Bitter Brew: The Rise and Fall of Anheuser-Busch and America's Kings of Beer Part 20

18

HERE COMES THE SON

In the spring of 1990, Anheuser-Busch simultaneously introduced two new products, each the result of careful planning and promotion.

One was Bud Dry, a brand whose name derived from a brewing process that was all the rage in j.a.pan. "Dry" beer was produced by fermenting the malt, grain, water, and yeast mixture, called wort, longer and more thoroughly, allowing the yeast to consume more of the residual sugar. The result was a light-bodied beer with slightly fewer calories than regular beer, but with higher alcohol content (5 percent), a drier, less malty taste, and little to no aftertaste. As the estimable London beer expert Peter ("the Beer Hunter") Jackson put it, dry beer was "notable for having scarcely any taste, and no finish."

Dry beer itself was nothing new. The process was a modification of one used to make a German lager called Diat Pils, originally brewed specifically with diabetics in mind because of its lower sugar content. Several regional American brewers had produced dry beers over the years, but the style had not caught on with U.S. beer drinkers. In 1987, however, j.a.pan's Asahi Brewery introduced a dry beer in that country, hoping to sell 1 million barrels the first year. Instead, Asahi Dry Draft sold 13.5 million barrels. Asahi's three compet.i.tors-Kirin, Suntory, and Sapporo-quickly introduced their own dry beers, and within a year, 39 percent of the beer sold in j.a.pan was dry-brewed, and all four brewers began exporting their new dry brands to the United States.

August III was not about to get caught flat-footed again on a new style of beer, no matter how bland it tasted or oxymoronic it sounded. He put dry beer on the fast track, and Michelob Dry was rushed into five test markets in September 1988. By April 1990, A-B was convinced there was a big enough market for another American-made dry beer, and the company announced the national launch of Bud Dry Draft, backed by a $70 million marketing and advertising budget-the most any brewer had ever spent to promote a new beer, the company said.

The other new product A-B introduced in April 1990 was a revamped version of August IV. Last seen publicly as a defendant on trial for a.s.saulting police officers, the Fourth, now twenty-five, had been made over into the spitting corporate image of his father. From the short, slicked-down hair to the b.u.t.toned-down oxford-cloth white dress s.h.i.+rts, the resemblance was almost eerie in the publicity photos Fleishman-Hillard released, announcing that, in his first managerial role with the company, August IV was being put in charge of the Bud Dry rollout and its record budget.

The Fourth was emerging from three years of image rehab, having completed a series of a.s.signments that read like a checklist his father might have given him t.i.tled "Things You Need to Do to Redeem Yourself and Follow in My Footsteps." He had graduated from St. Louis University. He'd completed an apprentices.h.i.+p as a member of Brewers and Maltsters Local Union No. 6, working in the brew house. He'd taken a course of study at Versuchs und Lehranstalt fur Brauerei, a brewing inst.i.tute in Berlin, where he earned a master brewer certificate. He'd spent a year as a.s.sistant to A-B's vice president of brewing, Gerhardt Kraemer, and another year as a.s.sistant to marketing vice president Mike Roarty. And he appeared to have settled down in his personal life by becoming engaged to a local model named Judy Buchmiller, as chronicled by Post-Dispatch gossip columnist Jerry Berger in his frothy Top of the Town column:

"Bud Dry was on the house at Dominic's on The Hill Sat.u.r.day night, courtesy of August Busch IV, twogether [sic] with his fiancee, who toasted the countdown to their middle-aisling November 17 at Our Lady of Lourdes, followed by a pouring at the St. Louis Country Club."

Two months later, Berger reported that the Fourth and Buchmiller were "off and running to join August III in the Florida Keys to catch Miss Budweiser in an offsh.o.r.e race," and he noted offhandedly that their wedding had been postponed. "We're still, hopefully, going to get married," the Fourth said, as if trying to placate his father, who'd been pus.h.i.+ng for the marriage. "We're very much in love. I want to marry the girl." But it never happened.

Publicity surrounding the Fourth's reemergence was tightly controlled by Fleishman-Hillard, which doled out access and information to news outlets and reporters that could be counted on not to dredge up his reckless past. For the most part, the media gave him a break and focused on the present. But even Fleishman-Hillard couldn't control all the reporters all the time, and in one of the Fourth's first arranged interviews, he was asked whether the unusually large $70 million Bud Dry budget was the company's way of ensuring success for the boss's son. "No, no, no, no," he responded. "This brand had tremendous success in test markets." Then he all but confirmed that he'd been given special treatment with the promotion, blurting out, "I've only been on the [Bud Dry] team two or three months."

The Fourth initially earned kudos from his coworkers merely for being nicer than his father. "He was very personable," said a former A-B middle manager who first met him during the Bud Dry rollout. "He was walking through the brewery, shaking hands, and asking people questions and actually listening to them. I felt like he was trying to learn, and not from the way his dad did things. He didn't go around looking for old beer. It was more the way Gussie had done it."

There was still that other side to the Fourth, however, the one that came out at night, when he was running with his friends in St. Louis's Central West End or traveling on company business away from the prying eyes of his father and the higher-ups in the home office. This was the side that a group of A-B marketing employees saw during the company's spring break promotion in Palm Springs in 1989.

A team of about ten of them had been in the desert resort town for two weeks, spreading goodwill and free beer among the thousands of "contemporary adults" who were taking a breather from their educational pursuits, when they were told that the heir apparent was flying in to check out the festivities. "He was in training at the time," one member of the team recalled later. "The word was that Three Sticks (August III) was grooming him, and he was on the straight and narrow."

Spring break was serious business because A-B drew 17 percent of its sales from the twenty-one-to-thirty-year-old segment of the population, or the so-called Generation X. Historically, twenty-one-to-thirty-year-olds consumed the most beer, an average of 45 gallons a year per person, compared to 36 gallons for those in the thirty-to-forty age range and 20 gallons in the forty-to-sixty-year-old segment.

Six months worth of planning and preparation had gone into A-B's promotional events in Palm Springs and other college-break hotspots around the country. News that the CEO's son was coming to town for the weekend and wanted to be included in "evening calls" to key accounts only added to the stress on the marketing team and the local distributor, as they now had to prepare for the Fourth's arrival. It fell to the distributor to round up a handful of "models" from Los Angeles-all long-legged and large-breasted but with an array of skin and hair colors-to serve as the Fourth's personal retinue of Bud Girls during his visit. The marketing team got the impression this was a standing order among distributors whenever the Fourth hit town. "Your responsibility was to help him have a good time."

The Fourth checked into the Villas at the Oasis, where the A-B team was staying, but for reasons that soon became clear, his quarters were located apart from the others, on the far side of the property. On Sat.u.r.day night, the marketing team made a call at Pompeii, the largest-volume club in the area. They worked the crowded room for several hours, buying rounds, handing out promotional items, shaking hands, and making friends. To the inebriated patrons, it was a giant party; to the marketing team, it was a job, more enjoyable than other jobs perhaps, but still grueling in its own way.

Midway through their most important call of the week, however, "all of a sudden we were told that the Fourth wanted us to leave," one team member recounted later. "The distributor came to us and said, 'Gather all your personnel and go. He wants you out of here.' It was all because he was partying and didn't want us to see what he was doing."

The Fourth apparently took the party back to his private villa later that night. The next day, the place was trashed, the Fourth and the models were gone, and the A-B distributor was settling up with Oasis management over the damages.

Bud Dry was a success out of the gate, selling 3.2 million barrels in its first nine months. The company boasted that the new brand accounted for 3.4 percent of sales and had "the best start of any beer since Bud Light in 1982."

Fleishman-Hillard hyped the Fourth's role in the launch, telling the media that he had "helped develop the company's dry brewing method" and heroically promoted the brand by piloting Bud Dry's forty-foot Skater catamaran in six offsh.o.r.e races "at speeds of up to 140 miles an hour" until his father insisted he quit because of the danger. The latter revelation led reporters to describe him as "daring" and "risk-loving." The PR firm also put it out that the Fourth flew planes and helicopters, rose at 5:00 a.m., jogged daily, worked out twice a day, held black belts in aikido, tae kwon do, and hapkido "for security reasons," rode a Harley, owned two manly dogs-a German shepherd and a rottweiler-and wore cowboy boots to work. It was as if they had cast him in his own beer commercial: the most interesting contemporary adult male in the world.

Despite its fast start, Bud Dry sales dropped off in 1991, and the brand, like dry beer in general, ultimately proved a disappointment. But that didn't affect the Fourth's trajectory at the company. In July 1991 he was named brand director for Budweiser, prompting the Fortune magazine headline "King of Beer Taps Crown Prince." It was a big promotion that coincided with the first decline in Budweiser sales in fifteen years. The drop was sizable, nearly 6 percent, and the company blamed the doubling of the federal excise tax on beer-to $18 a barrel-that occurred in January 1991, and the economic recession, which caused beer drinkers to switch to cheaper brands. But A-B's research showed it was more than that: the company's flags.h.i.+p brand, which produced nearly 40 percent of its sales and half of its $1.7 billion in operating profits, was falling out of favor with contemporary adult drinkers, the Fourth's peers, who were turning to upstart American microbrew brands such as Samuel Adams and imports like Corona Extra, which had experienced a tenfold increase in sales on the strength of its TV commercials showing s.e.xy young couples relaxing on a tropical beach.

The research threw a scare into A-B's aging management, causing fifty-four-year-old August III to admit, "I've lost the ability to understand the 21- to 30-year-olds the way I used to." Again, the Fourth seemed perfectly cast. "He was young and they thought he could relate to that group," said a former marketing staffer. "He was one of them; they figured he could feel the pulse." Still, inside the company and out, the question hung in the air: was this twenty-six-year-old with less than two years of managerial experience and lingering personal "issues" up to the task? There were some clear signs that he wasn't.

In early media interviews about his promotions, the Fourth came across as defensive and even self-pitying. An article in the Chicago Tribune quoted him as saying, "Everybody thinks, 'it must be easy to be you,' but it's probably the hardest thing in the world to be me, and to work under the pressure you have to be under. You have to do three times as good as the next guy to be considered to be doing the same job as he does."

He hit on the hard-to-be-me theme again in an interview with Fortune magazine, saying, "You don't know how different it is walking in these shoes, versus what people perceive it to be. People think, 'Here's a guy who's got it all-the Busch name, the best job in the world' [but]; it's a very different reality."

He was alluding to what it was like to work for his father. "There's not a day in the week where he doesn't ask me a question or give me a hard time about something," he told Business Week magazine.

The Business Week interview was intended to highlight their supposedly close working relations.h.i.+p, but the resultant article failed to conceal the tension between them. "When asked about the [Tucson] accident, the father clenches his fists and lightly pounds a table," the magazine reported, quoting the son as saying, "It was tough for a while ... that's all I want to say." The Fourth acknowledged that he would like "to step into my father's shoes someday," and his father told the reporter that someday would not be soon. "You're looking at a guy who's 54 years old," he said. "I intend to be around here a long time." He appeared to be quoting Gussie verbatim when he added, "There is no guarantee that August [IV] has a direct line of succession in this corporation."

In the saga of Busch fathers and sons, history was repeating itself, and in remarkable detail. The Fourth's coming of age mirrored that of August III. His parents, too, had split up when he was five, and from then on he lived primarily with his mother and visited his father on weekends, when his father wasn't traveling. His bonding with August III had occurred in duck blinds on the farm and during day trips to the brewery, where "Little August" was allowed to sit in on executive meetings. When the Fourth was a teenager, his father remarried and started a new family, which included another son, Steven, with whom he spent more time and developed a closer relations.h.i.+p, just as Gussie had done with Adolphus IV.

In the Busch family, it seemed as if the firstborn son was offered in sacrifice to the company. The Fourth knew from the age of cognizance that he was expected to become CEO one day. He had no choice in the matter; doing something else with his life was not an option. He also knew he would only become CEO if and when his father judged him worthy. The job was his to lose, every day. The scrutiny was unrelenting, the criticism constant.

At the office, the Fourth's interaction with his father also followed the pattern established by August III and Gussie, with the son struggling to prove himself and the father only grudgingly acknowledging his effort. As a result, the Fourth regarded "the Chief" with an equal measure of hero wors.h.i.+p and resentment. He had pictures of the two of them in happy poses all over his office and home, yet he told people, "I never had a father-son relations.h.i.+p, ever; it was purely business," echoing his father's comment about Gussie years before: "I never had a daddy."

The Fourth constantly sought paternal approval but rarely received it to his satisfaction. Even when he emulated his dad by wearing boots at work, he fell short of expectations. He showed up for a meeting with A-B's California wholesalers at the Los Angeles brewery one afternoon sporting a pair of pointy-toed lizard-skin cowboy boots, and his father immediately bawled him out in front of a subordinate. "When the f.u.c.k are you going to learn to dress like a business person?" he barked. The Fourth pointed to his father's feet and said, "Well, what do you call those?" August III looked down at his hand-tooled Lucchese dress boots with tastefully rounded toes and said, "These are aristocrat boots." Pointing at his son's feet, he declared, "Those are s.h.i.+t-kickers."

Such scenes were not uncommon. But even as August III focused his laserlike attention, sharp tongue, and short temper on his son, he continued to reward him with plum promotions that few in the company felt he deserved. In 1993, after less than two years as Budweiser brand director, the Fourth was elevated to senior director of the Budweiser family of brands-Budweiser, Bud Light, Bud Dry, and Bud Ice Draft, a new higher-alcohol brand aimed at the adult contemporary segment. In February 1994 he was named vice president and director of all A-B brands (including Michelob, Busch, and imported brands) and became part of his father's so-called strategy committee, the inner circle of about a dozen top executives.

The promotions weren't tied to any obvious accomplishments on his part, since the company experienced comparatively anemic growth in those years (an increase of only 200,000 barrels in 1993) and Budweiser continued to lose market share (another 0.5 percent in 1993). But the Fourth exhibited a talent for managing up. Having inherited a bright and experienced team of brand managers and sales executives, he used them adroitly, letting them know from the start that a big part of their jobs was to make him look good to his father and the board of directors. If they did that, then he would take care of them, and they all would rise in the company together. "We'll either be famous or fired," he told them. It was a strategy his father would have approved, and it paid off.

In late summer 1994, one of August's team, the new Budweiser brand director Mike Brooks, sent a memo to two top executives at D'Arcy Advertising, Jim Palumbo and Mark Choate, telling them that A-B wanted a new campaign for Bud, one that would "contemporize" the brand and make it more appealing to the twenty-one- to thirty-year-old segment. He asked them to give the a.s.signment out to creative teams in all D'Arcy's offices-New York, Detroit, and Los Angeles, in addition to St. Louis-and present their best work within a month. Thirty days later, Choate, Palumbo, and a handful of D'Arcy creative types presented Brooks with dozens of campaign ideas in a session that lasted several hours. Brooks was struck by one concept in particular from a young creative team in St. Louis, Dave Swaine and Michael Smith. Presented on an "art card," a twelve-by-sixteen-inch piece of white foam board, it was a four-panel drawing of frogs sitting on lily pads with a Budweiser sign in the background. The card was augmented by a thirty-second ca.s.sette recording of frogs croaking, "Bud ... bud ... weis ... bud ... weis ... bud ... weis ... bud ... weis ... er."

It was beautifully simple and so totally off-the-wall that Brooks couldn't help laughing at the absurdity. Of all the things he was shown, "Frogs" stood out.

The next day, Brooks, Choate, and Palumbo presented "Frogs" and two or three other concepts to Brooks's boss, Bob Lachky, the senior director of Budweiser brands, and Lachky's boss, August IV. Both men agreed that "Frogs" was fall-down funny and the best of the lot. They instructed Brooks to take it up the line to Patrick Stokes, the president of the brewing division. One of August III's original stable of MBAs, Stokes had run the Campbell Taggart baking operation before August III put him in Denny Long's old job in 1990. He was seen as a competent, if colorless, placeholder until the Fourth was judged ready to a.s.sume the presidency. Inside the company, Stokes was jokingly called "the Tommy Newsom of the beer business," a reference to the b.u.t.toned-up, perpetually brown-suited backup bandleader on The Tonight Show, who host Johnny Carson delighted in introducing as "the man from bland" and "Mr. Excitement." Brooks was surprised when Stokes, too, laughed at "Frogs" and said he would support the concept as an ad campaign for Budweiser.

That left only August III to convince. The four executives would have been hard pressed at that moment to say exactly why they thought "Frogs" would help sell Budweiser to twenty-five-year-olds. It was certainly a unique concept; they'd never seen anything like it before. It wasn't anyone's father's idea of a Budweiser commercial. There would be no Dalmatians riding on red beer wagons, no Clydesdales galloping slo-mo through the snow, no blue-collar worker tossing back a cold one at the end of a long day, no jiggling Bud Girls on the beach, no beer really, no cla.s.sic "pour shot" with a punchy voiceover tagline talking about taste or quality or tradition, none of the things that August III liked in a Bud commercial. But they all sensed that if the concept were properly executed, then people would not only remember it, they'd likely never forget it.

It was decided that Brooks should make the pitch to August III at the annual weeklong planning meeting in September, when every brand director presented his advertising and marketing plans for the upcoming year. The meeting was held in the big conference room at the Soccer Park, where more than forty executives, including the entire strategy committee and the creative team from D'Arcy, sat in a U-shaped arrangement of tables, with the presenter in the middle facing August III, who was sitting at the center of the head table.

About halfway through his four-hour presentation, Brooks introduced "Frogs" as "an idea for a thirty-second commercial, for your approval." He held the art card with the drawing of the frogs across his chest and pushed the start b.u.t.ton on the ca.s.sette player next to him.

When the tape ended, all eyes turned to August III, who did not react. He stared at the art card, and then glanced up at Brooks, then back at the card. He didn't smile. Neither did Stokes or Lachky or the Fourth or any member of the strategy committee. They all just sat there, stone silent.

Finally, August said, "I don't get it, Brooks."

"Sir, I'd like to play the tape again," Brooks replied.

"You do that."

Still holding the art card across his chest, Brooks rewound the tape and pressed the start b.u.t.ton again, all the while thinking, "I'm in big trouble here; this was my recommendation."

Halfway through the replay, however, a smile flickered across August's face; by the end, he was laughing, and so was everyone else in the room, out of relief if nothing else.

"What's the message of that, Brooks?" August asked.

"Sir, the message is that Budweiser is so attractive that even frogs are drawn to it."

"That's fantastic. What's it gonna cost?"