Raisins are big business.
For some decades now, Americans have been able to buy all kinds of fruit year-round, from strawberries to citrus to casabas to kiwis to apricots, regardless of the season. But as a recent piece in the New York Times revealed, some of the business practices that make this possible are as shocking as they are unethical. This is particularly the case for the raisin industry, which got its first solid economic footings over a century ago by marketing a simple, healthy product.
To fix the industry’s current stagnant sales, the Sun-Maid Raisin Growers, a cooperative owned by 750 families, hired a rainmaker, an executive with a long résumé in the food industry. What he reportedly discovered upon his arrival in California — dissension, anger, even death threats — stunned him. But it shouldn’t have. The industry has always had a surprisingly dark underbelly. In fact, its initial success depended in part on coercion and forced cooperation.
When people from all over the world began to settle and farm California in the 19th century, they faced practical and financial obstacles. The inland Central Valley required extensive irrigation projects before it could be deemed arable. University scientists helped with disease and pest problems that hindered agricultural development. But even once a crop was grown and harvested, a daunting physical distance separated the fruit farms on the West Coast from the consumers who lived in the Midwest and East.
Several solutions emerged: a transcontinental railroad network, refrigerated cars and chemical preservatives helped solve the problem. But all also added to costs. And so, to sell their fruit thousands of miles away, farmers formed marketing cooperatives — the key to success in the California fruit industry. The citrus growers formed Sunkist; Blue Diamond processed almonds; Diamond Walnuts served the walnut growers; and Sun-Maid, the most monopolistic of them all, was formally incorporated in 1912 for the raisin market.
Unlike in steel or oil, where the owners of the monopoly control the physical plant of production, agricultural marketing cooperatives do not own the farms that produce what they sell. They simply serve as agents for those farmers who choose to belong. Farmers pay what can at times be a high cost to belong to the collective: they must cede the power to negotiate the price of their crops to the cooperative. In exchange, they get a guaranteed return.
But that system has an inherent problem. As soon as the cooperative sets its price, noncooperative packers offer more, to induce growers to sell to them instead. As a result, those farmers who don’t join the cooperative threaten the profit structure of the cooperative — why join a cooperative if you can make more outside of it? — and thus undermine its very existence.
Economists call this phenomenon the free-rider problem. Cooperatives call it cheating.
From the moment that raisin growers formed Sun-Maid, initially named the California Associated Raisin Company, in the 1910s, they used various forms of persuasion to induce their neighbors to pledge their crops to the cooperative. Sun-Maid membership campaigns became social rallying events in the little towns that dot the Central Valley around Fresno. Parades, Raisin Day festivities every April 30 and relentless publicity in the Pacific Rural Press and Sun-Maid’s own magazine drove home the message that everyone had to join.
Winning over a farmer was a big deal for Sun-Maid, because the economic contract was tied to the land, not the owner. By joining, growers were committing not just themselves to deliver to Sun-Maid every year, but also obligating whoever bought their property in the future as well, even if they had no desire to join Sun-Maid. This scheme effectively leashed raisin vineyards to the cooperative to control for years to come.
But it didn’t stop there. In those early years, growers put economic pressure on each other. Under the cover of darkness, bands of nightriders, armed with lists of growers not yet under contract, paid visits to the holdouts. They chopped down raisin vines, shot up buildings and intimidated people in a variety of ways. One grower was dunked in a nearby canal by a rope tied around his neck. Children were bullied and beaten at school to get their parents to fall into line.
The cooperative’s drive to control every single raisin grower gave its loyalists carte blanche to force their neighbors to sign up when more peaceable methods of persuasion failed. Sun-Maid’s most important boosters were the white men who also held prominent economic and social positions in the Central Valley, and the cooperative’s membership campaigns enabled them to use extralegal means on Japanese, Armenian and other minority growers to ensure the cooperative met its membership goals.
Sun-Maid did what it could to disavow the violence. In 1915, after the conclusion of its first membership campaign, it ordered its partisans to abide by rules for future night-riding and declared that “all contracts taken . . . at the end of a rope or by mob violence of any kind will be returned to the signer.”
Despite Sun-Maid’s published intentions, night-riding pressure worked, helping it to build the biggest monopoly in California. Between 1916 and 1923, Sun-Maid never controlled less than 85 percent of the nation’s raisin crop. At its peak during WWI, Sun-Maid’s share hit 93 percent. The cooperative’s president blithely dismissed accusations of anti-competitiveness: “Call us a trust, if you want to, but we’re a benevolent one.”
In the early 1920s, the Justice Department dispatched agents to investigate reports of violence. They found that “the referendum period was a time of unchecked mob rule.” Still, growers who wanted to leave had some options: they usually prevailed when Sun-Maid sued them for breach of contract and state courts struck down the worst provisions as anti-competitive.
After the war, the Sun-Maid monopoly flexed its muscles and doubled prices, eliciting first a Federal Trade Commission investigation and then a Sherman Act prosecution that attracted the attention of Congress and alarmed the national agricultural lobby. As a result, in 1922 Congress passed legislation regulating farmers’ marketing cooperatives, and the Justice Department was forced to settle the raisin prosecution case.
But the law only addressed price issues, not labor practices. It permitted cooperatives to monopolize the crops they sold as long as prices did not exceed “fair and reasonable” rates. The authority to determine what was fair and reasonable was given to the secretary of agriculture. In the 97 years since, the USDA has never once used that power. Rather, the USDA’s most important function has been to administer an enormous subsidy program to keep food prices high enough that producers will continue to farm.
Sun-Maid was by no means the only agricultural cooperative that used extralegal violence to shore up its monopoly. During this period, night riders also traveled the tobacco regions of Kentucky, for example. In a statement to The Washington Post, Sun-Maid acknowledged the “many unfortunate events which took place in agriculture and other developing industries” in this period, while stating that “Sun-Maid neither condoned nor encouraged any of these coercive tactics and there is no record of the company’s involvement.” But most cooperatives, like Land O’Lakes and Ocean Spray Cranberries, succeeded or failed without resorting to those methods.
And so, while the days of the robber barons may be over, the “raisin mafia” does reappear from time to time to take charge of the cooperative’s affairs in times of uncertainty. After all, that is how the industry was built. The current generation of raisin industry leaders has been in charge for more than three decades. They’re not letting go without a fight.