Bitter Brew: The Rise and Fall of Anheuser-Busch and America's Kings of Beer Part 13

But a lot had changed since Gussie's time. The latest research showed that 30 percent of beer drinkers actually consumed 80 percent of the beer. They were generally twenty-one- to thirty-four-year-old males, mostly blue collar, but including a growing number of college students. Unlike their forebears, they didn't down the bulk of their beer in bars; they bought it in liquor and grocery stores and consumed it at home at the rate of 10 million six-packs a night, usually while watching some sort of sports program on television. Their taste in beer varied according to their ethnicity. And, as the success of Miller Lite proved, they were not so brand-loyal that they wouldn't try a new product, even something as sissy-sounding as a "low calorie" beer.

Given the research, A-B's best marketing strategy going forward seemed a no-brainer: create ad campaigns that targeted those "heavy male users" and air them during nationally televised sporting events. So August convened a meeting of all the marketing executives on a Sat.u.r.day morning in Denny Long's office. He wanted to know what sporting events A-B was sponsoring, and what else was available. The marketing guys sheepishly explained that the sponsorship rights to all the major network sporting events-the World Series, the Super Bowl, Monday Night Football, the College Football Game of the Week, the NBA playoffs, the Stanley Cup, Wimbledon, the Moscow Summer Olympics, the Indy 500-had been bought up by other brewers, including, um, Miller. The A-B marketing department had evaluated the cost of those sponsorships and decided they were too expensive.

August was astounded, and furious. He ordered the marketing people to contact each of the approximately 950 A-B wholesalers in the country and have them fill out a form that listed every sporting event that took place in their market, noting which ones were already sponsored and by whom, and which ones were still available at what price. He wanted all the information sent to St. Louis within a week.

The results of the frantic fact-gathering were presented during a four-day conference at the Quality Inn in Fort Magruder, Virginia, a few miles from the Busch Gardens resort in Williamsburg. In the hotel's ballroom, banquet tables were arranged in a square with August and Denny Long seated at the head table that transversed the front of the room. At each seat there was a note tablet emblazoned with a logo of an eagle swooping down on its prey with talons exposed, and the slogan "A Sense of Urgency." Next to each tablet was a baseball cap with the letters "ASU" st.i.tched above the brim. The caps and the attacking eagle, which were Long's idea, gave the proceedings a military feel, as if they were about to embark on a dangerous mission. In a way, they were.

They went through the list of sporting events property by property as two media buyers from the ad agency D'Arcy, MacMa.n.u.s, Masius Advertising manned phones at a table in the corner. The NCAA basketball tournament was taken, but how about the National Catholic Basketball Tournament? "What's the cost?" August would ask. If the price were right, he'd bark, "Buy it!" Alabama football? Buy it! Notre Dame basketball? Buy it! And so it went. From the smallest college football game to the most obscure sport (hydroplane racing, hot air ballooning, water polo), he bought sponsorships by the barrel full, several hundred during the four-day conference and eventually thousands. He envisioned making Anheuser-Busch synonymous with American sport by planting the company flag at every compet.i.tive event in the country. If there was a three-legged sack race being cheered on somewhere, then, by G.o.d, there had better be a Budweiser sign at the finish line. And when the sponsorship rights for the major network sports contests became available again, he expected A-B to wrest them from Miller's grip no matter what the cost. Toward that end, he doubled the advertising budget, raising it to $100 million for 1978, matching what Miller claimed it was spending. "There is little choice for either of us," he said, "for we are at war."

Much of the burden for wrestling sports sponsorships away from Miller and other brewers, and for forging relationships with all teams in the major professional sports, fell on Michael Roarty, the vice president of marketing. Fortunately, he seemed ideally suited for the task. Exuding even more twinkly-eyed Celtic charisma than Miller's John Murphy, Roarty was A-B's designated MC and unofficial amba.s.sador of bonhomie. Fellow Irishman Denny Long described him as a shanachie, a Gaelic word meaning "storyteller." He was an open tap of stories, jokes, and anecdotes, the guy everyone wanted to sit next to at dinner. "There is a charm about him that is almost hypnotic," a reporter once said.

Roarty turned that charm on the growing list of famous entertainers and sports figures A-B contracted to promote Bud and Bud Light, mixing easily with the likes of Paul Newman, Roger Maris, and Bob Hope, with whom he became particularly close. "He was in charge of intangibles," his good friend Long said many years later, chuckling. "I never cared for that stuff, and August couldn't bear it, but Michael loved it, and he was brilliant at it."

There was no question that the Miller Lite blitzkrieg had taken Anheuser-Busch by surprise. As Miller rolled out its new "less filling" beer in 1975 and 1976, August and some of the A-B bra.s.s scoffed at the very idea of light beer and claimed they had no intention of introducing their own low-calorie brand to compete. "We think our beer is light enough," said vice president of brewing Andrew Steinhubl, who repeated the company line that any weight gain among beer drinkers was probably due to the fact that beer enhanced people's appet.i.te and had nothing to do with the calories in the beer itself. August predicted to his executive team that Miller ultimately would fail.

So it was doubly embarra.s.sing when Miller Lite proved an unqualified success, with five million barrels shipped its first full year on the market. A-B responded by introducing two new brands in 1977-Natural Light and Michelob Light. But because of management's earlier scorn for the light beer category, the move was seen as a jumping-on-the-bandwagon act of desperation.

Miller said as much when it pet.i.tioned the Federal Trade Commission to halt the sale of Natural Light, claiming the new product's name infringed on its Lite trademark, which gave it the exclusive right to use the terms lite and light in marketing beer. According to Miller, A-B was attempting to "ride the coattails" of its multimillion-dollar investment in developing the Lite brand.

A-B struck back with its own FTC complaint, accusing Miller of fraudulently advertising its Lowenbrau brand. Miller had begun importing Lowenbrau (German for "lion's brew") from its six-hundred-year-old maker in Munich in 1974, positioning it as a premium-priced compet.i.tor to A-B's Michelob brand and playing up its Old World provenance. After two years, however, Miller quietly switched to brewing Lowenbrau under license in its Fort Worth, Texas, plant, while maintaining its premium, imported price. The Texas Lowenbrau was not the same as its Bavarian namesake. It contained corn grits and two chemical additives, ingredients that would put it in violation of Germany's so-called purity laws, which mandated that beer could contain only water, hops, barley, and yeast.

Sensing a delicious opportunity, A-B marketing executives enlisted their lawyers and their public relations reps at Fleishman-Hillard in a plan to use an FTC complaint as the linchpin in a media campaign aimed at embarra.s.sing Miller and killing Lowenbrau as a compet.i.tor. In a presentation to August, they explained how they were going to provide every legitimate media outlet and every A-B distributor with a copy of the complaint, complete with nearly ninety pages of backup research and exhibits showing how Miller's advertising and package labeling were leading American consumers to believe they were buying a German import that had won six gold medallions in international taste compet.i.tions. Any reporters who needed more convincing would be sent six-packs of Lowenbrau so they could see for themselves that you needed a magnifying gla.s.s to find any reference to Texas on the labels or cardboard cartons. All in all, the executives believed the campaign would be so credible that it could not be ignored, and Lowenbrau drinkers would be livid, because they were educated, affluent, didn't like to be ripped off, and would not forget.

August was delighted. "We'll blow their doors off," he said. When he asked, "What do you think will happen with the complaint?" the lawyers told him, "Absolutely nothing; the FTC won't act on it."

But the media sure did. A-B's blitz mailing of several thousand thick packets-"I think we set a record for poundage," said a former Fleishman-Hillard executive-resulted in more than two hundred newspaper articles, the most d.a.m.ning of which was an a.s.sociated Press story that included a statement from a Lowenbrau executive in Munich saying the company was embarra.s.sed by what its U.S. licensee had done. Within a year, the Lowenbrau brand was all but dead in America.

The two beer companies continued to pummel one another with seemingly petty legal complaints. Miller filed one with the U.S. Bureau of Alcohol, Tobacco, and Firearms, accusing A-B of falsely advertising Michelob Light as a low-calorie beer. The company pointed out that most light beers, its own included, contained about 100 calories, a third less than regular beers. But Michelob Light contained 134 calories, only 20 percent less than regular Michelob. In addition to asking the agency to stop A-B from promoting Michelob Light as a "light" beer, Miller's attorneys took a gratuitous-and inaccurate-slap at A-B's brewing process: "We understand that Anheuser-Busch produces Michelob Light by brewing a batch of Michelob and then diluting it with carbonated water. Although it has watered down its beer, Anheuser-Busch has not reduced the price."

A-B's attorneys replied drolly, "We find it hard to understand how we can be accused of misleading consumers [when] every can and bottle of the product prominently displays the statement: 'Contains 134 calories, approximately 20 percent fewer than Michelob.'"

Miller finally went with a nuclear option, asking the FTC to bar A-B from claiming that any of its beers were "natural products" or were "brewed naturally" or contained "all natural ingredients." According to the complaint, A-B used "800,000 pounds of tannic acid annually" in its brewing process, and its vaunted beech wood aging "consists of dumping chemically treated lumber" into its beer storage vats. "It is an affront to the American consumer that this industrial giant and major advertiser should be allowed to continue to resort to advertising claims that are false and misleading."

As schoolyard taunts go, it was the equivalent of telling little Johnny in front of all the other kids that his mother was a dirty wh.o.r.e. Miller compounded the insult by submitting "testimony" from three nutritionists who said that A-B's ad claims were deceptive based on a definition of a natural food as "one that has undergone only minimal processing after harvest, or contains no chemical preservatives," such as milk or washed fruit.

A-B called Miller's complaint "a publicity ploy without substance and deliberately misleading regarding our brewing process." It said the tannins used in makings its beer occurred naturally in many foods, including cereal grains, grapes, and tea, and its beech wood chips were not chemically treated, but rather washed in baking soda prior to being placed in the aging vats.

A-B filed one last patently silly complaint with the SEC, claiming that the labeling on Miller High Life, which still carried the slogan "The champagne of beer," was misleading because the product "contained none of the qualities of champagne." After the two companies had spent millions in the legal t.i.t-for-tat, neither the FTC nor the ATF took action on any of their complaints.

Miller posted excellent numbers in 1978-31.3 million barrels shipped, 7 million more than the previous year, and an increase in market share to 19 percent. But the record came at great expense, as Miller reported that Philip Morris had invested $4 billion in its brewing operation since 1972.

Anheuser-Busch finished in first place for the twenty-first straight year, shipping 41 million barrels and increasing its market share to 24 percent. But despite its 10-million-barrel edge, the perception persisted in the financial press that Miller was winning the war.

In a caustic article ill.u.s.trated with an antique Budweiser bottle covered with cobwebs, Forbes stated, "For six years now, Murphy's Miller has been walking all over St. Louis' Anheuser-Busch." The article took August and his management team to task for "arrogance" and "complacency," saying they suffered a "cla.s.sic case of self deception" and were "merely reacting" while Miller was "calling the shots." The magazine that once mocked Gussie for his stubborn insistence on quality now ridiculed August for his sports-sponsorship buying spree, saying it looked "like an overreaction."

Anyone who knew August could imagine him gagging on the humble pie when the reporter got him to admit, "We missed the boat." (Which the magazine turned into the article's headline.)

Denny Long, too, was forced make an embarra.s.sing admission. "We didn't take Miller seriously, but we do now," he was quoted as saying. Forbes described him as almost shouting as he vented his frustration at the prevailing Miller-versus-Anheuser-Busch narrative: "They say Miller is innovative, that its ads are creative, that it brings out new products to create new market segments, that it's gaining market share. Aren't we doing all these things, too? In the last 12 months we have introduced more new products, more new ads, added more new marketing people and worked harder than in any similar time in Anheuser-Busch history."

(In the wake of the article, August issued an order to Fleishman-Hillard: "You are not to have anything to do with Forbes magazine again." The ban lasted eight years, and when one Fleishman-Hillard rep violated it by responding to a Forbes reporter's request for some publicly available A-B information, August had him fired from the account.)

August and the company received much more even-handed coverage in Newsweek, whose reporter pressed August about his new nemesis and captured the coiled warning in his response. "Miller is aggressive," he said. "They're fine marketers. We compliment them." Then, fixing the reporter with an icy stare and speaking very slowly, he added, "But we will remain No. 1."

12

REBIRTHING BUD

Four years after he was shown the door, Gussie still showed up at the brewery with some regularity. His office suite on the third floor of the administration building remained intact, with its large gilt-framed oil portraits of Adolphus and August A. and the dark mahogany roll-top desk from which he and his father had run the company for more than seven decades. He usually announced his arrival as he stepped off the elevator, either by sounding the familiar racetrack trumpet fanfare "The Call to the Post" on a battery-powered horn he carried, or by braying at an equal volume, "Awwwwwguuuust!" Which never failed to make people jump or set August's teeth on edge.

Their relationship was outwardly polite, and August went out of his way to praise his father's contribution to the company in public statements. But privately, each held deep resentments. Gussie did not attend August's wedding to Virginia Wiley in 1974 and, in August's opinion, was not a very attentive grandfather to their two children-Steven August, born in 1975, and Virginia Marie, born in 1979. When a longtime A-B executive suggested to August, "Perhaps it's time you and your dad patch things up," August turned to him and said angrily, "That man to this day does not know the names of my children. He looks at them and he doesn't know who they are." On another occasion, when August sent word to Grant's Farm that the company would not approve some changes his father was planning to make at the Bauernhof, Gussie flew into a rage. "Who the f.u.c.k are you to tell us what we can do out here?" he hollered in a phone call to August. "If I ever see you again I will shoot you."

Fortunately for August, Gussie spent most of his time tending to his duties as chairman of the Cardinals. Unfortunately for baseball, he spent most of that time fighting with people-Marvin Miller and the players a.s.sociation, his fellow National League owners, the National League's president and its chief labor negotiator (both of whom he wanted fired), baseball commissioner Bowie Kuhn (him, too), and his own players.

The Cardinals were a shadow of the team they used to be. Only Lou Brock remained from the glory days of the 1960s. Gussie had been forced to remove his longtime friend and duck-hunting pal Red Schoendienst as manager. The fans still grumbled about his trading of Steve Carlton, who had gone on to become the undisputed best pitcher in baseball, winning four Cy Young awards. With Carlton in the lineup, the fans and local sportswriters agreed, the Redbirds could have won four division t.i.tles in the 1970s. Instead, the team was tied for last place with the New York Mets midway through the 1978 season, putting on its worst performance in fifty years.

Once again, Gussie blew his stack, but this time he didn't march into the dressing room with a retinue of reporters. In a published letter that sounded as if it had been dictated to his secretary, Margaret Snyder, rather than written by a PR man, he lit into the entire Cardinals organization, "down to the bat boys."

"I am getting d.a.m.n mad," he said. "There is no way, and I repeat, no way, I am going to tolerate this type of performance for the most loyal fans in the world, and I mean this.... I want this message carried loud and clear: The Big Eagle, the Boss, Gussie-whatever they want to call me-IS NOT HAPPY! I am tired of excuses. Management does not pay salaries to supposedly quality players for constant mental errors.... I personally have not seen too many head-first slides, the opposition's second baseman being kicked into left field on double plays and people banging into walls to make plays.... My patience is getting thin.... I did not recommend the purchase of the Cardinals to the Anheuser-Busch board so that, 25 years later, the Cardinals would have the worst record in their history. I trust that I have made myself clear and for everyone's sake I am praying for the situation to improve." (It did, but only slightly; the Cardinals finished second-to-last, ahead of the Mets.)

It was a sign of the changing times that St. Louis sportswriters did not unanimously praise Gussie for his tirade. Globe-Democrat columnist Rich Koster called it a "cheap shot," and offered up a little sports relativism for the man who believed that second place wasn't worth s.h.i.t. "[The Cardinals'] value is not that they win or lose; it's that they are here to enjoy," he wrote. "And while their owner is No. 1 in beer, his position in the community is perhaps misused by making failure out of mere defeat."

During Gussie's appearances at the office, he apparently didn't hear the heresy that was being bandied about, namely that Budweiser-the brand his grandfather had introduced to the world 103 years before, the cornerstone of the Anheuser-Busch empire, the lifeblood of the Busch heirs, and the guiding principle of his life-was finished. Budweiser sales were flat, and the future belonged to new brands like Natural Light and Michelob Light. The younger generation had no affinity for the beer of their fathers and grandfathers. The old warhorse was on its last legs.

At least, that's what Denny Long was being told by some of his young sales and marketing managers. Conventional wisdom in the beer business held that once a brand started to die, there was no reviving it. The younger executives believed that Bud was destined to go the way of Pabst Blue Ribbon and Schlitz, and the company should put its money and marketing effort into building new brands.

Long didn't buy it. It was true that both of A-B's new light beers had performed only moderately well, selling about 2.5 million barrels each in their first year on the market, and that Budweiser sales appeared to be stalled at 22 million barrels a year. But Bud was still the No. 1 selling beer in the world, and he suspected the lack of growth was the fault of the marketing, or the lack thereof, not the beer. The way he saw it, there were only a few brand names that had become part of the American fabric-Coca-Cola, Hershey, Levi's, Campbell Soup-and he believed that Budweiser could be one, too. So when one of his executives asked, "What are we going to do with Budweiser?" he responded, "We are going to breathe new life into it."

His idea was to saturate the public consciousness with print ads and TV commercials aimed at the blue-collar consumer. In addition to sporting events, "Every bus stop is going to say 'Budweiser,'" he told the marketing team. "You are not going to drink it there; it's not a place where you are going to spend your money. But Budweiser will be in your head, and you will have it with you all the time, to the point where asking for a 'Bud' becomes a habit."

The a.s.signment went to D'Arcy, MacMa.n.u.s, Masius, the St. Louisbased ad agency that had handled the Budweiser account since 1915. D'Arcy and Anheuser-Busch had literally grown up together, bonded by business and blood. D'Arcy's CEO, James B. (for Busch) Orthwein, was August's first cousin and a longtime member of the A-B board. James's father, Percy Orthwein, had married Gussie's sister Clara, and served as D'Arcy's CEO and an A-B director before him. Over the years, D'Arcy had parlayed its Busch family connection and its high profile work for A-B into a national reputation as one of the most creative agencies in the world of advertising. D'Arcy was responsible for the enormously successful "When You Say Bud (You've Said It All)" campaign in 1970. More recently, "Jimmy" Orthwein had played a pivotal role in helping convince other board members to side with August in ousting Gussie.

Long wanted a new Budweiser campaign that would be "a salute to the American worker." He knew it would be criticized as jumping on the bandwagon again, because Miller was mining the blue-collar vein. But he thought Miller had the right idea, just the wrong beer. As he often said at the employee meetings, "We are not flashy. We are seldom the darlings of the industry. We just continue to meet and overcome challenges." D'Arcy was told that the new campaign-like its "When You Say Bud" campaign-needed to be "comprehensive," meaning it had to serve as the sole advertising message for Budweiser over a period of several years, not just for a few TV commercials.

August didn't get involved with ad campaigns until the agencies and the marketing department made their first storyboard presentations to him and Denny Long. He responded powerfully to this one, which proposed to show everyday folks working on the job and then rewarding themselves with a cold Bud at the end of the day. Thematically, it was derivative of the "Miller Time" campaign ("If you've got the time, we've got the beer"). But August fixed on one particular tagline from a list of a dozen or so suggestions-"For All You Do, This Bud's for You." He thought it was perfect: catchy, simple, and sustainable.

From then on, he practically dictated the elements he wanted to see in the ads and commercials, most importantly real people, not actors. Hence, the first commercial was shot with real factory workers on the job in a Houston meat-packing plant. Subsequent shoots featured real construction workers, truckdrivers, butchers, bartenders, and farmers. Per August, only twelve-ounce longneck bottles were shown, no cans. Even though cans were the real working man's preference, he thought the cla.s.sic gla.s.s bottle looked better and was more in keeping with tradition, since his great-grandfather had established Budweiser as "the king of bottled beer." He also believed that bottles provided the consumer with a superior taste and tactile experience. To help insure blue-collar authenticity in the ads and commercials, he began inviting an ad hoc group of plant employees to D'Arcy's presentations, encouraging them to comment on what the agency was putting forward.

August's micromanagement at times rankled the D'Arcy creative team, but the collaboration ultimately resulted in one of the most effective and memorable ad campaigns of all time. "This Bud's for You" ran for more than a decade and, over the course of dozens of commercials, embedded itself in the American consciousness alongside the likes of Campbell Soup's "Mmm Mmm Good."

More importantly, the campaign paid off immediately as Budweiser sales roared back to life, increasing by more than 10 million barrels in the eighteen months following the airing of the first commercial.

D'Arcy also handled the Natural Light account, and the agency's campaign went at Miller head-on with a series of print ads and TV commercials "designed to drive them up the wall" in Milwaukee, according to Mike Roarty. A typical print ad showed a can of Natural Light with the caption, "Brewed with water, rice, hops, barley and yeast." Next to it was a can of Miller Lite with the caption, "Brewed with water, corn syrup (dextrose), modified hops extract, propylene glycol alginate, amyloglucosidase and pota.s.sium metabisulfite."