Bitter Brew: The Rise and Fall of Anheuser-Busch and America's Kings of Beer Part 17

For all his tough talk, Peach ended up pulling his punches. He dropped the felony weapons charge, saying it "did not meet the legal requirement" because the gun was not "on his person or within reach." He chose not to subpoena the mobile phone records after learning that August III sat on the board of the phone company, AT&T, feeling it wasn't worth the fight it would take to get them. And he a.s.signed his least experienced attorney to the case-"a misdemeanor attorney who had never tried a misdemeanor case," according to Nick Fredericksen.

The detectives would have preferred that Peach drop the case altogether, but they knew he couldn't. Coming on the heels of Peter Busch getting probation in the shooting of David Leeker and August IV walking away scot-free in the death of Michele Frederick, it would be perceived by the public as whitewash, evidence that the Busch family routinely bought off the authorities. So the prosecution was going to trial because it was politically impossible not to. And the detectives were resigned to the fact that they were going to have to get up on the witness stand and take one in the teeth for the team.

Norm London, who'd begun his career as an attorney for the St. Louis Police Department, was considered the best criminal defense trial lawyer in town. No one was better versed in police procedures. And since the prosecution's case was based almost entirely on the arrest report-what the detectives said happened that morning-his defense narrative cast them as rogue cops who terrorized a young man into thinking he was about to be kidnapped or killed. He asked jurors to put themselves in August IV's shoes, to imagine if their son or daughter were caught in the same circ.u.mstances while driving home one night.

Most of the three-day trial was taken up with the testimony of the detectives, as London tried to trip them up, catch them in inconsistencies between what they said in the arrest report and what was on the recording of the chase.

"You claimed you were a.s.saulted," he said to Fredericksen, "and yet you did not broadcast that?"

"I did not broadcast that because I didn't want the other officers taking an action more extreme than the situation warranted," Fredericksen responded.

Detective Mike Wilhite testified that near the end of the chase, his partner, Junius Ranciville, pulled their car up alongside the Mercedes, and he leaned out the right side window, displaying his badge and shouting at the driver, "Police officer." He said that August responded by swerving toward them, forcing them to swerve as well to avoid a collision. When London asked why he had not broadcast that information on the radio, Wilhite replied, "I was worried about our own safety. I was worried about the location where we were, and trying to stop the car."

Throughout the trial, August III sat in the back row of the courtroom with his wife, Ginny, and August IV's mother, Susie. His demeanor rarely varied from extremely p.i.s.sed off. He glared at the prosecutor. He glared at the reporters who were scribbling down what was said. Most of all, he glared at the prosecution witnesses, his face at times reddening, the veins in his face and neck bulging. Nick Fredericksen would not have been surprised to see smoke coming out of his ears. During breaks in the proceedings, August III could be seen huddled with his legal team and his son in the corridor, talking and gesticulating animatedly as if giving orders: the man in charge. When reporters asked him for a comment, he responded with a baleful look. About the only time he smiled during the trial was when Norm London asked a defense witness, a waitress at a local restaurant, what August IV's favorite drink was, and she replied, "Bud Light."

As one of his key witnesses, London put Jim Sp.r.i.c.k on the stand. Sp.r.i.c.k identified himself as a friend of August IV's and testified that they were driving in separate cars to Jimmy's Cabaret at 4915 Delmar when he saw the Mercedes pulled over on Highway 40, but noticed no red lights flashing and heard no sirens.

Sp.r.i.c.k had known August IV since high school and was the most devoted member of his bar-hopping entourage, the one usually sent ahead to prepare for August's arrival at the next stop. People who knew Sp.r.i.c.k believed there was nothing he wouldn't do for August IV. The narcotics detectives recognized him as the individual who had approached them on Delmar Avenue as they were taking August IV into custody that morning and asked why they were arresting his friend. They wondered why-if he'd driven by the brief stop on Highway 40, as he testified-he hadn't pulled over and approached them at that point. And where was he during the subsequent fifteen-minute pursuit? How could he have followed them at the speed they were traveling? Did August call him? Without the phone records they would never know.

The detectives would have liked the prosecutor to press Sp.r.i.c.k a lot harder than he did, and to raise the question of why August had pulled over in the first place. Something made him stop. If it wasn't their lights and sirens, then what was it? And why in the world would three teams of plainclothes police officers choose to chase down a suspect in a speeding car without establishing their authority by using their lights, sirens, or badges? Did that make any logical sense at all?

August IV did not take the stand in his own defense. In closing arguments, the young prosecutor called him "a man who plays by his own rules" and urged the jury to "send a signal that this type of reckless behavior will not be tolerated." In his summation, Norm London told jurors, "What you have seen in this courtroom is lies, perjury, and a police cover-up."

It took the jury less than two hours to return a verdict of not guilty. One juror told reporters that he was impressed by London's comment about putting themselves in August IV's shoes. "You have to walk in someone else's shoes," he said, "and sometimes those shoes are a little tight." Several said they were swayed to vote for acquittal by the fact that sirens could not be heard on the police recording of the pursuit.

Immediately after the verdict was read, August IV shook hands with the jurors and thanked them. "I am very, very happy," he told reporters. "Justice has been done." His father, too, thanked the jury, but had no comment for reporters. Several days later, however, he hand-delivered a statement to police headquarters demanding an investigation of the narcotics detectives:

"St. Louis Police Department officials should carefully review policies and management control over the undercover narcotics squad who disgrace the vast majority of good law abiding professional officers in the St. Louis Police Department by their unprofessional conduct and gross misstatement of facts, as doc.u.mented in testimony in my son's trial."

Noting that he could afford good lawyers for his son, he said he was troubled by "the question of how persons of moderate to low income could defend themselves against a police unit that takes great liberties with citizens' rights and that obviously by their own testimony have taken liberty with the truth-which is what our whole system of justice is built upon. Therefore, I call upon the department to fully investigate the incident not only because it involved the safety of my son but because it brought to light action and att.i.tudes that undermine the credibility of all police officers, and most important because such actions pose a threat to every resident of this community."

A police spokesman responded that neither the department nor the circuit attorney's office had any problem with the detectives' conduct the night of the arrest or their testimony at the trial. "We examined both the shooting and the pursuit and didn't find any violations of department rules or any other improprieties," said the commander of internal affairs, adding, "If he, Busch, wants to come forward and make [an official] complaint, we will be happy to entertain it."

If nothing else, the episode proved there was a limit to August III's power. Despite his wealth and connections, he was not able to get the charges dropped and prevent an embarra.s.sing public trial. Perhaps that's what angered him the most as he listened to police officers testifying against his son. After all his family and company had paid to St. Louis police personnel for private security over the years, he didn't get his way when it really mattered.

To their surprise, the six narcotics officers never suffered any repercussions. There were no unwanted transfers, missed promotions, or derailed careers. Several years after the trial, in fact, Nick Fredericksen was given departmental approval for "secondary duty" working security at an Anheuser-Busch stockholders' dinner. The extra-pay, off-duty service apparently caused him to get a Christmas card that year from Anheuser-Busch, embossed with a picture of the Clydesdales and personally signed by August III.

Four months after the trial, August IV pleaded guilty to driving his Porsche at 65 miles an hour in a 35 mph zone, and was put on a year's probation. He'd gotten the ticket while he was awaiting trial, but his attorneys had managed to put off his traffic court appearance five times, until after the trial verdict was in. For all his vehicular transgressions, August IV never lost his driver's license.

Along with the Tucson crash, the high-speed chase would become a public relations burden August IV would carry for the rest of his life, an obligatory paragraph in any newspaper or magazine profile of him. But he at least got the last laugh on city attorney George Peach, the only man who ever put him through a trial. In 1993, after earning a reputation for being particularly zealous in prosecuting p.o.r.nography and prost.i.tution cases, Peach was convicted of using city funds to pay for the services of prost.i.tutes. August IV, then being heralded as a rising star and heir apparent at Anheuser-Busch, sent him a life-size blow-up s.e.x doll.

16

"I PROBABLY FEEL WORSE ABOUT THIS THAN YOU DO"

America's seemingly unquenchable thirst for beer finally began to slacken in the 1980s. Per capita consumption hit a historic high of 23.8 gallons in 1981, then sales went flat.

Experts blamed an aging population-baby boomers approaching forty-and rising public concern over alcohol abuse. Whatever the cause, the drop in demand left some formerly robust brewers-most notably Pabst-awash in red ink, and others-including Miller-saddled with excess production capacity.

August III had foreseen the development, which he termed a "growth gap." Beginning in the late 1970s, he moved to fill the gap. Leaving the day-to-day business of the brewing division to his two gregarious Irishmen, Denny Long and Mike Roarty, August turned his attention to expanding operations into related businesses to offset an expected slowing in beer sales. In 1981 A-B launched Eagle Snacks, distributing its own line of salty, thirst-inducing munchies-peanuts, pretzels, and potato chips-to bars, taverns, and convenience stores, placing itself in compet.i.tion with junk food giant Frito-Lay and Planter's Peanuts.

A year later, in 1982, August acquired the second largest baking company in the United States, Dallas-based Campbell Taggart, Inc., which specialized in refrigerated-dough and frozen food products. The expansion wasn't as big a stretch as it seemed, considering that A-B was the country's No. 1 producer of baker's yeast and No. 2 producer of corn syrup. As with Eagle Snacks, the plan was to distribute Campbell Taggart products through A-B's existing beer wholesaler network, having the distributors warehouse and deliver the baked goods right alongside the beer. On paper, it made synergistic sense-the trucks were already delivering to every grocery store in the country.

A-B paid a whopping $570 million for Campbell Taggart, which represented a 20 percent premium over its market value. But August believed the acquisition would establish A-B as a major player in the food industry, a serious compet.i.tor to the big packaged goods firms he so admired-Procter & Gamble, Philip Morris, Nabisco, and General Mills. Among the new baked products A-B put on the beer trucks was a line of bread branded "Grant's Farm."

After bread, August took the company into wine, buying a California winery called Master Cellars that marketed bulk wine-also called "keg wine" or "wine on tap"-to bars and restaurants. Again, the plan was to ride piggyback on A-B's distributor network. August had wanted to move the company into the wine business back in the early 1970s; he even sent a group from his corporate planning department to Europe for six weeks to find a winemaker partner. When they presented the board with a detailed marketing plan, however, Gussie said no, and that was that. This time, August made Master Cellars Winery the cornerstone of a new division within the company that reported directly to him, and the Anheuser-Busch Beverage Group soon introduced Baybry's Champagne Coolers and Dewey Stevens Premium Wine Coolers to compete with the popular Bartles and Jaymes wine coolers that were being marketed by the Gallo Winery.

From there, it was a short logical leap into the fastest-growing segment of the beverage industry-bottled water. In September 1984 Anheuser-Busch paid $900,000 for Saratoga Springs Mineral Water, a tiny, troubled 114-year-old company in Saratoga Springs, New York, with distribution on the East Coast from Washington, D.C., up through New England. A-B invested another $1.5 million in new equipment and renovations at the plant, making it capable of producing two million cases a year, and began marketing "Saratoga Naturally Sparkling Mineral Water." In April 1985, August approved the purchase of Sante Mineral Water in Santa Rosa, California, and the A-B beverage group introduced two brands of flavored water, aSante (Italian for "to health") and Zeltzer Seltzer. A-B also bought a controlling interest in Ireland's Ballygowan Spring Water Company (named for its source, an underground spring in County Limerick in southwestern Ireland). The plan was to distribute the Ballygowan brand of "pure Irish spring water" in the United States.

August III's timing could not have been better. Bottled water was exploding in popularity-sales more than tripled in the United States between 1980 and 1987, from $443 million to $1.5 billion-and A-B faced only one major compet.i.tor in the nation, Perrier, which controlled about 75 percent of the market. Despite Perrier's dominance, A-B management and beverage industry experts believed that the fearsome marketing and distributing machine that had vanquished Miller Brewing would have little trouble defeating the French. As one ad executive working on the Miller account told the Los Angeles Times, in grudging admiration, "Anheuser-Busch could drive the distribution of horse p.i.s.s if they wanted to."

But things didn't work out the way August III had planned. A-B's new beverage group fizzled, producing nothing but losses between 1984 and 1987. According to Denny Long, the problem wasn't the products: "Wine and bottled water appeared to fit us like a glove, but we tried to load too many industries into the existing beer distribution system, and it was too many different items for the distributors to handle."

The bread didn't rise in the food products division either, as both Eagle Snacks and Campbell Taggart fell far short of expectations. As one investment banker sniped at the time, "Being superior planners and producers in the beer industry does not make [Anheuser-Busch] superior bakers."

"Actually, given our years in the production of baker's yeast, we were pretty d.a.m.ned good bakers," countered Long. "I think the biggest problem with Campbell Taggart was the age and condition of their plants and equipment." The overriding problem was that August III's great "diversification initiative" loaded too much onto the backs of A-B's distributors, many of whom who were either unwilling or unable to carry the weight.

Long was not responsible for the food products or beverage operations, but he felt the pressure nonetheless because beer supported it all. Every year, he had to sell tens of million of dollars' worth of beer just to offset the cost of the diversification. He was having trouble sleeping.

August didn't make it any easier for Long when he decided to expand the company's profitable theme park and resort operations to include a cruise ship company. A-B purchased a majority interest in the Seattle-based Exploration Cruise Lines, which operated a fleet of five smaller-size (five- to six-hundred-pa.s.senger) ships that specialized in "one-of-a-kind" travel adventures to out-of-the-way destinations in Panama, Tahiti, Alaska, and the Pacific Northwest. Some members of the board and the policy committee had misgivings about the venture. They fretted that cruise ships were expensive, profit margins were low, and the capital cost of growing the business was enormous, with each new ship costing anywhere from $50 million to $80 million to build. Their concerns were validated; Exploration Cruise Lines proceeded to lose $40 million over the next two years.

Fortunately, at the time Anheuser-Busch could absorb such losses. Americans may have been drinking less beer than in recent years, but more of what they were drinking was Budweiser and Bud Light. In 1985 they guzzled 46.5 million barrels of Budweiser alone, an increase of nearly 2 million barrels over 1984, and 25 percent of all beer sold in America. Bud Light sold 5.4 million barrels in 1985, an increase of 1.2 million. A-B's total output of 64 million barrels gave it a market share of 36 percent. The following year, the numbers increased to 72.3 million barrels and a 38 percent market share. It appeared that the company would hit a 40 percent market share by 1987, three years sooner than August had predicted. Now there was talk of reaching the milestone of 100 million barrels and 50 percent market share by the mid-1990s. "Is it arithmetically possible?" August responded to a reporter's question. "Yes."

Miller remained a distant No. 2. Its signature High Life brand had been beaten into submission by the booming sales of Budweiser, but its Lite brand accounted for 50 percent of all light beer sales, 18.5 million barrels in 1985, making it the second-best-selling beer in the country, behind Budweiser. Still, Bud Light was cutting into Miller's lead in the low-calorie category at a rate of more than a million barrels a year.

From the beginning, Bud Light had sold well among twenty-five- to forty-four-year-old professionals, the traditional drinkers of light beer. But in early 1987 A-B made a bold play for an even younger segment of the beer drinking population-twenty-one- to twenty-four-year-olds. When speaking for public consumption, industry executives referred to this group euphemistically as "contemporary adults." Among themselves, however, they described them more accurately as "heavy users." These were not the folks who stopped by the corner tavern at the end of a hard day's work to reward themselves for all they'd done. They were more the hard-partying college kids who liked to get hammered before a football game and drink themselves into a stupor on the beach during spring break. For them, Mike Roarty introduced a new ad campaign during the fourth quarter of Super Bowl XXI. It starred an English bull terrier named Spuds MacKenzie, riding a skateboard and wearing a Hawaiian shirt, sungla.s.ses, and a G.o.d-given s.h.i.t-eating grin while an adoring trio of beautiful girls in bikinis jiggled and sang his praises as "the original party animal."

The ad campaign was an instant sensation. Taken by the tongue-in-cheek idea of a "spokes-dog" for a beer company, the media jumped on the story like, well, a dog on a bone. Reporters, columnists, TV producers, and talk show bookers inundated A-B with so many calls about the studly Spuds (in real life a female named Honey Tree Evil Eye, or Evie for short) that Fleishman-Hillard a.s.signed the pooch his own PR rep, who played along with the conceit by referring to his client as "Mr. MacKenzie" while scotching persistent rumors that Spuds had been killed either in a limo accident or a "hot tub mishap in California." One writer for the trade magazine Adweek raised concern about the campaign's underlying message, noting that Spuds was presented all too cleverly as "the embodiment, the visual equivalent of, a pleasantly inebriated state," which would have violated FCC regulations if Spuds were a human.

Spuds quickly became a pop culture icon. The dog traveled to public appearances accompanied by his three "Spud-ettes." He did a spot on Late Night with David Letterman and one with Joan Rivers on Fox's Late Show. He landed a role in a movie with Martin Mull and made People magazine's annual "Best Dressed" list. He inspired a line of Spuds MacKenzie merchandise that grew to more than two hundred items-wall posters, beachwear, sungla.s.ses, satin jackets, stuffed dolls, plastic toys-enough that Macy's opened twenty-two Spuds MacKenzie boutiques in its New York department stores. Most important for Anheuser-Busch, Spuds sparked a dramatic increase in Bud Light sales, a jump of 21 percent-to 8 million barrels-in the first year of the campaign, pushing the brand to the No. 3 position, just behind Miller Lite and gaining.

Like many celebrities before him, however, Spuds eventually was undone by his success. Over the course of some twenty national TV commercials, the character developed a following among a group of consumers with a particular affinity for goofy-looking dogs in silly outfits-kids. And when Spuds paraphernalia began showing up in toy stores, howls of protest went up from Mothers Against Drunk Driving, the National Parent Teacher a.s.sociation, and even the U.S. Bureau of Alcohol, Tobacco, and Firearms, all of which accused Anheuser-Busch of cynically marketing to minors. Senator Strom Thurmond held a stuffed Spuds doll as a prop while delivering a stem-winder on the Senate floor attacking beer advertising aimed at youngsters.

A-B spokesmen responded that they were shocked, shocked, that anyone would think the company would "spend money and manpower and energy to advertise to a group that legally cannot consume beer." (In truth, the industry was well aware that "heavy users" tended to settle on their brand preferences while they were in high school and college, before they reached the age of twenty-one.)

"The company does not apologize for the Spuds character," an A-B spokesman told Adweek, which promptly busted the company for an egregiously inappropriate instance of target marketing that took place on the White Mountain Apache reservation in eastern Arizona.

"At the Apaches' annual Labor Day rodeo and tribal fair, life-size versions of Bud Man and Spuds MacKenzie rode an antique Model-A delivery truck down the parade route," the trade magazine reported. "As the familiar spokes-characters pa.s.sed by, eager children rushed to the truck to gather handfuls of Budweiser can-shaped candies that showered down." Noting that the Native American community was predisposed to high rates of alcoholism, Adweek called the promotion by A-B's local distributor a case of "brand-building among minors, targeting vulnerable consumers and ignoring the issue of alcohol abuse."

Faced with increasing controversy and bad publicity, A-B finally agreed to put Spuds down figuratively, but not before the character had taken a crippling bite out of Miller Lite's market share. In the annals of A-B advertising, Spuds MacKenzie still ranks as the company's most effective spokes-mammal.

During the first rush of Spuds-mania in the spring of 1987, Denny Long had every reason to be proud of his thirty-five years with the company. In his rise from office boy to president, he had played a key role in transforming Anheuser-Busch from a $700 million brewery that was "run like a grocery store," in the words of former corporate planning VP Robert Weinberg, into a $7 billion conglomerate the Los Angeles Times described as "archetypical of the corporate giants Coca-Cola and Pepsico in soft drinks and Philip Morris and R. J. Reynolds in cigarettes." During Long's eight years in charge of the brewing division, sales had doubled and profits had quadrupled.