Linda H. Kistler Clairmont P. Carter
and Brackston Hinchey
UNIVERSITY OF LOWELL

PLANNING AND CONTROL IN THE 19th CENTURY ICE TRADE

Abstract: This paper describes selected accounting records of the Tudor Ice Company which were devised to manage and control the far-flung business activities of Frederic Tudor, a 19th century entrepreneur who has been called America’s first monopolist. Tudor’s business genius lay in developing methods of harvesting, transporting, storing, and marketing commercial quantities of ice taken from New England ponds and shipped to tropical ports around the world. Frederic Tudor employed relatively sophisticated accounting techniques to analyze and control transportation costs and the costs of product shrinkage. He also routinely analyzed and translated foreign currency transactions for his geographically dispersed operations and evaluated the impact of competition on his operations.

Introduction

He cuts and saws the solid pond, unroofs the house of fishes, and carts off their very elements and air, held fast by chains and stakes like corded wood, through the favoring winter air to wintry cellars to underlie the summer there ….

Walden—Henry David Thoreau

Frederic Tudor (1783-1864) was a 19th century Boston entrepreneur who recognized the potential profit in shipping and marketing commercial quantities of ice harvested from New England lakes and ponds to tropical climates where the product, if known at all, was a luxury good. Through his singleminded and often ruthless pursuit of profit, he developed a thriving industry where none had existed before. Tudor’s business practices earned him some notoriety as America’s first monopolist.

Eventually known throughout New England as The Ice King,” Tudor’s first ice shipment in 1806 amounted to only 130 tons. At the height of the ice trade during the 1850s, however, more than 140,000 tons of ice were exported from Massachusetts in one year. Exhibit 1 depicts the growth and decline of the ice trade from 1806 to 1886. Beginning with his first cargo to the West Indies in 1806, Tudor shipped ice from Boston to such distant ports as New Orleans, Charleston, Savannah, Calcutta, Singapore, Rio de Janeiro and throughout the Caribbean

The personal diaries and accounting records of Frederic Tudor are housed in Harvard University’s Baker Library. They offer fascinating glimpses of his entrepreneurial vision, his management methods and philosophy, and his skillful application of accounting and financial data to manage his diverse business interests which

EXHIBIT 1

SMOOTH CURVE GRAPH SHOWING THE GROWTH OF THE MASSACHUSETTS ICE TRADE 18 06-1 866
Source: Essex Institute, Historical Collection.
MASSACHUSETTS ICE TRADE 1806 – 1886

Kistler, Carter and Hinchey: Planning & Control in 19th Century Ice Trade 21 included sailing vessels to transport the ice and ice houses to store the product while awaiting sale.
This paper briefly introduces Frederic Tudor, the man, noting his marketing skills and selling techniques, and his innovative contributions to harvesting, transporting, and storing ice in tropical climates. Portions of Tudor’s surviving financial records are described, including examples of accounting for product shrinkage, an obviously critical concern with ice—which literally melts into unprofitable water. Tudor’s method of translating foreign currency transactions for his Calcutta venture during the 1850s also is noted. Finally, Tudor was sensitive to the problems of competition, and his analysis of its impact on his Calcutta operation is presented.

Frederic Tudor, Entrepreneur and Innovator

On the outgoing tide the morning of February 13, 1806, the brig “Favorite,” (Captain Pearson commanding) cleared Boston harbor with the first cargo of New England ice bound for the West Indies. Between that date and 1886, the enterprises of Frederic Tudor would cut, store, and deliver to tropical destinations as far away as Calcutta an estimated two million tons of pure New England water processed by the harsh New England winters.

Frederic Tudor had previously declined the opportunity to follow his brothers into Harvard College, preferring more immediately to seek his fortune in business. He was only 23 years old when he quit his job as a clerk in the counting house of a Boston merchant and purchased and outfitted the “Favorite” using savings and borrowings that totaled about $7,000 for this first venture. While age 23 may appear somewhat youthful to embark on an enterprise of this scale, Tudor’s diaries disclose that he had considered himself a businessman since he was about thirteen years old.

The “Favorite” arrived in Martinique after a 20-day passage. Upon clearing customs, Tudor circulated the following advertising broadside announcing his novel product:
Today, March 7 and during three consecutive days, there will be put up for sale in small amounts a cargo of ice, brought into this port very well preserved, from Boston, by the brig, Favorite, Captain Pearson; this sale will take place immediately and will last three days only, the brig having to proceed at that time to another island. The price is ten cents a pound. It is necessary to bring a wool cloth or a piece of covering to wrap the ice; this means preserves it much longer.

Frederic Tudor not only conceived the idea of cutting, storing, shipping, and merchandising New England ice throughout the tropical world, he also nearly singlehandedly invented the technology to accomplish the task. In the early 19th century, ice was a notoriously short-lived product. A method had to be devised to ship it over vast distances through warm climates and store it long enough to bring the product to market without critical loss of volume. Tudor’s transportation solution, first introduced on the “Favorite,” was to transform an ordinary merchant ship into a floating ice house by adding a foot or more of sawdust insulation to the hull and packing the ice solidly between layers of sawdust and hay. This frozen cargo was totally below the ship’s water line, and used the ocean water as coolant.

Because the ice functioned as ballast, Tudor’s ships also carried other cargo. For example, an 1875 cargo to Bombay contained, in addition to ice, the following items: rosin, drills, oil, glass, boards, and lobsters. A cargo from Boston to Calcutta contained rock oil, drills, salmon, lobsters, and boards. Other ships carried apples, butter, tar, pitch, turpentine, ice pitchers, painkiller, ink, manufactured cloth, and manufactured tobacco.

Analyzing the results of his first venture in the ice trade, Tudor recorded in his diary in 1806:

The plan of transporting the ice is perfectly good. Now the one thing needful is an ice house which will keep the ice after it has arrived in the West Indies.3
The Martinique venture of 1806 was not a financial success because the lack of an ice house at the destination precluded effective storage. A merchant whose stock in trade is literally melting away cannot afford to hold it off the market to await the prospect of later monopoly profits.

The fundamental storage problem required Tudor to concentrate his considerable talents on improvements in ice house construction and to seek additional capital.
Having secured a monopoly from the Spanish governor in Cuba and backed by several friends, Tudor constructed an ice house at Havana; and sometime in January 1807, another ice ship, the “Trident,” set sail from Boston bound for Havana with 180 tons of ice. The cargo arrived with little loss in transit, but lasted only two weeks because the new storage facility, although properly designed, had been poorly constructed. The ice house was rebuilt, and by 1810 the Havana operation was sufficiently profitable to compel Tudor to record:

I have at last the comfort of reflecting that I have given a success to this business which is permanent, and which must forever remain a monument to the advantage of steady perseverence in a project which is good in the main, but for a while plagued by unfortunate circumstances not intrinsically connected with it.

Tudor faced formidable marketing and technological challenges in bringing ice to the tropics. Ice was a totally new product in most tropical cities; and Tudor realized he must not only bring the product to market, he also had to, in many cases, create that market. Tudor devised a two-pronged marketing strategy. The preferred approach was to obtain a distribution monopoly via contract with the local government, a method he successfully employed in his Havana venture. If sole distribution rights could not be obtained from government sources, he attempted to convince local businessmen to invest in the construction of an ice house in return for low, stable ice prices. As announced in a Tudor advertising broadside in Charleston, South Carolina (1816): “If a subscription of ten thousand dollars can be raised, then the price shall be fixed at six cents and a quarter a pound.”5 Tudor also offered volume discounts through the sale of weekly tickets allowing the purchaser to buy bulk quantities of ice at reduced prices. Thus, he not only raised capital to finance the operation, but also helped to assure a market for the product.

Introduction of ice to the public required another strategy, and Tudor outlined his plan in his diary:

lt becomes necessary to establish with one of the most conspicuous bar keepers a jar and give him his ice for a year. The object is to make the whole population use cold drinks instead of warm or tepid and it will be effected in the course of three years. A single conspicuous bar keeper having one of the jars and selling steadily his liquors all cold without an increase in price, render it absolutely nec-essary that the others come to it or lose their customers— they are compelled to do what they could in no other way be induced to undertake.

The strategy worked, and Tudor’s business soon extended throughout the Gulf of Mexico and the Caribbean; and by 1833, as far as Calcutta—where the first ice cream ever eaten in India was made from Massachusetts ice.

Successful marketing placed considerable strains on production, since the tools and machinery required for cutting and handling large quantities of ice simply did not exist. Here, also, Tudor’s genius as an innovator came to the fore. At first, Tudor employed work crews to cut the ice by hand from throughout eastern Massachusetts and coastal New Hampshire and Maine. As demand grew, Tudor’s ice men used equipment such as the horse-drawn ice-cutter, which was invented by Nathaniel Wyeth. Wyeth eventually developed specialized tools for cutting and processing ice at all stages of production, and Tudor strongly urged Wyeth to patent these devices and restrict their use to Tudor operations.
Tudor’s success inspired competition; and by the 1820s and 1830s, he could no longer ignore the problem. Competitors copied his shipping and storage methods; and he responded in typically direct fashion—by engaging in cut-throat pricing. During this period, his business practices were vigorous—often ruthless—and Tudor perhaps deserved his reputation as America’s first monopolist.

The relentless pursuit of profits from his worldwide ice business reached its zenith in 1856, when Massachusetts exported 146,000 tons of ice. During that year 363 cargoes were shipped to fifty-three different cities in the United States, the West Indies, the East Indies, China, Australia, and the Philippines.

Ice exports from Massachusetts declined dramatically during the 1860s (see Exhibit 1) due to continued strong competition and the introduction of artificial means of refrigeration. An era was coming to a close; and with Frederic Tudor’s death in 1864, his business operations declined and his properties were either sold or leased for other purposes.

Elements of Accounting and Control

The Frederic Tudor collection in Baker Library at Harvard University includes journals, wastebooks and cashbooks, ledgers, weather notebooks, letterbooks, and personal diaries dating from 1803 to 1897. While some records appear to be complete, others are fragmentary and nearly illegible. The following sections examine selected portions of several documents and are not intended to present a comprehensive analysis of extant records.

Tudor’s accounting records are of interest both in terms of their content and also the form in which financial disclosures are made. As might be expected, there are many similarities between the Tudor Ice Company records and financial data produced by modern accounting systems. On the other hand, the form of Tudor’s accounting system differs significantly from typical management information systems in use today.

Kistler, Carter and Hinchey: Planning & Control in 19th Century Ice Trade 25

Disclosure Content

The fundamental objective of management accounting is to provide relevant information to assist managers in the planning and control of business enterprises. Although management accounting as a formally recognized discipline is a relatively recent development, managers have been using cost accounting data for decision-making since Biblical times. Tudor designed his accounting records to assist him in the management and control of his operations. His early years as a counting house clerk doubtless proved valuable when he ventured forth on his own. This brief discussion merely introduces the scope and complexity of the Tudor collection, while focusing on the following management concerns: product shrinkage, competitive pricing, profitability of selected ventures, and foreign currency translations.

Product Shrinkage. By its nature, the storage and distribution of ice in distant tropical cities required careful analysis of product shrinkage to minimize and control loss of volume. Exhibit 2 is an excerpt from Tudor’s Calcutta ice trade accounting records that illustrates routinely compiled statistics for product shrinkage. Based upon the data presented in Exhibit 2, product shrinkage percentages were calculated by the authors and are shown in Exhibit 3. The data reveal that, on average, nearly 50 percent of ice shipped from New England to Calcutta was lost due to melting. Selling prices clearly reflected this shrinkage or Tudor would have been forced to discontinue his Calcutta operations, which reported increasing sales from inception in 1833 until 1850 when 1,161 tons were sold.

Competition. Competition in the ice trade was a pervasive problem for Frederic Tudor, particularly in mainland cities of the United States. Tudor frequently resorted to cut-throat price reductions to control the ice trade in such southern cities as Savannah and Charleston. While the monopoly Tudor enjoyed in Havana allowed him to sell ice for as much as $0.25 per pound, in South Carolina and Georgia, prices as low as six to eight cents a pound were hard to maintain because of competition from New York entrepreneurs.

Tudor apparently took an active role in pricing decisions. His typical strategy was to cut prices drastically to force his competitors out of business. For example, Tudor would price his ice for a penny a pound until a competitor’s supply had melted at the docks; then he would raise prices to profitable levels. His diaries record the following case:

26 The Accounting Historians Journal, Spring, 1984
EXHIBIT 2
TUDOR’S CALCUTTA ICE TRADE
ACCOUNTING FOR SALES AND SHRINKAGE
1833-1850

Year Tons Shipped Tons Landed Tons Sold
1833 201 82 30
1834* — — —
1835 354 62 16
1836 671 369 118
1837 910 557 297
1838 613 298 143
1839 2,536 1,257 347
1840 1,885 935 420
1841 3,203 1,687 475
1842 2,063 1,073 438
1843 1,620 797 327
1844 3,320 1,524 635
1845 2,331 1,168 697
1846 3,079 1,578 766
1847 2,883 1,463 775
1848 3,266 1,661 828
1849 3,434 1,917 806
1850 3,107 1,641 1,161

Tudor’s New England shipper, S. Austin, broke his contract; shipped to Calcutta “on his own account, by which he lost greatly.”
Source: Collected Papers of the Tudor Ice Company, Baker Library, Harvard Uni-versity Graduate School of Business, Cambridge, MA.
This interferer will get about $5.00 in all for what must have cost him at least $100 …. This business is mine. I com-menced this business (the depot at Savannah), and have a right to rejoice in ill-success attending others who would profit by my discovery without allowing me the credit of teaching them.

In addition to pricing references in his regular accounting reports, Frederic Tudor prepared special accounting analyses during periods of intense competition (or opposition as he called it). Exhibit 4 presents a portion of Tudor’s analysis during a period of competition between November 1849 and December 31, 1850 in Calcutta, India.
The analysis of previous sales is interesting. Tudor included the

Kistler, Carter and Hinchey: Planning & Control in 19th Century Ice Trade 27
EXHIBIT 3
TUDOR’S CALCUTTA ICE TRADE
PRODUCT SHRINKAGE
1833-1850

Year
1833
1834
1835
1836
1837
1838
1839
1840
1841
1842
1843
1844
1845
1846
1847
1848
1849
1850

Percent Percent
Ice Tons Landed Ice Tons Sold
Versus Tons Shipped Versus Tons Landed
41 37
18 26
55 32
61 53
49 48
49 28
50 45
53 28
52 41
49 41
46 42
50 60
51 49
51 53
51 50
56 42
53 71

December 1848 sales twice in order to develop comparative data and measure the impact of competition. Unquestionably, the effects of competition were dramatic. According to Tudor’s records, ice was reduced to 1/2 anna per seer from two annas per seer to meet competition from November 3,1849 to March 27, 1850. On April 1st, the price was restored to two annas per seer. (An anna was a fraction of a rupee. It was discontinued as a unit of account in the 1950s when cents were adopted. A seer is a unit of weight some-what greater than two pounds, but less than one kilogram.) On July 6, 1850 ice was again reduced to 1/2 anna from two annas in response to competition.

Venture Profitability. Frederic Tudor’s ice operations extended worldwide, and his accounting records indicate that each market was treated as a separate venture. Tudor also compiled extensive statistics and financial data on a monthly and an annual basis for such items as revenues, shipping costs, landing charges, tons sold,

28 The Accounting Historians Journal, Spring, 1984
EXHIBIT 4
CALCUTTA OPERATIONS, TUDOR ICE COMPANY
ANALYSIS OF THE IMPACT OF COMPETITION
1848-1850

Regular Sales At Similar Periods Sales During Opposition
Previous (No Competition) (Competition) Period
Rupees Rupees
Tons of Received Tons of Received
Month/Year Ice Sold For Ice Month/Year Ice Sold For Ice
1848 1849
5th to 30th 5th to 30th
November 43 5146.8 November 55 1726.14
December 35 4225.0 December 39 1235.10
1849 1850
January 28 3290.0 January 41 1238.6
February 30 3558.0 February 46 1447.4
March 66 7452.0 March 93 2908.13
7 to 31 July 73 8770,9 7 to 31 July 121 3792.6
August 101 10345.4 August 143 4495.14
September 87 10724.8 September 139 4345.5
October 83 10327.12 October 114 3441.0
1848 1850
November 51 6185.0 November 79 2586.2
December 35 4225.0 December 58 1822.12
632 74249.9 928 29085.6
RECAPITULATION
Tons Rupees
Regular Sales (No Opposition) 632 74249.9
Sales During Opposition 928 29085.0
296 45164.9
Being an increase in Quantities of 47 percent and decrease in Amount of 60 percent of money.
Source: Accounting Records of Frederic Tudor, Calcutta Trade, 1833 to 1850 In-clusive, Baker Library, Harvard University Graduate School of Business Administration.
sales, prices, number of purchases, and the amount of profit and loss. Separate accounts were maintained for his New Orleans ven-ture and his Calcutta operation, for example.

Maintenance of detailed accounting records provided useful control devices, beginning with his earliest venture in Havana. At one point, Tudor detected a significant discrepancy between the tons of ice sold in Havana and the amount of money he was receiving. An investigation revealed the discrepancy was due to the misconduct of one of his agents, who subsequently was dismissed.

Foreign Currency Translation. Frederic Tudor’s far-flung operations required him to account for ventures in different currencies. He encountered problems not dissimilar to those facing contemporary multinational companies. The Tudor accounting records indicate that he routinely converted foreign currency to U. S. dollars by applying a conversion factor to foreign currency data. For example, from November 1848 through March 1849, Tudor converted rupees to dollars by multiplying rupees by $0.50.

Accounting Disclosure—Form Versus Content

Two of the more interesting aspects of Tudor’s ice trade records are the manner in which the information was disclosed and the level of sophistication reflected in the reports. Many statements were prepared on lined accounting paper with numerous columns. The reports were handwritten with columns neatly totaled and double-underlined. In addition to the multiple rows and columns for numerical data, Tudor’s accounting records typically included a column for comments and notes by the preparer. Indeed, the narrative comments in the Tudor reports reveal some of the interesting problems this early multinational business confronted.

As well as referring to specific problems, the narrative portions of Tudor’s accounting records provide a rudimentary history of his business operations at each location. He notes such events as the return of certain employees and agents, land purchases, the impact of competition, war, and the vicissitudes of weather upon his profits and losses. For example, a perusal of Tudor’s Calcutta records reveals the impacts of an Indian war in 1845 and 1846, serious competition in 1849 and 1850, and notations of significant climatic variations that influenced sales during the same period.

Conclusion

Unlike most of his contemporaries in maritime commerce during the early years of the Republic, Frederic Tudor created and successfully operated a truly international company. The nature of his product dictated that the Tudor Ice Company be more than a carrier of ice: the company had to become a part of the local business scene wherever Tudor ships called. The efficient and effective man-agement of such a world-wide enterprise in the early 19th century could not have been accomplished without the techniques of management accounting documented in this paper. Without these tools of planning and control, the profits of the Tudor Ice Company could have been as unstable and transitory as its principal product.

FOOTNOTES

1 Collected Papers of the Tudor Ice Company, Baker Library, Harvard University Graduate School of Business.
Accounting Records, 1860-1875.
3Frederic Tudor Diaries, 1806.
4Frederic Tudor Diaries, 1810.
Advertising pamphlet printed by J. E. Miller, Queen Street, Charleston, South Carolina, November, 1816. Collected Papers of the Tudor Ice Company.
6Frederic Tudor Diaries, 1819.
7Boston Board of Trade.
8Cummings, p. 38.
9Frederic Tudor Diaries, May 15, 1819.
BIBLIOGRAPHY
Accounting Records, 1860-1875, Tudor Ice Company, Ledger A, Baker Library, Har-vard University Graduate School of Business Administration.
Boston Board of Trade, Third Annual Report, 1857, pp. 79-82.
Collected Papers of the Tudor Ice Company, Baker Library, Harvard University
Graduate School of Business Administration.
Cummings, Richard O. “New England Ice Industry and Trade.” Unpublished doc-toral thesis, Harvard University, Cambridge, Massachusetts, 1934.
Frederic Tudor Diaries, Baker Library, Harvard University Graduate School of Busi-ness Administration.