,433,628 cash (approximately $63 million in 2011$), of which his wife received about one-third, the remainder being divided equally among his children. The year of Pfizer’s death, sales at his company totaled $3,441,000 (approximately $89 million in 2011$) with profits of $405,000 (approximately $10.4 million in 2011$). By comparison, that same year DuPont, one of the largest U.S. chemical companies at the time, recorded sales of $30,800,000 (approximately $795 million in 2011$) with profits of $5,300,000 (approximately $139 million in 2011$).[13] Though hardly a giant, Pfizer was one of the largest specialty chemical companies in the country. Pfizer’s achievement was all the more impressive considering the fifty-year head start and greater initial capitalization of DuPont. Over the first one hundred and two years of its existence (1802–1904), DuPont’s assets grew at an annual rate of 7.8%. By comparison, Pfizer’s assets grew at an annual rate of about 12.6% during the fifty-seven year period 1849–1900.[14]

Personality and Social Development

According to his daughter Alice, Pfizer was a hard worker, leaving for the office early in the morning and returning home late, and Pfizer’s biographer has concurred with her testimony.[15] In the early days of his company, Pfizer delivered his santonin sugar cones to customers personally, at first on foot and later by horse and buggy as business expanded. Pfizer became an American citizen in 1856, but continued to make frequent trips to Europe, partly to establish business contacts with exporters and to keep up to date on the latest chemical manufacturing techniques, but also for social reasons.[16] It was on one of his business trips to Germany that Pfizer met his future wife, Anna Hausch. According to family lore, while watching a parade he spotted her on a balcony, made inquires, and got himself introduced at a ball that night. They were married in 1859 and had seven children, five of whom survived to adulthood — Charles Jr. (1860), Gustave (1861), Emile (1864), Helen (1866), and Alice (1877).[17]

By the extravagant standards of his day, Pfizer was not considered to be a rich man, but rather “very comfortably situated.” Nevertheless, well before his death, Pfizer made all of his children financially independent, giving Charles Jr. and Emile a share in the family business, and arranging cash settlements for the other children, who opted to live overseas. Gustave lived most of his life in Paris; Helen married Sir Oliver Duncan of Great Britain and lived in Austria and Switzerland; Alice married the Baron Bachofen von Echt of Austria and lived in Vienna. Pfizer’s cosmopolitan habit of maintaining close contacts with Europe no doubt eased the barrier to his children making homes overseas. Pfizer’s sons, in particular Charles Jr., did not inherit their father’s work ethic, being devotees of fox hunting, polo and other diversions.[18] With his home in New York, vacation home in Newport, playboy sons, and daughters married to European nobility, Pfizer was virtually the prototype of a Gilded Age millionaire.

Pfizer’s socializing tended to have a business angle. He was active in the Manufacturing Chemists Association, which sponsored clambakes, sailing cruises, horseback riding, and elaborate dinners, but the main purpose of the group was professional networking and lobbying for favorable tariffs. He was a member of many clubs but only for the sake of form, with the exception of the Metropolitan Opera House in New York, of which he was a subscribing member for the Saturday performances. He was not active in politics and was not a churchgoer.

His youngest child, Alice, remembered him as a fond though rather distant figure, a “wise, broad minded, generous and well read man” who could not really relate to a girl two generations younger than himself.[19] Something of a liberal, he practiced a style of “laissez-faire” child rearing.[20] Not religious himself, he regarded with amusement Alice’s early enthusiasm for a Congregational church, but did nothing to dissuade her from joining it. Similarly, both her parents thought a high school education was ample for a girl of her status and that thereafter Alice should concentrate on improving her domestic skills and finding a husband. But they made no real objection to her pursuing a university degree, only asking that she do so in New York, so that they could be close to her. When their daughter Helen married an Englishman and moved to Europe, the Pfizers visited her every summer, taking Alice along with them.

Pfizer had the reputation of being a good employer with a soft spot for fellow German immigrants. It was said that any German American coming to him with a hard luck story was assured of a job. Certainly Pfizer had progressive ideas on the relationship between labor and management. The company established an emergency reserve fund for employees and their families in distress, to be used at the discretion of the company’s officers. In January 1906 a profit sharing plan was initiated for employees, a tradition that would be expanded in later years. In his will, Pfizer left $10,000 (approximately $258,000 in 2011$) to the German Hospital Society of Brooklyn.

Immigrant Entrepreneurship

In a sense, Pfizer’s business success was the epitome of being in “the right place at the right time.” The United States was virgin ground for a chemical manufacturing company with little domestic competition and a strong and growing demand for products. Furthermore, the Civil War soon caused a surge in demand and the high tariffs imposed gave domestic manufacturers an advantage over imported goods. From 1850, the year of Pfizer’s first product, to 1905, the year before Pfizer’s death, the U.S. chemical industry grew twenty-fold.[21] However, Pfizer’s company was no random seed falling by chance on rich soil. He had deliberately placed himself in the right place, selecting America in general and New York in particular as the best location to begin his enterprise, and prepared thoroughly for the venture. He and his cousin had the skills necessary to start the company, and their first offering showed their insight into what product was in demand and how to present it in an appealing manner. Conservative in expanding, Pfizer nevertheless was quick to capitalize on opportunities presented, as when he ramped up production during the Civil War, challenged foreign producers of tartaric acid and citric acid, and responded aggressively to attempts of the Japanese to cut off his supply of camphor.

Pfizer made good use of family connections and the German-American community in his business. His cousin was his business partner; his father financed the start-up; and two sons and a nephew would hold key positions in the company. Pfizer located his first office in the heavily German area of Williamsburg and hired so many German immigrants in his Brooklyn factory that it was known as “the German Navy Yard,” a reference to the other large industry in the city, the Brooklyn Navy Yard. Pfizer’s hiring of so many German workers was likely due to his personal inclination and not because they had a disproportionate concentration of chemical talent. Although in 1850 German universities were among the world’s best in chemical research, the chemical industry in Germany was hardly more advanced than it was in the United States. A generation would pass before Germany overtook England and France as the leader in chemical manufacturing.

Although he may have initially favored hiring fellow German Americans, Pfizer appreciated talent wherever he found it — witness his rapid promotion of John Anderson to a position of leadership in the company. Even so, Pfizer favored his own sons too much and should have recognized that his eldest, in particular, did not have the qualities necessary to run the company.[22] He may not have been happy with the ouster of Charles Jr. from the board of directors, but he must have recognized that it was Anderson whose drive and energy most resembled his own.

Conclusion

Through careful planning and hard work, Pfizer founded a company that became one of the largest manufacturers of fine chemicals in the United States. The company’s heroic days would come after its founder’s death — the production of citric acid through fermentation (freeing Pfizer from dependence on the citrus market), which led to its production of penicillin during World War II and thus to the transition of Pfizer from a fine chemical maker to a pharmaceutical company, currently among the world’s largest. The company’s ultimate greatness was, however, due in no small measure to the ideals of its founder which he expressed in 1899 while speaking at the Drug Trade Club in New York on the occasion of Pfizer’s fiftieth anniversary: “Our goal has been and always continues to be the same: to find a way to produce the highest quality products, and to perfect the most efficient way to accomplish this, in order to best serve our customers.”

Notes