International business and national war interests: Unilever between Reich and empire, 1939-45

International Business and National War Interests

Unilever had huge interests on both sides of the Second World War. This book deals with the activities of the Anglo-Dutch multinational during the war. Given the various threats faced by Unilever during the Nazi period, Ben Wubs argues that it was not self-evident that the company would survive the war. Based on research into company sources which were hitherto unavailable, he shows the effect of the war on Unilever as well as the changing conditions in the European food, oil and fats and soap industries. Wubs makes an analysis of the company’s strategy, structure and performance in this period. Simultaneously, he explores the external conditions, which helped the company to survive the war. The author argues that Unilever survived the Second World War because the group had prepared itself legally well in advance. As a consequence, the company could easily be split in two autonomous parts. Unilever’s highly decentralised operating structure helped the company to survive the ambitions of the Nazi State. The deteriorating war conditions for Nazi Germany eventually worked to the advantage of the company. Besides, Unilever’s innovative attitude helped the company to adapt to completely new conditions of resource allocation. This book will be of interest to students engaged in economic and technology history, management studies and business law, as well as business and war historians. Ben Wubs is a Researcher at the Erasmus University in Rotterdam and Utrecht University engaged in various projects related to multinationals, the Dutch business system and Dutch multinationals and the German hinterland.

Routledge international studies in business history Series editors: Ray Stokes and Matthias Kipping

1 Management, Education and Competitiveness Europe, Japan and the United States Edited by Rolv Petter Amdam 2 The Development of Accounting in an International Context A Festschrift in honour of R.H. Parker T.E. Cooke and C.W. Nobes 3 The Dynamics of the Modern Brewing Industry Edited by R.G. Wilson and T.R. Gourvish 4 Religion, Business and Wealth in Modern Britain Edited by David Jeremy 5 The Multinational Traders Geoffrey Jones 6 The Americanisation of European Business Edited by Matthias Kipping and Ove Bjarnar 7 Region and Strategy Business in Lancashire and Kansai 1890–1990 Douglas A. Farnie, David J. Jeremy, John F. Wilson, Nakaoka Tetsuro and Abe Takeshi 8 Foreign Multinationals in the United States Management and performance Edited by Geoffrey Jones and Lina Galvez-Munoz

9 Co-Operative Structures in Global Business A new approach to networks, technology transfer agreements, strategic alliances and agency relationships Gordon H. Boyce 10 German and Japanese Business in the Boom Years Transforming American management and technology models Edited by Akira Kudo, Matthias Kipping and Harm G. Schröter 11 Dutch Enterprise in the 20th Century Business strategies in small open country Keetie E. Sluyterman 12 The Formative Period of American Capitalism A materialist interpretation Daniel Gaido 13 International Business and National War Interests Unilever between Reich and Empire, 1939–45 Ben Wubs

International Business and National War Interests Unilever between Reich and Empire, 1939–45

Ben Wubs

First published 2008 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Ave, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group, an informa business This edition published in the Taylor & Francis e-Library, 2008. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” © 2008 Ben Wubs All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Wubs, Ben. International business and national war interests: Unilever between Reich and empire, 1939–45/Ben Wubs. p. cm. – (Routledge international studies in business history; 13) Includes bibliographical references and index. 1. Unilever (Firm)–History. 2. International business enterprises–Management–Europe–History. 3. World War, 1939–1945–Economic aspects–Germany. 4. World War, 1939–1945–Economic aspects–Great Britain. I. Title. HD9999.S74U585 2008 338.88941094309044 ISBN 0-203-89536-3 Master e-book ISBN ISBN10: 0-415-41667-1 (hbk) ISBN10: 0-203-89536-3 (ebk) ISBN13: 978-0-415-41667-2 (hbk) ISBN13: 978-0-203-89536-8 (ebk)

2007049650

Contents

List of figures List of tables Acknowledgements List of abbreviations

1

Introduction

2

Unilever in the 1930s

viii ix xi xiii

1 11

The origins of Unilever 11 The great merger 18 Unilever’s structure in the 1930s 20 Geographical expansion 25 Competitors 27 Performance in the 1930s 28 Conclusions 35

3

Unilever and Nazi Germany Unilever in Germany 37 Foreign direct investment in Germany 40 Business obstacles in Nazi Germany – meeting Hitler 43 Currency restrictions and the shipbuilding deal 47 Acquisitions and ‘Aryanisation’ 49 Raw materials and whaling – meeting Göring 53 Unilever classified as an ‘Aryan Firm’ 54 Blessing on the MVU board in Berlin 56 Conclusions 57

36

vi

Contents

4

War preparations

59

National war preparations 59 Unilever’s legal war preparations 62 The building-up of stocks 65 Military war preparations 69 Conclusions 70

5

Business as unusual, 1939–1941

72

War economies 73 Unilever’s organisational changes 77 The British Trading with the Enemy Act 80 The ‘Unilever problem’ 84 Henkel 90 Government intervention in the market 91 Innovation – quick-frozen foods industry 99 Conclusions 101

6

A Reichs Commissioner for the Unilever Group, 1941–1945

103

Total war 104 Unilever a German syndicate? 105 ‘Aryanisation’ 112 German competitors’ attacks 114 NV’s new organisation 120 Raw-materials crisis 124 Mersol – a synthetic solution 128 Conclusions 132

7

London’s calling, 1941–1945 A managed economy 134 Change of organisational outlook 135 Relations with the Dutch government in exile 137 Relations with other allied governments in London 141 Relations with the British government 143 Views on economic policy 146 Rationalisation of soap production 149 Synthetic detergents 151 Frozen foods in Britain 153 Conclusions 155

133

Contents vii

8

The aftermath, 1945–1950

157

War-time performance 157 Purges in NV’s Board 162 Nationalisation in Eastern Europe 166 Multinational lobby groups 169 Public-relations policy 170 Anti-trust 171 Conclusions 174

9

Conclusions

176

Strategy 177 Structure 179 National institutions 180 Raw materials 182 Capital penetration 183 Long-term consequences 184 Appendix Notes Primary sources Bibliography Index

187 195 226 228 246

Figures

2.1 2.2 A.1 A.2 A.3 A.4 A.5 A.6

Unilever’s organisation chart, 1938 Unilever’s holding company structure, 1938 Unilever’s holding company structure Limited, 1939 Unilever’s holding company structure NV, 1939 Unilever’s organisation chart, 1938 Unilever’s organisation chart, September 1939 Unilever’s organisation chart, May 1940 Unilever’s organisation chart, June 1941

22 24 188 189 190 190 191 191

Tables

2.1 2.2 2.3 2.4 2.5 3.1 3.2

4.1 4.2 4.3 5.1 5.2 6.1 6.2 6.3 7.1 8.1

Sales of margarine, edible fats and soap in Unilever’s most important markets in 1938 Estimated total capital employed by Lever Brothers & Unilever NV and Limited 1930–1939 Largest manufacturing firms in Europe, 1929–1930 Total net profit of Lever Brothers & Unilever NV and Limited, 1930–1939 Profitability of Lever Brothers & Unilever NV and Limited, 1930–1939 Unilever’s sales of margarine and fats in Germany, 1932–1938 and Unilever’s share in Germany’s total production Number of Unilever companies in ‘Greater Germany’ operating in various branches of industry 1939–1940 and their equity capital Unilever’s purchases of raw materials in 1938 Unilever NV’s stock of raw materials in the Netherlands at the end of 1938 and 1939 Unilever’s raw materials position in the Netherlands as at 27 April 1940 Total export to Germany and Wehrmacht consumption in the Netherlands divided by period Weekly sales of margarine by UVC (Unilever Verkoop Centrale), 1938–1941 Area cultivated with rape seed and grey poppy seed, and total domestic produce of oils and fats in the Netherlands, 1939–1945 Area cultivated with oil-bearing seed and total home produce in ‘Greater Germany’, 1939–1945 Per capita consumption of detergents in the Netherlands, and Unilever’s share, 1938–1945 Estimated production of synthetic detergents in Britain, 1936–1946 Summary of capital employed and profits distributed and retained of Lever Brothers & Unilever Limited, 1937–1946

26 30 31 32 33 38

42 66 67 68 92 93 125 126 131 152 159

x

Tables

8.2

Total net profits of Lever Brothers & Unilever NV on the European continent, 1939–1943 and world-wide, 1944–1945 8.3 Summary of capital employed and profits distributed and retained of Lever Brothers & Unilever NV, 1937–1946 8.4 Unilever sales by region, 1937 and 1946 9.1 Long-term consequences of the Second World War for Unilever A.1 Number of Unilever NV companies in various countries in the world in 1947 A.2 Number of Unilever Limited companies in various countries in the world in 1947 A.3 Unilever Limited and NV, summary of consolidated figures, 1937–1950

160 161 162 185 192 193 194

Acknowledgements

I wish to thank many people and institutions who made this book, which grew out of a dissertation, possible. Let me begin with the last stage and then return to the original chronology. The final book benefited considerably from Ray Stokes’ and Matthias Kipping’s constructive comments and recommendations on the original manuscript. As the editors of the Routledge series International Studies in Business History they provided a great deal of help. This project began ten years ago, in 1998, when I decided to return to academic work. Former director Hans Blom and head of research Peter Romijn of the Netherlands Institute for War Documentation (NIOD) both gave me their full support. Together with Hein Klemann we drew up a first draft of my research programme. The idea of researching the history of Unilever during the Second World War was born in this group. Nevertheless, two main issues had to be solved. First, I had to convince Unilever of the value of this project to the company. Second, I had to find a partner to finance my research, because NIOD had promised to subsidise part of the project under the express condition that someone else would pay the other part. After a year of serious reflection Unilever granted me unrestricted access to all relevant business records. The company’s former lawyer Jaap Winter played an important role in the agreement. Moreover, after Gabrielle Muris had put me in contact with Joop Visser, the former director of the Centre for Business History at Erasmus University decided to offer me a five-year research contract. In July 2000 I started with three supervisors: Hein Klemann and Paul van de Laar (both Erasmus University) and Geoffrey Jones (Harvard Business School). A great team was formed: Jones as an expert on international business, Klemann as an authority in the field of economics and the Second World War, and Van de Laar as the unsurpassed city historian of Rotterdam. Their invaluable advice and comments on the many drafts have profoundly influenced my work. Furthermore, I had to find my way in the archives, in particular Unilever’s archive in Rotterdam. Head of Historical Archives Ton Bannink has been indispensable for my thesis. His welcoming, open and professional attitude was very stimulating. In addition, I wish to thank all staff of Unilever’s Historical Archives in Rotterdam and London, in particular René Trommelen and Jeanette Strickland. Alan Hemingway’s checks and changes improved the English of the original manuscript to a large extent.

xii

Acknowledgements

I am also very grateful to the staff of the Bundes Archive in Berlin, the Netherlands Institute for War Documentation in Amsterdam and the National Archive in The Hague. In addition, I am indebted to Jan Paulussen of the Philips Electronics Company Archives in Eindhoven, who drew my attention to important material of the Dutch Reconstruction Committee in London during the war. I have benefited greatly from discussions with several other people on several occasions. Discussions with the members of the Study Group for Business History, a quarterly meeting in Utrecht, were very inspiring. Although this is not a complete list, I would like to mention Doreen Arnoldus, Kees Boersma, Bram Bouwens, Ferry de Goey, Janneke Hermans, Maurits van Os, Hans Simons and Gerarda Westerhuis. As NIOD colleagues working on economics-related projects, Angela van Son and, particularly, Ralf Futselaar regularly commented on various drafts of my work. Next, I learned much about the history of Unilever’s accountancy from Cees Camfferman (Vrije Universiteit, Amsterdam). I am grateful to Patrick Fridenson (L’École des Hautes Etudes en Sciences Sociales, Paris) for his comments on my paper at the European Business History Association (EBHA) conference in Helsinki in 2002. During two ESF workshops on Economics under Occupation in Warsaw and Utrecht in 2003 I improved my knowledge of the economies of the Second World War. Comments by Gerard Aalders (NIOD, Amsterdam), Patricia Clavin (Jesus College Oxford), Sergei Kudryashov (German Historical Institute, Moscow), Joachim Lund (Copenhagen Business School), Richard Overy (University of Exeter) and Alice Teichova (Cambridge University) were especially useful. I thank Mira Wilkins (Florida International University) for the interesting discussion we had during an Internationalisation Conference in Utrecht in 2004. I am indebted to Karola Fings (NS-Dokumentationszentrums, Köln) for sharing her knowledge of Big Business in Nazi Germany and to Suzanne Hilger (Düsseldorf University) for sending me her work on Henkel. Deirdre McCloskey (University of Illinois, Chicago) taught me about bourgeois virtues and she kindly commented on the outline of my thesis. After I had finished my dissertation in 2005 I broadened my knowledge on business history and business systems through discussions with my new colleagues at Utrecht University and the so-called BINT project, in particular Joost Dankers, Keetie Sluyterman, and Jan Luiten van Zanden. Joost Jonker checked the final version of the manuscript. Despite all help, comments and advice, any possible errors and misinterpretations are mine. Finally, I thank my parents, Lies and Geert, who have always encouraged me to learn freely. My warmest thanks go to my lover Loes de Maat, who as an economist and manager, was probably the greatest help of all. Except for my dearest little daughters, Pien and Meis, who helped me most to get my priorities right.

Abbreviations

AG AKU ASKI Marks BArch BIS BPM buna CEVV Corvo De-No-Fa DOR ƒ FDI GDP Gestapo GM GmbH HGL

Hovema IG Kg LET Limited

Aktiengesellschaft (Joint Stock Company) Algemeene Kunstzijde Unie Ausländer Sonderkonten für die Inlandszahlung (nontransferable credit marks only to be used in Germany) Bundesarchiv Berlin Bank for International Settlements Bataafsche Petroleum Maatschappij (operating company of Royal Dutch) contraction of butadiene and natrium, i.e. synthetic rubber Commissie voor Economische Verdedigingsvoorbereiding (Committee for Economic Defence Preparation) Commissie Rechtsverkeer in Oorlogstijd (Committee Legal Matters in Wartime) De Nordiske Fabriker Deutsche Oelmühlen-Rohstoffe GmbH (German Oil Mill Raw Material Company) Dutch guilders foreign direct investment gross domestic product Geheime Staatspolizei General Motors Gesellschaft mit beschränkter Haftung (Limited Liability Company) Hauptgeschäftsleitung des Unilevers-Konzerns in Grossdeutschland (Board for Unilever Group in Greater Germany set up in 1942) Hollandsche Vereeniging tot Exploitatie van Margarinefabrieken Interessengemeinschaft, but also used as abbreviation for IG Farben Kilogramme Luchtgevulde Eenheids Toiletzeep (Air Filled Unity Soap) Used in this book as abbreviation for Unilever’s parent company in London

xiv

Abbreviations

Limmat Ltd Marcom Marga Mavibel MDC M-form MVO MVU NSB NV

NZC PCA P&G £ RBVVO

RM RWM Saponia TWEB UAC UAL UAR UGM UVC VGF Wemado ZAST

Swiss holding company owned jointly by Unilever and Schicht family Limited Liability Company contraction of margarine and compound, i.e. a distributor of margarine resources in Britain during the war Unilever holding company which held mainly margarine interests in Germany, Austria and Sudeten area Maatschappij voor Internationale Beleggingen (Unilever’s holding company for international investments) Minutes of Directors’ Conference multidivisional organisation margarine, vetten en oliën (margarine, fats and oils) Margarine-Verkaufs-Union Nationaal-Socialistische Beweging (Dutch Nazi Party) Naamloze Vennootschap (Limited Liability Company), in this book also used as abbreviation for Unilever’s parent company in Rotterdam Nederlandse Zuivel Centrale (Dutch Dairy Centre) Philips Company Archives, Eindhoven Procter & Gamble pound sterling Rijksbureau voor de Voorbereiding van de Voedselvoorziening in Oorlogstijd (Government Bureau for Preparation of the Food Supply in Wartime; later Government Bureau for the Food Supply in Wartime) Reichsmarks Reichswirtschaftsministerium (Reich Economics Ministry) Unilever holding company which held mainly soap interests in Germany, Austria and Sudeten area Trading with the Enemy Branch United Africa Company Unilever Archives London Unilever Archives Rotterdam Unilever Grondstoffen Maatschappij NV (Unilever’s Dutch raw materials company) Unilever Verkoop Centrale (Unilever’s Sales Company) Vereinigte Glanzstoff Fabriken Unilever holding company which held Unilever interests in East and South-east Europe Zentralauftragsstelle (Central Office of Orders)

1

Introduction

Therefore, owning assets that are apt to attract the robber or the tax gatherer and not sharing or even disliking warrior ideology that conflicts with its ‘rational’ utilitarianism, the industrial and commercial bourgeoisie is fundamentally pacifist and inclined to insist on the application of the moral precepts of private life to international relations.1

Unilever had huge interests on both sides of the Second World War, in particular in the British Empire as well as in the German Reich.2 This book deals with the activities of the Anglo-Dutch multinational in that period. Until now the war period is only insufficiently covered in the existing historiography on one of the most important European companies at the time. In the 1930s and 1940s Unilever was the largest company in the world engaged in the processing of non-mineral fats and oils. Its two most important products were margarine and soap. Although it is extremely difficult to compare the capital figures in that period there were only a few companies in Britain and on the European continent that came anywhere near the size of Unilever measured by capital employment. In addition, Unilever was one of the world’s first genuine multinationals with operating companies in more than 40 countries. Its main markets, however, were Britain, Germany and the Netherlands. My study will join a growing body of research on the activities of companies during the war period, which includes German companies, companies from countries under German occupation and subsidiaries of companies from the Allied countries operating in Germany or the occupied areas. The purpose of this introduction is to give an overview of the existing literature and its major debates and findings and to outline the major themes addressed in this particular study. Unilever was founded by merger in 1930 and has a long tradition of allowing independent scholars to research its history. In 1954, Charles Wilson, a Cambridge University historian, published a pioneering two-volume History of Unilever, based on confidential sources.3 During the Second World War the Board had recognised that ‘an objective history had to be produced, telling the good and the bad’.4 Although Wilson’s study offers an immense insight into the evolution of Unilever, the 1939–1945 period was discussed in only eight pages.

2

Introduction

According to Wilson it ‘was not the place (. . .) to follow the story of the business in war’.5 Possibly the time had not yet been ripe for it. In 1968 Wilson published a third volume of Unilever’s history dealing with the challenges of and response to the post-war industrial revolution in the 1945–1965 period.6 Ten years later David Fieldhouse’s study on Unilever’s overseas manufacturing and plantations activities was published.7 In 1994 the same author told the story of Unilever’s largest subsidiary and trader, the United Africa Company (UAC), from 1929 to 1987.8 Fieldhouse focuses on subsidiaries which operated mainly in the colonial or ex-colonial territories. As a result, he has almost nothing to say about the parent company in its main European markets during the war. In 2005 Jones published volume IV of Unilever’s history, Renewing Unilever: Transformation and Tradition, dealing with the whole Unilever group in the 1960–1990 period.9 In effect, the Second World War remained a lacuna in Unilever’s corporate history, despite the fact that this period provides an unusually interesting case of corporate governance issues. My study aims to fill this gap. Although it is not a commissioned corporate history – like the Fieldhouse studies – it is nonetheless based on full and unrestricted access to the company’s records of the 1930s and 1940s. Since the unification of Germany and the end of the Cold War increasing numbers of companies have allowed and often commissioned academics to study their history in the Third Reich.10 The end of the Cold War has reduced the fear that the industry’s relationship with the Nazi regime would discredit a company’s name.11 In addition, pressure from international Jewish organisations in particular in the United States has induced several companies to open up their archives. Most of these monographs, however, deal with the behaviour of German companies in the Third Reich and little was written about the international dealings of these companies.12 Even fewer studies deal with, for example, American, British and Dutch multinationals which had subsidiaries in Nazi Germany. Mira Wilkins’ The Maturing of Multinational Enterprise is an important exception of a general study of American multinationals which also deals with the war period.13 A part of her study explores American foreign direct investment (FDI) during the depression and the Second World War.14 US official FDI data, cited by Wilkins, show for example that US direct investment in manufacturing in Germany rose by almost 50 per cent from 1929 to 1940. In Chapter 3 of this study, I will come back to these figures and compare them with Unilever’s direct investment level in Germany at the time. Another important remark in Wilkins’ study is that multinationals neither calmed nor embittered international relations during the war. ‘[A]fter 1939 – as before 1939 – multinational businesses were buffeted by political conditions beyond their control.’15 In 1988 Charles Cheape published an intriguing article about the American Norton company in Nazi Germany. He presented a rich and complex pattern of the company’s behaviour at the time: the managers of the bonded abrasives company cooperated with, ignored and violated Nazi policies in the firm’s longterm self-interest.16 In 1997 Ivo Blanken’s study was published on the Dutch electronics multinational Philips which operated its business in both camps

Introduction

3

during the war. The book, however, does not explore the German side of the business due to a lack of sources. It mainly deals with Philips’ management in the occupied Netherlands (Eindhoven) and its exile management in New York.17 At the beginning of the German occupation of the Netherlands Philips was put under two German supervisors (Verwalter). Meanwhile the official domicile of the company had been transferred from The Hague to Willemstad in Curaçao, which hampered the German occupier’s ability to interfere with Philips’ overseas affiliates. In the 2000s some fine studies have been published that deal with multinationals based in allied countries as well. In 2004 Christopher Kobrak and Per Hansen edited European Business, Dictatorship and Political Risk, 1920–1945, which aims to explore how various multinational companies in the inter-war period dealt with political risks posed by home or host country regimes at the time.18 In an introductory essay on multinationals and dictatorship Wilkins raises the question whether some legitimate generalisations can be made about the strategies and structures of multinationals in that period.19 Her article, however, mainly deals with the problems of foreign multinationals in Nazi Germany in the pre-war period. It focuses on two major issues: foreign exchange restrictions and their consequences and technology transfer. Although my study also treats Unilever in Nazi Germany during the 1930s it focuses on the wartime period and consequently deals with other issues. Yet it hopes to add up some evidence for a few generalisations about the strategies and structures of multinationals during the war. Several other chapters in the book address the challenges multinationals faced that were based in Allied countries but had subsidiaries in Nazi Germany and in various countries of occupied Europe. Lars Heide’s chapter, for example, on IBM during the Second World War disagrees with Edwin Black’s account of America’s largest computer firm. In his rather biased work Black stated that IBM’s CEO Thomas J. Watson was a Nazi collaborator and that the company as a whole was to be held responsible for the Holocaust, because it delivered hollerith machines which were also used in the Nazi extermination camps.20 Heide, however, clearly shows that IBM’s control of Dehomag, its German subsidiary, had diminished since the early 1930s. After the German declaration of war on the United States it became completely autonomous from the American parent company and under control of the German government.21 Another interesting chapter – based to a large extent on the author’s previous work – is Neil Forbes’ account on how British business managed political risk in Nazi Germany during the 1930s.22 Although Forbes’ essay only deals with the pre-war period it is relevant for my study because it analyses the role British industrial firms and banks played in the economic appeasement of Nazi Germany. At the time, British multinational firms had invested heavily in Germany and British financial institutions had made long-term loans to German states and municipalities.23 As a result, Forbes concludes that British business directly or indirectly played a role in facilitating Hitler’s rearmaments plans. However, as my study of the Unilever case will show, the reality of the 1930s

4

Introduction

was too complicated to make an easy assessment of political risk. A peace settlement with Nazi Germany – independent of the business elite’s political inclinations – was thought to be in the interest of British multinational business and banks during that period. Moreover, Germany’s currency restrictions made a divestment strategy impossible – capital transfers to abroad were simply forbidden. British companies, including Unilever, made separate deals with the regime to reduce financial damage as much as possible. In 2007 Forbes published an article which focuses on Unilever in Germany in the 1930s.24 Here Forbes states that Unilever’s executives did not understand that all commercial decisions in Nazi Germany had political consequences at the time, and therefore he reproaches them for naivety and myopia. The last qualifications, however, were not particularly apt for Unilever’s top management at the time. As this study will show, the company was constantly making assessments of the political situation in Germany based on information coming mostly from high-ranking German officials. Another collection of papers Business and Industry in Nazi Germany, edited by Francis R. Nicosia and Jonathan Huener and published in 2004 as well, contains the essays by some of the best historians in the area of business history and Nazi Germany, such as Gerald D. Feldman, Harold James and Peter Hayes. The majority of these essays are critical of the over-emphasis of the alignments between the Nazis and big business in Germany. One essay written by Simon Reich considers the relation between the Nazi regime and foreign-owned companies, in particular the American Ford Motor Company which had set up a subsidiary in Germany in 1925 which opened a plant in Cologne 1931.25 Reich contextualises the Ford case into the larger debate of corporate social responsibility and accusations of complicity levelled in the 1990s against American foreign direct investors in Nazi Germany. Reich argues that Ford had only a relatively small investment in Germany and it was accordingly only a small player in the German car industry. Ford experienced systematic discrimination by the Nazi authorities both because it was marginal to Germany’s military plans and because of its American ownership. Once the US entered the war the German subsidiary was run by its German executives in the interests of the German wars effort. Ford in Detroit had lost its control and could therefore not be held responsible for the practices of its subsidiary, including the use of forced labour. Henry Turner’s book General Motors and the Nazis published in 2005 brings up similar arguments, though it was impossible for him to argue that Opel, GM’s subsidiary in Germany, was only a marginal car producer at the time.26 The main topic of his study is, according to its subtitle, the struggle for control of Opel, Europe’s biggest carmaker. In the book Turner concludes that during the war the company had more or less continued its operations in Germany but without direct management control from the parent company. Before Hitler had declared war on the United States all direct contact with Opel’s headquarters in Germany had been lost. During the rest of the war the German subsidiary was managed by Germans previously appointed by General Motors. Nevertheless,

Introduction

5

after Opel’s sequestration bureaucrats of the Nazi regime decided what and how to produce in the interest of the German war effort.27 The Royal Dutch/Shell group faced comparable threats as the Unilever group during the 1930s and 1940s and both companies had similar dual legal structures, so a comparison between two of the largest European companies at the time becomes imperative. In 2007 three volumes have been published on the history of Royal Dutch/Shell – the other Anglo-Dutch multinational. Volume 1 and volume 2 partly deal with the 1930s and the Second World War and are therefore of great interest for my study.28 During the 1930s Royal Dutch/Shell had to respond to the disastrous economic circumstances and mounting difficulties in countries of nationalist economic policies like Nazi Germany. The formidable challenges forced the group to reorganise. Chauvinism, however, was still alive within the Dutch and British parent companies. According to Jonker and Van Zanden the Group resembled the heraldic eagle with two heads looking in opposite directions which obstructed the creation of efficient management at the time. The Group’s CEO Deterding looked at Nazi Germany with great admiration. Nevertheless, his public support of and propaganda for Germany’s new regime and subsequent conflicts with the Board brought about his resignation in June 1936.29 The power struggle between Royal Dutch and Shell Transport managers continued in the background. The Group’s German subsidiary Rhenania-Ossag – Germany was the company’s fourth biggest market in the world – had meanwhile adapted completely to the New Order and grew luxuriantly. It had solved its major currency problems in Germany by making special shipbuilding deals and using bilateral clearing deals. In January 1940, after the beginning of the war, the German government appointed a supervisor (Verwalter) to take charge of Rhenania-Ossag. As a result, the Group lost control over its German subsidiary. At the beginning of the German occupation of the Netherlands the Dutch parent transferred its legal seat, like Philips, to the Dutch colony Curaçao. According to Howarth and Jonker the Dutch parent company chose to move the company seat of the Dutch parent company to emphasise the Dutch character of Royal Dutch and it suggest that the Dutch managers felt uncomfortable to rely too much on the British parent company. However, the transfer did not help the company much in occupied territory, because a supervisor for the Dutch parent was appointed to act on behalf of the concern in occupied Europe.30 The Second World War dealt heavy blows to the Group’s business. It reduced production, manufacturing capacity and tanker capacity and led to heavy loss of lives. Nonetheless, the long-term effects of the war, according to Howarth and Jonker, were rather positive: the Group transformed itself during the war and emerged strengthened.31 First, the original imbalance between Dutch and British representation on the Boards of the main operating companies disappeared. Second, the top-management structure was brought more in line with the rest of the business and made more transparent and efficient. Third, the Group’s geographical focus was much more directed towards the Western Hemisphere than before the war. Fourth, the old colonial discrimination between people of

6

Introduction

various backgrounds disappeared. Howarth and Jonker conclude that these transformations even amounted to a renaissance for Royal Dutch/Shell. To wrap up: an important issue in the literature on multinationals headquartered in Allied countries with subsidiaries in Nazi Germany and in occupied Europe is the struggle for control. Wilkins rightly remarks that the concept of managerial control in an international context is rather elusive in any case.32 However, the Nazi dictatorship, subjected the management of the outward and inward multinationals to particularly stringent rules and regulations. In addition, ownership and control were two separate matters, particularly during the Second World War. The Unilever case also shows how complex the issue of control and ownership became at the time. The struggle for control over Unilever’s operating companies in occupied Europe and the struggle for the ownership of Unilever’s business on the European continent is a major theme of this study. The innovation of Unilever during the war is another theme of this book. In 1942 Schumpeter published his – now classic – work Capitalism, Socialism and Democracy in which he argues that modern capitalism cannot be understood according to the principles of the market economy, particularly if one adheres to the neo-classic monopoly model.33 According to Schumpeter it is a mistake to reduce monopoly to the purely restrictive and anti-social consequences that are normally ascribed to it since monopoly power is often a temporary adjunct of the process of ‘creative destruction’. In his view in capitalist reality it is not the traditional competition, price competition, quality competition and sales effort that counts but the competition by means of innovation. According to him there are four types of innovation: product innovation, process innovation, organisational innovation and innovation of markets.34 In the twentieth century the largescale firm became the dominant engine of technical progress; however, the possibilities for innovating its organisation and institutions are of equal importance, according to Schumpeter.35 In 1959 Edith Penrose’s book The Theory of the Growth of the Firm was published on the operation and performance of the modern corporation as an evolving organisation.36 Penrose follows Schumpeter’s argument and makes a strong case for the big firm with respect to the development of new technology and innovative products. She finds no evidence that ‘diseconomies of size’ will arise at some point in the firm’s growth and that the large firm will become inefficient. Although a firm’s structure can change in due course – an industrial firm can develop into a financial holding company – its efficiency need not suffer because of the change of its organisational form, according to Penrose.37 Since the 1960s Alfred Chandler worked with Schumpeter’s theory on the central role of organisational innovation.38 He has synthesised an enormous amount of empirical material, generalisations and concepts on the evolution of modern big business in ways that provide insights into the nature of the innovative firm. Chandler’s key concepts about the changing strategies and structures of large companies in the twentieth century are indispensable for an understanding of Unilever’s history as well. Nonetheless, the limitations of Chandler’s concepts in relation to this specific company are also identified.39 In

Introduction

7

one of his major studies, Scale and Scope, he traces the evolution of large American, British and German firms into multinationals. In a chapter that deals with Unilever’s case he states that its organisational structure was a variant of the multidivisional form. This study will explore whether this observation is correct. Although Chandler also looks into the industrial conditions in the innovation process, the institutional conditions are not given sufficient exposure in his major works. In this study the process of organisational innovation within Unilever, and the influence of the war on this process will be analysed. Business enterprises, however, are social institutions which operate in broader institutional environments.40 As a result, to understand the historical transformation of the modern innovative large firm, not only industrial and organisational conditions are of importance but also institutional conditions. During the 1990s William Lazonick and Mary O’Sullivan developed a theoretical perspective on the social conditions of innovative enterprise (SCIE) that derived from a synthesis of existing comparative-historical research and economic theories on the innovative firm.41 They accepted that business enterprises are social structures that are in turn embedded in broader (typically national) institutional environments. Although there are other, and perhaps better-known, business system frameworks, I found Lazonick’s model useful and operational for my study. As this (multinational) business history needs to be seen in the context of the political and socio-economic developments, I found it useful to analyse the organisational, the industrial and the institutional conditions of Unilever in its key markets at the time. In every chapter these elements work as a kind of leitmotiv or selecting tool. The use of a model, however, does not mean that the role of personality and entrepreneurship in Unilever’s business is not recognised. Individuals and personal contacts mattered. As Jones notes: ‘Entrepreneurship was often a vital asset for British companies expanding abroad, but one sometimes overlooked by those schooled in neo-classical economics who see the entrepreneur solely as an economic agent.’42 The aim of this study is to examine the effects of the Second World War on the structure, strategy and performance of Unilever. It focuses on the company in Britain, the Netherlands and Germany in the 1939–1945 period. Unilever survived the war against the odds, and this forms the central research question in this book: How did such a multinational survive a war which shut off the continental branch of the company from its traditional raw materials market for edible oils and fats, and which split up the company into a continental and a British part? How did Unilever survive the economic ambitions of Nazi Germany, which endeavoured to get hold of at least the continental part of its capital? These problems were especially acute as under Nazi law Unilever could be seen as a ‘Jewish’ company which should be ‘Aryanised’. How did the company survive British legislation aimed at restricting or taking over companies based in enemy, or enemy-occupied, countries? For a long time historians of big business and Nazi Germany have concentrated on ethical questions, in particular on the moral and criminal culpability of (German) businessmen.43 There is probably no period in human history where

8

Introduction

ethical questions have had such a high priority. Though it is legitimate to ask ethical questions about the (international) dealings of multinationals, not only in wartime, the answers can often not be painted in black and white; most companies were neither Oskar Schindlers nor ‘Hitler’s willing executioners’.44 The ‘right or wrong’ approach often leads to under-exposure of certain aspects of the war and it can impede thorough analysis. It is not the primary role of historians to raise ethical questions about their subjects; the historian’s role is to explain why and how things have happened in the past. My study does not answer the question of whether Unilever was either right or wrong during the war. It endeavours to describe, evaluate and explain the war history of a large and complex international business, which was caught between various belligerents. There are several good reasons why this research should be of interest to the economic, political and business history of the twentieth century. First, it describes, analyses and evaluates the strategy and the structure of a leading European multinational which survived the Second World War on both sides, i.e. the Anglo-Dutch part of Unilever in the sphere of the Allies (Limited), and the Dutch part in Nazi Germany and Nazi-occupied Europe (NV). This study provides insight into the development of the relationships between the business and politics from the pre-war era of the late 1930s to the end of the 1940s. Second, based on research into company sources which were hitherto unavailable, this study shows the changes in the markets, raw materials and products at the time. It provides a view of the changing conditions in the food, oil and fats, and soap industries, which were of foremost importance during the war. Third, this research adds evidence that should enable the further development of theoretical approaches to international business. Unilever’s case offers the opportunity to analyse the long-term effects of one of the greatest external shocks of the last century on one of the biggest companies of Europe. This study has been done on the basis of Board minutes, reports, travel reports, annual accounts, policy documents and correspondence in Unilever’s Historical Archives in Rotterdam (UAR) and London (UAL). Materials on continental affairs are for the greater part to be found in Rotterdam, as are most archives of the German Reich Commissioner for the Unilever Group. Information on Britain, Board minutes and supporting documents for the Board are to be found in Unilever’s archive in London (now stored at Port Sunlight near Liverpool). In addition, government reports and correspondence and other government files on the Unilever business have been put into the archives of the Nationaal Archief in The Hague and the Bundesarchiv in Berlin. No period in Unilever’s history has been analysed so thoroughly by (German) government officials like the war period. The book is organised both chronologically and thematically. The chapters are organised in each case by time (and space). As the book deals with an Anglo-Dutch multinational with large investments in Germany, the focus moves from one country or area to another. Simultaneously, the chapters deal with different periods. Within each chapter, I use an organising principle based on the overall framework, which means that in every chapter the organisational, institutional and industrial conditions of Unilever in a specific period are analysed.

Introduction

9

Chapter 2, which introduces Unilever, starts with a short history of earlier mergers in the oils and fats business and deals with the formation of the company in 1930. Special attention is paid to Unilever’s organisational structure within the scope of Chandler’s ideas about the multidivisional company. Next to be dealt with are the various growth strategies of the company as well as Unilever’s competitors in relation to the company’s own development. Finally, its performance at the eve of war is discussed. The overall aim of this chapter is to provide some historical context for later developments in the 1930s and 1940s. Chapter 3 deals with Unilever’s position in Nazi Germany during the 1930s, when the company had grown into an empire inside the German Reich after 50 years of greenfield investments, acquisitions and mergers. On the eve of Hitler’s rise to power the Anglo-Dutch multinational dominated the German edible fats industry. Shortly after the Nazis had come to power Unilever’s Board decided to accommodate the new regime because it thought that it could not allow itself to withdraw completely from its largest European market outside Britain. In 1934 Unilever reached a special agreement with the German government about the currency restrictions. Via complicated barter deals, the multinational could indirectly transfer profits from Germany to the Dutch parent company. Later on the company needed to make all sorts of acquisitions to use its frozen Reichsmarks in Germany. From 1938 on, Unilever felt the impact of the new anti-Semitic laws in Nazi Germany and it needed government relations to become classified as an ‘Aryan’ company. Chapter 4 explores the extensive war preparations that Unilever made on the eve of war. First, Unilever signed a new Equalisation Agreement, which made a theoretical split of the company into two independent parts possible. Then, two South African holding companies were established. In the event of a German invasion of the Netherlands NV’s overseas assets would be transferred to these companies. In addition, in the last year before the war Unilever laid in huge stocks of raw materials in Britain as well as in the Netherlands. Chapter 5 discusses Unilever during the first two years of the Second World War. In this period it was far from business as usual for Unilever in Europe. The company was stuck between the war interests of various national states, especially the British Empire and the German Reich. The Anglo-Dutch multinational had intensive and close relations with the British government as well as with the Dutch government in exile in London. In Britain problems in connection with the Trading with the Enemy Act had to be solved. For the continental part of the company, relations with the German authorities were much more complicated and not as unequivocal. It was not entirely clear what the ambitions of the Reich in connection with Unilever were or at least they were contradictory. The polycratic power relations inside the Third Reich were not unfavourable to the company. Chapter 6 looks at the effects of Göring’s appointment of a special Reich Commissioner for the Unilever Group in June 1941. It involved a preparation for subsuming Unilever’s capital under a German syndicate. The appointment of

10

Introduction

a Reich Commissioner, however, turned out differently from the intentions of various German agencies and did not work out unfavourably for the company. Eventually, the Reich Commissioner protected the company against competitors and other German government agencies. Chapter 7 is about Unilever’s business in Britain, which differed to a large extent from its continental affairs during the second part of the war. In London business objectives other than just making profits played a role in the decisionmaking process at the time. The company developed a strong sense of social responsibility and became deeply involved in the British war effort long before it was clear that the Allies would win. In addition, the company created as much goodwill as possible with the Dutch and other Allied governments in London. Various Board members were helping the British and Dutch governments to a great extent. Although there is no doubt that they believed in what they were doing, they also were sound businessmen, knowing exactly where their (postwar) interests lay. Chapter 8 examines the company in the immediate post-war period. As an answer to three major political threats, denazification, decartelisation and nationalisation, the company pursued a triple strategy based on legal action, political lobbying and a positive public-relations policy. In addition, the company had to make a financial settlement in respect of its legal re-unification in 1945. As a result, reconstructed consolidated accounts of the war period were published in 1946 and gave an overall positive picture of the war performance. Chapter 9 is the concluding chapter. It answers the main research question of how Unilever survived the greatest exogenous shock in its history. In addition, it describes some of the long-term consequences that the Second World War had for Unilever, whereby it is considered whether the war turned out to have a positive or negative effect on the company in the long run. Consequently, I will draw some long-term conclusions using Geoffrey Jones’ monograph on the 1960–1990 period. The events of the war can explain several of the characteristics of Unilever that he explores for the post-war decades. Lastly, a more general conclusion is drawn about the effect of a company’s organisational structure on its adaptability.

2

Unilever in the 1930s

The formation of Unilever in September 1929 took place at the worst possible moment in the economic history of the twentieth century.1 A few weeks after the merger contract had been signed a deep slump broke out. In the last week of October the American stock market crashed and economic activity, which had already slowed down in the summer, went into rapid decline.2 As a result worldwide production broke down and unemployment in all major industrial nations rose to unprecedented levels. Still there were great differences between various nations in terms of the severity and duration of the crisis. Although the crisis ushered in an expansion of the role of government in the economy in all countries, there was a wide variation in government reactions.3 This chapter starts with a short history of earlier mergers in the fats and oils sector in Europe to understand the formation of Unilever in 1929 and to give some historical context for later developments in the 1930s and 1940s. Then it will be shown that the great merger was not a result of the Great Depression; the matter had been negotiated long before. In fact, the merger was a result of earlier mergers. In the following section the company’s structure is discussed by using Chandler’s framework on the multidivisional company. After that Unilever’s major growth strategy, alongside vertical and horizontal integration, will be identified, i.e. geographical expansion. Next Unilever’s business in relation to its main competitors in the soap business is explored – in the margarine trade it did not face great competition, except for butter. The last section deals with Unilever’s performance in the 1930s. The figures prove two important facts about Unilever before the Second World War. First, Unilever was one of Europe’s largest holding companies in the 1930s. Second, on the eve of the war Unilever’s profits reached an all-time high.

The origins of Unilever The merger that formed Unilever in 1929 had been a result of earlier mergers in the fats and oils sector in Europe, caused by fierce competition in the sector. Complete mergers of the largest companies in the industry had been aimed at bringing to an end the devastating rivalry in the oils and fats business. The formation of Unilever was the result of a process that started at the beginning of

12

Unilever in the 1930s

the 1920s and resulted in the complete amalgamation of four large family firms: Jurgens, Van den Bergh, Schicht, Lever Brothers, and two smaller firms: CalvéDelft and Hartog. In 1871 butter firm Antoon Jurgens from Oss (the Netherlands) had started the first margarine plant outside France after the acquisition of the Mèges Mouriès margarine patent. The business had flourished, mainly because of its exports to Britain and Germany. Demand for the cheap butter substitute had been great in the ever-growing industrial regions of these two countries. In 1888 Jurgens set up a margarine plant in Germany (Goch) after the Bismarck administration levied a tariff on margarine. In 1899 the company introduced a branded margarine under the name Solo, following its competitor Van den Bergh. In 1906 NV Anton Jurgens Vereenigde Fabrieken was established to unite the multitude of companies inside and outside the Netherlands into a holding company. In 1917, during the First World War, Jurgens had started the large Purfleet margarine plant in Britain and bought some others to meet new British competition. In 1919 the company controlled 67 plants and 16 trading companies, in particular in Germany, Britain and the Netherlands. Jurgens also owned companies in Scandinavia, Belgium, France, South America and the Netherlands East Indies.4 At the beginning of the 1920s, however, Jurgens was badly hit when a sharp drop in raw materials prices left the company with a large number of raw materials contracts, which almost ruined the company. In 1922 Jurgens had issued debentures to save his business. In addition, the company had been rationalised: plants were sold or closed and others combined. In the meanwhile the company was diversifying in other directions; in the soap and candle business. The margarine market in the 1920s, however, was stagnant and even shrinking. Competition was fierce and prices were low. In this atmosphere Jurgens looked for some form of market regulation or co-operation in Europe. Unlike most of its competitors the Jurgens business was run by family members and Anton Jurgens himself exercised absolute control over the business until the merger in 1929.5 Only two years after Jurgens, butter exporter Sam van den Bergh also established a margarine plant in Oss. The success story is quite similar to that of Jurgens. His major export countries were also Britain and Germany. Van den Bergh also set up a margarine plant in Germany (Cleves) as a result of Bismarck’s protectionist policy. From here the company built a large empire in Germany. In 1898 it launched a branded margarine Vitello in Germany, successfully using the marketing principles that William Lever had applied in the British soap trade in the 1880s. Van den Bergh’s interests were united in three holding companies. The NV Hollandsche Vereeniging tot Exploitatie van Margarinefabrieken (Hovema) combined its continental interests. The First World War made Van den Bergh’s international business extremely complicated, because its biggest markets, Germany and Britain, had become two of the main belligerents.6 Raw materials for the Dutch and German margarine manufacturers came mainly from British colonies. In addition, before the war large quantities of oil-bearing seeds, shipped in via British ports, had been crushed in North Germany. The refined oil was used in the German and the

Unilever in the 1930s

13

Dutch margarine industry, of which the latter supplied the British market. The British blockade of German ports, however, made these international flows of raw materials and finished products impossible. Furthermore, the Trading with the Enemy Act put Van den Bergh’s subsidiary in Britain (Van den Bergh’s Limited) in a delicate position. The British would only allow exports of raw materials to the Netherlands if Van den Bergh could guarantee that none would be used for supplying the Germans.7 The system of controlled imports (by British accountants) to the Netherlands, however, enabled Van den Bergh to expand its production and its exports of margarine to Britain. Until at least the middle of 1916 the company’s margarine trade with Britain flourished. Subsequently, the German submarine war disturbed British imports and re-exports of raw materials to great extent. As a result, Van den Bergh set up a margarine factory in Britain, like his Dutch competitor Jurgens. Meanwhile, the German market had lost its pre-war importance for the company as the raw materials shortage had grown so severe there that the manufacture of margarine had almost ceased. After the Great War Van den Bergh’s businesses in Germany and other countries on the continent were quickly restored. By 1926 Hovema owned 30 margarine plants, oils mills and refining plants on the European continent. The British interests, controlled by Van den Bergh’s Ltd, now included a margarine factory in Fulham and a participation in chain stores like Lipton and Brough’s.8 The Dutch interests were united in NV Van den Bergh’s Fabrieken and included margarine plants, oil mills, refining facilities and soap factories. Van den Bergh’s had been far less hit by the raw materials crisis at the beginning of the 1920s because they had never taken such an interest in the raw-materials supply as Anton Jurgens had done.9 Nevertheless, it faced the same slump and fierce competition in the margarine market of the 1920s, as the other oligopolists did. By contrast with the Jurgens organisation, the management of Van den Bergh’s business had been placed more and more in the hands of professional managers. Paul Rijkens had joined the company in 1910 and Pieter Hendriks in 1913. Together with the Amsterdam lawyer and Sam’s son-in-law Jacques Polak, they would play a major role in the further development of Van den Bergh, the Margarine Unie and eventually Unilever.10 On the eve of the First World War the Schicht Concern had grown to the largest company in the soap, margarine, fats and oils business in the AustroHungarian Empire. In 1848 Georg Schicht had started a soap business in Bohemia. His son Johann Schicht had started a second soap plant in Aussig (now Usti nad Labem). From 1887 the Schichts had diversified the business vertically. An oil mill, fatty acid and glycerine, stearin and candle-making plants had been set up. From 1891 they advertised their famous brand Swan Soap along the lines of William Lever in Britain. In 1904 they also began in the edible fats and oils business. Two years later they established Georg Schicht AG to control their companies in Central Europe. During the First World War the economic situation on the home markets of the Schicht concern deteriorated quickly as result of the British blockade of the

14

Unilever in the 1930s

Central Powers. Raw materials shortages were acute and the Schichts were losing money with their operations. In reaction to this worsening situation Georg Schicht proposed an escape route: the purchase of tangible assets in neutral countries. In the Netherlands Heima was set up as a buying and selling company for raw materials and in Switzerland Limmat was established for all Schicht’s financial dealings. The companies were supplied with capital from Dutch and Swiss banks. The profits of Heima and Limmat were essential for Schicht’s survival during the First World War.11 The fall of the Austro-Hungarian Empire after the First World War, however, shattered the market for Schicht’s products completely. Their plant in Aussig, which was now situated in the recently created state of Czechoslovakia, was much too large for so small a market. At the same time they were challenged by Van den Bergh who had acquired half of shares in the Centra company of Austria, a direct competitor of the Schichts. At the same time the Czech currency was depreciating and raw-material purchases on the world market were becoming difficult. The Schicht concern became an easy target for take-over by Van den Bergh (and Centra) or Jurgens and it therefore took the initiative to start negotiations with its major West European competitors. The negotiations resulted in two treaties signed in 1920: the Great Entente and the Little Entente. The latter, notwithstanding its name, was the most important, because it covered the principal Schicht markets in Czechoslovakia, Austria and Hungary. The essence of the Little Entente was that Jurgens and Van den Bergh would not enter Schicht’s market with exports or operating plants, and would in exchange receive 50 per cent of the profits realised in these countries. The Great Entente covered the less important Schicht markets in Poland, Danzig, Yugoslavia, Romania, Switzerland and Germany, but included the same conditions as the earlier agreement. In addition, in both agreements, there was exchange of shares in each other’s companies. As a result, Van den Bergh and Jurgens acquired a large block of shares in the Schicht business and Schicht received an important share of its Dutch competitors. Another important article in the agreements was that none of the parties should take an interest in the British Lever Brothers without the agreement of all contracting parties.12 In fact, both Ententes closely linked (by exchange of equity) the most important businesses in Western and Eastern Europe, except for Lever’s business, ten years before the great merger. In 1884 William Lever, who had been making money in the wholesale grocery trade, started producing and selling a new kind of soap under the registered brand name Sunlight.13 Lever was one of the first movers in modern branding, i.e. the large-scale marketing of mass-produced consumer goods; and, in fact, the central idea around which Unilever was formed 35 years later. In 1887 he set up a large factory near Liverpool with next to it a comfortable village for his workers, which he called Port Sunlight. In the 1890s Lever was selling nearly 40,000 tons of soap per annum in Britain alone, and he was building export facilities and plants in North America, the European continent, South America, the British Empire and China. In 1910 Lever had a 26 per cent share of

Unilever in the 1930s

15

the British market, and the company would reach the highest market share in Britain in 1934 with 62 per cent. By the 1920s the company had developed strong brands like Eve and Lifebuoy (toilet soaps), Lux (flakes), Vim (scouring powder), Rinso and Persil (soap powders). Another important feature of William Lever was his vertical integration and diversification strategy. Like Anton Jurgens he wanted to control the supply of oils and fats. As early as the 1890s he acquired oils mills, which also took him into the animal feeds trade (a by-product of oil-crushing). Lever’s ambitions, however, took him further upstream in the production chain. In 1906 Lever started plantations in the Pacific and the Solomon Islands. As the British Colonial Office did not want him to have land in other British territories, Lever went to the Belgian Congo. In 1911 he established the Societé Anonyme des Huileries du Congo and received a Belgian government concession to develop 750,000 hectares of palm culture.14 One year previously, however, Lever had launched himself into the West Coast merchants’ trade when he bought a West African trading company and began to trade in oil-bearing seeds and palm oil.15 Another source of raw material was whale oil, for the greater part coming from the Norwegian whaling industry; however, after the First World War it also came from his own whaling company established in Britain, the Southern Whaling & Sealing Co. During the First World War William Lever diversified his business horizontally. As (mainly Danish) butter became scarce and therefore increased in price, demand for margarine almost doubled between 1914 and 1916 in Britain.16 As a result, Lever decided to establish an enormous margarine factory at Bromborough. Since the British government controlled the oils and fats business, it had encouraged Britain’s largest soap manufacturer to move into the production of the cheap butter substitute in order to reduce the dependency on Dutch importers. Although Planter’s Margarine, as Lever’s product was called, was not of the same quality as that of its Dutch competitors, it did well enough on the British market until the end of the war. In addition, Lever’s move into margarine forced both Van den Bergh and Jurgens to change their strategy and acquire factories in Britain too. After the Great War, in 1920, Lever Brothers was invited to buy one of the three largest West African trading companies, the Niger Co Ltd. As soon as the acquisition was completed, however, the market for African produce collapsed and the bankers pressed for repayment of a £2 million loan which had been granted to the Niger Company. As a result Lever Brothers got into great financial difficulties. The bankers insisted that William Lever (Lord Leverhulme after 1917) should hand over control of the business to a senior accountant, Francis D’Arcy Cooper, of the accounting firm Cooper Brothers. As a consequence, D’Arcy Cooper joined a newly established Special Committee, consisting of two Levers and two professional managers. According to Alfred Chandler it meant a shift ‘from personal to collective management’.17 From then on Leverhulme could only act on proper advice of a management team. Furthermore the bankers demanded the issue of debenture stock – a form of finance that Leverhulme

16

Unilever in the 1930s

himself had hated for his entire life. In 1925 Leverhulme died and the business then came under the chairmanship of D’Arcy Cooper. His main task was, as Reader notes, ‘to bring the business back on an even keel after the wild adventures of the post-war boom’.18 D’Arcy Cooper would play a major role in the ultimate merger with Lever Brothers’ main competitors. Twenty years before the merger of the biggest competitors in the business into the Margarine Unie in 1928, Van den Bergh and Jurgens had signed a profit-pooling agreement in 1908 (renewed in 1913 and 1920).19 The agreement had been the result of a major raw-materials crisis for the margarine trade in 1906 and fierce competition from butter and newcomers in the market. Both companies had begun to lose money. The rivals agreed to pool their profits and divide them between each other in the ratio of 60 per cent for Van den Bergh and 40 per cent for Jurgens. In addition, under the agreement both companies had the right to participate for 50 per cent in each other’s raw-materials purchases.20 The agreement, however, did not end the rivalry between the two margarine giants. On the contrary, it proved to be the source of much disagreement. From 1924 to 1927 Van den Bergh and Jurgens were involved in complicated and costly arbitration proceedings in Britain. In the end the only solution to solve their blurred disputes appeared to be a complete merger of the two companies. In Wilson’s words: The only policy seemed to be to fight back, but the prospect of victory was remote, and that of double annihilation distinctly likely. Counsel on both sides were convinced that to carry on the arbitration would be a senseless waste of money and effort, and indeed it was from respective Counsel that the initiative for a reconciliation had come.21 Thus the arbitration in itself did not solve anything; however, it was a turning point in a long dispute between the two companies, which resulted in a new organisation. In November 1927 two new holding companies were created, the NV Margarine Unie in the Netherlands and the Margarine Union Ltd in Britain, to control the Jurgens and Van den Bergh businesses. The dual structure, a Dutch and a British parent company, was modelled on Van den Bergh’s legal structure. The two parent companies were bound together by what was called an Equalisation Agreement, whose aims were to ensure an equal distribution of profits between Dutch and British shareholders and to avoid double taxation. In addition, the agreement provided that the boards of NV and Limited should be identical. Because NV held the so-called deferred shares of Limited with a value of £100,000, which represented a twentyfold voting right for the board, the Dutch company could control the British parent. Originally, the first issues of Ordinary Capital in the new holding companies NV and Limited were all made to the Van den Bergh and Jurgens families as a payment for their controlling interest in their former businesses.22 After a short while, however, the outside holders of Ordinary shares in Van den Bergh and Jurgens were allowed to subscribe for (and exchange their) Ordinary shares in Margarine Unie/Union.

Unilever in the 1930s

17

The interest from investors was overwhelming and thus the value of the Ordinary shares rose rapidly. New Ordinary Capital was issued in 1928 at a premium of 50 per cent.23 In November 1927 the consolidated value of the total issued capital had been £27.7 million, at the end of 1928 it rose to £33.7 million and in 1929 it amounted to £48.1 million.24 According to Wilson the merger’s object had been the elimination of competition, a reduction of costs, and an increase in profits.25 It is possible to conclude that the Margarine Unie/Union had become a powerful party on the capital market. The new company used the capital that it raised to acquire new businesses (mainly competitors) and with the premium it created great financial reserves.26 In 1928 Margarine Unie acquired a much smaller competitor in the oils and fats business, the Franco-Dutch company Calvé-Delft. The company had been a threat to the Margarine Unie as it had been expanding its business into important markets like Germany, Czechoslovakia, France and Belgium. Another major acquisition was Hartog of Oss in North Brabant at the beginning of 1929. The Jewish family firm was closely related to the Van den Bergh and Zwanenberg families who began their businesses in Oss as well. According to Doreen Arnoldus these three interrelated families were part of a Jewish social network, which was mainly based on religion and kinship.27 The firm was active in the meat-packing trade and in edible fats. In the 1920s it had been expanding in foreign markets like Britain, Germany and even India. The ghee (Indian cooking fat) trade especially was also important to the Margarine Unie in India. In addition, Hartog was building a new margarine factory in Germany in Cleves, almost next door to that of the Margarine Unie. The price which the Margarine Unie paid for Hartog was high (in cash and shares). And, furthermore, two Hartog family members obtained a seat on the board of the Margarine Unie: Arthur and Jacob.28 During the 1920s there had been constant discord between the various parties to the Entente Agreements. Constant quarrels between Jurgens, Van den Bergh, Centra and Schicht about control of firms had led to various lawsuits. The Ententes of the early 1920s, however, had linked the companies inseparably through an exchange of equity. The formation of the Margarine Unie/Union in 1927 meant a change in the balance of power inside the Entente in favour of the Dutch companies. The alliance of Calvé and Hartog with the Margarine Unie had strengthened the Dutch side further. The acquisition by Schicht of a large chocolate company in Germany, and disagreement with its Dutch partners about it, forced Schicht (and Centra) into a complete amalgamation with the Margarine Unie/Union at the end of 1928. It was realised by a further exchange of equity and by the appointment to the board of three Schicht family members, Georg, Heinrich and Franz Schicht. At the beginning of 1929 Lever Brothers Limited remained the last large competitor in Europe on the raw materials market for oils and fats.

18

Unilever in the 1930s

The great merger The amalgamation of Unilever in January 1930 was not unique at the time, but must be seen in the context of a major merger boom and rationalisation movement in Europe during the 1920s which saw the formation of large conglomerates like IG Farbenindustrie, Imperial Chemical Industries and Vereinigte Stahlwerke (United Steel Works).29 After the First World War it became clear that the German dyestuffs industry would be unable to regain its position in the world market which it had before war. In order to remain competitive and gain access to new markets, the companies already belonging to the community of interests (Interessen-Gemeinschaft) decided to merge completely. In 1925 BASF, Bayer, Hoechst, Agfa, Griesheim and Weiler-terMeer, transferred their assets to Interesse Gemeinschaft Farbenindustrie AG, and established one of the largest companies in the world.30 Two smaller members of community of interest, Cassella and Kalle, remained legally distinct, but were managed as wholly owned subsidiaries. In 1926 Imperial Chemical Industries Limited was formed in Britain from the merger of four British chemical companies – Brunner Mond, Nobel Industries, United Alkali and British Dyestuffs – to challenge in particular its gigantic German competitor IG Farben on the world market for chemical products.31 In 1925 four large iron and steel companies in the Ruhr, Thyssen, Phoenix, Rheinelbe and Rheinstahl, agreed in principle to the establishment of a vertical integrated steel group. Although initially involved with the negotiations Hoesch and Krupp remained independent steel firms. Thyssen held the largest share (26 per cent) of the in 1926 established Vereinigte Stahlwerke AG. The reason for the formation Europe’s largest steel company had been a constant drop in prices and overcapacity in the German steel industry, which forced them to rationalise and look for new market opportunities.32 According to Jeffrey Fear it was ‘an attempt to create American-style mass production economies’ and to attract American investment capital.33 The main reason for a possible amalgamation of Lever Brothers and the Margarine Unie/Union was their common interest in the raw-materials market. In the 1920s and 1930s the production of margarine and soap was based on the same raw materials, coming literally from all corners of the globe. The major part consisted of vegetable oils and oil seeds: copra from the Dutch East Indies, the Philippines and Malaya, palm kernels, coconuts and palm oil from Africa, the Dutch East Indies and Malaya, groundnuts from India, Africa and North America, soya beans from North America and Manchuria and tallow from North America, South America, Australia and from local production in Europe. In addition, substantial quantities of whale oil from the Antarctic and other marine oils were processed.34 Because of the development of hydrogenation techniques since 1909, which had made it possible to harden oil, many raw materials had become interchangeable. From now on the choice of a specific oil or fat depended mainly on its price. As a consequence of this major technical innovation soap and margarine manufacturers competed with each other on the rawmaterials markets, as buyers.

Unilever in the 1930s

19

Before the First World War Anton Jurgens had tried in vain to control the predominantly Norwegian whaling industry. After he had met great opposition it had resulted in a Whale Oil Pool. This Pool would regulate and distribute the Norwegian whale oil among the largest soap and margarine companies in Europe.35 In fact, it was a first step towards the reconciliation of Europe’s major competitors in the oils and fats business. Nonetheless, it took another 15 years of rivalry before these companies merged into Unilever – years in which Lever Brothers had been in great financial trouble, Jurgens and Van den Bergh had buried the hatchet and set up a financially sound Margarine Unie/Union, and the margarine and soap markets had become stagnant. Wilson has shown that the formation of Unilever in September 1929 was not the result of the Great Depression, which began a month later.36 The biggest merger ever had been negotiated for more than a year during a time of reasonable prosperity for the oils and fats business. In fact, negotiations between Lever Brothers and Margarine Unie (Margarine Union) had been started to solve business conflicts between the two and had been aimed at a separation of interests rather than a merger.37 Since the First World War Britain’s largest soap company Lever Brothers had also been involved in the making of margarine and the largest margarine manufacturers on the continent Van den Bergh and Jurgens had acquired considerable soap interests in the Netherlands. After the formation of Margarine Unie in 1927 and the alliance with Centra and Schicht in 1928 the company had also obtained considerable soap interests in Central Europe. Hence the two giants began talks in 1928 about some kind of exchange of their businesses. The idea was that Margarine Unie could swap its soap interests for Levers’ margarine interests. Or as Wilson has put it: ‘the scheme was a device for enabling Lever Brothers and the Unie to keep out of each other’s way’.38 Lever Brothers’ chairman D’Arcy Cooper, however, did not want to lose the most promising sideline of edible fats. He thought that the soap market had reached its ceiling.39 An idea, however, that was to turn out to be incorrect. In fact, the edible-fats business proved to be much more problematic in the 1930s. Another issue in the negotiations was what would happen to the oil-milling, refining and hardening businesses, the suppliers of raw materials for soaps as well as margarine? The idea was that a joint venture (‘middle company’) would run these plants. It created, however, more problems of management and control than it solved.40 Therefore, Paul Rijkens of the Margarine Unie/Union and John McDowell of Lever Brothers designed a plan for a complete merger. On 2 September the contract was signed. From 1 January 1930 the world’s largest company in the oils and fats business would be established under the contraction: Unilever. In Britain Margarine Union Limited changed its name to Unilever Limited. In exchange for its own (issued) shares it acquired the Ordinary shares of Lever Brothers Limited. The NV Margarine Unie’s new name was Unilever NV and it held the same interests as before. Following the example of Van den Bergh, the two holding companies were also linked together by an Equalisation Agreement

20

Unilever in the 1930s

(and still are). The two most important provisions of this agreement were again: first, the Dutch and British shareholders would receive dividends of equal value and would have equal rights upon liquidation and, second, the boards of the two parent companies had to be identical. In 1930 total capital employed of the two parent companies and their major subsidiaries represented a nominal value of nearly £117 million.41 Nevertheless, unlike after the previous merger Unilever could not take advantage of a rise in the value of its shares. A month after the contract was signed the stock markets collapsed. In December 1929 the average value of shares dropped by one-third. In the same period Unilever shares even lost more than 40 per cent in the City. At the end of 1930 Unilever shares had lost about 70 per cent of their value compared with that of October 1929.42 In addition, commodity prices fell sharply. Unilever’s raw material companies went through even harder times as prices of primary products showed a stronger decline, while its grocery and fish shops were losing money as the purchasing power of the millions of unemployed world-wide had sharply declined.

Unilever’s structure in the 1930s Unilever’s legal dual form must not be confused with its organisational structure. The object of the merger agreement was unity, as the company’s name expressed. There was much common ground between the former family businesses: they focused on branded consumer goods, they used the same raw materials, they relied heavily on capital markets for equity and loans and, last, they used some kind of holding company structure. The formation of a centralised and unified company out of a conglomerate of former family businesses, managed directly from one centre (London), however, appeared much more complicated than the signing of an Equalisation Agreement. In fact, the formation of Unilever as a unified company would take another ten years, was violently disrupted by the Second World War and was continued after the war. From 1930 onwards D’Arcy Cooper and Paul Rijkens together took the lead in the unification and centralisation of Unilever. The Boards of Directors of Limited and NV were identical. From 1931 the Board meetings were regularly held in a new and impressive headquarters in London (Unilever House in Blackfriars), instead of in various European cities, which had been the case directly after the merger. In time the number of Board members decreased. In 1930 the Board had consisted of 32 members, by 1938 the Board of Directors consisted of only 24 members. What was probably more important, however, was that they were no longer chosen by origin, from the old capital groups of Van den Bergh, Jurgens, Schicht, Hartog and the old Lever groups, but on the basis of skill.43 In 1931 Anton Jurgens, supported by D’Arcy Cooper, had imposed his own view that Board members had to be chosen on the basis of their ability and their importance for the company as a whole, irrespective of group or family association.44 Although professional managers played an important role in the 1930s, members of the old families were still well represented on the Board of

Unilever in the 1930s

21

Directors and had a good-sized share in the business until after the Second World War.45 In fact, 11 out of the 24 board members were still from an old Unilever family in 1938, namely Albert, James and Sydney van den Bergh, (son-in-law) Jacques Polak, Arthur Hartog, Rudolf and Henri Jurgens, Lord Leverhulme and Heinrich, Franz and Georg Schicht. Besides, until 1938, the founding families of Jurgens, Van den Bergh and Schicht owned the important Special Ordinary Shares (numbered one to 2,400), which entitled them to elect the members of the Board. The Directors’ Conference, as Unilever’s Board meetings were called, acted as an informal exchange of information and opinions once a week. It also had a more formal function: the allocation of capital expenditure.46 In addition, the Board was supported by various service and advisory staffs, which were accommodated in Unilever House. Final authority was, however, increasingly delegated to an executive body: the Special Committee. It had been formed in September 1930 after the example of Lever Brothers’ administrative organisation. Initially it was a body of eight persons, but by 1938 it had been reduced to six, of whom the most important were the chairman of Limited, Francis D’Arcy Cooper, and the chairman of NV since 1937, Paul Rijkens. Both D’Arcy Cooper and Rijkens were typical examples of professional managers; both were in charge as a result of their management qualities and not by birth. Other members of the Special Committee in 1938 were: Lord Leverhulme, who had very little time available on account of his numerous public duties, Georg Schicht, Albert van den Bergh and Harold Robert Greenhalgh. The Special Committee was primarily responsible for Unilever’s general business policy; it focused on overall monitoring, planning and resource allocation. The members did not conduct the daily business of any specific unit, but were kept informed of, and advised and decided on the more important matters that were submitted to them by other directors.47 The Special Committee had meetings with various executive committees. The business in Britain was exceptionally managed by a Group Executive, organised by product: soap, margarine, oil mills and foods. The Continental Committee supervised the continental business in Europe. The Overseas Committee looked after Unilever’s business in the British Empire and North America. The United Africa Company (UAC) Board managed Unilever’s subsidiary, the largest trading company in the world (see Figure 2.1). Alfred Chandler, who explores Unilever’s case in Scale and Scope, concludes that in the 1930s: Unilever, one of Britain’s most successful multinational giants, had come to be managed through a multidivisional structure, with a corporate office of general and staff executives, with product divisions for its domestic [British] markets, and with geographical divisions for its markets overseas.48 It is questionable, however, whether Unilever fitted into this multidivisional form (M-form), which had began to spread through the US industry during the

22

Unilever in the 1930s

Unilever & Lever Brothers Ltd

Identical Board of Directors

Unilever & Lever Brothers NV

Special Committee

UK executives

British product divisions: Soap Margarine Oil Mills Food

British Empire Committee

British Empire: Canada and New Foundland, Nigeria, South Africa, India, Australia, New Zealand, Solomons

NV Continental and Overseas Committee

Overseas: United States, Brazil, China, Argentina, Siam, Belgian Congo, Netherlands, East Indies, Philippines

European continent: the Netherlands, Germany, Belgium, France, Norway, Italy, Denmark, Sweden, Finland, Czechoslovakia, Austria, Hungary, Y ugoslavia, Romania, Poland

UAC Board

United Africa Group: British West Africa, Middle East, French West Africa, British East Africa, Liberia Portuguese and Spanish Guinea, Morocco

Figure 2.1 Unilever’s organisation chart, 1938.

interwar years and combined co-ordinated control with a certain decentralisation.49 In the multi-divisional company the organisation was split into a number of quasi-autonomous product divisions, which were headed by its own management and organised as a relative autonomous economic entity.50 The multidivisional structure implied at least two levels of general management: the operational management was put in the hands of the managers of the divisions, while a group of generalists were freed from operational problems to focus on long-term targets, investment strategies and performance of the business as a whole.51 Since 1933, after the Unilever’s Board had decided that the members of the Special Committee should concentrate on the overall monitoring, planning and resource allocation of Unilever, at least two levels of management were created. The Unilever Group, however, was not organised according to product divisions. Only the British business was – by way of exception – grouped by products, which originated in 1926 in Lever Brothers, and could be called a multidivisional organisation. Chandler, however, did not conduct primary research into Unilever and was therefore completely dependent on Charles Wilson’s study, which is not particularly clear about the company’s organisational structure. He interpreted Wilson’s

Unilever in the 1930s

23

study to mean that Unilever had a multidivisional form in its home British market, while retaining geographical management elsewhere. Unilever’s geographic-division organisation, with autonomous geographical divisions which all dealt with the same range of products, he interpreted as a ‘variance of the multidivisional form’.52 The state of decentralisation, however, outside Britain was such, that the use of the term multi-divisional for Unilever as a whole is misleading. The Unilever Group was organised along the lines of national companies rather than functional divisions. In the 1930s Unilever was a – typically European – holding company, which was a conglomerate of hundreds of operating companies, organised in a complex legal structure (see Figure 2.2 and Appendix). The multidivisional structure was hardly known in Europe.53 Nationally distinctive holding companies were common at the time. Unilever was a conglomerate because it rapidly diversified into several unrelated business areas as a result of the merger and a large number of acquisitions during that period.54 In the 1930s the national subsidiaries enjoyed relative autonomy. For example, Van den Bergh’s and Jurgens’ Fabrieken NV managed the Dutch businesses, except for soap. The company was quoted on the Amsterdam stock exchange next to Unilever NV. Unilever’s German business, again except for soap, was managed by the Margarine Verkaufs Union (MVU). The United Africa Company was managed by the UAC Board in London almost autonomously from Unilever, as a company within the company. Christopher Barlett and Sumantra Ghoshal give various reasons why Unilever developed into a geographically decentralised organisation before the Second World War.55 First, after William Lever’s death in 1925 several important changes were made with respect to Lever Brothers’ overseas operations. H.R. Greenhalgh, the first chairman of the Oversees Committee, had changed Lever’s centralised management style into rather decentralised style, based on local autonomy of the overseas managers. Second, branded packaged goods companies like Unilever had to respond to different market conditions. Differences in consumer tastes and preferences, market structures and (product) legislation made product differentiation from country to country necessary. Third, the rising trade barriers during the 1930s reinforced the trend towards decentralisation. Unilever’s larger national companies became highly integrated businesses, often with their own local brands and products. Nevertheless, this trend towards decentralising did not mean that the Unilever Group was not rationalising its operations during the 1930s. It closed down businesses where necessary, especially in Britain and Germany. It amalgamated and integrated businesses as far as possible in Europe. The European experience, however, was completely different from the American experience on which Chandler’s generalisations are based – in the 1930s Unilever still depended for the greater part on sales in Europe.56 There was no single European market, like the American market: there were only national markets, which became increasingly closed off from each other. For that reason alone it was impossible to use one business strategy for all countries in Europe. On the contrary, national

Interests in British Empire

Van den Bergh en Jurgens Fabrieken NV (Netherlands)

Marga NV Saponia NV (Germany)

Same boards Same dividends

Figure 2.2 Unilever’s holding company structure, 1938.

The United Africa Company Limited, London

British companies

Unilever & Lever Brothers Ltd

Mavibel (Overseas)

Lipoma NV (Switzerland and Italy)

Wemado NV (Eastern Europe)

Unilever & Lever Brothers NV Rotterdam

Unilever in the 1930s

25

management played a major role in this period. Unilever was centralising where possible, for example, in matters of finance, capital expenditure, raw-materials supply, global strategy, international brands and patents. Simultaneously, Unilever was decentralising where necessary, for example as regards national markets, national brands, legal affairs and staff matters. By September 1939, nonetheless, there was more unity inside the company than had been the case when Unilever was first formed ten years earlier.

Geographical expansion Another growth strategy, next to vertical and horizontal integration, that was followed by Unilever’s predecessors had been geographical expansion. In the literature on multinational companies two main types of international investment are distinguished.57 First, portfolio investment, which involves the acquisition of securities issued by foreign institutions without any control over or participation in their management. Second, foreign direct investment (FDI), whose main feature is the purchase of power to exert some kind of control over the decisionmaking process of the unit being invested in.58 Multinationals engage in FDI either through the acquisition of all (or part) of an existing foreign company or by making a greenfield investment in a foreign country.59 According to these definitions Unilever’s predecessors were multinational companies as early as the late nineteenth century, when both Van den Bergh and Jurgens had established factories in Germany. In Schicht’s case, the company had automatically become a multinational after the fall of the Austro-Hungarian Empire. William Lever had invested in foreign companies as a result of a vertical integration strategy, in his search for raw-materials supplies and new markets. Therefore, after the formation of Unilever in 1929, the company had much experience in the management of foreign direct investment. During the 1930s and 1940s portfolio investment would gain importance as a form of Unilever’s international activities when foreign direct investment became either too risky or even impossible in some regions. Although Jones believes that Chandler is exaggerating by stating that British foreign direct investment during the interwar years was primarily caused by tariffs, he does agree that multinational company strategies were defensive rather than aggressive.60 Unilever’s motives behind foreign direct investment decisions taken in the 1930s were indeed often defensive and related to hostgovernment pressures, as the German case clearly demonstrates (see Chapter 3). Unilever’s investment strategy in the United States was in the first place determined by competitive behaviour in relation to Procter & Gamble and Colgate Palmolive and the attractiveness of the North American market. In addition, political pressure on the European continent forced the company to refocus its international investment strategy. In his address to the shareholders’ meeting in May 1939 chairman Paul Rijkens observed that without neglecting its interests on the European continent, Unilever’s policy was to concentrate increasingly on areas of the world where

26

Unilever in the 1930s

‘the atmosphere is less clouded by political factors’.61 Profit opportunities likely to be lost in Central Europe (Germany in particular) were replaced by the development of new prospects elsewhere. Consequently, in the late 1930s Unilever’s business in the United States was expanding. The edible fat Spry was a record-breaker and one of the leading brands. Soap brands Rinso, Lifebuoy and Lux were widely known. In 1939 the business bought two soap factories in Baltimore and it was building a new headquarters in Boston. In addition, Unilever was interested in buying the majority of the shares of the (American) Lipton Tea Corporation, of which Van den Bergh had already acquired 25 per cent in 1927.62 In South America, especially in Argentina and Brazil, it was growing in toilet preparations, including perfumes. In Africa Unilever’s interests were dependent on the United Africa Company (UAC) in which Unilever then owned 80 per cent of the shares (a little later it would acquire the other 20 per cent). These interests were extensive, covering the whole of British Africa, French West Africa, Liberia, Portuguese and Spanish Guinea, East Africa and Morocco. In the Belgian Congo Unilever was granted a concession by the crown to produce palm oil and palm kernels. In 1938 the agreement with Belgium was adapted; from that moment Unilever was allowed to set up plantations. In the Union of South Africa Unilever had increasing sales in the edible fat business and its market share in soap was nearing 80 per cent. South Africa offered many expansion possibilities for Unilever. For six years the country had a budget surplus. The high gold price and ‘the presence of both Dutch and British elements’ made this country most convenient for Unilever.63 In Asia profits and sales increased, particularly in the British Indies and Burma. And 1938 was one of the best years for the China Soap Company. Had hostilities with Japan not broken out in the middle of 1937, sales and profits in China would have been even better.64 Although the company was searching for other possibilities at the end of the 1930s – it operated over 500 businesses in more than 40 countries – Britain, the Netherlands and Germany still formed Unilever’s stronghold and operating base. Especially the Netherlands and Britain, the parent countries, were of great importance as regards both production and the management of the company.

Table 2.1 Sales of margarine, edible fats and soap in Unilever’s most important markets in 1938 (in ’000 metric tons)

Britain Germany The Netherlands France Belgium Czechoslovakia Source: UAR, His 114, 1091.

Margarine and fats

Soap

192.1 252.7 67.3 28.5 37.3 32.5

263.0 30.0 43.1 54.0 30.6 21.8

Unilever in the 1930s

27

Furthermore, the home markets were of substantial size (see Table 2.1). For example, in 1939 the Dutch had the highest soap consumption in the world: 10.8 kilos per head of which Unilever had a market share of more than 40 per cent. In the Dutch margarine business Unilever even had 90 per cent of the market. In 1938 in Britain Unilever had a share of about 50 per cent of all soap sales.65 British annual soap consumption per head amounted to 9.8 kilos.66 Outside of the home markets, Germany was Unilever’s most important market for margarine. In spite of the restrictions that the Nazis had imposed on margarine production Unilever was still selling 33 per cent of all its margarine and fats in Germany in 1938, although this figure was down from 44 per cent in 1930.67 Unilever did not have a large share of the German soap market; it sold only 30,000 tons out of a total of 510,000 tons (6 per cent).

Competitors On the edible-fats market Unilever did not have to compete with any other large oligopolistic firms. Although there were hundreds of other margarine companies in Europe, and though they had sometimes formed associations, like in the German case, they could never exercise as much power as Unilever did. The main competition, though, came from butter, which was produced by millions of farmers world-wide and was often supported by government policy during the agricultural crisis of the 1930s. The agrarian lobby remained a formidable opponent during the whole period. In Nazi Germany, for example, the Minister of Agriculture Richard Walther Darré, according to his ‘blood and soil’ ideology, favoured the manufacturing of butter above the production of margarine.68 The main competition in the soap business, however, came from other large firms in the world, such as Colgate-Palmolive-Peet, Procter & Gamble and Henkel. Although there were still many small soap manufacturers Unilever’s main markets had become more and more oligopolistic.69 On the American soap market Colgate-Palmolive-Peet and Procter & Gamble were Unilever’s main competitors. Colgate-Palmolive-Peet had entered the Dutch and British markets in the 1920s with its green toilet soap Palmolive based on olive oil, but remained one of the smaller soap companies there until after the Second World War.70 In 1930 Procter & Gamble (P&G) had entered the British market with the acquisition of Thomas Hedley Limited of Newcastle. The acquisition had been an isolated deal. Basically, P&G focused on its domestic US market at the time.71 However, the rapid expansion of Lever Brothers’ share of the US market in the 1920s (8.1 per cent in 1929) had been a major threat to America’s leading soap manufacturer P&G.72 In reaction to this threat the American company challenged Unilever on its own home market with the acquisition of Hedley’s. Another reason why P&G had entered the British market was to supply exports to Belgium, although it took until 1954 before it expanded into the European continent.73 Through an aggressive advertising campaign in Britain P&G captured a large market share at the expense of Unilever during the 1930s. In 1929 Unilever’s share of British soap sales had been 60 per cent, compared with

28

Unilever in the 1930s

Hedley’s share of only 1.2 per cent. In the 1930s P&G reorganised Hedley’s original plant and built two new factories in Britain. By 1938 Hedley’s market share increased to nearly 15 per cent, while at the same time Unilever’s share dropped to 51.5 per cent.74 Hedley’s competed against Unilever’s famous brands (Sunlight, Persil, Rinso, Lux and Vim) with its own Fairy, Oxydol, Sylvan and Mirro. In the 1930s, however, the largest threat to Unilever on the continent came from the German family firm Henkel which owned the manufacturing rights for Persil throughout a large part of Europe. This most famous and successful soap powder brand had been introduced by Henkel in 1907 as the first self-acting washing powder. Persil’s name came from the contraction of its main components: perborate (an oxygenous bleaching agent) and silicate (a salt).75 Until today, however, Unilever owns the manufacturing rights for Persil in Britain (and after the First World War in France). In 1909 the British firm Crosfield had received the manufacturing rights for Persil in the British Empire. Through Lever’s acquisition of Crosfield in 1919 Unilever had eventually become the owner of the Persil brand in the British Empire. The perborate powder trade in Germany, however, was completely in the hands of Henkel. In the 1920s Henkel and Unilever had made an agreement about the division of the perborate powder trade in Europe. Unilever’s soap powder brand Radion, as a consequence, was not marketed in Germany before the Second World War. Henkel had also followed the growth strategy of vertical and horizontal integration. Next to its soap output its products included water glass, fatty acids, soda, adhesives and glycerine.76 During the First World War glycerine production had expanded rapidly as a key ingredient for explosives.77 Henkel would even become Europe’s largest glycerine producer. After the First World War Henkel’s growth in Germany was followed by a geographical expansion. By 1934 it built a Persil plant in Jutphaas (near Utrecht) in the Netherlands and one in Belgium. Especially Henkel’s factory in the Netherlands was a threat to Unilever on its largest continental soap market (Unilever had about 45 per cent of the Dutch soap trade).78 But also in other European countries Unilever’s Radion met with fierce competition from Henkel’s Persil. In Denmark and Sweden Henkel had the largest share of the soap-powder trade and in Norway it had obtained a government licence to set up a plant. In the 1930s Henkel also held a strong position in Central and Eastern Europe where its competitor was Unilever’s Georg Schicht AG from Czechoslovakia.79

Performance in the 1930s A company’s performance can be assessed in various ways.80 Often business analysis is restricted to financial performance. Size is measured then by capital employment, turnover, staff, total assets, etc. As profits in themselves have no meaning, they are often related to size. Therefore profitability is commonly measured by rates of return (for example, return on equity or holding return). Another indicator of business performance is related to the survival of a

Unilever in the 1930s

29

company over the long term.81 As the survival of Unilever’s business during the war is the issue of this study, this aspect will not be specifically addressed in this section. Nor will other aspects of performance, such as competitiveness (market share, innovativeness, etc.) and reputation, be discussed here, because there are no reliable and systematic figures for this period. As a result this section is mainly limited to Unilever’s financial performance in the 1930s. Making a financial analysis of Unilever in the 1930s, however, is still an elaborate process. First, Unilever was a relatively late adopter of consolidated statements, compared with for example US companies like Standard Oil. Though the financial reports did contain some consolidated figures, the annual reports are not consolidated in a modern sense. Second, Unilever’s valuation of its assets was rather conservative, as was the case with many companies in this period. The published balance sheets often understated the company’s financial position. For example, shares in subsidiary companies, the major asset on Unilever’s balance sheet, were only valued at cost.82 This enabled the board to make undisclosed transfers from the profit and loss account to internal reserve funds, i.e. secret reserves.83 Third, in the 1930s profits from countries with restricted currencies, like Germany, were included in the results only to the extent that their equivalent value had become available outside those countries in Dutch guilders or sterling.84 As a consequence not all profits from Germany were included in the aggregate net profits shown in Unilever’s annual reports in the 1930s. Nevertheless, it is possible to reconstruct something like consolidated figures for the late 1930s by adding together the accounts of NV, Limited and their major subsidiaries in Britain and the Netherlands. Though the figures are not exact, this method does provide a satisfactory indication of Unilever’s employment of capital and its net profits world-wide. After the ‘New Equalisation Agreement’ of 31 December 1937 the British parent company was called Lever Brothers & Unilever Limited.85 In order to retain continuity and unity the Dutch parent was renamed Lever Brothers & Unilever NV.86 (In this study – for practical reasons – I use the present name Unilever.) From 1937 the capital of Lever Brothers and Unilever was amalgamated into a new British parent company called Lever Brothers & Unilever Limited. If one adds to the capital employment of the latter the figures of another major British subsidiary, Van den Bergh & Jurgens Limited, which had a separate stock market listing, an overall impression of the capital that was employed by Unilever in Britain during the 1930s can be established. As a result, for example, Unilever’s total capital employment in 1939 in the British Empire alone added up to an amount of £98 million. Until 1937 the major subsidiaries of the Dutch holding company had been Anton Jurgens Vereenigde Fabrieken NV, NV Hollandsche Vereeniging tot Exploitatie van Margarine Fabrieken (Hovema) and Van den Bergh’s Fabrieken NV. The first two were liquidated in 1937 and the latter changed its name into Van den Bergh & Jurgens Fabrieken NV.87 The sum of the capital employed by NV and its major subsidiaries gives an impression of the capital that was employed by Unilever on

30

Unilever in the 1930s

Table 2.2 Estimated total capital employed by Lever Brothers & Unilever NV and Limited, 1930–1939 (in million pounds sterling) Year

Total capital

Year

Total capital

1930 1931 1932 1933 1934

117.0 132.4 138.0 141.8 145.8

1935 1936 1937 1938 1939

150.3 148.6 147.9 151.0 155.8

Note UAR, His 115, Lever Brothers & Unilever NV and Limited Annual Reports and Statements of Account 1930–1939.

the continent and outside the British Empire during the 1930s. For example, in 1939 NV employed approximately £57 million. If Limited’s total capital employment of £98 million sterling in 1939 is added to NV’s total capital, the outcome is a total capital employment of over £155 million. According to Youssef Cassis’ comparative study on European big business Unilever was Europe’s largest company measured by share capital in 1930.88 Cassis compares assets, equity and labour employment figures of the largest companies in Britain, France and Germany. His figures, however, have to be treated cautiously. At the time in Europe holding companies did not produce consolidated figures, which makes it quite difficult to calculate for example total share capital figures of the Anglo-Dutch groups like the Unilever and Royal Dutch/Shell. Cassis’s comparison at least shows that after the merger Unilever was one of the largest manufacturing companies in Europe at the time. In Britain there were only a few companies that came anywhere near this level of share capital, i.e. Imperial Chemical Industries, Imperial Tobacco Co., Courtaulds, Anglo-Persian and Shell Transport and Trading.89 Other large British companies were much smaller. On the continent Unilever’s size was incomparable to that of any other firm at the beginning of the 1930s, with the exception of Royal Dutch, IG Farben and Vereinigte Stahlwerke. Table 2.3 shows a list of Europe’s largest companies and compares total share capital and total assets. The published figures of Shell and Royal Dutch are combined. Measured by share capital Unilever was Europe’s largest company after its formation in 1930. However, if the ranking would be according to total assets the capital intensive Imperial Chemical Industries would be on top. The figures of Royal Dutch/Shell Group, however, are a flagrant underestimation. The Dutch parent owned 60 per cent of the shares and the British 40 per cent, but it was only in 1951 that the Group started to consolidate the value of its main subsidiaries. According to Joost Jonker, who has done extensive research into Royal Dutch/Shell, the Group size in 1930 was comparable to the size of Standard Oil Company (New Jersey) measured by sales, production and refinery runs.90 The latter did consolidate its capital figures at the time in contrast to the Royal

Unilever in the 1930s

31

Table 2.3 Largest manufacturing firms in Europe, 1929–1930 (in million pounds sterling) Company

Registered office

Share capital

Total assets

Unilever Group Imperial Chemical Industries Royal Dutch/Shell Group IG Farben Imperial Tobacco Co. Vereinigte Stahlwerke Courtaulds Anglo-Persian

Netherlands/Britain Britain Netherlands/Britain Germany Britain Germany Britain Britain

93.3 76.7 73.2 55.0 50.9 40.0 32.0 23.9

117.0 125.1 105.4 104.5 76.5 107.3 46.7 44.3

Sources: Youssef Cassis, Big Business: The European Experience in the Twentieth Century (Oxford: OUP, 1997) 240–266; Royal Dutch Company for the Working of Petroleum Wells in the Netherlands Indies, Report for 1930; Lever Brothers & Unilever NV and Limited Annual Reports and Statements of Account, 1930.

Dutch/Shell group. Share capital of Standard of New Jersey amounted to £166 million in 1930 and total assets amounted to £364 million.91 According to Peter Hayes IG Farben was ‘the largest company not just in Germany, but in all of Europe and, by most indices, the fourth largest in the world behind General Motors, United States Steel, and Standard Oil of New Jersey’.92 The figures Hayes nonetheless presents do not prove his statement. More than 100 plants and mines belonged to the core firm in 1929 with a total book value of the company’s share capital of 1.1 billion Reichsmarks (£54 million). Most likely these figures were again an understatement of the real value of the chemical concern at the time, but still they were smaller than the published, and underestimated, figures of Unilever and Royal Dutch/Shell. In 1930, after the formation of Unilever, a combined profit and loss account was added to the combined balance sheets. These combined statements were mislabelled as ‘consolidated statements’. Nevertheless, in 1930 Unilever began to publish information about six of its major operating subsidiaries. From then on a summary of the balance sheets of the principal subsidiary and associated companies was published as well as an appropriation of profits of these companies. From the beginning Unilever reported total net profit for the two parent companies Limited and NV. Again, however, this profit was not a consolidated figure. From 1937 Unilever published a consolidated statement for Limited and NV and for all subsidiary and allied companies in which either of these companies directly or indirectly held 50 per cent or more of the ordinary capital. Total net-profit figures in Table 2.3 are calculated on the basis of the average exchange rates that Unilever used for the payment of dividend to its British and Dutch shareholders. Calculations of Unilever’s net profit in the 1930s, however, need to be treated with caution. In view of the large number of fluctuating currencies involved and Unilever’s accounting conventions in this period, any consolidated figures expressed either in sterling or Dutch guilders could only be regarded as approximate. Nevertheless, the picture presented in Table 2.3 is

32

Unilever in the 1930s

compelling. Net profits remained stable in this era despite the economic and political crisis in the 1930s. From 1937 onwards, in fact, the Unilever group almost doubled its net profits. Indeed, 1939 was a peak year. Table 2.4 shows the profitability, defined as the ratio of profits to total capital employed, during the 1930s. It puts the profit figures of Table 2.3 in the context of capital employed by the company and clearly shows that Unilever’s profitability rose in last years before the war. Furthermore, Table 2.3 demonstrates clearly a big shift in the profitability of NV and Limited at the expense of NV. From 1933 it became almost impossible to transfer profits from German subsidiaries to NV in Rotterdam and, simultaneously, the North American business was booming. As a result London had to transfer profits to NV in favour of the shareholders and this meant double taxation. By redistributing the assets of the two groups at the end of 1937, the two had to become about equal measured by capital employment and profits.93 That is why, for example, the highly profitable North American business came under the control of Rotterdam, as did virtually all the assets outside the British Empire. Nevertheless, despite this redistribution Limited by far outranked NV as regards profits in the second half of the 1930s. In addition, Unilever possessed vast reserves (apart from the ample secret reserves). In 1938, the last normal year before the war, more than £5 million was absorbed by the dividends on preference capital. Another £2.5 million had been Table 2.4 Total net profit of Lever Brothers & Unilever NV and Limited, 1930–1939 (in million Dutch guilders and sterling) Year

1930 1931 1932 1933 1934 1935 1936 1937 1938 1939

Net profit Unilever NV Dutch f

Net profit Unilever Ltd. £ sterling

Unilever’s exchange rate

Total net profit £ sterling

30.0 30.0 18.4 14.0 14.7 13.6 15.5 25.0 28.9 31.8

1.8 1.7 2.1 1.6 1.8 2.4 3.5 7.1 6.7 7.6

£1 = ƒ12 £1 = ƒ9.60 £1 = ƒ8.47 £1 = ƒ7.68 £1 = ƒ7.20 £1 = ƒ7.20 £1 = ƒ8.97 £1 = ƒ9* £1 = ƒ9 £1 = ƒ9*

4.3 4.9 4.3 3.5 3.8 4.3 5.2 10.0 9.9 11.2

*

Sources: UAR, His 115, Lever Brothers & Unilever NV and Limited Annual Reports and Statements of Account, 1930–1939. As a consequence of war the annual report of 1939 was published in July 1940, after the occupation of the Netherlands. It had not been possible to prepare a consolidated statement of the two companies. The exchange rate used to calculate the consolidated net profit in 1939 is therefore purely theoretical. Note * To make an account comparison possible with the figures of the Dutch parent company Unilever used a yearly fixed exchange rate. For example, in 1939 Dutch guilders had been converted to sterling at a fixed rate of £1 = ƒ9.

Unilever in the 1930s

33

Table 2.5 Profitability* of Lever Brothers & Unilever NV and Limited, 1930–1939 Year

Profit ratio

Year

Profit ratio

1930 1931 1932 1933 1934

3.7 3.7 3.1 2.4 2.6

1935 1936 1937 1938 1939

2.9 3.5 6.7 6.6 7.2

Note * Profitability is defined as the ratio of profits to total capital employed. Table 2.4 is based on the figures of Table 2.2 and Table 2.3.

distributed as dividend on ordinary capital, but only after £1.3 million had been appropriated for the general reserves, reserves against shares in subsidiary companies and reserves for contingencies. NV increased the general reserve to £11.6 million (ƒ105 million) by allocating £0.3 million (ƒ2.5 million) from the profits. In Limited the general reserve remained unchanged at £10 million.94 Consequently, Unilever had various possibilities for internal financing. The company was famous for financing its acquisitions by cash rather than debt. There was almost no loan capital inside the company. Unilever’s image since its creation was therefore one of a bedrock of certainty in a risky and changing world. Before consolidated statements were well established – during the war in Britain by Limited – the company provided shareholders with segmental financial information. As early as the 1920s D’Arcy Cooper had presented financial information, like total sales figures, at Lever Brothers’ annual general meetings of shareholders. Until 1939 D’Arcy Cooper reported the global sales turnover, the breakdown of profits by eight or more product lines and by up to eight geographical regions.95 The chairman’s addresses to shareholders at Unilever’s general meetings in London therefore provide extra information about the company’s financial position in the late 1930s.96 In May 1938 D’Arcy Cooper gave an account of the global Unilever sales turnover within the context of the world economy. In 1937, according to the chairman, industrial activity, assisted by armament expenditure, continued at a high level in the majority of countries. The statistical position of most raw materials had been favourable. World consumption in 1937 had been higher than ever before, and so far there had not been any considerable reduction in purchasing power. The framework of the economic structure, as distinct from much of the political superstructure, appeared sound enough. There were, according to D’Arcy Cooper, ‘no technical reasons why economic conditions should further deteriorate’.97 The trade of the two parent companies over 1937 showed a very healthy expansion. The combined value of Unilever sales reached a record figure of £190 million, which was 12 per cent more than the highest figure previously

34

Unilever in the 1930s

attained. This was partly a result of an increase in tonnage, and partly a result of higher prices. Extensive advertising had helped to bring about this result. Soap reached a total tonnage record of almost 850,000 tons world-wide. The greatest progress had been made in the USA, with the British Empire coming in a close second.98 The turnover of margarine and edible fats, the other core business, was only just maintained. A decrease in the Central European countries had been offset by increases in the United States and the British Empire. The value of Unilever sales of soap and margarine in 1937 had been exactly the same, at £42 million each. In his 1939 address D’Arcy Cooper described 1938 as a year of a succession of crises and of international tension, a year when ‘political factors largely had dominated the course of the business’.99 Economic activity, according to him, had become so completely subservient to political and military demands that it was increasingly difficult to distinguish economic trends from their political background. It was impossible to determine how far the rapid decline in the first part of the year was a result of international tensions and how far it was attributable to economic developments. D’Arcy Cooper nonetheless concluded that Unilever seemed ‘relatively immune from economic depression and political disturbances’.100 The aggregate profit of £12.2 million was only a reduction of less than half a per cent, measured as a percentage of the total issued capital. Years before the Unilever Board had foreseen the adverse effects of currency restrictions in Central Europe and had taken steps (apparently successfully) to replace earning capacity, which might be lost on the continent by developing new earning capacity elsewhere in the world. In 1939 D’Arcy Cooper gave an account of the global sales turnover only in physical quantities (tons) instead of monetary amounts (sterling or Dutch guilders) as he had done the year before. Soap sales had broken all previous records for the seventh year in succession and amounted to 880,000 tons. Furthermore, Unilever had an 11 per cent market share of the combined consumption in all other countries in the world in which it was trading, covering a population of 1.5 billion. World consumption of margarine and edible fats had risen by 61,000 tons; however, Unilever sales had gone up by 81,000 tons. Thus the company’s world market share had grown. But per capita consumption had not yet reached the 1929 figure, due to government restrictions on the sale and manufacture of margarine. Furthermore D’Arcy Cooper disclosed Unilever’s sales turnover and gave a breakdown of this figure.101 In 1938 total sales turnover had amounted to £200 million. Of this, Unilever employees received £25 million (12.5 per cent), shareholders £12.2 million (6 per cent) and governments £25.8 million (13 per cent). The rest represented costs of materials and expenses. In addition, the chairman remarked that one should bear in mind the highly vertically integrated structure of the Unilever business and he stated: If Unilever had included in the turnover not merely the sale of the finished product to the ultimate consumer, but also the sale of intermediate products,

Unilever in the 1930s

35

from plantations to crushing factories, from there to refining plants, thence to the hardening units and finally to the soap and margarine factories, and if it had also included the supplies from paper factories, wood factories, printing works and the like, the turnover would have reached ‘astronomical figures’.102

Conclusions In spite of, and not thanks to, the depression Unilever was established at the beginning of the 1930s and performed exceedingly well in that decade. The latter inspired its chairmen to note the company’s relative immunity from economic depression and political disturbances. At the end of the 1930s, on the eve of the Second World War, Unilever made the highest profits ever. Also worldwide sales reached unprecedented heights. In addition, these expanding sales were mainly in new markets, on other continents, far from the political risk of the European continent, i.e. (North) America and Africa. This had been the result of Unilever’s business strategy in the late 1930s, responding to the everincreasing tensions on the continent. Although Unilever did not have the multidivisional form that Chandler attributes to the firm, it certainly went through a managerial revolution. Europe’s largest conglomerate, which operated over 500 companies world-wide, was managed by professionals like Paul Rijkens and D’Arcy Cooper. Nevertheless, the original families, Van den Bergh, Jurgens, Leverhulme, Hartog and Schicht, were still well represented on Unilever’s Board of Directors. In addition, until 1938 the founding families owned the important Special Ordinary Shares, which entitled them to elect the members of the Board. Although Unilever centralised its business as far as possible, there was still much that was not managed from above, from the London headquarters. Much was still decided on an operating level or national level. This had been the result of Unilever’s own history, but also a result of the development of more and more European closed economies, in which it would be impossible to operate top-down, as a multinational that was managed entirely from its corporate centre. Things had to be decided on the spot, taking national circumstances into account. Under these conditions Unilever’s organisation, which was centralised where possible and decentralised where necessary, performed stunningly well. Alongside the pros of Unilever’s conglomerate structure in the European context in the 1930s, there were also cons. Probably the greatest threat to Unilever was its possible disintegration into its constituent companies. From the history of Unilever’s formation it can be easily demonstrated that mainly the Schicht group could be a threat to the unity of the company if it came under external pressure. Their involuntary association with the Margarine Union in 1928, and a little later Unilever, could constitute a future threat to the company. Their national background, coming from the Sudetenland in Czechoslovakia, would not contribute to Schicht’s loyalty to an Anglo-Dutch firm during a war with Germany.

3

Unilever and Nazi Germany

On 30 January 1933 President Paul von Hindenburg appointed Adolf Hitler Chancellor of Germany; two months later the Nazis established a dictatorship. Economic problems in Germany nonetheless were immense: unemployment figures were over eight million and the country was short of foreign currency. As a result, Hitler needed the conservative forces in Germany to maintain power. Industrialists and bankers were won over by the promise of a strong national economy without trade unions. The army was persuaded by the promise of rearmament and political stability. The support of the ordinary German was secured by a so called recovery policy, which actually had started two years before the Nazis came to power. As from 1934, however, the Nazis economised on local work creation programmes for the benefit of an unprecedented increase on military spending. From 1933 to 1935 military spending increased from less than 1 per cent to almost 10 per cent of Germany’s national income.1 By 1936 the German economy was booming, unemployment had almost disappeared and industrial production peaked. The new regime had won a great deal of support by the time the Four-Year Plan was made public.2 Rearmament under Schacht had been only limited compared with the plans that were launched by Hermann Göring on a party rally in September 1936.3 In the next four years Germany’s production capacity had to be completely directed towards the building of a significant offensive strike force. In 1938 the Wehrmacht accounted for 80 per cent of all goods and services purchased by the German Reich.4 The rapid reallocation of Germany’s production was realised through extensive government intervention in the economy: foreign trade, foreign currencies, national prices, production and the allocation of raw materials were put under strict bureaucratic control. Business was made subordinate to the regime’s objectives of national autarchy and rearmament. Simultaneously, national companies profited tremendously from the rise of domestic demand, the end of foreign competition, rising prices and static wages. In the course of time, German business built up gigantic financial reserves, which were to be used for huge investments.5 Foreign owned multinational companies, like Standard Oil, Royal Dutch/Shell, General Motors and Unilever were put under the same regulations as their German counterparts. In general, they had the same advantages and disadvantages of the system, but in addition they were all subject to

Unilever and Nazi Germany 37 exchange controls that made transfers of their large profits to the home countries extremely difficult. The main issue of this chapter is Unilever’s position in the Third Reich in the 1930s. A short historical outline will be provided to understand the company’s unprecedented size in Germany, which resulted from the fact that Unilever’s predecessors had established two margarine factories in the German Reich. The next section explains and compares the company’s huge foreign direct investment level in Germany at the time. Then business obstacles in Nazi Germany and Unilever’s strategy for solving these will be explored. Especially currency restrictions threatened the multinational company. The ensuing section deals with various acquisitions in Germany in the second half of the 1930s, among them also Jewish companies. Next, Unilever’s increasing role in Germany’s raw-materials supply is explored. After Göring’s establishment of the Four-Year Plan in 1936 Unilever offered to build a whaling fleet to supply (mainly its own) margarine factories in Germany with train-oil. The final section explores the increasing difficulties that the company encountered after the ‘Aryanisation’ of bigger industrial companies was enforced as from 1938 and how the company solved the complicated legal issue.

Unilever in Germany The new factories established by Jurgens and Van den Bergh had brought the first basic alteration in the position of the German margarine industry since 1888. For the first time the production of margarine on a real industrial scale was made possible in factories which had a relatively high capacity and which for those days were equipped in a very modern way. Through economies of scale Van den Bergh and Jurgens created a cost advantage over smaller competitors. Aided by their experience in the Netherlands and Britain, they were able not only to improve the quality of margarine considerably, but also to standardise it to a much greater extent. In combination with up-to-date marketing methods the total turnover of margarine in Germany, and their share thereof, increased considerably. By 1913, after a 25 year period, total German production had risen to 200,000 tons annually. Germany’s defeat in the First World War and the subsequent inflation had made (cheap) margarine an even more desirable commodity and in consequence its production increased further. In 1928 a total figure of 440,000 tons was reached, culminating in 1932 in a total output by the German industry of 500,000 tons. When the Nazis came to power, however, restrictions were imposed on all margarine producers so as to protect German farmers, who had been important electorate for the Nazi party in 1933. As a result margarine production started to decline in Germany in the 1930s. By 1939 total margarine output in Germany had fallen to 365,000 tons annually.6 Table 3.1 shows Unilever’s sales in Germany in relation to the total margarine production. Although the company’s sales decreased dramatically in Nazi Germany during the 1930s, its relative importance in the market remained fairly stable at around 60 per cent during that period.

38

Unilever and Nazi Germany

Table 3.1 Unilever’s sales of margarine and fats in Germany, 1932–1938 and Unilever’s share in Germany’s total production (in 000 metric tons) Year

Unilever’s sales

German production

Unilever’s share (%)

1932 1933 1934 1935 1936 1937 1938

344 268 247 254 268 231 252

500 422 394 418 436 380 420

68.8 63.5 62.7 60.8 61.4 60.8 60.0

Source: His 114, 1091, Sales of Margarine and Margarine Production.

During the 1920s other reasons for foreign direct investment had become important: competition behaviour, market attraction, acquisition of competitors and mergers.7 Up to 1927 both Van den Bergh and Jurgens had obtained additional margarine factories either by building them or by acquiring competitors. Such acquisitions had then been accompanied by reconstruction and modernisation of the factories so obtained. Or in some cases the acquired factories had been shut down and only the competing brands and market shares were utilised. Because of their more up-to-date methods of production, economies of scale and scope and greater experience in the marketing of branded products, Jurgens and Van den Bergh had in effect become the leading margarine manufacturers in Germany. In 1928 Centra and Schicht, leading companies in the oils, fats and soap business in Central Europe, had also come into the Margarine Unie. In 1929 margarine and meat company Hartog of Oss, which had also started up margarine factories in Germany, had joined the Margarine Unie. As a result, Margarine Unie NV’s interests in Germany had increased further. In addition, in 1929 the company acquired 50 per cent of the share capital of two large German margarine corporations: Fritz Homann A.G. in Dissen and Schmitz & Loh A.G. in Duisburg.8 The Margarine Unie nonetheless did not participate in the management of these companies. By 1930, following various acquisitions, mergers and joint-ventures, Unilever’s share in the margarine industry in Germany stood at about 69 per cent. In Germany alone it had 25 margarine factories in operation.9 Although Unilever had a dominant position in the German market there were still other (smaller) producers. In 1935 the number of independent margarine producers in Germany amounted to 122 (as compared with 200 ten years before). By then Unilever’s share had fallen to 60 per cent. In addition, margarine was not the only edible fat. The greater part of fat consumption in Germany was accounted for by competing animal-fat products like bacon, lard, cooking fats, and butter. In the 1928–1932 period the share of margarine in Germany’s total fat supplies amounted to 27 per cent. In the 1933–1939 period, when domestic butter was

Unilever and Nazi Germany 39 favoured by the Nazis, margarine’s share would even fall to 24.6 per cent.10 In conclusion, Unilever was big in margarine in Germany; however, there was still competition, mainly from animal fats produced by German farmers. After the First World War Jurgens and Van den Bergh had also integrated vertically in Germany. Since the 1920s they had acquired and operated their own oil mills, refineries and hardening plants to secure a regular supply of raw materials at reasonable costs. Some of these facilities were a physical part of their margarine factories, the others had supplied a greater or smaller part of their output to these factories or to other independent producers. After its formation in 1930, therefore, Unilever owned refineries which were part of its margarine factories at Hamburg, Mannheim and Cleves. It owned an oil mill in Spyck, a refinery and hardening plant at Emmerich and a hardening plant at Brake.11 In addition, Unilever had majority interests (of about 90 per cent) in companies which operated an oil mill and refinery at Hamburg (Thörl), Mannheim (V.D.O.), and Bremen (B.B.O.). The capacity of the processing resources was enough to provide for the needs of peak periods of output of finished products. In so far as the production of these facilities was not required for Unilever’s own margarine factories, it was sold on the market in and outside Germany.12 By 1939 the output of Unilever’s oil mills, refineries and hardening plants in Germany amounted to 173,000 tons of crude oil, which was about 35 per cent of the total oil production at the time.13 For administration, taxation and other reasons the German factories were not operated as branches of the Dutch parent firm, but by specially established German holding companies whose shares were held by the Dutch parent company. In 1920 Jurgens had organised its German interests into the Deutsche Jurgens Werke AG in Hamburg and Van den Bergh had combined its German companies into the Generaldirection Van den Bergh AG (Gediva) in Berlin. In 1924 its name was altered to Van den Bergh Margarine AG.14 The transfer of the ordinary shares of Jurgens and Van den Bergh to the Margarine Unie NV in 1927 had meant that all the factories and other interests in Germany that were directly or indirectly held by the Dutch parent companies had passed in their entirety into the ownership of Margarine Unie NV in Rotterdam. In June 1929, in addition to the existing companies, a new German company was established in Berlin to enable a more direct control of its German interests, i.e. Jurgens-Van den Bergh’s Margarine-Verkaufs-Union GmbH, abbreviated to MVU. In May 1939 its name was changed to Margarine-Verkaufs-Union GmbH. MVU had two functions: first, it was a holding company which controlled an important part of Unilever’s interests in Germany, and second, the MVU was an operating company, which managed centrally all German oil and margarine plants.15 Compared to Unilever’s prominent position in the British (50–60 per cent) and Dutch (40–45 per cent) soap markets, the company was not big in the soap business in Germany during the 1930s. Jurgens and Van den Bergh had not gone into soap in Germany before the merger. It had only been through the merger with Georg Schicht AG in 1928 and Lever Brothers in 1929 that Unilever had

40

Unilever and Nazi Germany

acquired the soap interests of these companies. As a result, by 1930 Unilever owned two soap factories in Germany: Sunlicht AG in Mannheim producing mainly hard soap (Sunlicht Seife), and Parfümerie Elida in Hamburg producing toilet soaps and cosmetics. Both companies’ market positions were far behind Henkel’s. In 1937 Henkel sold about 227,000 tons of detergents in Germany, which was about 50 per cent of the market.16 In that year Unilever sales amounted to 27,000 tons, which was equivalent to a market share of only 6 per cent.17 In 1939 in Greater Germany, which included Austria and Czechoslovakia, Unilever’s share had nonetheless increased to 16 per cent, when it sold around 77,000 tons of soap. By that time Unilever’s soap interests in Greater Germany were held and managed by one holding company, Sunlicht A.G. in Berlin.

Foreign direct investment in Germany Although no comparative research has been done into the level of foreign direct investment (FDI) in Germany in the 1930s, the Anglo-Dutch Unilever must have been one of the largest, and perhaps even the largest foreign direct investors in Germany before the Nazi takeover in January 1933. On the basis of secondary literature some facts and figures can be compared. According to John H. Dunning all foreign direct investment in the world in 1938 amounted to US$26,350 million of which 39.8 per cent had been British and 27.7 per cent American.18 By that time the Dutch share had reached 10 per cent.19 As a result, these three countries accounted for almost 80 per cent of total world FDI on the eve of the Second World War. According to US official data, cited by Mira Wilkins, total American foreign direct investment in manufacturing in Germany alone had amounted to US$138.9 million in 1929. By 1940 the figure had risen to US$206.3 million, now including also Austria and Czechoslovakia.20 High profits, albeit for the greater part not transferable to the US, and the absence of problems with the trade unions encouraged American companies to accommodate to the new regime, according to Wilkins.21 Of the total American manufacturing FDI, General Motors (GM) owned the biggest stake. In 1929 GM had purchased 80 per cent of Opel AG shares, Germany’s largest carmaker at Rüsselsheim, worth US$26 million (£5.4 million sterling). The company had acquired the remaining 20 per cent in 1931 for US$7.3 million (£1.5 million sterling).22 As a result GM had become the largest American foreign direct investor in Germany (about £7 million sterling).23 By 1932 its American arch-enemy Ford had invested 15 million Reichsmarks (£1.3 million sterling) in the Ford-Werke AG plant in Cologne.24 There are no figures for total British FDI in Germany in the 1930s, but some facts about large British multinationals are known. For example, Courtaulds – a British viscose rayon manufacturer – had formed a joint company with the German company Vereinigte Glanzstoff Fabriken (VGF) in 1925. Courtaulds had contributed 50 per cent of the capital, or about £50,000.25 Between 1926 and

Unilever and Nazi Germany 41 1928 Courtaulds purchased a substantial part of the VGF shares. In 1929 VGF merged with the Dutch firm Enka into the AKU (Algemeene Kunstzijde Unie). By that time Courtaulds held £950,000 of VGF shares, which were transferred into AKU shares. By 1930 it held £1.25 million of AKU shares.26 Another British case is the tyre manufacturer Dunlop. During the First World War Dunlop’s German company had been sequestrated and the investment, valued at £278,000, had been completely written off.27 Nevertheless, the company was acquired again after the war, but it was only after 1925 that the German tyre market expanded again. As a result, the capital of the German Dunlop company was raised several times. By 1929 it amounted to RM12 million (about £0.6 million sterling), which meant that Dunlop operated the second largest tyre factory in Germany.28 In 1903 the oil company Royal Dutch entered the German market as it started a production unit for gasoline in Düsseldorf, namely Bezine Werke Rhenania. By 1904 Rhenania controlled 90 per cent of German gasoline market.29 After the merger between Royal Dutch and Shell Transport in 1907 the Group became Standard’s only serious rival. Despite, or as a result, of the First World War the Group’s subsidiaries in Germany succeeded in expanding activities. In 1924 the Group acquired the Stern-Sonneborn lube oils works in Hamburg (Ossag) and subsequently merged with its German subsidiary in Düsseldorf into RhenaniaOssag Mineralölwerke.30 In 1930 its headquarters was relocated to Hamburg. During the Nazi period Rhenania-Ossag – Germany was the company’s second biggest market in Europe and fourth biggest market in the world – adapted to the New Order and expanded its operations, despite restricting regulations. In 1929 the Group had increased Rhenania-Ossag’s capital from £3.3 million (RM40 million) to £6.7 (RM83.6 million).31 In 1938 the Group got involved in the Pölitz project for the production of synthetic gasoline at a total cost of £12.3 million (RM150 million). The project was funded by the joint shareholders: Jersey Standard and the Group £2.3 million (RM27.5 million) each, IG Farben £1.6 million (RM20 million) and Deutsche Gasoline £0.4 million (RM5 million). In 1940 the plant came finally in production at a total cost of £28 million (RM270 million), which meant that the Group had almost doubled its financial commitment to the project.32 Compared with these limited facts and figures for other large American, British and Dutch companies it becomes obvious that Unilever had grown historically bigger than any other foreign company in Germany in the 1930s. According to the Board minutes of April 1933 it had invested between £18 million and £20 million sterling in that country, which had earned profits of approximately £2 million annually.33 These, according to Unilever’s chairman D’Arcy Cooper, were: ‘facts which made our position in Germany vital to our interests’.34 By the time the war broke out in September 1939 Unilever’s total FDI in Greater Germany, i.e. the Old Reich, Austria and Sudetenland, amounted to approximately £37.6 million sterling (RM416.8 million).35 Compared with America’s total direct investment in manufacturing in Greater Germany in 1940 ($206 million) Unilever’s total direct investment in Germany ($167 million)

42

Unilever and Nazi Germany

comes close to the official US figures (81 per cent). In addition, like the US’s direct investment level in manufacturing in Greater Germany, Unilever’s direct investment showed an increase in the 1930s. It has to be considered, however, that the rise in Unilever’s figures had been partly due to the Anschluss of Austria and the annexation of Czechoslovakia. In the latter country alone Unilever had invested somewhere near £8 million at the time. Table 3.2 shows the number of German subsidiaries operating in various fields. It shows that Unilever had 157 companies in Greater Germany in 1939. Nevertheless, only 102 companies were actually in operation as a factory or trading company. For various reasons 55 companies had been closed down in Greater Germany. Like in the Netherlands Unilever often closed down or reorganised a company right after its acquisition. A competitor was often bought just for its brand, or in the German case, for its margarine quota. For that reason the margarine industry shows the highest number of closed-down companies. Table 3.2 also shows the equity capital that Unilever held in various branches of industry in Germany in 1939. Unilever obviously had a very strong interest in the margarine industry. The soap interests came off second best, however. Clearly, other industries had also become important to the company. On the eve of the Second World War the company had become highly diversified in Germany. More than in any other country in the world Unilever had interests here in businesses that were often far removed from its core activity. The next section will explain why.

Table 3.2 Number of Unilever companies in ‘Greater Germany’ operating in various branches of industry, 1939–1940 and their equity capital (in millions of Reichsmarks) Operating Margarine industry Oil industry Soap industry Shop, chain store, distribution companies Wood, paper, cardboard, packaging materials industry Shipping and whaling Fish and food industry Clothing, synthetic cellulose and others Total

Closed down

Total

Equity capital*

24 6 9

21 3 10

45 9 19

186.4 41.9 69.6

8

9

17

10.5

13 13 18

1 2 1

14 15 19

21.5 36.2 24.8

11

8

19

25.9

102

55

157

416.8

Source: B-Arch., R87–5930, 1721, Hauptbericht über das Deutsche Geschäft des UnileverKonzerns, 12–13 and 34. Note * The equity capital includes nominal capital, reserves and retained profits.

Unilever and Nazi Germany 43

Business obstacles in Nazi Germany – meeting Hitler After Hitler’s assumption of power in January 1933 Unilever’s strong position in Germany became rather insecure. Information coming from headquarters in Berlin and from directors travelling around in Germany was blurred and incompatible. On 16 March Franz Schicht had informed the Board from Berlin that the position in Germany was not as bad as it had appeared in the British press: ‘There was every hope that good order would be preserved.’36 Nevertheless, he also had to admit that the Berlin office had not been able to arrange a meeting with the government on the forthcoming law about the compulsory addition of butter to margarine. In addition, agitation had been engineered by the Nazis against the Sunlicht company as foreigners. It had been stated that ‘one manager was an Englishman and the other a Jew’.37 And last, ‘some anxiety had been caused by the rumour that Hitler might use the funds at the Reichsbank (Unilever’s frozen Reichsmarks) for purposes which would serve to reduce unemployment’.38 On 30 March, however, the Berlin office remained reluctantly optimistic. It counteracted ‘the rumours which had been disseminated in this country’ (in Britain) regarding the political situation in Germany. ‘The message stated that “peace and order” ruled throughout Germany and the reports of alleged atrocities are nothing but lying and biased reports of the worst type.’39 In April D’Arcy Cooper nonetheless questioned the reports from Berlin. At the time the Board in London discussed whether the annual address of the chairman to the shareholders’ meeting should make special reference to the difficulties the business was encountering in Germany. The situation was very delicate; there was no use in our threatening the Government, though at a later stage we might have to fight them. It seemed to him [D’Arcy Cooper] that with the position in so nebulous a state it was not proper to enlarge on the subject in the Speech.40 Greenhalgh added that any more specific mention of the political situation might add ‘to the difficulties of Unilever’s people in Berlin’.41 Rijkens urged the need for care as regards the possible effect the speech might have in Germany: ‘In Germany we were a German firm.’42 It was agreed to make no special reference in the address to the German situation. Meanwhile in May 1933 the Special Committee had taken precautions with regard to Germany. Unilever was under vicious attack. Competitors had spread the rumour in the press and to the government that Unilever’s business in Germany was not only under foreign control, but also ‘non-Aryan’ foreign control.43 As a result Albert van den Bergh, Dr Treitel and Dr Friedman, all three of Jewish descent, had resigned from the Supervisory Board of Van den Bergh Margarine AG in Berlin. The Jewish director of the Sunlicht soap company at Mannheim M.G.K.K. Fabian left Germany and became director of the Dutch Lever soap company (he was to acquire Dutch nationality in 1939).44 In view of these anti-Jewish sentiments in Germany – there was as yet no

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comprehensive anti-Semitic policy towards large Jewish companies – the Special Committee also suggested that R. de Kadt and Charles Steward should be replaced as Supervisory Directors of Hovema in the Netherlands, which held the shares of Unilever’s margarine companies in Germany.45 As a replacement R.J.H. Patijn was asked to accept a seat on the Advisory Board of Hovema. However, he proved a reluctant candidate. Patijn thought that the campaign which had forced De Kadt to resign was so unsavoury that he did not feel much inclination to become his successor. He accepted the appointment but stated: This campaign is so disagreeable to me that I do not much feel like being his successor. Nevertheless I realise that the directors in Germany really do not have a choice: they must either withdraw from Germany, which in our case is impossible, or swim along with the ‘Aryan’ current.46 Rijkens answered that ‘they [the Special Committee] also had an uncomfortable feeling that (. . .) in the interest of our German business, we have to adjust ourselves to circumstances and feelings which we do not find sympathetic’.47 He agreed with Patijn that Unilever had ‘to swim with the Aryan current, but only to a limited extent’.48 Nobody, however, could yet know to what extent private business had to co-operate with Nazi policy, or where the Aryan current would eventually lead to. The replacement of De Kadt and other Jewish directors or Supervisory Board members shows that Unilever’s Board had formulated a preliminary policy towards the Third Reich. The company accommodated with the Nazi government in the interests of its extensive business interests in Germany. At the same time there was not much sympathy inside the Board for the new regime, except for some members of the Schicht family who displayed a rather conciliatory attitude. In June 1933 Arthur Hartog phoned to London and raised the alarm at Unilever’s headquarters. A Dutch paper (Nieuwe Rotterdamse Courant) had reported on Hitler’s latest speech in which he was stated to have said: The only logical consequence of the National-Socialist policy in the long run will be that no private property will be tolerated. In accordance with the democratic principle it will therefore be illogical to maintain the autocracy of private industry. This conflict will lead to nationalisation of all private business.49 Publication of this speech had been forbidden in Germany, according to Hartog.50 The chairman’s first reaction to this alarming message was that all that Unilever could do was to place as many of its frozen Reichsmarks as possible with government or quasi-government institutions on condition that they could be sold in return for Dutch guilders.51 A month later in July 1933 D’Arcy Cooper and Paul Rijkens nonetheless flew to Berlin to obtain first-hand information from the Nazi leaders. The British businessman E.W.D. Tennant, who had a friendly relationship for years with

Unilever and Nazi Germany 45 Von Ribbentrop (a merchant and Hitler’s adviser on foreign policy), had arranged a meeting with Keppler (Hitler’s economic adviser).52 Tennant had also mentioned that Chancellor Hitler would have been pleased to see D’Arcy Cooper in Berlin as he had been most anxious that good relations between Germany and the British business community should be fostered.53 During the first visit, however, Hitler failed to turn up. Therefore both chairmen had to accept Keppler’s company. They had a discussion about the position of the margarine industry in Germany and Unilever’s historical role in the edible fats business. Nevertheless, D’Arcy Cooper tried to arrange a meeting with Hitler himself to discuss the general question of businesses working with foreign capital in Germany.54 The meeting between Hitler and Unilever’s chief executives D’Arcy Cooper and Rijkens would not take place until late October 1933. In the meantime the company sent as much information as possible about its German business to Von Ribbentrop. In August mediator Tennant criticised Unilever for being too modest in its description of its importance for the German economy. Unilever had to make clear to what extent Germans were shareholders in the business and what happened to the profits made in Germany. According to Tennant, Hitler had considerable objections to the idea of large foreign companies dumping their surplus purchases into Germany and exporting their profits out of Germany. And last, Tennant noted, Unilever had to explain to Hitler the advantages the company was bringing to Germany, particularly in the way it financed large quantities of raw materials which it had to import from abroad.55 On Tennant’s advice Unilever wrote a memorandum, which was supported by a letter from Rijkens. Both documents produced persuasive arguments. First, it was noted that it was extremely difficult to say to what extent Germans were shareholders of Unilever NV and its Dutch subsidiaries. There were, however, regular reports of the Amsterdam and Rotterdam stock exchanges that fairly important share dealings had taken place for German account. It had been estimated that no less than 10 per cent of Unilever was in German hands. Second, in 1931, before the Brüning government had implemented currency restrictions, the whole of the concern’s share of the German profits had been transferred to the Dutch parent company. In 1932, after the transfer difficulties had begun for foreign companies, Unilever had transferred RM5.5 million, converted into foreign currency, to the Netherlands. About RM1 million had remained in Germany in frozen accounts. Third, in 1932 Unilever had a total turnover of about RM350 million, which had again been spent for the larger part in Germany, for example on new assets and renewals, repairs, taxes, sundry materials, services and wages (in 1933 Unilever had about 20,000 staff in Germany). Fourth, the larger part of the raw materials had to come from abroad. The domestic production of oilseeds was practically nil at the time, and the production of animal fat was entirely insufficient. Imports of vital raw materials had to a large extent been possible due to Unilever. In 1932 Unilever plants had processed over one-third of the total quantity of oil seeds and two-thirds of all whale oil imported into Germany. Fifth, the idea of dumping surplus purchases

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was based on a fallacy as far as Unilever was concerned. In Germany not a single product had been marketed which had not been manufactured in German factories. And if there had been a question of undercutting, this had been done by competitors in Germany which had forced the company to sell its goods at unremunerative prices.56 After Unilever’s memorandum and after other facts and figures had been supplied to the Nazi regime, Tennant arranged a meeting with Hitler on 24 October 1933. This time vice-chancellor Von Papen had also played a role in the arrangement. Rijkens and D’Arcy Cooper had been asked to prepare a short agenda for the discussion with Hitler. They raised the following points: first, the general attitude of the German government towards private industry and the oils and fats industry in particular; second, the employment of foreign capital in Germany, in particular the protection of existing interests and the extension of new interests; third, the general position of the oils and fats industry in Germany.57 ‘Interviews entirely satisfactory’, Rijkens and D’Arcy Cooper cabled to London directly after the meeting with Hitler.58 Two days later Hitler’s Economics Minister Schmitt confirmed that he had no objections against the contents of the notes of the meeting taken by Rijkens. He only added that all companies working in Germany had to ‘pay due attention to the national exigencies’.59 According to the notes Hitler had said: ‘I am against any form of socialisation of private business or the establishment of state monopolies.’60 Furthermore, he had given Unilever ‘an assurance that the German government would not make any difference in its treatment between a company whose shares were held by foreigners and one whose shares were held by Germans’.61 Last, Hitler had stated that ‘also the Margarine Industry should be liberated from restrictions and measures by the government’.62 With hindsight it is too easy to conclude that ‘an agreement’ with Hitler, as Rijkens would later refer to these notes in his memoirs, had no significance at all.63 Contemporaries, however, must have attached great importance to Hitler’s and Schmitt’s signatures, which were appended to Rijkens’ notes. It was a sign that Hitler was opposed to the socialisation of the industry, contrary to, for example, SA leader Ernst Röhm, who constantly argued in favour of a second revolution in Germany. Second, the signatures also indicated the view of Economics Minister Schmitt, former leader of the Allianz concern (by far the largest private insurance company in Germany). He proved a strong advocate of private business.64 Last, the signed agreement could be used against prospective antiUnilever policies of various government agencies. As a result, it was copied in great numbers and distributed amongst Unilever’s subsidiaries in Germany. In spite of Hitler’s promises, however, the margarine business in Germany was still confronted with strong state interference. Since May 1933 margarine production in Germany had to be reduced by 40 per cent by law. A fat tax was levied on vegetable oil and margarine. In addition, a Government Agency for Milk Products, Oils and Fats (Reichstelle für Milcherzeugnissen, Öle und Fette) was set up to control the quantity and the prices in the margarine industry.65

Unilever and Nazi Germany 47 Hitler, however, had also made it clear to Unilever that the government was anxious that the supply of cheap margarine should be available for the poorer people in Germany. Therefore Unilever’s margarine quota, which had formerly been fixed at 62.5 per cent, had been raised by 10 per cent.66 In December 1933, however, it became clear that the company had been too optimistic. Owing to differences between Keppler and the Minister of Food and Agriculture Darré the attitude of the government was no longer as favourable as Unilever had thought a few months previously.67 In line with Darré’s ‘Blood and Soil’ (Blut und Boden) ideology the import of oils and fats was restricted to favour the production of German butter under the slogan: Rettung des Deutsche Bauertums (save the German farmers).68 The drawback of this policy, however, was that ultimately less cattle cake, which was a by-product of the oil mills, was available for German farmers. In addition, butter remained more expensive for the poorer people, despite the levy of the fat tax. During the 1930s nonetheless the more realistic officials in the Ministry of Food and Agriculture must have gained the upper hand as only a reduction of 20 per cent in total margarine production was realised in Germany. Butter consumption rose from 7.5 kg to 8.8 kg per head in 1938, and margarine fell from 7.9 kg to 6.1 kg per head in the same period. Margarine Union’s production fell from over 300,000 tons in 1932 to around 250,000 tons in 1938.69

Currency restrictions and the shipbuilding deal Another pressing problem was Germany’s currency policy during the 1930s. Since 1931, following the international withdrawal of short-term funds from Germany, the Brüning government had suspended the Gold Standard and had imposed restrictions on capital exports. Up to 1934, however, it remained possible to transfer the larger part of dividends from Unilever’s German subsidiaries to Unilever NV in Rotterdam. Cash surpluses blocked in Germany were safely and profitably invested in government or quasi-government institutions.70 The Nazi assumption of power, however, worsened Germany’s currency problems. It led to severe balance of payments problems and a rapid deterioration of Germany’s foreign exchange position. Importers into Germany, like Unilever’s raw materials companies, were increasingly rationed by the Reichsbank in their needs for foreign exchange. In July 1934 Unilever no longer received any foreign exchange. In reaction the company blocked shipments of raw materials into Germany.71 One month before, Reichsbank President Schacht had taken over Schmitt’s position as Economics Minister after the latter had had serious disagreement with Hitler on military expenditure.72 Schacht had expressed complete agreement with Hitler and had said that he was even prepared to ruin the Reichsmark if necessary in order to achieve rearmament. He now obtained far reaching powers over the economy of the Third Reich. In September 1934 Schacht launched his New Plan. Imports had to be stabilised at a level where they could be paid for by exports and they had to be brought into line with Germany’s

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needs and its policy of autarky.73 The suspension of capital exports was now joined by the suspension of interest payments. For every separate import a foreign-exchange certificate had to be obtained. Transfer of dividends to Britain and the Netherlands became steadily more difficult. The consequence for Unilever was, on the one hand, millions of blocked Reichsmarks and, on the other, a direct need for hard currency to import raw materials to run its factories in Germany. In September 1934 a delegation of representatives of British importers into Germany of wool, mineral oil, metal, jute, rubber, non-ferrous metals, and non-mineral oils and fats had met with Schacht and were later received by Hitler.74 The delegation comprised executives from seven British industries, including Unilever, Dunlop and Shell, and was led by Rijkens. The aim of the British businessmen was to solve the acute foreignexchange problem. The British government, which was informed about the meeting, suspected Schacht of looking for credit on easy terms.75 Rijkens pointed out to Schacht that Unilever had invested so much in Germany and that the amount of outstanding commercial debts from Germany still exceeded a year’s credit on raw materials. ‘[U]nder these circumstances it was not reasonable to expect the Margarine Industry to make further sacrifices as the profit margin on Margarine was not sufficient to allow us to speculate further.’76 Between July 1931 and September 1934 Unilever had invested approximately RM100 million in long-term loans, stock-exchange investment and real estate.77 Unilever was not prepared to invest more surplus capital in Germany and provide the country with more credit. Schacht ‘stated that it was hoped to be able to make satisfactory arrangements with regard to outstanding commercial debts to the British Empire’.78 Thereupon, he agreed with Rijkens on a more reasonable treatment of credits for raw material imports. The problem of the transfer of dividends and cash surpluses, however, remained unresolved. As a result, a little later Rijkens visited successively Schacht, Keppler and Brinckman (head of the export division in the Ministry of Economic Affairs) to solve Unilever’s own currency issue. Portfolio investments, however, were no solution for the transfer of dividends to the parent company in the Netherlands in the long run. A better solution for the blocked marks – agreed upon with Schacht, Keppler and Brinckman – was the building of ships at German shipyards, partly paid for in blocked marks. Some of these ships were for Unilever’s own use inside or outside Germany and others were sold outside Germany at a discount for hard currency. Between 1934 and 1936 a total of 530,000 of shipping tonnage (worth £6 million) was constructed as part of shipbuilding programme, mainly at yards in Hamburg, Bremen and Kiel.79 From the German point of view it was a good deal because it stimulated employment and a general economic recovery. From Unilever’s point of view it was also a success, because it was an alternative method of transferring profits abroad. The shipbuilding business enabled Unilever to bring a considerable portion of its profits out of Germany. In fact, it was barter trade, necessary in order to continue Unilever’s business in Germany. The company needed raw materials, which could only be obtained for hard currency. Germany’s currency

Unilever and Nazi Germany 49 restrictions and its autarkic policy had made raw-material imports difficult. Simultaneously, Germany as a whole needed raw materials. As a result, Unilever paid for the ordered ships partly in raw materials, for example palm oil or whale oil, and partly in blocked marks. The shipbuilding business was therefore not only a way to get profits and dividends out of Germany, it was also a way to get raw materials in. The following illustrates the complexity of a ship order. In April 1936 the Margarine Verkaufs Union in Berlin proposed to Karl Blessing (director at the Economics Ministry at the time) that Unilever would order two tankers of 14,500 tons from a German shipyard at a price RM2.75 million each. Delivery would be between January and March 1938. Method of payment: 35 per cent in palm oil and 65 per cent paid in blocked marks belonging to Unilever NV in Rotterdam, which made a withdrawal from its account at Van den Bergh’s Margarine AG, in Berlin. The palm oil was paid for with ASKI Marks (credit marks) at a fixed price.80 MVU would give the shipyard a cash advance until the raw materials, which were to be placed at the disposal of German buyers (including Unilever subsidiaries) had been sold. Purchaser of the tankers would be Lever Brothers in Toronto, because freedom of clearing with the Netherlands was refused.81 In comparable fashion Unilever ordered 17 freighters (8,000 tons each), 26 tankers (about 14,500 tons each) and 19 trawlers (about 500 tons each) between 1934 and 1936. After 1936, when the German economy was booming, the German government was holding out for a larger proportion of the price to be paid in convertible foreign currency.82 As a result, the purchase of ships in Germany was no longer an attractive solution to Unilever for the purpose of the dealing with blocked marks.

Acquisitions and ‘Aryanisation’ Although the shipbuilding programme had been a means of absorbing cash surpluses from Unilever’s German business, other investments had become necessary, particularly after 1936. The first result had been a further growth of Unilever’s foreign direct investment level in Germany. By September 1939 the 102 operating companies in Greater Germany had 33,900 staff in Greater Germany.83 Compared with Britain, Unilever’s most important market and domicile, where the company had 41,000 employees, Germany was Unilever’s second country by number of staff. A second result of the cash surpluses had been a further vertical and horizontal diversification of the business. At the beginning these surpluses had been invested in other foodstuffs industries, real estate, (quasi) government loans, stock market equity and other portfolio investments. Gradually, however, the company had searched for direct investment possibilities, which had mostly no connection with the core business. The Frankfurter Zeitung had warned that the shifting of capital might in due course possibly lead to ‘incoherent concern building’.84 From 1935 onwards German directors made applications to the Board in London for permission to make various investments in processed cheese

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factories. Due to the strict regimentation of the margarine industry they were looking for additional employment for their sales organisation, preferably in the field of foodstuffs.85 The investments proved to be rather remunerative. In 1939 Rudolf Jurgens reported to the Board: ‘It may be remembered that profits in the Melted Cheese business have been very satisfactory for the last few years – amounting to about RM4 million in 1938 – and are expected to continue on this basis.’86 As a result, in June 1939 Unilever acquired another processed-cheese factory in connection with fulfilling an army contract for canned cheese.87 In November 1936 the German government proposed to Unilever that it should participate in a synthetic wool company. The government would give a guarantee against any losses on the business over a period of seven years and also guaranteed 5 per cent interest on the investment during the same period. According to Sunlicht’s director Carl Santkin, Unilever as a whole could benefit from this participation, because it offered the opportunities for testing new detergents and washing methods for cellulose fibres. The Special Committee in London thereupon recommended that the investment had to be made. In February 1937 the Westfälische Zellstoff A.G. was established with a total equity capital of RM2.2 million, to which Unilever contributed RM0.8 million.88 The acquisition of an ice-cream factory in Hamburg (Eis am Stiel) and the investments in Langnese-Eiskrem GmbH in 1936 and 1937 appeared at first sight to be a waste of money. But the Board felt in 1939 that the results would improve. ‘The Results of 1937 and 1938 are far from satisfactory . . . [still] . . . the business should be carried on and the money necessary for modernisation should therefore be spent.’89 As a result, on 27 January 1939 a licensing agreement was signed between the Margarine Verkaufs Union and Frosted Foods Limited, owner of the Birds Eye patent for freezing techniques. The licence covered Germany and Eastern Europe. In exchange Frosted Foods received a 10 per cent share in Unilever’s subsidiary that was being formed, Solo Feinfrost GmbH.90 Simultaneously, Göring planned a frozen-foods industry, because he wanted to provide the Wehrmacht with fish, vegetables and fruit. Now Unilever had the necessary licences, plants and sales organisation to meet his demands. In the autumn of 1939, just after the beginning of the war, the first food was frozen by Solo Feinfrost. The armed forces were the major bulk consumer. In January 1937 the acquisition of an interest in the Neue Norddeutsche und Vereinigte Elbeschifffahrt AG was considered. According to Heinrich Schicht the acquisition not only afforded a suitable channel for investing blocked marks, but it would also enable economies to be effected by means of working arrangements with other Unilever inland-shipping companies.91 The investment of RM5 million proved satisfactory and gave Unilever a majority share (75 per cent) in the Elbe inland-shipping business.92 In November 1937 there was an opportunity of an additional investment in the Nordsee Deutsche Hochseefischerei AG with its head office at Bremerhaven.93 Nordsee was Germany’s largest integrated sea-fishing company, which operated its own trawlers, processing factories, ice factories and retail shops in Germany, Austria, Czechoslovakia, Norway, France, Turkey and

Unilever and Nazi Germany 51 Poland.94 An application was made to the government for a further block of shares, but not such as would increase Unilever’s holding to above 50 per cent. In March 1939 Rijkens reported to the Board that the German government had not given its approval for the purchase of a further block of shares in Nordsee.95 By 1941, however, Unilever (MVU) owned 49 per cent of the share capital of Nordsee, which amounted to nearly RM11 million.96 In the 1935–1938 period Unilever also acquired ‘Jewish property’ (often referred to as ‘non-Aryan’ in Nazi terminology). When the pressure on Jewish businesses increased, some of the bigger enterprises as well as pieces of land owned by German Jews were offered for sale to the Margarine Verkaufs Union in Berlin. From April 1938 all ‘Jewish property’ worth over RM5,000 had to be reported to the government. From then on it could only be sold to corporations chosen by the state. And from June 1938 apparent transfers of ‘Jewish property’ to non-Jewish partners were made punishable by law. Until 1938 emigration was still possible for Jews. The problem, however, was how to get private capital out of the country. Emigration was only possible if the cash was deposited in the Gold-Discount-Bank, for which emigrants received only 6 per cent in foreign currency in return; the remaining 94 per cent was ‘earmarked for special ends’ (i.e. confiscated by the Third Reich).97 Hence Jewish entrepreneurs appealed to multinationals like Unilever for at least three reasons. First, Unilever could use its blocked marks to acquire Jewish businesses and pay outside Germany in hard currency. Second, Unilever could use its influence in the Netherlands and Britain as a big employer to make immigration into those countries possible. And third, Unilever had also been classified as a Jewish company by some Nazi groups (though not officially) and might therefore be willing to help other Jewish entrepreneurs. All the more so since Unilever, especially Sydney van den Bergh and Arthur Hartog, was already helping Jewish Unilever employees to emigrate from Germany. Nonetheless, Unilever’s acquisitions of Jewish property should not be mistaken for charity. All new acquisitions were researched like any others, and favourable deals were sought. To what extent Unilever misused the awkward situation facing Jewish businessmen is difficult to say, because of the variety of deals. Some surviving relatives filed a claim after the war, others did not. Again it is difficult to draw easy black and white conclusions. Some of the facts and figures given below show how difficult it is to assess. In addition, it is impossible to construct a comprehensive image of these deals, because, for obvious reasons, there is no written proof of special conditions. Hole-and-corner arrangements in favour of the Jewish owners were extremely dangerous and were punishable by death. Three particular examples will be quoted to illustrate how the ‘Aryanisation’ deals varied.98 The first acquisition of ‘Jewish’ property was cloth manufacturer Fritz Cohen Tuchfabrik A.G. in Mönchengladbach in 1935. According to an independent research bureau this company ‘applied state of the art technology’.99 The Jewish owners Felix, Fritz and Paul Cohen asked for RM2.8 million for their liquid assets; the fixed assets, with a book value of over RM2 million, were

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thrown in for free. Profits in 1934 after deducting depreciation had amounted to over RM0.5 million. The MVU financed the acquisition using blocked marks. The business was bought through an intermediary, the Duisburg-based margarine firm Schmitz & Loh, a 50 per cent Unilever subsidiary. According to the Frankfurter Zeitung, ‘the Duisburg firm (had) now entered a field of activity which is very remote from its own branch of business and perhaps in this the question of price [had] played a part’.100 The business continued under the name of Tuchfabrik Rheinland with a capital of RM2.5 million and was placed under a new management. The Cohen family emigrated to America in 1935 (and called themselves Kohn) where they had an advisory post in relation to the business and an agency for the American continent. After the war they expressed themselves as satisfied with the way in which they had been treated by Unilever.101 Another acquisition was the rayon factory J. Wertheimer & Co. in Bielefeld. The asking price was RM3 million but the Special Committee proposed RM2.3 million, slightly more than the value of the liquid assets.102 Hence the fixed assets would be acquired for free. In addition nothing would be paid for the goodwill. On 1 May 1936 Unilever took over Wertheimer’s firm for RM2.5 million including a profit sharing settlement to a maximum of RM1.4 million. The average yearly profit had been over RM0.5 million. The contract would be signed ‘as soon as the outstanding currency question’ had been settled. Wertheimer also asked Hendriks whether he could give his name as a reference to the British authorities. In June Hendriks made an appointment with Wertheimer in London and in the same month ‘the outstanding currency question’ was arranged, although there was ‘a drop in the rate of Emigrant Marks’. Wertheimer emigrated to the United States.103 In April 1937 a report was drawn up about the economic performance of this company under the name of Ravensberger Seidenweberei GmbH. The rayon factory’s turnover was lower, but the operation was still profitable. A government allocation of quotas for raw materials, wool and cotton, and price controls, however, made the business more difficult in due course. After the war Wertheimer’s heirs (the Werth family), living for the greater part in Britain, submitted a claim for 50 per cent of the shares. This was felt unreasonable by Unilever, which offered 25 per cent. The Werth family, however, held out for 50 per cent and set a number of other conditions which were unacceptable to the company. Although Unilever wanted to avoid court action, legal proceedings seemed inevitable in 1949.104 A year later, however, a ‘friendly’ restitution settlement was reached between Unilever and the Werth family.105 The latter received £20,000 in cash and an interest-bearing debenture in the Ravensberger Seidenweberei in Bielefeld, which amounted to DM1 million. The last example of an acquisition of a ‘non-Aryan’ business was the Aluminium Foil Works D. Morgenstern OHG in Fürth, Bavaria, in July 1938. According to accountant Rosenberg, the average profit from 1935 to 1937 was RM78,250. This was almost 20 per cent of the purchase price of RM0.4 million that Unilever paid. The company’s total capital had been about RM1 million, including the book value of RM392,000 for the current assets. Again the land,

Unilever and Nazi Germany 53 buildings and plant were acquired almost free of charge. In this case Unilever had to proceed with caution because the German Reich had forbidden an earlier acquisition in the packaging sector. In August 1938 the company was renamed Folienfabrik Fürth-Forchheim GmbH. Unilever had acquired a controlling interest of 51 per cent. After the war Unilever arranged for Morgenstern’s widow, who lived in the United States, to be paid an annuity in dollars.106 This was particularly worthwhile as Unilever thus had the opportunity to acquire another block of 39 per cent of the shares.

Raw materials and whaling – meeting Göring In the spring of 1936 Germany’s accelerating rearmament and the growing domestic demand caused an acute economic crisis. Only a sharp reduction in living standards or an enormous increase in German exports could help the situation, according to Economics Minister Schacht.107 He feared economic chaos caused by the planned high level of armaments production and tried to convince Hitler to change this economic policy. Hitler, however, waved him away. Schacht was pushed rapidly out of the power base of the German economy.108 His role was taken over by Hermann Göring. He became the driving force behind the Four-Year Plan, which was announced at the Nuremberg Party Rally in September 1936. From now on Germany was building the foundations for massive armed strength, undeniably directed at expansion and war. The objectives of the Four-Year Plan were to finance the imports necessary for the rearmament programme by saving foreign exchange, to promote the building of war stocks and to make Germany immune to an Allied blockade. Consequently, the autarkic policy was intensified and the production of synthetic materials, like synthetic fuel and rubber, and other chemical products became indispensable. As a result, the Four-Year Plan relied heavily on IG Farben. According to Peter Hayes IG could therefore adopt a strategy of indispensability to play down the effects of the autarky policy on IG’s foreign trade and growing demands from the Nazi Party.109 At the beginning of April 1936 Hitler had already appointed Göring as Plenipotentiary for the Securing of Raw Materials and Foreign Exchange Demands of the Reich.110 Göring had to overcome the raw materials crisis and currency crisis and had to force through the policy of autarky. As the margarine business depended largely on imports of raw materials and Unilever was the largest importer of edible oils and fats, the company began negotiations with the plenipotentiary. In May 1936 Georg Schicht had a meeting with Göring.111 Göring raised objections to the fact that the greater part of Unilever’s foreign exchange was being used for imports of oils and fats. Therefore he promised (a promise which he fulfilled) that the Third Reich would put all its efforts into the development of synthetic soap made from mineral fats and that it would stimulate the development of domestic oil-bearing seed. Georg Schicht replied that the British shareholders were discontented with the development of Unilever’s continental

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(German) business, which was damaged by the margarine regulations and currency restrictions. As a result, Unilever would have had RM150 million of liquid assets if it had not used the larger part for the financing of a shipbuilding programme.112 The whole programme had stimulated employment in Germany and had used stagnant capacity of the German shipyards. In addition, as an additional payment Unilever had imported into Germany 117,000 tons of fats and oil without any payment of foreign exchange. For all these reasons Unilever was not prepared to supply raw materials on credit to Germany.113 Despite Unilever’s repeated refusal to supply Germany with easy credit the atmosphere at the meeting remained agreeable. Göring expressed his appreciation of the British Empire, which Germany would never disturb. In reaction, Georg Schicht noted that Unilever’s chairmen D’Arcy Cooper and Rijkens had done everything in their power to improve the relations between Germany and Britain by co-founding the Anglo-German Fellowship a year before.114 Simultaneously, Schicht himself made it clear to Göring that ‘as businessmen doing business in all countries of the world they stood completely aloof from politics’.115 Georg Schicht reciprocated the goodwill that Göring had shown and put forward Unilever’s plan to build a German whaling fleet. Göring embraced the idea as it was completely in line with an autarkic policy. He stipulated, however, that Unilever’s whaling fleet had to be operated for the benefit of the whole of the German margarine industry. For Unilever it was another outlet for blocked marks and a means to import raw materials without using foreign exchange. After the German firms Henkel and Rau had established Die Erste Deutsche Walfanggesellschaft and entered the whaling industry Unilever had also decided to build a German whaling fleet.116 A processing ship of 27,500 tons and eight catchers were ordered and the Unitas Deutsche Walfang GmbH was established in Berlin.117 In May 1937 Göring was invited to the launching at Bremen of the processing ship Unitas together with chairmen Paul Rijkens, D’Arcy Cooper and Lord Trenchard. The latter was Marshal of the Royal Air Force and chairman of the Unilever’s African trading company UAC, which did considerable business with Germany.118 After the beginning of the war with Britain, after only two catch seasons, the entire whaling fleet was berthed in the port of Hamburg and was confiscated after the war by the Allied forces.119 In 1937 and 1938 it had supplied only 2 per cent of Germany’s fat requirements.

Unilever classified as an ‘Aryan Firm’ On 27 November 1937, one day after Schacht’s resignation as Economics Minister, State Secretary Hans Ernst Posse of the Economic Ministry signed an order which was the beginning of the expulsion of Jews from the economy and professional life.120 ‘Aryanisation’, as it was called in Nazi terminology, took place in three stages. First, from 1933 to 1937 the Nazis seized Jewish property, particularly of smaller and medium-sized companies in the smaller towns and in the country, without any legal basis. The Nazi government did not obstruct these

Unilever and Nazi Germany 55 local party activities, although they were incompatible with the state interest at that moment, i.e. the consolidation of the war preparations.121 Accordingly, Jewish banks and bigger industrial companies were left alone until 1938. Nevertheless, as early as 1933 Jews were expelled from the civil service and the professions. Second, in January 1938, against the background of the Four-Year Plan, the ‘Aryanisation’ policy was systematised by the Nazi government. Göring – now plenipotentiary general of the Four-Year Plan – decided that all money that had been blocked in frozen accounts as part of the ‘Aryanisation’ programme should fall to the German State. From April 1938 all Jewish property worth over RM5,000 had to be reported. From June 1938 apparent transfers of Jewish property to non-Jewish partners were made illegal. The November pogrom, the Reichskristallnacht, was the beginning of a further radicalisation of ‘Aryanisation’, i.e. sequestration of Jewish property without any compensation and the expulsion of Jews from all economic activities. From January 1939 onwards Jewish companies were ‘Aryanised’ or closed down and the exercise of virtually all occupations was forbidden to Jews. Securities and valuables had to be delivered into a state organisation. In addition, Jewish patents and estates were brought under compulsory ‘Aryanisation’.122 The conclusion of the ‘Aryanisation’ process was the sequestration of all deportees’ property by the German government from November 1941 until the end of the war. On 14 June 1938 Unilever was confronted with a new law in Germany – the third order of the civil law – requiring registration of Jewish firms. The presence on the board of a single director of Jewish origin made the whole firm a ‘Jewish firm’. This Law might have affected one of the NV companies in Germany. On 21 July 1938 Unilever’s Board nonetheless was confident. It was noted that the Aryan question in Germany had been settled satisfactorily. Although Lever Brothers & Unilever N.V. itself could not for the present be recognised as an Aryan Concern, recognition as such had been given to the operating Subsidiaries in the country, but to preserve the position precautions would have to be taken for the future.123 Accordingly, at the beginning of August Rijkens and Hendriks had a meeting with Göring and ‘obtained the impression that the relationship of Unilever’s business to the German government was reasonably satisfactory and that the atmosphere there was better than they expected’.124 Hence the time was ripe for some guarantees from the German government. On 24 August the Unilever Board sent a memorandum to Hans Kehrl, a high-ranking official in the Ministry of Economics, stating that inside the Unilever concern and consequently inside its subsidiaries there was no Jewish influence of overriding importance; ‘the Jewish share in the Unilever capital was only 1.65 per cent.’125 Simultaneously, Rijkens got in touch with Keppler, Dr Fisher, director of the German Credit Company (Reichskreditgesellschaft), and Dr Markau, director of the German Chamber of Commerce for Britain.126 Two days later Markau promised Rijkens to plead Unilever’s case. After three days Keppler replied to

56 Unilever and Nazi Germany Rijkens and stated that, though the Jewish participation in the Unilever capital was not very big, many board members were Jewish, and ‘this was here and there criticised’.127 Keppler referred to Unilever’s Memorandum ‘Administration and Capitalisation of the Unilever Concern’ in which 24 members of the Board of Directors were mentioned. The directors were ‘all pure Aryans [. . .] with the following exceptions: Albert van den Bergh, James P. van den Bergh, Sidney van den Bergh, Arthur Hartog and Dr J.L. Polak’.128 Then Keppler gave Rijkens a hint that ‘these gentlemen concerned’ were not to be put into action in German Unilever interests.129 Rijkens answered to Keppler: ‘The non-Aryan gentlemen in the enterprise only carry out orders concerning geographical territory other than Germany.’130 Only the ‘Aryan’ board members Dr Heinrich Schicht, Rudolf Jurgens, P.D.H. Hendriks, C. Barnish and Rijkens himself were involved in the German Unilever business. A few days later Markau informed Rijkens that from the German side there were no objections against Unilever regarding ‘the matter concerned’.131 On 28 November 1938 the Luftwaffen-Verordnungsblatt published: ‘The Unilever concern and his [its] subsidiaries, working on the sale margarine, oil and fats, are considered to be an Aryan company’, signed by the ‘R.d.L. u. Ob.d. L.’, i.e. Hermann Göring.132 According to Simon Thomas, a Dutch Unilever director in Germany, this announcement was very important because the recognition of ‘the Aryan qualification was not given objective[ly] but subjective[ly] by this revocable instruction of mister Göring’.133 In other words, though Göring knew that according to the Nazi law the Anglo-Dutch parent company was not ‘Aryan’, he was prepared to certify that it was. In an executive decree issued by Göring on 5 July 1938 about the ‘Aryanisation’ of Jewish companies he had indeed reserved for himself all the measures that might be necessary in order ‘to ensure that the utilisation of the registered property be in conformity with the interests of the German economy’.134

Blessing on the MVU board in Berlin In March 1939 Rijkens reported to the Unilever Board that Dr Karl Blessing had accepted the offer made to him and that he would be joining the board of the MVU in Berlin as from the first of May. ‘Blessing was not a Nazi in politics, but in his expert capacity he was on excellent terms with the Economics Ministry’, Rijkens noted.135 The idea was to strengthen the German side. Until the beginning of February 1939 Blessing had been a director of the Reichsbank and before that he had been with Schacht at the Economics Ministry.136 After Hitler had told Schacht that he would create money to cover the state’s deficit, the Reichsbank directorate, including Blessing, had signed an anti-inflation memorandum.137 Hitler had been furious and had dismissed Schacht and the rest of the directorate. Schacht had clearly overplayed his hand; Funk took over his position as president of the Reichsbank. In the early 1930s Blessing had worked at the Bank for International Settlements in Basel. He had joined the Economics Ministry in 1934, where he

Unilever and Nazi Germany 57 worked in the field of raw materials and foreign exchange. In this capacity he had had many dealings with Unilever. Like Schacht, Blessing was a man in favour of Germany’s business community. Nonetheless, whereas Schacht’s star had set in the late 1930s, Blessing’s star was rising. He had become Funk’s protégé. After his dismissal from the Reichsbank directorate he had joined the advisory board of the central bank and Unilever’s Board in Germany. In June 1941 he left Unilever and moved to the new state controlled oil company Kontinentale Öl AG, set up by Göring.138 Rijkens, however, was wrong about Blessing’s political inclination; he had joined the Nazi party in May 1937.139 It is not clear, however, whether it was through political conviction or career planning. Since Göring ruled the German economy, party membership had become a prerequisite for a career in the economic bureaucracy. From Unilever’s point of view, however, Blessing’s appointment served to strengthen the company’s contact with the German economic establishment in a precarious period after Schacht’s dismissal. Despite Göring’s ‘Aryan’ declaration Unilever’s position in Germany was under pressure. In addition, political tensions in Europe were mounting; a war in Europe would disturb Unilever’s international business completely and put its huge foreign direct investments at great risk.

Conclusions By 1933 Unilever had grown into an empire inside the German Reich after fifty years of greenfield investments, acquisitions and mergers and had become the single largest foreign direct investor in Germany. On the eve of Hitler’s rise to power the Anglo-Dutch multinational dominated the German edible fats industry. In effect, in January 1933 it had almost 70 per cent of the German margarine market. In addition, through the merger between Margarine Unie, Schicht and Lever Brothers, Unilever also had become involved in the German soap business. Compared to its main competitor Henkel, however, it was relatively small in detergents. Shortly after the Nazis had come to power Unilever’s Board decided ‘to swim with the Aryan current’ to a certain extent. In other words, the company decided to accommodate to the new regime, because it was thought that it could not allow itself to divest and withdraw completely from its largest European market outside Britain. Although the average Board member was not sympathetic towards Nazi ideology it was decided to reach some agreement with the new regime. In October 1933 D’Arcy Cooper and Rijkens had a meeting with Hitler in person to secure some undertakings from the new Chancellor. Unexpectedly Hitler was prepared to make a far-reaching promise. As long as Unilever was prepared to manufacture in the interest of the Reich, the new government would not touch the company’s assets in Germany. Although it would become evident by 1934 that the Nazis would not pursue a nationalisation policy in general, the commitment towards Unilever came rather early. In 1934 Unilever reached another agreement with Schacht about the currency

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Unilever and Nazi Germany

restrictions. Because the Reichsbank and the Economics Ministry could not make any exceptions, in spite of the company’s importance for Germany’s rawmaterials supply, a solution was reached via a circuitous route. Unilever was allowed to place orders for ships with German shipyards and to settle the accounts partly with frozen marks owned by its German subsidiaries and partly with imported raw materials. Consequently, Unilever was able to transfer, or literally ship off, considerable portions of its German profits to the Netherlands. The agrarian lobby remained strong during the 1930s. As a result, Unilever lost a substantial share of its margarine market in Germany, but not as much as had been expected. The German government also saw the drawbacks of its own policy. Margarine was much cheaper than butter, and was therefore a popular article in industrial areas. In addition, a decrease in margarine production resulted in less cattle cake – a most important by-product used by farmers as forage. Another effect of the anti-margarine policy was that it reinforced Unilever’s diversification strategy inside Germany. This strategy was reinforced by the currency restrictions. In particular after 1936, when the shipping deals became less attractive to Unilever, it looked for favourable acquisitions, among them also ‘Jewish’ companies which were, however, often remote from its core activity. Only from 1938 did the German government officially begin to enact antiJewish laws with regard to large companies like Unilever. Now all contacts were mobilised to get information about the impact of the new anti-Semitic laws in Nazi Germany. A special memorandum was prepared for the relevant government circles, in which the Jewish influence on Unilever was trivialised. Although there were five Board members of Jewish origin, according to the memorandum, none of them was engaged with the German businesses. Shortly afterwards Unilever was classified as an ‘Aryan’ company by Göring himself.

4

War preparations

In Britain, Germany and the Netherlands war preparations were made with different motives and from a different perspective. In Germany the Second FourYear Plan of October 1936 meant a big shift towards large-scale militarisation of the economy; the German economy was restructured for an offensive war. In Great Britain, the planning for future war in fact began immediately after the First World War, but accelerated after 1933 when Hitler came to power. The crisis with Italy over the invasion of Abyssinia in 1935, increasing tensions in Anglo-German relations following the remilitarisation of the Rhineland in 1936 and the threat to British interests posed by the Sino-Japanese war of 1937 stimulated further planning for economic warfare. In the Netherlands the formation of a committee for economic defence preparations in reaction to the Rhineland crisis signalled the beginning of systematic war preparations. This chapter starts with the war preparations in Unilever’s home countries, Britain and the Netherlands, and in Unilever’s second largest market, Germany. The two sections that follow deal with Unilever’s own preparations made in the two years preceding the war. First, a new Equalisation Agreement was signed on 31 December 1937, by which the assets of Limited and NV were redistributed. Second, in the beginning of 1939 all former ‘British’ shares, which had been taken over by the Dutch, as well as the Special Ordinary Shares were brought to South Africa. In the event of German aggression no overseas assets should fall in German hands. Third, simultaneously, the company built up large stocks – especially in Britain and the Netherlands – and was very much encouraged to do so by both governments. The last section discusses Unilever’s attitude towards contributing to defence preparations. Contrary to the company’s own war preparations, it stood aloof from military war preparations on the continent.

National war preparations Following the announcement of the Four-Year Plan at the Nuremberg Party Rally in September 1936 the German economy was pushed in the direction of expansion and war. The driving force behind the Four-Year Plan was Göring, chief of the Luftwaffe, who would gain most directly from the Plan in his power struggle with Economics Minister Schacht for control over the economy. By that

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War preparations

time Schacht favoured a re-entry of Germany into the international markets and moving away from the armaments-led economy. Hitler – exceptionally – had been persuaded to put his economic views in writing in preparation for the Party Rally. His memorandum talked about the solution to the economic problems, which was to be found in partial autarky.1 Essential food imports were only allowed if they were not at the cost of rearmament. Production of synthetic gasoline, iron and synthetic rubber (buna) had to be increased at any price. The priority given to a forced rearmament by means of an autarkic economic policy took the war preparations in Germany on to a new plane.2 Within four years Germany was to achieve independence of imports of strategic raw materials. Hitler appointed Göring Plenipotentiary of the Four-Year Plan, although he had played only a marginal role in economic policy until then. However, as the head of the Luftwaffe Hitler believed him to be absolutely committed to a further rearmament of Germany. The volume of investment planned by Göring’s bureaucratic apparatus was enormous. Between 1936 and 1940 the Four-Year Plan was responsible for somewhere between 20 and 25 per cent of all investment in the Third Reich, undeniably directed at war.3 The conservative Schacht, backed by big business and the army, which feared economic chaos, was forced to resign as Economics Minister in 1937.4 Because of his opposition to Hitler’s armaments expenditure he was also dismissed from his post as Reichsbank president in 1939. Walther Funk, who was appointed Economics Minister in 1938, was willing to operate under Göring’s supervision. In 1939 Funk also replaced Schacht as president of the Reichsbank. During the war Funk would play only a marginal role in the struggle for power in the German economy between Göring, Speer and Himmler, and would be particularly busy lining his own pockets.5 To understand the policy of appeasement towards Germany’s overt war plans one cannot ignore how greatly the interest of the largest empire in history mattered to British politicians. The preservation of world peace was essential for the survival of the vulnerable Empire.6 As a result, Britain’s policy of appeasement can be interpreted as a double strategy; on the one hand it aimed to appease Hitler, on the other, simultaneously, Britain gained some time to make extensive war preparations. It was Chamberlain, as Chancellor of the Exchequer, who played a leading part in Britain’s rearmament programme from 1933 onward. In 1935 military expenditure was one-fifth higher than the year before and in 1936 two-thirds higher than 1934.7 Expenditure on the Royal Air Force trebled in that period. Furthermore, plans were made in terms of war capacity as a whole. In 1936 a Ministry for the Co-ordination of Defence was set up under Sir Thomas Inskip. He had to draw up a comprehensive survey of what had been achieved, and what needed to be done. In that same year Chamberlain introduced in the annual budget a four-year plan for rearmament, which provided the framework for the military structure with which Britain entered the war in September 1939.8 As from 1935 plans were made to move swiftly and smoothly to a war

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61

economy should it become necessary. Most of the plans for mobilising the economy for war were based on problems experienced in the First World War. The Ministry of Munitions thought out many plans for the administrative structure of wartime government in the 1930s. The system of raw-material controls was modelled on its predecessors from the First World War. There was a stockpiling of strategic materials, such as non-ferrous metals, cotton, hemp, iron ore and rubber. A shadow factory scheme was initiated to extend the capacity of the munitions industry. Lists were compiled of firms that could produce wartime munitions. A system of food control and rationing was planned and ration books printed.9 The pace of rearmament did not slacken after Munich. On the contrary, it was speeded up. In Chamberlain’s view Hitler’s next step of expansionism would bring war. On 27 October 1938 a new Committee on Defence Preparations and Accelerations was set up under the chairmanship of Inskip. Every aspect of war preparation received attention. Civil defence preparations were made and purchasing missions were sent to the United States to buy stocks and aircraft.10 Consequently, government expenditure on arms increased spectacularly. Although much of the economic rearmament effort was hidden from the public, Britain was far from being unprepared when Germany invaded Poland in 1939. In contrast to the German and the British war preparations the Dutch defence policy appears unworldly. After the remilitarisation of the Rhineland in 1936 Prime Minister Colijn stated in a memorandum to General Reynders that the Netherlands was not in a position to obstruct the plans of a great power to occupy certain parts of the country: ‘There is no remedy against this danger.’11 Furthermore, there was no money available. Colijn rejected solutions ‘that would cost several millions’.12 Accordingly he refused to ask the Dutch parliament to approve the necessary millions to improve the defence capacity. Consequently, Dutch government expenditure on defence was extraordinarily low. In 1939 Germany’s military spending was 23 per cent of its GDP and in Britain expenditure on war-related activities rose to 15 per cent of total national expenditure. In the same year the Netherlands spent only 4 per cent of national expenditure on arms.13 Even though the Dutch had almost doubled their military expenditure from 1938 to 1939, they never moved anywhere near the German or British figures. The Dutch attitude towards defence was based on two suppositions. First, Dutch politicians hoped the Netherlands could stay neutral as it had done in the First World War. Second, in case of an enemy foray the Netherlands had its allies, which would help this small neutral country. As a result, economic war preparations received more attention than the military preparations. In 1936 a Committee for Economic Defence Preparation (CEVV) was set up and laid the foundation for economic war preparations.14 Special attention was paid to the food supply in wartime. The neutral Netherlands had to be nourished. To avert the food shortage experienced in the First World War, the Government Bureau for Preparation of the Food Supply in Wartime (RBVVO) was set up on 1 April 1937 and it was placed under the leadership of S.L. Louwes.15 In September

62 War preparations 1939 this bureau was renamed the Government Bureau for the Food Supply in Wartime, with the same abbreviation.16 In the summer of 1938 an Economic Defence Council, chaired by Economics Minister Steenberghe, was established.17 Council members were Hirschfeld, Director General in the Economics Ministry, and Louwes. Both men were to play a key role in the economic life of the Netherlands during the German occupation. The Council was responsible for the defence preparations with regard to industrial production. In the event of war many raw materials would become scarce. To meet the shortage of raw materials the Defence Council began to set up Government Bureaux (Rijksbureaux). These vertical organisations had to list the stocks and ration raw materials. Twenty bureaux were prepared and composed according to branch of industry and type of raw material. Industry and trade were closely involved in this matter. The management was recruited from amongst the top people in each branch of industry, frequently managers of the bigger companies. The establishment of these bureaux gained momentum with the Sudeten crisis in 1938. After the crisis the urgency diminished; however, the establishment of the Government Bureaux continued. By the end of August 1939 a dozen bureaux had been set up. From an economic point of view the Netherlands was much better prepared than at the beginning of the First World War.18 Nevertheless, it was not until the German occupation in May 1940 that the Government Bureaux would play a part in the organisation of the Dutch economy, in particular in the allocation of raw materials.

Unilever’s legal war preparations As the tensions on the continent mounted the Anglo-Dutch multinational Unilever also made arrangements to ensure that its business would run smoothly in the event of war. Because the enterprise had businesses in all potentially belligerent countries, war preparations nonetheless became rather complicated. In the event of war contradictory interests were bound to arise. Centre of attention was the position of the Rotterdam holding company, Unilever NV. Possibly the Board hoped, as did many politicians, that the Netherlands would again remain neutral, as it had done in the First World War. In a letter to Unilever’s subsidiary in Boston Greenhalgh, on behalf of the Board, explained the nature of the company’s war preparations. ‘. . . I should perhaps make it clear that we do not expect Germany overrunning Holland or any other dire emergency happening to that country; the arrangement is merely precautionary having regard to the difficult times that are before us’.19 Thus, although the Board did not expect Germany to invade the Netherlands, it was preparing itself thoroughly for the unlikely event. It is questionable whether Unilever’s new Equalisation Agreement of 31 December 1937 had been prepared solely in anticipation of a possible war, but the timing and the results of the agreement match up very well with other arrangements at the time. The new agreement was a renewal of the old agreement of 1929 and involved no change in the principle that Unilever had two

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63

parent companies. The two holding companies Unilever Limited in London and Unilever NV in Rotterdam in fact formed one enterprise. In connection with double taxation the company had two parent holding companies. The London and Rotterdam boards were identical and in conformity with the agreement the shareholders should be treated equally. The latter, however, was the difficulty. Developments on the continent, especially in Germany, had brought a big shift in the profitability of NV and Limited at the expense of NV. From 1934 it had become almost impossible to transfer profits from German subsidiaries to NV in Rotterdam and, simultaneously, the North American business was booming. As a result London had to transfer profits to NV in favour of the shareholders and this meant double taxation, even though the main reason for having an Equalisation Agreement was to avert this. By redistributing the assets of the two groups at the end of 1937, the two should become about equal in capital employment and profits.20 That is why for example the highly profitable North American business came under the control of Rotterdam, as did virtually all the assets outside the British Empire. Nevertheless, as part of Unilever’s war preparations the new agreement also had a great advantage. In the event of war between Britain and Germany – and assuming Dutch neutrality – business contact between London and Rotterdam would become difficult. In that case the Dutch holding company could take advantage of the surplus liquid assets of the highly profitable American subsidiary, which was, in addition, also located in a neutral country. So the continental part of the company would have sufficient means at its disposal to be self-reliant in case of emergency. The New Equalisation Agreement meant a completion of the merger process of the 1930s. The principle of unified management had been accepted in the organisation and the change of ownership of assets no longer affected the business.21 Nearly all the old Lever assets outside the British Empire had now been sold to NV. Therefore, the New Equalisation Agreement was a sort of paradox to the company. On the one hand, Unilever’s dual structure continued, on the other, its renewed form created more unity. During the Second World War that particular aspect would prove essential. The British and the continental businesses could be separated and could simultaneously work in Unilever’s general interest. Actually during the war the enterprise would be broken up to a considerable extent. Businesses in Germany and in German-occupied territory would be cut off completely from London. Contact with Unilever businesses in neutral countries also had to be handled very cautiously. As a result, the Unilever businesses throughout the world had to pursue their own interests, dictated by local circumstances. The most important consequence of the new agreement, however, was that NV in Rotterdam and Limited in London would be able to run their businesses independently. When the war risk increased Paul Rijkens urged the Special Committee to take further measures. According to the chairman of NV, the option to split the company into two theoretically autonomous parts was not enough. In February 1939 he proposed a scheme for splitting the Dutch parent company into two. NV

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War preparations

would remain in possession of its continental assets and its overseas assets would be transferred to another company, which would be in South Africa because of the favourable tax position there.22 In the case of German aggression no overseas assets should fall into German hands that could seize these Unilever assets as part of the sequestration of enemy capital. Unilever’s legal war preparation could be seen as a cloaking activity of an Allied company, and shows that during the 1930s not only German multinational companies attempted to protect their foreign assets.23 In contrast to the Dutch multinational Philips and the other Anglo-Dutch multinational Royal Dutch/Shell (Bataafsche Petroleum Mij. – BPM), Unilever did not use the Dutch Relocation of Registered Office Act (Wet op de Zetelverplaatsing). It was discussed in the same period, but only adopted a few days before the German invasion of the Netherlands in May 1940. In accordance with the act it was possible for Dutch companies to relocate their registered office to Curaçao, Surinam or the Dutch East Indies.24 In December 1937 Unilever’s holding company Mavibel had combined the former British interests outside the British Empire. In February 1939 Unilever, as proposed by Rijkens, set up a South African holding company called Internationale Mij. voor Handel en Nijverheid Beperk in Durban. Under this holding company a 100 per cent participation was set up, the Overseas Holding Ltd. In the event of war and occupation of the Netherlands all overseas capital of Unilever NV would be transferred from Mavibel to the latter.25 Apart from NV’s holdings in the Dutch East Indies, all interests in non-British overseas companies, in the United States, the Philippine Islands, China, Argentina, Brazil, Thailand, Turkey and the Belgian Congo, would be transferred to the South African holding company. Simultaneously, Unilever set up a trust (Whitehall Trust) in London.26 The South African subsidiary of NV owed Limited an amount of £11 million. This loan had been the result of the transfer of assets from the Limited group to the NV group in 1937 – a result of the New Equalisation Agreement. As security for this loan, the non-British interests were vested in the Whitehall Trust in London.27 Under British law it was possible to convey the ownership of property in trust to somebody else. The property had to be administered by a trustee in favour of the original owner. Through this legal construct it was possible to avoid difficulties with the British Trading with the Enemy Act, because of the link with the South African subsidiary of Unilever NV. The same Trust Instrument, as it was called inside the company, was used for its nominative shares (registered shares). In 1939 half of the Special Ordinary Shares were transferred to the Overseas Holding, Durban. As security for another loan of £499,000, these shares were also vested in the Whitehall Trust in London.28 These priority shares – numbered one to 2,400 – entitled the owner to choose the Unilever board and could only be sold to third parties with the permission of all owners. The possession of these shares was thus of vital importance for the election of the directors of the company. Before the war half of these Special Ordinary Shares were held by a Dutch subsidiary of NV (NV

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65

Elma) and the other half by a subsidiary of Limited (United Holdings Limited). If war were to break out and the Netherlands was invaded by the Germans, the Special Shares were protected against sequestration. To make an election of a continental board possible, however, the holders of these Special Ordinary shares handed over their voting right to NV Elma. In the event of an occupation of the Netherlands the continental side of Unilever could be managed according to its articles of association, with its Special Ordinary shares safe in South Africa. In conclusion, the rather complicated legal provisions made sequestration of Unilever’s overseas interests impossible, and simultaneously through the Trust Instrument, they guaranteed that these interests were at the disposal of the Unilever board in London. The same is true of the Ordinary Special Shares necessary for the election of the board. In addition, these provisions safeguarded Unilever’s assets against the consequences of the British Trading with the Enemy Act. Combined with the new Equalisation Agreement it was possible to run the company on both sides of the Second World War. Unilever had prepared itself legally well in advance for various possible eventualities. Besides, these extensive legal preparations show that in this period Unilever relied heavily on Britain and the British parent company.

The building-up of stocks Unilever’s raw-materials purchases took place on the world market, for the greater part in London and partly in Amsterdam and Rotterdam. In London, Raw Materials Ltd, a subsidiary of Lever Brothers & Unilever Limited, was responsible for the purchase of oils and fats. In the Netherlands Unilever Raw Materials Company (Unilever Grondstoffen Maatschappij NV – UGM) bought the raw materials like linseed oil, animal fats and coconut oil. Between these two companies there was a system of mutual delivery upon payment of the original contract price. The Dutch raw-materials company also supplied Unilever companies on the European continent, partially with supplies that had been processed in Dutch oil-milling companies. In addition, Unilever companies in different countries had their independent purchases of raw materials, mostly oil-bearing seeds cultivated in the states concerned. Unilever also bought raw materials for third parties, i.e. for other margarine, soap and fat factories.29 Since 1933, due to currency restrictions and government control of the economy in Germany, Unilever’s raw material companies in London and Rotterdam had no longer been able to arrange to supply German subsidiaries with raw materials. The purchase took place centrally by the Deutsche OelmühlenRohstoffe GmbH (D.O.R.) in Berlin, which was controlled by the Reichsgetreidestelle. In 1935, nevertheless, Unilever had been the only buying agent for the D.O.R. But in 1936 after the end of the contract, the Unilever Grondstoffen Maatschappij N.V. only purchased oil-bearing seeds for the D.O.R., and particularly palm kernels and groundnuts for UAC’s account.30 Table 4.1 shows the Unilever purchases of raw materials in Europe in 1938.

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War preparations

These figures do not include independent purchases in various countries, like the substantial purchases of groundnuts in France from Senegal or the significant German purchases of whale oil from Unilever’s own German whaling fleet. It gives a geographical breakdown of the Unilever’s purchases of raw materials in 1938 and the relative importance of various countries in Europe. Table 4.1 nonetheless misrepresents Unilever’s raw material purchases in Germany because the UAC deliveries to Germany are not included, nor is the catch of the German whaling fleet, which amounted to 100,000 tons per year.31 In this period total world production of oils and fats amounted to 21.6 million tons, of which Unilever’s raw materials companies purchased about two million tons.32 About 9 per cent of the total world production was either processed or purchased via Unilever in its main markets in Europe. The largest share (56 per cent) was purchased in Britain: about 1.1 million tons. The Netherlands was the second biggest raw-materials market (18 per cent). Germany was in fact the third raw-materials market if the oil supplied by the whaling fleet is included. The Central European countries, the former Schicht countries, were fourth. Although this is only a rough indication, it gives an impression of the relative importance of various countries to Unilever’s raw-materials purchases before the war. In May 1939 D’Arcy Cooper paid attention in his shareholders’ address to the sharp drop in raw-material prices. According to him the fall in prices for oils and fats was caused by both political and economic circumstances. In any event world supply amply exceeded demand. In 1938 oils and fats production in the United States increased by 230,000 tons, or 10 per cent, compared with 1937. Production of copra and coconut oil rose by 120,000 tons, whale oil production increased by 90,000 tons and lard showed a growth of 200,000 tons. World-wide olive oil production amounted to 1,100,000 tons as compared with 700,000 tons Table 4.1 Unilever’s purchases of raw materials in 1938 (in ’000 metric tons) Oil seeds Britain Netherlands France Belgium DOR* Heima* Scandinavia Switzerland Total

934 282 43 67 105 140 69 – 1,640

Oil 114 49 11 335 – 5 2 0.2 180

Whale oil 54 33 – 15 – 11 37 – 150

Various fats

Total

35 4 3 0.3 – 3 1 0.2

1,137 368 57 417 105 159 109 –

46

2,352

Source: UHA-R, His 194–1498, Purchases of raw materials in 1938.

*

Note * DOR denotes Deutsche Oelmühlen-Rohstoffe G.m.b.H. and Heima stands for the former ‘Schicht countries’ like Poland, Czechoslovakia and Yugoslavia. The original detailed figures were given in English tons (1,016 kg). I have converted them into metric tons and then rounded them off.

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67

in 1937. As a result prices had dropped. For example, the price of coconut oil fell from £21 per ton to £15 per ton, the price of groundnut oil decreased from £21 to £18 and the price of palm oil dropped from £16 to £13 in 1938.33 Nevertheless, it was difficult to pinpoint where the interest of the Unilever concern lay – in high or in low raw-material prices.34 Manufacturing companies were glad to obtain the raw materials as cheaply as possible. On the other hand Unilever owned the largest trading company in oils and fats in the world: the United Africa Company (UAC). In addition, Unilever had its own whaling companies in Britain (The Southern Whaling & Sealing Co.) and Germany (Unitas Deutsche Walfang GmbH). Thus low raw material prices influenced the profitability of the UAC and the whaling companies. A rise in raw material prices would not affect the soap business because all soap producers in the world needed the same materials. Nevertheless, it might prove difficult for the margarine industry where prices were determined by the extremely low butter prices. At the end 1938 D’Arcy Cooper stated that the company’s interests in West Africa were so large that higher raw material prices would suit the company better.35 In 1939 the tide started to turn. That year brought an increase in demand for oils and fats, particularly in Europe, and consequently higher prices. As the threat of war was growing governments and companies built up stocks. Stocks of whale oil were hoarded, because whaling became an insecure business. In Britain margarine manufacturers were using as much palm oil as possible. Imports of palm oil and groundnuts from West Africa to Britain increased.36 Unilever as the largest player on the British oils and fats market built up huge stocks of raw materials in close collaboration with the British government. The greater part of the produce came from Unilever’s subsidiaries in Africa. The UAC showed a period of unprecedented growth.37 In the Netherlands the company was also stimulated by government legislation to build up stocks.38 As the Unilever Raw Materials Company (UGM) supplied Unilever companies throughout continental Europe, stock building in the Netherlands as part of the Dutch war preparations was important for the continental business of the company. Table 4.2 gives a picture of Unilever’s stockpiling in

Table 4.2 Unilever NV’s stock of raw materials in the Netherlands at the end of 1938 and 1939 (’000 tons)

UGM Outside UGM End 1938 UGM Outside UGM End 1939

Oil seeds

Whale oil

Oils and fats

14.5 6.7 21.2 57.4 11.5 68.9

2.7 – 2.7 32.6 – 32.6

17.2 3.1 20.3 23.4 3.5 26.9

Source: UHA-R, His 194–1498, Vorräte europäischer Länder.

68 War preparations the Netherlands in 1938 and 1939 and its enormous increase in 1939. In addition to the UGM purchases Unilever companies in the Netherlands had their independent purchases of raw materials (referred to here as Outside UGM), mostly domestically cultivated oil-bearing seeds. Stockpiling, however, was a risky enterprise. Price falls would cause largescale losses for those who held stocks, as had been the case in 1937 and 1938. In addition these surplus supplies held in 1939 involved extra costs, like loss of interest and storage charges.39 Normally Unilever kept stocks that were sufficient for 13 weeks, but under these circumstances it laid in stocks to cover at least one year. The Unilever board probably assessed the war risk as higher than the economic risk of stockpiling. The Dutch institutional environment encouraged Unilever’s policy. The Dutch government stimulated the industry to build up stocks. Not only did Shell hold large stocks of mineral oils, but the storehouses of Philips were also filled to the rafters. But smaller Dutch companies, too, kept exceptionally high levels of stocks.40 The raw-materials position for oils and fats in the Netherlands on the eve of the German occupation was excellent. According to the RBVVO the total stock of edible fats and oils amounted to 131,000 tons. Together with the large stocks of oilseeds this would last for at least one and a half years.41 Table 4.3 shows Unilever’s raw materials position as at 27 April 1940. It also indicates the number of weeks that the Unilever companies could produce margarine and soap with these oils and fats. Technology advances over the preceding ten years had rendered them roughly interchangeable for the making of soap or margarine. Not included in this table were for example the stocks of oilseeds, soya beans, palm kernels and copra – the oil-yielding kernel of a coconut – which were not reported in these inventories of refined oil and fats. Table 4.3 shows Unilever’s relative importance for the total Dutch stockpiling. The company owned about half of the Dutch stock of oils and fats when the Germans invaded the country. In the Netherlands Unilever had enough refined

Table 4.3 Unilever’s raw materials position in the Netherlands as at 27 April 1940 Oils/fats

Position

Expenditure

Coconut oil Palm kernel oil Palm oil Groundnut oil Soya oil Maize oil Linseed oil Animal fats Whale oil

9,850 3,350 11,551 2,126 10,973 279 9 13 29,024

– 400 300 175 275 – – – 60

– 33 38.5 12 39 – – – 483

Total

67,175

1,210

55.5

Source: UHA-R, Dir 15, 287, 3, Raw materials position at 27 April 1940.

Weeks of cover

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69

oils and fats in stock to produce for at least one year (55.5 weeks) under the same conditions and quotas that existed in the Netherlands until May 1940. Immediately after the German occupation, however, the soap quotas were cut to 70 per cent and the method of producing soap was changed. Soap was manufactured with ever-smaller quantities of fatty acids. Eventually, as from February 1941, soap manufacturing based on natural oils and fats was almost reduced to zero in the occupied Netherlands.

Military war preparations On 29 September 1938, after the conclusion of the Munich Conference, chairman D’Arcy Cooper proposed to write a letter of congratulation to Prime Minister Chamberlain. ‘The chairman said that in no section of the Business World could there be more realisation of the services the Prime Minister had rendered in preserving Peace than in this Company.’42 Although the British and French governments had surrendered Czechoslovakia in exchange for peace on the European continent, Unilever’s Board clearly did not believe that the conference had prevented war completely. As a result, in the same Board meeting the chairman said that he had been impressed by the way the different sections of the business in Britain had made their arrangements to carry on effectively in the event of war. He stated in addition: ‘The full resources of the Organisation would be at the disposal of the [British] Government.’43 Like the British Cabinet Unilever was pleased with the results of Munich. Nonetheless, it continued to prepare the company for an anticipated war. On the European continent, however, Unilever continued to pursue a strict policy of neutrality. Contrary to Unilever’s war preparations in the legal sphere and the building-up of stocks, the company expressed the view that active (air) defence was to be regarded as the concern of the continental governments. Unilever’s formidable direct investments in Germany would be at risk if the company were to become too closely involved in active defence preparations in other countries on the continent. This had also been the reason for Unilever’s active involvement in the British economic appeasement movement towards Nazi Germany through its membership of the Anglo-German Fellowship.44 In the Netherlands Unilever objected to air-defence preparations being paid for by industry. In June 1939 the Continental Committee had decided to defer a decision to spend ƒ7,000 on an air-raid shelter at the Unilever soap factory in Vlaardingen.45 According to the Committee it might not have been in accordance with government regulations yet to be decided upon. In July 1939 the Unilever board had lodged an objection with the Rotterdam Committee for Air Defence. It doubted whether it was correct to charge the bill completely to Rotterdam trade and industry, since in The Hague the government was paying for the costs of air defence in full.46 In the end, Unilever did not contribute financially to active Dutch defence preparations. In addition, Unilever stood completely aloof from an initiative taken by Philips in June 1939. Philips’ director Otten tried to convince Arthur Hartog to

70

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use industry’s influence on the Dutch government to build a few battle cruisers for the defence of the Dutch East Indies. ‘We have to bear the consequences of our rich possessions (. . .) and leave the petty politics, by which we shirk our responsibility to others until now’, according to Otten.47 Hartog replied that he respected Otten’s opinion, but he wanted to leave the decision to the Dutch government. Even though Hartog answered in a private capacity, his reply is illustrative of Unilever’s attitude towards active defence matters on the European continent. In September 1939, for example, the Continental Committee replied to the Norwegian Unilever holding company De-No-Fa, regarding the purchase of anti-aircraft guns, that the enterprise had in all countries taken up the standpoint that ‘as long as no legal stipulations exist on the subject matters of active air raid defence are not the concern of civilians, but of the government’.48 In cases where other continental companies made similar proposals the Committee took a similar view. This contrasted sharply with Unilever’s attitude towards defence matters in Britain and its close association with Britain’s explosives production, as will be explored in the next chapter.

Conclusions As tensions built up on the European continent, Unilever, like the British government, made extensive war preparations. First, the company signed a New Equalisation Agreement on 31 December 1937. Although there were other reasons for a new agreement it made a theoretical split of the company into two equal independent parts – Limited and NV – possible in the event of war. In addition, because Unilever’s subsidiary in the United States now fell directly under NV, the latter could use the surplus liquid funds of its successful American business in the event that NV became completely isolated from Limited. Second, at the beginning of 1939 a scheme was adopted for splitting NV in two. Rotterdam would remain in possession of the continental assets and NV’s overseas assets would be transferred to a South African holding company in the event of a German attack on the Netherlands. Through the establishment of the Whitehall Trust – the name is far from coincidental – difficulties with the British Trading with the Enemy Act were avoided. In contrast to the other two Anglo/Dutch multinationals, Philips and Shell, Unilever did not use the Dutch Relocation of Registered Office Act, which made it possible for Dutch companies to relocate their registered office to a Dutch colony. Third, as the threat of war was growing Unilever, like other companies, laid in huge stocks in Britain as well as the Netherlands. Stocks of whale oil were hoarded and imports of palm oil and groundnuts into Britain were increased in close collaboration with the British government. In the Netherlands the company was also encouraged by the government to build up stocks; in 1939 and the first four months of 1940 enormous stocks of all kinds of oils and fats were built up. Contrary to Unilever’s legal war preparations and the building-up of stocks, the company stood completely aloof from military defence preparations on the

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71

European continent. The company’s formidable direct investments in Germany would be at risk if the company became too closely involved in continental military war preparations. Moreover, the outbreak of a European war would be absolutely detrimental for its business; as a result, the company pursued a strict policy of neutrality on the continent. This contrasted greatly with the company’s policy in Britain where it substantially supported the government’s war preparations. The way Unilever prepared itself, however, clearly shows that the company relied heavily on the British side, counting on Britain’s victory.

5

Business as unusual, 1939–1941

Between the Blitzkrieg attack on Poland in September 1939 and the spring of 1940 little of military importance happened in Western Europe. During the Phoney War period British bombers had been engaged in raids over Germany, but they were dropping leaflets rather than bombs. In the spring of 1940, however, the war in Western Europe became really serious when the German army invaded Norway, Denmark, the Netherlands, Belgium and France. In response to the Luftwaffe’s devastating bombing raid on Rotterdam on 15 May 1940, Churchill, who had just succeeded Chamberlain, decided to start a bombing campaign on industrial and military targets in Germany.1 After the conquest of Western Europe Germany, the occupied territories and the aligned neutral states constituted potentially an overwhelmingly powerful economic bloc. The European continent, which was completely under the German sphere of influence, comprised an economy, measured by combined GDP, greater than that of the British Empire. The latter was the only serious enemy left since the Soviet–German pact had been signed in 1939 and the US would be formerly neutral until December 1941. The incorporation of the European economies into the German economic sphere of influence was to a large extent executed through the introduction of a centralised clearing system in August 1940. Exporters in the occupied territories were paid by their national banks. The Germans thereupon received their goods, but never settled the account. Another means to incorporate the occupied economies was penetration (Verflechtung) of German (private) capital into large companies of the occupied countries. Penetration succeeded in some particular cases to a certain degree – for example in France the Wendel mining and steel group was taken over by the Reichswerke Hermann Göring. However, the most important West-European multinationals like Unilever, Royal Dutch, Philips and Luxembourg’s steel giant Arbed were able to frustrate the German plans for capital penetration.2 In addition, in Unilever’s case various groups inside the German state had their own designs. The most powerful sections endeavoured to transform the largest conglomerate of the European oils and fats industry into a German syndicate. This chapter and Chapter 6 will show why the Nazi State, as well as private German capital, failed largely in their attempts. The aim of this chapter is to explore the changes in the organisational, institu-

Business as unusual, 1939–1941 73 tional and industrial conditions for Unilever as a result of the beginning of the Second World War in September 1939. It starts with a short comparison of the war economies which were most important to Unilever, i.e. Germany, Britain and the Netherlands. The next section discusses the impact of the war on the company’s organisation. Then the British Trading with the Enemy Act is discussed in relation to Unilever. After that the plans of the Third Reich for the Anglo-Dutch multinational are explored. Special attention is paid to Henkel, its main competitor on the continent, which did everything in its power to weaken Unilever’s position during these first two years of the war. The next section deals with the consequences of government intervention in all three markets. And finally, Unilever’s major innovation on the continent at the beginning of the war will be identified, namely the frozen-foods industry.

War economies Scholars have for a long time accepted the view that the Nazis were deliberately only partially mobilising the economy by pursuing a strategy of Blitzkrieg. According to Alan Milward it was a method to avoid the misery that war seemed destined to bring to the civilian population.3 The Nazis were actually less well placed than the democracies to demand sacrifices from their populations; they therefore sought to have guns and butter (or margarine in this case). In Milward’s view it was a method of avoiding ‘total war’.4 Richard Overy, however, disagrees entirely with this view; the slowness to respond to the needs of total war was due to the fact that their major war plans assumed that they would be involved in major conflict only three or four years later. He thus shares A.J.P. Taylor’s view that Hitler was surprised to find himself involved in a continental war because of the invasion of Poland, but disagrees strongly with Milward that Hitler had no long-term war plans.5 According to Overy the characteristic feature of the German economy was not business as usual in a peacelike war economy.6 Although the regime did its utmost to prevent major reductions in rations of the German population, civilian consumption in Germany was cut to a much larger extent than in Britain during the first two years of the war.7 Adam Tooze does not agree either with Milward’s idea that the Blitzkrieg in the West was motivated by Hitler’s concern for the home front.8 Simultaneously, he rejects Overy’s thesis on Hitler’s miscalculations concerning the outbreak of war. According to Tooze this idea underestimates the deliberateness of Hitler’s war plans and the enormous risks he was taking in September 1939.9 Werner Abelshauser shows that there had already been a re-distribution from consumer to producer goods industries in the second half of 1930s.10 The effect of the Four-Year Plan on the German economy and the civilian consumer had been enormous. The regime had managed to achieve a quite extraordinary shift of earnings away from the normal consumer; guns before butter.11 Even in the peak pre-war year of 1938, average real earnings never reached the peak levels of the late 1920s. Yet GDP was almost one-third higher than it had been.

74

Business as unusual, 1939–1941

Despite having one of the biggest economies in the world Germany had managed to keep the living standards of its workers not much above what they had been before the First World War.12 In addition, the Plan had transformed the structure of the German economy. Between 1936 and 1939 two-thirds of all industrial investment had gone into war and war-related production. Since the introduction of the Four-Year Plan the private sector had had to endure extensive state intervention. In 1936 Hitler had stated: The Economics Ministry has merely to set economic tasks, and the private sector has to implement them. If, however, the private sector believes that it is unable to do this, then the National Socialist state will know how to solve these tasks itself.13 Where private business failed, the state created its own industry, as had been experienced, for example, by the steel industry in 1937 when it had refused to expand its capacity. The Reichswerke had been founded and financed by the German state and given preferential treatment in the allocation of labour, raw materials and plant.14 The original purpose of the Reichswerke was to mine lowquality domestic German iron ores, but after an aggressive campaign of corporate expansionism it had grown into one of the largest industrial conglomerates in Europe during the war.15 By 1943/1944 total assets of this highly diversified company spread all over occupied Europe amounted to almost £485 million.16 Another example was the new, state-controlled Kontinentale Öl AG, the largest oil company in Germany which had also been set up by Göring in 1941. In this case the Reich owned 60 per cent, whilst the other 40 per cent of the shares had gone to the private oil industry. According to Rainer Karlsch and Raymond Stokes this property construction, a mix of private and state ownership, was favoured by the Nazi State during the establishment of new companies.17 As the state gained a hold over the economy, some big companies, conversely, had an increasing influence on the Four-Year Plan organisation. In some areas this even led to a sort of privatisation of state economic policy. The chemicals giant IG Farben took control of the management of chemical part of the Plan. In 1936 Carl Krauch, a member of the IG Board, accepted the appointment as head of research and development in Göring’s Plan, an unpaid governmental post nonetheless.18 Shortly afterwards he withdrew from IG’s managerial Board, taking instead a position on the supervisory Board. Although his salary was paid by IG during the whole period until 1945, it is still debatable were exactly Krauch’s and IG’s interests laid in this relationship. According to Peter Hayes it was a choice between helping the regime to manage its synthetic policy or ‘being run over by it’.19 Whatever may be, IG Farben had an absolutely unique position within the war economy of Nazi Germany, which contrasted sharply with the position of for example the German heavy industry.20 IG managed the bulk of the investments in the chemical industry in Germany and assured the Wehrmacht of substantial supplies of synthetic gasoline, synthetic rubber (buna), explosives, poison gas, etc.21

Business as unusual, 1939–1941 75 As Germany could not rely solely on its own resources, despite its policy of autarky, there was an important economic motive for Germany’s territorial expansion and Hitler’s wish to control the richer industrial areas of the former German and Austrian empires. Austria, then the Sudetenland, then Bohemia and in September 1939 Silesia, were all integrated in the German economy. Their labour force, raw materials, heavy industry and gold reserves were all added to the resource base of Greater Germany.22 In May 1940, after Germany had occupied Western Europe and the Nordic countries (except for Sweden and Finland), Göring initially ordered that the rich resources in the areas of raw materials, stocks and means of production should be looted.23 In the autumn of 1940, nonetheless, the German occupier changed its occupation policy, as it appeared that the stay would be protracted. From then on German policy was more directed towards the mobilisation of productive capacity of the occupied Western territories.24 The British economy faced a serious deterioration in its reserves position and inflationary pressure during the Phoney War period.25 Britain was buying many vital stocks in the United States and had to pay for these in cash because of the latter’s neutrality. (The Lend Lease Program in March 1941 would remove this financial constraint). In addition, between September and December 1939 overseas suppliers asked for higher prices, freight charges rose, the exchange value of the pound fell, and home agricultural prices rose rapidly. Consequently, the food price index rose by 14 per cent.26 Furthermore, employment and wartime wages increased rapidly. The Government – as the owner of stocks – was incurring large losses on the sale of imported cereals and meat because it fixed the prices at which they were released from stock. To prevent further increases in retail food prices a subsidy on bread, flour, milk and home-killed meat was adopted at the end of 1939. A further rise in the cost of living could lead to discontent and an upward movement in wages, which had to be restrained.27 After the inauguration of Churchill as Prime Minister on 10 May 1940 – on the day that Germany invaded the Netherlands – the British economy was mobilised for war. The market economy was replaced by state-determined production plans. Financial planning was replaced with physical planning in terms of labour, steel and factory space. In 1940 and 1941 the British economy was rapidly transformed into a managed economy. GDP in Britain grew rapidly from 1940 onwards, by an average of almost 5 per cent annually.28 In addition, the Board of Trade adopted rationing to check the inflationary pressure. Initially a coupon system was used for gasoline and basic foodstuffs (butter, meat, sugar and tea). In June 1941 the (German) points system was introduced for clothes and footwear, and in 1942 this was extended to other foodstuffs and consumer goods like soap and sweets.29 The points system appeared to be successful, as it involved the passing back of points by retailers in order to obtain new supplies. The Netherlands was caught between the German Reich and the British Empire between September 1939 and May 1940. The Allies’ blockade of Germany caused a difficult problem for the neutral country, which depended

76

Business as unusual, 1939–1941

heavily on transit trade with Germany.30 For the Allies almost all imports could be seen as contraband. On the other hand, co-operating too readily with the British blockade could mean a violation of Dutch neutrality and possibly German reprisals. The Dutch were dependent on German coal, steel and other industrial products and on the sale of Dutch farm products on the German market. In addition, the Dutch government stimulated the build-up of stocks in the Netherlands in the event of war. The British, conversely, were opposed to this policy. Too many stocks in the Netherlands would favour a possible German occupier. Simultaneously, the Dutch pointed out to the Germans how they had been of service to them, for example by forwarding forbidden goods, granting secret currency loans, and allowing German cargo ships into Dutch territorial waters. The Dutch, however, succeeded in carrying it off fairly well. Transit traffic was indeed reduced by 90 per cent, but total trade between September 1939 and April 1940 was only 20 to 25 per cent lower than the average before 1938.31 Furthermore, stocks were built up, not by increasing imports, but by a reduction of exports. Private consumption in the Netherlands was high as a result of hoarding, whilst investments in current assets rose due to the build-up of stocks. On the whole 1939 brought the Dutch economy its highest rate of growth in the 1930s.32 The illusion of neutrality was shattered when Germany occupied the country in May 1940 and was able to exploit the Dutch preparations. At the beginning of the occupation the German authorities were highly enthusiastic about the Dutch pre-war stockpiling: ‘. . . the Netherlands covered themselves so well that – in spite of the removal of large quantities of stocks into the Reich – all stocks on hand can be used for the production of German orders well into the year 1941’.33 For good reason Britain had looked upon Dutch stockpiling with great apprehension. From the beginning it was not clear what would happen to these Dutch stocks. According to Göring, the most powerful man in economic matters at the time, all raw materials that the German authorities could lay their hands on had to be sent to the Reich.34 Hitler, however, had sent the Austrian Nazi lawyer Arthur SeyssInquart as his Reichs Commissioner in the Occupied Dutch Territories to win over the ‘Germanic’ Dutch for National Socialism. As a result, Seyss-Inquart and Hans Fischböck (General Commissioner of Economics and Finance) in The Hague tried to limit the exploitation by Berlin. Nevertheless, in June Göring ordered that Dutch companies had to sell stocks for half a year of normal production to Germany. Thereupon, in August 1940 the Reichs Commissioner in The Hague set up an institute which transferred orders from overloaded German companies to Dutch companies with enough capacity, later called Central Office of Orders (Zentralauftragsstelle–ZAST). In that way Seyss-Inquart could withstand Göring’s robber policy and at the same time solve the Dutch unemployment problem.35 Of course the Dutch authorities in The Hague were in favour of SeyssInquart’s policy, because he also defended vital Dutch economic interests. Before the war Dutch officials had been ordered – in the best interests of the

Business as unusual, 1939–1941 77 population – to stay at their posts in the event of an occupation. Because only the Queen and her Ministers had fled to London, their deputies (secretariesgeneral) had become the highest officials in the Ministries. They worked, with their staff, directly under Seyss-Inquart during the whole of the war. Therefore, the Germans were able to occupy the Netherlands with a controlling administration of no more than 1,500 officials. These Dutch officials, however, also had their own aims. They defended Dutch interests and tried to keep the Germans out of their businesses. The most important Dutch official during the war was Secretary-General H.M. Hirschfeld of the Economics Ministry. He was also responsible for the Dutch Government Bureaux (Rijksbureaux). These bureaux had been set up in 1939 for every branch of trade to regulate the allocation of raw materials in the Netherlands in case of war. During the occupation they were also involved in the rationing system. The Government Bureaux were mostly run by businessmen themselves in close co-operation with Dutch government officials. After the German occupation Fischböck placed his own representatives (Referente) in these bureaux. Nevertheless, until 1942 these representatives did not create too much trouble as they came from industrial circles in Germany as well. During the first one-and-a-half years of the German occupation the Dutch economy flourished. Dutch industry was involved largely with German orders. Profits and investments were high and unemployment disappeared. Therefore 1940 and 1941 can only be described as times of boom. Dutch GDP even peaked in 1941 when it was 7 per cent higher than 1938, the last normal year before the war.36 In this period the German occupier obviously exploited the Netherlands, but it was mainly done by trade. The Germans paid for what they bought, albeit most of the time with Dutch treasury money or by monetary expansion.37 Nonetheless, it made no difference to private companies where the money came from, as demand was high. Worse was to come, however.

Unilever’s organisational changes In response to the beginning of the war between Germany and Britain on 3 September 1939 Unilever changed its organisation completely. Then for the first time the company’s organisational structure corresponded to its dual legal structure. At the beginning of the war – after the British imposition of the economic blockade – its businesses in Germany and in German-occupied territory were cut off completely from London. The only contact possible with German companies was through the Netherlands and other neutral countries. As a result, Unilever created two autonomous boards, one in London (Limited) and one in Rotterdam (NV). Roughly speaking, companies in the British Empire were managed from London, companies on the European continent and in North America were directed from Rotterdam. Whereas in previous years the boards of Limited and NV had been identical, at the outbreak of war – in connection with the Trading with the Enemy Act – the boards of the two companies were reconstituted in such a manner that no director of either company was a director of the other.

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Business as unusual, 1939–1941

The Continental Committee moved from London to Rotterdam. All companies on the European continent, with the exception of France, had to communicate exclusively with the Continental Committee in Rotterdam and had to refrain from direct contact with London. This applied to all departments and to all matters, including correspondence by letters as well as contact by telegraph or telephone. Contact from London with continental companies would be maintained exclusively through the Continental Committee in Rotterdam.38 All companies in France had to contact London directly. In October 1939 all French interests, which had been owned by a Dutch holding company Doma NV, a subsidiary of Unilever NV, had been sold to Distributors & Transporters Limited. This subsidiary of Unilever Limited transferred the ownership to another company in London, Unilever (France) Limited. The reason for the transaction was the outbreak of war with Germany. Because the Netherlands was a neutral state and the shares of the French companies were in Dutch hands, Unilever’s business in France looked suspicious to the French. As a result, Unilever’s business in France was affected by this suspicion and was therefore brought into British hands.39 Temporarily, during the period of Dutch neutrality, only Dutchmen served on the Rotterdam board. According to the articles of association of NV the membership of the board had to be at least six and at most 25.40 Since the beginning of September 1939 the NV board consisted of the following Dutchmen: Henri Jurgens, who died in December 1939, R.J.H. Patijn, chairman of the Dutch board, Rudolf Jurgens, Pieter Hendriks, who returned from London to Rotterdam to take care of the interests of NV, Sidney van den Bergh and Dr J.W. Beyen, the former President of the Bank for International Settlements (BIS). Furthermore three consultative members were appointed: the former prime minister Dr Hendrik Colijn, who offered his good offices to the company, Dr Th. A. Fruin, a Dutch lawyer, and Dr K.P. van der Mandele, president of the Rotterdam Chamber of Commerce.41 Thus during the period of Dutch neutrality, the continental side of the company, NV, fortified its management with members from international banking circles (Beyen), from the legal world (Fruin), from the Rotterdam business community (Van der Mandele), and furthermore, from the world of politics – the five times Dutch prime minister Colijn. From September 1939 the British Board of Unilever Limited consisted mainly of British members, plus two Dutch Special Committee members Albert van den Bergh and Paul Rijkens. Franz and Heinrich Schicht returned to Berlin to become Board members of the Margarine Verkaufs Union. During the Phoney War period the German holding company operated almost autonomously from Unilever’s Boards in Rotterdam and London. All formal contact with London broke down. Business contact with the Netherlands was also limited to a minimum, as it could be misinterpreted by either the British or the German side. In the first months of the war German directors, under the pretext of protecting war secrets, withheld more and more information from their Dutch colleagues Simon Thomas and Tempel in the headquarters in Berlin. Therefore both the latter directors decided in April 1940 to move to the Netherlands.42

Business as unusual, 1939–1941 79 Shortly after the German occupation of the Netherlands Karl Blessing came to visit Rotterdam and informed NV’s board about the policy of the German Reich. A year before, in May 1939, Unilever had strengthened its contact with the German economic establishment (after Schacht’s dismissal as Reichsbank’s president) by appointing Blessing as financial director of the Margarine Verkaufs Union. Now Blessing came to tell that the German occupier would not create difficulties for Unilever NV if German nominees filled half of the positions on NV’s Board and advisory directorates.43 This was not too difficult for the Dutch board to accept, as two of these nominees, Karl Blessing and Heinrich Schicht, were already Unilever directors in Germany. A third nominee, State Councillor (Staatsrat) Karl Lindemann, was chairman of the supervisory board of Norddeutsche Lloyd of Bremen. Like Blessing he was a member of the business network of industrialists associated with Heinrich Himmler (Freundeskreises Reichsführer SS).44 On 31 May 1940 NV’s Board gave the German troika mandates over Unilever’s three most important holding companies, Marga, Saponia and Wemado, which were the formal owners of most of Unilever’s operating companies in Greater Germany and were in turn owned by NV in Rotterdam. In addition, Blessing, Schicht and Lindemann acquired rights of veto over Unilever’s business in the Balkans and Scandinavia.45 According to a press release dated 2 October 1940 the NV Board in Rotterdam consisted of the following members: R.J.H. Patijn, Rudolf Jurgens, Pieter Hendriks, Heinrich Schicht, Franz Schicht, Karl Blessing, K.P. van der Mandele, Karl Lindemann, Dr Reichle and former secretary of the Board M.G. de Baat. Furthermore four consultative members were appointed: Th. A. Fruin, H.L. Woltersom, H.J. Abs (Deutsche Bank), Dr A. Diehn and J.M. Honig (a Dutch Nazi). Colijn resigned as a consultative member.46 NV’s Board was clearly Germanised. Nevertheless, the newly appointed Germans had been either a Unilever director before the war or had been a direct business contact, like Hermann Abs or Karl Lindemann. In addition, these German board members had their own offices at the Margarine Verkaufs Union in Berlin for most of the time. As a result, Berlin headquarters became much more important and independent of Rotterdam. Over time, Unilever was actually managed from three headquarters: London, Rotterdam and Berlin. The formal power over the business as a whole, however, remained with the boards of NV in Rotterdam and Limited in London. Unilever’s overall business strategy was still mapped out in London by Limited. The NV Board in Rotterdam, actually managed by Hendriks and De Baat, operated as an improvising Board, which had to make the best of a bad job when dealing with the German Reich, where it proved largely impotent since Unilever’s business in Greater Germany and Eastern Europe was managed increasingly from Berlin, autonomous of Rotterdam. On the outbreak of war Heinrich Schicht and his cousin Franz had resigned from the London Board to return to Germany. Heinrich’s brother, Georg Schicht, naturalised as a British subject, stayed in London during the whole war.

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As a major shareholder he had been vice-chairman until 1937. It is obvious that he stayed in London to keep an eye on Schicht’s interests in the company. Unilever’s executive body in London, known as the Special Committee, then consisted of Georg Schicht, together with chairman Francis D’Arcy Cooper, vice-chairman Paul Rijkens and ‘Governor’ Lord Leverhulme, son of the founder of Lever Brothers and the biggest individual shareholder. At the beginning of 1940, however, Unilever Limited’s chairman D’Arcy Cooper was entrusted by the president of the Board of Trade with the task of reorganising the British export trade. In October 1940 he went to the United States on a mission for the British government in order to discuss with the US government ways to raise Britain’s dollar earnings.47 Other direct connections of Unilever’s Board with the British government were Members of Parliament Lord Leverhulme and Clement Davies. The latter was the leader of the Liberal Party in the House of Commons and a close friend of Churchill.48 In 1941 Clement Davies left Unilever and devoted himself completely to politics. After the German invasion of the Netherlands, Jewish board member Sidney van den Bergh fled from the Nazis and became a Board member of Limited in July 1940. Another Jewish senior board member of NV, Arthur Hartog, escaped from France after the German invasion of that country and made his way to Canada. Johan Willem Beyen, NV board member and head of the Bank for International Settlements in Basle from 1937 to 1940, was able to fly to London via Paris and was installed as chairman of the Financial Committee of Limited. At first, however, the Dutch government in exile appointed him as its financial adviser.49 In addition, from the beginning of the war vice-chairman Rijkens became a special adviser to the Dutch government in London and in 1941 he became chairman of the Dutch Reconstruction Committee.50 He was to become one of the most important organisers of the Dutch community in London during the war.51 Although the above is not a comprehensive enumeration of all board members it shows, on the one hand, the extensive changes in Unilever’s organisation and Boards at the beginning of the war and, on the other, the close relations between Unilever and the British and Dutch governments.

The British Trading with the Enemy Act On 3 September 1939 the Trading with the Enemy Act, which had been prepared in advance, came into operation. In drafting the Trading with the Enemy legislation, based on First World War experience, the officials had been aware of the different economic reality in the 1930s. The increasing internationalisation of business had resulted in an adaptation of the Trading with the Enemy legislation so that it would apply to residents, rather than citizens of enemy states. Companies were considered enemy property if they were controlled by an enemy or incorporated according to the law of an enemy state. The enemy concept was complemented by a blacklist, which enabled neutral companies that traded with the enemy to be classified as enemy property.52 The intention of the Act was to prevent the enemy from benefiting from

Business as unusual, 1939–1941 81 enemy interests in Britain and, visa versa, to prevent enemy interests in Britain from benefiting from activities of the enemy.53 In addition, it prohibited any commercial or financial dealings with the enemy and it provided for the preservation of enemy property in Britain until the end of the war. Enemy property in Britain could be vested by the Board of Trade in a Custodian, who was given wide-ranging powers over it.54 To ensure the effectiveness of the Act, the legislation was extended to each country occupied by Nazi Germany. Such a country thereby became an enemy of Britain and its residents’ property in the British Empire was made subject to the control of the Custodian of Enemy Property. Trade and financial transactions between Britain and the continental business became difficult under the Trading with the Enemy Act. During the early part of the war, however, the act was not rigorously enforced. No one was sure how long the war would last and the relative calm during the early months meant that the idea of ‘business as usual’ persisted. Certain transactions with enemies were still permitted, for example through Swiss intermediaries. There was a general unwillingness to disrupt trade with the neutrals, and the property of neutral companies was not deemed subject to the control of the Custodian. At the beginning of 1939 Unilever’s chairman Rijkens had urged the Special Committee to bring all former British shares, taken over by the Dutch, to South Africa. In the event of German aggression towards the Netherlands no overseas assets should fall into the hands of the Germans, who could seize these Unilever assets as part of the sequestration of enemy capital. In February 1939 – as part of the war preparations – two South African holding companies had been formed. In the event of war and occupation of the Netherlands all overseas capital of Unilever NV would be transferred to the latter.55 By means of a loan, the nonBritish interests were vested as a security in the Whitehall Trust in London (see Chapter 4).56 This rather complicated legal construct had been called a Trust Instrument, which would only become operational after a possible occupation of the Netherlands by Germany. In August 1939, several days before the outbreak of war, Unilever’s board had considered using its Trust Instrument. The main object of the Trust Instrument was to protect NV’s foreign assets against the consequences of Germany gaining control of the Netherlands. The instrument provided that, if Britain were engaged in war, a trustee in Britain would assume control of NV’s South African assets on behalf of Limited. The question which now arose was the extent to which these assets would fall under the Trading with the Enemy Act and thus be liable requisitioning by the British government. Board member Clement Davies, who dealt with these legal questions, noted during a board meeting three days before the war: [. . .] that the position under Trust Instruments had been disclosed to him by the Treasury, who had informed him that they had no present intention of requisitioning securities of this kind. He had informed the Treasury that they might rely on the goodwill of the Board of N.V. as much as that of the Board of LIMITED should the need arise.57

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Thus the British government had no intention of sequestrating the NV assets that were held by the British trustee. As a result, Unilever could immediately use its Trust Instrument when Germany occupied the Netherlands. All interests in nonBritish overseas companies, in the United States, the Philippine Islands, China, Argentina, Brazil, Thailand, Turkey and the Belgian Congo, would be transferred to the South African holding companies, which conveyed the ownership of these assets to the Whitehall Trust. The same Trust Instrument could be used for its priority shares. These priority shares entitled their owner to elect Unilever’s Board. The possession of these shares was thus of vital importance for the election of the directors of the company and should not fall into the hands of the Germans. From 3 September 1939 Unilever’s international financial relations became very complicated. Under the Trading with the Enemy Act there was a ban on [. . .] paying or transmitting any money, negotiable instrument or security for money to or for the benefit of an enemy or to a place in enemy territory, or performing any obligation to, or discharging any obligation of, an enemy, whether the obligation was undertaken before or after the commencement of the Act.58 Accordingly, business contacts between London and Rotterdam had to be conducted with great circumspection. On the one hand, the implementation of the Trading with the Enemy Act was still insecure and, on the other, Unilever’s business interests in Germany were extremely important. With Germany being a ‘belligerent enemy’ and the Netherlands a potential ‘technical enemy’ by virtue of its likely occupation by Germany, Unilever’s business in the United States, another neutral country, could offer a provisional way out of the difficulties. Since the end of 1937 Lever Brothers Company in Boston had been NV’s most important overseas asset. The New Equalisation Agreement had brought the United States business under the control of Rotterdam. As a result during the period of Dutch neutrality it provided the Dutch parent company with the liquid resources needed to carry on its normal business on the European continent. Nonetheless, as an important part of the liquid resources was represented at this juncture by deposits with American banks and by other current accounts, it became necessary to obtain an undertaking for essential finance from the British parent company when it took over these current accounts. And, moreover, since the British holding company could have been restricted by war measures, this undertaking had to become operative in an alternative way, i.e. through Lever Brothers Company in Boston. In other words, Lever Brothers Company, USA, had to supply funds to cover NV’s debts and all its short-term liabilities and this had, if possible, to be backed by an undertaking from Limited. As a result, Limited could indirectly supply funds to NV. This obligation would cease if and when Germany occupied the Netherlands. Under these circumstances the Trust Instrument would come into effect and all current and other accounts of Unilever’s business in the United States could be transferred to the Whitehall Trust.59

Business as unusual, 1939–1941 83 The effect on Unilever of the German occupation of the Netherlands in May 1940 was to sever completely the relations and communication between the two parent companies Limited and NV. Any dealings between the two, even if possible, were prohibited from then on under the Trading with the Enemy Act. Nevertheless, in May 1940 there was still a lack of clarity about the implementation of the Act. For example, the position of NV’s subsidiaries in neutral countries was not entirely clear. Consequently, several months of discussion ensued with the Board of Trade. At the end of May Clement Davies explained at a Directors’ Conference that ‘as Britain was not at war with the Netherlands, NV was not an enemy at Common Law, though registered under the laws of the Netherlands’.60 The same applied to subsidiaries in the Netherlands. ‘It was for this reason that the legality of the Equalisation Agreement was not touched by the German invasion of the Netherlands.’61 As regards the question of the Trading with the Enemy Act, however, the position was more complicated. The provisions of the Act and their application to companies situated in enemy territory were not entirely clear. ‘Individuals resident in enemy territory were clearly enemies, and it could not have been intended that Companies should not be. It was certain, however, that the government did not want to hamper contact with NV’s Subsidiaries outside Europe [. . .]’62 Because all these companies had to be regarded as technical enemies under the Act, all debts and securities owing to them had to be returned to the Custodian of Enemy Property. Another question which was discussed was whether Limited should act as a self-appointed agent for NV and its subsidiaries all over the world in so far as this would be permissible under the Trading with the Enemy Act. Beyen called the attention of the meeting to the first decree of the Dutch government in London (Royal Decree A1) which had only recently been issued. ‘He [Beyen] need hardly say that the Dutch government would assist in any way it could.’63 A few weeks later Rijkens called attention to this Royal Decree, which had been promulgated on 30 May 1940. The effect of this decree seemed to be that all shares, debts and claims belonging to persons inside the Netherlands and realisable outside the Netherlands would be expropriated by the Dutch government. This decree was wide enough to cover NV’s companies on the European Continent, in the Dutch East Indies and also the South African holding companies. The shares of these Unilever companies had now passed into the hands of the Dutch government as trustees, and would be returned to the rightful owners after the war. According to Rijkens: ‘There was a possibility that the Dutch government might appoint this Company as an Agent for the administration of the Companies affected.’64 Shortly afterwards the Dutch government in London assigned Limited the task of administering these assets. On 20 June 1940 Rijkens reported that the position of the overseas subsidiaries of NV had now been cleared up and that there was no objection from the point of view of the Trading with the Enemy Act to have free intercourse with them. Discussions, however, were still taking place with the Trading with the Enemy Branch to clarify the position of the European subsidiaries of NV. There was to be a meeting the following day with the authorities for the purpose

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of considering this question and also the question of whether Unilever would be permitted to act as agents for NV companies generally.65 The next day the Board of Trade consented to Limited having intercourse with the European subsidiaries and acting as their agent. This decision, in combination with the decree by the Dutch government, meant that all Unilever companies in neutral countries came under the direction of Limited in London.66

The ‘Unilever problem’ At the beginning of the German occupation of the Netherlands in May 1940 it was not clear what the ambitions of the Third Reich were in connection with Unilever. The Reich did not have a well-defined plan for Unilever’s future on the continent. As the Anglo-Dutch company constituted the largest business conglomerate in the oils and fats business in Germany and as it was also highly diversified, there were various German government agencies involved, each with different agendas. As a result, Unilever was immediately confronted again with the polycratic structures, internal conflicts and administrative confusion of Nazi Germany.67 Since the end of the 1960s various studies have pointed to the chaotic and contradictory leadership and the multidimensional power-structure of Nazi Germany.68 Ever since the 1930s, however, Unilever’s Board knew from experience that these different German government agencies could be played off against one another. The following section will show how contradictory German policy towards Unilever was during the 1940–1941 period. During the period of the Phoney War the Anglo-Dutch Unilever could be seen as enemy property, at least in part, that should fall under the jurisdiction of the Reich Commissioner’s Office for the Treatment of Enemy Assets.69 In January 1940 Hitler had appointed a special Reichs Commissioner, who was supposed to create the conditions for a legitimate management of enemy capital. The German State was extremely interested in acquiring shares in enemy enterprises, but was very circumspect in obtaining any for fear of reprisals on the part of the Allies, as had been the case in the First World War. Since Unilever shares were partly in British hands, Unilever’s capital was treated as enemy property. The company was placed under the supervision (Verwaltung) of Reichs Commissioner Dr Friedrich Ernst in Greater Germany who had to treat (protect and preserve) Unilever’s assets according to international legislation. Ernst was not a Nazi and had been on active service at the Ministry of Justice since 1921. He would resign voluntarily in October 1941 and join a private bank in Berlin.70 At the beginning of 1940, however, Ernst had found out that Unilever’s business in Greater Germany was not in British hands, but for the larger part in the hands of the Dutch holding companies Marga, Saponia and Wemado, which were in turn owned by Unilever NV in Rotterdam. Therefore, Unilever’s assets in Greater Germany could not be sequestrated by a Reichs Commissioner for Enemy Property.71 In May 1940 after the German occupation of the Netherlands an order was nonetheless issued which enabled the appointment of a supervisor for Dutch

Business as unusual, 1939–1941 85 companies that were under enemy influence. At this point Blessing visited Ernst and tried to convince him that Unilever NV in Rotterdam was not under British influence. On the contrary, Blessing continued, the Dutch board now consisted of a majority of Germans. In addition, he himself, Heinrich Schicht and Karl Lindemann had been given important mandates over Unilever’s businesses in Greater Germany. Ernst was persuaded and he appointed Blessing, Schicht and Lindemann as protecting supervisors (Schutzverwalter) of Unilever’s holding companies Marga, Saponia and Wemado, which held the greater part of Unilever’s assets in Greater Germany.72 As Germany’s largest company in the non-mineral oils and fats industry Unilever fell under the competence of Göring’s Four-Year Plan (Section Nourishment). On 3 June 1940 Georg Reichart of this section had prepared a confidential plan concerning the ‘Unilever problem’ in the Netherlands and Greater Germany.73 In a covering letter he advised his superior Herbert Backe to inform the Economics Ministry and Reichs Commissioner Ernst to take no action until the people behind the Four-Year Plan came up with their important proposals. Since October 1933 Backe had been State Secretary in the Ministry of Food and Agriculture. In 1936 he was also appointed Food Commissioner for the FourYear Plan, responsible directly to Göring for the co-ordination of the agricultural and industrial policy. During the war the star of the technocrat was rising. Eventually, in May 1942, he succeeded his Minister Darré and became the most powerful man in the field of nourishment in the Third Reich.74 This meant that Backe was extremely important for Unilever’s future at the time. In his confidential report Reichart proposed to Backe to appoint a plenipotentiary for the Unilever Group in Rotterdam. In addition, Unilever companies in Germany should be taken over by German businessmen. According to Reichart, the British Unilever concern had cloaked its business one day after the beginning of the war by pretending to be a Dutch company. Because of its domination on the world market of raw materials and its influence on the nourishment of Germany Unilever had been able to force its will on Germany. ‘Unilever in Germany had always been a state in a state.’75 Because of Unilever’s economic power it had been ‘in a position to thwart National Socialist economic policy’ and ‘make special deals with various government agencies’.76 As a result the company had been able to transfer part of its pyramidal profits made in Germany to abroad. Reichart concluded that while Unilever had the best organisation in the world, and at the same time contacts with so many government agencies on the continent, the British government would easily be able to use the information that the company had available to it. In other words, Unilever could easily work for the Secret Service. Thus the appointment of a plenipotentiary for the Unilever Group in Rotterdam would also have a military and strategic purpose.77 A few weeks later, on 29 June 1940, Helmuth Wohltat of the Economics Ministry and Backe agreed to Reichart’s proposal:78 [t]hat there is a state and economic-political interest in having the commitments that exist between the Dutch, German and English interests of the

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Business as unusual, 1939–1941 concern closely examined by an impartial person. This related less to the capitalist interests but rather – after the war has been won – to bring to Berlin the world-wide central organisation for the oils and fats market that was hitherto located in Rotterdam.79

Obviously Unilever was meant by ‘the world-wide central organisation for the oils and fats market’. Their idea was to bring the ‘central organisation’ from Rotterdam to Berlin. Backe and Wohltat also agreed upon a supervisor for the Unilever group in Rotterdam. ‘Without doubting the [pro-]German attitude of the current directors of the concern, Messrs. Blessing and [Heinrich] Schicht, one cannot expect these gentlemen to sacrifice the private economic interests of the Unilever concern.’80 Therefore it would be better to appoint Count Grothe as a supervisor of the Dutch Unilever Group. Grothe was Darré’s agent in the occupied Netherlands. He represented the agrarian, and consequently anti-Unilever lobby. State Secretary of the Economics Ministry Friedrich Landfried was furious when he heard about the nomination of Count Grothe. He told Backe that Economics Minister Funk was dealing with this case personally and wanted Blessing, Schicht and Lindemann to be appointed at the top of the Dutch Unilever Group. Because Funk was Göring’s subordinate, and as Göring was still in full command, the appointment of Count Grothe was then out of the question. For the time being Unilever was in safe hands (those of Blessing). A year later, however, Backe would come up with detailed plans to solve the ‘Unilever problem’. Because Unilever NV had its headquarters in Rotterdam it also fell within the competence of the Reichs Commissioner for the Dutch Occupied Territories, Seyss-Inquart. He, however, was opposed to Göring’s aim to interweave the German and the Dutch economy. What Göring meant by interweaving (Verflechtung) was the (forced) acquisition by German companies (or the German state) of large Dutch companies. It fitted in perfectly with Göring’s primitive views on economics, which boiled down to plundering as much as possible from the occupied territories for the German Reich. In June 1940 Göring ordered Economics Minster Funk to start planning Europe’s economic New Order (Neuordung) under Germany’s leadership. In August in a confidential memorandum Göring made clear what he meant by that: One target of German economic policy is the expansion of Germany’s influence on foreign companies. Whether and to what extent a peace treaty can lead to the restitution of appropriated shares is incalculable at the moment. During the war, however, it is necessary to use any possibility to penetrate into the interesting economic objects of the occupied countries.81 In the Netherlands Göring decided interweaving should start immediately, yet without the use of force, as this might endanger Dutch interests in the United States and the Dutch colonies.

Business as unusual, 1939–1941 87 Although Seyss-Inquart was not a charitable Nazi he was opposed to Göring’s policy because it interfered with his own ambitions. He had another interest: Hitler had ordered him to win over the Dutch for National Socialism. Naturally, Dutch officials and Dutch business circles were completely against forced acquisitions of Dutch assets. Interweaving of the Dutch and German economy, as Göring had called it, was therefore not a short-term aim of SeyssInquart. The fulfilment of German orders in the Netherlands was of much greater importance to him. His financial and economic commissioner in the Netherlands, Hans Fischböck, however, played a double role in this case. He was involved in the establishment of the ‘interweaving office’ (Verflechtungs Referent) at the Economics Ministry in Berlin whose job was to solve the financial problems involved with the acquisition of foreign companies.82 A direct menace to Unilever, however, were the ‘Aryanisation’ orders issued by Reichs Commissioner Seyss-Inquart in October 1940. According to Decree No. 189/40, dated 22 October 1940, ‘legal persons were obliged to register if, on 9 May 1940, at least one of the persons legally authorised to represent the company or at least one of the members of the Supervisory Board was Jewish’.83 Arthur Hartog and Sydney van den Bergh had fled from the country, but other Jewish directors of operating companies were still in the Netherlands. Director Fabian of the Lever soap company, for example, had previously been a director of the Sunlicht company at Mannheim and had left Germany in 1933. In 1939 he had acquired Dutch nationality.84 After the October decree Unilever had to dismiss him, because otherwise the whole parent company would have been obliged to be registered as a Jewish company. Fabian and the other Jewish directors resigned. As a result, Unilever avoided compulsory registration. Unilever made a financial settlement with its unemployed directors and awaited events. There were worse times yet to come. At the beginning of July 1940 the Four-Year Plan and the Reichs Economics Ministry decided to appoint an independent accountant Albert Cantrup. In consultation with Fischböck Berlin had decided to analyse Unilever’s complex holding structure. Cantrup and the auditors of the German Audit and Trust Company (Deutsche Revisions- und Treuhand AG) came into the Rotterdam office and started a research into the Unilever Group. Cantrup already had much experience with Unilever in Germany as he had been commissioned by Reichs Commissioner Ernst at the beginning of 1940 to do a research into Unilever in Greater Germany, but also in the 1930s he had drawn up independent account reports of Unilever’s business in Germany. Now he had to examine the books in an endeavour to establish that NV was under British control. If that was the case, Unilever NV’s capital in Rotterdam could be sequestrated as enemy property and there would be a legal ground for the appointment of a plenipotentiary for the Unilever Group in Rotterdam, as Reichart had proposed in his plan. In the course of 1940 and 1941 the auditors issued massive but inconclusive reports on the financial and organisational structure of ‘Lever Brothers & Unilever NV and the businesses of the Unilever group in Greater Germany’.85 Although these reports offered a tremendous insight into the complex holding structure of

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Unilever’s business, the main question about the relationship between Limited and NV was not answered conclusively. As a result, Unilever NV could still not be sequestrated as enemy property. For good reason, Hendriks, Unilever’s director in Rotterdam, had commissioned Cantrup himself – although under German pressure. Probably more important, however, was the fact that Cantrup and the other auditors worked at the expense of Unilever. In 1943 and 1944 Cantrup’s office presented hefty invoices for their research work in 1942 and 1943, amounting to as much as 487,000 guilders.86 Unilever had already paid the German Audit and Trust Company 99,000 guilders over the year 1940.87 After the war Unilever made a complaint about these steep bills, because the auditors of Price, Waterhouse & Co, had charged only 30,000 guilders for a much bigger responsibility before the war (for producing the pre-war annual reports of Unilever NV).88 Cantrup’s auditors, however, had done quite a different job. They had started their research with the aim of casting light on Unilever’s complex holding structure and the financial and legal relationship between Rotterdam and London. In due course, however, they ended up in a mass of paperwork from which it became less and less important to draw any conclusions. That had been exactly what Unilever (Hendriks and De Baat) had intended when they had commissioned Cantrup: they would co-operate with the German authorities, but during the execution of the order they constantly used delaying tactics.89 Meanwhile, Cantrup and his auditors were able to live their life of luxury in The Hague, far away from the terror of the eastern front. The Gestapo also tried to prove that Unilever NV was under British control.90 It had a general distrust of the Anglo-Dutch company, feeling that it was an organisation that could easily be used for espionage for the British government. As Unilever had close contacts with various government agencies in various European countries, the company had an immense insight into strategic information, e.g. stocks of raw materials in various countries that were now occupied by the Germans. To prove their proposition the Gestapo listened to various informers. Köhler, a Dutch Nazi working for Henkel in the Netherlands, offered information about Unilever’s relation to Britain and how it had cloaked the company after the beginning of the war. In addition, he reported how Unilever maintained relations with various government agencies in Germany before the war and how it had bribed German officials.91 Another informant, Dr Beck, had been a Unilever director in the soap business, but had been dismissed after a clash with director Fabian in 1938. According to Beck, Fabian had – as a ‘Jew’ – emigrated from the Third Reich and ‘had conducted a smear campaign’ against Nazi Germany inside the company. Furthermore, Beck reported on Unilever’s extraordinary influence in the Belgian Congo. As an example of Unilever’s power position he adduced the fact that Unilever was even dominating the supply of fuels in that country. Without Unilever’s permission it was impossible to drive in Belgian Congo, according to this informant. The next informant was Koster, a member of the economics department of the Dutch Nazi Party (NSB). He offered the

Business as unusual, 1939–1941 89 Gestapo a photograph taken in Rotterdam headquarters of a secret diagrammatic impression of Unilever’s organisation. In addition, he was willing to prepare reports on Unilever, its influence on Dutch politics and the political views of senior Unilever managers.92 The next informant, Thielemann, was an embittered Unilever director, who claimed that Unilever had reneged on the promises it had made to him as a former independent soap manufacturer. He also complained about the ‘emigrated Jew Fabian’ who fulfilled an executive position in the Netherlands. Thielemann also claimed that there was British domination inside the Unilever Group: ‘for every major change he had to consult with England (London)’.93 On 30 August 1940 SS-Obersturmführer Fuchs, who was in charge of this Gestapo investigation, went to Unilever’s headquarters in Rotterdam to make inquiries for himself. He introduced himself to sales director Kretzschmar (UVC) as a commander of the German army under the guise of having a scientific interest (in writing a PhD research after the war) in the company.94 After some hesitation Kretzschmar promised to provide Fuchs with all necessary documents about Unilever’s business structure and its influence on the Dutch and European economy. In the course of the meeting Kretzschmar told Fuchs that the German Audit and Trust Company had just been commissioned to conduct an audit of the accounts and to write a history of the company. Hence Kretzschmar seemed to be co-operating willingly with Fuchs. However, as he told the SS-Obersturmführer, Unilever had already supplied the German authorities with all the documents that had been demanded. In actual fact, Fuchs left emptyhanded. In his report on the meeting he wrote in frustration: ‘I established that Kr[etzschmar] is a Jew.’95 After months of abortive research, barring some rather trivial reports by embittered informants, the Gestapo scored an unexpected success. On 24 October 1940 SS-Haupsturmführer Kaspar had a meeting with Albert Scheib, supervisor of Unilever in Brussels. Scheib had confiscated 41 metal boxes containing Unilever documents in Bordeaux. These documents were destined for London and mainly related to Unilever’s colonial companies. From these documents the Germans concluded that since 10 May 1940 the whole African colonial business of Unilever had no longer been managed from London or Brussels but from Leopoldville in the Belgian Congo. In the future the distribution of raw materials from the African plantations to various Unilever factories in the world, with the exception of enemy states, had to be carried out from there. In addition, Scheib told Kaspar that the Belgian Unilever business would be organised like the Dutch one, whereas the French Unilever would come under the Reichs Commissioner of Enemy Property, because all French assets belonged to Unilever Limited in London.96 Most likely Scheib himself would be appointed as a Commissioner for Unilever France in Paris. Nevertheless, the Gestapo was not so much interested in Unilever’s future organisational issues. What mattered to them were the 41 boxes in Bordeaux. They demonstrated that Unilever was a British dominated company, and therefore not to be trusted. Such a secret operation could only be the work of British intelligence. The Gestapo would find use for the information later on.

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Henkel Besides the threats from the various German government agencies Unilever was also threatened by its biggest competitor on the continent, Henkel & Cie. After the invasion of the Netherlands, Belgium and France, this German family firm tried to influence the Reich’s plans regarding Unilever. Its chairman Werner Lüps, who had been member of the Nazi party before Hitler’s takeover, had seized power in the company after the liberal Hugo Henkel had been forced by the Nazis to resign in 1938. Hugo’s nephew Werner Lüps had then used his paternal family connection to Göring to get himself appointed as leader of the company (Betriebsführer).97 At the beginning of the war Lüps adopted an aggressive business strategy, which included the use of Henkel’s extensive financial reserves to acquire shares in other companies.98 In addition, he tried to deal with Henkel’s all-powerful competitor in Europe. In the summer of 1940 Lüps thought that his company would finally obtain satisfaction after Nazi Germany had occupied Unilever’s headquarters in Rotterdam. The first thing that Lüps tried to settle with Reichs Commissioner Ernst was Henkel’s disagreement with Unilever about the Persil brand.99 In Britain as well as in France (and their colonies) Unilever had acquired the rights to use the Persil brand, which had originally been Henkel’s property. In France Unilever had obtained the Persil rights during the First World War. According to Lüps Unilever had obtained the Persil rights through an agent, the Societé Marseillaise de la Marque Persil. Contrary to an agreement with Henkel the Societé d’Electrochemie in Paris had transferred the Persil brand to this agent.100 Now that Germany had invaded France and all restrictions on German property had been removed Lüps urged Ernst to convey the full ownership of Persil back to Henkel. The Persil issue in France was not settled immediately. At the beginning of July 1940, however, Lüps was appointed provisional commissioner of Unilever’s companies in Paris, Savonneries Lever, S.A. and Brussels, Lever Frères, S.A.101 On the basis of this position Lüps was able to attack Unilever and simultaneously promote Henkel’s own interests in France. Unilever’s director in Brussels lodged a notice of objection with the supreme command of the German army in Belgium and France. However, nothing was done about it. On the contrary, on 19 February 1941 Henkel obtained the rights to the Persil brand in France from the Supreme Command of the German Army in France.102 Unilever was prevented from using the Persil brand during the rest of the war. Henkel nonetheless was not entitled to compensation for Unilever’s use of the brand, as it had claimed. At the end of July 1940 another Henkel director, Schmelz, had a meeting with a representative of the Reichs Commissioner for the Treatment of Enemy Property in Berlin. Henkel’s aim at the meeting was to prove that British dominance existed inside the Anglo-Dutch Unilever and to show how NV and Limited were linked through an exchange of priority shares. Furthermore, Schmelz noted that the two parent companies were associated by a

Business as unusual, 1939–1941 91 so-called equalisation agreement. He continued, however, by stating that the two companies were not equal at all. The British side of the company was the dominant part of Unilever. This was clearly demonstrated by the fact that threequarters of the Board consisted of Englishmen. In addition, according to Henkel’s information, the British share (£67 million) in Unilever’s equity was much higher than the Dutch equity share (ƒ305 million).103 A record was drawn up, including all the evidence delivered by Henkel. Nevertheless, nothing was done with the information at the time, for two reasons. First, Henkel might have had plans with Unilever, but various government agencies had their own plans. Moreover, Reichs Commissioner Ernst was given the order to do nothing until the Four-Year Plan and the Economics Ministry had taken a decision on Unilever. Second, Backe and Wohltat had just decided that they did not want ‘gentlemen of the competition’ to be involved with Unilever.104

Government intervention in the market During the war government intervention in the market showed great similarity in all three countries; the economy was managed at all possible levels of production, distribution and consumption. Rationing was introduced for the most important products. Raw materials and finished products were rationed, prices were fixed and production recipes were laid down by laws. As a result, Unilever lost important rights to take decisions in private business matters. However, as governments needed the co-operation of industry, Unilever was able to influence the government agencies’ policy. In the Netherlands and Britain Unilever staff were lent out to various government bureaux. In that way Unilever staff had a direct influence on the rationing policy for soap and margarine and on the allocation of raw materials to industry. In the Netherlands competitors even complained about the disproportionate representation of Unilever staff in the government bureau responsible for soap.105 In addition, close contacts with the rationing apparatus provided Unilever with first-class market information, which it could apply to its own production plans. Last, government intervention brought an end to competition and regulated markets. In the Netherlands Unilever had been closely involved in a national margarine cartel in the 1930s. At the time cartels were a common form of market organisation. The traditional laissez faire policy of the Netherlands had favoured the existence of cartels. During the 1930s the government’s indifference towards cartels even changed towards a positive attitude as they were then seen as way to protect and organise the Dutch open market.106 In 1933 the Margarine Convention had been established as the first Dutch cartel in the oils and fats industry. This production cartel had to divide up the quotas. The Convention had been advantageous to Unilever. It could easily exceed its quota. Because of its low production costs, the marginal profits were higher than the costs of the fine.107 For that reason many smaller producers – with higher production costs – transferred their quotas to Unilever without losing their formal independence. As a result, by 1939 Unilever held 90 per cent of all quotas in the Dutch margarine

92

Business as unusual, 1939–1941

market.108 In the vegetable oil industry Unilever owned 45 per cent of the total Dutch capacity in the 1930s.109 In 1934 the seven largest oil producers had entered into a cartel agreement in close co-operation with the Crisis Dairy Board (Crisis-Zuivel-Centrale), a government agency. The resulting Vegetable Oil Producers Syndicate regulated quotas, prices and rules of conduct towards other parties. It existed until the 1950s. Apart from organising the oils and fats industry the Dutch government had also organised itself for the event of war. In 1937 it had established the National Bureau for the Preparation of the Food Supply during the War (RBVVO). In September 1939 it was renamed the National Bureau for the Food Supply during the War. During the whole war S.L. Louwes would be its powerful director. He would be responsible for the rationing of food to the population and the allocation of raw materials to the food processing industry. As the biggest margarine and oils manufacturer in the Netherlands Unilever had many dealings with the RBVVO, in the field of rationing as well as in the field of the allocation of raw materials to its factories. Despite the huge stocks built up before the war, the Netherlands and Unilever encountered raw-materials shortages within one year after the German occupation. Before the war the annual oils and fats requirements had amounted 170,000 tons. About half of this had found a technical use and the other half had been used for consumption. After May 1940 imports of oils and fats came to a standstill. At the beginning of the occupation the total stocks of edible fats amounted to 131,000 tons, of which Unilever held about 67,000 tons (see Chapter 4). Total stocks of all oils and fats in the Netherlands, including technical fats, amounted to 262,000 tons at the beginning of the German occupation.110 Under pressure from Göring, however, a substantial part of these huge Dutch stocks had to be sold to Germany to cover the German fat deficit. In addition, the Wehrmacht in the Netherlands turned out to be a great consumer. Table 5.1 shows German withdrawals from Dutch stocks of oils and fats from May 1940 until August 1943, as recorded by Dutch officials. It shows that the greater part of the German withdrawal of edible oils and fats took place from August 1940 until the summer of 1941. After August 1940 hardly any edible fat

Table 5.1 Total export to Germany and Wehrmacht consumption in the Netherlands divided by period Products

Edible oils and fats Technical oils and fats

Volume (metric tons)

15/5/1940– 31/7/1940 (%)

1/8/1940– 31/7/1941 (%)

1/8/1941– 31/7/1942 (%)

1/8/1942– 7/8/1943 (%)

49,100

11.8

85.2

1.6

1.4

50,200

14.1

50.0

32.1

3.8

Source: Netherlands Institute for War Documentation (NIOD), Hirschfeld, 212a, 6c.

Business as unusual, 1939–1941 93 was being exported to Germany. A year later the export of technical oils and fats to Germany also stagnated for the larger part. In addition to these figures, about 40,000 tons of butter was exported to Germany between May 1940 and September 1941. The production of butter remained the same as in 1939 and amounted to 109,000 tons.111 These figures show two things. First, a year after the beginning of the occupation the large Dutch stocks of edible fats – despite the rationing of margarine, butter and oil since July 1940 – were starting to run out some time in 1941. Second, what was mainly left for Dutch consumption was butter. Before the war Louwes had stimulated the export of butter, but after September 1941 exports came to a halt.112 Henceforth, the Dutch population became dependent on expensive butter and, moreover, on a much smaller quantity of fat. The allocation of raw materials was in the hands of the Dutch Dairy Centre (NZC), section Margarine, Fats and Oils (MVO). During the war, as the Dutch position of oils and fats quickly deteriorated, the MVO gained more and more power in the oils and fats business. From January 1941 the MVO intervened with the production, trade, stocks and distribution of oils and fats by industry.113 It encouraged Dutch farmers to cultivate oil-bearing seed (rapeseed and poppy seed) – and paid them a premium to do so, as was also the case in Germany. Although the incentive worked, an explosive growth in the acreage of oilseeds under cultivation was only reached in 1943, the obvious reason being that the farmers needed time to adjust their plans. Until 1940 Unilever’s margarine output was normal, while manufacturing costs had still not risen. In May 1941, however, the MVO closed down the margarine industry because of severe raw materials shortages. Unilever, like other manufacturers, nonetheless had a right to compensation for keeping its margarine-making equipment on standby.114 The amount of compensation was based on the average sales before the war (1938–1940 period). In January 1942 the production of margarine was resumed for another 12 weeks and concentrated in three large factories, Van den Bergh en Jurgens (Unilever’s), Batava and Vis.115 In the Netherlands soap products had been put under a Rationing Act immediately after the outbreak of the war between Britain and Germany in September

Table 5.2 Weekly sales of margarine by UVC (Unilever Verkoop Centrale), 1938–1941 (in tons) Year

Regular

Popular (Volksmargarine)

Total

1938 1939 1940 Average 1938–1940 1941

846 891 797 845 257

113 107 97 105 51

959 998 894 950 308

Source: UAR, BJ 157, Margarineaccijnsregeling.

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Business as unusual, 1939–1941

1939. This meant that a newly established Section Soap of the Government Bureau for Chemical Products regulated the production and distribution of soap. The aim of this rationing law was to ensure the distribution of fixed quantities amongst the population in the event of shortages of the oils and fats necessary for the production of soaps. Up to the German occupation, however, such a shortage did not arise and the government therefore only limited the output of the manufacturers to the same quantity of soap that they had produced in the average sales achieved between 1 September 1938 and 31 August 1939. The base period, however, was extremely favourable for the Unilever soap companies because nearly all Unilever companies then had their highest ever output. Unilever products, such as Sunlight, Radion, Rinso, Vim and Lux, had all shown a remarkable improvement in their position in 1939. In 1934 Unilever’s total soap sales in the Netherlands had amounted to 35,058 tons compared to 46,658 tons in 1939. As a result Unilever’s 1940 quota, 45,610 tons, nearly reached the best possible figure.116 Unilever’s quota amounted to about 45 per cent of the Dutch soap market. In January 1940 a discussion took place at the Ministry of Economics as to whether the Distribution Law was being used by the industry as a means to regulate the market; in other words to keep outsiders out of the market. Government officials therefore proposed to the minister to suspend the soap rationing temporarily. However, representatives of the soap industry, including Unilever’s soap director Fabian, were against the suspension of soap rationing, because it would lead to ‘slackness in the business and price competition’.117 The Minister of Economics M.P.L. Steenberghe nonetheless decided to abolish soap rationing as from 1 May 1940 (ten days before the German attack on the Netherlands) because the raw materials position of the Netherlands would not cause any problems in the first two years.118 Soon soap rationing had to be reintroduced in the occupied Netherlands. Soap, Unilever’s second core product in the Netherlands, was rationed from September 1940, except for scouring powders and soapless products.119 Soap manufacturers received only 30 per cent of their fatty acids compared with the basic period (August 1938–July 1939). The use of edible oils and fats for the production of soaps was forbidden as early as 1940. At the beginning of 1941 it was forbidden to split fatty acids from oils and fats for the production of soap.120 Consequently, manufacturers were allowed to reduce the fatty acids content of soap. As from November 1941 the soap industry received less than 15 per cent fatty acids compared with the basic period. Obviously the quality of soap deteriorated rapidly as the industry changed the formulas, adding more fillers and user fewer fatty acids. Therefore, in the course of the occupation the quality as well as the quantity of soap was greatly reduced.121 As early as 1941 only 25 per cent of the Dutch pre-war level was being produced.122 As the quality of soap quickly worsened, Unilever stopped the marketing in the Netherlands of its famous brands Sunlight, Lux, Radion and Presto, as it did not want to lose their goodwill. Like other manufacturers it started the production of a toilet soap called L.E.T. (air-filled unity) toilet soap.123 This typical

Business as unusual, 1939–1941 95 German wartime product contained only 40 per cent soap; its volume, however, was two and a half times greater. Another typical wartime product was a washing up liquid called Vet-Ex (Fat-Ex), whose name immediately betrayed its contents (or lack of contents). Unilever’s scouring powder Vim was produced during the whole war, although also of a lesser quality. Vim only contained at most 3 per cent fatty acids, but was available to the public without a rationing coupon.124 In Germany oils and fats were immediately rationed after the imposition of an Allied blockade at the beginning of the war in September 1939. Butter was less hit by the German government regulations than margarine and animal fats. Although milk production dropped as a result of a lack of concentrated cattle feed, which had been a by-product of the oil industry (oil cake and expellers), butter production remained at a reasonable level because 75 per cent of Germany’s milk was churned into butter. Butter consumption amounted to around 5 kg per head per annum during the war, compared to 8.8 kg in 1938. Consumption of animal fat, i.e. bacon and lard, went down from 7.2 kg in 1938 to 2 kg per head. Margarine consumption dropped from 6.1 kg in 1938 to 3 kg during the war, and vegetable oil consumption fell from 2.5 kg to 1 kg. As a result, after September 1939 the average total annual oils and fats consumption of the German went down from just under 25.6 kg in 1938 to 11.5 kg during the whole war.125 Considering that 90 per cent of the raw materials of the oils and fats industry had come from abroad before the war, these figures look less dramatic. For various reasons, however, German fat consumption during the whole war was quite high compared with other countries on the continent (with the exception of Denmark). First, the most obvious reason was that the Germans removed as many raw materials as possible from the occupied countries. For example, the large Dutch stocks were of great importance for Germany at the beginning of the war. Second, the German government stimulated the domestic cultivation of oilbearing seed, mainly rapeseed, through the payment of premiums to farmers. As a result, total output tripled from 75,000 tons in 1939 to 220,000 tons in 1941.126 After the occupation of the Netherlands and Denmark, Germany imported large quantities of butter from these countries. As a consequence, the government decided to close down the German margarine industry for three months: July, August and September 1940.127 In mid-September the industry was reopened. As a result of the raw materials shortages, however, the German Milk and Fat Industry Association decided to concentrate margarine production in only 33 plants; 115 smaller factories where closed down. Three large Unilever factories in Goch, Wilhelmsburg and Delmenhorst continued to operate. Four others, in Cleves, Bahrenfeld, Mannheim and Pratau, also continued to operate, but at a lower level, because they were affected by the concentration policy. These seven factories had had a market share of 42 per cent before the war, but now only possessed a mere 35 per cent. Unilever’s total market share in the German margarine market decreased from around 54 per cent in 1939 to 47 per cent in 1940.128 Due to the raw materials shortages Unilever’s total margarine

96

Business as unusual, 1939–1941

output in Germany fell from around 250,000 tons annually in 1939 to 100,000 tons during the war.129 In 1940 the use of brand names like Rama, Sanella or Blauband was forbidden. Only the manufacturing of a unity product was allowed, under the name ‘Table Margarine’ (Tafelmargarine). Each manufacturer was allocated a number; for example, the Margarine Verkaufs Union received number 32.130 This government measure, however, was convenient to Unilever which had built up a good reputation for its brand names and the goodwill associated with them was a valuable asset to the company. Because high-quality raw materials were no longer imported from outside Europe margarine producers could not guarantee the quality of their goods. Unilever’s output in the Melted Cheese business expanded in 1940 and compensated to some extent for the huge losses in the margarine industry. Although Unilever’s soap factories had the same raw materials difficulties as the margarine, oils and fats companies, they were operating at a reasonable capacity. Whereas the use of edible fats had been completely forbidden for the production of (Unity) soap and soap powders, the output of non-rationed goods like Vim, Clarex and Ominol increased in this period.131 Most promising, however, was the mushrooming growth of a completely new industry in Germany, i.e. the quick-frozen foods industry (see next section).132 Unilever’s newly established company Solo-Feinfrost was the first mover and market leader in this field in Germany. As a result, notwithstanding the losses in the oils and fats business, Blessing, Lindemann and Schicht reported to the German government that over the year 1940 Unilever’s consolidated business in Greater Germany would close with a profit of around five million Reichsmarks. In wartime Britain the ownership of all raw materials remained with the government all the time. Before the war 95 per cent of the consumption of oils and fats, including butter, amounting to 1,380,000 tons, had been imported. With the increasing difficulties of transportation at sea and the shipping losses due to the German submarine war, the British government rationed edible fats.133 After the beginning of the war in September 1939 responsibility for the allotment of raw materials had been placed with a Controller of Oils and Fats.134 All manufacturers were to sign an agreement with the Ministry of Food, which regulated the allotment of raw materials and their sale by the Ministry to the manufacturers. At the end of 1939 a Soap and Fat Splitters Federation had been formed whose main object was to achieve economies on raw materials. At the beginning of the war Unilever’s factories ran into difficulties due to the government rationing of raw materials. As early as October 1939 some oil mills were faced with the threat of closure if raw materials did not become available in larger quantities.135 In November 1939 it was reported to the board that there had been considerable difficulty in obtaining the necessary raw materials for making Stork, Unilever’s finest margarine brand in Britain, with the same quality as before the control.136 In July 1940 the margarine and cooking fats industry agreed with the Ministry of Food to pool their resources and to co-operate as one company during

Business as unusual, 1939–1941 97 the war period. In fact, this agreement lasted until 1954.137 In addition, production was standardised and branding came to a halt. The identity of the company remained hidden to consumers. As a result, Unilever’s goodwill was not forfeited during the war and, simultaneously, competition on the British edible-fats market disappeared completely. Margarine manufacturers worked on an agreed basis of profit and were paid for the costs of their operations. The distribution of the resources was taken up by a new company called Marcom Limited (a contraction of margarine and compound). Its organisation was based on the administrative system of Van den Bergh and Jurgens Limited, Unilever’s largest margarine subsidiary in Britain. The board of Marcom included representatives of the Ministry of Food as well as the margarine industry. The daily business, rationing, storage and maintenance of supplies was done from the offices of Van den Bergh and Jurgens and other private companies.138 Different arrangements applied to the soap trade, in which the products remained the property of the manufacturers.139 At the outbreak of war the British government did not allow more oils and fats to be used in the soap trade in wartime than had been used in peacetime. In fact, after a few months the government reduced the amount of oils and fats available to the industry. In the 1930s Procter & Gamble’s (Hedley’s) advent on the British market had resulted in an overall increase in soap consumption. From 1930 until 1938 the total soap trade in Britain had grown unexpectedly from 427,000 tons to 508,000 tons. In 1930 consumption per head of the population had amounted to 8.8 kg, whereas in 1938 it had risen to 10.2 kg.140 During the first war year soap demand increased even further owing to a smaller number of unemployed. As a result, the market turned from a buyers’ market into a sellers’ market. In conjunction with all soap manufactures in Britain and after consultation with the Ministry of Food prices of hard soap, for example, increased by about 20 per cent at the beginning of 1940.141 The government, however, tried to limit the expansion of the soap trade in Britain as a whole. Increased consumption of soap would increase imports of oils and fats. Therefore Unilever suggested to Hedley’s that an agreement be reached on the limitation of advertising. In July 1940 the two main competitors on the British market agreed on a level of advertising expenditure which would ensure that the goodwill of their main nationally advertised brands would be maintained. Hedley’s reduced its advertising for Oxydol (soap powder) from £250,000 a year to £150,000 a year. Unilever felt that the same amount was sufficient to maintain the goodwill of its own main soap powders Rinso and Persil. According to Unilever’s soap executive Hansard, the agreement had stopped Hedley’s from ‘building up solid goodwill for their product against post-war conditions’. And he continued: ‘[w]ithout undue complacency we can say that the sting has been taken out of the Hedley aggression. (. . .) We seem to have seized the initiative in the general advertised soap trade policy field.’142 Thus Unilever’s competitiveness on the British home market improved. Government interference with the soap industry led to a stabilisation of the market conditions, which enabled Unilever to keep its largest competitor under control.

98

Business as unusual, 1939–1941

In addition, both Hedley’s and Unilever endeavoured to make a better use of the total amount of oils available for soap making. The government system of issuing oils and fats to soap-makers had stabilised the percentage of such oils and fats used by Hedley’s and Unilever at the level obtained in the basic year ending 30 June 1939, while at the same time demand for soap products had increased. Both companies cut out lesser selling lines. In addition, both Hedley’s and Unilever reduced the fatty acid content of soap. For example, in 1940 Hedley’s reduced the fatty acid content of their soap powder Oxydol from 56 to 50 per cent, which gave them a satisfactory product and allowed them to sell 12 per cent more powder, whilst using the same amounts of oils and fats. Unilever reduced the fatty acid content of Rinso from 50 to 45 per cent and Persil from 40 to 37.5 per cent.143 Due to the control of raw materials the turnover for 1940 was 6 per cent down on that for 1939. However, record figures were achieved for several of the best-known brands. In addition, progress had been made in Britain in non-controlled lines, such as toothpaste. During the war in Britain Unilever was also involved in the rationing of a particular strategic raw material, glycerine. Hard soap-making is a chemical process based on the principle that when fats – which are compounds of fatty acids and glycerine – react with caustic soda, the caustic soda combines with the fatty acids to form soap, releasing glycerine. This translucent, colourless, sticky and hygroscopic by-product was – and still is – applied in many branches of industry.144 Glycerine was used, for example, in the tobacco industry as a wetting agent, in the personal care branch as a basic material in the manufacture of toothpaste and skin cream and in the textile industry it was used for fabric smoothing. During the war, however, glycerine was a raw material, next to nitrogen, for the making of explosives (nitro-glycerine). A compound of nitrocellulose and nitro-glycerine proved ideal as a gun propellant and was called cordite. Hence hard soap’s by-product glycerine became of great wartime importance. This was the reason why the industry had been under government control during the First World War.145 At the time A. Rae had been placed in charge of glycerine supplies at the Ministry of Munitions in London. In 1919 Rae had joined Joseph Crosfield and Sons, a subsidiary of Lever Brothers. In the same year the United Kingdom Glycerine Producers’ Association Limited had been formed and Rae had been appointed as its secretary. In 1929 Glycerine Limited had been established to centralise the marketing of glycerine for Unilever. Rae was appointed general manager and later managing director. In July 1939, two months before the beginning of the war, the Board of Trade had asked the Glycerine Producers’ Association to take charge of glycerine rationing, in close conjunction with the Ministry of Supply, ‘in the event of an emergency’.146 Unilever’s Board agreed to the plans by the Board of Trade. As a result, Rae and Clarke – the latter having become the new chairman of Glycerine Limited – virtually became controllers of glycerine rationing in Britain during the war.147 A few months before the outbreak of war Georg Schicht had remarked on the low prices of glycerine in the face of the heavy rearmament programmes. The

Business as unusual, 1939–1941 99 secretary of the Glycerine Producers’ Association had replied that Admiralty and War Office purchases had remained normal. At the end of the year, however, there would be 19,000 tons of glycerine in stock, which were available to the government at any time.148 At the time glycerine prices were quite low, because annual production was about 7,000 tons in excess of consumption.149 In August, nonetheless, sales of glycerine improved. The chairman reported that the sales figures for 33 weeks (ending on 19 August) were 20,441 tons, compared with 16,679 for the corresponding period of the previous year.150 No threeyear contracts had yet been drawn up. However, a contract had been concluded with a firm of paper makers and with Courtaulds to cover their requirements until the end of the year, both at current prices. Deliveries to Imperial Chemical Industries (ICI), the most important private producer of explosives in Britain, had gone up.151 Although there was no extra demand from the government immediately after the outbreak of war, Unilever increased the storage capacity for crude glycerine in Port Sunlight, Nantes, Durban and Cape Town.152 In October 1939 Unilever’s chairman reported to the Board that the War Office now wanted glycerine for the manufacture of cordite (smokeless gunpowder). If their plans materialised, the War Office would require practically the full production of the Glycerine Producers’ Association.153 A month later the chairman remarked that ‘the glycerine position was getting satisfactory now’.154 He added that the government had chosen a site for a cordite factory, but that this would not be ready within a year. Unilever was in touch with the British government about deliveries of crude glycerine, but nothing was settled yet. In the first week of the new year deliveries were 363 tons as against 207 tons in the first week of 1939, an increase of a mere 75 per cent. In February 1940 Clarke and Rae were considering the question of future supplies of glycerine, particularly with regard to the War Office requirements. They concluded that if Association were to rely only on the output of the home market, there would be a shortfall of 15,000 tons by the middle of 1943.155 In conclusion, within less than half a year the market position of crude glycerine in Britain had changed completely: from a rather low priced by-product of hard-soap production it had become an essential and scarce raw material for war production. Besides, Unilever had in effect become controller of the glycerine market in Britain.

Innovation – quick-frozen foods industry Special attention should be paid to a major innovation closely associated with Unilever in Germany and the occupied territories, i.e. the quick-frozen foods industry. Wartime shortages of tinplate forced Germany to go all-out for frozen foods. Hundreds of plants were built and production was quadrupled in the first three years of the war. The growth of the frozen-foods industry in Germany, from 22,000 tons in 1940 to over 100,000 tons in 1944, was mainly the result of the need to find a substitute for canned foods when tin became a scarce commodity in Germany after the imposition of the British blockade.156 The two leading producers of frozen foods for the German market were: Solo

100

Business as unusual, 1939–1941

Feinfrost GmbH and Nordsee Deutsche Hochseefischerei AG. Both of these companies belonged wholly or partly to Unilever. Soon, however, a number of other German firms became interested in the frozen-foods business. A direct competitor was Hochseefischerei Anderson & Co in Hamburg. This company, specialised in the freezing of fish, was owned by the Reemtsma cigarette company. In 1941 15 leading breweries engaged in the production of highly concentrated fruit juices formed Schneider & Cie in Berlin. In 1942 two icecream manufacturers merged to form Nuremberg & Pankrofer AG to produce concentrated citrus juices by a freezing process. Another ice-cream manufacturer to enter the frozen foods market was Gronland Icecreme GmbH. These German quick-freeze firms all had plans to set up freezing plants abroad.157 During the war a quick-freezing syndicate was formed between Anderson & Co, Solo Feinfrost and Nuremberg & Pankrofer to operate in France. In Norway the aim of the German occupier was to freeze as much fish as possible for the troops. A subsidiary of Solo Feinfrost, Frostfilet AG, established the largest quick-freezing plant in Europe for fish fillets in Trondheim. Plants were built in Hungary, Poland and Bulgaria, financed largely by private firms, freezing mainly for the German market.158 In 1941 foreign supply to the German frozen-foods industry became so important to the German army that a special meeting was organised between representatives of the Army High Command, the Four-Year Plan (section Nourishment) and representatives of the quick-freeze industry. During this meeting a plan was laid down for the zoning of production. Norway was reserved for fish, the Netherlands and France for vegetables, and Italy and the Balkans for fruit. In addition, the German army itself took an interest in the organisation of the distribution of frozen foods, from the producer to the ultimate consumer, in particular the Wehrmacht.159 After Germany’s occupation of the Netherlands the frozen-foods industry was also introduced in the Netherlands. The German occupier was particularly interested in the large amounts of fish, vegetables and fruit in this country. In 1940 and 1941 the Germans imported quick-freeze equipment for other Dutch firms, which was paid for and installed by Solo Feinfrost. In addition, new firms in the frozen foods business were established with German capital, e.g. Vita, Nordland and Winterzon Conserven. In November 1940 Unilever NV was also instructed (by the Four-Year Plan) to manufacture frozen food in the Netherlands.160 As a result, Unilever set up Proco NV.161 At first frozen foods were partly sold on the Dutch market. The German Wehrmacht, however, soon laid claim to the entire output. Until 1944 frozen vegetables and fruit were produced for the German Wehrmacht. Frozen-fish production in the Netherlands came to a standstill in 1943 when offshore fishing was prohibited. Proco’s production would drop during the war from 2,910 tons in 1941 to only 261 tons in 1944.162 Because it had a market share of about 17 per cent, the total output of frozen foods in the Netherlands must have amounted at most to about 10,000 tons annually. Through its ownership of the Bird Eye patents Frosted Foods controlled the use of the quick-freezing process outside the United States. Solo Feinfrost was a

Business as unusual, 1939–1941 101 licensee of Frosted Foods in Germany, Eastern Europe and the Balkans, but was specifically precluded from selling or hiring freezing equipment to third parties outside Germany, Eastern Europe and the Balkans. As a result, the rights of Frosted Foods were infringed by the use of their process without their consent during the German occupation of Western Europe.163 Clearly Solo Feinfrost was instructed by the German authorities to export freezing equipment outside Germany in the State’s interest. The other German companies involved in the quick-freezing industry, however, were acting voluntarily and in their own interests. After the war some complicated legal questions had to be solved.

Conclusions At the beginning of the Second World War Unilever’s business in Europe was far from usual. The Anglo-Dutch multinational was stuck between the war interests of various national states, especially Britain and Germany. It had intensive and close relations with the British government, the Dutch government in exile in London and with Dutch government officials in the occupied Netherlands. There was ample personal contact between Unilever directors and both governments. Relations with the German authorities were much more complicated and not as unequivocal, but personal contacts mattered as well. Immediately after the beginning of the war in September a complicated legal problem had to be solved in Britain, i.e. the Trading with the Enemy Act. Although Unilever had prepared itself extensively for the eventuality of war, many issues still remained unsolved. The effect on Unilever of the German occupation of the Netherlands in May 1940 was to cut relations and communications between the two parent companies Limited and NV completely. Any dealings between the two, even if possible, were prohibited from then on under the Trading with the Enemy Act. In May 1940, however, there was still a lack of clarity about the implementation of the Act. For example, the position of NV’s subsidiaries in neutral countries was not entirely clear. Another question was whether Limited could act as a self-appointed agent for NV and its subsidiaries all over the world. In June 1940 the Board of Trade consented to Limited having contact with Unilever’s European subsidiaries and acting as their agents. The latter decision, in combination with a decree by the Dutch government, meant that all Unilever companies in neutral countries came under the direction of Limited in London. The goodwill between Unilever and the British and Dutch governments, in conjunction with the Dutch government’s legislation in London, helped Unilever to defy the threats of the Trading with the Enemy Act. Relations with the German government were less successful. It was not entirely clear what the ambitions of the Reich were in connection with Unilever. The German plans were contradictory at least. The question always remained which government agency pulled the strings? From experiences in the 1930s, however, Unilever’s Board knew that the polycratic power structure of the Third Reich would not be unfavourable to the long-term interests of the company.

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The idea of State Secretary Backe (Four-Year Plan and Ministry of Agriculture and Food) was to bring Unilever’s headquarters over to Berlin and to Germanise Unilever completely. In addition, he planned the appointment of a supervisor for the continental Unilever group. At first, however, he had to get rid of Karl Blessing, Karl Lindemann and Heinrich Schicht, who had been appointed as protecting supervisors by Reichs Commissioner Ernst of the Office for the Treatment of Enemy Assets. State Secretary Landfried (Economics Ministry) obstructed the appointment of Count Grothe (Darré’s man in the occupied Netherlands) as a supervisor of the Dutch Unilever group. Economics Minister Funk – which virtually meant Göring – wanted Blessing, Schicht and Lindemann at the top of the Dutch Unilever group. As a result, in 1940 Unilever was saved temporarily from sequestration and a complete Germanisation. Nonetheless Backe and his officials in the Four-Year Plan still planned secretly to solve the ‘Unilever Problem’. At the operational level government intervention had great consequences for Unilever. In the Netherlands and Germany as well as in Britain, oils and fats and Unilever’s principal finished products, soap and margarine, were rationed. Nevertheless, in Britain and the Netherlands – even under German occupation – the relation between government and Unilever left room for self-regulation. In Germany Unilever companies were assigned tasks or closed down. In Britain the company came off best. Although government intervention was also great, it was simultaneously mild. Besides, raw-materials shortages were not as great as on the European continent and demand for daily consumer necessities rose during the war. In the Netherlands raw-material shortages were worst after one year of the German occupation. As a result, margarine production came to a halt as early as May 1941 (to be resumed in 1942 when home produce became available). The Dutch soap position, both in quantitative and qualitative terms, also deteriorated within one year after the start of the German occupation. Whereas the Dutch economy was booming during the initial period, Unilever was unable to take advantage of the opportunity. In Germany Unilever’s oils and fats business was also subjected to great pressure. However, as the company had diversified its German business into various fields in the 1930s it could compensate for the poor results in its core business. Especially the mushrooming growth of a frozen-foods industry in Germany and in the occupied countries prevented Unilever from financial collapse on the European continent.

6

A Reichs Commissioner for the Unilever Group, 1941–1945

After Germany’s invasion of Soviet Union in June 1941, the Japanese attack on Pearl Harbor and the United States’ subsequent entry into the war in December all major world powers were directly or indirectly at war. A European and East Asian conflict had turned into a world war. As a consequence, the Axis powers faced fearful odds. The Allied powers together had an enormous military and economic supremacy.1 Nonetheless, an Allied victory was far from inevitable.2 By 1942 almost the whole of continental Europe was still in German hands and Japan had overrun China and the western colonies in Asia. The outcome of the war in 1942 and 1943 was much less certain than it would become in 1944. At some time during 1941 and the beginning of 1942 all belligerents had geared their economies to wage full-scale war. The available resources on the occupied continent were increasingly used for the German war effort. This chapter starts with a brief comparison of the (total) war economies of the most important countries for Unilever on the European continent, Germany and the Netherlands in this period. To improve economic performance and overcome Göring’s mismanagement of the German war economy Hitler appointed Speer as Minister for Armaments in February 1942. As a result, there was a drive for rationalisation in the German war economy and the exploitation of the occupied countries increased. Speer’s armaments production boom, however, was an exaggeration, mainly to serve the Nazi war propaganda.3 The next section deals with Göring’s appointment of a Reichs Commissioner for the Unilever Group half a year before. It involved a preparation for subsuming Unilever’s capital under a German syndicate. The appointment of a special Reichs Commissioner, however, would turn out differently from what various German agencies had planned in the 1940–1941 period. In effect, the appointment did not work out unfavourably for Unilever. The Reichs Commissioner protected the company against attacks by several competitors. The relocation of the company’s headquarters to Berlin, which was sought by various German government agencies and supported by some German Unilever managers, ended in complete failure. The last section of this chapter deals with the industrial conditions during the second half of the war. It shows Unilever’s contribution to solving the immense raw-material shortages of oils and fats on the European continent. It searched for various alternatives like the use of increased domestic produce and imports from

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Southeast Europe. A sharp increase in the production of soap based on synthetic raw materials by Unilever and its main competitors was of great significance for the soap supply during the war and for the further development of this major innovation in the post-war period.

Total war By December 1941 it was clear that Germany’s opening campaign in the Soviet Union had failed so far. The entry of the United States into the war that same month had made things even worse for Germany. Hitler blamed Göring for the inefficiency of the German war economy. On 3 December 1941 Hitler ordered the rationalisation of the economy in an effort to improve the productivity of industry and bring an end to the bureaucracy and chaos in the economic policymaking of the Third Reich, associated with Göring.4 As a result, the turning point for Göring’s career was in the winter of 1941–1942. In February 1942 Hitler appointed his architect Albert Speer as successor to Fritz Todt as Minister for Armaments. Todt had been killed in an air-crash, under rather suspicious circumstances, after he had come into conflict with Hitler about the organisation of the German war economy.5 As from the moment when Speer appeared as a plenipotentiary in the war economy Göring’s power declined. In due course Speer used Hitler’s direct political support to enlarge his powers. In April 1942 he established a Central Planning agency (Zentrale Planung) to handle the allocation of raw materials for the whole of German industry, which directly undermined the core of Göring’s Four-Year Plan.6 Furthermore Speer continued the establishing of a system of industrial committees (Ausschüsse), which gave greater responsibility to industry. The Four-Year Plan organisation was not dissolved, but Speer created new centralised offices, which were staffed mainly with men from private industry. In the 1942–1944 period the two magic words in the German war economy would become ‘concentration and rationalisation’. In April 1942 Economics Minister Funk, who had now sided with the new strong man in the German war economy, had announced these key words. Rationalisation meant on the one hand a tighter centralisation and control by the German State over the resources of capital, labour and raw materials, and, on the other, a concentration of production in the most efficient and economical plants. By the time Speer became Minister for Armaments and War Production in September 1943 he had enlarged his authority over the whole war economy.7 Although the output of the armaments industry increased after Speer’s appointment, Adam Tooze puts Speer’s ‘armaments miracle’ into perspective and shows that the dramatic statistics of production were rather propagandistic.8 The drive for rationalisation, however, had pushed the acquisition of ownership of foreign capital into the background. Besides, Speer needed private business to increase industry’s output; sequestration of non-Jewish enterprises no longer had priority. For the occupied Netherlands Speer’s appointment had also far-reaching consequences. From 1942, as part of the Reich’s rationalisation policy, many small

A Reichs Commissioner, 1941–1945 105 companies and companies that produced non-essential products were closed down. The aim was not just to economise on depleted raw materials, but also to save Dutch labour for the German war effort. According to Fritz Sauckel (plenipotentiary for labour supply) the Dutch labour surplus, which resulted from the occupier’s concentration policy, was to be sent to work in German industry. In 1942–1943 more than 240,000 Dutchmen were forced to work in Germany.9 However, labour extraction from the Netherlands (Arbeitseinsatz) proved rather counterproductive; at least as many Dutch workers as had been removed to Germany went into hiding and were lost for the Dutch as well as the German industry.10 In combination with shortages of nearly all raw materials the output of Dutch industry dropped sharply. Consequently, in the course of 1943 Speer became more and more opposed to the use of West-European forced labour in Germany. According to him it would be better to use the production capacity of the occupied countries in Western Europe on behalf of the Reich.11 Another result of the policy review in the Third Reich was that Reichs Commissioner for the Occupied Netherlands Seyss-Inquart and his economic official Fischböck lost much of their power over the Dutch economy. The Central Order Office (Zentralauftragsstelle – ZAST), which had been their instrument for organising individual orders from German to Dutch companies, became subordinated to Speer’s Central Planning agency in Berlin. Dutch companies had to inform the ZAST about their spare capacity and could no longer refuse orders from Germany. The Dutch Government Bureaux, organised by sectors of industry, which had until then come under the Dutch Economics Ministry led by Hirschfeld, now came directly under the organisation of industrial branches (Reichsstelle) in Berlin that had also become part of Speer’s Central Planning agency. In spite of the endeavours of Hirschfeld to lessen Berlin’s control over the Dutch occupied economy, sometimes even supported by Seyss-Inquart and other German officials in the Netherlands, the exploitation of the Netherlands intensified from 1942 onwards. According to Klemann about 41 per cent of Dutch GDP in 1942 went to the German war effort, without any real payment, whereas in 1943 and 1944 this figure even rose to 46 and 43 per cent respectively. While, simultaneously, in 1943 total Dutch GDP would fall by 10 per cent and in 1944 even by 19 per cent, measured in 1939 prices.12 There was too little left for the Dutch population to live their normal lives, as they had done until 1941. As a result of the increasing exploitation and repression, resistance to the German occupier grew in strength.

Unilever a German syndicate? On 23 June 1941, two days after Germany’s attack on Soviet Russia, Göring appointed a Reichs Commissioner for the Unilever Group (Reichskommissar für den Unilever-Konzern), State Secretary Dr Hans-Ernst Posse. He had been on active service as an outstanding high-ranking official of the Reich Economics Ministry since 1924. He was praised as an expert in the field of foreign-trade

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relations; in politics, however, he was seen as opportunist.13 He had applied for a Nazi party membership in April 1933, one month after Hitler had become dictator, but because there was a recruitment freeze, he was only admitted in November 1933. In July 1933 he was appointed State Secretary and in 1934 Hitler had for a moment even considered appointing him as his new Economics minister. Soon, however, Schacht had overshadowed Posse completely. He had welcomed the entry of Funk – Göring’s man – in the Ministry after Schacht’s dismissal and had played a major role in the ‘Aryanisation’ of the German economy in the 1937–1938 period. In 1938 he had become Funk’s deputy as Plenipotentiary of the Economy, which happened to be a powerless position, because Göring’s Four-Year Plan pulled the strings.14 In 1940 Posse had got involved with the exploitation of the occupied Western territories; however, he had again found out that Göring’s organisation was in control and that the Economics Ministry could only play second fiddle.15 Posse’s appointment as a Reichs Commissioner for the Unilever Group was the result of earlier discussions between the Four-Year Plan and the Economics Ministry in Berlin, which had lasted for more than a year. The immediate reason for his appointment now, however, was the ‘unreliability’ of Unilever NV’s Board. The proof of this was provided amongst other things by the 41 boxes found in Bordeaux, which had ‘raised serious objections against Unilever’s earlier policies’.16 On the basis of Gestapo material State Secretary Landfried of the Economics Ministry stated, ‘(. . .) a few companies of Unilever have a connection to the Secret Service’.17 Therefore it had become necessary ‘to abandon the soft policy towards Unilever and to consolidate the management in one hand’.18 Only the appointment of a Reichs Commissioner could ‘clarify the relations inside the Unilever concern’, according to Landfried.19 The aim of the measure was ‘not to bring Unilever under public ownership, but to order the concern and to come to a managed fat economy’.20 It involved a conscious preparation for subsuming Unilever’s capital under a German syndicate and for guaranteeing Germany’s influence on the main representative of the fats industry in the German Reich. In addition, it was agreed upon that competitors should not take advantage of the opportunity; Unilever companies should not fall into the hands of big competitors. Although Lindemann, Blessing and Schicht, as protecting supervisors of Unilever’s German holding companies Marga, Saponia and Wemado, could not be blamed for Unilever’s unreliability, their position had become incompatible with the appointment of a Reichs Commissioner for the Unilever group. As early as February 1941 Lindemann had been informed about the discovery of the 41 boxes in Bordeaux. He had been told that the Four-Year Plan (Göring) could no longer agree with his membership of the Unilever Board and therefore he would do well to resign. Thereupon Lindemann immediately had sent a telegram to Göring in which he informed him about his resignation: ‘I cannot square with my National Socialist conscience to belong any longer to this Concern.’21 Although Lindemann left the Board of Unilever NV in Rotterdam, he remained a member of the German Board in Berlin.

A Reichs Commissioner, 1941–1945 107 At the same time complaints had been made under the Four-Year Plan against Karl Blessing.22 The Economics Ministry, however, took him under protection. On 18 March 1941 State Secretary Neumann of the Economics Ministry stated that he rejected all complaints against Blessing. In addition, he did not cast doubt on Blessing’s important appointment in the oil industry by the Reichs Marshal (i.e. Göring).23 As a result, in May 1941 Blessing was kicked upstairs – or elegantly removed – and appointed to chair the Board of the newly established oil company Kontinentale Öl AG.24 Heinrich Schicht, like his cousin Franz Schicht, remained on the Board of the parent company, Unilever NV, because of their extensive knowledge of the business. Heinrich, however, had to give up his position as a protecting supervisor of Marga, Saponia and Wemado. Although there was no intention to remove the Schicht family completely, they ‘might give up voluntarily their capital position in the future’, according to the Economics Ministry.25 In June 1941 the Schicht family, through a spokesman, expressed their concern towards the FourYear Plan about the appointment of a Reichs Commissioner. They reminded the Four-Year Plan representative of the fact that their firm (Georg Schicht AG) had supported the Austrian Nazis financially even before the Anschluss.26 Thereupon, it had been made clear to the company that the appointment of a Reichs Commissioner would not work out unfavourably for the Schichts at all, but if the family planned to part with their interests they were free to do so. Simultaneously, there were serious doubts at the Four-Year Plan about the Schicht firm. Since the annexation of Czechoslovakia by the Reich Georg Schicht AG had become a German company, according to Franz and Heinrich. But according to the Four-Year Plan, relying on Cantrup’s reports about Unilever’s organisation, the Schicht companies in Eastern Europe were fully owned by Unilever NV in Rotterdam (through Lipoma). Because Unilever NV was considered to be under British influence Schicht could not be classified as a German company. In addition, Georg Schicht AG was also linked directly to Unilever Limited in London. After the First World War the company had received long-term loans from Lever Brothers in London, which had been provided by means of a holding company (Limmat) in Switzerland. Limmat was owned jointly by Unilever and Schicht. Besides, Georg Schicht, who owned the largest share in Georg Schicht AG, had become a British subject before the Second World War and was still on Unilever’s Board in London. As a result, the Four-Year Plan questioned whether Georg Schicht AG could be called a German company at all.27 On 27 June 1941 a joint meeting of the new Advisory Committee (Arbeitsausschuss) of Reichs Commissioner Posse and the German Board members of Unilever NV was held in the prestigious Hotel Adlon in Berlin.28 Posse’s Advisory Committee consisted of officials from all German government agencies involved with Unilever: the Reich Ministry for Food and Agriculture (Dr Moritz); the Four-Year Plan, Section Nourishment (Reichart); Reich Economics Ministry (Dr Mulert); Reichssicherheits-Hauptamt (Johst) and Gauleiter and Hamburg’s governor (Kaufmann). Unilever’s German Board members, like

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Heinrich and Franz Schicht and Karl Lindemann, were appointed to a Consultative Board (Beratungsausschuss) to this Advisory Committee. In practice, the government officials first met and took the decisions, whereupon Unilever’s businessmen could give their views in the next meeting on the decisions taken in the foregoing meeting. After Göring had signed the appointment of the Reichs Commissioner, Backe, Landfried and Posse informed the German Unilever management and various other government officials about the company’s future. Chairman of the meeting was Backe, who had become one of the most powerful German officials in food affairs at the time. Although he was promoted officially Reich Minister only at the end of 1943, he would usurp the Reich Ministry of Food and Agriculture much earlier, in May 1942. Backe immediately set the tone of the meeting with a quotation from Bernard Shaw’s Saint Joan: ‘My dear Lady – Your death was a political necessity. I assure you, however, that I have no personal aversion to you.’29 The quotation showed Backe’s intentions clearly: the termination of continental Unilever in its original form. The final goal had to be Unilever’s transformation into a German syndicate of the continental oil, margarine, whaling and raw materials industry. The motivation for the appointment of a Reichs Commissioner had been economic as well as political, according to Backe. The closing of the fat gap (die Fettlücke) was one of the most pressing problems of Greater Germany, especially from the viewpoint of a future peace with Britain, which Backe considered imminent. Unilever’s leading position on the raw materials’ world market was used against Germany until that moment, because behind Unilever stood Britain’s political power. Recent research into the company (Cantrup’s) had proven that Unilever NV’s property on the continent was in fact cloaked British property and should therefore be treated as enemy property. Furthermore Backe praised the work of the German directors, especially the work of Karl Blessing, and assigned all of them, except for Blessing and Lindemann, to work from now on for the newly established Advisory Board of the Reichs Commissioner.30 Thus the audience of German Unilever directors was intimidated, praised and instructed to continue their management tasks, all at the same time. Clearly the transformation of Unilever was also a human-resourcemanagement problem; the Reich was not in a position to run the largest company in Europe with its own staff. It needed Unilever’s German managers to run the business. Besides, the Reich was not even in a position to dismiss Dutch managers like Hendriks and De Baat, who were not invited to the meeting in Hotel Adlon. According to Posse, Hendriks in particular was of vital importance for the governance of continental Unilever.31 Finally, during the meeting Backe summed up the instructions that Reichs Commissioner Posse had received. First, to protect and preserve Unilever as enemy property and cut out enemy (British) influence. Second, to integrate Unilever’s food industry in a continental European nourishment system. Third, to integrate the technical fat industry in the context of a continental European economy. Fourth, to manage other (supply) companies within a European frame-

A Reichs Commissioner, 1941–1945 109 work. Fifth, to make preparations for the transformation of Unilever’s colonial raw material companies into German companies. Last, to make preparations to join a German syndicate of the German margarine, oil and whaling companies.32 Only the first instruction could be fulfilled in the short term. Exceptionally, Unilever was withdrawn from the authority of the Reichs Commissioner of Enemy Property Ernst and put under Reichs Commissioner Posse. That in itself nonetheless did not change much in the daily practice of the company; it only meant that Unilever’s property in Germany and the occupied territories was still protected and preserved, at least according to international and German law. The other assignments were rather ambitious, rather long term and, in the reality of the Second World War, rather unattainable. It is interesting, however, to explore how Posse and his deputy in the Netherlands, Werner Modest, put these broadly formulated aims into practice. In the 1930s Posse had had extensive contacts with Unilever as the biggest company in the oils and fats industry in Germany. Before the war Posse had been known to NV in his function as State Secretary of the Economics Ministry. His economic views were nearer to those of an international business like Unilever than to the official autarkic policy of his own government. In the 1930s he and Backe had already known that it would be impossible to make Germany autarkic, especially in the field of oils and fats.33 Dr Modest had also been acquainted with Unilever in Germany as an official of the Reich Office for Dairy, Oil and Fats (Reichsstelle für Milcherzeugnisse, Öle und Fette). In his first report to Posse in August 1941 Modest clarified his intentions in relation to the Unilever group: [. . .] to proceed in any event circumspectly and distantly and not to turn the management of the concern completely ‘upside down’ [. . .] In the same way Minister Fischböck discussed the matter with me, and he pointed to the major objective of my task which was to examine the organisation of the concern, whether and to what extent it can be made subservient to the interests of the Reich.34 This quotation shows two things. First, Posse did not want to change Unilever’s management on the continent, which meant that Hendriks and De Baat could continue in their Rotterdam positions, albeit under constant surveillance of a high-ranking Gestapo officer. It was a well-known fact that these Dutch managers were not particularly pro-German; however, their dismissal would mean chaos, which was the last thing that Posse wanted. Second, Unilever’s continental plants had to operate in the direct war interests of the German Reich. Guns were important of course, but without fat, food and soap the war on the (home) front would in any event be lost. In December 1941, nonetheless, Posse had to replace Patijn and Blessing who had both left Unilever NV’s Board. Blessing had taken a seat on the Board of Kontinentale Öl AG, but it is not clear why Patijn had left Unilever NV’s Board. He had been overtly critical of the anti-Semitic policy of the Nazis in the 1930s,

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and because the German occupier had just ordered the dismissal of all Jewish staff in this period this may have been the reason for his resignation.35 As a result, De Baat en Carl Santkin now came on the Board of Unilever NV in Rotterdam. They also became directors of Unilever’s important holding companies Marga, Saponia, Wemado and Lipoma.36 As from December 1941 Unilever NV’s Board in Rotterdam consisted (again) of three Dutchmen, Rudolf J.H. Jurgens, P.H.D. Hendriks and M.G. de Baat, and three Germans, Franz and Heinrich Schicht, and Carl M. Santkin. The latter had replaced the Jewish director Fabian of Sunlicht Gesellschaft in Mannheim in 1933 and had become a Board Member of MVU in Berlin. Now Santkin made a second career within the company due to his enthusiasm about the Nazi regime, although he never held a party card. De Baat had been a loyal Secretary of Unilever’s Board and had been always on Hendriks’ side. Heinrich and Franz Schicht had both received German nationality after Germany’s annexation of Czechoslovakia.37 Shortly before the outbreak of the war they had moved from London to Berlin. In 1940 Franz had joined the Nazi Party.38 His cousin Heinrich, who was a much more senior representative of the Schicht family, stood aloof from Nazi politics during the whole war.39 Whatever the political inclinations of these gentlemen it was still a fact that all Board members of NV were still Unilever’s own managers. In addition, the German members stayed in Berlin for the most part, which enabled Hendriks and De Baat to run NV’s business from Rotterdam, under the supervision of Posse’s man in the Netherlands, Werner Modest. In May 1942 Modest recapitulated his instructions to Fischböck: Due to a lack of a clearly defined assignment of my office I have discussed, by order of State Secretary Dr. Posse, the substance of my assignment in meetings in the Netherlands with Minister Fischböck and head of department Von Boeckh. The aim of my assignment, which came forward after these meetings was to explore if and when the organisation of the Dutch part of the Concern could be brought into service of the German Reich.40 Modest summarised the purport of his assignment to Fischböck in five tasks. First, he had to attend the Board meetings of Unilever NV in Rotterdam. Second, he was responsible for the financial audit of the company, which had been entrusted to Albert Cantrup. Third, he was involved with the ‘Aryanisation’ of the Unilever group. Fourth, he had to deploy Unilever in the Reich’s interests, i.e. to monitor production, to economise on raw materials and to carry out German orders (Auftragsverlagerung). Fifth, he had to study all legal and economic issues of the Dutch part of the company with the aim of becoming the ‘objective expert’ and of answering all questions from German government agencies in relation to Unilever NV.41 If one compares Modest’s – and, of course, Posse’s – targets with those of Backe one year earlier, some marked contrasts can be seen. Backe’s list was rather long term and abstract, while Modest’s aims were short term and quite

A Reichs Commissioner, 1941–1945 111 specific and concrete. Modest’s approach was businesslike and to the point from a German point of view. In the same document an even more striking contrast is worthy of note. Whereas Backe contended that Unilever NV’s capital had to be treated as enemy property, Modest wrote, only nine months later: (. . .) I assessed, according to my view of the law, that the capital of Lever Brothers & Unilever N.V., Rotterdam, is autonomous Dutch property, and cannot be regarded legally or economically, within the meaning of the Enemy Property Act, as British property.42 Within a year after the appointment of a Reichs Commissioner Unilever NV had turned from a British cloak into an ‘autonomous’ Dutch company. However, nothing had changed in Unilever’s legal structure in the meanwhile. Only the Reichs Commissioner’s perception of the company had changed. Cantrup’s audit reports had changed Modest’s and Posse’s views on Unilever’s complex holding structure. Besides, being so close to the company had possibly changed the Reichs Commissioner’s views on the company’s future too. We will never know with precision or confidence what exactly happened in NV’s boardroom in Rotterdam in this period. What we do know about are Cantrup’s steep invoices, which amounted to almost half a million Dutch guilders and which could possibly have changed the auditor’s mind. Probably more important, nonetheless. are the institutional changes in the German Reich. Göring’s declining role in the German war economy might explain why the policy change of the Reichs Commissioner could be so obvious and overt. The newly appointed plenipotentiary Speer needed Unilever’s willing co-operation to reach his short-term aims. Thus Unilever was able to turn the appointments of Posse and Modest to its advantage. Their appointments eventually did not work out unfavourably for the company in Germany and the occupied territories. Posse and Modest, in fact, promoted Unilever’s interests wherever they could and they gave the company much help during the second half of the war. For example, in 1943 during Sauckel’s forced labour campaigns (Sauckel Aktion) they were able to organise exemption for the greater part of Unilever’s staff in the Netherlands, although many plants were not working continuously or at full capacity. Also in the case of temporarily shut-down factories, as was the case with margarine plants and oil mills in Greater Germany as well as the Netherlands once they had run out of raw materials, Posse and Modest were always able to maintain the factories, inclusive of staff. In addition, they supported the company in the acquisition of raw materials through complicated negotiations with various German government agencies. Since Posse’s appointment Hendriks and De Baat could visit Berlin regularly and various other parts of the business on the continent, including those situated in the neutral countries Switzerland and Sweden.43 As a result, communication between Rotterdam and the Berlin office improved to some extent. Hendriks reported that he had accompanied Posse three or four times to Zürich and was impressed by the big profits that the Swiss company made for so small a country and by the way they were able to avoid having to make

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remittances of Swiss francs to the Netherlands. In Stockholm Hendriks learned that the Swedish Board (like himself) used the technique of agreeing with everything that Posse asked and then postponing its execution. Visits by Hendriks to neutral countries did not go by unnoticed by the London Board, but did not have an adverse effect on Unilever’s close relations with the British government, although these contacts were strictly forbidden.44

‘Aryanisation’ Another consequence of Posse’s appointment as Reichs Commissioner for the Unilever concern was the end of the constant threat of being classified as a ‘nonAryan’ company and consequently being ‘Aryanised’ or liquidated. From now on, attacks on Unilever were easier to fend off. Having a German State Secretary at the top of the enterprise was ample proof of being ‘Aryan’. As Modest noted: ‘After the appointment of a German Reichs Commissioner for the Unilever concern as a supervisor it is impossible to say that, the concern or part of it is in Jewish hands.’45 After the German occupation Unilever had changed the Board of Unilever NV and its subsidiaries. All ‘Jewish’ Board members had resigned (and had fled to London). As a result, Unilever had avoided compulsory registration as a Jewish company. Nevertheless, in 1941 according to a new German order (48/41) a company which had taken measures to avoid compulsory registration, i.e. dismissal of its ‘Jewish’ Board members, should pay a fine.46 In October 1941 the question remained as to how much Unilever had to pay. According to the order a company had to pay 1 per cent of the total equity of Unilever NV and its subsidiaries or 1 per cent of the total equity of Unilever NV and only its ‘Jewish subsidiaries’. In the first case Unilever had to pay ƒ6.3 million, in the second case the fine amounted to ƒ5 million.47 Whatever the case may have been, both were vast sums in those days. Although Modest agreed completely with Seyss Inquart and Fischböck about the removal of Jews from the company, he disagreed about the stipulated ‘Aryanisation’ penalty. In a letter to Fischböck he stated that the orders of the Reich Commissioner for the Occupied Territories had become of little substance in connection with Unilever after Göring had appointed a special Reichs Commissioner for the Unilever Group in June 1941.48 In addition, he noted that since Unilever was under the constant supervision of Posse it fell outside the jurisdiction of the Reichs Commissioner for the Occupied Territories, Seyss Inquart, and therefore he could not impose a fine on the company. Posse’s appointment nonetheless had tragic consequences for Unilever’s Jewish staff who still remained in the Netherlands. In contrast to Posse’s defence of the company’s interests, he fanatically attacked the Jews inside Unilever. In the late 1930s Posse had been involved directly with the ‘Aryanisation’ of the German economy. In November 1937, Posse had signed the order, which started the expulsion of Jews from the economy and professional life.49 When Unilever NV was forced by German order to dismiss all Jewish staff in

A Reichs Commissioner, 1941–1945 113 the autumn of 1941, Posse and Modest became actively involved with the expulsion of all Jews from Unilever. In this matter they did not accept any delaying tactics of Hendriks and De Baat. In September 1941 Modest wrote to Fischböck: ‘The Board is now free of Jews, but there are still many other Jewish employees. That, too, must be solved.’50 After six months, however, Modest reported: ‘Removal of Jews (. . .) meanwhile fully implemented.’51 Modest was under the impression that Hendriks and De Baat were collaborating fully with his policy, or at least he stated so to other German agencies: ‘By and large I have now gained the impression that Mr Hendriks in particular, but also Mr De Baat of the Board of the Unilever Group are making efforts in the most loyal way to make my task easier.’52 Hendriks and De Baat nonetheless, meanwhile pursued their own course, at least as far as possible. They helped their former Jewish staff financially. Moreover, they made an attempt to save their former Jewish staff’s lives. By mutual agreement between Unilever and its Jewish staff, it was decided that 88 staff would resign officially from 3 October 1941 in the Netherlands.53 Unilever made a financial settlement with its dismissed staff. Unilever’s pension fund Progress was made responsible for carrying out the settlement. In the first half year the dismissed staff received full salary, in the second half year 75 per cent and after that period 50 per cent. By June 1942, however, a new German order for the treatment of ‘Jewish’ property prescribed that the monthly allowances had to be reduced to a maximum of ƒ250. The remainder had to be transferred to a Jewish bank, which had been put under German control and was used to expropriate Jewish financial property, i.e. Lippmann, Rosenthal & Co., Sarphatistraat, in Amsterdam.54 After June 1942 Progress received the first information about deportations to Westerbork, Germany and Poland. When the pension fund received the news that a cheque was not cashed it meant that those involved had either been deported or had gone into hiding.55 The payment was stopped and the sum was then refunded to Unilever. As a result, less and less money was transferred to Lippmann, Rosenthal & Co. In 1944, however, the latter took the cynical position that whenever a former employee ‘was unable to be present’ Progress had to pay the monthly allowances directly to Lippmann, Rosenthal & Co.56 Unilever, however, refused to pay these claims until the end of the war. The Rotterdam board used Modest to defend itself against the claims of the German robber bank.57 In the course of 1942 and 1943 Hendriks and De Baat tried to save a selected group of its former staff. The selection was based on the indispensability of an employee for the company, according to the occupier’s criterion. As a result, the list only consisted of managers of operating companies in the Netherlands. Via a German lawyer, A.P. Bauer, an emigration list of Jewish employees was drawn up. Emigration during the war was, of course, not the immediate aim of the list.58 The idea was to prevent deportation to a concentration camp. Being on an emigration list was asking for a postponement of deportation and could mean survival. Vast sums, up to Swiss Frs. 300,000 per person, were made available

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by Unilever.59 It is not entirely clear how many people were on the list. Some letters mention 11 employees and their families, other sources state that there were 18 people. Nevertheless, it is entirely clear now that even this final attempt failed. On 16 March 1943 De Baat wrote to the lawyer Bauer: ‘. . . your attempts foundered and there is no possibility to get even one of our former staff on the list in question.’60 Finally, out of 88 dismissed Jewish staff, 53 were deported and killed in German concentration camps, whilst others had gone into hiding.61 The relative number of victims amongst Unilever staff (60 per cent) was lower than the average rate in the Netherlands (76 per cent), which could have possibly been the result of the drawing up of a list.62

German competitors’ attacks Although Göring’s role in the German war economy was declining, he continued to wield authority and power. The Reichswerke was still expanding all over Europe in 1942, to become one of the largest industrial conglomerates in Europe. In the domestic economy Göring also remained a political force to be reckoned with well into 1944, as Unilever would find out.63 At the end of 1941, Germany’s cigarette magnate Philipp Reemtsma acquired 25 per cent of the share capital (RM25 million) of ‘Nordsee’ Deutsche Hochseefischerei AG, Germany’s largest offshore fishing company. Until then 49 per cent of Nordsee’s total share capital were in the possession of Unilever’s Margarine Union in Berlin. Reemtsma used his Nazi party connections, in particular Göring and Hamburg’s governor (Reichsstatthalter) Kaufmann, to acquire a part of these valuable Unilever shares. The acquisition of these shares was no exception, nonetheless. During the war he used bank borrowings to expand his industrial holdings constantly; by October 1944 Reemtsma had become the Deutsche Bank’s largest debtor (RM46 million).64 The acquisition of these Unilever shares, however, involved a conversion of enemy property which had to be dealt with under trusteeship and was barred from any disposal according to the principles of international law and the German regulations with respect to enemy property. Therefore, Reichs Commissioner Posse, encouraged by Unilever, strongly opposed the alienation of these shares. Göring nevertheless ordered that 50 per cent of the Nordsee share capital (in fact Unilever’s share) should be transferred to German possession. These 50 per cent were distributed, through Reichsstatthalter Kaufmann, to Hamburg and Bremen businessmen on a 50 to 50 basis. As a result, Reemtsma, as a representative of the Hamburg economy, obtained 25 per cent of Nordsee’s share capital, i.e. 50 per cent of Unilever’s share.65 The acquisition of the Nordsee amounted not only to a profitable investment, but also to an eminent economic interest for the Reemtsma group. For its subsidiary and frozen foods company Anderson & Co this penetration into the best and greatest undertaking of German deep sea fishery, which was also involved in the quick freeze industry, meant a highly important addition to its economic activities. As early as 1940 the Reemtsma group had attempted to reach an

A Reichs Commissioner, 1941–1945 115 agreement with Nordsee with a view to establishing a combination of the frozen-foods industry. At the time, however, Blessing, as a protecting supervisor, had defended the interest of Unilever against Reemtsma. One and a half years later the cigarette monopolist did succeed in getting a piece of the Unilever cake, possibly the most profitable and promising piece at that time. Yet, after Reemtsma had acquired the shares, there came an energetic protest from State Secretary Backe of the Ministry of Food and Agriculture, who told Kaufmann that he would not permit Reemtsma establishing a monopolistic company in the food sector like he had done in the cigarette branch. Thereupon Kaufmann made Reemtsma transfer the shares into the custody of the City of Hamburg, evidently with the idea of reserving the shares for the Reemtsma group.66 In the course of 1942 Reemtsma endeavoured to acquire another highly promising subsidiary of Unilever, i.e. Solo Feinfrost GmbH.67 In fact, close connections had existed between Nordsee and Solo Feinfrost until the forced sale of Unilever’s share at the end of 1941. Both companies co-operated closely in the field of frozen foods. Solo Feinfrost, the only licensee for the American Birds Eye quick freeze process in Central Europe, rented out equipment to Nordsee’s fish processing plants and Nordsee, for its part, used Solo Feinfrost’s distribution system to sell its frozen fish. After the occupation of Norway Nordsee and Solo Feinfrost had together established two large quick-freeze factories in that country, one in Trondheim and another in Bodö.68 Both factories froze about 100,000 tons annually for the German Reich, which amounted to one third of the total Norwegian catch. In frozen fish Nordsee had about 80 per cent of the German market, while Solo Feinfrost had the larger part of the frozen vegetable and fruits market in Germany. Reemtsma, consequently, after it had acquired a major part of the Nordsee shares, showed a great interest in the supplementary acquisition. On 9 September 1942 Philipp Reemtsma made a cautious approach to Backe about his possible acquisition of a part of Unilever in exchange for the Reich’s plan to establish a tobacco monopoly, which would mean the end of his own corner in the market.69 ‘To give no rise to misunderstandings, he would never acquire a part of Unilever without Backe’s permission’, Reemtsma wrote. Reichart of the Four-Year Plan, who had dealt with his case, had told him that the Reich did not plan to pay him in cash, but in kind, i.e. in enemy property. Göring, by order of the Führer, had informed him likewise. Clearly Reemtsma had learned from Backe’s intervention in the Nordsee case and now proceeded more cautiously. This time, however, he overlooked Reichs Commissioner Posse. On 1 September 1942, even a week before Reemtsma’s direct approach to Backe, Posse took counter-action in response to unsubstantiated rumours that ‘Solo had to be handed over to Reemtsma’.70 In Posse’s letter to Backe he promptly referred to Göring’s orders in connection with the establishment of a Reichs Commissioner for the Unilever Group in June 1941. According to Posse the Reichs Marshal had ordered that

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In addition, Posse stated that competition between Andersen (Reemtsma) and Solo Feinfrost (Unilever) was essential for the development of the new quickfreeze industry and that, without Unilever’s distribution system, Solo would mean nothing as a company. Both letters appealed to Göring’s orders or in Reemtsma’s case even to Hitler’s orders. In that respect, both letters were on a par, except that the Posse letter was written in no uncertain terms compared with Reemtsma’s. Posse defended the interest of the Unilever group against an attack of a competitor. Besides, he attacked the Reemtsma group with another plan. According to Posse’s plan Nordsee had to be split up in two companies: one for its original activities, offshore fishing, and a new one for its quick-freeze operations. Then Solo Feinfrost could acquire the new equity of the latter company. Nordsee, for its part, could use this capital to invest in the expansion of its fishing fleet, which would be necessary after the war. In this way Unilever could be compensated for the loss of Nordsee a year earlier. And because the quick-freeze industry would show ‘an unexpected expansion after the war’ the Reich had an interest in Solo Feinfrost’s development, which had a widespread distribution network via Unilever.72 Backe’s answer came at a meeting of Reichs Commissioner Posse’s Advisory Board (Beirat) in Berlin in November 1942. He put a veto on the separation of Solo Feinfrost from the Unilever group, because of Unilever’s essential and extensive network of coldstores in the German Reich, which should be used for frozen fish as well as vegetables and fruit. In addition, it was important to keep competition alive to stimulate technical development in this infant industry. Backe did not arrive at a decision about the division of labour or specialisation of Nordsee and Solo Feinfrost (i.e. Posse’s plan). But, in fact, Posse, and through him of course Unilever, had won the case, because Reemtsma’s second attack had been beaten off. Henkel, Unilever’s main competitor on the continental soap market, also tried to play the German and the National Socialist Party card. In particular chairman Werner Lüps fiercely attacked Unilever in the autumn of 1941. Although his company had obtained some satisfaction after Unilever’s forced sale of the company’s Persil rights in France to Henkel in February 1941, Lüps pressed the officials of the Four-Year Plan hard with his historical treatises about Unilever’s ‘cut-throat competition’ before the war.73 In 1930 the Unilever Group had tried in vain to acquire the German family firm. When Henkel had turned down an inviting offer, Unilever had immediately started a knocking campaign against Persil in the Netherlands, Belgium, Switzerland and the Nordic countries with its own perborate washing powder brands, like Radion. Unilever, however, was not entitled to do so on the basis of

A Reichs Commissioner, 1941–1945 117 earlier agreements with Henkel, according to Lüps. Besides, it had fought Persil with all possible means. Unilever had used price-cutting and misleading advertising. It had even used the boycott against German goods during the 1930s by showing that Persil was a German product and that through the purchase of Persil the public was supporting the Hitler party and the German rearmament programme.74 According to Lüps, inside Germany Unilever had to stick to the Mannheim Agreement of 1922. According to this agreement Unilever had promised not to produce any perborate powder inside the German Reich, while Henkel had agreed not to produce any hard soaps there. Because Unilever had profited from Henkel’s major invention in other countries, Unilever’s interests outside Germany had to be ‘revised in favour of the Henkel firm, because these interests had only been acquired through unfair and cut-throat competition’. Lüps nonetheless failed to impress Posse, who returned Henkel’s historical treatise with a short note added to say that these were things of the past in which he was not interested.75 Lüps reacted furiously: ‘Posse has been manipulated in a General Director’s position, instead of remaining an impartial Reichs Commissioner.’76 Thereupon he planned to write a pamphlet against the Reichs Commissioner and deliver it to various Ministers and State Secretaries, Hitler’s Reich Chancellery and Göring. Now Göring’s protégé, Lüps, was cautioned by various government officials not to use his contacts. Henkel had lost a lot of its prestige at the Ministries, in particular at Göring’s, with its unfounded allegations about Unilever. ‘Besides, Ministers and State Secretaries [were] plagued by war worries, and [had] no mind to [deal with] a feeble Lever-Henkel question.’77 Meanwhile, Posse covered himself against Lüps at the Four-Year Plan when he wrote simultaneously to Backe and Reichart, and proposed co-operation between Henkel and Unilever instead of unnecessary competition between the two and that negotiations be started for an agreement about the European market.78 Posse assessed Lüps’ historical treatise about Unilever nonetheless as being completely useless for further discussions; Henkel was portrayed as a spic-and-span angel (‘ein reingewaschner Engel’), whereas Unilever was depicted as a shit-covered devil (‘ein mit Dreck beworfener Teufel’). According to Posse, Unilever’s senior director Heinrich Schicht had disproved Lüps’ views several times as ‘completely nonsensical and unfair’.79 Inside Henkel, however, things were changing at the end of 1941. In Paris two Henkel directors, Otto Pfaff and Heinrich Bertsch, informed Dr Matzke (Unilever’s administrator in France) that they were interested in reaching an agreement with Unilever and that they would put forward constructive proposals. Pfaff stated that he would make efforts to change Lüps’ tune.80 In addition, ‘he believed, and the Gentlemen in Düsseldorf [the Henkel headquarters] likewise, that the common enemy of Henkel and Lever was the I.G. [Farben]; instead of fighting each other, one should pack together against I.G’.81 Thereupon Matzke advised Unilever not to take the initiative and wait for things to come. ‘Especially the short answers of the Reichs Commissioner to the long Henkel memoranda have worked favourably for us. The moment for an

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intervention by State Secretary Backe [had] not yet come.’82 Lüps’ overthrow, however, made Backe’s intervention superfluous. The Henkel family dismissed Lüps from the Board as his megalomania and objectionable behaviour proved more and more of a danger to the company. On the way from Düsseldorf to Berlin, where he wanted to obtain an intervention from his uncle Göring, he was killed in a car accident on 16 April 1942.83 Jost Henkel, Hugo Henkel’s eldest son, succeeded him in July 1942; throughout the rest of the war Henkel refrained from attacks on Unilever. The last attack on Unilever’s business conglomerate came from Reichswerke ‘Hermann Göring’. On July 1942 the Reichs Marshal ordered that Unilever’s Elbe inland shipping business had to be taken out of the Unilever group to be incorporated in Göring’s shipping company, led by Göring’s henchman Rudolf Diels.84 After Reichs Commissioner Posse and Heinrich Schicht had protested in vain for a year against the forced sale of the Elbe shipping interests, eight companies were sold, whole or in part, to Reichswerke in September 1943.85 The total nominal value of the shares had amounted to RM5.5 million. However, Heinrich Schicht stated after the war that Reichswerke had paid a multiple of that amount.86 It was, however, most unlikely nonetheless that Reichswerke would have paid too much for the shipping companies, because Hendriks was prepared to sell at the nominal value as he did not want to attract Göring’s animosity.87 Besides, Unilever had already decided to sell this loss-making branch of industry – over the first half year of 1942 it had made a loss of RM0.8 million.88 Eventually, Reichswerke paid a little bit more than the nominal value, RM7.4 million.89 In addition, Unilever maintained Elbe Schiffahrt, a shipping agency just involved with traffic around Hamburg, a rather visionary decision, considering the outcome of the war.90 Most activities of the other Elbe shipping companies had been involved with transport to Aussig (Usti Nad Labem), which was situated in the Soviet occupation zone after the war. In the same period when Göring went after these inland-shipping interests he aimed at the acquisition of Unilever’s whaling company Deutsche Walfang Gesellschaft ‘Unitas’.91 Out of five German whaling fleets and two Norwegian fleets that had been active before the war, Unitas had been the most important company. Its mother ship, also called Unitas, with its 27,600 dead-weight capacity (BRT), had been the largest whaling ship in Germany and had been equipped with the state-of-the-art technology. Since the beginning of the war German whaling, however, had been discontinued. The German navy had sequestrated Unitas’ mother ship and its eight catchers and had used them to store drinking water supplies since then. A fixed rent was paid to the Margarine Verkaufs Union as the owners of Unitas. In July 1942 the Reichs Marshal ordered that Unitas should come under the General Inspector for Ocean Shipping, Captain Christiansen. Nevertheless, the Four-Year Plan, Section Nourishment were puzzled about the motives for the appointment of Christiansen, who happened to be also the director of WalfangKontor GmbH in Hamburg. Christiansen was a competitor and, simultaneously, an interested party, because Unitas owned 33 per cent of Walfang-Kontor.

A Reichs Commissioner, 1941–1945 119 Therefore the Section Nourishment officials wondered whether Göring’s appointment was just an administrative measure or also a removal of Unilever’s capital from Unitas?92 Was it the beginning of an acquisition by a competitor (Walfang-Kontor)? Or was it a plan to use the mother ship for ocean shipping whilst these ships were being used by the navy? The Section Nourishment, in line with State Secretary Backe, nonetheless took the view that a secret supplement to the assignment to a Reichs Commissioner for the Unilever group in June 1941 had been univocal about the role of its competitors: Basically, the Unilever group should not be broken up into medium-sized or small businesses or be nationalised. According to the Reichs Marshal’s will, competitive firms, like for example Henkel, IG Farben or other large firms, should not acquire parts of or a participation in the Concern. (. . .) In the event that also a take-over purchase of Unitas is planned (e.g. Hermann-Göring-Schiffahrtsbetriebe), this principle would be broken with.93 Section Nourishment was clearly opposed to Reichswerke’s concealed acquisition of Unitas. In the same document, dated 5 August 1942, Dr Wolf (economic adviser to Hamburg’s Governor Kaufmann, one of Unilever’s worst enemies and a Göring protégé) was quoted in favour of Backe’s position: ‘Economic adviser [Gauwirtschaftsberater] Dr Wolf (Hamburg) takes the same view as State Secretary Backe, that during the war the concern’s structure should not be changed.’94 These words were indeed used by Dr Wolf in January 1942, according to the minutes of the first meeting of the Advisory Board (Arbeitsausschuss) to Reichs Commissioner Posse, but he had used others as well. Wolf had also said that he resisted ‘attempts to strengthen the Concern inside Germany even more, because this [would] raise political objections’. In addition, he had stated that ‘changes inside the Concern [had] to be discussed in the Advisory Board’.95 Wolf thus had not agreed with Backe at all. On the contrary, between the lines he had threatened those officials who were too much in favour of Unilever with the intervention of the Nazi Party, of which he was a clear representative. Besides, changes inside Unilever were possible, as long as they were discussed in the Advisory Board, according to Wolf. In response Posse had reacted furiously: ‘he had been able to withstand those many vultures, who all wanted to cut a piece of this cake’. In January 1942 Wolf had tasted defeat; six months later his words were shrewdly distorted. In August 1942 the officials of the Section Nourishment brought forward another argument against Reichswerke’s acquisition attempts. The removal of Unitas from Unilever would mean that in the future other interest groups would be involved with the raw-materials supply of the oils and fats industry, while it was planned to transform Unilever into a syndicate for the entire European oils and fats industry. The entry of these new groups would impede or even prevent the formation of this planned syndicate.96

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In conclusion, Göring or businessmen who appealed to the Reichs Marshal, did not succeed in implementing the forced acquisition of Germany’s largest whaling company, because it created too many contradictions within the Reich’s policy in relation to Unilever. Although Reichswerke successfully acquired the major part of Unilever’s inland shipping interests, in fact because Unilever and the Reichs Commissioner accepted this for strategic reasons, Reichswerke failed completely in the case of Unitas. In 1942–1943 Göring was defeated by his own orders from 1941. Moreover, Backe and other Four-Year Plan officials frustrated Göring’s plans, which had been inconceivable a year before. By now Hitler preferred the pragmatism and the efficiency of technocrats like Backe and Speer above the Nazi favouritism of Göring’s clique. That is not say that Backe, who had meanwhile become the most powerful man in the field of nourishment, showed much sympathy for the Unilever Group. Following severe food-ration cuts for the German population Hitler had dismissed, by way of exception, his Minister of Food and Agriculture, Walther Darré, in the spring of 1942.97 Backe’s callous pragmatism and efficiency was preferred by Hitler to Darré’s ideological policies.98 Because he was also an expert on Russian affairs, he was appointed as Darré’s successor in May 1942, responsible for organising the German food sector for the war against the Soviet Union. Moreover, Backe was involved in the execution of the Hunger Plan, i.e. the project to starve the population of the General Government and the former Soviet Union. As a senior SS member he was dedicated, and supported by the most radical elements in the Nazi regime, to securing the German food supply. The Hunger Plan was closely related to the Nazi programme of racial genocide.99

NV’s new organisation By 1942 Unilever’s continental corporate governance was divided into three power bases, which would not basically change until the end of the war. In general, companies in Western Europe and the Nordic countries (except for Sweden) were controlled by Rotterdam, while companies in Greater Germany and (South) Eastern Europe, the former Schicht countries, were managed almost completely from Berlin, and companies in neutral countries, like Switzerland and Sweden, were directed (indirectly) from London. Since Posse’s appointment, however, there was business contact, at least to some extent, between these various centres. Through Posse and Modest, Rotterdam secured its influence over major decisions, as the failure of Reichswerke’s acquisition attempts clearly demonstrated. Simultaneously, there was a struggle for power in Unilever NV’s Board in this period. The German managers of NV, Heinrich Schicht, Franz Schicht and Carl Santkin, all worked for the German cause, at least that is what they pretended. It appeared, however, that the Schichts acted (also) out of self-interest, which was to get a stronger hold over continental Unilever. Santkin was a separate case: he had earned quick promotion despite a lack of good qualities, due to

A Reichs Commissioner, 1941–1945 121 his Nazi leanings. The Dutch directors Hendriks and De Baat tried to manage or better rescue, as far as possible, Unilever’s business on the continent in the general Unilever interest. Rudolf Jurgens’ role during the war is not entirely clear. Although he was the best-paid member of NV’s Board he was not pulling the strings in Rotterdam, nor did he have a seat on the Board in Berlin.100 As a major shareholder, he owned 2.5 million Unilever shares, and being of a pensionable age, he might as well have remained inactive during the war.101 As a result, his membership may have been only a matter of form.102 During 1942, the German state endeavoured to move Unilever NV’s headquarters from Rotterdam to the new headquarters of the Margarine Verkaufs Union (MVU) at the Hohenzollerndamm in Berlin, which was still under construction. ‘The Reichs Commissioner’s most important target is the gradual relocation of Unilever’s centre to Germany, to have Continental Europe in control of Germany’, according to the first meeting of the Reichs Commissioner’s Advisory Committee (Arbeitsausschuss).103 The relocation, however, was highly unpractical. As a result of the war construction activities at the Hohenzollerndamm had come to a halt; MVU staff still only occupied part of the building. In April 1942 Posse contacted the military authorities in Berlin to obtain an exceptional construction permit, but to no avail.104 In April 1942 Heinrich Schicht nonetheless established a Board for Unilever’s headquarters in Greater Germany, which he abbreviated to H.G.L. (Hauptgeschäftsleitung des Unilevers-Konzerns in Grossdeutschland), situated at the Hohenzollerndam 46/47, Berlin-Grünewald.105 The Board only consisted of German former members of the Margarine Verkaufs Union. As a result, nothing had changed so far; the existing situation had merely been confirmed. As Berlin became a main target for Allied bombing campaigns, Germany’s capital was disqualified as an alternative for Rotterdam as Unilever’s headquarters. In August 1943 HGL decided to relocate its own head office to the Milka margarine plant in Pratau near Wittenberg. Heinrich Schicht retreated to Aussig (Usti Nad Labem) in Sudetenland, while Franz Schicht became Business Leader (Hauptbetriebsführer) in Germany. Heinrich carried all major documents of Unilever’s subsidiaries in Germany to safety, as he insisted in his own defence after the war. It is more likely, however, that the Schichts had welcomed Unilever’s relocation during the war and that they had tried to usurp Unilever in Greater Germany and the occupied territories. Next to practical arguments, the German State, or at least these conflicting agencies, had other reasons why Unilever should not be transformed into a German company overnight. Contrary to Germany’s treatment of Jewish property and the genocide it committed on Jews, Gypsies and Slav peoples, its treatment of Western Allies’ property was generally according to international law. In addition, in the 1942–1943 period several documents of the German government agencies still anticipated a coming peace settlement with Britain. In May 1942 accountant Cantrup, accordingly, wrote a memorandum about ‘Unilever’s New Organisation’, for which he suggested two names: Deutsche Unilever A.G. or Kontinentale Margarine- u. Seife-Union A.G.106 In the

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memorandum he addressed many complicated legal questions and, in addition, formulated some answers too. He treated the question, for example, of how and when the 2.4 million nominative Unilever shares (Special Ordinary shares), half of which were placed with Overseas Holding Ltd in Durban and the other half with United Holding Ltd in London, could be transferred to the new German parent company. Another question he raised was whether the sequestration of NV Elma as enemy property would be enough to acquire the voting rights held by this company. At the beginning of the war the holders of the priority shares (Special Ordinary shares 1–2,400) had handed over their voting right to NV Elma to make an election of Unilever NV’s Board possible. Furthermore, he pointed out that, before the war, the centre of the Unilever group had been in London. As a result, after the beginning of the war Unilever NV in Rotterdam had lost its influence over other overseas companies, especially the rawmaterials companies. The question therefore was whether it would be prudent to operate the new German Unilever independently from London after the war. At last Cantrup addressed the issue – an essential one of course – of how and when the new German parent company could acquire Unilever NV’s share capital owned by the general public, mainly in the Netherlands. Cantrup put forward some proposals. First, sequestrated Jewish property in the occupied countries, in particular the Netherlands, could be transferred to the German parent company. For example, the large quantity of Unilever shares which had been handed in to Lippman, Rosenthal & Co in Amsterdam and had not yet been sold on the stock exchange could be used for this purpose. Second, 53 per cent of Unilever’s share capital, which amounted to ƒ164 million, was administered by a trust office in Amsterdam, N.V. Nederlandsch Administratie- en Trustkantoor. Because the office managed more than half of Unilever’s issued share capital, the delivery of these shares after the signing of a peace treaty with Britain and the Netherlands would be the appropriate channel for the new German parent to acquire a controlling interest in the company.107 Although Cantrup formulated some solutions he also concluded that a planned transformation of the Anglo-Dutch Unilever into a German parent company would be rather complicated and only feasible after the signing of a peace treaty with Britain, in the course of which Germany had to dictate the peace. The Advisory Board to the Reichs Commissioner evidently took his advice for granted. More urgent questions had to be solved in the course of 1942. The raw-materials position of the German Reich had become critical by then. By February 1943 not much had changed, though the Gestapo still complained about Unilever’s corporate governance.108 According to C.L. Sebastian, deputy of the SS headquarters (Reichsicherheits-Hauptamt) in the Advisory Board (Beirat), the Unilever group was only a unity to the extent that it was controlled by Reichs Commissioner Posse. The management, however, had not been united yet. The so-called Schicht countries were managed from Berlin, but the rest of continental Europe was partly directed from Holland and for the other part from Berlin. The management of the other countries from Berlin did not

A Reichs Commissioner, 1941–1945 123 converge in the top with that of the Schicht countries, but was run independently from it. What was needed, according to the Gestapo man, was the establishment of an intelligence office (Nachrichtendienst) in Rotterdam or Berlin. Thereupon, Sebastian was commissioned by SS-Standartenführer Schellenberg to study Unilever’s complex organisation in the Netherlands, Belgium and France and to meet the executive staff. The SS bureaucrat would not learn much about Unilever’s complex structure – a whole team of business analysts and accountants had been doing research since 1940. Sebastian’s note, nevertheless, shows two things: first, since 1942 the attempts to relocate Unilever to Berlin had failed, and second, as from 1943 the Gestapo tried to get a stronger grip on Unilever. The Gestapo, however, did not succeed. Within a year the situation in the Third Reich as a result of the war had completely radicalised and the Gestapo returned to Unilever’s headquarters; this time to remove the complete Dutch Board. On 7 November 1944 Hendriks and De Baat, as well as seven other directors of operating companies in the Netherlands, were brought to Berlin under the pretext of a meeting.109 Having arrived in Berlin they were held hostage in the Hotel Adlon and placed under Gestapo surveillance. The taking of hostages by the Germans during the occupation of the Netherlands was no exception. But why they were taken at that point in time is not clear. It could have been a response to the Allies’ advance and the growing Dutch resistance; in September 1944 a general railway strike had broken out. It is also possible, however, that these hostages, as representatives of an Anglo-Dutch multinational, were taken as an object of exchange in the future. Whatever the case may be, Posse and others in the economic establishment were helpful in getting Hendriks and the other directors from Berlin to the countryside. This was a much safer place than Germany’s most luxurious hotel situated on Unter den Linden in Berlin at the end of 1944.110 For the rest of the war Dutch board members Hendriks and the Baat lived on the Ahrensberg estate in Mecklenburg of Hugo Homann, director of the Fritz Homann AG margarine factory, in which Unilever had held 50 per cent of the equity since 1929.111 Homann had good contacts with the Nazi regime, and he had used these to save Hendriks’ youngest daughter, who had been a member of the Dutch resistance, from being sent to a concentration camp in 1941.112 Since then she had also lived on Homann’s estate. At the end of November 1944 Hendriks, after being reunited with his daughter, had granted mandates (through Posse) to senior staff in the headquarters in Rotterdam to continue the business in the Netherlands.113 Until the liberation of the Netherlands a committee (Comité-Vergadering), which consisted of senior Unilever staff, ran Unilever’s headquarters in Rotterdam. In May 1945 Hendriks and De Baat and the other managers were repatriated to the Netherlands. Hendriks died a year later. Even a stay in a Swiss sanatorium could not bring restore him to health; war stress had exhausted the most loyal Unilever manager completely, everyone agreed at his grave. Although an in memoriam is not usually the most appropriate historical source, the following quote gives a concise summary of Hendriks’ strategy during the war.

124

A Reichs Commissioner, 1941–1945 Although outwardly always accommodating and apparently willing to comply with the demands made by the Germans, he was nonetheless able in his own special way to ensure that in almost all cases either nothing at all came of the proposed measures or that they were only implemented in a watered-down form. His motto was: I never say ‘no’, but I slow things down and continue to do so for as much and as long as I can. In this respect his pronounced sense of reality always indicated to him with admirable certainty how far he could ultimately go.114

Raw-materials crisis In the autumn of 1941 Unilever NV ran into significant shortages of oils and fats in the Netherlands and the Reich. In the first year of the war Unilever had continued production in Western Europe using the stocks which it had built up in the Netherlands before the war; however, from the second half of 1941 serious problems had emerged. Consequently, in April 1942 Posse reported: ‘With respect to the German fat position the Concern has been ordered to be involved with the purchase of additional oilseeds and oil from abroad.’115 Since the Allied blockade of Germany and the German occupation of Western Europe Vichy France had become the only possible route for importing raw materials into Europe. Until the Allied occupation of North Africa in December 1942 French Unilever companies were supplied unexpectedly well with oils and fats from the French colonies across the Mediterranean.116 As a result, from June to August 1942 French Unilever companies were ordered to send 400 tons of oils and fats to Germany.117 In addition, the Reichs Commissioner’s deputy in France, Dr Matzke, bought over 1,000 tons on the black market (S-Markt), through a German cloak in France, Unico, on behalf of the German fat supply.118 Negotiations were carried on about another 700 tons of Corsican olive oil and 1,200 tons of whale oil from the Azores.119 Nevertheless, these French deliveries, albeit small compared with German needs, were only short lived and ended immediately after the Allied landings in Casablanca and Algiers. It is striking, though, that as a result of these severe raw-materials shortages the interests of the German Reich and the continental company converged at some time during 1942. Without oils and fats Unilever’s margarine production would come to a halt, as a result of which (more) plants would be shut down and capital goods and labour possibly taken away from the Netherlands to Germany, Ukraine or Russia. The German Reich, on the other hand, was also very much aware of the imminent danger of ever-smaller rations of oils and fats. As a result the Reichs Commissioner’s reports changed in terms of content in the course of 1942. In 1941 Posse had discussed mainly institutional matters. From 1942 until 1944, however, these reports read like business accounts, with a strong emphasis on the raw-materials issue. Continental Unilever, with the help of Reichs Commissioner Posse and other German government agencies, searched for various alternatives in the 1942–1944 period.

A Reichs Commissioner, 1941–1945 125 The first, and probably most important, alternative during the war was the stimulation of domestic cultivation of oil-bearing seed. Since 1941 the Dutch Dairy Central (NZC), section Margarine, Fats and Oils (MVO), had encouraged Dutch farmers to cultivate oil bearing seed (rape seed and poppy seed) by paying a premium. As a result, the area under cultivation increased tremendously during the war. By 1943 and 1944 over 50,000 hectares of domestic oilseed was cultivated in the Netherlands (see Table 6.1). The explosive growth in cultivation also yielded a rich harvest in 1943 because of the mild winter of 1942–1943 and the beautiful spring. The yield of an average hectare was about two tons of seed, which amounted to 800 kg of oil, according to the Reichs Commissioner’s deputy in the Netherlands, Modest.120 The total yield of domestic oil-bearing seed as a result amounted to 100,000 tons of seed or 45,000 tons of oil (which would make about 50,000 tons of margarine), about half of the prewar inland consumption of edible fats. The other half had to be covered by domestic butter production (about 80,000 tons). If one adds 13,000 tons of animal fats, then the total fat supply in 1943 amounted to 143,000 tons as compared with 111,000 tons in 1942. Although Modest’s estimates were rough and rather optimistic, these figures show a clear improvement and the importance of domestic produce for Dutch food supplies during 1943. In addition, Dutch rations in 1943 amounted to 250 g of butter or margarine (optional) for each person every ten days, which was about half of the Dutch pre-war consumption – low compared with 1939, but not nearly as dramatic as it could have been without domestic cultivation. In 1944 the yield of domestic seed amounted to between 70,000 and 80,000 tons. In April the Zwijndrecht, Twijnstra and Calvé-Delft oil mills were closed when all seed had been processed and all the reserves exhausted. As from May 1944, the Dutch population lived on butter, whose average production per week amounted to 1,500 tons compared with total ration of 1,300 tons weekly. As a result, until the ‘Hunger Winter’ of 1944 there was theoretically enough fat in the Netherlands. In ‘Greater Germany’ the total area of land used for oil-bearing seed also increased spectacularly with a record surface of 250,000 hectares yielding Table 6.1 Area cultivated with rape seed and grey poppy seed, and total domestic produce of oils and fats in the Netherlands, 1939–1945 (in hectares) Year

Rape seed

Poppy seed

Total

1939 1940 1941 1942 1943 1944 1945

388 1,780 3,379 4,036 48,509 49,459 34,686

2,741 1,228 41 6,602 7,827 6,104 2,433

3,129 3,008 3,420 10,638 56,336 55,563 37,119

Source: G.M.T. Trienekens, Tussen ons Volk en de Honger. De Voedselvoorziening 1940–1945 (Utrecht: Matrijs, 1985), 448–449.

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466,800 tons of seed in 1943, which would have resulted in around 2.5 kg of oil for every German that year (see Table 6.2). Most of the oil was used for the production of margarine, some was used in the form of oil. The remainder of the German edible fat supply had to come from butter, bacon and lard. Since 1940 Backe’s Ministry of Agriculture and Food had paid a premium of RM40 for each ton of seed, in addition to a fixed price of RM400 per ton. From 1941 until 1947 the government paid a premium of RM100 to the German farmer for each ton of inland produce.121 The increase in the yield was stunning, but the ratio between the area under cultivation and produce was not as spectacular as Modest had estimated in the Dutch case (Modest’s estimates had indeed been too optimistic in April 1943). A second alternative was the import of sunflower seed for Dutch and German Unilever oil mills from South East Europe, in particular Romania. Trade with South East Europe, however, was complicated by exchange controls; payments were made by means of a clearing system.122 Already before 1939 Romania had had a strong bargaining advantage towards the German Reich, because Germany was largely dependent on imports of Romanian mineral oil. During the war Germany’s dependency on Romania increased further. Meanwhile, German–Romanian relations had improved after the signing of a trade agreement in 1939. Germany would sell agricultural equipment in exchange for Romanian oil. At the end of 1940, after Marshal Antonescu had established a fascist government, a ten-year plan had been agreed upon, in which Germany would provide credit for Romania’s industrialisation.123 In the second half of 1942, when the raw-materials supplies deteriorated more and more, Göring’s deputy for the Netherlands, Belgium and France, Oberst Veltjens, came up with the idea that Unilever should get involved in the German–Romanian trade.124 The swap of mineral oil for agricultural machinery could also be done with non-mineral oil, or oil-bearing seeds, Veltjens must have reasoned. Unilever thereupon established two trading companies, one in Germany and the other in the Netherlands, which were legally independent of Unilever NV. In February 1943 the company Omega N.V. HandelsmaatschapTable 6.2 Area cultivated with oil-bearing seed and total home produce in ‘Greater Germany’, 1939–1945 Year

Acreage (’000 hectares)

Home produce (’000 metric tons)

1939 1940 1941 1942 1943 1944 1945

44 50 124 77 248 304 253

76 69 221 104 467 436 254

Source: UAR, Internal Unilever publications: W. Schüttauf, Die Geschichte der Margarine-Union 1929–1972 (U.P. 5872), 28.

A Reichs Commissioner, 1941–1945 127 pij, Rotterdam was established, which was a full subsidiary of Impex, Internationale Warenhandelsgesellschaft. m.b.H., in Berlin. The aim of both companies was barter trade in commodities: Omega and Impex had to buy ‘compensation goods’, like farming and dairy machinery, and swap these for oils and fats. Major Weyersberg, who was working for the German-occupation authorities in the Hague (Rüstungsinspektion) and had not been a Unilever man before, was made director of both companies. He was advised by Kretschmar, Unilever’s raw-materials expert in the Netherlands.125 In the early spring of 1943 they were to visit Spain, Portugal, Bulgaria, Greece, Turkey and Romania. The latter country, however, was the most eligible candidate. According to the Romanian buyers’ monopolist Solagra a total yield between 325,000 and 425,000 tons was expected in 1943, of which Romania itself needed at least 260,000 tons, perhaps more. The larger part of the yield had been reserved for Germany (90,000 tons) and Italy (20,000 tons).126 Therefore, if the yield proved high enough, Omega could buy between 3,000 and 5,000 tons in Romania to supply the Netherlands. These purchases, however, could only be done through the Romanian government agencies. Illegal export, through the black market (as had been the case in France), was made a capital offence by a direct order of Marshal Antonescu.127 However, the purchase of the compensation goods in the Netherlands was not very successful; tractors, milking machines and similar equipment were also scarce in the Netherlands at the time. German government agencies in the Netherlands therefore obstructed the purchase of these goods. In conclusion, the Balkans adventure did not work out successfully for the Unilever factories in the Netherlands. But, on the other hand, it did help the German supply, at least in 1943. Although it is not clear to what extent Impex in Germany was able to send compensation goods to Romania, the reserved 90,000 tons arrived in Germany in September 1943.128 A third alternative was sheer robbery in the Soviet Union by the ZentralHandelsgesellschaft Ost. At the end of 1942 Reichs Commissioner Posse reported that the Margarine Verkaufs Union had been deployed in the East (Osteinsatz): Russia, Ukraine and Byelorussia. The German Unilever holding company MVU had taken over the Öl- und Fettkombinat in Krasnodar and SoloFeinfrost had taken over Adygeisches Kombinat (canned foods), also in Krasnodar. Sunlicht AG was involved in the acquisition of a soap factory in Minsk (Byelorussia), which had been put into operation in October 1942 and produced five tons of soap per day.129 The east deployment was an important example of the autonomy of Unilever’s German management in Berlin (HGL), because the decision was clearly taken by the Berlin Board together with Posse.130 The deployment in Russia, however, was fairly short lived. On 2 February 1943 the Red Army won an all-important victory at Stalingrad after months of cataclysmic battle. Although Stalingrad was not decisive on its own, it marked the beginning of decisive Soviet victories in 1943. The German army was pushed back swiftly from the Baltic to the Black Sea.131 At the end of January 1943 the Red Army had launched operation Gallop with the object of driving the

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German armies from the industrial Donetz basin further back into the Ukraine. As a result, Krasnodar, which is located in the south of Russia near the Black Sea, had to be evacuated precipitately by the German Army, including the large margarine and canned-foods factories. Staff from the Krasnodar plants were moved to the Ukraine with a view to employing them in the Ukraine Milch- und Fettzentrale GmbH.132 In the slipstream of the German Armies’ retreat large quantities of sunflower seed suddenly appeared in the Reichs Commissioner’s reports between April and June 1943. About ‘300,000 tons of Russian sunflower seed from the yield of 1942 have been delivered to the Concern plants’, Posse reported.133 In September 1943 the total ‘delivery’ of sunflower seed from ‘the occupied East territories’ to Germany had increased to 440,000 tons – four and a half times the total Dutch domestic yield of oil-bearing seed in 1943. As a result, the total quantity of oil-bearing seed in Germany from July 1942 to July 1943 amounted to 759,000 tons; for the next allocation year 1943–1944 an amount of 900,000 tons was even expected.134 These amounts were so large that plans were made to deploy Dutch, Danish and Belgian oil mills. The military reality nonetheless soon crushed these optimistic plans. The onrushing Red Army liberated the Ukraine at the end of 1943 and advanced swiftly towards Byelorussia. In 1944 Germany was therefore thrown upon its own resources; instead of deployment of Unilever’s oil mills in the Netherlands, Denmark and Belgium Unilever’s oil mills in Germany were closed down.

Mersol – a synthetic solution The most significant change in the soap industry in the 1930s had been the appearance of synthetic detergents, largely in the form of soap powders.135 In the early 1930s Unilever had been working on a process which was developed by IG Farben. In 1933 an agreement between Unilever and IG had been made whereby IG would deliver the basic materials (Igpon) derived from coal to Unilever.136 The latter had the exclusive rights for the world-wide marketing of the so-called Iglever products. In this respect Unilever had not been an exception. In the 1930s IG Farben had dominated the world chemicals business and had fortified its commercial leadership by constructing over 2,000 cartels whose members included the largest industrial companies in the world such as Standard Oil (New Jersey), Etablissements Kuhlmann (France), Montecatini (Italy), Imperial Chemical Industries (Britain), Mitsui (Japan), and Dow Chemical Company and E.I. du Pont (United States).137 Even so, by 1933 IG Farben was not yet the company associated with the Nuremberg trials of 1947–1948. On the contrary, IG Farben’s chairman, Carl Bosch, had been the most vocal anti-Nazi in Germany’s business community and as one of Germany’s largest multinationals IG had been strongly opposed to Hitler’s narrow nationalist economic views.138 Besides, in the early days of the Third Reich the company had been classified by the Nazis as ‘non-Aryan’ for its large number of Jewish directors and scientists.139 It was only later, after the

A Reichs Commissioner, 1941–1945 129 introduction of Göring’s Four-Year Plan in 1936, that the company got largely involved with the war planning of Nazi Germany. Autarkic policy had seriously endangered the exports of IG and driven the company into the hands of the Nazis. In the company’s own interest IG’s senior managers were more and more actively participating in the economic policy of the regime.140 Carl Krauch, one of IG’s top managers, had become (unpaid) head of Göring’s new Raw Materials Office, which would become the central office in the new Four-Year Plan organisation in due course.141 By 1943 Germany’s warfare relied heavily on IG’s production of, for example, synthetic rubber (buna), synthetic gasoline, methanol, lubricants, poison gas, alloys and explosives. Unilever’s competitors Henkel in Germany and Procter & Gamble in the United States, had been also active in the field of synthetic detergents. In Germany Böhme Fettchemie AG, a Henkel subsidiary since 1935, had marketed its discovery under the name ‘Gardinol’ for the textile industry and ‘Fewa’ for household fine washing.142 This process was licensed to Du Pont and Procter & Gamble in the United States. In 1940 the General Aniline and Film Corporation, a Swiss IG Farben subsidiary, had acquired the rights to the American patents held by Böhme Fettchemie. In Germany Henkel would remain the owner of the Gardinol patent. Ten years earlier, in 1931, IG had started the production of Igpon in the United States at the General Aniline and Film Corporation plant at Linden, New York. As a result, at the beginning of the Second World War IG Farben controlled the market for synthetic detergents in the world. Before the war the production of synthetic detergents had been a relatively costly process, mainly based on fats and oils. Therefore output had remained small, and was concentrated in the United States with its big cities in hard-water areas and in Germany where natural fats were scarce as a result of the autarkic policy and foreign-currency restrictions in the 1930s. Nevertheless, when war broke out on the European continent and raw materials became scarce within less than a year, synthetic detergents from non-fatty raw materials offered a solution for the continental’s soap production, which could no longer be based on natural oils and fats. In 1937 IG Farben had introduced a synthetic detergent from non-fatty raw materials, called ‘Igepal’, though this had not been very successful. After the outbreak of war in Europe IG Farben developed a new product called ‘Mersolates’, which were used to replace soap for laundry and other purposes.143 They were based on ‘Mersol D’, used as substitute for natural fatty acids, which was a by-product of IG Farben’s synthetic gasoline production derived from lignite. Because synthetic gasoline production increased during the war, even larger quantities of Mersol were produced. The Reich Office for Industrial Fats and Detergents (Reichsstelle industrielle Fette und Waschmittel) in Berlin supported the accelerated introduction of the synthetic raw material to the German soap industry, because it took the strain off the edible-fats industry.144 In addition, it stimulated experiments for new uses in the soap industry. One of the main problems, however, was the storage of this aggressive acidic substitute, which corroded ordinary steel storage tanks. Therefore, acid-resistant storage equipment

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was built, which was of course costly and could therefore only be afforded by the larger soap companies in Germany, like Unilever and Henkel. IG Farben’s average output of Mersol D amounted to 80,000 tons annually during the war years, which was equivalent to 160,000 tons of soap of pre-war quality (about 25 per cent of the pre-war German soap market. During the war, however, the method of soap manufacturing changed dramatically. On the European continent soap (powder) was made with ever smaller quantities of fatty acids or its synthetic substitute Mersol. As a result, the 80,000 tons of Mersol covered a much larger proportion of (Greater) Germany’s detergent requirements.145 On the basis of the Iglever agreement of 1933, which had been renewed in 1935 and 1938, IG Farben nonetheless was not allowed to deliver synthetic raw material to other soap manufacturers, like Henkel. Unilever was the only legitimate customer of Mersol D. IG Farben, however, used its extensive political contacts and suspended the Iglever agreement unilaterally after the beginning of the war in September 1939.146 As a result, it delivered Mersol D not only to Unilever’s soap companies in Greater Germany but also to any manufacturer who was willing to pay IG’s price. Although IG Farben never formally confirmed this during the war, representatives of the company told Carl Santkin and Heinrich Schicht in November 1941 that the Iglever agreement in their view had become invalid after the beginning of the war. Thereupon De Baat sent a legal memorandum to Modest, in which he stated that although the agreement with Unilever Limited in Britain had been logically suspended during the war, it did not mean that the agreement with Unilever NV in Rotterdam had become null and void. In addition, De Baat explained to Modest that it would not be wise to lodge an appeal in writing for such time as IG had not notified its legal views. Heinrich Schicht and Santkin would communicate Unilever’s views vocally during their coming meeting with IG.147 Clearly, IG Farben was too powerful and too close to the Nazi Party to resist. It is striking that even Reichs Commissioner Posse and his deputy Modest did not even report the IG affair. Instead of opposing IG Farben, Posse and Modest made out a case for Unilever’s soap companies in the Netherlands. At the beginning of 1942 the raw-materials position in the Netherlands had become so bad that a concentration plan was made by the Dutch Government Bureaux for Chemical Products: 132 out of 149 soap companies had to be closed down from June 1942.148 In connection with the German rationalisation policy the Dutch soap industry had to be concentrated within 17 larger companies, which in fact had produced 80 per cent of all Dutch soap before the war. Unilever owned four large plants in the Netherlands of which the soft soap factory, Zachte Zeep Fabrieken Maarssen, was planned to be closed down in the absence of its main raw material, linseed oil.149 At the end of 1941 Modest and other German officials in the Netherlands, however, had started negotiations in Berlin for the delivery of Mersol D to the Netherlands, simultaneously with Unilever’s negotiations (Heinrich Schicht and Santkin) with the only provider IG Farben. Unilever’s soft-soap factory would

A Reichs Commissioner, 1941–1945 131 play a major role. This plant was most appropriate for the saponification of Mersol D into Mersolates, which could be used by other plants, Unilever’s and others from the concentration plan, for making soap (powders).150 As from March 1942 Maarssen was amply supplied with Mersol. In 1942 IG’s total delivery amounted to 3,351 tons.151 The next year the supply from Germany even increased; in June 1943 as much as 5,700 tons had already been delivered. And although the transport situation deteriorated in the course of 1943 and 1944, quarterly deliveries (averaging 870 tons) continued until mid-1944, when the Western Allies had invaded France and the Russians stood at the Polish border.152 Despite raw-materials shortages of oils and fats the soap (powder) position in the Netherlands showed a relative improvement after the beginning of imports of Mersol D from Germany in March 1942. Without these, however, Dutch soap production would have come almost to a halt then. After March 1942 the larger part of all soap produced in the Netherlands was based on Mersolates. Table 6.3 also shows an absolute improvement in Dutch per capita consumption of soap in 1943. A few things should be considered, nonetheless. First, the Mersolates were compounded with large quantities of alkali, builders and fillers, in other words, ‘finished products of war quality’, as they were called afterwards.153 Second, although these Mersolates were mainly used to replace soap for laundry and other purposes, it did not mean that they were as good as soap. On the contrary, research was done to determine the harmful effects on fabric.154 Table 6.3 also clearly shows the decreasing fatty acid consumption in the course of the war, which confirms the idea that without Mersol the Dutch soap industry would have collapsed completely, and with it Dutch soap rationing. Unilever’s increased market share in the later war years is easily explained through the execution of the concentration plans by the Dutch and German authorities, by which the small plants were closed down and production was confined to the larger plants. Table 6.3 Per capita consumption of detergents in the Netherlands, and Unilever’s share (in kilograms), 1938–1945 Year

Total detergent consumption*

Fatty acid consumption

Unilever’s share (%)

1939 1940 1941 1942 1943 1944 1945

12.4 8.8 3.0 2.5 3.9 2.6 1.5

5.8 4.2 1.1 0.5 0.4 0.3 0.9

43 42 44 39 46 50 45

Source: UAR, HA 71, Basic Information about the Lever Brother & Unilever Organisation in the Netherlands. Note * Total detergent consumption consisted of toilet and shaving soap, hard soap and flakes, soap and washing powder and soft soap.

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Conclusions Winning on the battlefield and overrunning entire nations turned out to be easier than transforming Unilever’s large organisation into a German syndicate, which would consolidate the continental food and fats industry; the designs of the Four-Year Plan and the Reich Economics Ministry were never realised. At the moment of Reichs Commissioner Posse’s appointment in June 1941 many determining factors were uncertain – first of all the outcome of the war. The future did not look very hopeful for Britain, the Netherlands and the Anglo-Dutch multinational Unilever. It was only a question of time before continental Unilever would become completely Germanised, with its headquarters in Berlin, operating as the central nervous system of the European oils and fats economy. Nevertheless, things turned out differently for various reasons. First, the aims of the Third Reich concerning Unilever were not particularly clear and were also contradictory. In June 1941 State Secretary Backe, who was becoming increasingly powerful at the time, formulated six long-term targets for Reichs Commissioner Posse. Most of these generally formulated tasks, however, proved unworkable to Posse and his deputy in the Netherlands Modest, except for one, i.e. the preservation and protection of Unilever as enemy property. As a result, the appointment of a Reichs Commissioner did not in the end turn out unfavourably for the company; it helped Unilever to defend its business against other state agencies and acquisitive competitors. Unilever’s Jewish staff, however, were not protected by the Reichs Commissioner. On the contrary, Posse played an active role in the ‘Aryanisation’ of the company, and consequently, the removal of all Jewish staff in the Netherlands. Second, the closing of a so called fat gap (der Fettlücke) had been one of the most pressing problems for Greater Germany and one of the main reasons for the appointment of a special Reichs Commissioner for the Unilever Group. In the course of the war, however, the fat gap expanded increasingly. Consequently, Posse was more and more occupied with the short-term aim of rawmaterials acquisition, for which he needed the company’s organisation. Unilever’s management, staff and capital became indispensable to keep the war machine going. Thus to turn Unilever’s corporate structure upside down appeared, at least from a German perspective, to an increasing extent to be blatant self-destruction. Third, within half a year after Posse’s appointment Göring’s power in the German war economy began to decline rapidly. As from February 1942 Speer’s star was rising. He successfully rationalised the German economy according to the needs of a total war. In Speer’s planning system the industry played a much larger role than it had done before; in fact, his new centralising offices were staffed with men from private industry. Against the background of this major institutional change transformation of Unilever’s business on the European continent during the war became highly unlikely, and the Reichs Commissioner’s behaviour towards his subject hardly surprising.

7

London’s calling, 1941–1945

After two years of continuous German triumphs – except for the Battle of Britain – Germany’s position seemed invincible. Although the German advance on Moscow had appeared unstoppable in the autumn of 1941, the severe winter of 1941–1942 marked the beginning of a turning point in the Second World War, when the German forces came to a halt. At the beginning of 1942, however, Britain and its Allies still faced the all but impossible task of defeating the Axis. Despite the United States’ entry into the war in December 1941 an Allied victory was still distant; it was only some time during the period between 1942 and 1944 that the tide started to turn in favour of the Allies.1 This chapter starts with a brief description of the British managed economy to get an impression of the macro-economic setting in the 1941–1945 period. Then Unilever’s changing organisational outlook, as a result of the war circumstances, is explored. Next, Limited’s close relations with the allied governments in London, in particular the Dutch exile government and with the British government, are dealt with. Unilever’s co-operative attitude towards these various governments created much goodwill, which made doing business in Britain much easier than on the European continent. The company was not only directly involved in the British war effort through a glycerine monopoly, but it also placed plants and staff at the government’s disposal. Individual Board members were closely associated with a Dutch Reconstruction Committee in London. In addition, Unilever developed an increasing interest in wider social and economic issues in this period. In 1943 the company published a paper on the problem of unemployment, which showed its changing views on economic policy. The subsequent section deals with Unilever’s industrial conditions in Britain during the 1941–1945 period. It deals with the rationalisation of soap production in Britain and the company’s views on the particular government policy in this sector of industry. In addition, Unilever’s contribution to the partial solution of raw-material shortages in Britain is explored. During the war the company played a key role in the development of synthetic detergents. Last, Unilever’s acquisition of Frosted Foods in 1943 is discussed. Although the acquisition did not result in an immense growth in the production of frozen foods in Britain at the time – on the continent frozen foods had shown an explosive growth during the war – it anticipated one of the most promising innovations after the war.

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A managed economy In the spring of 1941 British economic policy changed as a result of four major developments.2 First, in March the United States passed the Lend-Lease Act, which removed the financial constraint that required Britain to pay cash for American goods. From the summer of 1940, when the Phoney War had turned into a real war, it had become clear that Britain depended heavily upon the United States for its survival. In the 1940–1941 period the Board of Trade had given full priority to exports to the United States, because these earned hard currency, which it needed to pay for its imports. The British export drive, however, had become more and more inconsistent with Britain’s needs for its own war production. As a result, the American Lend-Lease aid meant a relaxation of the need to export. In addition, it provided Britain with vital supplies of foodstuffs, aircraft, tanks, munitions and raw materials. Without Lend-Lease the British war economy would have collapsed at some stage in 1942. Second, the lack of manpower became apparent as a major problem of the British war economy in this period, even though Lend-Lease aid did bring some relaxation on the labour market. By the spring of 1941 a large part of the male working population had been absorbed by the armed forces, and so the Board of Trade planned to release labour resources from civilian production and allocate them to essential war production. A concentration programme was launched to save raw materials, factory space and, above all, labour. At the same time a Control of Factory and Storage Premises was established.3 In 1942 the controls over production and supply were substantially extended. In addition, vast numbers of female workers were mobilised.4 Third, as a result of the war British wages were rising, and with them aggregate demand, whilst at the same time aggregate supply was falling because government demand put such a strain on industrial capacity.5 Prices in Britain tended to rise. From the spring of 1941, therefore, the government formulated an anti-inflation policy, which resulted in various actions. John Maynard Keynes was appointed as the main adviser to the Treasury. Under his influence British budgetary policy changed drastically, attempting to close the so-called inflationary gap between aggregate demand and aggregate supply.6 The 1941 Budget increased all kinds of taxation on persons, goods and companies to control the inflationary pressure. Another government action was the extension of rationing to as many essential goods as possible. Clothes rationing, introduced in June 1941, however, was meant to restrain inflation and not so much to ensure fair distribution. Because clothing was an item that had an important weighting in the cost of living index and because its prices had been rising much faster than the subsidised food prices, the Board of Trade used clothes rationing to impose a stricter price control.7 The same argument applied to soap rationing, which was introduced in February 1942 but which was by no means comparable to the severe rationing of soap on the European continent at the time. Fourth, the United States’ entry into the war in December 1941 had initially increased the burden on the British economy at the beginning of 1942. In order

London’s calling, 1941–1945 135 to build up its own military strength the US had diverted resources from LendLease aid to Britain to its own forces. In the course of 1942, however, deliveries from the US to Britain improved rapidly, although vital Atlantic shipping was constantly threatened by German U-boats well into 1943.8 Nonetheless, the United States’ entry into the war was in general one of the major turning points in the Second World War, in particular in relation to the British war economy, it had made everything easier and brought victory closer for the British. In 1942 the Ministry of Production was set up to co-ordinate the actions of all British war departments, especially in their relations with the Americans, and moreover, to co-ordinate some of the joint Anglo-American war production effort.9 Britain had now become a completely managed war economy, even though private industry still played a key role as the next sections will show.

Change of organisational outlook In December 1941 Unilever Limited’s chairman Francis D’Arcy Cooper died. His additional work for the Board of Trade and his mission to the United States a year before had proven too much for someone who had suffered from poor health even before the war.10 D’Arcy Cooper’s death marked the end of an era of Unilever’s centralising policy. The beginning of the war in September 1939 had brought this policy to an abrupt end; however, his demise made an organisational review possible. D’Arcy Cooper’s successor as chairman was Geoffrey Heyworth, who had previously been Unilever’s youngest director of the soap business in Britain. Herbert Davies and Paul Rijkens became vice-chairmen of the Board. Albert van den Bergh and Herbert Robert Greenhalgh had both retired from the post of joint vice-chairman and their Special Committee membership in 1941.11 Lord Leverhulme remained Governor of the Board and a member of the Special Committee. In the 1930s Unilever had rationalised and centralised its organisation. It closed down businesses where necessary, and it amalgamated and centralised the business as far as possible in Europe. Because there had been no single European market, however, it had been impossible to use one business strategy for all countries in Europe. National managements had begun to play a more important role in this period. In response to the beginning of the war between Germany and Britain in September 1939, Unilever had changed its organisation completely. For the first time Unilever’s organisational structure had corresponded to its dual legal structure. At the beginning of the war – after the British imposition of the economic blockade – Unilever’s businesses in Germany and in German-occupied territories were cut off completely from London; national managements had to function virtually by themselves. Simultaneously, the outputs and profits of important soap and edible fats factories in countries such as Canada, Australia, South Africa, India and the United States established new records during the war years due to unrestricted supplies of raw materials and the increased spending power of the overseas population.12 The importance of raw materials from West Africa for the British war effort

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increased the relative weight of Unilever’s trading company UAC. The overseas interests accounted for more than 30 per cent of the combined trading profits during for the year 1941 (by 1945 this contribution would even amount to 44 per cent).13 As a result, the organisation needed a review. In late December 1942 the Board discussed a memorandum on Unilever’s post-war organisation, which had been prepared by its new chairman Geoffrey Heyworth.14 He made two major points: [1.] The setting up of Group Boards would make the Overseas and Continental Committees in London superfluous. The line of contact between a ‘National’ Management would be through the appropriate Group Board; generally speaking National Management would not [have] contact with Headquarters, but there would be no hard and fast rules as to this as in some cases direct contact might be desirable, e.g. on technical subjects. It is the intention, however, that every Group Board should include one highly qualified technician who would see that proper contacts were kept. [2.] Group Boards will keep in close contact between themselves in addition to the periodic contacts they will have when their members pass through different Group areas on their way to and from London. Other contacts will be through visiting Directors of the Parent Company passing through the Group areas.15 One of the major problems, therefore, was how to give the national management the initiative without losing control at the headquarters in London. In this case something could be learned from the experiences of Arthur Hartog, Croudson Barnish and Laurence Heyworth (Geoffrey’s older brother) during their overseas visits since the beginning of the war.16 When in 1940 an invasion of Britain had looked very likely, Arthur Hartog, Laurence Heyworth and Croudson Barnish had taken refuge overseas.17 In the meantime they had visited Unilever companies all over the world, from Boston to Buenos Aires and from Sydney to Durban. Their visits suggested a partial solution to Unilever’s decentralisation problem, i.e. the introduction of a kind of mobile manager. At the end of 1943 a triple programme was worked out. First, an area or group management had to be created to supervise the national management. Second, the service departments in London should be enlarged to assist the group and national managements. Third, a mobile manager (‘contact director’) had to be appointed for every area.18 The tasks of the contact director were, for instance, to assess the Unilever subsidiary in relation to the country, to investigate new products, to inquire into labour relations and to find the right directors for the companies. These mobile managers should not be a kind of auditor who had to report every detail of a subsidiary anywhere in the world. The latter was done by means of quarterly reports that were sent by the companies themselves to Unilever House in London. The contact directors had to be the direct links between London and the self-governing companies in the world and had to

London’s calling, 1941–1945 137 replace the centralised Continental and Overseas Committees. This new organisational outlook shows that the company was trying to get a grip on the complicated business reality of the 1940s. Besides, the war worked here (also) as a catalyst to make the company innovate its complex organisation. At the end of the war Unilever would indeed apply these newly adopted organisation principles.

Relations with the Dutch government in exile Contrary to Unilever’s strained relations with the German government on the European continent, relations with the Dutch exile government in London remained close and co-operative during the rest of the war. That is not to say that Unilever always agreed with the Dutch government in London, although the company always helped their government by all possible means, personally or via Unilever’s organisation; staff and offices were put at the Dutch government’s disposal. In May 1940 Unilever’s subsequent financial director Beyen had become Financial Adviser to the Dutch government in exile, a post that he would continue to hold until 1952 when he became Minister of Foreign Affairs of the Netherlands.19 In 1943 by Dutch government order, he attended the preparatory meetings in London for Bretton Woods, which were chaired by Keynes. And from 1–22 July 1944 he led the Dutch delegation to the United Nations Monetary and Financial Conference held in Bretton Woods in New Hampshire, USA.20 In addition, the Dutch government had appointed Unilever’s chairman Rijkens a member of the Extraordinary Advisory Council (Buitengewone Raad van Advies) to the Dutch government.21 Unilever’s lawyer Polak was appointed an adviser to the Minister of Justice and a member of the Committee Legal Matters in Wartime (Commissie Rechtsverkeer in Oorlogstijd). The Corvo, as it was abbreviated, dealt with legal matters during and after the war. At first it had made proposals to the Dutch government to make multinational business outside the German occupied territories possible. During the war, however, many issues arose due to German (ill-)treatment of Dutch property and Dutch civilians, in particular the robbery of Jewish property, and the deportation and annihilation of Jewish civilians.22 Unilever’s vice-chairman Rijkens also chaired the Dutch Reconstruction Committee, a private initiative of Dutch captains of industry in London, in which the post-war problems of the Netherlands were discussed. Since the summer of 1940 Rijkens and Beyen had organised lunch meetings, chaired by Prince Bernhard of the Netherlands, with the aim of discussing Dutch post-war economic politics.23 As from April 1941 these meetings became more permanent in nature and minutes were taken. Those present included: P. Rijkens, J.W. Beyen and J.L. Polak (Unilever), J.B.A. Kessler, J.M. de Booy (Royal Dutch), S. van Zwanenburg (Organon) and, when he was in London, P.F.S. Otten (Philips).24 Actually, the meetings in London of these industrialists were a continuation of the pre-war Contact Committee of Dutch large multinationals

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(mainly Philips, Shell and Unilever), which had started in 1934 and was discontinued after a few months of the German occupation. During 1941 the main issues of the select committee, however, were the reorientation of Dutch foreign trade and economic policy. All persons present agreed that the Netherlands had focused too long on Dutch–German trade relations, while Britain had become much more important during the 1930s. In Rijkens’ opinion trade relations with Germany, which had frequently been taken pride in, had not been all that satisfactory since 1914: German purchasing power had fallen too much as a result of the First World War, and in fact we should already have changed course at that time. The most simple products had basically already become luxuries for Germany. It is self-evident that this will be even more serious after the present war and that it will therefore become even more desirable to concentrate less on Germany. We will have to adapt ourselves more to the requirements of other markets, just as Denmark also did in its past with regard to England. It must no longer be the case that we endeavour to export to England the things that we cannot sell in Germany.25 The question now arose as to when the Dutch government would take a stance. Rijkens believed that the Dutch had to take advantage of their privileged position at the time and open up negotiations to make the British Empire their primary market. This was not a policy for a short period, but for the very long term; and over that period the Netherlands would certainly have regained its full export capacity.26 Beyen agreed completely with Rijkens. The Netherlands had to refocus its long-term foreign-trade policy towards the British Commonwealth as soon as possible. He was not afraid of objections on the part of the British government, since the Dutch position was ‘psychologically extremely favourable’.27 The only objection that Beyen feared was a certain school of thought in Stratton House (i.e. the Dutch government in exile), which liked ‘to show the English how frightfully tough and independent’ the Dutch were. This no longer had anything to do with economics or politics, according to Beyen:28 There is nothing humiliating in acknowledging the position of England, which seems to be bringing this war to a favourable conclusion almost single-handedly. The attitude towards us, assuming that we do not do any foolish things, is extremely favourable, whereas at the moment we certainly also have quite some ‘following’ in our own country.29 According to Rijkens the elements that made the main contribution to building up Dutch goodwill in Britain were the navy and the merchant navy and the spirit in the occupied Netherlands. Mutual appreciation in the economic field was also satisfactory. The Dutch Queen and the members of the royal family were admired in Britain without any discussion: every Englishman had admiration for and confidence in them. Prime Minister Gerbrandy also had ‘a good press’,

London’s calling, 1941–1945 139 according to Rijkens. The criticism on the part of the British therefore related almost exclusively to the other government bodies and their mentality, ‘who were sinning against a good mutual understanding’.30 Van Zwanenberg (Organon) thought that the Dutch government in Stratton House would listen to their ‘arguments with two open ears: they will go in one, then go out of the other again’.31 He regretted this, as the moment was indeed very favourable; in addition, he believed that it would already be possible to go a fairly long way and that there was no need at all to restrict it to a vague ‘declaration of love’. The Ottawa states were already holding talks together and the Netherlands was also mentioned; it would be highly undesirable that they should reach a provisional result without the Netherlands being involved. Van Zwanenberg further pointed out that Britain would presumably want to reach an agreement with the US; it would be very serious if the Netherlands was left out of that. It was therefore ‘essential to reach an agreement now with the AngloSaxon bloc as a whole [original underlining]’.32 Prince Bernhard promised to inform Economics Minister Steenberghe and Prime Minister Gerbrandy accordingly and would invite them for a meeting to discuss the issue. Minister Steenberghe, however, reacted promptly in an interview in the weekly Vrij Nederland (Free Netherlands) published for the Dutch community in London.33 In this interview he stated: But more than anything one should not believe that we, too, are already busy working out an economic system, designing a trade policy, etc. for after the war. At the moment no-one can already have an overall picture of the demands and opportunities that will then emerge for us. We will therefore not stand alone in the world. That is why we will not be the only ones in charge. We have heard support for a link-up with economic groupings, [but] no-one knows what they will then look like or whether they will continue to exist.34 Steenberghe thus wanted to leave all post-war possibilities open. In fact, the Dutch Economics minister represented the view of the small and medium sized businesses in the agrarian areas, which had been much more oriented towards Germany before the war. The Study Group, however, completely disagreed with him and prepared a compelling memorandum, which was also sent to the Dutch government. The future of Dutch economic policy was dealt with in ten points. One item nonetheless summarised the views of Unilever and the other Dutch large multinationals. Both interest and tradition force us to look to the West. The Netherlands has always been an outpost of the European continent; we have always been the continent’s advanced gateway towards the ‘Atlantic’ nations. We belong to what has frequently been called: the fringe of the Atlantic. As a trading, colonial and seafaring nation, we cannot but link up with those whose interests lie on and around the oceans. Within a continental economic bloc the

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This did not imply, however, that the Netherlands should disregard the possibilities that Germany and Central Europe offered. Trade with Germany would always remain important; however, it would have to be reduced to a second or third place, according to these Dutch multinationals. In September 1941 another important issue was discussed: whether it would be advisable to include an economic representative body in the Dutch government system.36 The co-operation between the government bodies which had decided on Dutch economic policy before the war and the actual practice of economic life was much too small. After the war not only would the role of the State become more important in the regulation of economic life, but the problems would also become even more numerous and more complicated than previously. Especially questions of an international character, which would therefore require a solution within an international context, would step more into the foreground. In this area, however, the Dutch government had a shortage of guidance from those who possess the relevant know-how but, above all, experience in this respect. In other words, according to the captains of industry, the Dutch government needed the experience of the multinationals (also) after the war. According to Beyen, however, there had never a shortage of advice before the war: there had been an Industry Council, an Economic Council and several other small organisations. The result, however, had been often disappointing. The advice given by the industrialists often had a very limited horizon. The big ones had been no better than the small ones in this respect. And so one had to ask oneself: whether in the future not only an advisory committee is required, but also a body whose powers extend much further and which will be granted a certain degree of autonomous power in certain areas of legislation. Do we now wish to use and interpret these possibilities (which are offered by the constitution) in such a way that we move in the direction of the corporative state? In addition to the parliament, do we want to delegate special powers to an economic body? This is the alternative that we are facing.37 Beyen pointed out that no steps could be taken in the direction of the corporative state without undermining the most elementary principles of the democratic legal system. He therefore took the view that a much safer course would be taken by maintaining the existing structure but by applying delegated powers that go much further than hitherto in certain areas. It was possible – if this latter course is chosen – to delegate to the economic body to be created powers relating to the preparation of certain legislation.

London’s calling, 1941–1945 141 Rijkens again agreed with Beyen. He liked to see an economic body which not only had an advisory capacity but to which a part of the executive power was delegated. That would, however, not necessarily lead a corporative state form. Rijkens stated that he in fact always wanted the legislative power to be left in the hands of the parliament. The discussion about the power of an economic body in the postwar Dutch government system nonetheless shows that Unilever and other large Dutch multinationals were seeking a position of power after the war. Out of the lunch meetings in London a Study Group for Reconstruction Problems was set up in February 1942. A steering committee, chaired by Rijkens, created over 25 study groups and involved over 200 experts from the Dutch community in London.38 Unilever House, Blackfriars, provided the secretarial facilities. The study groups dealt with all conceivable topics, as long as these did not interfere with the daily politics of the Dutch government in London. For example, they explored political borders after the war, economic groupings, the problem of unemployment, educational issues, etc. Reports that were published would in due course be brought to the notice of the Dutch government. The Dutch government had meanwhile been notified of the establishment of the Study Group and of its intentions as regards the publishing of reports. Prime Minister Gerbrandy told Rijkens that he was not only in agreement with the objective of the Group, but applauded the direction it was taking.39 The first report was submitted to the Dutch government on 28 April 1942; many would follow until the end of the war. In March 1942 the British government also sought contact with the Study Group through the Office of Arthur Greenwood, Minister without Portfolio in the British War Cabinet, who had set up a secretariat that was dealing with a ‘general survey of reconstruction problems’. In addition, the Board of Trade contacted the Dutch Study Group in the absence of a body officially set up by the Dutch government.40 It is difficult to assess the importance of the Study Group for the post-war reconstruction of the Netherlands. However, it does show the positive stance of Unilever and other large Dutch multinationals towards Dutch post-war society and their influence upon the making of it. At least it created mutual goodwill between Unilever and the Dutch government.

Relations with other allied governments in London Although contacts between Unilever and the other allied exile governments in London were never as extensive as between the company and the Dutch government, Unilever also supported these governments. The most direct form of support was the sponsoring of and advertising in allied government publications in Britain during the war. In 1940 the Netherlands Publishing Company Ltd, whose shares were held by Unilever, Philips and Royal Dutch – and which was thus not a Dutch-government publication – had set up Vrij Nederland (Free Netherlands) in London.41 The profits of the paper were used to print ‘the voice of the Netherlands’, which was dropped above the occupied Netherlands by the Royal Air Force.42 After Vrij Nederland had become a great success in the

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Dutch community in London, representatives of De Gaulle’s Free French Movement came to visit Rijkens. As a result, in due course Unilever also partly financed the publishing of France Libre (Free France).43 At the beginning of 1942 Unilever’s advertising policy, however, was discussed at length. Its advertising company Lintas needed directions as to the total amount of money to be allocated and also how the space had to be filled.44 There were two possibilities regarding advertising in Czechoslovakian, Polish, Belgian, French and Norwegian government publications. First, institutional advertising along the lines of that which appeared in the Dutch Vrij Nederland, bearing the imprint of Lever Brothers & Unilever.45 Second, the advertising of products which had been previously advertised in the press of the countries concerned and which were also marketed in Britain. The Board’s discussions regarding France and Czechoslovakia, however, are most striking. They give a clear view of the political sensitivity inside the company, its long-term strategy and corporate planning during the war. Two managers, Sankey and Ward, who had worked in France until Germany’s invasion, were very definite in their opinion that no advertising either of the company’s name or products should be contemplated in French publications in London. They feared that: any support of the De Gaulle movement, even in this indirect manner, would probably make things very difficult for our management in occupied and un-occupied France [Vichy France], the name of Lever Brothers & Unilever and its connection with the French Companies being known to Government officials.46 Beyen completely disagreed with this view. He was in favour of institutional advertising in preference to advertising products. He thought that Unilever’s support of Free French journals would be a ‘bull point’ after the war.47 Unilever’s lawyer Polak nonetheless favoured following Sankey and Ward’s advice to refrain from advertising entirely. He pointed out that it would not be difficult after the war to show, if necessary, that Unilever had given support to the Free French Movement. The other persons present were fully in agreement with Polak’s views. As regards Czechoslovakia, the relation between Unilever and Schicht and Sana (a famous margarine and fat brand) was quite well known. Since the outbreak of the war Schicht in Aussig (Usti nad Labem) had done more harm to Sana by showing less delicacy in re-establishing their grip on the factory in Prague. Therefore it would be very risky to advertise Sana products in a Czechoslovakian newspaper in London. Moreover, it seemed questionable whether Sana would be able to start production immediately after the war. For ‘political reasons it would not be wise to stress again the link with Aussig’.48 The same was true of Schicht’s Vita brand (soap and margarine). ‘In some of the occupied countries the fact that the brands are known to originate from firms which bear the name of Schicht A.G. or are connected with

London’s calling, 1941–1945 143 them, is certainly not an asset with the public or with the respective governments.’49 Schicht AG of Aussig was too much associated with the Sudeten Germans, and therefore not particularly popular with the Czechoslovakian exile government in London. As a result, it was decided that advertising of Schicht brands would not be wise. It was not clear which brands would be sold after the war. Some would ‘doubtless have to be dropped’.50 Institutional advertising of Unilever’s name was therefore preferable in this case. In January 1942 the advertising agency Lintas formulated a general policy in relation to advertising in the allied newspapers in London. In the first post-war period it did not expect difficulties so much with the public, who would be hungry for goods, but more with their governments. The latter would have to distribute the raw materials, etc, and their attitude would therefore be of primary importance. The names of the products would not mean much to these governments, but they would be critical as regards the reputation of Unilever firms. If Unilever could now build up some goodwill for their own name, it might do ‘something to counterbalance the questionable reputation of some of our firms in the occupied countries’.51 Generally speaking, advertising in allied newspapers had to be done by way of ‘a prestige campaign for Lever Brothers & Unilever’.52 It might help the company to build up some goodwill with the allied governments, which in the immediate post-war period was of more importance than Unilever’s goodwill with the public.

Relations with the British government Relations with the British government remained close during the rest of the war. Unilever helped the British war effort by all possible means, personally or via its organisation; staff, offices and plants were put at the British government’s disposal. Chairman Geoffrey Heyworth served as the only representative from industry on the Cohen Committee on Company Law Amendment from 1943 to 1945. The Committee was appointed by the Board of Trade with a view to modernising company legislation and accounting principles.53 Unilever’s vicechairman Herbert Davies was also the director of Oils and Fats at the Ministry of Food during the war.54 In Britain the ownership of the oils and fats raw materials remained with the government all the time. Margarine manufacturers worked on an agreed basis of profit, reimbursing the government with the value of the goods being processed by them. Different arrangements applied to the soap trade, in which the finished products were the property of the manufacturers, but they were also dependent on the government who controlled the raw materials allocation. Unilever, through the position of power held by its vice-chairman in the Ministry of Food, consequently had an advantage over its competitors on the raw-materials market for oils and fats during the war. In September 1941 Geoffrey Heyworth and Paul Rijkens had a meeting with representatives of the Ministry of Supply.55 It appeared that the government was anxious to have the assistance of leading British companies, Unilever, Courtaulds and ICI, who would be prepared to take over shell-filling factories

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and run them for the government’s account. The firms had to employ the staff and had to accept the responsibility for the output of the factories. The factory Unilever would employ 10,000 staff in three shifts, of whom 9,000 would be women. Heyworth and Rijkens replied that they were interested in the principle, and since engineers had looked into the question and had come to the conclusion that they could manage the new business, they were completely in favour of the business. The company’s experience in the soap business made it particularly apt for this government order; filling a shell was almost the same process as filling a carton with soap powder. Accordingly, Procter & Gamble, Unilever’s largest competitor on the other side of the Atlantic, was doing the same job on US government assignment.56 The other important question for Unilever in Britain was whether it would be possible to obtain the right managerial staff. The factory director of Crosfield’s, however, thought that Unilever had the right manager to be in charge. Home Soap Executive would be in control, and Oil Mills and Margarine Executive were keen to give assistance. Last important issue was the government remuneration. The private firms would be paid on a cost plus basis; a remuneration system that was quite usual during the war in relation to government orders, not only in Britain. In a Board meeting chairman Heyworth nevertheless stated: ‘The idea was not to make profits. Undoubtedly these obligations would be putting a strain on our Organisation at this stage of the war, but it gave us an opportunity of shewing [showing] the Civil Service what Private Enterprise was capable of.’57 In January 1942 the shell-filling factory was nearing its completion; the first unit had to be in operation by the end of the month and full capacity had to be reached by May 1942. But on 15 January Heyworth reported to the Board that the government plans in relation to the shell filling factories had been partly abandoned. The idea now was that the two factories which were most advanced in construction had to be managed for a period of six months only when the managerial staff of the private firms would become state employees.58 Heyworth immediately went to see Lord Portal at the Ministry of Supply to discuss the matter. There he learned that the factory management agreement that Unilever had been asked to sign would contain a provision that either side could terminate it by giving three months’ notice. It meant that the Ministry of Supply could put an end to the agreement even before the full production stage had been reached. Lord Portal nonetheless assured Heyworth that it was not the intention of the Ministry to do any such thing and he proposed to write a letter to Unilever ‘so that it would be on record for any future Minister of Supply’.59 But, Heyworth asked Portal, what if political pressure was applied? Would the Ministry then change its mind and terminate the agreement? Unilever’s Board could feel confident about this, Lord Portal replied, that ‘there would be no interference with the management’.60 Finally, Heyworth was convinced and the production scheme continued along the same lines. During the whole war the Glycerine Producers Association ran the British glycerine monopoly. The Association was led by two Unilever men: Rae (Cros-

London’s calling, 1941–1945 145 field’s) and Clarke (Glycerine Limited), which had become controllers of glycerine distribution in Britain since the beginning of the Second World War. As they were regularly discussing glycerine-related issues with Unilever’s Board it is beyond dispute that Unilever controlled the glycerine business completely during the war, by order of the British government. In June 1940 Clarke reported on the position of glycerine, which would be insufficient to meet the government need if supplies to the industry were not curtailed. Attempts were made by the government to find alternative sources of supply, and the need for glycerine rationing was being considered. Clarke thought that there would have to be some form of rationing. Unilever’s factories in Britain, however, were making every effort to improve their already high percentage of glycerine recovery. In February 1941, when soap rationing was under discussion, Clarke warned the Board that a cut of 20 per cent – as the Board of Trade had planned – would mean a loss of 25 per cent or more of glycerine being produced. That would mean a shortage of 6,000 tons for 1941, another 6,000 tons for the next year and 15,000 tons short for 1943. But even if the fat supplies in Britain were not cut, it would necessary to import crude glycerine from the United States, according to Clarke.61 In November 1941 Unilever’s chairman warned that the British glycerine stock had dropped in recent months. Clarke added that the fall was even greater than appeared at first sight because deliveries to South Africa had been smaller than before.62 Consequently, the Glycerine Producer’s Association and Unilever were looking for alternatives abroad. In August 1941 Clarke reported an enquiry by the British government as to whether Unilever’s soap production in India warranted an expansion of the glycerine plant and, if so, whether Unilever was willing to expand the plant and to what extent.63 In reply Unilever sent an extensive memorandum to the government showing all options. Next, in October 1941 Geoffrey Heyworth reported on cables which he had exchanged with Arthur Hartog, who had arrived in the Dutch East Indies, on the subject of increased glycerine production in the Dutch colony.64 The main issue had been the residual fatty acids on the spot. Hartog had explained to Heyworth that probably a more successful method of obtaining the necessary quantity of glycerine in Britain would be to make it from sugar (in fact, a process used by Henkel and IG Farben in Germany). In November 1941 Arthur Hartog telephoned Unilever’s headquarters in London to discuss the glycerine proposition in the Dutch East Indies. It was decided to go ahead with the new soap plant for Malaya, which had to be imported from the United States, and as a result, not to extend the glycerine recovery facilities in the Dutch colony. By February 1942 Japanese forces had captured both Malaya and the Dutch East Indies, which made any investment superfluous and glycerine extraction for the Allies impossible. In the meanwhile, the United States had entered the war and had started to co-ordinate its war-production effort with Britain. As a consequence, crude glycerine could easily be supplied from the United States, although the war against the German submarines in the Atlantic was not won yet. Therefore, the

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Irish export policy in the field of strategic commodities like glycerine was a major setback for Britain. In October 1942 the Irish government, which remained neutral during the war, prohibited the export of crude glycerine from Ireland. The government’s policy was evidently to start refining in Ireland. The British Glycerine Producers’ Association thereupon offered to supply Ireland with all the refined glycerine they needed if they would let Britain have their crude glycerine. The Irish, however, turned down the offer.65 At the beginning of 1944 it was reported to Unilever’s Board that the glycerine deliveries over the year 1943 had shown a decrease of 16.8 per cent. Nevertheless, this was no longer seen as a problematic development. On the contrary, in June 1944 the Board agreed on the principle of writing down all stocks of glycerine held by Unilever companies world-wide to the level of Glycerine Limited’s value in Britain, which was £20 per ton.66 By January 1945, Unilever’s director Countway in Boston warned the headquarters in London that glycerine prices in the United States had dropped to a very low level.67 As a consequence, other manufacturers in Britain were selling all their output and the only stocks left in the country were those held by the Glycerine Producers’ Association. During the last two years glycerine had been selling at between £46 and £47 per ton, as compared with a pre-war price of £38 per ton. In June 1945, when Germany had surrendered, Heyworth compared the position of glycerine stocks with the position after the First World War when considerable stocks had been in hand. ‘He remembered it took 10 years after the 1914–1918 War for accumulated stocks to be got rid of.’68

Views on economic policy In January 1943 Unilever published a paper called ‘The Problem of Unemployment’, which can be seen as Unilever’s view on government intervention in the economy. The paper was obviously inspired by the theories of Keynes, as Beyen, who had written the paper, stated many years later in his memoirs.69 Since mid1942 Beyen had met Keynes in meetings at the Treasury about future international monetary policy, in preparation to the international conference of Bretton Woods in 1944. As an adviser to the Chancellor of Exchequer, Keynes was practically the most important man at the Treasury. Beyen must also have drawn inspiration from these meetings with Keynes. Besides, as early as 1941 Beyen had brought up the issue of unemployment several times in the Dutch Study Group for Reconstruction Problems as an important problem to be solved after the war. On 3 December 1942 Unilever’s board had decided to prepare the paper: The Chairman said it had been clear for some time past that business had to move from a negative to a positive attitude towards questions of Post-War Reconstruction, and various stirrings in that direction had already manifested themselves. There were reasons why we had not been signatories to the recent Pamphlet on ‘A National Policy for Industry’, though he suggested that we

London’s calling, 1941–1945 147 should publish from time to time our own contributions to the solution of Post-War problems.70 A few weeks later the paper was published privately in London. It was intended for a comparatively small circle of readers. Its reception by the British press, however, created an immediate demand for wider circulation. The Daily Mail wrote that, ‘Lever’s have declared war on booms and slumps. They want the world to stop from riding to economic perdition on the trade cycle’, while the Observer wrote: ‘After some of the curious economics put about recently, the very orthodoxy of the new Unilever pamphlet seems inspired.’71 In March 1943 Countway, Unilever’s director in the United States, reported to London that Unilever’s paper ‘had created considerable interest on the other side’ and he mentioned ‘that Procter and Gamble had also issued a Paper on Post-War Reconstruction’.72 From Canada and Australia Unilever received simultaneously some positive comments on the paper. The publication ‘had done the company a great deal of good’. In September 1943 a request was received from Sweden for Unilever’s consent for translation into the Swedish language. The consent was given and the royalty of 5 per cent was donated to the British Red Cross.73 Even in the German press, the Berliner Börsen-Zeitung newspaper drew some attention to the Unilever publication. According to Berlin’s stock-market daily Unilever’s paper should be read against the background of ‘the extreme fertility in the production of post-war plans, which the British business life display[ed] in the last months’.74 The German article referred, on the one hand, to Samuel Courtauld’s plea for more state intervention in the British economy and for more workers’ participation, and on the other, to the November Manifesto of 120 British industrialists (‘A National Policy for Industry’), which had pleaded the opposite. In fact, Unilever’s paper adopted a middle course between the two others, according to the Berliner Börsen-Zeitung. Unilever’s paper was published a month after the publication of the first Beveridge Report of December 1942, which was a plan for a total review of the British social-security system. Actually, Beveridge can be looked upon in retrospect as the father of the British welfare state. Unilever’s foreword referred to the Beveridge Report and its main assumption, the abolition of mass unemployment: ‘Unless measures for maintaining employment are prepared and can be effective, much that otherwise be gained through the Plan for Social Security will be wasted.’75 The paper started with a quote from Roosevelt who had said: ‘Economic policy is not an end in itself, but a means to achieve social ends.’76 What was meant by the quote was that it did not want to create a new social order like the Marxists or socialists, but sought an improvement in social conditions. The nineteenth century optimism that laissez-faire would lead to the wealth of complete nations had not proved to be justified. ‘Things cannot be left to themselves, and the necessity for interfering with them has led governmental action to become one of the economic factors in life.’77

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Though much could be learned from the war experience, it had to be kept in mind, according to Unilever, that the economics of war were a bad model for a peacetime economy. A war economy could not last for many years, because it was not concerned with balancing the production of consumption and capital goods. A peacetime economy, on the other hand, had to aim at the continual development of the apparatus of production in balance with an increasing production of consumption goods. Should a State as a central planning agency therefore allocate the means of production? Not at all. ‘In a free and progressive world one cannot do without the mechanism of costs and prices if one wants to measure the demand that production should try to meet.’78 And what about profit? ‘Profit, or loss, gives a clear indication of what people want to buy, and provides a check on the efficiency of its production.’ That was all classical economics. But what was new? Economic policy should aim at regulating the economy, the paper continued, for all members of society. There was a fundamental identity of interest between industry, on the one hand, and society, consumers or workers, on the other. Mass production had led to a general improvement in the standards of living. It created the goods and, by paying the factors of production, it created the purchasing power to buy these goods. At the same time industrial mass production had created trade cycles – periodical ups and downs in world production – which in turn created waves of unemployment. The paper, however, denied the ability of industry to take responsibility for maintaining employment and the right of industry to make national policy. That should be the task of the government. A self-imposed discipline on the part of industry can help to [arrive at] the solution of the problem, but the main task in fostering regular capital investment, and through it regular employment, lies with the Government. This does not mean the exercise by Government of direct control over production (apart from a period of acute shortage of materials after the war); it means the exercise by Government of the powerful means of indirect controls it possesses.79 According to Unilever – following Keynes here – there were two possibilities of controlling the trade cycle. First, the government could regulate capital investment by monetary instruments, i.e. changing the interest rates. Second, the government could regulate the incentive to investment by fiscal policy. It should take anti-cyclical measures, not only limited to depressions. In a slump government had to raise effective demand by more government expenditure and lower taxes; and in a booming economy, government had to lower effective demand by less government expenditure and higher taxes. So far Unilever (Beyen) had declared itself to be a good disciple of Keynes. Unilever, however, added what it was missing in Keynes’ theory: ‘the regulation of the production and prices of primary raw materials’.80 Big movements in raw-materials prices had had an important influence on the activity of industrial

London’s calling, 1941–1945 149 countries and on the development of ‘backward countries’ in which those raw materials were produced. Unilever knew this from its own experience. As the largest player on the world market for non mineral oils and fats it had seen its profitability going up and down as a result of fluctuating raw materials prices in the 1930s. The proposed solution, however, was still rather vague: international agreements and international organisations should prevent violent fluctuations as far as possible. The building up of stocks should prevent fluctuations in their prices. In addition, the income of the primary producer countries had to be raised and stabilised. Unilever did not propose that in itself as a means to solve unemployment in Britain, but it would ease the problem of adaptation after the war by creating new markets. Moveover, protection towards these countries should be avoided. Although Unilever accepted parts of Keynes’ ideas on the one hand, they disagreed about the scope on the other. In his memoirs Beyen accused Keynes of ‘being too nationalistic’ in his economic approach. An international business like Unilever, however, attached great importance to future international agreements and organisations at the time.81

Rationalisation of soap production In February 1942 soap rationing was introduced in Britain. All private individuals were entitled to a maximum consumption of 80 per cent of the average consumption of all individual consumers prior to rationing. It was the simplest of all government rationing schemes. Its feature was restriction of quantity (20 per cent) but with freedom of choice. The chairman could not say what the reduction in Unilever’s turnover would be, but he thought that it should be less than 20 per cent. It was estimated that the reduction in profits in the British soap business would be £1.5 million a year, which would still leave the company’s ‘earnings not far below the normal peace level’.82 A direct result of soap rationing was that soap production was also curtailed to 80 per cent. The question now arose as to whether the Board of Trade also intended to launch some rationalisation scheme for the soap industry, as it had done in other sectors, mainly to save labour. Such a scheme would involve concentration of production in fewer factories. At the time there were approximately 200 soap factories in Britain, of which only 23 employed more than 100 staff and only four of these employed more than 500. Almost all large factories in Britain, for example Port Sunlight, Crosfield’s, Watson’s, Gossage’s and Knight’s, belonged to Unilever Limited. The exception was Procter & Gamble’s subsidiary Hedley’s. The tremendous expansion of the company in Britain had come to a halt at the end of the 1930s. By the outbreak of the war the company had just reached the limits of its growth.83 After it had reached an agreement with Unilever at the beginning of the war the market shares had been settled. As a result, the rationalisation policy of the British government was not much of a threat to Unilever. On the contrary, rationalisation would mean the closing down of the smaller factories, which belonged to smaller competitors.

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It was nonetheless not completely clear what Unilever’s Board preferred in this respect. As regards releasing labour the soap trade did not have much to contribute, according to Geoffrey Heyworth. In the whole country no more than 14,000 persons were employed in the industry and although it was obvious that the soap being manufactured at that moment could be manufactured in a few big factories, such a rationalisation would release comparatively few people. On the other hand, if the production of individual brands were to be dropped, then the soap industry could save 2,000 or 3,000 staff. The ‘national interest would therefore seem to lie in the creation of national brands’, the chairman argued.84 Until that time only Unilever’s firm at Port Sunlight had produced national brands like Sunlight Soap, Rinso, Lux and Vim and Crosfield’s had produced Persil, but all the other factories had only had regional markets. In April 1942 Heyworth nonetheless felt that the profits in the British soap trade could be preserved by having only two grades of soap – a special grade and a standard grade – as had been done in the margarine trade through Marcom. In July 1940 the margarine and cooking fats industry had agreed with Ministry of Food to pool their resources and to co-operate as one company (Marcom) during the war period; production had been standardised and all brands had been abolished. The identity of the company would remain hidden to the consumers. Heyworth’s idea was to copy this scheme to the soap industry. There would be two grades in each line of soap, e.g. toilet soap, hard soap and soap powder. A scheme like this would save selling and invoicing costs, and it would permit a maximum degree of zoning to ease distribution. According to Georg Schicht, however, the margarine trade did not afford a complete comparison as there had already been a standard pack in peacetime, which meant that the change to the Marcom system had been relatively easy. Thereupon, Heyworth nonetheless said that there was some parallel, for example, between the soap trade and the chocolate trade. He had had a talk with Cadburys, who had felt that a rationalisation scheme had been necessary for the chocolate trade. The only difference between the chocolate business and the soap business was that it normally employed more labour per ton of production; therefore the chocolate trade could make a larger contribution to the national labour pool than the soap trade. In addition, Cadburys had no fear of getting back into branded products if the chocolate trade were to abandon its brands during the war. In other words, Heyworth tried to convince the Board that a temporary loss of brands did not mean a great threat to the company. A month later, the Home Soap Executive reported to the Board that in consequence of a further re-organisation the sales staff of Unilever’s soap companies had now been reduced to 321, which was only 40 per cent of their pre-war level. This was regarded as an irreducible number. Further relocation of production was being carried out, which had resulted in products being made nearer to the centres of consumption. In August 1942 the Home Soap Executive came to the conclusion that no worthwhile saving of labour could be effected from a further closing down of small factories, but the question of a possible labour saving by a further cutting down of transport was still being looked into.

London’s calling, 1941–1945 151 The Ministry of Supply had closed down the Pears factory. At Warrington space for munitions manufacture was being released; the soap production was transferred to Leeds. By October 1942 almost 33,000 tons of soap manufacture had been transferred to minimise the problems of distribution.85 By 1943, nevertheless, not much had changed in the British soap trade. The rationing level was the same as 1942. The main brands were still on the market. In August the Ministry of Food agreed to an increase in the price of soap provided that it could be shown that the costs had increased.86 Unilever could justify an increase for its main soap-powder brands Rinso and Persil, but they were afraid that Hedley’s was not able to justify an increase in the price of its soap powder brand Oxydol. Consequently, Unilever made an application for a price increase but it would not put it into force if Hedley’s failed to get permission for Oxydol, as otherwise it would lose market share to Hedley’s. By 1944 the Ministry of Supply had not implemented a further rationalisation of the British soap industry. The interesting thing now was that brand rationalisation, which Geoffrey Heyworth had anticipated in 1942, returned in the Board discussions on post-war sales policy two years later. The main point was that ‘we would have to face the sacrifice of a number of brands which had been known to us all our lives if we were to improve the value of other brands to the consumer’.87 The Board assumed an increase in post-war consumption and the main advantages of a reduction of brands would be a simplification in the sales structures.88 Furthermore there would be an advantage in putting the scheme into operation during the war as the de-rationing of oils and fats might come sooner than had hitherto been supposed.89

Synthetic detergents Also in Britain the appearance of synthetic detergents was the most significant change in the soap industry in the 1930s and 1940s. When the war started in September 1939 the agreement between Unilever and IG Farben, under which IG would deliver the raw materials and Unilever would do the marketing, was immediately suspended. Unilever could have obtained alternative products through the United States, but the possible supplier was an IG subsidiary (General Aniline and Film Corporation) and such transactions were therefore forbidden by the British Trading with the Enemy Act.90 As a result, at the beginning of the war an alternative product, called ‘Teepol’ and made by Shell, had to be obtained in Britain, though this was ‘of a less good quality’, according to Unilever’s Board.91 In 1938 Shell Petroleum Company (in the Netherlands: Royal Dutch Petroleum) had set up a pilot plant in the Netherlands for the manufacture of synthetic detergents derived from petroleum. Until the outbreak of war the entire production of synthetic detergents in Britain had been derived from natural oils and fats, although Shell had already started the construction of a plant for synthetics based on non-fatty raw materials at Stanlow. At the beginning of 1942 Technical Products’ (Shell Chemicals) plant came into operation and had an initial

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capacity of 10,000 tons of ‘Teepol’ per annum. The production expanded rapidly, up to 25,000 tons in 1945. In 1940 Imperial Chemical Industries (ICI) had introduced another synthetic soap base called ‘Lissapol’, which was manufactured at its Billingham division and whose total output amounted to 5,000 tons by the end of the war.92 Nevertheless, during the war only 25 per cent of the total output was used as a basis for household products, whilst about 75 per cent was sold to industrial consumers, e.g. laundries, restaurants and textile industries. During the war Unilever nonetheless introduced a Teepol-based powder brand (‘Wisk’) as a domestic washing product. ICI’s Lissapol was not suitable for the consumer market, because it did not lather – until then soap’s washing quality had always been identified with its lather power. In addition, ICI lacked the marketing experience for selling to the consumer market. Competition on the consumer market therefore came mainly from the smaller firms, which were licensed by the Ministry of Food as manufacturers of ‘worthy soap substitutes’.93 By 1946 over 500 small firms were selling soap, mostly of an inferior war quality, on the British market. In these times of shortage all firms, large or small, were able to sell all synthetic soap, whatever its quality. The limit to production and sales was imposed only by the production capacity of Shell’s plant at Stanlow. In February 1942 the shortages of oils and fats in Britain necessitated soap rationing in Britain – just as on the European continent, only two years later. Rationing enabled oils and fats to be saved for edible use. Due to the increasing difficulties of sea transportation edible fats of all kinds had been severely rationed at an earlier stage. As a result, increasing quantities of soap in Britain consisted of synthetic detergents. Until 1942 the production of synthetic detergents had been negligible. Between 1942 and 1946, however, production expanded sixfold (see Table 7.1). After the war the expansion of the new product would be even more rapid (sevenfold); by 1955 more than half of all soap in Britain would consist of synthetic detergents (253,000 tons), which were based on non-fatty raw materials. Although the production of synthetic detergents based on non-fatty raw materials was greatly accelerated by the scarcity of oils and fats during the Second World War it was not Unilever that took advantage of the new technology after

Table 7.1 Estimated production of synthetic detergents in Britain, 1936–1946 Year

Production

1936–1941 1942 1943 1944 1945 1946