Bitter Brew: The Rise and Fall of Anheuser-Busch and America's Kings of Beer Part 9

It looks extremely rocky

For the Sudsville Nine today

The players want more money,

They may not get their way.

The Mighty Gussie grumbles

That he's fed up to here;

Those who really know him say

He's not talking through his beer

"More!," cried the maddened players,

And the echo answered "More!"

But one scornful look from Gussie

Showed them all that he was sore.

They saw his face grow stern and cold,

They saw his muscles strain,

And they knew the Mighty Gussie

Wouldn't up their pay again.

Oh, somewhere in this favored land

The sun is s.h.i.+ning bright.

The band is playing somewhere,

And somewhere hearts are light,

And somewhere men are laughing

And somewhere children shout.

But there is no joy in Sudsville

Mighty Gussie shut them out.

After an eleven-day strike, the first in the history of baseball, the two sides reached an agreement. But as the season finally got under way, Gussie continued to vent, accusing his players of ingrat.i.tude, disloyalty, and treachery, ordering them to travel in smaller planes and double up in hotel rooms, going so far as to cancel the free case of beer each player traditionally received during home stands. Al Fleishman could not spin the national media this time. A Newsweek article depicted Gussie as a petty, vindictive tyrant who "seemed chiefly intent on revenge."

"As a result, team morale is at its lowest ebb and the tense atmosphere in the Cardinals clubhouse is reflected on the field," the magazine reported. The article quoted several unnamed Cardinal players blaming the boss. Said one, "In all other cities the strike was forgotten right after the season started. Not in St. Louis. Busch kept talking about it, and the fans were all ready to boo when they got to the park-and that hurt us."

Indeed. The Cardinals finished the season in fourth place and posted a financial loss of nearly $600,000. Steve Carlton, on the other hand, finished his first Phillies season with 27 wins (including 15 in a row), 30 complete games, 8 shut outs, 310 strike outs, a 1.97 ERA, and a unanimous selection as the winner of the National League Cy Young Award. In sum, he made Gussie look like a chump.

It got worse. Four days before Christmas, Anheuser-Busch reported that Busch Gardens in Houston-Gussie's baby-was a bust, and the company was taking a $4 million write-off against fourth-quarter earnings. The company stock immediately dropped seven points. A week later, Gussie announced that the Houston gardens would be closed and converted into "a sales promotion facility." A local Houston newspaper, the Baytown Sun, declared the situation, with its loss of hundreds of jobs, "a disaster." When Denny Long was sent to Houston to oversee the closure, he found that someone had shot up the park's entrance sign.

At the annual shareholders meeting in April, Gussie, d.i.c.k Meyer, and August sought to play up the 26.5 million barrels A-B had produced in 1972 and the company's sixteenth consecutive year in first place. But questions about declining profitability, falling share prices, and the challenge from Schlitz put them on the defensive. They explained that the company was caught in a squeeze between the fast-rising cost of its "natural ingredients"-hops, barley, and rice-and President Nixon's Economic Stabilization Program, an anti-inflation effort better known as wage and price controls, which prohibited the company from pa.s.sing the cost increases along to consumers. Schlitz looked better on paper for the moment, they claimed, only because the Milwaukee brewer used cheaper, non-natural ingredients in its brewing process.

"We are not going to trade cost efficiency for lower product quality," August vowed. "We are not going to trade solid long term growth for short term earnings gain." Gussie put it in a more personal context: "As long as I am in charge, I'm not going to lower quality." He believed in his bones that shortcuts and subst.i.tutions were the road to ruin in the brewing business and that his friend Bobby Uihlein was making a terrible mistake in playing around with his product formula, risking nothing less than the destruction of the company.

The Schlitz challenge was an underlying theme of A-B's 1973 national sales convention in Houston. The annual event was the company's most elaborate morale booster, bringing together several thousand wholesalers, wives, and sales and marketing managers from across the country for a few days of overindulgence and elbow-rubbing with the A-B bra.s.s and big-name Hollywood celebrities. No expense was spared. In addition to the ubiquitous MC Ed McMahon, the entertainment program for 1973 included pop duo the Carpenters and singer Tony Bennett.

"We are being challenged on all sides by those who would test our leaders.h.i.+p," Gussie intoned in his opening remarks as he introduced a film that featured McMahon in a comic turn as the brew master of a faux Schlitz plant. In the slickly produced film, a b.u.m wanders into the plant from a waterfront dock, sets down his rucksack, and begins pulling out dirty rags and throwing them into the brewing vat. "That ought to give it some gusto," McMahon's brew master says. The crowd in Houston's Music Hall howled at the allusion to one of Schlitz's most famous catchphrases.

The company's upcoming advertising campaign, as revealed at the convention by marketing VP George Couch, was aimed directly at Schlitz: full-page newspaper ads offering a tutorial on the traditional brewing process; a TV commercial extolling the virtues of natural ingredients; another touting the benefits of A-B's larger (than Schlitz's) aging vats, "Where Budweiser will be brewed slowly, as only Budweiser is"; and a recurring tagline, "Brewing beer right does make a difference."

Couch gave his presentation sitting at a desk near the center of the stage rather than standing at the podium like every other presenter. Earlier that day the heavyset, hard-drinking executive had complained of not feeling well and asked August if he could deliver his comments seated. In the middle of his presentation, Couch suddenly went silent. His head fell forward, chin onto his chest, and he didn't move. It took a few moments for people to realize something had happened. The stage curtain was quickly closed, but the audience, which included his wife, could still see paramedics working on him frantically. While the show went on, Couch was rushed to the hospital, where doctors determined he had suffered a ma.s.sive heart attack. He died a few days later.

It was a bad start to an awful year. During the first ten months of 1973, the American economy was. .h.i.t by a double whammy of an inflationary spiral and a bear market on Wall Street. Overall, wholesale prices jumped 17 percent, but the price of A-B's vaunted "natural ingredients"-barley, hops, and rice-shot up 34 percent. As the same time, the price of its stock plummeted, at one point dropping from $55 a share to $28. Schlitz stock fell, too, but not by nearly as much. Its per-share price remained above $40.

Then came an even worse turn of events. On October 17, the Organization of Petroleum Exporting Countries (OPEC) retaliated against the United States and its Western European allies for their support of Israel in its Yom Kippur War with Egypt. Overnight, OPEC raised the price of a barrel of oil to Western European countries by 70 percent and imposed a total oil embargo on the United States.

The result was catastrophic. With U.S. petroleum reserves already nearly depleted, President Nixon called for voluntary rationing of energy, asking homeowners to turn down their thermostats to 65 and for companies to trim work hours. Gas stations were asked to hold their sales to a maximum of ten gallons per customer and to shut down on Sunday. In California, drivers were restricted to buying gas on odd- or even-numbered days that conformed to the last digit of their license plates. Lines formed around nearly every gas station in the country, with waits of up to two hours in some places.

OPEC ended the embargo in January 1974, but held the price of a barrel of oil at triple what it had been before the embargo. Gas prices had quadrupled, from 25 cents a gallon to over a dollar. The Dow Jones average fell by a whopping 45 percent between 1973 and 1974. The price of A-B stock fell to $21 a share. The United States and most Western economies were thrown into a severe recession.

The economic crisis did not cause Americans to cut back on their beer drinking, however. Anheuser-Busch sold a record 28.9 million barrels in 1973, an increase of 3.7 million barrels over 1972, or 12.7 percent. But barrels didn't tell the story anymore. The financial press pointed out that A-B's profits had fallen by $11 million, and Schlitz was now the more profitable of the two. As Forbes magazine reported, Schlitz earned 21 percent on stockholders equity, compared to A-B's 13 percent. "This year [1974], the number will be more decisively in Schlitz's favor, the third year of declining profitability for Busch.... In beer, No. Two is No. One."

Schlitz quickly became Wall Street's new darling among brewers, with its stock trading above A-B's and its fifty-eight-year-old CEO, Bobby Uihlein, stepping forward to boast that thanks to his cost-cutting measures, "We are the company with momentum now." Gussie was infuriated by the comment, and Al Fleishman arranged an interview with Business Week, which put Gussie on the cover for a lengthy article about Anheuser-Busch's "struggle to stay first in brewing." The magazine quoted an unnamed A-B executive grousing about the compet.i.tive disadvantage inherent in Gussie's insistence on traditional methods. "We use five times as much labor as Schlitz does. We've got to import and store hops. We require larger aging facilities." Russell Ackoff was quoted as saying, "I could cut production costs by 50 percent, but where quality is concerned, the subject is verboten." Even Forbes, which had celebrated Gussie in the past, took a swipe at him, depicting him as "slowing down" and out of touch with modernity in an article that ended on a smugly patronizing note: "It is hard not to sympathize with Gussie Busch, with his pride in tradition and in his products. Yet if the job of management is to make money for its stockholders and to a.s.sure the long-term health of the company, it is fair to ask whether Busch should be paying more attention to the dollar sign. Will Gus Busch's pride yield to economics?"

The answer was a resounding, table-pounding "No" from Gussie. There would be no change to the Budweiser brewing process as long as he was in charge, and he planned to be in charge as long as he was alive. As one A-B wholesaler put it, "The old man would burn the brewery first."

Of course, Gussie's refusal to cut brewing costs only increased the pressure to cut elsewhere. He had already ordered that the company cease paying for the helicopter that August used to fly back and forth between the brewery and Waldmeister every day. Now he suggested at a management committee meeting that all of the top executives give up their company-provided automobiles. It was not a popular idea to begin with, but when Gussie revealed that he wasn't including himself in the car giveback, d.i.c.k Meyer blew up. "You sonofab.i.t.c.h," he said. "You are going to keep all your four or five cars and your two drivers, but as president of this company I am to have no car? That's bulls.h.i.+t." And with that, he got up and walked out of the meeting.

The car privileges continued, but efforts were made to replace the egregious gas-guzzlers-including the big heavy station wagon used to ferry the Busch children-with more fuel-efficient vehicles. Gussie and d.i.c.k Meyer got into it again a few weeks later when Gussie demanded that he lay off more than a hundred people in the top and middle management ranks. Meyer thought Gussie was acting capriciously and unreasonably, so he refused. Gussie told him to either make the cuts or resign, and Meyer chose the latter, to the surprise of everyone except perhaps Gussie and August. Some executives believed that Gussie used the layoffs as a pretext to get Meyer to quit and thereby make room for August to finally take over the presidency. August had fully supported Gussie's stance on the brewing process, and the two had been getting along well since the Weinberg brouhaha. August's promotion was announced the same day as Meyer's resignation, and within ten days a handful of the young MBAs in August's corporate planning department were named vice presidents, prompting the Post-Dispatch to declare in a headline, "New Guard Takes Over the Reins of Anheuser-Busch." Denny Long was elevated to executive vice president and general manager of the brewery, becoming, in effect, August's No. 2.

It appeared to be an all-out triumph for August, but he was not fooled by his own publicity. He knew whose hands still held the reins, and how hard it was going to be to pry them loose. Even though his father was seventy-five, it might be years before he could claim his birthright. Once again, however, fate stepped in to speed up the Busch succession process.

It was cold and raining in St. Louis on December 6, 1974. The big house at Grant's Farm was bustling with preparations for the annual party celebrating the Feast of St. Nicholas, the Old World patron saint of children and precursor to the modern-day Santa Claus. It was one of the Busch family events that August usually attended. Trudy always made a big deal out of St. Nicholas Day, the highlight of which was a visit from an elaborately costumed St. Nick, who would suddenly emerge from the trees and enter the house carrying a bag full of fruits, nuts, and presents that he poured out onto the floor and distributed to the kids. The last thing St. Nick always pulled from the bag was the sapling whipping switches, which he held ominously in his hand while relating the naughty or nice things each child had done that year. St. Nick was usually Trudy's brother w.i.l.l.y, and the older kids were sworn not to tell the younger ones.

At 4:00 p.m. that afternoon, on Highway 244 a few miles from Grant's Farm, a tractor-trailer truck skidded off the pavement and hurtled across the gra.s.s median into the opposite traffic lanes, where it struck a car, jackknifed, and then collided head-on with a Volkswagen van carrying the two youngest Busch children-eleven-year-old Andrew and eight-year-old Christina-on their way home from school. The fifty-foot-long flatbed rig cut through the thin metal skin of the van like a can opener, severing the legs of the Busch family's longtime chauffeur, Nathan Mayes. Andrew Busch was thrown through the front window of the van and suffered serious injuries. Christina, who was sitting directly behind Mayes, suffered devastating head and abdominal injuries. Witnesses said the little girl made it to the hospital alive only because a car carrying five nurses happened by the accident, and they ministered to her and Andrew until the ambulances arrived.

Fifteen-year-old Billy Busch was waiting at his school for Nathan to pick him up. When the van didn't arrive by five, he called home and was told there had been an accident and someone else would come for him shortly. He was taken straight to St. John's Mercy Hospital, where much of the family was already gathered in a waiting room.

"I remember thinking, 'This can't be, this can't be,'" Billy said of the scene he encountered. "Christina was in the ICU, and Mom told me they had all these wires running in and out of her, and she couldn't breathe on her own. They told me that Andrew was going to be okay but that Nathan was dead, which really upset me because I was very close to him. But I thought Christina would get better because Dad would make it all right. He would get the best doctors and they would fix her."

The most shocking thing to Billy was the effect of the tragedy on his father, who was collapsed in a chair, sobbing uncontrollably, unable to take charge of anything. "I had never seen Dad like that," he said. "It was like everything had been taken out of him."