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CHAPTER 77

1893, 1907, 1929 and Today

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By Margaret Gurowitz
Feb 10, 2009

Recently, Johnson & Johnson Chairman and CEO William Weldon told investment analysts that, due to the strength of the Company’s leadership, our broad base of business and our fiscal discipline, he remained optimistic about our ability to adjust to the current evolving economic conditions.  He also mentioned that, thanks to the people at Johnson & Johnson, the Company has managed through difficult economic cycles many times throughout its history.  So while the past may have little or no bearing on current or future events, I thought it would be interesting to take a look at the difficult economic cycles in 1893, 1907 and 1929, and how the Company steered through those times…by looking at the bigger picture and managing for the long term.

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Old Johnson & Johnson Plaster Mill with Delaware & Raritan Canal in Foreground, 1893

The Panic of 1893

During the Panic of 1893, Johnson & Johnson had been in business for only seven years.  In those seven years, Johnson & Johnson had expanded steadily, adding more products, more employees, and pioneering the first-ever First Aid kits and improvements in sterilization methods for its surgical dressings and sutures.  Robert Wood Johnson the first was president of the Company, and a new product was introduced that year that would have a huge impact on our business… JOHNSON’S® Baby Powder.  The Company, like the country, was doing well, and the Johnson brothers’ first-ever mass produced sterile surgical dressings were causing surgical mortality rates to drop in U.S. hospitals…because the availability of the Company’s aseptic dressings and sutures made it possible for more and more surgeons to adopt antiseptic surgery.

The 1880s had been a time of incredible economic expansion and optimism in the U.S.  But over time, that expansion became driven by speculation, leading to a railroad bubble.  Railroads were the hot industry of the day, and they greatly over-extended themselves, causing widespread bankruptcies, bank runs and a credit crunch.  A series of railroad and bank failures rippled across the United States.  It’s estimated that over 15,000 companies and 500 banks failed, leading to high unemployment at the worst of the crisis.  The unemployment plus loss of savings due to failing banks left a huge chunk of the middle class unable to pay mortgages, forcing many families to walk away from their recently built homes.  (Stop me if that sounds even slightly familiar.)

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Robert Wood Johnson, one of the Company's three founding brothers

Fortunately for Johnson & Johnson, the medical products business was steady.  From the beginning of the Company, Robert Wood Johnson the first had put in place a group of strong managers who kept Johnson & Johnson focused on its larger goals during the Panic of 1893-1896.  Due to the prudence of its management and its focus on new areas of business (like Baby Powder) and constantly improving its products, the Company was able to weather the crisis.  At the end of 1894, employment at Johnson & Johnson had risen (to 400 employees), and the Company had grown to occupy 14 buildings.  Factory output was up sharply, with Johnson & Johnson producing 4,000 pounds of cotton and 15,000 pounds of plasters per day, and 3,500,000 yards of gauze a year.

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Johnson & Johnson Employees, circa 1890s

The U.S. economy recovered in 1896, leading to ten years of growth.  But in 1907, the country, and Johnson & Johnson, faced another economic downturn.

The Panic of 1907

In 1907, there was another economic crisis, this time called The Panic of 1907. (Before 1929, these crises were called “panics,” until President Herbert Hoover decided it would be less alarming to call the 1929 crisis a depression instead.)  The Panic of 1907 was triggered by a failed stock-cornering scheme that led to the downfall of one of New York’s largest trusts.  The New York Stock Exchange fell almost 50% from its high in 1906, leading to bank failures, business bankruptcies, and runs on banks as frightened depositors withdrew their money. The crisis would have been worse had financier J. P. Morgan and others not intervened to prop up the banking system.  Johnson & Johnson was 21 years old at the time, still with Robert Wood Johnson the first as president.  The Company had continued to grow steadily and in 1906 had formalized its benefits for employees into the Employee Welfare Department, which included pensions, insurance coverage, medical and social benefits, educational classes and more.  Like other companies, Johnson & Johnson was affected by 1907’s financial panic, and instituted some temporary belt-tightening measures like shorter hours and lower paychecks.  With its eye still on long-term goals, and because it hadn’t taken the kinds of unnecessary risks that led to trouble for other companies, Johnson & Johnson was able to continue a plant expansion and, in 1908, opened a large addition to its Cotton Mill.

cotton-mill-addition-1907

1907 Addition to Cotton Mill.  For those familiar with New Brunswick, NJ, the dirt road in front of the building is George Street.

After the economic recovery, Johnson & Johnson continued to grow and expand, adding new products and more manufacturing capacity.  The extraordinary demands for dressings during World War I led to the purchase of the Chicopee Manufacturing Company in 1916.  In 1919, the Company opened its first international affiliate in Canada.  Five years later, due to a well-researched worldwide fact-finding trip by the future General Robert Wood Johnson and his brother (as the sons of Robert Wood Johnson the first, they represented the younger generation of management), the Company opened its first overseas affiliate in the U.K. in 1924, thus starting our decentralized global expansion.

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Seward Johnson (L) and the younger Robert Wood Johnson (R) in Egypt during their 1923 fact-finding trip

The Great Depression

On February 1, 1927, 33-year-old Robert Wood Johnson (son of Company founder Robert Wood Johnson the first) was elected to the Company’s Board of Control, the forerunner of today’s Executive Committee. The mood in the United States was optimistic (it was the height of the Roaring Twenties), more and more people were investing in the stock market and, on the surface, everything seemed good.  But Johnson became concerned during the summer of 1928 because U.S. industrial production and consumer spending were starting to lag, and he urged management to curtail all major spending.

poor-mans-plaster

On Thursday, October 29, 1929 – Black Thursday – the stock market collapsed…and the nation was officially in the grips of the Great Depression, which worsened over the next few years into a worldwide crisis.  Massive bank failures caused runs on banks, and many small and large businesses failed. U.S. unemployment reached a high of 25 percent – one in every four working Americans was without a job – and soup kitchens and bread lines became a common sight.

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Robert Wood Johnson

On February 4, 1930, in the middle of this mess, Robert Wood Johnson was promoted to vice president and general manager of Johnson & Johnson, with his uncle James still as company president.  Faced by growing threats to the business, Johnson adjusted:  he shortened work shifts, eliminated Saturday work (it was common back then for working hours to extend to Saturdays – the elimination of Saturday work was one of the changes caused by the Great Depression) and he asked production employees to take three-day weekends twice a month, among other belt-tightening measures.  Those actions were mild compared to what was happening at other companies, and they reflected well on the Company’s policy of focusing on the long-term, bigger picture, the crucial nature of the business it was in, and on the reserves it had built up.  Due to the Company’s smaller size, the unique situation at the time and the measures it was able to take, no jobs were lost at Johnson & Johnson during the Depression.  In 1932, Robert Wood Johnson succeeded his 76-year-old uncle James as president of Johnson & Johnson.  In 1933, six weeks before Franklin Delano Roosevelt was inaugurated, the new president of Johnson & Johnson sent Roosevelt a letter outlining his ideas for a plan for the nation’s economic recovery.  In the letter, Robert Wood Johnson suggested a federal law to increase wages and reduce working hours for American workers.  This proposal was contrary to what most industrialists of the time were saying and, needless to say, it received widespread attention in the newspapers of the day.

During the years of the Depression, both sales and growth had slowed at Johnson & Johnson.  But Robert Wood Johnson and his management continued to look for opportunities…including opportunities to continue the careful and judicious global expansion when the business was large enough in a given region, leading to operating companies in Mexico, South Africa, Australia and Europe during this time period.  Seeing another opportunity in decentralization, in 1934 the Company opened a large manufacturing plant in Chicago, the first major domestic facility outside of New Brunswick.

Now that Robert Wood Johnson had reached the top position in the Company, he would put into practice many of his ideas about running a business, which helped get Johnson & Johnson through the Great Depression, and would greatly expand the business in the future and lead to the writing of Our Credo.  To find out what some of his ideas were, stay tuned for my next post.

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Carrie
MARCH 23, 2009 12:35 PM

Hello, My name is Carrie and I'm researching Johnson & Johnson for my business management class. This will be one of many e-mail I suppose. What I am looking for is How is Johnson & Johnson adapting to this horrible recessionary environment? It is such a tried and true, trustworthy company and obviously will survive as it has been around for over 100 years.

Margaret
MARCH 23, 2009 02:45 PM

Hi Carrie,

As mentioned in my post above, the Company is continuing to focus on the bigger picture and manage for the long term, consistent with how it was managed during previous economic downturns. For a closer look, I'm referring you to our Chairman and CEO William C. Weldon's letter to shareholders starting on page 1 of the 2008 Annual Report, which just came out recently:
http://files.shareholder.com/downloads/JNJ/509991472x0x279165/27509B47-3E17-454B-8E4E-54F07D09A668/2008_JJ_Annual_Report.pdf

Amanda
JUNE 10, 2009 05:50 PM

Hello my name is Amanda. Someone recent gave me an old Johnson and Johnson's baby powder container from an old house they were cleaning out. Does anyone know where I could find a website with pictures of all the old containers so I can try to figure out how old it is? I do know thanks to this scite that is atleast before 1963 because it's a metal container and the containers became plastic in 1963. Thank you!

Margaret
JUNE 11, 2009 10:48 AM

Hi Amanda,

That's a great way to get vintage product tins. I once received an old Johnson & Johnson First Aid Kit from the 1920s the same way. If you e-mail me a picture of your tin, I will try to identify the timeframe it's from. The blog's email is having a few technical difficulties right now, so you can reach me at mgurowi@its.jnj.com

Margaret

Jennifer
AUGUST 10, 2009 01:46 PM

Hi I have an old johnson and johnson tin first aid kit with the stuff still in it. it's black and still in good shape. the medical book inside of it is copy writed 1933. please let me know anything you could tell me on it. Thank you.

Margaret
AUGUST 10, 2009 03:31 PM

Hi Jennifer,

Without seeing a picture of your First Aid Kit, it's difficult to say, but since the First Aid Manual inside it is dated 1933, if the Manual is original to your First Aid Kit, it's safe to assume that your Kit is from 1933, and was made during the Great Depression. The oldest Kits were black, and later we started making the cases in other colors, such as blue and white. First Aid Kits were invented by Johnson & Johnson in 1890 in response to the need for on-site treatment for railroad workers laying cross-country railroad track in America. Demand for the kits soon expanded and there were First Aid kits for the home and for offices and factories, and a law was passed that every public building had to have a First Aid kit. When automobiles and airplanes came into use, Johnson & Johnson made First Aid kits for those as well. After years of research into the best ways to provide on-site care for injured or ill people, Johnson & Johnson came out with the first ever First Aid Manuals in 1901, which were then included with the First Aid Kits.

Hope that's helpful,

Margaret

Mark Stewart
NOVEMBER 16, 2009 11:19 AM

I am looking to purchase a 1930's vintage first aid kit by J&J to put into my 1936 airplane. The airplane came from the factory with the kit bolted to the left rear floorboard. I know it was by J&J, and that it was a tin box, size is thought to be about 6" long, 4" wide and 2" tall, but that is all I know. Can you help me?
Many thanks,
Mark

Margaret
NOVEMBER 16, 2009 01:18 PM

Mark,

How great that you have a 1936 airplane that had a Johnson & Johnson First Aid Kit installed from the factory! The Company did make "Aerokits" that were designed to be in an airplane, and your kit may have been one of those. Those kits were designed to be smaller and lighter, for obvious reasons. Unfortunately, we don't offer vintage products for sale. Your best bet would be to search e-Bay or other online sites, and to visit antique stores to see if you can locate a replacement kit. Incidentally, Charles Lindbergh took a Johnson & Johnson First Aid Kit on his historic flight aboard The Spirit of St. Louis. The kit is in the Smithsonian's National Air and Space Museum. Here's a post I did with a photograph: http://www.kilmerhouse.com/?p=985

Good luck in your search!

Margaret

Elayne
FEBRUARY 06, 2010 01:14 PM

I have a very old"wooden " cylindrical container for plaster. Made by Johnson & Johnson.It reads across the top-Plaster for Chiropodists. With "N O" across the top. I can not find this anywhere on the net. If you could give me any kind of info on this. I would SO GRATEFUL!! Thank YOU. ELAYNE.

Margaret
FEBRUARY 08, 2010 03:52 PM

Elayne,

Without seeing a picture of your container, it's hard to say. Are the letters across the top "N-O" or "Z-O"? If you are able to, please send me a photo of your container through the blog's mailbox, and I will try to track the date down for you. If you go to the "About the Blog Author" page, there is a link there to email me.

Thanks,

Margaret

Elayne
FEBRUARY 08, 2010 09:25 PM

Thank you so much for responding to my question. I will send you an Email as quick as I can with a picture. I have dial-up,so it will take a bit to upload.And yes,it is "Z O" on the top,not "N O".ELAYNE

Dawn Williamson
OCTOBER 20, 2012 01:53 PM

I have a Johnson & Johnson Chiropodists Adhesive Felt Thick (Approx. 1/8 Inch) RUBAD container marked 1 Yard, 7 Inches. The top is metal, round tube cardboard with a metal bottom. Do you know when this was made or how rare it might be?

Margaret
OCTOBER 21, 2012 08:56 PM

In reply to by Dawn Williamson

Hi Dawn,

I will check our archives for more information and let you know! I will post the answer in the comments in a few days.

Margaret