All it took was one ship

All it took for me to think about this topic was one ship.

If only this was true, it would make a good story but the truth is that I came across the topic of this Swedish East India Company (or SOC in Swedish) through some researches on old statistics of tea trade. When I found out that this company was quite successful in spite of several problems (more on that later in this blog post) and in spite of being among the lesser known East India Companies (most people knowing only the British, Dutch and French ones), I knew I had something interesting to look at.

This was confirmed a bit later when I went to the Armada in Rouen (a famous gathering of big sailing ships) and saw the Götheborg, the sailing replica of a 18th-century ship that sank right before getting back into its harbour in Göteborg, fully loaded with goods from China.

034-Götheborg-full

Götheborg in full

034-Götheborg-closer

Götheborg, a closer look

This was an obvious sign of destiny.

What is so peculiar with this company? And why not another small one like the Imperial Ostend Company (yes I know I am the best when it comes to finding obscure and unknown references or names)? First of all because it lasted longer (from 1731 to 1813, even if no ships were sent from 1807 on) and also because it was quite successful.

Successful, I hear all of you saying but we never heard of it. How can a company be successful and leave nothing but a ship in the memories of Western people?

To show how successful it was, I will give you some raw data of the number of ships sent to China (almost all those listed below were heading towards this country), the pounds of tea shipped back (mostly to be smuggled back to Great Britain) and the pounds of tea officially sold by the East India Company in the same country.

To understand these figures, you have to know that in 1784, the Commutation Act was passed in England reducing the taxes on tea from 119% to 12.5% (thanks to Richard Twining of the Twinings Tea Company) and in these times, news were slow to move from one country to another and the ships of 1785 might have been sent without any knowledge of this Act.

Year

Number of ships sent

Pounds of tea shipped

Pounds of tea sold in Great Britain by the EIC

1767

2

3 066 143

4 681 891

1768

2

3 186 220

6 668 717

1769

1

1 494 509

7 984 684

1770

2

3 076 642

7 723 538

1771

no account

3 000 000

5 566 793

1772

2

2 746 800

5 882 953

1773

1

1 489 700

2 571 902

1774

2

4 088 100

5 687 384

1775

2

2 562 500

5 475 498

1776

2

3 049 100

3 763 540

1777

2

2 851 200

4 304 277

1778

2

3 258 000

3 402 271

1779

2

2 626 400

5 457 138

1780

3

4 108 900

5 588 315

1781

2

3 267 300

3 578 499

1782

3

4 265 600

4 166 854

1783

3

4 878 900

3 087 616

1784

none

8 608 473

1785

4

6 212 400

13 165 715

1786

1

1 747 700

13 985 506

Total

40

60 976 114

121 351 564

Average cargo per ship sent

1 524 403

Year

Number of ships sent

Pounds of tea shipped

Pounds of tea sold in Great Britain by the EIC

1787

2

2 890 900

14 045 709

1788

2

2 589 000

13 429 408

1789

none

14 537 967

1790

none

14 682 968

1791

1

1 591 330

15 090 781

1792

1

1 559 730

15 821 101

1793

1

756 130

15 833 660

1794

none

16 642 448

1795

2

2 759 800

17 794 897

1796

none

16 549 563

1797

2

1 406 200

16 319 254

1798

1

1 408 400

18 808 617

1799

1

444 800

19 910 292

1800

2

2 202 400

20 358 827

1801

none

20 022 261

1802

2

1 427 067

21 837 698

1803

none

21 647 922

1804

2

2 352 666

18 501 904

1805

none

21 025 310

1806

none

19 655 973

Total

19

21 388 423

352 516 560

Average cargo per ship sent

1 125 706

Ships sent to China by the SOC with the pounds of tea shipped back compared to the pounds of tea sold in Great Britain by the EIC from 1767 to 1806 (source: Oriental Commerce by William Milburn, 1813)

Now since you all know that Sweden is not the most Western or maritime country in Europe, you will probably ask why did they venture on these high seas and why were they so successful?

I heard you in the back, the answer is not “because they are Vikings”.

Money is the answer as after the Greath Northern War (1700-1721), Sweden, the former Baltic Sea major power, was impoverished and trade was seen as one of the options to help the country recover.

It didn’t go without all kinds of struggle as at first tea and porcelain were seen as “poor goods” to be traded for the traditional and well-known timber and steel. Furthermore, the nascent Swedish textile industry saw the Asian textiles as direct competitors and wanted to avoid it.

Part of the solution came from the closing of the Ostend Company as English and other foreigners who could not trade via foreign companies had to find a new “home” to help them make some profits.

Following a discussion in the Sweden Parliament, the company was formed in 1731 and was given a royal chart for at first 15 years.

What set it aside from the other Indian Companies in the different countries? First of all, secrecy was to be maintained around the shareholders and finance (ie the books were burned at the end of each trip). Why? Because all countries forbade their citizens to trade with Asia without going through their “national” companies, which were not able to satisfy every demand (and the potential profits were also hampered by high taxes).

They could also not trade in any port belonging to any State in Europe, unless they had been authorized by the local authorities to do so.

The other rules were shared by the other companies and as such I will only list them: all departures and arrivals were to be made from Gothenburg, the Swedish State taxed everything, the ships were to be built and outfitted in Sweden and at first the subscribers were only in for one trip (this changed in 1753).

The ships when at sea followed a specific trade routine. Leaving Gothenburg with iron, copper and timber, they headed towards Cadiz in Spain to trade their goods for Spanish (or should I say South American) silver (the company being prohibited to use Swedish coins, remember mercantilism?), which was the basis of the trade with Asia. From there, it sailed mostly to China, bringing back tea (and some other items like porcelain).

What made this company so successful?

My analysis (but after all if you have read up to now, it is because you want to read it or because you thought this was about Vikings selling teas) is that they made it because they had good leaders, they focused on one niche with potential and didn’t try to fight too openly those already on the market.

For the good leaders, one just has to look at its founders: you have some Scots merchants, some former Hanseatic ones and some Swedish ones. Some had experience with the former Ostend Company (and thus with Asian trade), others with European trade and others were well connected but all of them were men of experience that wanted to get more money from trading.

For example, Colin Campbell was a Scot merchant that had a huge debt to pay and that wanted to pay it (see http://en.wikipedia.org/wiki/Colin_Campbell_%28Swedish_East_India_Company%29).

The focus on the niche is obvious when looking at the value split of the cargo at Gothenburg. Most of the times, 90% of it was tea, a good that could be easily put into a ship in good quantities, had a market with people ready to pay for it (thanks to the high taxes), something that ensured a good return on investment since with less cost per pound (more on that in a few lines) you could sell it under the official price (but still with a good margin) and know that you would be able to sell everything.

The benefits of not fighting openly those already on the market part were twofold. On the one hand, by deciding not to “colonize” or create “factories”, the Swedish East India Company was probably seen as a lesser threat to the big players (see the numerous and costly fights between the Portuguese, Dutch, English and French for the control of the Indian sea and the Asian trade) and on the other hand, it avoided the extra burden of having to build fortifications, keep garrisons, wage wars… Hence the less cost per pound of cargo unloaded.

All this made the SOC, a successful and profitable company until the British government decided to drop the tax level bringing the “official” tea back into the competition and making smuggling not worth the cost.

This was one market evolution too much for the SOC, a company that had put all its eggs in the same basket and wasn’t able/willing to find new waters to swim in them.

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Xavier

My name is Xavier.

I live on the other side of the pond but you had probably found this out thanks to my “strange” English.

I am a tea addict and I studied several (and I do mean several) years ago marketing, hence this blog, which will try to combine both worlds.
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