Bitter Brew: The Rise and Fall of Anheuser-Busch and America's Kings of Beer Part 12

He told her that she could continue to drive the white Lincoln, but "you may not use any other Grant's Farm vehicles." Nor could she call upon the services of any member of the Grant's Farm staff, including the children's longtime nanny, Yolanda. "As of this date, I have terminated the employment of Yolanda Gloggner," Gussie wrote. "I am also advised that her lease for an apartment at the Bauernhof has been terminated." It was breathtakingly brutal. He was doing to Trudy exactly what August and the board had done to him.

Trudy obtained an injunction barring her eviction, and she remained in the Cottage while her lawyers and Gussie's slugged it out in court filings. But as lord of the manor, Gussie continued to torture her by, among other things, ordering his security guards at the front gate to search the trunk of her car whenever she drove off the estate, lest she attempt to remove any of his "personal property." At one point, when Trudy's brother Kurt traveled from Switzerland to visit her, the guards barred him from entering. Trudy was so incensed that she uncharacteristically complained to the press. "I think it's time this was exposed," she told a reporter from the St. Louis Globe-Democrat. "I was always hoping we could have an amicable reconciliation, and when that became impossible, an amicable divorce. But when it comes to my brother coming all the way from Switzerland for only three days.... I was horrified to understand when I came to the gate that my brother was not allowed in.

"He is the only uncle my children have, the only close relative my children have. I need someone from my family to help me. I cannot understand. To me, refusing him entrance is just totally diabolic."

Gussie's response to her public outburst was, "I have no comment."

A divorce was granted on February 28, 1978. Trudy came to court wearing a black dress and knee-high black boots, but Gussie didn't make an appearance. He was home recovering from a recent hip surgery. Under the terms of the settlement, Trudy received an undisclosed amount of cash and stock, and monthly maintenance for the rest of her life or until she remarried. The agreement also provided for a new home and a trust fund for her, in accordance with a prenuptial agreement.

On her way out of court that day, Trudy smiled for reporters and said graciously, "It is not a bitter divorce. I am glad we have had such great children, and I've had marvelous years with my husband."

Her children would not have agreed with her sunny a.s.sessment at that moment. In truth, the divorce had shattered the family. Divided by their loyalties, the six surviving siblings ceased functioning as a unit and began to scatter: Beatrice returned to college; Trudy moved into her mother's new home; Peter, Billy, and Andrew remained in the big house with Gussie; Adolphus had taken up residence at Belleau Farm.

"This became my sanctuary," he said, sitting in the rustic kitchen thirty-three years later. "I couldn't stand being at Grant's Farm anymore. And I was torn because Dad would always call and say, 'Please, you have to spend more time with me.' But it hurt me so badly to see him."

It would be seven years before he spoke to his mother again. "It was sad to see all of that crumble before your eyes," he said.

11

"WE ARE AT WAR"

The first real test of August's leadership came on March 1, 1976. The company's contract with its Teamster-affiliated bottlers expired at midnight, and picketers from bottling locals in Jacksonville, Florida, and Columbus, Ohio, appeared at the Pestalozzi Street plant just before dawn. Within hours, the Teamsters had shut down eight Anheuser-Busch breweries, idling eight thousand workers.

The issues in the strike had to do not with money but with the grievance and arbitration process and a demand by the Teamsters that they be given a say in any plant automation changes that might affect the number of union jobs. August sensed that the strike would be his crucible. He no longer had his father looking over his shoulder, second-guessing him, criticizing, interfering, undermining or countermanding his decisions. Now it was his photo on the first page of the annual report, his signature on the letter to shareholders. Newspapers and magazines could no longer refer to him as "young Busch." At long last, the kid had become the king, and it was up to him to rule.

When the picketers appeared, August was ready for them. A-B had built up its inventory in antic.i.p.ation of the strike, and had a thirty-day supply of beer on hand. The company also had an unlikely ally.

The Brewers and Maltsters Local No. 6 was the second-largest union on the Pestalozzi Street premises, representing approximately 1,000 of the plant's 4,000 hourly employees (Bottlers Local 1187 represented 1,490 employees). Local 6 members had recently ratified a new three-year contract that gave them a wage increase of $2.25 an hour. It was "the best economic package in the history of the brewing industry," according to their business manager, Robert Lewis. As a result, Local 6 members honored the out-of-towners' picket line grudgingly.

"My people are bitter about being involved in this," said Lewis, who was furious at the leaders of his parent union, Teamsters International in Chicago, for calling a strike over such sidebar issues. In addition to the pay increase, Lewis had negotiated an employee stock-purchase plan that he believed "could be revolutionary" in the industry. "Now the average worker is going to be concerned with profit and loss because it will affect his investment," he said, noting that Anheuser-Busch had since incorporated the stock-purchase plan into eighteen of its thirty-three union contracts. The Teamsters' action threatened "everything we have gained," he said.

Lewis gave most of the credit for the stock-purchase plan to August, whom he had publicly blamed for the 1969 strike and once characterized to reporters as "biologically incapable of doing his job." In the intervening years, however, the two had taken Gussie's advice and learned to get along, to the point where they now considered themselves friends.

For the most part, Anheuser-Busch had a history of good relations with its craft unions, dating to the days before the turn of the century when the mostly German-born plant employees were part of the city's tight-knit German-American community, which made up the bulk of the local beer drinkers. Back then, if you angered your workers, you ran the risk of losing your customer base. As a result, labor disputes tended to be settled quickly. In June 1881, for example, five hundred workers at the Pestalozzi Street plant went on strike after management rejected their demand for shorter hours and higher pay. They labored from 4:00 a.m. to 7:00 p.m. seven days a week, at a salary of $55 to $75 a month, with free lunch furnished at 10:00 a.m. and 4:00 p.m., and a daily allowance of twenty free beers per man. They wanted $5 more per month, a company-furnished breakfast at 6:00 a.m., and three hours off on Sunday morning to go to church. (Apparently, they considered the beer ration sufficient.) After a short work stoppage, they got what they wanted.

Not this time. When the bottlers' strike reached its twenty-third day, Anheuser-Busch announced that it would begin making beer with the help of nonunion "supervisory" personnel. On August's order, the St. Louis facility transferred eight hundred office workers, accountants, and other salaried personnel to beer production and began brewing and bottling Budweiser, Busch, and Michelob for shipment.

August was especially eager to keep his St. Louis wholesalers supplied because Miller was taking advantage of the strike to flood the city with its product. One Milwaukee trucking company alone was bringing three 40,000-pound loads of Miller beer into St. Louis every day.

The Teamsters International in Chicago was stunned at August's audacity. The union's chief negotiator said it was the first time in more than eighty years that a brewer had attempted to make beer in the midst of a strike.

"This is nothing but scab beer," fumed Art Barhorst, the business manager for Local 1187, who claimed the brewery was forcing office workers, "including typists," to help break the strike by "threatening them with firing." A spokesman for the brewery countered that the employees were happy to be making the additional money that came from working twelve-hour shifts. In all, nearly three thousand salaried employees nationwide joined in the effort to keep the beer flowing.

Violence flared as strikers attempted to prevent trucks from leaving the plant and distributorships. A security guard fired a shot at strikers after an explosion blew a hole in a door at Lohr Distributing, the main A-B wholesaler in the city of St. Louis. The wife of Lohr's sales manager received a threatening phone call telling her, "We have your husband prisoner now." At Grey Eagle Distributing in St. Louis County, a fully loaded beer truck was overturned. Windows were broken at a liquor store. More than twenty strikers were arrested in the various incidents.

Art Barhorst defended the lawbreakers with some overblown rhetoric that seemed borrowed from the epic management-labor battles of the early 1900s. "When a man sees his job being jeopardized and his family going hungry, he reacts in other-than-normal manner," he said. "Any violence at the Anheuser-Busch plant is a direct result of the company's actions to destroy our union, and they must bear the weight of responsibility."

Despite the incidents, Anheuser-Busch managed to maintain 62 percent of normal production with its salaried employees, which prompted Robert Lewis to unleash an angry broadside at the Teamster leadership. "Teamsters International has brought on a situation that organized labor in various industries will have to live with from now on," he said in a lengthy interview with the Post-Dispatch that produced the front-page banner headline "Beer Strike May Have Broad Labor Impact."

"This strike has proved that unions no longer can effectively close down management," Lewis said. "Anheuser-Busch is producing beer as if the situation is normal, and because of that this strike may be an encouragement, an incentive, to management in other industries to take on organized labor. We feel at this point the strike has been lost."

And so it had. On June 4 the bottlers returned to work, having agreed to almost the same contract offer they'd walked away from at the end of February. The strike had lasted ninety-five days, making it by far the longest in A-B's history. It had cost the company a 4 percent drop in market share and an estimated $30 million in net profit. But August considered it an important victory, both for the company and himself.

"The union pushed us to the cliff," he said. "They wanted written into the contract that they would have the right to approve or disapprove any changes in production before we could implement them. They would manage our production, not us. It was a test of me. It was the first time they had to deal with me on the front line."

He showed his grat.i.tude to the salaried workers who'd become temporary brewers and bottlers by giving them $1,000 bonuses, in the form of twenty-two shares of A-B stock and $356 in cash. This of course angered the union employees, who regarded it as an in-your-face payment to scab labor. It didn't help matters when, a few weeks later, August sent a letter to shareholders, executives, and administrative (nonunion) personnel, announcing that the company was forming a political action committee. Called AB-PAC, it would offer "you and me an effective, practical way to join forces and pool our financial support in a concerted effort to elect qualified candidates who will be willing to listen to the industry's point of view and support it."

While AB-PAC would be noncompulsory and nonpartisan, he made it clear that its "qualified candidates" were not likely to be union-loving Democrats:

"For years, labor and other special interests groups have been deeply involved in the electoral process by endorsing candidates and providing them with substantial financial support. American business has, however, been severely limited in the extent to which it could take part in this process. The result has been a gradual but constant erosion of the free enterprise system, a system we believe to be the basis for the future well being of this country and its citizens."

The unions took the announcement as a shot across the bow, signaling that A-B would be taking an even harder line in the years ahead. A company spokesman hurried to dispel that notion, saying August's statement had nothing to do with the strike and that labor was only mentioned "out of respect for the effective way some labor organizations have taken part in the political process."

August recognized that he had continuing problems with his labor force. "A strike leaves scars," he told shareholders at the company's annual meeting. "The att.i.tudes of people are understandably affected by the tensions and ill will generated by picket lines and the operations of plants. It is important that these att.i.tudes be replaced with feelings of mutual respect."

He began a concerted effort to bind up the wounds, launching a series of meetings at every brewery, inviting salaried and hourly employees and their spouses to hear executives present a comprehensive review of the state of the company and the brewing industry, and explain in detail A-B's financial and marketing strategies. He tapped Denny Long to help drive the effort, figuring that Long's working-cla.s.s bona fides would play better with the rank and file than his own ruling-cla.s.s resume. "You are one of them," he said.

Long quickly saw that the union workers didn't consider themselves part of the company. During an employee meeting in Houston, a group of union workers still unhappy with the recent settlement stood together in the back of the large auditorium rather than sit with the nonunion workers. They weren't hostile, just wary, uncomfortable. So Long stepped away from the podium, and with the microphone in his hand walked to the back of the room and stood among them.

"Tell us what you need," he said.

"To be recognized," one bottler replied.

"Give me an example," said Long.

After a pause, another bottler said, "We need a place to play team softball."

Long knew they were testing him with a minor annoyance, but he turned to the plant manager and said, "Give them a field." Afterward, he said to August, "We have to get them working for us, and to do that we need a common enemy."

As it happened, there was one handy. Since 1972, Miller's annual output had gone from 5 million barrels to 18 million. The brewery had upped its production by 5 million barrels in the last year alone, the largest single-year increase in the history of the industry, and seemed certain to take over the No. 2 position behind A-B in the coming year. Funded by the deep pockets of Philip Morris, Miller was committed to a billion-dollar expansion program that included building a monster brewery in North Carolina capable of pumping out 10 million barrels a year. The company claimed its overall capacity would reach 40 million barrels a year by 1980. In Denny Long's view, "They were coming at us like a fast-moving freight train."

Which is why he thought Miller could be the unifying factor A-B needed. They just had to drive home the point to the union members: it wasn't management or their salaried coworkers that threatened their livelihood; it was Miller Brewing. "Let's not fight among ourselves," he urged at the employee meetings. "Let's fight them."

Long came up with the idea of distributing T-shirts to all St. Louis plant employees, emblazoned with the declaration "I Am a Miller Killer." The white shirts with bright red lettering were so popular that workers in other plants began clamoring for them. Back in the days before August tapped him to be his a.s.sistant, Long had run what was known as the company's Standards Department, a group of young time-and-motion specialists that conducted studies aimed at making plants more efficient and productive. At the time, they were regarded suspiciously as management "tools," looking to reduce costs by eliminating jobs. Now, in the new "Miller Killer" environment, the standards people were seen in a new light, perceived as team members, partnered with the plants' industrial engineers in the battle against their common enemy, Miller.

The Miller Killers increased productivity by 20 percent nationwide, with minimal capital expenditures. August seized on the theme of teamwork as the hallmark of the new Anheuser-Busch. Under his father, the company often had been characterized as a "family," but never as a team. Like an overbearing parent, Gussie led by edict-"Because I said so, G.o.ddammit"-and August had seen the dysfunction that resulted. So teamwork became his favorite word, and a spontaneous display of esprit de corps could melt his normally frosty demeanor and make him go almost misty-eyed. (A psychologist might say this was connected to his being a loner as a kid and never partic.i.p.ating in team sports.)

While Anheuser-Busch management was distracted by the strike, the American media fell in love with Miller Brewing. Business reporters were drawn to the story of the company's spectacular growth and its clever jock-filled TV commercials, and they invariably succ.u.mbed to the quotable Irish charm of Miller's CEO, John Murphy, whom the company PR department pitched as "the man who took Miller High Life from the champagne bucket to the lunch pail without spilling a drop." Murphy relished the spotlight, dropping bons mots such as, "Every Irishman dreams of going to heaven and running a brewery." He seemed to revel in taunting Anheuser-Busch and its p.r.i.c.kly new boss, showing reporters the voodoo doll named August that he kept in his office and the foot rug under his desk displaying the A & Eagle logo. "Ours is a simple objective," he told Newsweek. "It's to be No. 1." He hinted that he had a specific date in mind when it would happen, but he just couldn't reveal it yet.

Naturally, reporters repeated Murphy's gibes to August, who was unable to resist the bait, responding testily (and memorably) to a Business Week reporter, "Tell Miller to come right along, but tell them to bring lots of money."

August didn't fully realize how tough the fight with Miller was going to be until he focused his attention on A-B's marketing effort. For the most part, the company had been doing the same thing for years-pitting its long-established brand (Budweiser) against another long-established brand (first Pabst, then Schlitz), with a familiar message (natural ingredients equal quality) aimed at a familiar customer (the monolithic male beer drinker). The formula had worked well enough to keep Anheuser-Busch in first place for twenty straight years.